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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number 0-16322
ECOS GROUP, INC.
F/K/A EVANS ENVIRONMENTAL CORPORATION
(Name of small business issuer as specified in its charter)
COLORADO 84-1061207
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 SOUTHERN BOULEVARD, SUITE 200,
WEST PALM BEACH, FLORIDA 33405
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (561) 835-0990
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 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 [ ]
As of October 11, 1996, the Company had a total of 17,585,126 shares of common
stock, $.012 par value, outstanding.
Transitional Small Business Disclosure format (check one): Yes [ ] No [X]
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<PAGE>
ECOS GROUP, INC.
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial statements:
Consolidated balance sheets
- September 30, 1996 and March 31, 1996 3
Consolidated statements of operations
- Three months and six months ended September 30, 1996
and 1995 4
Consolidated statements of cash flows
- Six months ended September 30, 1996 and 1995 5-6
Notes to financial statements 7-13
Item 2. Management's discussion and analysis
of financial condition and results of operations 14-20
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K 21
SIGNATURES 22
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<TABLE>
<CAPTION>
ECOS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30,1996 MARCH 31, 1995
----------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 265,143 $ 178,121
Restricted cash 31,560 154,749
Marketable securities 30,000 75,000
Accounts receivable, net 1,237,983 792,929
Note receivable 500,000 -
Net assets of discontinued operations - 1,037,971
Prepaid expenses & other 487,054 354,974
----------- -----------
Total current assets 2,551,740 2,593,744
Amounts due under state reimbursement
program 908,878 832,922
Property & equipment, net 2,759,446 573,813
Goodwill, net 6,772,779 946,554
Prepaid public relations services 400,337 -
Deferred costs, net 346,559 -
Other assets 375,028 298,859
----------- -----------
Total assets $14,114,767 $ 5,245,892
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 1,361,959 $ 1,861,425
Accrued expenses 626,808 604,459
Payroll taxes - 1,051,688
Note payable, bank 500,000 -
Related party note payable 251,220 85,000
Current portion of capital lease
obligations & notes payable 611,593 1,197,262
----------- -----------
Total current liabilities 3,351,580 4,799,834
Notes payable, net of current portion 1,012,647 873,113
Commitments & contingencies - -
Stockholders' equity (deficit):
Preferred stock:
Series A, $.001 par value 5,000,000
authorized, none issued and outstanding - -
Series B convertible, $.01 par value
1,000,000 authorized, issued and outstanding - -
Common stock:
$.012 par value, 25,000,000 authorized,
issued and outstanding:
September 30, 1996 - 17,585,126 211,022
March 31, 1996 - 4,590,126 55,082
Additional paid in capital 16,111,721 6,635,498
Net unrealized loss on marketable
securities (45,000) -
Retained earnings (deficiency) (6,527,203) (7,117,635)
----------- -----------
Total stockholders' equity (deficit) 9,750,540 (427,055)
----------- -----------
Total liabilities &
stockholders' equity (deficit) $14,114,767 $ 5,245,892
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
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<TABLE>
<CAPTION>
ECOS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Environmental Consulting $ 1,262,490 $ 1,474,739 $ 2,527,535 $ 3,265,550
Soil Remediation 928,546 - 928,546 -
----------- ----------- ----------- -----------
Total Revenue 2,191,036 1,474,739 3,456,081 3,265,550
----------- ----------- ----------- -----------
Cost of Environmental
Services:
Direct Labor & Benefits 496,337 256,810 1,001,887 864,746
Other Direct Costs 209,638 292,555 488,633 681,487
----------- ----------- ----------- -----------
705,975 549,365 1,490,520 1,546,233
Cost of Soil Remediation 910,292 - 910,292 -
----------- ----------- ----------- -----------
Total Direct Costs 1,616,267 549,365 2,400,812 1,546,233
----------- ----------- ----------- -----------
Gross Profit 574,769 925,374 1,055,269 1,719,317
----------- ----------- ----------- -----------
General, Administrative
& Other
Operating Costs 1,104,155 1,085,061 1,810,551 2,090,288
Reserve for Restructuring - - 350,000 -
Other Offering Costs - - - 151,766
----------- ----------- ----------- -----------
Total Operating Costs 1,104,155 1,085,061 2,160,551 2,242,054
----------- ----------- ----------- -----------
Operating Loss (529,386) (159,687) (1,105,282) (522,737)
----------- ----------- ----------- -----------
Other Income (Expense):
Interest, Net (19,421) (46,804) (42,525) (90,482)
Other Income, Net (13,131) 300 14,131 300
----------- ----------- ----------- -----------
(6,290) (46,504) (28,394) (90,182)
----------- ----------- ----------- -----------
Net Income (loss)
before Taxes (535,676) (206,191) (1,133,676) (612,919)
Provision for
Income Taxes - - - -
----------- ----------- ----------- -----------
Loss from Continuing
Operations (535,676) (206,191) (1,133,676) (612,919)
Discontinued Operations:
Income - Discontinued
Operations - 136,928 - 222,428
Gain on Disposal - - 509,036 -
----------- ----------- ----------- -----------
Income (loss) before
extraordinary items (535,676) (69,263) (624,640) (390,491)
Extraordinary Items:
Net Gain on Vendor
Settlements - - 280,981
Net Gain on Payroll
Tax Settlement - - 934,091 -
----------- ----------- ----------- -----------
Net Income (Loss) $ (535,676) $ (69,263) $ 590,432 $ (390,491)
=========== =========== =========== ===========
Income (loss) Per
Share from:
Continuing Operations $ (.03) $ (.01) $ (.09) $ (.05)
Discontinued Operations - .01 .05 .02
Extraordinary Items - - .10 -
----------- ----------- ----------- -----------
$ (.03) $ - $ .06 $ (.03)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
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<TABLE>
<CAPTION>
ECOS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
---------- -----------
<S> <C> <C>
Operating activities:
Net income (loss) $ 590,432 $ (390,491)
---------- ----------
Adjustments to reconcile net income
(loss) to net cash used in
in operating activities:
Depreciation & amortization 330,761 158,930
Gain on sale of equipment (1,000) (300)
Other 20,626 42,608
Discontinued operations (509,036) (222,428)
Extraordinary items (1,228,203) -
Changes in operating assets &
liabilities, net of effects from
purchase of American Remedial
Technologies, Inc.:
Decrease in accounts receivable 140,737 66,949
(Increase) decrease in prepaid expenses
and other assets 195,155 (21,363)
Decrease in amounts due from state
reimbursement program (75,956) (40,795)
(Increase) in other non-current assets 41,418 613
Increase (decrease) in accounts payable (737,262) 47,948
Increase (decrease) in accrued liabilities 102,679 (312, 859)
(Decrease) in payroll taxes (446,547) (24,197)
---------- ----------
(2,166,628) (304,894)
---------- ----------
Net cash used by operating activities of:
Continued operations (1,576,196) (695,385)
Discontinued operations - (15,164)
---------- ----------
(1,576,196) (710,549)
---------- ----------
Investing activities:
Restricted cash 123,189 -
Payments for purchase of American
Remedial Technologies, Inc., net
of cash acquired (5,983,677) -
Proceeds from disposal of discontinued
operations, net of expenses 1,047,007 -
Purchases of equipment (169,809) (18,944)
Proceeds from disposal of equipment 1,000 103,354
---------- ----------
Net cash provided (used)
by investing activities (4,982,290) 84,410
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements
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<TABLE>
<CAPTION>
ECOS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
SIX MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
----------- -----------
<S> <C> <C>
Financing activities:
Proceeds from original issuance of stock $ 8,100,000 $ 477,013
Proceeds from warrant exercise 337,500 -
Costs associated with issuance of stock (805,758) (126,059)
Proceeds from notes payable 562,800 217,233
Payments on capital lease obligations
and notes payable (1,220,254) (81,420)
Payments on related party notes payable (328,780) -
---------- -----------
Net cash provided by financing activities 6,645,508 486,767
---------- -----------
Net increase (decrease) in cash 87,022 (139,372)
Cash, beginning of period 178,121 300,743
---------- -----------
Cash, end of period $ 265,143 $ 161,371
========== ===========
Cash paid during the period for interest $ 135,805 $ 114,674
========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING:
On July 8, 1996 the Company acquired 100%
of the outstanding stock of American
Remedial Technologies, Inc.
Details of the acquisition are:
Common stock issued $ 1,500,000
Convertible preferred stock issued -
Book value of assets acquired 3,106,127
Liabilities assumed 1,466,844
Cash paid for acquisition $ 6,000,000
Cost of acquisition 46,836
Less cash acquired 63,159
-----------
Net cash paid $ 5,983,677
-----------
On August 20, 1996 the Company issued
545,000 shares of common stock for
services to be performed in connection
with a public relations
consulting agreement. The stock and
related cost of issuance was valued at: $ 493,881
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements
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<PAGE>
ECOS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BUSINESS
ECOS Group, Inc. (formerly known as Evans Environmental Corporation) (the
"Company") is engaged, through its wholly-owned subsidiaries, in
environmental consulting and other environmental related services (the
"Consulting Division") and soil remediation (the "Remediation Division").
