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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
__________________________
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File No. 1-11596
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PERMA-FIX ENVIRONMENTAL SERVICES, INC.
_____________________________________________________
(Exact Name of Registrant as Specified in its Charter)
Delaware 58-1954497
_____________________________ __________________________
(State or other jurisdiction (IRS Employer Identification
of incorporation or organization) Number)
1940 N.W. 67th Place
Gainesville, FL 32653
________________________ ________
(Address of Principal (Zip Code)
Executive Offices)
(352)373-4200
______________________________
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
___________________ _____________________
Common Stock, $.001 Par Value Boston Stock Exchange
Redeemable Warrants Boston Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Class B Warrants
<PAGE>
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 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
_____ ______
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained to the best of the 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 Form 10-K.
[ ]
The aggregate market value of the voting stock held by nonaffiliates
of the Registrant as of March 14, 1997, based on the closing sale
price of such stock as reported by NASDAQ on such day, was
$13,521,998. The Company is listed on the Small-Cap Market on
NASDAQ.
As of March 14, 1997, there were 10,095,948 shares of the
registrant's common stock, $.001 par value, outstanding, excluding
920,000 shares held as treasury stock.
Documents Incorporated by reference: None
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<TABLE>
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PERMA-FIX ENVIRONMENTAL SERVICES, INC.
INDEX
Page No.
PART I
<S> <C>
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . .1
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . 14
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . . . . . 16
Item 4A. Executive Officers of the Company. . . . . . . . . . . 18
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters. . . . . . . . . . . . . . . . 20
Item 6. Selected Financial Data . . . . . . . . . . . . . . . 21
Item 7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . 22
Item 8. Financial Statements and Supplementary Data . . . . . 36
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . 79
PART III
Item 10. Directors and Executive Officers of
the Registrant. . . . . . . . . . . . . . . . . . . 80
Item 11. Executive Compensation . . . . . . . . . . . . . . . . 83
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . 89
Item 13. Certain Relationships and Related Transactions . . . . 93
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K. . . . . . . . . . . . . . . . . . 99
<PAGE>
PART I
ITEM 1. BUSINESS
Company Overview
Perma-Fix Environmental Services, Inc. (the "Company") is a
Delaware corporation engaged in the (i) treatment, storage,
recycling and disposal of hazardous and non-hazardous waste, mixed
waste which is both low-level radioactive and hazardous, and
industrial waste management services; and (ii) consulting
engineering services to industry and government for broad-scope
environmental issues. The Company has grown through both
acquisitions and internal development. The Company's present
objective is to maximize the profitability of its existing segments
and to continue to focus on those core businesses and expertise
which will achieve this objective.
Principal Products and Services
Through its subsidiaries, the Company is in the following two
(2) lines of business: (i) waste management, including off-site and
on-site services for the treatment, storage, recycling and disposal
of hazardous, non-hazardous and mixed low-level radioactive and
hazardous wastes; and (ii) environmental engineering and consulting
services specializing in environmental management programs, agency
communications, regulatory permitting, compliance and auditing,
landfill design, field testing and characterization. The Company
services research institutions, commercial companies and
governmental agencies nationwide. Distribution channels for
services are through direct sales to customers or via
intermediaries.
The Company was incorporated in December of 1990 as a Delaware
corporation. Its executive offices are located at 1940 N.W. 67th
Place, Gainesville, Florida 32653.
A more detailed summary of the Company's industrial waste
management and consulting engineering services is provided below:
Waste Management Services: The Company provides off-site waste
storage, treatment, recycling and disposal services through its five
treatment, storage and disposal ("TSD") facility subsidiaries:
Perma-Fix Treatment Services, Inc. ("PFTS") located in Tulsa,
Oklahoma; Perma-Fix of Dayton, Inc. (PFD), located in Dayton, Ohio;
Perma-Fix of Memphis, Inc. ("PFM"), located in Memphis, Tennessee;
Perma-Fix of Ft. Lauderdale, Inc. (PFL), located in Ft. Lauderdale,
Florida; and Perma-Fix of Florida, Inc. (PFF), located in
Gainesville, Florida. PFTS is a permitted facility that provides
transportation, treatment and storage of liquid hazardous and non-
hazardous wastes, stabilization of liquid and solid drum residues
and disposal of non-hazardous liquid waste, including characteristic
hazardous liquid waste in which the hazardous characteristics are
<PAGE>
removed, by injection into a deep well located at PFTS' facility.
Prior to disposal, all hazardous liquids are processed in a manner
designed to remove or eliminate the hazardous characteristics of the
liquids. PFTS is permitted to dispose in the deep well non-
hazardous waste liquids (including, but not limited to,
characteristic waste liquids for which the hazardous characteristics
have been removed). The deep well has been specifically designed
and constructed for this purpose.
PFD operates a permitted hazardous waste treatment and storage
facility to collect and treat oily waste waters and used oil from
both small and large quantity generators and provides hazardous
waste treatment services for collecting and processing organic
solvents, sludges, and solids for use as substitute fuels in cement
kilns.
PFM is a permitted facility that provides transportation,
storage, treatment and disposal services to hazardous and non-
hazardous waste generators throughout the United States. PFM
operates a hazardous waste storage facility that primarily blends
and processes hazardous and non-hazardous waste liquids, solids and
sludges into substitute fuel or as a raw material substitute in
cement kilns that have been specially permitted for the processing
of hazardous and non-hazardous wastes.
On January 27, 1997, PFM sustained an explosion and fire at its
TSD facility in Memphis, Tennessee, which resulted in damage to
certain hazardous waste storage tanks located on the facility and
caused certain limited contamination at the facility. From the date
of the fire through the date of this report, this facility has not
been operational. However, PFM has accepted and will continue to
accept waste for processing and disposal, but has arranged for other
facilities owned by the Company or subsidiaries of the Company or
others not affiliated with the Company to process such waste. The
utilization of other facilities to process such waste results in
higher costs to PFM than if PFM were able to store and process such
waste at its Memphis, Tennessee, TSD facility, along with the
additional handling and transportation costs associated with these
activities. PFM is in the process of repairing and/or removing the
damaged storage tanks and any contamination resulting from the
occurrence, and, as of the date of this report, anticipates that PFM
will be able to begin certain operations at the facility by the end
of April 1997. The extent of PFM's activities at the facility, once
operations are renewed, are presently being evaluated by the
Company. The Company and PFM have property and business
interruption insurance and have provided notice to its carriers of
such loss. Although there are no assurances, the Company presently
believes that its property insurance will cover any property loss
suffered by PFM at the facility as a result of such occurrence. The
Company is in the process of determining the amount of business
interruption insurance that may be recoverable by PFM as a result
thereof, if any. See "Property," "Management's Discussion and
<PAGE>
Analysis of Financial Condition and Results of Operations" and Note
15 to Notes to Consolidated Financial Statements. Certain
statements contained in this paragraph are forward-looking
statements, and (i) PFM may be unable to begin operations as stated
above if repair, removal or restoration of the damaged tanks are
delayed beyond the date stated or any federal, state or local
governmental authority institutes action against PFM prohibiting PFM
from beginning operations or delays issuance of the approvals, if
any, necessary for PFM to begin operations, or (ii) the insurance
carrier determines that property loss coverage is not available or
is available only in limited amounts or contests the amount of PFM's
claim.
PFL is a permitted facility that collects and treats hazardous
waste waters, oily waste waters, used motor oils and other waste
petroleum products. Recycled waste oil is sold as "on-
specification" fuel. PFL also provides underground storage tank
cleaning and removal support services, and other tank and pit
cleaning activities that complement the facility's treatment
capabilities.
PFF specializes in the processing and treatment of certain
types of low-level mixed radioactive and hazardous wastes. Its four
basic services include the treatment and processing of waste Liquid
Scintillation Vials (LSVs), the processing and handling of other
mixed and radioactive wastes, collection and processing of organic
solvents and sludges for fuel blending, and management of various
other hazardous and non-hazardous wastes. The LSVs are generated
primarily by institutional research agencies and biotechnical
companies. These wastes contain mixed (low-level) radioactive
materials and hazardous waste (flammable) constituents. This
business began in 1983 and to this date has processed over one
million ft3 of LSV waste. Management believes that PFF controls
approximately 80% of the available LSV business in the country. The
business has expanded into receiving and handling other low-level
radioactive and mixed wastes primarily from the nuclear utilities,
the U.S. Department of Energy ("USDOE") and other government
facilities. PFF manages the activities at the facility under the
jurisdiction of the State of Florida Office of Radiation Control and
the State Department of Environmental Protection.
Through its wholly-owned subsidiary, Industrial Waste
Management, Inc. ("IWM"), located in St. Louis, Missouri, the
Company is engaged in supplying and managing non-hazardous and
hazardous waste to be used by cement plants as a substitute fuel or
as a source of raw materials used in the production of cement.
The Company also provides on-site (at the generator's site)
waste treatment services to convert certain types of characteristic
hazardous wastes into non-hazardous waste by removing those
characteristics which categorize such waste as "hazardous" and
treats non-hazardous waste as an alternative to off-site waste
<PAGE>
treatment and disposal methods. These services are provided by the
Company's wholly-owned subsidiaries, Perma-Fix, Inc. ("PFI") and
Reclamation Systems, Inc. ("RSI"), through "Service Centers".
Service Centers are located in Tulsa, Oklahoma, and Albuquerque, New
Mexico. PFI does not treat on-site waste that is specifically
listed as hazardous waste by the EPA under the Resource Conservation
and Recovery Act of 1976, as amended ("RCRA"), but treats only non-
hazardous waste and characteristic waste deemed hazardous under
RCRA.
For 1996, the Company's waste management services business
accounted for approximately 82.1% of the Company consolidated
revenues, as compared to approximately 82.7% for 1995.
Consulting Engineering Services: The Company provides
environmental engineering and regulatory compliance consulting
services through Schreiber, Grana & Yonley, Inc. ("SG&Y") located
in St. Louis, Missouri, and Mintech, Inc. ("Mintech") located in
Tulsa, Oklahoma, with a field office in Kansas City, Kansas. SG&Y
specializes in environmental management programs, permitting,
compliance and auditing, in addition to landfill design, field
investigation, testing and monitoring. SG&Y clients are primarily
industrial, and include extensive work in the cement manufacturing
industry. Mintech specializes in environmental and geotechnical
consulting, engineering, geology, hydrogeology and geophysics,
including evaluating, selecting and implementing the appropriate
environmental solutions to problems involving soil and water. In
addition, Mintech personnel routinely provide training services
required under RCRA and the Superfund Amendments and Reauthorization
Act ("SARA") to private industry, governmental agencies and military
installations. During 1996 environmental engineering and regulatory
compliance consulting services accounted for approximately 17.9% of
the Company's total revenue, as compared to 17.3% in 1995.
Segment Information and Foreign and Domestic Operations and Export
Sales
During 1996, the Company was engaged in two industry segments:
(i) treatment, recycling and disposal of hazardous and non-hazardous
wastes; and (ii) environmental engineering and consulting services.
See Note 12 of Notes to Consolidated Financial Statements included
in Item 8 of this report. Most of the Company's activities were
conducted in the Southeast, Southwest and Midwest. The Company had
no foreign operations or export sales during 1996.
Importance of Patents and Trademarks, or Concessions Held
The Company does not believe that it is dependent on any
particular patent or trademark in order to operate its business or
any significant segment thereof. The Company has received
registration through the year 2000 for the service mark "Perma-Fix"
by the U.S. Patent and Trademark office.
<PAGE>
The Company owns patents covering various systems for the
recycling of waste materials in cement kilns. The Company has an
agreement with Continental Cement Company which provides for the
payment of royalties to Continental at such time as one or more of
the above patents are licensed to other cement manufacturers for the
recycling of waste materials.
The Company does not believe the on-site waste treatment
processes utilized by PFI are patentable. The Company does,
however, believe that its level of expertise in utilizing such
processes is substantial, and, therefore, maintains such processes
as a trade secret of the Company. The Company maintains a policy
whereby key employees of PFI who are involved with the
implementation of the treatment processes utilized by PFI sign
confidentiality agreements with respect to non-disclosure of such
processes.
Permits and Licenses
The Company's business is subject to extensive evolving and
increasingly stringent federal, state and local environmental laws
and regulations. Such federal, state and local environmental laws
and regulations govern the Company's activities regarding the
treatment, storage, recycling, disposal and transportation of
hazardous, non-hazardous and radioactive wastes, and require the
Company and/or its subsidiaries to obtain and maintain permits,
licenses and/or approvals in order to conduct certain of their waste
activities. Failure to obtain and maintain such permits or
approvals would have a material adverse effect on the Company, its
operations and financial condition. Moreover, as the Company
expands its operations it may be required to obtain additional
approvals, licenses or permits, and there can be no assurance that
the Company will be able to do so.
PFTS is presently operating its hazardous waste storage and
treatment activities under a RCRA Part B permit. It operates its
deepwell injection disposal facility under a non-hazardous waste
permit issued by the State of Oklahoma.
PFM operates under a final RCRA permit relating to its
hazardous waste drum storage activities and interim status RCRA
permits to store in tanks the hazardous waste which PFM blends and
processes into substitute fuels. PFM has submitted for renewal its
final RCRA permit.
PFF operates its hazardous and low-level radioactive waste
activities under a RCRA Part B permit and a radioactive materials
license. PFF's low-level radioactive license was issued on August
18, 1995 and amended on March 13 and August 15, 1996 for expanded
radioactive waste management activities. These include larger
numbers of radioisotopes, increased radioactive chemical/physical
forms, research and development, and holding times of up to three
(3) years.
<PAGE>
PFD operates a hazardous and non-hazardous waste treatment and
storage facility under a RCRA Part B permit granted January 3, 1996.
The Company believes that its TSD facilities presently have
obtained all approvals, licenses and permits necessary to enable it
to conduct its business as it is presently conducted. The failure
of the Company's TSD facilities to renew any of their present
approvals, licenses and permits, or the termination of any such
approvals, licenses or permits, could have a material adverse effect
on the Company, its operations and financial condition.
The Company believes that its on-site waste treatment services
performed by PFI does not require federal environmental permits
provided certain conditions are met, and PFI has received written
verification from each state in which it is presently operating that
no such permit is required provided certain conditions are met.
There can be no assurance that states in which the Company's waste
facilities presently do business, other states in which the
Company's waste facilities may do business in the future, or the
federal government will not change policies or regulations requiring
PFI to obtain permits to carry on its on-site activities.
Seasonality
Management believes that the Company experiences a seasonal
slowdown during the winter months extending from late November
through early March. The seasonality factor is a combination of the
inability to generate consistent billable hours in the consulting
engineering segment, along with poor weather conditions in the
central plains and midwestern geographical markets it serves for on-
site and off-site services, resulting in a decrease in revenues and
earnings during such period.
Dependence Upon a Single or Few Customers
The majority of the Company's revenues for fiscal 1996 have
been derived from hazardous and non-hazardous waste management
services provided to a variety of industrial and commercial
customers. The Company's customers are principally engaged in
research, biotechnical development, transportation, chemicals, metal
processing, electronic, automotive, petrochemical, refining and
other similar industries, in addition to government agencies that
include the USDOE, USDOD, USDA, VA and other federal, state and
local agencies. The Company is not dependent upon a single
customer, or a few customers, the loss of any one or more of which
would have a material adverse effect on the Company, and the Company
during 1996 did not make sales to any single customer that in the
aggregate amount represented more than ten percent (10%) of the
Company's consolidated revenues.
Competitive Conditions
The Company competes with numerous companies that are able to
provide one or more of the environmental services offered by the
Company and many of which may have greater financial, human and
<PAGE>
other resources than the Company. However, the Company believes
that the range of waste management and environmental consulting,
treatment, recycling and remediation services it provides affords
it a competitive advantage with respect to certain of its more
specialized competitors. The Company believes that the treatment
processes it utilizes offer a cost savings alternative to more
traditional remediation and disposal methods offered by the
Company's competitors.
Many other companies presently provide services similar to
those provided by the Company (except in the low-level radioactive
and hazardous mixed waste area, which has only a few competitors),
and there continues to be intense competition within certain
segments of the waste management industry, which has resulted in
reduced gross margin levels for those segments. Competition in the
waste management industry is likely to increase as the industry
continues to mature, as more companies enter the market and expand
the range of services which they offer and as the Company and its
competitors move into new geographic markets. The Company believes
that there are no formidable barriers to entry into the on-site
treatment business within which PFI operates. The Company believes
that the permitting requirements, and the cost to obtain such
permits, are barriers to the entry of hazardous waste TSD facilities
and radioactive activities as presently operated by the Company
through its subsidiaries. Certain of the non-hazardous waste
operations of the Company, however, do not require such permits and,
as a result, entry into these non-hazardous waste businesses would
be easier. In addition, at present there is only one other facility
in the United States that provides low-level radioactive and
hazardous waste recycling of scintillation vials, which requires
both a radioactive permit and a hazardous waste permit. If the
permit requirements for both hazardous waste storage, treatment and
disposal activities and/or the handling of low level radioactive
matters are eliminated or made easier to obtain, such would allow
more companies to enter into these markets and provide greater
competition to the Company.
In the on-site waste treatment service area, the Company
believes that the major competition to its services is the continued
utilization of traditional off-site disposal methods such as
landfilling. As the viability of the Company's on-site treatment
process is demonstrated in the market, the Company believes that the
potential to reduce costs and the ability to limit potential
liability will persuade waste generators to utilize the Company's
services. In the future, the Company believes that it will face
direct competition as processes such as those applied by the Company
are utilized by competitors.
The Company believes that it is a significant participant in
the delivery of off-site waste treatment services in the Southeast,
Midwest and Southwest. The Company competes with TSD facilities
operated by national, regional and independent environmental
<PAGE>
services firms located within a several hundred mile radius of the
Company's facilities. The TSD with radiological activities works
on a nationwide basis, to include Puerto Rico, Guam, Samoa, the
Virgin Islands and Antarctica.
The Company's competitors for remediation services include
national and regional environmental services firms that may have
larger environmental remediation staffs and greater resources than
the Company. The Company recognizes its lack of technical and
financial resources necessary to compete for larger remediation
contracts and therefore, presently concentrates on remediation
services projects within its existing customer base or projects in
its service area which are too small for companies without a
presence in the market to perform competitively.
Environmental engineering and consulting services provided by
the Company through Mintech and SG&Y involve competition with larger
engineering and consulting firms. The Company believes that it is
able to compete with these firms based on its established reputation
in its market areas and its expertise in several specific elements
of environmental engineering and consulting such as environmental
applications in the cement industry.
Capital Spending and Certain Environmental Expenditures
During 1996, the Company spent approximately $2,082,000 in
capital expenditures, which was principally for the expansion and
improvements to the operations, and to comply with federal, state
and local environmental laws, rules and regulations at its TSD
facilities. For 1997, the Company has budgeted $1,250,000 for
capital expenditures to maintain permit compliance and improve
operations and $350,000 to comply with federal, state and local
regulations in connection with remediation activities at two
locations. As with 1996, these ongoing environmental expenditures
were not significant, with the exception of remedial activities at
two locations. The two facilities where these expenditures will be
made are Environmental Processing Services, Inc. ("EPS"), a former
RCRA storage and recycling facility, and also the remedial activity
at the PFM facility. EPS operated its facility on property that it
leased from an affiliate of EPS ("Leased Property").
In June 1994, the Company acquired from Quadrex Corporation
and/or a subsidiary of Quadrex Corporation (collectively, "Quadrex")
three TSD companies, including the Dayton, Ohio, PFD facility. The
former owners of PFD had merged EPS with PFD, which was subsequently
sold to Quadrex. The Company, through its acquisition of PFD in
1994 from Quadrex, was indemnified by Quadrex for costs associated
with remediating the Leased Property, which entails remediation of
soil and/or groundwater restoration. The Leased Property used by
EPS to operate its facility is separate and apart from the property
on which PFD's facility is located. During 1995, in conjunction
with the bankruptcy filing by Quadrex, the Company was required to
advance $250,000 into a trust fund to support remedial activities
<PAGE>
at the Leased Property used by EPS, which was subsequently increased
to $343,000. As discussed in Note 7 to the consolidated financial
statements included in Item 8, the Company has accrued approximately
$925,000 for the estimated costs of remediating the Leased Property
used by EPS, which is in excess of the current estimate for
completion and will extend for a period of three (3) to five (5)
years.
The PFM facility is situated in an industrial setting in
Memphis, Tennessee, with numerous industrial and commercial
businesses proximate. By and from the acquisition of PFM, the
Company assumed certain liabilities to remediate gasoline
contaminated groundwater and investigate, under the hazardous and
solid waste amendments, potential areas of soil contamination on its
property. Prior to the Company's ownership of PFM, the prior owners
installed monitoring and treatment equipment to restore the
groundwater to acceptable standards in accordance with federal,
state and local authorities. As discussed in Note 7 to the
Consolidated Financial Statements included in Item 8, the Company
has accrued approximately $1,160,000 for the estimated costs of this
continuing restoration, which is in excess of the current estimate
and will extend for a period of five (5) to ten (10) years.
As previously discussed, due to a fire and explosion at PFM's
Memphis, Tennessee, TSD facility in January 1997, the Company
anticipates, although there is no assurance, that its property
insurance will cover substantially all of the costs to repair or
remove tanks damaged at the facility as a result of such occurrence.
The Memphis facility has not been operational since the date of such
occurrence. However, PFM has accepted and will continue to accept
waste for processing and disposal, but has arranged for other
facilities owned by the Company or subsidiaries of the Company or
others not affiliated with the Company to process such waste. The
Company is in the process of determining the amount of business
interruption insurance that may be recoverable by PFM as a result
of such occurrence, if any. See "BUSINESS--Waste Management
Services" for further discussion as to such occurrence and certain
forward-looking statements contained herein and cautionary
statements relating thereto.
In addition, the Company has budgeted $1,250,000 for capital
expenditures during 1997 in order to upgrade its TSD facilities to
reduce the cost of waste processing and handling, expand the range
of wastes that can be accepted for treatment and processing and to
maintain permit compliance requirements. However, there is no
assurance that the Company will have the funds available for such
budgeted expenditures. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and
Capital Resources of the Company".
<PAGE>
Number of Employees
As of December 31, 1996, the Company and its subsidiaries
employed approximately 255 persons, of which approximately 61 were
assigned to the Company's engineering and consulting segment and
approximately 189 to the waste management segment. The Company is
not a party to any collective bargaining agreement covering its
employees. The Company believes its relationship with its employees
is satisfactory.
Governmental Regulation
The Company and its customers are subject to extensive and
evolving environmental laws and regulations administered by the EPA
and various other federal, state and local environmental, safety and
health agencies. These laws and regulations largely contribute to
the demand for the Company's services. Although the Company's
customers remain responsible by law for their environmental
problems, the Company must also comply with the requirements of
those laws applicable to its services. Because the field of
environmental protection is both relatively new and rapidly
developing, the Company cannot predict the extent to which its
operations may be affected by future enforcement policies as applied
to existing laws or by the enactment of new environmental laws and
regulations. Moreover, any predictions regarding possible liability
are further complicated by the fact that under current environmental
laws the Company could be jointly and severally liable for certain
activities of third parties over whom the Company has little or no
control. Although management believes that the Company is currently
in substantial compliance with all applicable laws and regulations,
the Company could be subject to fines, penalties or other
liabilities or could be adversely affected by existing or
subsequently enacted laws or regulations. The principal
environmental laws affecting the Company and its customers are
briefly discussed below.
The Resource Conservation and Recovery Act of 1976, as amended
("RCRA"). RCRA and its associated regulations establish a strict
and comprehensive regulatory program applicable to hazardous waste.
The EPA has promulgated regulations under RCRA for new and existing
treatment, storage and disposal facilities including incinerators,
storage and treatment tanks, storage containers, storage and
treatment surface impoundments, waste piles and landfills. Every
facility that treats, stores or disposes of specified minimum
amounts of hazardous waste must obtain a RCRA permit or must obtain
interim status from the EPA, or a state agency which has been
authorized by the EPA to administer its program, and must comply
with certain operating, financial responsibility and closure
requirements. RCRA provides for the granting of interim status to
facilities that allows a facility to continue to operate by
complying with certain minimum standards pending issuance or denial
of a final RCRA permit.
<PAGE>
Boiler and Industrial Furnace Regulations under RCRA ("BIF
Regulations"). BIF Regulations require boilers and industrial
furnaces, such as cement kilns, to obtain permits or to qualify for
interim status under RCRA before they may use hazardous waste as
fuel. If a boiler or industrial furnace does not qualify for
interim status under RCRA, it may not burn hazardous waste as fuel
or use such as raw materials without first having obtained a final
RCRA permit. In addition, the BIF Regulations require 99.99%
destruction of the hazardous organic compounds used as fuels in a
boiler or industrial furnace and impose stringent restrictions on
particulate, carbon monoxide, hydrocarbons, toxic metals and
hydrogen chloride emissions.
The Safe Drinking Water Act, as amended (the "SDW Act"),
regulates, among other items, the underground injection of liquid
wastes in order to protect usable groundwater from contamination.
The SDW Act established the Underground Injection Control Program
("UIC Program") that provides for the classification of injection
wells into five classes. Class I wells are those which inject
industrial, municipal, nuclear and hazardous wastes below all
underground sources of drinking water in an area. Class I wells are
divided into non-hazardous and hazardous categories with more
stringent regulations imposed on Class I wells which inject
hazardous wastes. Operators of Class I hazardous waste injection
wells that can demonstrate to the satisfaction of the EPA that the
wastes will not migrate from the injection zone for 10,000 years are
able to receive significant exemptions from these regulations. PFTS
does not have and is not expected to receive such an exemption and
therefore only injects non-hazardous liquid waste and certain types
of hazardous liquid waste streams which have been treated prior to
disposal in compliance with applicable regulations or for which no
treatment has been prescribed by applicable law.
The Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA", also referred to as the "Superfund
Act"). CERCLA governs the clean-up of sites at which hazardous
substances are located or at which hazardous substances have been
released or are threatened to be released into the environment.
CERCLA authorizes the EPA to compel responsible parties to clean up
sites and provides for punitive damages for noncompliance. CERCLA
imposes joint and several liability for the costs of clean-up and
damages to natural resources.
Health and Safety Regulations. The operation of the Company's
environmental activities is subject to the requirements of the
Occupational Safety and Health Act ("OSHA") and comparable state
laws. Regulations promulgated under OSHA by the Department of Labor
require employers of persons in the transportation and environmental
industries, including independent contractors, to implement hazard
communications, work practices and personnel protection programs in
order to protect employees from equipment safety hazards and
exposure to hazardous chemicals.
<PAGE>
Atomic Energy Act. The Atomic Energy Act of 1954 governs the
safe handling and use of Source, Special Nuclear and Byproduct
materials in the U.S. and its territories. This act authorized the
Atomic Energy Commission (now the Nuclear Regulatory Commission) to
enter into "Agreements with States to carry out those regulatory
functions in those respective states except for Nuclear Power Plants
and federal facilities like the VA hospitals and the USDOE
operations. On July 1, 1964, the State of Florida signed this
Agreement. Thus, the State of Florida (with the USNRC oversight),
Office of Radiation Control, regulates the radiological program of
the PFF facility.
Other Laws. The Company's activities are subject to other
federal environmental protection and similar laws, including,
without limitation, the Clean Water Act, the Clean Air Act, the
Hazardous Materials Transportation Act and the Toxic Substances
Control Act. Many states have also adopted laws for the protection
of the environment which may affect the Company, including laws
governing the generation, handling, transportation and disposition
of hazardous substances and laws governing the investigation and
clean-up of, and liability for, contaminated sites. Some of these
state provisions are broader and more stringent than existing
federal law and regulations. The failure of the Company to conform
its services to the requirements of any of these other applicable
federal or state laws could subject the Company to substantial
liabilities which could have a material adverse affect on the
Company, its operations and financial condition. In addition to
various federal, state and local environmental regulations, the
Company's hazardous waste transportation activities are regulated
by the U.S. Department of Transportation, the Interstate Commerce
Commission and transportation regulatory bodies in the states in
which it operates. The Company cannot predict the extent to which
it may be affected by any law or rule that may be enacted or
enforced in the future, or any new or different interpretations of
existing laws or rules.
Potential Environmental Liability and Insurance
The nature of the Company's business exposes it to significant
risk of liability for damages. Such potential liability could
involve, for example, claims for clean-up costs, personal injury or
damage to the environment in cases where the Company is held
responsible for the release of hazardous materials; claims of
employees, customers or third parties for personal injury or
property damage occurring in the course of the Company's operations;
and claims alleging negligence or professional errors or omissions
in the planning or performance of its services or in the providing
of its products. In addition, the Company could be deemed a
responsible party for the costs of required clean-up of any property
which may be contaminated by hazardous substances generated by the
Company or transported by the Company to a site selected by the
Company, including properties owned or leased by the Company. The
<PAGE>
Company could also be subject to fines and civil penalties in
connection with violations of regulatory requirements.
Prior to the time of acquisition of PFM by the Company,
gasoline has been detected in the groundwater at the PFM facility,
and remediation of such gasoline is currently underway. See
"BUSINESS -- Certain Environmental Expenditures". The PFM facility
is situated in the vicinity of the Memphis Military Defense Depot
(the "Defense Facility"), which Defense Facility is listed as a
Superfund Site and is adjacent to the Allen Well Field utilized by
Memphis Light, Gas & Water, a public water supply utilized in
Memphis, Tennessee. Chlorinated compounds have previously been
detected in the groundwater beneath the Defense Facility, as well
as in very limited amounts in certain production wells in the
adjacent Allen Well Field. Very low concentrations of certain
chlorinated compounds have also been detected in the groundwater
beneath the PFM facility and the possible presence of these
compounds at PFM is currently being investigated. Based upon a
study performed by the Company's environmental engineering group,
the Company does not believe the PFM facility is the source of the
chlorinated compounds in a limited number of production wells in the
Allen Well Field and, as a result, does not believe that the
presence of the low concentrations of chlorinated compounds at the
PFM facility will have a material adverse effect upon the Company.
The Company currently has $1 million of general liability
insurance coverage with $2 million in the aggregate plus $6 million
excess umbrella coverage. In addition, the Company carries
contractors' pollution and professional liability coverage of $1
million per occurrence and $2 million in the aggregate. The Company
is required by EPA regulations to carry environmental impairment
liability insurance providing coverage for damages on a claims-made
basis in amounts of at least $1 million per occurrence and $2
million per year in the aggregate. To meet the requirements of
customers, the Company has doubled these coverage amounts to $2
million per occurrence and $4 million per year in the aggregate.
In particular, the PFTS deep well carries liability insurance of $4
million per occurrence and $8 million per year in the aggregate.
The cost of the Company's insurance is substantial. Although the
Company believes that its insurance coverage is presently adequate
and similar to or greater than the coverage maintained by other
companies of its size in the industry, there can be no assurance
that liabilities that may be incurred by the Company will be covered
by its insurance or that the dollar amount of such liabilities that
are covered will not exceed the Company's policy limits.
Furthermore, there can be no assurance that the Company will be able
to continue to obtain adequate or required insurance coverage or,
if obtainable, to be able to purchase it at affordable rates. If
the Company has difficulty in obtaining such coverage, it could be
at a competitive disadvantage with other companies and/or may be
unable to continue certain of its operations.
<PAGE>
ITEM 2. PROPERTIES
</TABLE>
<TABLE>
<CAPTION>
The following table describes the principal properties
currently operated by the Company:
Location Entity Own/Lease Description
________ ______ _________ ___________
<S> <C> <C> <C>
Dayton, OH Perma-Fix of Dayton, Inc. Own 27,000 sq. ft. of
office and ware-
house space on
25.6 acres
Davie, FL Perma-Fix of Ft. Lauderdale, Own Office and plant on
Inc. 2.5 acres
Davie, FL Perma-Fix of Ft. Lauderdale, Lease 2,115 sq. ft. of
Inc. office space
Gainesville, Perma-Fix of Florida, Inc. Own 45,000 sq. ft. of
FL office and ware-
house space on 7.5
acres
Memphis, TN Perma-Fix of Memphis, Inc. Own 6,000 sq. ft. of
office space on
9.8 acres
Memphis, TN Perma-Fix of Memphis, Inc. Own 3,000 sq. ft. of
office and ware-
house space on 2
acres
Tulsa, OK Perma-Fix Treatment Services, Own 1,950 sq. ft. of
Inc. office space on 25
acres
Tulsa, OK Perma-Fix Treatment Services, Lease(1) 13,541 sq. ft. of
Inc. office and ware-
house space on 10
acres
Atlanta, GA Perma-Fix Environmental Lease 480 sq. ft. of office
Services, Inc. space
Tulsa, OK Mintech, Inc. Lease 8,707 sq. ft. of
office space
Albuquerque, Perma-Fix of New Mexico Lease 5,236 sq. ft. of
NM Inc. warehouse space
Fenton, MO Schrieber, Yonley & Lease 13,000 sq. ft. of
Associates office space
Kansas City, Perma-Fix of Memphis, Lease 5,000 sq. ft. of
MO Inc. office and ware-
house space
____________________
<FN>
(1) Lease provides an option to purchase for a nominal amount at
the end of the lease term.
</FN>
</TABLE>
The Company believes that the above facilities currently
provide adequate capacity for the Company's operations and that
additional facilities are readily available in the regions in which
the Company currently operates.
The facility owned by Perma-Fix of Memphis, Inc. ("PFM") that
is permitted to store and treat hazardous waste and at which fuels
are blended has not been operational since January 27, 1997, the
date that an explosion and fire occurred at the facility. The
<PAGE>
Company anticipates that PFM's facility will be able to resume
operations during the second quarter of 1997. The extent of PFM's
activities at this facility once operations are resumed is presently
being evaluated by the Company. See "BUSINESS -- Waste Management
Services" for further discussion of such occurrence and certain
forward-looking statements contained herein and cautionary language
relating thereto.
ITEM 3. LEGAL PROCEEDINGS
During September 1994, Perma-Fix of Memphis, Inc. (PFM),
formerly American Resource Recovery Corporation ("ARR"), was sued
by Community First Bank ("Community First") to collect a note in the
principal sum of $341,000 that was allegedly made by ARR to CTC
Industrial Services, Inc. ("CTC") in February 1987 (the "Note"), and
which was allegedly pledged by CTC to Community First in December
1988 to secure certain loans to CTC. This lawsuit, styled Community
First Bank v. American Resource Recovery Corporation, was instituted
on September 14, 1994, and is pending in the Circuit Court, Shelby
County, Tennessee. The Company was not aware of either the Note or
its pledge to Community First at the time of the Company's
acquisition of PFM in December 1993. The Company intends to
vigorously defend itself in connection therewith. PFM has filed a
third party complaint against Billie Kay Dowdy, who was the sole
shareholder of PFM immediately prior to the acquisition of PFM by
the Company, alleging that Ms. Dowdy is required to defend and
indemnify the Company and PFM from and against this action under the
terms of the agreement relating to the Company's acquisition of PFM.
Ms. Dowdy has stated in her answer to the third party complaint that
if the Note is determined to be an obligation enforceable against
PFM, she would be liable to PFM, assuming no legal or equitable
defenses.
In May 1995, PFM, a subsidiary of the Company, became aware
that the U.S. District Attorney for the Western District of
Tennessee and the Department of Justice were investigating certain
prior activities of W. R. Drum Company, its successor, First
Southern Container Company, and any other facility owned or
operated, in whole or in part, by Johnnie Williams. PFM used W.
R. Drum Company to dispose of certain of its used drums. In May
1995, PFM received a Grand Jury Subpoena which demanded the
production of any documents in the possession of PFM pertaining to
W. R. Drum Company, First Southern Container Company, or any other
facility owned or operated, and holder in part, by Johnnie Williams.
PFM complied with the Grand Jury Subpoena. Thereafter, in September
of 1995, PFM received another Grand Jury Subpoena for documents from
the Grand Jury investigating W. R. Drum Company, First Southern
Container Company and/or Johnnie Williams. PFM complied with the
Grand Jury Subpoena. In December 1995, representatives of the
Department of Justice advised PFM that it was also currently a
subject of the investigation involving W. R. Drum Company, First
Southern Container Company, and/or Johnnie Williams. Since that
<PAGE>
time, however, PFM has had no contact with representatives of either
the United States District Attorney's office for the Western
District of Tennessee or the Department of Justice, and is not aware
of why it is also a subject of such investigation. In accordance
with certain provisions of the Agreement and the Plan of Merger
relating to the prior acquisition of PFM, on or about January 2,
1996, PFM notified Ms. Billie K. Dowdy of the foregoing, and advised
Ms. Dowdy that the Company and PFM would look to Ms. Dowdy to
indemnify, defend and hold the Company and PFM harmless from any
liability, loss, damage or expense incurred or suffered as a result
of, or in connection with, this matter.
In addition to the above matters and in the normal course of
conducting its business, the Company is involved in various other
litigation. The Company is not a party to any litigation or
governmental proceeding which its management believes could result
in any judgments or fines against it that would have a material
adverse affect on the Company's financial position, liquidity or
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of stockholders ("Annual Meeting")
was held on December 12, 1996. At the Annual Meeting, the following
matters were voted on and approved by the shareholders:
1. The election of four (4) directors to serve until the
next annual meeting of stockholders or until their
respective successors are duly elected and qualified;
2. Approval of the Third Amendment to the Company's 1992
Outside Directors Stock Option and Incentive Plan.
3. Approval of the Company's 1996 Employee Stock Purchase
Plan.
4. Approval of an amendment to the Company's Certificate of
Incorporation increasing the authorized shares of the
Company's common stock from 20,000,000 shares to
50,000,000 shares.