Until April 3, 1996, the Company was also engaged in the production and
sale of cable products (the "Cable Products Division"). The Company
changed its name to ECOS Group, Inc. effective October 25, 1996 pursuant
to a majority vote at its annual meeting of shareholders held on October
18, 1996. The name change was made because of the Company's expanded
activities in remediation since the acquisition of American Remedial
Technologies, Inc. ("American Remedial") in July, 1996, as further
discussed below.
2. SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL STATEMENTS: The accompanying unaudited financial
statements have been prepared in accordance with the instructions to Form
10-QSB and do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. The consolidated balance sheet as of March 31, 1996 has been
derived from the audited financial statements as of the period ended March
31, 1996, but does not include all disclosures required by generally
accepted accounting principles. In the opinion of management, these
statements reflect all adjustments, consisting of normal recurring
adjustments, considered necessary for a fair presentation for the periods
presented. Operating results for the three and six months ended September
30, 1996 are not necessarily indicative of the results that may be
expected for the year ending March 31, 1997. These statements should be
read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the period
ended March 31, 1996.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All
intercompany balances and transactions have been eliminated.
PER SHARE DATA: Per share data is based on the weighted average number of
shares of common stock, 17,925,919 and 15,164,148 for the quarters ended
September 30, 1996 and 1995, respectively, and 12,134,054 and 13,024,292
for the six months ended September 30, 1996 and 1995, respectively. For
the 96 Quarter and six months ended September 30, 1996, 4,840,001 common
stock options and warrants which are common stock equivalents were assumed
to be exercised for computation of earnings per share under the treasury
stock method. For the 95 Quarter and six month period ended September 30,
1995, common stock equivalents have not been included in the weighted
average number of shares as they are anti-dilutive.
7 of 22
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ECOS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DISCONTINUED OPERATIONS: During April 1996, ABC Cable Products, Inc., a
wholly-owned subsidiary, ceased operations and disposed of all of its
operating assets. As such, the Company has treated the Cable Products
Division as discontinued operations for all periods presented.
PRESENTATION: Certain amounts previously reported have been reclassified
to conform to the Fiscal 1997 financial statement presentation.
3. ACQUISITION
On July 8, 1996, the Company acquired all the outstanding stock of
American Remedial. American Remedial operates a soil remediation facility
in Lynwood, California. The acquisition of American Remedial will involve
the Company in thermal soil remediation, a natural outgrowth of its
current environmental consulting and remediation activities. The
acquisition was accounted for as a purchase and, accordingly, the purchase
price was allocated to the acquired assets and assumed liabilities, based
on their respective fair values. The excess (approximately $5,900,000) of
the purchase price over the fair values of assets acquired was recorded as
a goodwill and is being amortized over 15 years on a straight line basis.
The purchase price of American Remedial consisted of a cash payment of
$6,000,000, the issuance of 3,000,000 shares of unregistered Common Stock
of which 272,277 shares were subsequently registered and the issuance of
1,000,000 shares of Series B Preferred Stock. The Series B Preferred Stock
is convertible, subject to an earn-out formula, up to a maximum of
10,000,000 shares of Common Stock. Furthermore, Mr. Enrique A. Tomeu, the
current American Remedial's President, has become the Chief Executive
Officer of the Company. The Series B Convertible Preferred Stock, $.001
par value per share (the "Series B"), is not entitled to receive any
dividends and has a liquidation value of $.75 per share. The holders of
the Series B are entitled to elect six members to the Company's Board of
Directors.
The purchase price was principally funded from a contemporaneous
Regulation S stock offering by the Company as herein discussed.
The pro-forma results of operations, which follow, assume that the
acquisition had occurred at the beginning of each period presented. In
addition to combining the historical results of operations of the two
companies, the pro-forma calculations include adjustments for the
estimated effect on the Company's historical results of operations for
amortization of goodwill.
8 of 22
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ECOS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. ACQUISITION (CONTINUED)
SIX MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1996
------------------ ------------------
Revenues $ 3,673,703 $ 4,361,176
================= =================
Net earnings (losses) $ (741,483) $ 392,321
================= =================
The following is a summary of the financial position of American Remedial at
date of acquisition, July 8, 1996:
JULY 8, 1996
------------
Current assets $ 836,326
Property & equipment, net 1,663,053
Other assets 484,147
------------
Total assets $ 2,983,526
============
Current liabilities $ 839,057
Long-term debt 132,299
Related party debt 495,000
Stockholders equity 1,517,160
------------
Total liabilities and equity $ 2,983,526
=============
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ECOS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. NOTE PAYABLE, BANK
On August 23, 1996 PTV Corporation (f/k/a ABC Cable Products, Inc.), a
wholly-owned subsidiary, borrowed $500,000 from a bank pursuant to a
Promissory Note collateralized by reassignment to the bank of the letters
of credit received from the sale of its cable product division and is also
guaranteed by the Company. The bank note is due on the same payment dates
of the letters of credit, which are March 5, 1997 ($250,000) and September
5, 1997 ($250,000). The bank note bears interest at prime plus 1.75%.
5. STOCKHOLDERS' EQUITY
On July 8, 1996, the Company completed a Regulation S stock offering. The
offering involved a sale of 9,000,000 shares of Common Stock at an
offering price of $.90 per share generating gross proceeds to the Company
of $8,100,000. The offshore placement agent (the "Placement Agent")
handling the offering entered into an agency agreement which provided for
a cash management and selling fee aggregating $607,500, or 7.5% of the
gross proceeds. In addition, the Placement Agent received broker warrants
to purchase 630,000 shares of Common Stock, exercisable at $1.00 per share
until July 8, 1998 and was reimbursed for out-of-pocket expenses of
approximately $140,000. Thus, net cash proceeds of the Company including
other offering cost of approximately $58,000 in connection with this
offering were approximately $7,294,500. The majority of the net proceeds
received from this offering were utilized for the acquisition of American
Remedial and payment of debt under the Strategica line of credit.
During the six month period ended September 30, 1996, warrants were
exercised for 450,000 shares of Common Stock for total proceeds of
$337,500.
On August 13, 1996, the Company entered into a five year Lead
Generation/Corporate Relations Agreement with a public relations company,
which was retained to provide certain corporate relations services. As
payment for these corporate relations services, the Company issued to the
public relations company, 545,000 shares of Common Stock valued at
approximately $494,000 inclusive of related cost. Additionally, the
Company has issued warrants to purchase Common Stock as follows: (i)
300,000 shares at the exercise price of $2.00 per share, exercisable
within one year from August 13, 1996, (ii) 150,000 shares at $2.50 per
share, exercisable within two years from August 13, 1996; and (iii)
150,000 shares at $2.70 per share, exercisable three years from August 13,
1996. The Company agreed to register all of the above shares for resale by
the public relations company. Notwithstanding the above, the public
relations company has agreed to return 47,000 shares to the Company if by
the end of the five year term of the agreement the price of the Company's
shares as traded on NASDAQ has not traded at or above $4.50 per share for
any period of ten consecutive days.
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ECOS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
6. RESERVE FOR RESTRUCTURING
During the first quarter of Fiscal 1997, the Company recorded a special
charge of $350,000 for the restructuring of its operations and integration
with American Remedial, which was acquired on July 8, 1996. These costs
include accruals for severance pay, real and personal property lease
terminations, relocation costs for certain offices and other costs
associated with a streamlining of operations and administrative functions.
These costs are expected to be paid or settled during the 1997 fiscal
year.
7. EXTRAORDINARY ITEMS
VENDOR SETTLEMENTS
During April 1996, the Company executed a Composition Agreement with
certain of its trade creditors. The Company, due to its limited cash flow
situation, began negotiating with these creditors in September 1995. These
creditors formed an Informal Creditors Committee, who hired both legal and
accounting professionals. Negotiations were finalized in April 1996 with
over 75% of the creditors accepting a payout of $.20 for each $1.00 of
their allowed claim. The payout was made in April 1996 from funds that the
Company had previously put into escrow. The Company continues to negotiate
with the creditors who rejected the Company's offer. In the three months
ended June 30, 1996, the Company recorded a benefit, net of expenses, of
approximately $281,000 related to completed vendor settlements.
SETTLEMENT OF DELINQUENT PAYROLL TAXES
On June 28, 1996, certain subsidiaries of the Company and the IRS
completed an Offer in Compromise agreement settling all outstanding issues
and disputes. In connection with the settlement these subsidiaries paid
the IRS an aggregate of $350,000 and agreed to waive certain net operating
tax loss carryforwards. The net operating loss carryforwards waived would
have been available to offset future taxable income. As a direct result of
this settlement, in June 1996, the Company recorded a gain of
approximately $934,000, net of professional fees and costs. The Company,
including its subsidiaries, has no other outstanding disputes with the IRS
or delinquent payroll taxes.