<PAGE>
<TABLE>
<CAPTION>
At the Annual Meeting the four (4) nominated directors were
elected to serve until the next annual meeting of stockholders. The
directors elected at this annual meeting of stockholders and the
votes cast for, against and abstentions for each director are as
follows:
Abstentions
Withhold and Broker
For Authority Non-Votes
_________ _________ _________
<S> <C> <C> <C>
Dr. Louis F. Centofanti 7,993,533 61,952 -
Mark A. Zwecker 7,994,533 60,952 -
Steve Gorlin 7,993,533 61,952 -
Jon Colin 7,991,233 64,252 -
</TABLE>
Also, at the Annual Meeting the shareholders approved the Third
Amendment to the Company's 1992 Outside Directors Stock Option and
Incentive Plan, which, among other things, provided that each
eligible director shall receive, at such eligible director's option,
either sixty-five percent (65%) or one hundred percent (100%) of the
fee payable to such director for services rendered to the Company
as a member of the Board in Common Stock of the Company. In either
case, the number of shares of common stock of the Company issuable
to the eligible director shall be determined by valuing the common
stock of the Company at seventy-five percent (75%) of its fair
market value as defined by the Plan. Also approved at the Annual
Meeting was the adoption of the Perma-Fix Environmental Services,
Inc. 1996 Employee Stock Purchase Plan. This plan provides that
eligible employees of the Company and its subsidiary, who wish to
become stockholders, an opportunity to purchase common stock of the
Company through payroll deductions. The maximum number of shares
of common stock of the Company that may be issued under the plan
will be 500,000 shares. The plan provides that shares will be
purchased two (2) times per year and that the exercise price per
share shall be eighty-five percent (85%) of the market value of each
such share of common stock on the offering date on which such offer
commences or on the exercise date on which the offer period expires,
whichever is lowest. The final proposal approved at the Annual
Meeting was the amendment to the Company's Restated Certificate of
Incorporation, as amended, to increase from 20,000,000 to 50,000,000
shares the Company's authorized common stock, par value $.001 per
share.
<TABLE>
<CAPTION>
The votes for, against and abstentions and broker non-votes are
as follows:
Abstentions
and Broker
For Against Non-Votes
_________ _______ ________
<S> <C> <C> <C>
Approval of Third Amend- 5,784,580 309,415 1,961,490
ment to the 1992 Out-
side Directors Stock
Option and Incentive
Plan
Approval of the 1996 4,318,672 160,550 3,576,263
Employee Stock Pur-
chase Plan
Amendment to the Restated 6,868,750 293,685 893,050
Certificate of Incor-
poration increasing the
number of authorized
shares of common stock
from 20,000,000 to
50,000,000
</TABLE>
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
The following table sets forth, as of the date hereof,
information concerning the executive officers of the Company:
<S> <C>
Dr. Louis F. Centofanti Dr. Centofanti has served as Chairman of
Chairman of the Board, the Board since formation of the Company
President and in February 1991. Dr. Centofanti also
Chief Executive Officer served as President and Chief Executive
Officer of the Company from February 1991
until September 1995, at which time
Mr. Robert W. Foster, Jr. ("Foster") was
elected as Chief Executive Officer. Upon
the resignation of Foster in March 1996,
Dr. Centofanti was again elected to serve
as President and Chief Executive Officer
of the Company and continues as Chairman
of the Board. From 1985 until joining
the Company, Dr. Centofanti served as
Senior Vice President of USPCI, Inc.
("USPCI"), a large integrated hazardous
waste management company, where he was
responsible for managing the treatment,
reclamation and technical groups within
the company. In 1981, he founded PPM,
Inc., a hazardous waste management
company specializing in the treatment of
PCB contaminated oils which was sold to
USPCI in 1985. From 1978 to 1981,
Dr. Centofanti served as Regional
Administrator of the Department of Energy
for the southeastern region of the United
States. Dr. Centofanti has a Ph.D. and a
M.S. in Chemistry from the University of
Michigan, and a B.S. in Chemistry from
Youngstown State University.
Mr. Richard T. Kelecy Mr. Kelecy was elected Chief Financial
Chief Financial Officer Officer in September 1995. He previously
Age: 41 served as Chief Accounting Officer and
Treasurer of the Company, since July
1994. From 1992 until June 1994,
Mr. Kelecy was Corporate Controller and
Treasurer for Quadrex Corporation
("Quadrex"). In February 1995, Quadrex
filed for bankruptcy protection under the
federal bankruptcy laws. From 1990 to
1992 Mr. Kelecy was Chief Financial
Officer for Superior Rent-a-Car, and from
1983 to 1990 held various positions at
Anchor Glass Container Corporation
including Assistant Treasurer.
Mr. Kelecy holds a B.A. in Accounting
and Business Administration from
Westminster College in New Wilmington,
Pennsylvania.
_________________________
<FN>
(1) There is no family relationship between any of the executive
officers.
</FN>
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
<TABLE>
<CAPTION>
The Company's common stock, with a par value of $.001 per
share, is traded on the NASDAQ Small-Cap Market ("NASDAQ") and the
Boston Stock Exchange ("BSE") under the symbol "PESI" on NASDAQ and
"PES" on the BSE. Effective December 1996, the Company's common
stock also began trading on the Berlin Stock Exchange under the
symbol "PES.BE." The following table sets forth the high and low
bid prices quoted for the common stock during the periods shown.
The source of such quotations and information is the NASDAQ Stock
market statistical summary reports:
1996 1995
__________________ __________________
Low High Low High
_____ ______ _______ _______
<S> <C> <C> <C> <C> <C>
Common Stock: 1st Quarter 1 1 3/4 1 3/4 3 1/8
Second Quarter 29/32 2 7/16 1 11/16 3
Third Quarter 1 1/2 2 9/16 1 7/8 2 3/4
Fourth Quarter 1 5/16 2 7/16 1 1/8 1 15/16
</TABLE>
Such over-the-counter market quotations reflect inter-dealer
prices, without retail mark-ups or commissions and may not represent
actual transactions.
As of December 31, 1996, there were approximately 182
shareholders of record of the Company's common stock, including
brokerage firms and/or clearing houses holding shares of the
Company's common stock for their clientele (with each brokerage
house and/or clearing house being considered as one holder).
However, the total number of beneficial shareholders was
approximately 1,100 on this date.
Since its inception, the Company has not paid a dividend on its
common stock and has no dividend policy. Management is subject to
certain restrictions on the payment of dividends by the terms and
covenants under the terms of the Loan and Security Agreement ("Loan
Agreement") with Heller Financial, Inc. The Company is prohibited
from paying dividends unless Heller agrees to such payment. The
Loan Agreement was entered into on January 27, 1995 and is further
discussed in Note 5 of the Notes to Consolidated Financial
Statements.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
The financial data included in this table has been derived from
the consolidated financial statements of the Company and its
subsidiaries. Financial statements for the year ended December 31,
1996 have been audited by BDO Seidman, LLP, and for the years ended
December 31, 1995 and 1994, by Arthur Andersen LLP. Financial
statements for the years ended December 31, 1993 and 1992 have been
audited by Coopers & Lybrand L.L.P.
Statement of Operations Data:
(Amounts in Thousands,
Except for Share
Amounts) December 31,
________________________________________________
1996 1995(4) 1994(3) 1993 1992(1)
_______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C>
Revenues $31,037 $34,891 $28,075 $10,123 $ 5,983
Net loss applic-
able to common
stock (405) (9,052) (1,516) (1,895) (1,269)
Net loss per common
share(2) (.05) (1.15) (.25) (.44) (.50)
Weighted average
number of common
shares outstand-
ing(2) 8,761 7,872 5,988 4,287 2,531
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data:
December 31,
_______________________________________________
1996 1995(4) 1994(3) 1993 1992(1)
_______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C>
Working capital
(deficit) $ (773) $(9,372) $ (705) $ 1,278 $ 7,280
Total assets 29,036 28,873 35,067 17,711 10,523
Long-term debt,
less current
maturities 4,881 1,116 4,772 820 1,516
Total liabilities 16,451 20,935 18,105 6,997 2,286
Stockholders'
equity 12,585 7,938 16,962 10,714 8,237
<FN>
(1) Includes financial data of IWM using the purchase method of
accounting and only from February 10, 1992, the date of
acquisition.
(2) As adjusted to reflect the stock split approved by the Board
of Directors in July 1992, and to reflect all stock options
and warrants outstanding at December 31, 1993 as if such
options and warrants had been outstanding for all periods
presented prior to December 31, 1993, using the treasury stock
method in accordance with SEC Staff Accounting Bulletin
No. 83.
(3) Includes financial data of Perma-Fix of Florida, Inc., Perma-
Fix of Dayton, Inc. and Perma-Fix of Ft. Lauderdale, Inc., as
acquired from Quadrex Corporation and accounted for using the
purchase method of accounting, from June 30, 1994.
(4) Includes write-down of impaired intangible permit related to
an acquisition completed in December of 1993 and certain
nonrecurring charges.
</FN>
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis is based, among other
things, upon the audited consolidated financial statements of the
Company and its subsidiaries, and includes the accounts of the
Company and its wholly-owned subsidiaries, after elimination of all
significant inter-company balances and transactions.
Results of Operations
The following discussion and analysis should be read in
conjunction with the consolidated financial statements of the
Company and its subsidiaries and the notes thereto included in Item
8 of this report.
The Company is an active participant in the pollution control
industry, which encompasses numerous segments ranging from
residential solid waste collection and disposal to integrated
remedial services for military and government installations, and the
treatment and disposal of hazardous and mixed waste. The industry
was born out of the promulgation of federal, state and local
environmental regulations. Over the last three to five years, waste
minimization, in conjunction with maturing market conditions, has
lead to acquisitions, consolidations and some firms exiting from
segments in this industry. Today's business environment in the
waste management industry is highly competitive, with customer cost
containment, pricing pressures and market share consolidation
prevalent. As a result of these industry conditions and the related
losses recognized by the Company, a major restructuring program was
initiated during 1995. This program included the closure of several
poorly-performing service centers, the establishment of regional
profit centers and the reduced overall cost structure and overhead
carried by the Company. Charges related to this program are
reflected in the operating results for the year ended December 31,
1995.
The reporting of financial results and pertinent discussions are
tailored to two segments of the pollution control industry: Waste
Management Services and Consulting Engineering Services.
<PAGE>
<TABLE>
<CAPTION>
Below are the results of operations for the Company for the prior
three years with subsequent disclosures for industry segments for
this same year found in the segment reporting section.
(Amounts in Thousands) 1996 1995 1994
______________________ _______ _______ _______
<S> <C> <C> <C>
Revenues $31,037 $34,891 $28,075
Cost of goods sold 21,934 26,564 22,301
_______ _______ _______
Gross profit 9,103 8,327 5,774
Selling, general and
administrative 6,922 8,132 5,298
Depreciation and amortization 2,252 2,431 1,545
Permit write-down - 4,712 -
Nonrecurring charges - 987 -
Other income (expense):
Interest income 65 70 65
Interest expense (812) (952) (373)
Other 558 (235) (109)
Provision for income taxes - - 30
Preferred stock dividends (145) - -
________ ________ ________
Net loss applicable
to common stock $ (405) $(9,052) $(1,516)
======== ======== ========
</TABLE>
Summary -- Years Ended December 31, 1996 and 1995
The Company had net revenues of $31,037,000 for the year ended
December 31, 1996, compared to the 1995 net revenues of $34,891,000.
This decrease in revenue from 1995 to 1996 of $3,854,000 reflects
the impact of the various restructuring programs initiated during
1995, which resulted in the consolidation and closure of certain
offices, the divestiture of a subsidiary and the elimination of
select low margin activities, as the Company continued to focus its
efforts on certain business segments. The above noted increase in
revenues, however, from 1994 to 1995 principally reflects the June
1994 acquisitions of Perma-Fix of Dayton, Inc. ("PFD"), Perma-Fix
of Ft. Lauderdale, Inc. ("PFL"), and certain assets located in
Gainesville, Florida, now known as Perma-Fix of Florida, Inc.
("PFF"), from Quadrex Corporation and its subsidiary Quadrex
Environmental Company (collectively, "Quadrex"). During 1996, the
Company experienced reduced revenues at PFL's facility in Ft.
Lauderdale, Florida, during the period that a major capital
expansion project at such facility was being instituted. In
addition, during such expansion, the PFL facility was vandalized
during October 1996, resulting in a minimal reduction in revenues
over a two to four week period. The combined reduction in revenues
at PFL was approximately $718,000 during 1996, which was partially
offset by increased revenues of $268,000 at certain other fixed-
based facilities of the Company and receipt during 1996 of new
<PAGE>
contracts, such as the waste treatment project at the U.S.
Department of Energy's Fernald, Ohio, facility.
Cost of goods sold for the Company decreased during 1996 by
$4,630,000 to a total of $21,934,000, as compared to $26,564,000 for
1995. This decrease is partially attributable to the overall
reduction in revenue of $3,854,000 as discussed above, and to the
cost benefit associated with the various restructuring programs and
a reduced cost structure throughout the organization. This reduced
cost structure can be further reflected by the cost of goods sold
as a percent of revenue, which was 70.7% for 1996, as compared to
76.1% and 79.4% for 1995 and 1994, respectively.
Selling, general and administrative expenses decreased
$1,210,000 from $8,132,000 for fiscal 1995 to $6,922,000 for fiscal
year ended December 31, 1996. This decrease principally reflects
the reduced administrative cost structure, resulting from the
restructuring program, which reflected an overall reduction in
administrative expenses of $1,441,000 during 1996. This reduced
administrative cost was partially offset by an increase in marketing
expenses of approximately $231,000 from 1995 to 1996, reflecting
increased sales and marketing efforts as the Company focuses on new
business areas of the waste industry. The increase in selling,
general and administrative expenses from 1994 to 1995 principally
reflects a full year of expenses in 1995 as a result of the
acquisition from Quadrex of PFD, PFL and PFF, over the partial year
of 1994. As a percent of revenue, SG&A expenses were 22.3% of
revenue for 1996, as compared to 23.3% of revenue for fiscal year
ended December 31, 1995.
During December 1995, the Company recognized a permit
impairment charge of $4,712,000, related to the December 1993
acquisition of Perma-Fix of Memphis, Inc. ("PFM"). The evaluation
of this impairment included the review of prior operating results,
the recent restructuring activities, including the reduction of all
possible operating and overhead costs, margin and revenue
enhancements, and the related estimate of future undiscounted
operating income. Based upon this review, the permit was deemed to
be impaired and a charge recorded for the full carrying amount of
this intangible permit, which is further discussed in Note 13 of the
Notes to Consolidated Financial Statements.
During 1995, the Company recorded several nonrecurring charges
totalling $987,000, for certain unrelated events. Of this amount,
$450,000 represents a divestiture reserve as related to the sale of
a wholly-owned subsidiary and $537,000 are one-time charges
resulting from restructuring programs.
The Company decided in 1994 to divest its wholly-owned
subsidiary, Re-Tech Systems, Inc., which is engaged in post-consumer
plastics recycling. A reserve in the amount of $450,000 was
recorded during the second quarter of 1995 for the estimated loss
<PAGE>
to be recognized through a sale transaction. During the first
quarter of 1996, the Company completed the sale transaction for this
business, resulting in total consideration of $970,000, which is
further discussed in "Liquidity and Capital Resources" of this
Management's Discussion and Analysis of Financial Condition and
Results of Operations and Note 14 of the Notes to Consolidated
Financial Statements. The Company also executed restructuring
programs during 1995 within the waste management services segment.
A one-time charge of $237,000 was recorded to provide for costs,
principally severance and lease termination fees, associated with
the restructuring of the Perma-Fix, Inc. service center group. This
program entailed primarily the consolidation of offices in
conjunction with the implementation of a regional service center
concept, and the related closing of seven (7) of the nine (9)
offices. A one-time charge of $75,000 was also recorded during the
second quarter of 1995 to provide for consolidation costs,
principally severance, associated with the restructuring of the
Southeast Region, which is comprised of PFF and PFL. These
restructuring costs were principally incurred and funded during
1995.
In December of 1995, in conjunction with the above referenced
restructuring program, the Company and Mr. Robert W. Foster, Jr.
("Foster") agreed to Foster's resignation as President, Chief
Executive Officer and Director of the Company, thereby terminating
his employment agreement with the Company effective March 15, 1996.
The Company paid severance benefits of $30,000 in cash, continued
certain employee benefits for a period of time, and issued $171,000
in the form of common stock, par value $.001, of the Company
(152,000 shares). Pursuant to the above, the Company recorded a
nonrecurring charge at December 31, 1995 of $215,000. In addition,
severance costs of approximately $10,000 were also incurred upon the
termination of several corporate executives. These restructuring
costs were principally incurred and funded during the first six (6)
months of 1996.
Depreciation and amortization for 1996 reflects a total of
$2,252,00 or a decrease of $179,000 from the 1995 balance of
$2,431,000. This decrease is principally a result of reduced
amortization in conjunction with the permit write-down of $4,712,000
related to PFM, as recorded in December 1995. The amortization
expense for 1996 was $455,000, which reflects a decrease of $232,000
from the 1995 total of $687,000. This reduced amortization is
partially offset by increased depreciation of $53,000 reflecting new
capital assets acquired during the year, partially offset by asset
dispositions and the divestiture of a subsidiary of the Company.
Interest income totalled $65,000, a reduction of $5,000 from
the 1995 total of $70,000. This total reflects interest earned on
the restricted cash balances maintained by the Company. These
restricted cash balances and related interest income generally
increase from year to year. However, the restricted cash balance
<PAGE>
was reduced in the fourth quarter of 1995 as the Company replaced
existing letters of credit with an alternative financial assurance
instrument, thereby eliminating the need for such restricted cash.
This, in turn, resulted in reduced interest income in 1996.
Interest expense also decreased during 1996 by $140,000 to a total
of $812,000, as compared to $952,000 for 1995. The interest expense
is primarily related to the senior debt facility with Heller
Business Credit and the capital lease line with Ally Capital
Corporation, both of which reflect reduced debt balances during 1996
due to repayments and correspondingly reduced interest expense.
Interest expense was also impacted by a reduced revolving credit
line balance during 1996 resulting from the proceeds generated from
the private placements which were used to partially repay said
balance. Offsetting this reduced interest expense, during 1996, was
the preferred stock dividends totalling $145,000 incurred in
conjunction with the Series 3 Class C Convertible Preferred Stock
as issued in July 1996. The preferred stock dividend was paid in
the form of 100,387 shares of common stock of the Company, which
covered the period July 24 through December 31, 1996, and were
issued in January 1997.
Other income (expense) for 1996 reflected an income total of
$558,000, as compared to expense of $235,000 for 1995. In
conjunction with the above discussed restructuring programs and
office closures, the Company renegotiated and settled certain
accounts payable on favorable terms and adjusted other liabilities,
resulting in approximately $334,000 net other income during 1996.
The Company also recognized a gain of approximately $166,000 on the
sale of non-productive assets, including the gain on the sale of Re-
Tech. Effective December 31, 1996, the Company divested its arsenic
removal technology for a net gain of approximately $122,000.
Partially offsetting the above gains during 1996 were other expenses
totalling $65,000, which principally represented costs associated
with the October 1996 vandalism at PFL's facility as discussed
above.
The Company reported a net loss applicable to common stock of
$405,000 in 1996, as compared to $9,052,000 in 1995. The per share
loss was $.05 for 1996 versus $1.15 in 1995. Net loss for 1995
included permit write-down and nonrecurring charges totalling
$5,699,000, which, when deducted from the total loss, results in a
comparable loss of $3,353,000. This significant improvement from
1995 to 1996 reflects again the impact of the various restructuring
programs, cost reduction across all segments of the Company and the
revenue focus on select areas of the waste industry.
Summary -- Years Ended December 31, 1995 and 1994
The Company had net revenues of $34,891,000 for the year ended
December 31, 1995, compared to the 1994 revenue of $28,075,000. The
Company benefited by a full calendar year of its 1994 acquisitions
of PFD, PFL, and certain assets located in Gainesville, Florida, now
known as PFF, from Quadrex. As a percent of revenue, this is a
<PAGE>
24.3% increase over 1994 revenue. Despite this increase, the
Company continued to experience flat to declining revenue during
1995, attributable to its service groups and engineering segments,
as a result of discontinuing specific products or locations.
Cost of goods sold for the Company increased 19.1% from 1995
over 1994, totaling $26,564,000 for 1995 versus $22,301,000 for the
year ended December 31, 1994. As a percent of revenue, costs of
goods sold were 79.4% in 1994 versus 76.1% for fiscal 1995. The
cost of goods sold continues to decrease as a percent of revenue,
which is attributable to a business mix based more on fixed-based
processing facilities (82.7% of gross revenue in 1995 versus 74.9%
of gross revenue in 1994). These fixed-based operations generally
have lower costs of goods sold versus the engineering consulting
segments.
Selling, general and administrative expenses increased
$2,834,000 from $5,298,000 for fiscal 1994 to $8,132,000 for fiscal
year ended December 31, 1995. Both marketing and general
administrative expenses were higher than 1994, reflecting increased
costs of acquiring new customers and general administrative
functions, and the full year of the businesses acquired from
Quadrex, which reflected an increase of approximately $1,333,000
over the partial year of 1994. Also impacting this increase was the
additional reserves for "allowance for doubtful accounts" recorded
during 1995 versus 1994; $610,000 and $311,000, respectively. This
increase of $299,000 is principally a result of the Industrial
Compliance and Safety, Inc. acquisition completed during the second
quarter of 1995 and the related forgiveness of its indebtedness to
the Company. As a percent of revenue, SG&A expenses were 23.3% of
revenue for the year ended December 31, 1995, as compared to 18.9%
of revenue for fiscal year ended December 31, 1994.
Depreciation and amortization for 1995 reflects a total of
$2,431,000 or an increase of $886,000 over the 1994 balance of
$1,545,000. This increase was principally a result of the
depreciation and amortization related to the businesses acquired
from Quadrex, which resulted in an increase of $588,000 in 1995,
over the six (6) months of 1994.
Interest income reflected a slight increase during 1995, with
$70,000 for fiscal 1995 versus $65,000 for fiscal year ended
December 31, 1994. However, interest expense increased to $952,000
for the year ended December 31, 1995 as compared to $373,000 for the
year ended December 31, 1994. This increase is principally
attributable to the senior debt facility with Heller Business Credit
and a capital lease line with Ally Capital Corporation. Under these
facilities the Company utilized debt financing to fund capital
expenditures and working capital needs, which resulted in increased
interest expense of $579,000 for fiscal 1995.
<PAGE>
Other expense for 1995 was $235,000, which reflects an increase
of $126,000 over the 1994 total of $109,000. This expense
represents primarily the $281,000 in financing fees relative to
securing the Heller Financial, Inc. Loan and Security Agreement,
partially offset by various other income items.
The Company reported a net loss of $9,052,000 in 1995 as
compared to a net loss of $1,516,000 in 1994. The per share loss
was $1.15 for 1995 versus $.25 in 1994. The increase in both the
dollars lost and per share loss are generally attributable to
discontinuing certain of the service center/mobile treatment
centers, the write-down in anticipation of the loss from divesting
the plastics business, poor performance from the Memphis fixed-based
facility and resulting permit impairment charge, and generally poor
performances from the remainder of the Company's operations.
Subsequent Event
On January 27, 1997, the Company's subsidiary, PFM, sustained
an explosion and fire at its Memphis, Tennessee, TSD facility. As
a result, this facility has not been operational since the date of
the explosion and fire. However, during this period, PFM has
accepted and will continue to accept waste for processing and
disposal, but has arranged for other facilities owned by the Company
or subsidiaries of the Company or others not affiliated with the
Company to process such waste. The utilization of other facilities
to process such waste results in higher costs to PFM than if PFM
were able to store and process such waste at its Memphis, Tennessee,
TSD facility, along with the additional handling and transportation
costs associated with these activities. The Company anticipates
that this facility will begin certain limited operations on or prior
to the end of April 1997, upon the repair and/or removal of the
tanks that were damaged as a result of such occurrence. The Company
presently believes that its property insurance will cover any
property loss suffered by PFM as a result of such occurrence. The
Company is presently in the process of determining the amount of
business interruption that may be recoverable by PFM as a result of
such explosion and fire. See "BUSINESS--Waste Management Services"
for a discussion of certain forward-looking statements contained
herein and certain cautionary statements relating thereto.
Liquidity and Capital Resources of the Company
At December 31, 1996, the Company had cash and cash equivalents
of $45,000. This cash and cash equivalents total reflects a
decrease of $156,000 from December 31, 1995, as a result of net cash
used in operations of $1,291,000 (principally related to the
reduction of accounts payable and accrued expenses of $2,085,000,
partially offset by increases in accounts receivable and other
assets), cash used in investing activities of $963,000 (principally
purchases of equipment, net totaling $2,082,000, partially offset
by the proceeds from the sale of property and equipment of
$1,214,000) and cash provided by financing activities of $2,098,000.
Accounts receivable, net of allowances, totalled $5,549,000, an
<PAGE>
increase of $518,000 over the December 31, 1995 balance of
$5,031,000, which reflects an increase in the days sales outstanding
at year end, resulting from the timing of collections.
In January 1995, the Company entered into a term and revolving
loan agreement with Heller Financial, Inc. ("Heller"). Under the
loan agreement with Heller, the Company was provided a term loan of
$2,500,000 and a revolving loan facility in the amount of
$7,000,000. The term loan is for a term of 36 months, payable in
monthly installments of $42,000 and a balloon payment for the
balance on January 31, 1998. The revolving loan facility is reduced
by the outstanding unpaid principal amount due on the term loan and
is subject to the maximum credit availability, determined on a
monthly borrowing base equal to 80% of the eligible accounts
receivable (as defined in the loan agreement) of the Company and its
subsidiaries. See Note 5 to Notes to Consolidated Financial
Statements.