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ECOS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
8. SALE OF CABLE PRODUCTS DIVISION
On April 3, 1996, ABC Cable Products, Inc. ("ABC"), a wholly-owned
subsidiary, ceased operations and sold all of its operating assets for an
aggregate of $550,000 in cash and a promissory note in the amount of
$1,000,000. In addition, at closing, the purchaser assumed certain
liabilities of ABC aggregating $595,049. The promissory note, which is
fully collateralized by certain irrevocable letters of credit, has payment
dates of July 1, 1996 ($500,000), March 5, 1997 ($250,000) and September
5, 1997 ($250,000). The September 5, 1997 payment will automatically
accelerate if certain of the underlying letters of credit are not renewed.
The July 1996 payment was received in a timely manner. ABC subsequently
changed it's name to PTV Corporation.
In April 1996, the Company recorded a gain of $509,036, net of costs
associated with the transaction, on the sale of its Cable Products
Division.
9. SUBSEQUENT EVENTS
In October 1996, the Company's subsidiary, American Remedial entered into
a joint venture agreement with a closely held Florida corporation for the
design, construction and operation of a metal recycling operation in West
Virginia, to be known as ECOS Briquetting, Incorporated. American Remedial
will provide the construction capital (not to exceed $2.2 million) and the
other partner will provide the raw materials to be recycled and will be
responsible for the sales and marketing for the material.
The joint venture agreement provides for among other terms for (i) profits
and losses, as defined, to be allocated 50% between the two partners; (ii)
losses shall accrue to the account of American Remedial and in
consideration for this arrangement, the other joint venture partner agreed
to split the commission on it's marketing of materials; (iii) 20% of
distributions from the venture on a pro-rata basis for recovery of each
partners initial contributions and; (iv) formation of a four person
committee consisting of two representatives from each partner, with the
responsibility of managing the business and affairs of the new venture.
The Company's principal officer and majority shareholder is the
brother-in-law of one of the principal owners of the other joint venture
partners. As of October 11, 1996, the operations of this new venture were
still in the design, development and financing status.
12 of 22
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ECOS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
10. GOING CONCERN
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The Company
has suffered significant net losses for the years ended March 31, 1996 and
1995 and, at March 31, 1996 and September 30, 1996, its current
liabilities exceeded its current assets. These conditions raise
substantial doubt about the Company's ability to continue as a going
concern.
Management has taken measures to address the Company's going concern
issue. As discussed above, subsequent to March 31, 1996, management sold
the operating assets of the Cable Products Division, executed a
Composition Agreement with certain of its trade creditors and settled its
delinquent payroll tax matter with the IRS. In addition, management
completed a regulation S stock offering on July 8, 1996 and secured a bank
loan in August 1996. A substantial portion of the net proceeds from the
stock offering were used by the Company to acquire all of the outstanding
stock of American Remedial and repay the outstanding balance of the
Strategica Capital Corporation line of credit. The acquisition of American
Remedial will involve the Company in thermal remediation, a natural
outgrowth of its current environmental consulting and remediation
activities. Management is also continuing to evaluate the need for future
cost savings measures.
In the absence of obtaining profitable operations or obtaining additional
debt or equity financing the Company may not have sufficient funds to
continue operations in 1997.
13 of 22
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ECOS GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SIGNIFICANT CHANGES IN MANAGEMENT
Beginning in July 1996, the Company began a renewed process of
reorganization, restructuring and changing its direction. A significant
part of these changes was the appointment of a new President and Chief
Executive Officer, Mr. Enrique A. Tomeu, as a condition of the acquisition
of American Remedial Technologies, Inc. ("American Remedial"). Mr. Tomeu
replaced Mr. John C. Reynolds, who guided the Company from April 1995
until July 1996 as Interim President. Mr. Tomeu has implemented an agenda
for changes in management, operations, and corporate structure. Since
coming on board, changes in management have included the appointment of a
new Chief Financial Officer, two new Vice Presidents of Operations for the
west and east coast divisions, and a Director of the Company's
Environmental Consulting Division.
During the quarter ended September 30, 1996, there have been significant
changes in operations including: (i) directing the Company into
remediation and resource recovery; (ii) restructuring its existing
environmental consulting division; and (iii) reducing corporate overhead.
On July 8, 1996, the Company purchased American Remedial Technologies,
Inc. ("American Remedial"), which launched its efforts in the remediation
and resource recovery arenas. Subsequent to this purchase, American
Remedial has announced the formation of a joint venture with a private
company in the recovery and beneficial re-use of steel making by-products
and announced the development of a system for the treatment of bio-solids
at its existing thermal remediation facility in Los Angeles, California.
The environmental division has been restructured through closing
non-profitable offices and labor reductions in order to improve and
generate a consistently profitable operation. In September 1996, the
environmental division announced the commencement of a major project in
the clean-up and remediation of damage associated with Hurricane "Fran" in
North Carolina. During the quarter ended September 1996, these changes
showed a demonstrable improvement in the environmental division's
profitability.
In connection with the operational changes discussed above, the Company
began an aggressive program in the change of the corporate structure aimed
at reduction of corporate overhead. The reduction of corporate overhead is
based on management's view that the Company's existing operating
subsidiaries could not generate sufficient, sustained, operating profits
to cover the corporate overhead. Management believes that the reductions
made to date are an important component of the Company's efforts to return
to profitability with its current operating capacities, although further
changes may be made as the Company moves out of this restructuring mode,
which is expected to be concluded by the end of Fiscal 1997.
14 of 22
<PAGE>
ECOS GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
During the fiscal year ended March 31, 1996 ("Fiscal 96"), the Company
incurred a net loss of $2,051,365. These losses from operations which
began in prior years and continued through most of the first and second
quarter of Fiscal 1997, are attributable to the Company's lack of
sustained revenue growth, inability to balance associated labor costs and
other operational costs. The Company took certain significant cost savings
actions during Fiscal 96 and continues to do so, including significant
labor reductions, restructuring of underperforming offices, closing of
unprofitable offices, reductions of corporate overhead and other cost
saving measures. Although these cost saving measures have not returned the
Company to profitability, management believes that the Company can return
to sustained and profitable revenue growth, although no assurances can be
given. Management will continue to evaluate any additional cost savings
measures and focus on new marketing efforts to increase revenues from its
existing offices.
On April 3, 1996, the Company sold all the operating assets and ceased
operations of ABC Cable Products, Inc. ("Cable Products Division"), a
wholly-owned subsidiary, for an aggregate of $550,000 in cash and a
promissory note in the amount of $1,000,000. In addition, the purchaser
assumed certain liabilities of ABC aggregating $595,049. From this sale
the Company recorded a net gain of $509,036.
In connection with the Company's focus to increase its revenue base, it
broadened its service base with the July 1996 acquisition of American
Remedial Technologies, Inc. ("American Remedial"). American Remedial (the
"Remediation Division") operates a multiple technology soil recycling
operation located in Lynwood, California, which is designed to treat
non-hazardous petroleum hydrocarbon contaminated soil.
QUARTER ENDED SEPTEMBER 30, 1996 COMPARED TO QUARTER ENDED SEPTEMBER 30,
1995
Revenues for the quarter ended September 30, 1996 (the "96 Quarter") were
$2,191,036, up 49 percent from $1,474,739 in the second quarter of 1995
(the "95 Quarter"). This increase in revenue of approximately $716,000 is
primarily attributed to the addition of soil remediation revenues of
$929,000 from the Company's new subsidiary acquisition in July 1996,
American Remedial. Revenues for the Consulting Division declined 14
percent ($212,000) from the corresponding quarter of the prior year
predominantly caused by the closing of the New York office in Fiscal 96
and the loss of certain contracts and recurring work from certain
municipal and government customers.
Direct costs of environmental services were $705,975, a 28 percent
increase from $549,365 of the corresponding 95 Quarter. This increase in
direct cost resulted from the loss of the aforementioned contracts not
renewed in Fiscal 97, which contracts required less utilization of
subcontracting cost combined with the additional cost incurred in the
hiring of new senior professionals for the purpose
15 of 22
<PAGE>
ECOS GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
of generating new business. Cost of soil remediation of $910,292 was 98
percent of soil revenues, a substantially high cost of operation caused
primarily from several periods of abnormal thermal plant shutdowns during
the quarter for major repairs and maintenance. Modifications and
improvements have been made to the thermal plant to avoid further
shutdowns.
Total gross margin was 26 and 63 percent for the 96 and 95 quarter,
respectively, a decrease of 38 percent due primarily from the abnormal
high cost of operations of the Remediation Division and loss of recurring
consulting revenues from the Consulting Division. Additionally, the soil
remediation market served by American Remedial continues to be highly
competitive causing a suppressed average selling price and accordingly,
lower amounts of revenue.
General, administrative and other costs were $1,104,155, a 2 percent
increase from $1,085,061 of the corresponding prior quarter. This modest
increase is primarily related to the addition of the Remediation Division.
Loss from continuing operations of $535,676 in the 96 Quarter was a
$329,485 increase over the $206,191 loss in the 95 Quarter. This loss, for
the 96 Quarter, results primarily from the approximate operating loss of
$248,000 from the Remediation Division, corporate expenses of $453,000 and
offset by a profit from the Consulting Division of $164,000, which is the
result of new management's restructuring efforts. The 95 Quarter loss of
$206,191 consisted of a Consulting Division loss of $106,000 and corporate
expenses of $100,000.