As of December 31, 1996, the borrowings under the Company's
revolving loan facility totalled $2,879,000, a decrease of $297,000
from the December 31, 1995 balance of $3,176,000, with a related
borrowing availability of $958,000, based on 80% of the amount of
eligible receivables of the Company as of December 31, 1996. The
balance on the term loan totalled $1,383,000, as compared to
$2,083,000 at December 31, 1995. Total indebtedness under the
Agreement with Heller, as amended, as of December 31, 1996 was
$4,262,000, a reduction of $997,000 from the December 31, 1995,
balance of $5,259,000. See Note 5 to Notes to Consolidated
Financial Statements.
Pursuant to the Agreement with Heller, as amended by the Third
Amendment, the term loan bears interest at a floating rate equal to
the base rate (prime) plus 1 3/4% per annum, and the revolving loan
bears interest at a floating rate equal to the base rate (prime)
plus 1 1/2% per annum. The loans also contain certain closing,
management and unused line fees payable throughout the term. Both
the revolving loan and term loan were prime based loans at December
31, 1996, bearing interest at a rate of 9.75% and 10.00%,
respectively.
Pursuant to the Sixth Amendment to the Agreement with Heller,
the Company is obligated to raise an additional $700,000 on or
before August 15, 1997. Under such amendment, this additional
amount may be in the form of proceeds received under property and/or
business interruption insurance as a result of the explosion and
fire at PFM's facility, insurance proceeds with regard to vandalism
at the PFL facility, selling of additional equity securities by the
Company, or other proceeds obtained in a manner approved by Heller.
The Company believes that it will be able to comply with such a
requirement. Whether the Company will be able to comply with such
a requirement is a forward-looking statement, and the results of
such could materially differ from the above statement if, among
<PAGE>
other things, PFM is unable to recover from its insurance carrier
insurance proceeds and the Company is unable to sell equity
securities in an aggregate amount necessary to comply with such
requirement.
Under the Sixth Amendment to the Agreement with Heller, the
Company is to provide Heller with evidence on or before May 9, 1997,
that the adjusted orderly liquidation value of the equipment owned
by the Company and its subsidiaries that are borrowers under the
Agreement with Heller exceeds 75% of the principal amount of the
term loan with Heller, which totaled $1,217,000 as of April 1, 1997.
If such principal balance of the term loan exceeds 75% of the
liquidation value of such equipment, then the Company and Heller are
to discuss the appropriate required repayment of the term loan. If
Heller and the Company are unable to agree on an amount on or prior
to May 31, 1997, then Heller shall make such determination of the
amount of such required prepayment, which shall be paid by the
Company on or prior to May 26, 1997, or, in lieu thereof, Heller may
cause such amount to be paid by making a revolving loan in the
amount thereof under the Agreement with Heller. The Company
believes that the liquidation value of its owned equipment will
exceed 75% of the principal amount of the term loan with Heller,
and, if for any reason, such does not occur, the Company believes
that it will have sufficient availability under its revolving credit
line with Heller to pay such amount. The penultimate sentence
contains a forward-looking statement, the results of which could be
materially different than such statement if damage occurs to a
material amount of the Company's equipment or there is a decline in
the Company's business resulting in a substantial reduction in the
Company's receivables that would cause the Company not to have the
necessary availability under its revolving line of credit with
Heller.
As of December 31, 1996, total consolidated accounts payable
for the Company was $3,677,000, a reduction of $1,725,000 from the
December 31, 1995 balance of $5,402,000. This December 1996 balance
also reflects a reduction of $1,804,000 in the balance of payables
in excess of sixty (60) days, to a total of $1,422,000. The Company
utilized a portion of the net proceeds received in connection with
the sale of preferred stock during 1996, as discussed below, to
reduce accounts payable.
Ally Capital Corporation ("Ally") had previously provided the
Company with an equipment financing arrangement to finance the
purchase of capital equipment. As of December 31, 1996, the
Company's outstanding principal balance owing under this equipment
financing arrangement was $1,257,000. The Company has fully
utilized this equipment financing arrangement with Ally. See Note
5 to Notes to Consolidated Financial Statements.
At December 31, 1996, the Company had $6,360,000 in aggregate
principal amounts of outstanding debt, as compared to $8,478,000 at
<PAGE>
December 31, 1995. This decrease in outstanding debt of $2,118,000
during 1996 reflects the net repayment of the revolving loan and
term note facility of $997,000, the scheduled principal repayments
on long-term debt of $920,000, including the equipment finance
agreement payments to Ally, and the repayment of $582,000 on a
mortgage obligation in conjunction with the Re-Tech sale, as
discussed below.
The Company's net purchases of new capital equipment for the
twelve month period ended December 31, 1996 totalled approximately
$2,082,000. These expenditures were for improvements to the
operations, including two (2) large capital expansion projects
within the waste management segment, and other capital expenditures
necessary to maintain compliance with federal, state or local permit
standards. These capital expenditures were principally funded by
the proceeds from the issuance of preferred stock, as discussed
below, with the exception of $57,000, which was financed by the
Company's equipment financing lender, as discussed above, and
$424,000 through various other lease financing sources. The Company
has budgeted capital expenditures of $1,250,000 for 1997 (excluding
any expenditures at PFM due to the explosion and fire), which
includes completion of the two (2) above noted expansion projects,
as well as other identified capital and permit compliance purchases.
The Company anticipates funding these capital expenditures by a
combination of lease financing with lenders other than the equipment
financing arrangement discussed above, and/or internally generated
funds.
The working capital deficit position at December 31, 1996 was
$773,000, as compared to a deficit position of $9,372,000 at
December 31, 1995. The December 1995, deficit position includes the
reclassification of certain long-term debt to current as a result
of a default under certain financial ratios under certain loan
agreements at that time. Prior to this reclassification, the
December 1995, deficit position would have been $3,399,000, which
reflects an improvement in this position of $2,626,000 during 1996.
The Company issued to RBB Bank Aktiengesellschaft ("RBB Bank"),
during February 1996, 1,100 shares of newly created convertible
Series 1 Preferred at a price of $1,000 per share, for an aggregate
sales price of $1,100,000, and paid placement and closing fees of
$180,000. The Company also issued to RBB Bank 330 shares of newly
created convertible Series 2 Preferred at a price of $1,000 per
share, for an aggregate sales price of $330,000, and paid placement
and closing fees of $35,000. The Series 1 Preferred and Series 2
Preferred accrued dividends on a cumulative basis at a rate per
share of five percent (5%) per annum, payable, at the Company's
option, in cash or in common stock of the Company. All dividends
on the Series 1 Preferred and Series 2 Preferred were paid by the
issuance of shares of common stock. During the second quarter of
1996, a total of 722 shares of the Series 1 Preferred were converted
into approximately 1,034,000 shares of the Company's common stock
<PAGE>
and the associated accrued dividends were paid in the form of
approximately 16,000 shares of the Company's common stock. Pursuant
to a subscription and purchase agreement for the issuance of Series
3 Class C Convertible Preferred Stock ("Series 3 Preferred"), as
discussed below, the remaining 378 shares of the Series 1 Preferred
and the 330 shares of the Series 2 Preferred were converted during
July 1996 into 920,000 shares of the Company's common stock, which
included the accrued and unpaid dividends thereon, and the Company
purchased the 920,000 shares for $1,770,000. As a result of such
conversions, the Series 1 Preferred and Series 2 Preferred are no
longer outstanding.
On July 17, 1996, the Company issued to RBB Bank 5,500 shares
of newly-created Series 3 Preferred at a price of $1,000 per share,
for an aggregate sales price of $5,500,000, and paid placement and
closing fees of approximately $586,000. As part of the
consideration for the issuance of the Series 3 Preferred, the
Company also issued to RBB Bank two (2) common stock purchase
warrants entitling RBB Bank to purchase, after December 31, 1996,
until July 18, 2001, an aggregate of up to 2,000,000 shares of
common stock, with 1,000,000 shares exercisable at an exercise price
equal to $2.00 per share and the other 1,000,000 shares of common
stock exercisable at an exercise price equal to $3.50 per share.
Dividends on the Series 3 Preferred are paid when and as declared
by the Board of Directors at a rate of six percent (6%) per annum
and are payable semi-annually. Dividends are cumulative and shall
be paid, at the option of the Company, in the form of cash or common
stock of the Company. It is the present intent of the Company to
pay such dividends, if any, in common stock of the Company. The
shares of the Series 3 Preferred may be converted into shares of
common stock. See Note 4 of Notes to Consolidated Financial
Statements and "Certain Relationships and Related Transactions" for
further discussion of the Series 3 Preferred and the conversions of
such series of preferred. The Company received from the sale of the
Series 3 Preferred net proceeds of approximately $4,900,000.
Pursuant to the terms of the Subscription Agreement relating to the
sale of the Series 3 Preferred, the Company has purchased from RBB
Bank from the net proceeds 920,000 shares of common stock of the
Company that RBB Bank received upon conversion of the balance of the
outstanding shares of Series 1 Preferred and Series 2 Preferred for
$1,770,000. The Company used the net proceeds for capital
improvements at its various facilities, to reduce outstanding trade
payables, and for general working capital requirements. As of this
date, the holder of the Series 3 Preferred has not elected to
convert any of the Series 3 Preferred into common stock of the
Company. The accrued dividends for the period July 17, 1996 through
December 31, 1996 were paid in January 1997, in the form of
approximately 101,000 shares of the Company's common stock.
Effective March 15, 1996, the Company completed the sale of Re-
Tech Systems, Inc., its plastics recycling subsidiary in Houston,
Texas. The sale transaction included all real and personal property
<PAGE>
of the subsidiary, for a total consideration of $970,000. Net cash
proceeds to the Company were approximately $320,000, after the
repayment of a mortgage obligation of $595,000 and certain other
closing and real estate costs. In conjunction with this
transaction, the Company also made a prepayment of $50,000 to Heller
Financial, Inc. for application to the term loan. As previously
disclosed, the Company recorded during 1995, a nonrecurring charge
(recorded as an asset reduction) of $450,000 for the estimated loss
on the sale of this subsidiary, which, based upon closing balances,
the Company recognized a small gain on this sale after the asset
write-down. The Company sold total assets of approximately
$1,346,000, while retaining certain assets totalling approximately
$94,000 and certain liabilities totalling approximately $48,000.
In addition to the above asset sale, the Company also sold certain
non-productive assets during 1996, principally at closed service
center locations and at the Perma-Fix of Dayton, Inc. facility.
Proceeds from these asset sales total approximately $320,000.
Effective February 7, 1997, the Company amended five (5)
warrants with an original issuance date of February 10, 1992, to
purchase an aggregate of 487,814 shares of the Company's common
stock ("Acquisition Warrants"). The Acquisition Warrants were
amended to (i) reduce the exercise price from $2.1475 per share of
common stock to $1.00 per share of common stock, and (ii) extend the
expiration date of the warrants from February 10, 1997 to March 3,
1997. All Acquisition Warrants were subsequently exercised prior
to this March 3, 1997 date, which resulted in $487,814 of additional
capital/equity.
As previously discussed, the Company's subsidiary, PFM,
sustained an explosion and fire at its TSD facility in Memphis,
Tennessee, on January 27, 1997, damaging certain hazardous waste
storage tanks and causing certain limited contamination at the
facility. Since such event the facility has not been operational.
It is not presently anticipated that such facility will become
operational until the damaged tanks are repaired, which is presently
anticipated to be the end of April 1997. PFM is in the process of
repairing or removing the damaged tanks and removing or remediating
the contamination caused by the explosion and fire. During the
period that PFM's facility is not operational, PFM has accepted and
will continue to accept waste for processing and disposal, but has
arranged for other facilities owned by the Company or subsidiaries
of the Company or others not affiliated with the Company to process
such waste. The utilization of other facilities to process such
waste results in higher costs to PFM than if PFM were able to store
and process such waste at its Memphis, Tennessee, TSD facility,
along with the additional handling and transportation costs
associated with these activities. The additional costs incurred or
to be incurred are undetermined at this time. The Company has also
experienced a reduction in revenues as a result of this occurrence,
as it attempts to selectively accept and reroute waste, which the
Company does not believe is material at this time. As previously
<PAGE>
discussed, the Company and PFM have property and business
interruption insurance. The Company presently believes, although
there are no assurances, that its property insurance will reimburse
the company for repair, replacement or removal of the damaged
property, due to the explosion and fire. The cost of this property
repair and restoration is undetermined at this time. The Company
is presently in the process of determining the amount of business
interruption insurance that may be recoverable by PFM as a result
of such occurrence, if any. See "BUSINESS--Waste Management
Services" for a discussion of certain forward-looking statements
contained herein and cautionary statements relating thereto.
In summary, the Company has taken a number of steps to improve
its operations and liquidity as discussed above, including the
equity raised in 1996. If the Company is unable to continue to
improve its operations and to sustain profitability in the
foreseeable future, such would have a material adverse effect on the
Company's liquidity position and on the Company. This is a forward-
looking statement and is subject to certain factors that could cause
actual results to differ materially from those in the forward-
looking statement, including, but not limited to, the Company's
ability to maintain profitability or, if the Company is not able to
maintain profitability, whether the Company is able to raise
additional liquidity in the form of additional equity or debt.