Net loss for the 96 Quarter was $535,676 compared to a loss of $69,263 for
the 95 Quarter.
SIX MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 20, 1995
For the six months ended September 30, 1996 (the "96 Period"), the Company
reported revenues of $3,456,081, up 6 percent from $3,265,550 in the
comparable period last year (the "95 Period"). This increase in revenue
resulted primarily from the new acquisition of the Remediation Division
($928,546), offset by a 23 percent decline in revenues from the Company's
Consulting Division from $3,265,550 in the 95 Period compared to
$2,527,535 in the 96 Period. The decline in revenues for the Consulting
Division were primarily from the closing of its New York Office and loss
of certain contracts and recurring work from certain municipal and
governmental customers.
16 of 22
<PAGE>
ECOS GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The Company's total direct cost and expenses were 69 percent and 47
percent for the 96 and 95 Periods, respectively, as a percentage of total
revenues, representing a 55 percent increase in costs caused substantially
from the addition of cost of soil remediation. Direct cost for the
Environmental Division as a percentage of total consulting revenues was 59
and 47 percent for the 96 and 95 Periods, respectively, an increase of 12
percent. This increase in cost results from the loss of more profitable
contracts and new senior professionals hired to generate new business.
Gross margin as a percentage of revenue was 31 percent of the 96 Period
compared to 53 percent for the corresponding 95 Period. This decrease in
gross margin of 38 percent was due mainly to the high cost of operations
of the Remediation Division and underutilization of direct personnel cost
from the Consulting Division because of reduced business.
General, administrative and other operating cost were $2,160,551 for the
96 period, a decrease of $81,503 or 4 percent from the 95 Period. The
decrease is primarily related to 95 Period costs which included
approximately $150,000 of expenses for the New York Office which was
closed during Fiscal 96 and the realignment and termination of certain
personnel and reduction of office costs in the 96 Period. In the first
quarter of Fiscal 97 the Company recorded a restructuring charge of
$350,000 in anticipation of additional costs associated with an overall
reorganization and implementation of a new management structure. As of
September 30, 1996, approximately $185,000 of the provision for
restructure remains for the execution of managements' plans.
The operating loss of the 96 Period was $1,133,676, an increase in the
operating loss of $520,757 from the 95 Period. The operating loss was
comprised of a Remedial Division loss of $247,203, a Consulting Division
profit of $4,214 and corporate expenses of $882,259.
The 96 Period also includes several non-occurring operating transactions
and extraordinary items totaling a net gain of approximately $865,000. One
of these non-recurring transactions was a charge to earnings of $350,000
for the Company's restructuring plans initiated in the First Quarter ended
June 30, 1996 for the streamlining of operations and administrative
functions and integration with American Remedial. During the 96 Period the
Company reached a settlement with certain of its trade creditors who
accepted a payout of $.20 for each $1.00 of their allowed claim. This
settlement resulted in a net gain of $280,981 for the Company. In
addition, on June 28, 1996, the Consulting Division completed an Offer in
Compromise Agreement with the IRS settling all outstanding issues and
disputes related to delinquent payroll taxes. As a direct result of this
settlement, the Company reported a net gain of $934,091, net of
professional fees and costs.
In the 95 Period, the Company paid a $151,766 finder's fee in connection
with the unsuccessful Regulation S offering and accordingly, the Company
expensed the full amount of the finder's fee.
The net income of $590,432 for the 96 period is approximately $980,000 or
251% improvement over the $390,491 loss for the 95 period, due primarily
to the extraordinary items discussed above.
17 of 22
<PAGE>
ECOS GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
The Company has operated with a working capital deficiency during a
majority of the periods presented in the accompanying financial
statements. For the six month period ended September 30, 1996, the
Company's primary source of liquidity was generated from cash provided
from investing and financing activities. This included proceeds from the
sale and its Cable Products Division, issuance of new equity, exercise of
warrants and bank borrowing.
The Company's working capital ratio increased to .76 at September 30, 1996
from .54 at March 31, 1996. As of September 30, 1996, the Company had a
working capital deficit of $799,840, representing a reduction of
approximately $1,400,000 from the September 30, 1995 working capital
deficit of $2,206,090. The decrease in the working capital deficit is
primarily attributable to the sale of its Cable Products Division, the IRS
settlement and payoff of the Strategica Capital Corporation ("Strategica")
line of credit.
On July 8, 1996 the Company completed a Regulation S stock offering. The
offering involved the sale of 9,000,000 shares of Common Stock at an
offering price of $.90 per share generating gross proceeds to the Company
of $8,100,000. The offshore placement agent handling the offering entered
into an agency agreement which provided for a cash management and selling
fee aggregating $607,500, or 7.5% of the gross proceeds and broker
warrants to purchase 630,000 shares of Common Stock, exercisable at $1.00
per share until July 8, 1998. Net cash proceeds to the Company in
connection with this offering were approximately $7,294,500, net of broker
fees and offering cost, of which a substantial portion was used for the
ART acquisition and reduction of outstanding debt.
On July 8, 1996, the Company acquired all the outstanding stock of
American Remedial Technologies, Inc. ("American Remedial"). American
Remedial operates a soil remediation facility in Lynwood, California. This
facility is the only currently licensed fixed base facility for thermal
soil remediation in Los Angeles County, California. The acquisition of
American Remedial will involve the Company in thermal remediation, a
natural outgrowth of its current environmental consulting and remediation
activities. The purchase price of American Remedial consisted of a cash
payment of $6,000,000, the issuance of 3,000,000 shares of unregistered
Common Stock and the issuance of 1,000,000 shares of Series B Preferred
Stock. The Series B Preferred Stock is convertible, commencing after March
31, 1997, subject to an earn-out formula, up to a maximum of 10,000,000
shares of Common Stock.
In July 1994 the Company established a $2,500,000 subordinated line
of credit with Strategica. This line of credit bore interest at 15% and
was secured by a first lien on all the assets of the Company, including
its subsidiaries. At March 31, 1996, the
18 of 22
<PAGE>
ECOS GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Company was not in compliance with certain of the covenants of the
Strategica line of credit. The covenants contained provisions regarding
certain operating ratios, solvency ratios, material adverse changes and
other matters. On July 12, 1996, the Company repaid the outstanding loan
balance under the Strategica line of credit of approximately $1,400,000.
In April 1996, ABC Cable Products, Inc., a wholly-owned subsidiary, ceased
operations and disposed of all of its operating assets for an aggregate of
$1,500,000 in cash and a promissory note and the assumption by the buyer
of $595,049 of ABC's liability. ABC received, at closing, $550,000 cash
and a promissory note in the amount of $1,000,000. The note, which is
fully collateralized by certain irrevocable letters of credit, has payment
dates of July 1, 1996 ($500,000), March 5, 1997 ($250,000) and September
5, 1997 ($250,000). The July 1, 1996 payment was received on time and was
used to reduce the then outstanding balance of the Strategica line of
credit.
In April 1996, the Company executed a Composition Agreement with certain
of its trade creditors. The Company, due to its limited cash flow
situation, began negotiating with these creditors in September 1995.
Negotiations were finalized in April 1996, with over 75% of the creditors
accepting a pay out of $.20 for each $1.00 of their allowed claim. The
payout was made in April 1996 from funds that the Company had previously
put into escrow. In April 1996, the Company recorded a benefit, net of
expenses, of approximately $281,000 related to these completed vendor
settlements.
In October 1996, the Company's subsidiary, American Remedial, entered into
a joint venture agreement with a closely held Florida corporation for the
design, construction and operation of a metal recycling operation in West
Virginia. American Remedial is expected to provide the construction
capital not to exceed $2,200,000. As of October 11, 1996, the operations
of this new venture are still in the design, development and financing
stages.
American Remedial is in the process of expanding its Lynwood facility to
treat and recycle bio-solids generated from local water treatment plants
and produce a fertilizer by-product for resale. This expansion will
require equipment modifications at its existing Lynwood Thermal Plant,
which have been estimated to cost approximately $500,000. The equipment
has been ordered for estimated installation in December 1997 and is
expected to be financed under an operating lease structure.
From time to time over the last 15 months, the Company has been involved
in discussions with a private lender to the Company. The purpose of these
discussions has been to settle all outstanding differences between the
former lender and the Company regarding a variety of matters, including,
without limitation, the exercise price of the former lender's outstanding
warrants, amounts claimed to be owed to the former lender for legal fees,
shares claimed to be owned to the former lender for the loan of funds and
services rendered, and claimed rights to additional shares
19 of 22
<PAGE>
ECOS GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
of the Company's stock. Although all cash amounts owed to the former
lender for principal and interest were paid in full in July 1996, the
former lender has continued to make further demands on the Company.
Although the Company has rejected the validity of all such claims it has
agreed to reach an accommodation with the former lender on some of these
claims solely for the purpose of reaching a definitive settlement of all
outstanding differences. To date the former lender has not agreed to any
settlement. The Company is unable to foresee the ultimate outcome of this
matter.
Although working capital for the six months period showed an improvement,
because of the continued losses and its interest burden, the Company could
continue to experience a cash shortage that, if not remedied, could
adversely affect the Company's operations. The Company's proposed plans
for expansion, as discussed above, could also be delayed. The Company is
presently seeking various methods of raising sources of capital, either
through a private equity placement or debt arrangement to fund its current
operations and plans for expansion. No assurance can be given that such
capital or debt raising will be available or on terms acceptable to the
Company. The Company is continuing its restructuring plans for cost
savings, which have involved the relocation of its corporate offices,
reduction of line personnel, closing of underperforming offices and
continued negotiations of rental obligations. The Company presently has no
arrangements in place for alternative sources of financing, except for the
$500,000 revolving bank loan, which has been fully utilized.
20 of 22
<PAGE>
PART II. Other information
Item 6. Exhibits and Reports on Form 8-K
(a)(i) Audited financial statements of American Remedial
Technologies, Inc. for the Fiscal periods ended March 31,
1996 and 1995 incorporated by reference as filed with Form
10-QSB/A for the quarterly period ended June 30, 1996.
(a)(ii) Corporate Relations Agreement dated August 13, 1996 between
the Company and Corporate Relations Group, Inc. incorporated
by reference as filed under exhibit No. 10.2 of Registration
Statement on Form S-3 dated October 9, 1996.
(a)(iii) Joint Venture agreement dated October 10, 1996 between
American Remedial Technologies, Inc. and Marbi, Inc.
(a)(iv) The Company's 1996 Stock Option Plan incorporated by
reference as filed under Exhibit 10.3 of Registration
Statement on Form S-3 dated October 9, 1996.
(b)(i) Form 8-K dated April 17, 1996 incorporated by reference,
reporting the sale and disposal of substantially all
operating assets of ABC Cable Products, Inc. a wholly owned
subsidiary, on April 3, 1996.
(b)(ii) Form 8-K dated July 22, 1996 incorporated by reference,
reporting the acquisition of all the outstanding stock of
American Remedial Technologies, Inc. on July 8, 1996. The
unaudited financial and Pro Forma financial information of
the acquisition were filed with Form 10QSB/A for the
quarterly period ended June 30, 1996.
21 of 22
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EVANS ENVIRONMENTAL
CORPORATION
November 12, 1996 By: /s/ DAVID C. LANGLE
-------------------
David C. Langle
Chief Financial Officer
on behalf of the Registrant and as
Principal Accounting Officer
22 of 22
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 265,143
<SECURITIES> 30,000
<RECEIVABLES> 2,039,769
<ALLOWANCES> (301,786)
<INVENTORY> 0
<CURRENT-ASSETS> 2,551,740
<PP&E> 3,771,866
<DEPRECIATION> 958,420
<TOTAL-ASSETS> 14,114,767
<CURRENT-LIABILITIES> 3,351,580
<BONDS> 0
0
0
<COMMON> 211,022
<OTHER-SE> 9,539,518
<TOTAL-LIABILITY-AND-EQUITY> 14,114,767
<SALES> 3,456,081
<TOTAL-REVENUES> 3,456,081
<CGS> 2,400,812
<TOTAL-COSTS> 2,160,551
<OTHER-EXPENSES> 28,394
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,525
<INCOME-PRETAX> (1,133,676)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,133,676)
<DISCONTINUED> 509,036
<EXTRAORDINARY> 1,215,072
<CHANGES> 0
<NET-INCOME> 590,432
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
EXHIBIT 99
(a)(iii)
ECOS GROUP, INC.
EXHIBIT (a)(iii) JOINT VENTURE AGREEMENT DATED OCTOBER 10,1996 BETWEEN AMERICAN
REMEDIAL TECHNOLOGIES, INC. AND MARBI INC.
<PAGE>
AGREEMENT
THIS AGREEMENT, (This "Agreement") is made and entered into as of this
tenth day of October, 1996, by and between AMERICAN REMEDIAL TECHNOLOGIES, INC.,
a Florida Corporation ("ART"), and MARBI, INC., _______________ a Corporation
('%Iarbi"). ART and Marbi are sometimes referred to in this Agreement
collectively as the "Parties" and individually as "Party".
WITNESSETH:
WHEREAS, Marbi has entered into an exclusivity agreement with Tri State
Material Processors for the purchase of Tri State Material Processors
beneficiated kisch Ones (hereinafter referred to as "the Exclusivity Agreement")
and
WHEREAS, Marbi and ART each are engaged in the business of providing
environmental services, including the recycling and sale of iron and steel
production residuals and
WHEREAS, pursuant to the terms hereof, ART and Marbi desire to enter into
a venture to produce and market briquettes from iron and steel production
products.
NOW, THEREFORE, in consideration of the performance by the Parties of the
terms, conditions and covenants herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
1. THE JOINT VENTURE
1.1 FORMATION AND PURPOSE. The Parties hereby enter into and form a
joint venture (the "Venture") for the purpose of producing recycled iron and
steel products for resale to the iron and steel industry .The Venture shall be
known as ECOS Brick, Incorporated or such other name as the Parties may mutually
agree upon. The Parties shall execute any registration or assumed or fictitious
name certificate or certificates required by law to be filed in connection with
the formation ofthe Venture and shall cause such registration, certificate or
certificates to be filed in the appropriate records. The rights and obligations
of the Parties shall be governed by the provisions of this Agreement and Uniform
Partnership Act as enacted in the State of Florida and as may be amended from
time to time (the 'IJniform Act"). To the extent that the Uriiform Act is silent
on a matter or permits the Parties to agree to the disposition or handling of a
matter in a manner contrary to the Uniform Act, the provisions ofthis Agreement
shall control.
1.2 OBLIGATIONS OF THE PARTIES. Initially, the Venture will seek to
permit a new facility in Weirton, West Virginia for the production of
briquettes. ART will provide the capital for design, permitting Construction and
startup of the briquetting facility not to exceed two million two hundred
thousand dollars, Marbi will provide the Exclusivity Agreement and the washed
iron bearing materials from the exclusivity agreement, other raw materials for
example, coke breeze, and will be responsible for the sales and marketing of the
briquettes once produced.
<PAGE>
1.3 OTHER ACTIVITIES OF THE PARTIES. Subject to Section 9, each Party
of the Venture shall be free to engage in any other business activity for its
exclusive benefit. The other Party of the Venture shall not have any claim of
interest in such other business activity. In addition, neither Party of the
Venture shall have any authority to bind the other Party. Further, neither the
Venture nor either Party shall be responsible or liable for any indebtedness or
obligation ofthe other Party, whether or not incurred or arising before or Her
the signing of this Agreement, except as to those joint responsibilities,
habilities and indebtedness incurred after the date ofthis Agreement and which
are specifically identified or within the scope of this Agreement. This
Agreement shall not be deemed to cause either Party of the Venture to be a
partner of, or agent for, the other Party except to the extent necessary for
specific purposes ofthe Venture.
1.4 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the
Venture shall be at the following address:
1000 Southern Boulevard, Suite 200
West Palm Beach, Florida 33405
2. RIGHTS. Powers and Duties ofthe Parties
2.1 THE COMMITTEE. The business and ahirs of the Venture shall be
rnanaged by or under the direction of a four person Committee which, so long as
ART and Marbi bAh maintain a 50% interest in the Venture, shall consist of two
representatives of ART and two representatives of Marbi (the "Committee"). At
any time when, as provided in this Agreement, either ART or Marbi does not
maintain a 50% interest in the Venture, the members of the Committee will be
elected by majority vote of the Parties to the Agreement with each Party to the
Venture receiving a number of votes equal to such Party's percentage in the
Venture multiplied by one hundred (100). The Committee may exercise ad such
powers of the Venture and do all such Awful acts and things as are not by
statute or by this Agreement directed or required to be exercised or done by the
Parties.
2.1.1 The Parties hereby appoint the following persons to serve
as their respective representatives on the Committee, with full power and
authority to act for and bind the respective Parties in matters arising under
this Agreement or in connection with the Business.
2.1.1.1 ART designates _________________ representatives to the
Committee.
2.1.1.2 Marbi designates Mark W. Koch and Craig Brennan as its
initial representatives to the Committee.
2.1.2 Either Party may at any time change its representatives to the
Conoenittee by notifying the other Party in the manner provided for herein of
the appointment of a new representative. No representative of a Party shall be
liable to the Venture or the Parties hereto by reason of his acts as such,
except in the case of gross negligence or fraudulent or dishonest conduct.
<PAGE>
2.1.3 The Comrnittee shall meet no less often than quarterly to act on
matters pertaining to the Business. Either Party shall have the power to call
additional meetings when necessary in its opiriion The Committee shall act only
by unanimous consent.
2.1.4 In the event of a material impasse of the Committee, a Party (the
"Initiating Party") may offer to purchase the Interest in the Venture (the
"Subject Interest") of the other Party (the "Receiving Party"). The Initiating
Party shall give written notice (the aPurchase Notice") in the manner provided
herein to the Receiving Party of the terms of such offer.