Environmental Contingencies
The Company is engaged in the waste management services segment
of the pollution control industry. As a participant in the on-site
treatment, storage and disposal market and the off-site treatment
and services market, the Company is subject to rigorous federal,
state and local regulations. These regulations mandate strict
compliance and therefore are a cost and concern to the Company.
Because of the integral part of providing quality environmental
services, the Company makes every reasonable attempt to maintain
complete compliance with these regulations; however, even with a
diligent commitment, the Company, as with many of its competitors,
may be required to pay fines for violations or investigate and
potentially remediate its waste management facilities.
The Company routinely uses third party disposal companies, who
ultimately destroy or secure landfill residual materials generated
at its facilities or at a client's site. The Company, compared to
its competitors, disposes of significantly less hazardous or
industrial by-products from its operations due to rendering material
non-hazardous, discharging treated waste waters to publicly-owned
treatment works and/or recycling wastes into saleable products. In
the past, numerous third party disposal sites have improperly
managed wastes and consequently require remedial action;
consequently, any party utilizing these sites may be liable for some
or all of the remedial costs. Despite the Company's aggressive
compliance and auditing procedures for disposal of wastes, the
Company could, in the future, be notified that it is a PRP at a
<PAGE>
remedial action site, which could have a material adverse effect on
the Company.
In addition to budgeted capital expenditures of $1,250,000 for
1997 at the TSD facilities, which are necessary to maintain permit
compliance and improve operations, as discussed above under
"Business -- Certain Environmental Expenditures" and "Liquidity and
Capital Resources of the Company" of this Management's Discussion
and Analysis, the Company has also budgeted for 1997 an additional
$350,000 in environmental expenditures to comply with federal, state
and local regulations in connection with remediation of certain
contaminates at two locations. As previously discussed under
"Business -- Certain Environmental Expenditures," the two locations
where these expenditures will be made are the Affiliated Property
in Dayton, Ohio, a former RCRA storage facility as operated by the
former owners of PFD, and PFM's facility in Memphis, Tennessee.
Additional funds will be required for the next five to fifteen years
to properly investigate and remediate these sites. As discussed in
Note 7 to the Consolidated Financial Statements, the Company has
accrued $2,085,000 for estimated costs of remediating these two
sites, which is projected to be the maximum exposure and is expected
to be performed over a period in excess of ten (10) years. The
Company expects to fund these expenses to remediate these two sites
from funds generated internally. This is a forward looking
statement and is subject to numerous conditions, including, but not
limited to, the Company's ability to generate sufficient cash flow
from operations to fund all costs of operations and remediation of
these two sites, the discovery of additional contamination or
expanded contamination which would result in a material increase in
such expenditures, or changes in governmental laws or regulations.
<PAGE>
<TABLE>
<CAPTION>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Consolidated Financial Statements: Page No.
_________________________________ _______
<S> <C>
Reports of Independent Certified Public
Accountants
BDO Seidman, LLP 37
Arthur Andersen LLP 38
Consolidated Balance Sheets as of
December 31, 1996 and 1995 40
Consolidated Statements of Operations
for the years ended December 31, 1996,
1995 and 1994 43
Consolidated Statements of Cash Flows for
the years ended December 31, 1996, 1995
and 1994 45
Consolidated Statements of Stockholders'
Equity for the years ended December 31,
1996, 1995 and 1994 47
Notes to Consolidated Financial Statements 49
Financial Statement Schedules:
II Valuation and Qualifying Accounts for
the years ended December 31, 1996,
1995 and 1994 101
Schedules Omitted
In accordance with the rules of Regulation S-X, other schedules
are not submitted because (a) they are not applicable to or required
by the Company, or (b) the information required to be set forth
therein is included in the consolidated financial statements or
notes thereto.
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Perma-Fix Environmental Services, Inc.
We have audited the accompanying consolidated balance sheet of
Perma-Fix Environmental Services, Inc. and subsidiaries as of
December 31, 1996, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year then
ended. We have also audited the schedule listed in the accompanying
index. These consolidated financial statements and schedule are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements and
schedule based on our audit.
We conducted our audit 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 and schedule are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements and
schedule. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements and schedule. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Perma-Fix Environmental Services, Inc. and subsidiaries
at December 31, 1996, and the results of their operations and their
cash flows for the year then ended, in conformity with generally
accepted accounting principles.
Also, in our opinion, the schedule presents fairly, in all material
respects, the information set forth therein.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
Orlando, Florida
February 14, 1997, except
for Note 5 which is as of
April 14, 1997
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Perma-Fix Environmental Services, Inc.:
We have audited the accompanying consolidated balance sheet of
PERMA-FIX ENVIRONMENTAL SERVICES, INC. (a Delaware corporation) and
Subsidiaries as of December 31, 1995, and the related consolidated
statements of operations, cash lows and stockholders' equity for
each of the two years in the period ended December 31, 1995. These
consolidated financial statements and the schedule referred to below
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements and schedule 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 Perma-
Fix Environmental Services, Inc. as of December 31, 1995, and the
results of their operations and their cash flows for each of the two
years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has
suffered recurring losses from operations and and for the year ended
December 31, 1995, the Company had a net working capital deficiency
of approximately $9,372,000, an accumulated deficit of $13,885,000,
and was in violation of substantially all financial covenants under
its debt agreements with its two major lenders (see Note 5). These
factors raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not
include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company
be unable to continue as a going concern.
<PAGE>
Our audits were made for the purpose of performing an opinion on the
basic financial statements taken as a whole. The schedule listed
in the index to consolidated financial statements is presented for
purposes of complying with the Securities and Exchange Commission's
rules and is not a required part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied
in our aduits of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data for each
of the two years in the period ended December 31, 1995 required to
be set forth therein in relation to the basic financial statements
taken as a whole.
/s/ Arthur Andersen LLP
Jacksonville, Florida
March 15, 1996
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31
(Amounts in Thousands,
Except for Share Amounts) 1996 1995
___________________________________________________________________
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 45 $ 201
Restricted cash equivalents
and investments 448 380
Accounts receivable, net of
allowance for doubtful accounts
of $383 and $392, respectively 5,549 5,031
Inventories 107 183
Prepaid expense 549 414
Other receivables 545 134
_________ ________
Total current assets 7,243 6,343
Property and equipment:
Buildings and land 4,894 6,055
Equipment 6,429 5,874
Vehicles 1,421 1,589
Leasehold improvements 289 143
Office furniture and equipment 1,136 1,252
Construction in progress 3,028 1,435
_________ ________
17,197 16,348
Less accumulated depreciation (4,593) (3,378)
_________ ________
Net property and equipment 12,604 12,970
Intangibles and other assets:
Permits, net of accumulated
amortization of $598 and
$366, respectively 3,949 4,036
Goodwill, net of accumulated
amortization of $435 and
$289, respectively 4,846 4,992
Covenant not to compete, net of
accumulated amortization of
$383 and $304, respectively 9 87
Other assets 385 445
________ ________
Total assets $ 29,036 $ 28,873
======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS, CONTINUED
As of December 31
(Amounts in Thousands,
Except for Share Amounts) 1996 1995
___________________________________________________________________
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,677 $ 5,402
Accrued expenses 2,860 2,951
Revolving loan and term note
facility 500 5,259
Equipment financing agreement 646 1,778
Current portion of long-term debt 333 325
_________ _______
Total current liabilities 8,016 15,715
Long-term debt, less current portion 4,881 1,116
Environmental accruals 2,460 3,063
Accrued closure costs 1,094 1,041
_________ _______
Total long-term liabilities 8,435 5,220
Commitments and contingencies
(see Notes 3, 5, 7 and 10) - -
Stockholders' equity:
Preferred stock, $.001 par value;
2,000,000 shares authorized,
5,500 and 0 shares issued and
outstanding, respectively - -
Common stock, $.001 par value;
50,000,000 shares authorized,
10,399,947 and 7,872,384 shares
issued, including 920,000 and
0 shares held as treasury
stock, respectively 10 8
Redeemable warrants 140 269
Additional paid-in capital 28,495 21,546
Accumulated deficit (14,290) (13,885)
________ _______
14,355 7,938
Less common stock in treasury at
cost; 920,000 and 0 shares issued
and outstanding, respectively (1,770) -
________ _______
Total stockholders' equity 12,585 7,938
________ _______
Total liabilities and
stockholders' equity $ 29,036 $ 28,873
======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31
(Amounts in Thousands,
Except for Share Amounts) 1996 1995 1994
___________________________________________________________________
<S> <C> <C> <C>
Net revenues $ 31,037 $ 34,891 $ 28,075
Cost of goods sold 21,934 26,564 22,301
________ ________ ________
Gross profit 9,103 8,327 5,774
Selling, general and
administrative
expenses 6,922 8,132 5,298
Depreciation and
amortization 2,252 2,431 1,545
Permit write-down
(see Note 13) - 4,712 -
Nonrecurring charges
(see Note 14) - 987 -
________ _______ ________
Loss from operations (71) (7,935) (1,069)
Other income (expense):
Interest income 65 70 65
Interest expense (812) (952) (373)
Other 558 (235) (109)
________ ________ ________
Net loss before
provision for
income taxes (260) (9,052) (1,486)
Provision for income taxes - - 30
________ ________ ________
Net loss (260) (9,052) (1,516)
Preferred stock dividends 145 - -
________ ________ ________
Net loss applicable
to common stock $ (405) $ (9,052) $ (1,516)
======== ======== ========
Net loss per common share $ (.05) $ (1.15) $ (.25)
======== ======== ========
Weighted average number of
common and common equiva-
lent shares outstanding 8,761 7,872 5,988
======== ======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31
(Amounts in Thousands) 1996 1995 1994
___________________________________________________________________
<S> <C> <C> <C>
Cash flows from operating
activities:
Net loss $ (405) $ (9,052) $ (1,516)
Adjustments to reconcile
net loss to cash pro-
vided by (used in)
operations:
Depreciation and amorti-
zation 2,252 2,431 1,718
Permit write-down 4,712
Divestiture reserve 450
Provision for bad debt
and other reserves 17 844 114
(Gain) loss on sale of
plant, property and
equipment (4) 8 9
Changes in assets and
liabilities, net of
effects from business
acquisitions:
Accounts receivable (535) 957 (779)
Prepaid expenses, inven-
tories and other assets (531) (42) 246
Accounts payable and accrued
expenses (2,085) (246) (2,210)
_______ ________ ________
Net cash provided by
(used in) operations (1,291) 62 (2,418)
________ ________ ________
Cash flows from investing
activities:
Proceeds of short-term
investments 2,384
Purchases of property and
equipment, net (2,082) (2,953) (1,914)
Proceeds from sale of plant,
property and equipment 1,214 14 4
Effect of acquisitions 9 292
Change in restricted cash,
net (95) 171 63
_________ ________ _______
Net cash provided by
(used in) investing
activities (963) (2,759) 829
_________ ________ _______
Cash flows from financing
activities:
Borrowings (repayments)
from revolving loan
and term note facility (997) 2,162
Borrowings on long-term
debt and equipment
financing agreement 1,573 668
Principal repayments on
long-term debt (1,502) (1,327) (2,279)
Proceeds from issuance
of stock 6,367 3,641
Purchase of treasury stock (1,770)
________ ________ ________
Net cash provided by
financing activities 2,098 2,408 2,030
________ ________ ________
(Decrease) increase in cash and
cash equivalents (156) (289) 441
Cash and cash equivalents at
beginning of period 201 490 49
________ ________ _______
Cash and cash equivalents at
end of period $ 45 $ 201 $ 490
========= ======= =======
___________________________________________________________________
Supplemental disclosure:
Interest paid $ 844 $ 923 $ 435
Income taxes paid - - -
Non-cash investing and financing
activities:
Issuance of common stock
for services $ 462 $ - $ -
Long-term debt incurred
for purchase of property
and equipment 424 - -
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended December 31
Preferred Stock Common Stock
(Amounts in Thousands, ___________________ __________________
Except for Share Amounts) Shares Amount Shares Amount
_________________________________________________________________________
<S> <C> <C> <C> <C>
Balance at December 31, 1993 - $ - 4,473,208 $ 4
Net loss - - - -
Issuance of stock for
acquisitions - - 575,659 1
Issuance of stock and
warrants for cash - - 1,400,000 1
Issuance of stock for
note conversion - - 78,140 -
Issuance of stock for
transaction costs - - 210,000 1
Amortization of deferred
compensation - - - -
______ _______ _________ _______
Balance at December 31, 1994 - - 6,737,007 7
Net loss - - - -
Issuance of stock for
acquisitions - - 1,135,377 1
Amortization of deferred
compensation - - - -
______ _______ _________ _______
Balance at December 31, 1995 7,872,384 8
Net loss - - - -
Preferred stock dividend - - - -
Issuance of stock for cash
and services - - 573,916 -
Issuance of preferred stock
for cash 6,930 - - -
Conversion of preferred stock
to common (1,430) - 1,953,647 2
Expiration of redeemable
warrants - - - -
Redemption of common shares
to treasury stock - - - -
_______ ______ __________ _______
Balance at December 31, 1996 5,500 $ - 10,399,947 $ 10
======== ====== ========== =======
</TABLE>
<TABLE>
<CAPTION>
Common
Additional Stock
Redeemable Paid-In Accumulated Held in Deferred
Warrants Capital Deficit Treasury Comp.