2.1.4.1 The Receiving Party shall have the right and obligation
to (a) sell the Subject Interest to the Initiating Party on the terms and
conditions set forth in the Purchase Notice or (b) purchase the Interest of the
Initiating Party on equivalent terms. This right shall be exercised by the
Receiving Party within 30 days of receipt of the Purchase Notice. But in no
event before the first to occur of (i) two months after the receipt by the
Venture of a permit to operate for the first briquette facility or (ii) four
months from the date hereof. The Receiving Party shall exercise its right to
sell the Subject Interest or purchase the Interest of the Initiating Party under
this subsection by giving notice in writing of its intent to the Initiating
Party.
2.1.4.2 In the event the Receiving Party fails to purchase the
Interest of the Initiating Party, elects to sell the Subject Interest to the
Initiating Party or fails to provide the notice of election described in the
preceding paragraph, the Initiating Party shall purchase the Subject Interest on
the terms set forth in the Purchase Notice.
2.1.4.3 Any purchase or sale of an Interest pursuant to the
provisions of Section 2.1.4.1 shall be consummated within three months from the
date of the Purchase Notice.
2.1.4.4 In addition to situations in which there is a material
impasse of the Committee, in the event of a change in the beneficial ownership
of a controlling interest in the voting capital stock of a Party or in the event
that the Board of Directors of a Party as currently constituted changes by more
than fifty percent (S0%) (the Party undergoing such a change is referred to in
this section as the "Changing Party", and the other Party to the Venture is
referred to in this section as the "Non-Changing Partfie'), then the
Non-Changing Party wild aRer a period of sixty (60) days, have the option of
exercising the rights and obligations of an Initiating Party, and if such option
is exercised, the Changing Party will have the rights and obligations of a
Receiving Party.
2.2 MANAGEMENT OF THE VENTURE. The Committee shall designate a General
Marwer, who shall have general and active management of the business and affairs
of the Venture and such other powers and authority as the Committee shall from
time-to-time delegate. The General Manager shall act through such officers,
employees or agents of the Venture as the Committee or the General Manager,
subject to the approval of the committee, may from time-to-time designate.
Except as expressly limited hereinbelow, the General Manager shall have
authority to do any and all things necessary to carry out the purpose of this
Agreement, including
<PAGE>
but not limited to the following:
2.2.1 Having accountants prepare annual financial reports and
deliver to the Parties monthly reports of operations;
2.2.2 In accordance with generally accepted principles of
accounting consistently applied, and unless otherwise provided in this
Agreement, determining whether items of income, gains, loss, deduction, or
credit shall be treated either as capital or extraordinary items, or
alternatively, as profit or loss items.;
2.2.3 Taking any and all actions as the General Manager deems
necessary or appropriate to effectively manage the Business; and
2.2.4 Executing, acknowledging and delivering any and all
insUnents to effectuate any ofthe foregoing powers.
2.3 PROHIBITED ACTS. The following actions may not be taken by the
General Manager without the express written approval and consent of the
committee:
2.3.1 An act in contravention of this Agreement;
2.3.2 Any act that would make it impossible to carry on the
ordinary business of the Venture;
2.3.3 Any general assignment for the benefit of the creditors of
the Venture;
2.3.4 Any possession of Venture assets for other than a Venture
purpose;
2.3.5 Any act (except an act expressly required by this Agreement)
which would cause the Venture to become an association taxable as a corporation;
form;
2.3.6 Admission of a person or entity as a substitute Party;
2.3.7 Change and reorganization of the Venture into any other
legal
2.3.8 Selection and opening of bank accounts;
2.3.9 Borrowing money in the name of the Venture from third
parties for the purposes set forth in this Agreement and the execution of
promissory notes therefore;
2.3.10 Causing the Venture to guarantee, endorse or become
contingently liable upon the obligations of any other person, firm or entity;
and
<PAGE>
2.3.11 Retaining either or both of the Parties, or their
respective affiliates, to provide services to the Venture, subject to
supervision by the General Manager.
2.4 REIMBURSEMENTS AND PAVMENT OF EXPENSES. The Venture shall pay
certain operating expenses, including but not limited to expenses related to
employees, facilities and vendors of the Venture, accounting and legal expenses,
expenses in connection with reports and applications required to be filed with
goverlunental authorities respecting permits, licensing, taxes and other matters
and such extraordinary or non-recurring expenses and other operating expenses
approved by the Committee. Members of the committee shall serve without
compensation, but shall be reimbursed by the Venture for all reasonable
out-of-pocket costs incurred in connection with the management of the Venture.
In the event either or both of the Parties hereto, or their respective
affiliates, are retained hereunder to provide services to the Venture, such
person or persons shall be reimbursed for reasonable out-of-pocket costs and
direct labor and other costs at rates approved by the Committee.
3. CAPITALIZATION
3.1 INITIAL CAPITAL CONTRIBUTIONS. ART shall contribute it's expertise
and capital not to exceed $2.2 million dollars to design, permit, construct and
commence operatiofis to the Venture and Marbi shall contribute its advice,
sources of raw materials, purchasing arrangements with steel mills, the
Exclusivity Agreement with Tri State Material Processors and expertise toward
the development of the Venture . It is agreed by both Parties that the
Contributions made by each Party are of equal value to the Venture.
The total of the contributions made by each Party to the Venture
being equal, the initial interest of the Parties (the Interests) in and to any
profits and assets derived from the Business, any property acquired by the
Venture, all contributions required, and all money received and losses incurred
in the Business shall be as follows:
ART 50%
Marbi 50%
The interest may be adjusted from time-to-time in the manner set
forth herein.
3.2 ADDITIONAL CAPITAL CONTRIBUTIONS. All necessary working capital
when and as required for the Business, as determined by the Committee, shall be
furnished by the Parties proportionately in accordance with their respective
Interests. The PartEs agree to make such working capital contributions without
set-offor deduction of any type.
3.2.1 In the Event that one, but not both, of the Parties fails or
is unable to fully provide its proportionate share of the funds required by the
Venture, as determined by the Committee, on or before the date designated
therefor, then the funds contributed by the non-
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defaulting Party (the "Excess Contribution") shall be treated as a non-recourse
loan by the nondefaulting Party to the Venture in the amount of the Excess
Contribution. The loan shall bear interest at the rate of prime plus two percent
(3%) per annum, and shall mature upon the first to occur of (a) the payment of
its required capital contribution by the defaulting Party or (b) 120 days afier
the making of the Excess Contribution (the "Maturity Date"). If the defaulting
Party cures its default with 120 days by making its required capital
contribution plus interest, such interest shall be repaid by the Venture to the
non-defaulting Party to satisfy the interest on the loan, and the principal due
on the non-defaulting Party's loan shall be contributed to capital. To better
secure the non-defaulting Party, the Venture shall directly pay the defaulting
Party's share of Joint Venture distributions directb to the non-defaulting Party
until the interest on the Excess Contnbution loan is completely repaid. If the
defaulting Party's distributions exceed the interest on the loan, the
distributions will be retained by the Venture and treated as a contribution to
the capital account of the Venture to the extent that the defaulting Party's
required contribution has not been rnade. For every such dollar retained by the
Venture, the non-defaulting Party will be deemed to have contributed one dollar
of the principal due on the loan to the capital account. Notwithstanding the
direct payment to the non-defaulting Party, any such distributions, because they
reduce the obligation of the defaulting Party to the non-defaulting Party, shall
be viewed as distributions to the defaulting Party for purposes of this
Agreement, including Sections 3.4.5 and 8.3 hereof.
3.2.2 In the event the Excess Contribution is not repaid on or
before the Maturity Date, the Interest of the non-defaulting Party in the
Profits, as hereinafter defined (but not the Losses (as hereinafter defined) or
liabilities), of the Venture shall be increased to the proportion that the
amount actually contributed by such Party bears to the total amount of
contributions by both Parties (the "Adjusted Interest"), and the Interest of the
defaulting Party shall be decreased to one hundred percent (100%) minus the
Adjusted Interest.
3.3 RIGHT TO WITHDRAW CAPITAL OR PROPERTY. Neither Party shall be
entitled to withdraw form the Venture any part of its capital contribution, or
to receive any distribution or compensation from the Venture, except as
expressly provided in this Agreement. Neither Party shall be entitled to demand
or receive any property form the Venture or, if a distribution is made, to
receive anything other than cash.
3.4 CAPITAL ACCOUNTS. An individual capital account (the "Capital
Account") shall be maintained for each Party. The balance of a Party's Capital
Account shall be equal to its initial capital contribution, any additional
contributions made by it to the Venture, and any Profits, as hereinafter
defined, allocated to the Party, less all distributions to or on account for the
Party, and any Losses, as hereinafter defined, allocated to the Party. The
Capital Account shall also be adjusted upward and downward, as provided in
Section 704(b) of the Internal Revenue Code of 1986, as may be amended from
time-to-time (the "Code"), and the regulations and temporary regulations
promulgated thereunder (the "Regulations").
4. ALLOCATION OF PROFITS AND LOSSES
<PAGE>
4.1 GENERAL. The Profits and Losses of the Venture and all other items
of income, gain, loss, deduction and credit of the Venture shall be determined
for each fiscal year of the Venture (defined in Subsection 6.3 below) in
accordance with the method of accounting followed by the Venture for federal
income tax purposes and applied in a consistent nunner.
4.2 ALLOCATION OF PROFITS AND LOSSES. The Venture's Profits and Losses
will be allocated as follows, profits aRer taxes will be distributed 50 percent
to each party of the venture. Losses shall accrue to the account of American
Remedial Technologies. In consideration of this Marbi Inc. agrees to split the
commission on it's marketing of materials under the exclusivity agreement with
Tri State Material Processors 50 /50 with American Remedial Technologies
effective upon execution of this agreement.
4.3 DEFINITION OF PROFITS AND LOSSES. The term "Profits" and "Losses"
mean, for each fiscal year or other period, an amount equal to the Venture's
tamble income or loss for sllch year or period as determined in accordance with
Section 703(a) of the Code (for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to Section 703(a) (1) ofthe
Code shall be included in taxable income or loss) and taxable income or loss
shall be adjusted as provided by the Code and Regulations.
4.4 CONTRIBUTED PROPERTY. Income, gain and deduction with respect two
property contributed to the Venture by either Party shall be allocated in
accordance with Section 704(c) of the Code and the regulations applicable
thereto, so as to take account of any variation between the basis of the
property to the Venture and the agreed upon value of the property at the time of
contribution.
5. DISTRIBUTIONS. The initial capital contribution of ART and the bridge
financing provided by Marbi shall be recovered from the Venture by allocating 20
percent of the distribution from the Venture on a pro-rata basis until each
parties initial contribution is recovered. Subject to the approval of the
Committee and its determination that capital to be distributed is not required
for the conduct ofthe Business, the Venture shall distnbute any net Profits to
the Parties, reduced by any necessary cash reserves, in accordance with their
respective Interests in the Venture no less frequently than quarterly. Any
distributions in excess of net Profits shall be made from time-totime as agreed
upon by the Committee. The Committee shall seek to distribute cash, in total to
both Parties, with respect to each taxable year of the Venture, in an amount
which is equal to at least forty percent (40%) of the Venture's net Profits for
that year, so as to provide the Parties with sufficient cash f om the Venture to
pay income tax on their share of the Venture's income.
6. TAXES AND ACCOUNTING
6.1 INCOME TAX RETURNS OF THE VENTURE. All income taxes of the Venture
shall be prepared using the cash method of accounting unless any laws or
regulations require the accrual method of accounting.
6.2 ELECTIONS OF THE VENTURE. Each of the Parties hereby recognizes
that the
<PAGE>
Venture will be subject to all provisions of Subchapter K of Chapter 1 of
Subtitle A of the Code., governing the taxation of partnerships and partners;
provided, however, that it is understood and agreed that the filing of U.S.
partnership returns of income shall not be construed to extend the purposes of
the Venture or the obligations or liabilities of the Parties as set forth
herein. In the event ofthe permitted transfer by one ofthe Parties of all or any
part of its interest in the Venture, then such election shall be filed by the
Venture upon the request of the Party made with respect to the income tax return
for the period including the date of transfer of such interest in the Venture
for which the election is being made. Such request shall be in writing and shall
be made not less than 60 days prior to the initial date established by law for
filing such income tax return,
6.3 FISCAL YEAR. The fiscal year of the Venture shall be from April 1st
to
6.4 BOOKS OF ACCOUNT AND RECORDS. The Venture shall maintain adequate
accounting records t the office of the Venture. All books, records and accounts
of the Venture shall be open at all reasonable times to inspection by either
Party or any agent of either Party.
6.5 REPORTS. The Venture's accountants shall cause to bezprepared at
the expense ofthe Venture and furnished to each ofthe Parties within 60 days
after the close of each fiscal year: (a) a balance sheet of the Venture, dated
as ofthe end of such fiscal year, (b) a related statement of income and expense;
and (c) information for the fiscal year as to the balance in each Party's
Capital Account. In addition, within a reasonable time after the end of each
fiscal year, the Venture's accountants shall prepare and deliver to each Party a
report setting forth in sufficient detail al such information and data with
respect to business transactions affected by or involving the Venture during
such fiscal year as shall enable the Parties to prepare their federal, state and
local income tax returns in accordance with the laws, rules and regulations then
prevailing. The accountants shall also prepare federal, state and local tax
returns required by the Venture.
6.6 AUDITS: TAX MATTERS. If the Internal Revenue Service, or any other
governmental agency with jurisdiction, shall conduct, commence or give
notification of intent to conduct or commence any audit or other investigation
of the books, records, tax returns or other afEirs of the Venture, the Venture
shall promptly advise the Parties thereof by notice. _____________ is designated
the "Tax Matters partner" under Sections 6221 ET SEQ. of the Code.
6.7 BANK ACCOUNTS. The Venture shall maintain checking or other
accounts in such bank or banks as the Cornmittee shall determine and all funds
received by the Venture shall be deposited into those accounts. A withdrawal
shall require the signature oftwo members of the committee or such other or
different signatures as may be agreed upon by the Parties in order to fulfill
the provisions of Section 2.4.
7. SALE OF VENTURE INTEREST. In the event that any Party (the "Offering
Party") desires to accept any bona fide offer to purchase any or all of such
Party's Interest in the Venture (the
<PAGE>
"Offered Interest"), the Offering Party shall be obligated to give written
notice (the "Offer Notice"), in the manner provided herein, to the other Party
(the "Continuing Party") of the terms of such offer, and shall submit to the
Continuing Party a true and complete copy of such offer.
7.1 The Continuing Party shall have the first right and option to
purchase the Offered Interest on the same terms and conditions offered by the
third party. This right shall be execrable by the Continuing Party within 15
days of receipt of the Offer Notice in the manner provided for herein. The
Continuing Party shall exercise its option to purchase under this subsection by
giving notice in writing of its intent to exercise its option to the Offering
Party. In the event that the Continuing Party declines to purchase the Offered
Interest, the Continuing Party has the option to dissolve the Venture in
accordance with Section 8 hereof rather than accept the third party as a partner
in the Venture.
7.2 Any material change in the terms of any offer prior to closing
shall constitute a new offer subject to the same rights of first refusal by the
Continuing Party as in the case of an initial offer.
7.3 In the event the consideration, terms and/or conditions offered by
a third party are such that the Continuing Party may not reasonably be required
to furnish the same consideration, meet the sarne terms or satisfy the same
conditions, then the Continuing Party mazy purchase the Offered Interest
proposed to be sold for the reasonable equivalent in cash and/or other
consideration. If the Parties cannot agree within a reasonable time on the
reasonable equivalent in cash and/or other consideration, an independent
appraiser shall be designated by the parties, at the expense of the Venture, and
his determination shall be binding as to the equivalency.
7.4 In the event the Continuing Party fails to purchase the Offered
Interest and has not exercised the option to dissolve the Venture as provided in
Section 7.1, the Offering Party may sell the Offered Interest to the third party
on the terms set forth in the Offer Notice, provided that if the sale is not
completed within 120 days from the date of the Offer Notice, the Continuing
Party shall have an additional right of first refusal on the same terms and
conditions as are applicable to the initial right of first refusal, and further
provided that, if there is a material change in the terms of the sale,
regardless of when the sale is completed, the Continuing Party shall have an
additional right of first refusal on the modified terms and conditions. If the
Continuing Party accepts the right of first refusal and defaults under this
agreement to purchase, the Offering Party then may sell the Offered Interest to
any third party at any price.
7.5 Any attempt by either Party to transfer its Venture Interest or any
part thereof, in any manner other than a provided herein, shall be null and
void.
8. DISSOLUTION
8.1 EVENTS OF DISSOLUTION. The Venture shall be dissolved upon the
occurrence of any of the following:
<PAGE>
8.1.1 At the election of a Continuing Party, as provided in
Section 7.1 hereinabove;
8.1.2 In the event of an Excess Contribution by a Party, upon
written notice by such Party;
8.1.3 Mutual agreement ofthe Parties to the Verdure; or
8.1.4 One hundred eight (180) days' prior written notice by either
Party.
8.2 INSOLVENCY. In the event of the dissolution or ternmnation of
existence of a Party, or the insolvency of a Party, i.e., the failure of a Party
to pay its debts as they mature or the failure to maintain the fair salable
value of its assets in excess of its liabilities, the voluntary or involuntary
appointment or a receiver, trustee, custodian or similar fiduciary for a Party
and, if involuntary, the continuation of such appointment for more than 30 days,
an assignment by a Party for the benefit of creditors, the commencement of any
proceedings underwany bankruptcy laws by or against a Party, which such
proceedings shall continue for more than 30 days, or the nuking by a Party of
any offer of settlement, extension or composition to its unsecured creditors
generally (such events collectively referred to as insolvency" and such party
and its legal representative being hereinafter referred to as the insolvent
Party"), then the Venture shall continue without dissolution; and
8.2.1 All acts, consents and decisions with respect to the
Business or the management of the Venture shall thereafter be taken solely by
the remaining Party; and
8.2.2 The participation of the insolvent Party in the profits of
the venture shall be United to the Insolvent Party's interest, but the Insolvent
Party Shall be charged with, and shall be liable for 100% of any and all losses
that may be suffered by the Venture as a result of such Insolvency.
8.3 WINDING UP AND LIQUIDATION OF THE VENTURE. In the event of
dissolution of the Venture, the Venture shall wind up its affairs in an orderly
manner and shall be liquidated as quickly as circumstances allow. The remaining
assets ofthe Venture shall be applied in the following order:
8.3.1 To debts owing to creditors other than the parties to the
Venture;
8.3.2 To debts owing to Parties to the Venture; and
8.3.3 To the Parties in proportion to their then positive Capital
Accounts.
<PAGE>
9. NON-COMPETE AGREEMENT. Until the dissolution of the Ventures as
provided herein, each of the Parties, their successors, permitted assigns,
parents, subsidiaries and other affiliates, including companies in which either
Party has any interest, shall be prohibited from providing briquetting of
recycled iron production products in the States of Ohio, Michigan, Pennsylvania,
Indiana, Illinois and Missouri other than through the Venture. However, it is
understood and agreed that the Parties to the Venture are permitted, in the
States of Ohio, Michigan, Pennsylvania, Indiana, Illinois and Missouri, and in
any other locations, to perform recycling of scrap iron products by means other
than briquetting, ie., magnetic separation, screening etc.. It is further
understood and agreed that in connection with their respective Other Remediation
Activities, both of the Parties to this Agreement will obtain control; over
certain recyclable materials ('controlled Materials") which may be treated
through either thermal desorption, magnetic separation, screening or Other
Remediation Activities. It is understood and agreed that neither Party to this
Agreement is required to have such Controlled Materials remediated by the
Venture other than those Controlled Materials covered by the Exclusivity
Agreement, and that both Parties to this Agreement are permitted, at their own
discretion, to direct such Controlled Materials to be treated by either the
Venture or Other Remesliation Activities. The parties hereto acknowledge and
agree that any Part's remedy straw for a breach or threatened breach of any of
the provisions of this Section 9 would be inadequate and such breach or
threatened breach shall be per se seemed as causing irreparable harm to such
Party. Therefore, in the event of such breach or threatened breach, the Parties
hereto agree that, in addition to any available remedy at law, including but not
limited to monetary damages, an aggrieved Party, without posting any bond, shall
be entitled to obtain in arbitration, and the offending Party agrees not to
oppose the aggrieved Party's request for, equitable relief in the form of
specific enforcement, temporary restraining order, temporary or permanent
injunction, or any other equitable remedy that rnay then be available to the
aggrieved Party.
10. MISCELLANEOUS
10.1 COST AND EXPENSES. Each Party hereto agrees to pay its own costs
and expenses incurred in negotiating this Agreement and consummating the
transactions desonbed herein.
10.2 ASSIGNMENT. This Agreement rnay not be assigned by either Party
hereto without the prior written consent ofthe other Party.
10.3 ENTIRE AGEEMENT. This Agreement constitutes the entire agreement
between the Parties hereto with respect to the subject matter hereof. It
supersedes all prior and contemporaneous negotiations, letters and
understandings relating to the subject matter hereof.
10.4 AMENDMENT. This Agreement rnay not be amended, supplemented or
modified in whole or in part except by an instrument in writing signed by the
Party or Parties against whom enforcement of any such amendment, supplement or
modification is sought.
10.5 CHOICE OF LAW. This Agreement will be interpreted, construed and
<PAGE>
enforced in accordance with the laws of the State of Florida
10.6 CONSTRUCTION. The Parties hereto and their respective legal
counsel participated in the preparation of this Agreement; therefore, this
Agreement shall be construed neither against nor in favor of any of the Parties
hereto, but rather in accordance with the Air meaning thereof.
10.7 EFFECT OF WAIVER. The failure of any Party at any time or times to
require performance of any provision of this Agreement will in no marner affect
the right to enforce the same. The waiver by any Party of any breach of any
provision of this Agreement will not be construed to be a waiver by any such
Party of any succeeding breach of that provision or a waiver by such Party of
any breach of any other provision.
10.8 SEVERABILITY. The invalidity, illegality or unenforceability of
any provision or provisions of this Agreement will not affect any other
provision of this Agreement, which will remain in full force and effect, nor
will the invalidity, illegality or unenforceability of a portion of any
provision ofthis Agreernent affect the balance of such provision. In the event
that any one or more of the provisions contained in this Agreement or any
portion thereof shall for any reason be held to be invalid, illegal or
unenforceable in any respect, this Agreement shall be reformed, construed and
enforced as if such invalid, illegal or unenforceable provision had never bin
contained herein
10.9 ENFORCEMENT. All disputes, without exception, between the Parties
to this Agreement arising out of, or relating to, the interpretation or
performance pursuant the terms of this Agreement, or any breach thereof, shall
be resolved by binding arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA"), as modified by this
Section 10.9 only. Such arbitration shall take place in West Palm Beach,
Florida. This agreement to arbitrate shall be binding upon the Parties. All
disputes shall be initiated by the service of a written notice to the other
Party of intent to arbitrate setting forth the matter in controversy. Each Party
shall bear its own cost and expense of arbitration.
All arbitration pursuant to this Section 10.9 shall be heard by a
panel of three arbitrators. One arbitrator shall be appointed by each of the
Parties within five (5) days of the date of the filing of the notice of the
intent to arbitrate. The third arbitrator shall be selected by the two (2)
arbitrators selected pursuant to the foregoing sentence. Such third arbitrator
shall be selected within fifteen (15) days of the date of the filing of the
notice of intent to arbitrate. If for any reason an arbitrator is not selected
within the applicable time schedule specified in this Section, that arbitrator
shall, as soon as possible, be appointed by the West Palm Beach, Florida office
of AAA.
The arbitration hearing shall be conducted by the panel of
arbitrators in West Palm Beach, Florida or at such other place as agreed by all
the Parties. The hearing must be conducted within six (6) months of the date of
the filing of the intent to arbitrate. The decision of the arbitrators shall be
rendered no later than fourteen (14) days after the close ofthe hearing and the
decision of the arbitrators shall be final and binding upon the parties hereto
and reduced to
<PAGE>
judgement.
All time periods specified in this Section t0.9 may be extended by
the mutual consent of the Parties hereto.
Should it become necessary for either Party to enter or enforce
any award hereunder, such Party will be awarded reasonable attorneys' fees at
all trial and appellate levels, expenses and costs. Any such suit, action or
proceeding shall be brought in the courts of Palm Beach County in the State of
Florida or in the U. S. District Court for the Southern District of Florida The
Parties hereto hereby accept the exclusive jurisdiction of those courts for the
purpose of any such suit, action or proceeding.
Venue for any such action, in addition to any other venue
permitted by statute, will be Palm Beach County, Florida. The Parties hereto
hereby irrevocably waive to the fullest extent permitted by law, any objection
that any of them may now or hereafter have to the laying of venue of any such
suit, action or proceeding, and hereby further irrevocably waive any claim that
any suit, action or proceeding brought in Palm Beach County, Florida has been
brought in an inconvenient forum.
The Parties hereto acknowledge and agree that any Party's remedy
at law for a breach or threatened breach of any of the provisions of this
Agreement would be inadequate and such breach of threatened breach shall be per
se deemed as causing irreparable harm to such Party. Therefore, in the event of
such breach or threatened breach, the Parties hereto agree that, in addition to
any available remedy at law, including but not limited to monetary damages,-en
aggrieved Party, without posting any bond, shall be entitled to obtain and the
offending Party agrees not to oppose the aggrieved Party's request for equitable
relief in the form of specific enforcement, temporary restraining order,
temporary or permanent injunction, or any other equitable remedy that may then
be available to the aggrieved Party.
10.10 BINDING NATURE. This Agreement will be bi~~g upon and will inure
to the benefit of any successor or successors ofthe Parties hereto.
10.11 NO THIRD PARTV BENEFICIARIES. No person shall be deemed to
possess any third party beneficiary right pursuant to this Agreement. It is the
intent of the Parties hereto that no direct benefit to any third party is
intended or implied by the execution ofthis Agreement.
10.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the sarne instrument.
10.13 NOTICES. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered in person or sent by overnight delivery, confirmed telecopy
or prepaid first class registered or certified mail, return receipt requested,
to the following addresses, or such other addresses as are given to the other
Party to this Agreement in the manner set forth herein:
<PAGE>
If to American Remedial Technologies, Inc.:
With copies to:
If to Marbi Inc.:
With copies to:
Any such notice shall be effective when delivered in person or sent by
telecopy, one business day after being sent by overnight delivery or three
business days aRer being sent by registered or certified mail. Any of the
foregoing addresses may be changed by giving notice of such change in the
foregoing manner, except that notices for changes of addresses shall be
effective only upon receipt.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the day and year first written above.
AMERICAN REMEDLAL TECHNOLOGIES, INC.
a Florida Corporation
By:
---------------------------------
Enrique A. Tomen, President
MARBI, INC.,
a Florida Corporation
By:
---------------------------------
Mark W. Koch, President