_______________________________________________________________________
<S> <C> <C> <C> <C>
$ 121 $13,982 $ (3,317) $ - $ (76)
- - (1,516) - -
- 3,217 - - -
140 3,500 - - -
8 220 - - -
- 630 - - -
- - - - 46
_________ _______ ________ ________ ________
269 21,549 (4,833) - (30)
- - (9,052) - -
- (3) - - -
- - - - 30
_________ _______ ________ ________ ________
269 21,546 (13,885) - -
- - (260) - -
- - (145) - -
- 693 - - -
- 6,129 - - -
- (2) - - -
(129) 129 - - -
- - - (1,770) -
_________ _______ ________ ________ _________
$ 140 $28,495 $ (14,290) $ (1,770) $ -
========= ======= ======== ======== =========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
________________________________________________________________
NOTE 1
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Perma-Fix Environmental Services, Inc. (the "Company") is a
Delaware corporation engaged in the treatment, storage, processing
and disposal of hazardous and non-hazardous industrial and
commercial wastes, and provides consulting engineering services to
industry and government for broad-scope environmental problems. The
Company has grown through both acquisitions and internal
development. The Company's present objective is to focus the
operations and to maximize the profitability of its existing
businesses.
The Company is subject to certain risks: (1) It is involved
in the transportation, treatment, handling and storage of hazardous
and non-hazardous, mixed and industrial wastes. Such activities
contain risks against which the Company believes it is adequately
insured, and (2) in general, the industries in which the Company
operates are characterized by intense competition among a number of
larger, more established companies with significantly greater
resources than the Company.
The consolidated financial statements of the Company for the
years 1994 through 1996 include the accounts of Perma-Fix
Environmental Services, Inc. ("PESI") and its wholly-owned
subsidiaries, Perma-Fix, Inc. ("PFI") and subsidiaries, Industrial
Waste Management, Inc. ("IWM") and subsidiaries, Perma-Fix Treatment
Services, Inc. ("PFTS"), Perma-Fix of Florida, Inc. ("PFF"), Perma-
Fix of Dayton, Inc. ("PFD"), Perma-Fix of Ft. Lauderdale, Inc.
("PFL"), Perma-Fix of Memphis, Inc. ("PFM") and Perma-Fix Recycling,
Inc. ("Re-Tech"). The Perma-Fix Recycling, Inc. (Re-Tech) plastic
recycling subsidiary was, however, sold effective March 15, 1996.
________________________________________________________________
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries after elimination of
all significant intercompany accounts and transactions. See Note
3 for acquisitions.
<PAGE>
Reclassifications
Certain prior year amounts have been reclassified to conform
with the 1996 presentation.
Business Segments
The Company provides services and products through two business
segments -- Waste Management Services and Consulting Engineering
Services. See Note 12 for a further description of these segments
and certain business information.
Use of Estimates
In preparing financial statements in conformity with generally
accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements as well as the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Cash Equivalents
The Company considers short-term investments with an initial
maturity date of three months or less at the date of purchase to be
cash equivalents.
Restricted Cash Equivalents and Investments
Restricted cash equivalents and investments include
certificates of deposit ($145,000 and $289,000 at December 31, 1996
and 1995, respectively) and amounts deposited in cash collateral
accounts ($645,000 and $406,000 at December 31, 1996 and 1995,
respectively). As of December 31, 1996, $234,000 of the restricted
cash balance was pledged as collateral for the Company's secured
letters of credit, as compared to $226,000 at December 31, 1995.
Of the total restricted cash for 1996 and 1995 ($790,000 and
$695,000, respectively), $448,000 of the 1996 total is classified
as a current asset, as compared to $380,000 in 1995. The long-term
portion totaling $342,000 for 1996 ($315,000 in 1995) reflects cash
held for long-term commitments related to the RCRA closure action
at a facility affiliated with PFD as further discussed in Note 7.
The remainder of the restricted cash, as recorded as a current
asset, represents secured collateral relative to the various
financial assurance instruments guaranteeing the standard RCRA
closure bonding requirements for the PFM, PFD and PFTS TSD
facilities. The letters of credit secured by this restricted cash
renew annually, and the Company plans to replace the letters of
credit with other alternative financial assurance instruments.
Inventories
Inventories consist of fly ash, cement kiln dust and treatment
chemicals. Inventories are valued at the lower of cost or market
with cost determined by the first-in, first-out method.
<PAGE>
Property and Equipment
Property and equipment expenditures are capitalized and
depreciated using the straight-line method over the estimated useful
lives of the assets for financial statement purposes, while
accelerated depreciation methods are principally used for tax
purposes. Generally, annual depreciation rates range from ten to
forty years for buildings (including improvements) and three to
seven years for office furniture and equipment, vehicles, and
decontamination and processing equipment. Maintenance and repairs
are charged directly to expense as incurred. The cost and
accumulated depreciation of assets sold or retired are removed from
the respective accounts, and any gain or loss from sale or
retirement is recognized in the accompanying consolidated statements
of operations. Renewals and improvements which extend the useful
lives of the assets are capitalized.
Intangible Assets
Intangible assets relating to acquired businesses consist
primarily of the cost of purchased businesses in excess of the
estimated fair value of net assets acquired ("goodwill") and the
recognized permit value of the business. Goodwill is generally
amortized over 40 years and permits are amortized over 20 years.
Amortization expense approximated $455,000, $686,000 and $573,000
for the years ended 1996, 1995 and 1994, respectively. The Company
continually reevaluates the propriety of the carrying amount of
permits and goodwill as well as the amortization period to determine
whether current events and circumstances warrant adjustments to the
carrying value and estimates of useful lives. The Company uses an
estimate of the related undiscounted operating income over the
remaining lives of goodwill and permit costs in measuring whether
they are recoverable. At December 31, 1995, the Company recognized
a permit impairment charge of approximately $4,712,000 related to
the December 1993 acquisition of Perma-Fix of Memphis, Inc. See
Note 13 for further discussion of this charge. At this time, the
Company believes that no additional impairment of goodwill or
permits has occurred and that no reduction of the estimated useful
lives of the remaining assets is warranted. This evaluation policy
is in accordance with SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
which is effective for fiscal years beginning after December 15,
1995. Adoption of this pronouncement did not have a material impact
on the financial statements.
Accrued Closure Costs
Accrued closure costs represent the Company's estimated
environmental liability to clean up their facilities in the event
of closure.
Income Taxes
The Company accounts for income taxes under Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes", which requires use of the liability method. SFAS No.
109 provides that deferred tax assets and liabilities are recorded
based on the differences between the tax bases of assets and
liabilities and their carrying amounts for financial reporting
purposes, referred to as temporary differences. Deferred tax assets
or liabilities at the end of each period are determined using the
currently enacted tax rates to apply to taxable income in the
periods in which the deferred tax assets or liabilities are expected
to be settled or realized.
Net Revenues
Revenues for services and reimbursable costs are recognized at
the time services are rendered or, in the case of fixed price
contracts, under the percentage-of-completion method of accounting.
No customer accounted for more than ten percent (10%) of
consolidated net revenues.
Self-Insurance
During June of 1994, the Company began a self-insurance program
for certain health benefits, which was implemented initially at only
three (3) locations. As of January 1, 1995, all employees were
included in this program. The Company has stop-loss coverage of
$60,000 per individual per occurrence with an annual aggregate
limitation of approximately $776,000 per year. However, as the
employment of the Company increases or decreases, the aggregate
limitation rises or falls proportionally. The cost of such benefits
is recognized as expense in the period in which the claim occurred,
including estimates of claims incurred but not reported. The claims
expense for 1996 was approximately $748,000, as compared to $693,000
for 1995. This increase principally reflects the full
implementation of this program, to include all employees of the
corporation, and the occurrence of several larger claims during
1996.
Net Loss Per Share
Net loss per share has been presented using the weighted
average number of common shares outstanding. Common stock
equivalents (stock options and warrants) have not been included in
the net loss per share calculations since their effects would be
antidilutive. Net loss per share for the fiscal year ended December
31, 1994 has been restated, in accordance with Accounting Principles
Board Opinion No. 15, "Earnings Per Share", to reflect the issuance
of contingent shares to Quadrex during 1995.
Fair Value of Financial Instruments
The book values of cash, trade accounts receivable, trade
accounts payable, and financial instruments included in current
assets and other assets approximate their fair values principally
because of the short-term maturities of these instruments. The fair
value of the Company's long-term debt is estimated based on the
current rates offered to the Company for debt of similar terms and
maturities. Under this method, the Company's fair value of long-
<PAGE>
term debt was not significantly different from the stated value at
December 31, 1996 and 1995.
________________________________________________________________
NOTE 3
ACQUISITIONS
During the second quarter of 1995, the Company completed the
acquisition of substantially all of the assets and certain
liabilities of Industrial Compliance and Safety, Inc. ("ICS") of
Kansas City, Missouri. ICS has provided environmental, remedial,
emergency response and waste management services for clients across
the U.S. since 1989, and has been consolidated with the Company's
existing waste management operations in Kansas City. The assets of
ICS were acquired through the forgiveness of indebtedness to the
Company and assumption of certain liabilities. The acquisition was
accounted for using the purchase method effective June 1, 1995 and,
accordingly, the assets and liabilities as of this date and the
statement of operations from the effective date were included in the
accompanying consolidated financial statements. The Company
performed a purchase price allocation as of June 30, 1995, which
resulted in an unallocated excess purchase price over net assets
acquired, or goodwill, of $177,000, to be amortized over 10 years.
The forgiven debt by the Company totalled $376,000 and was recorded
against the respective bad debt reserve, and not utilized in
determination of the purchase price. ICS assets of $233,000 were
acquired through the assumption of accounts payable, debt and other
liabilities of $358,000, and transaction costs of $52,000. The
acquisition of ICS had an insignificant impact on historical
financial data and, thus, pro forma financial information giving
effect to the acquisition has not been provided.
On June 17, 1994, the Company acquired three treatment, storage
and disposal facilities (the "Quadrex Facilities") from Quadrex
Corporation ("Quadrex"), acquiring all of the outstanding stock of
two facilities and purchasing certain assets and assuming certain
liabilities of one facility. The acquisition was accounted for
under the purchase method of accounting. Accordingly, the purchase
price has been allocated to the net assets acquired based on their
estimated fair values. This allocation has resulted in goodwill and
intangible permit costs of $3,359,000 and $3,335,000, respectively.
The goodwill is being amortized over 40 years and the intangible
permit costs over 20 years, both on a straight-line basis. The
results of operations of the Quadrex Facilities have been included
in the consolidated statements of operations since June 30, 1994.
The Quadrex Facilities were acquired for a combination of debt
assumed ($5,532,000), accounts payable and other liabilities assumed
($8,141,000) and shares of the Company's common stock ($3,217,000).
The value of the common stock reflected the market value of the
Company's common stock adjusted to account for restrictions common
to unregistered securities. Under the terms of the acquisition
agreement, the Company held back issuance of certain shares
<PAGE>
contingent upon Quadrex's satisfying certain conditions. As of
December 31, 1994, 576,000 shares had been recorded as issued and
outstanding, and during 1995 the Company issued approximately
1,135,000 shares of common stock in full and complete settlement of
all shares due Quadrex.
________________________________________________________________
NOTE 4
PREFERRED STOCK ISSUANCE AND CONVERSION
The Company issued, during February 1996, to RBB Bank
Aktiengesellschaft, located in Graz, Austria ("RBB Bank"), 1,100
shares of newly created Series 1 Class A Preferred Stock ("Series
1 Preferred") at a price of $1,000 per share, for an aggregate sales
price of $1,100,000, and paid placement and closing fees of
$180,000. During February 1996, the Company also issued 330 shares
of newly created Series 2 Class B Convertible Preferred Stock
("Series 2 Preferred") to RBB Bank at a price of $1,000 per share,
for an aggregate sales price of $330,000, and paid placement and
closing fees of $35,000. The Series 1 Preferred and Series 2
Preferred accrued dividends on a cumulative basis at a rate per
share of five percent (5%) per annum, payable at the option of the
Company in cash or Company common stock. All dividends on the
Series 1 Preferred and Series 2 Preferred were paid in common stock.
The Series 1 Preferred and Series 2 Preferred were convertible, at
any time, commencing forty-five (45) days after issuance into shares
of the Company's common stock at a conversion price equal to the
aggregate value of the shares of the Preferred Stock being
converted, together with all accrued but unpaid dividends thereon,
divided by the "Average Stock Price" per share (the "Conversion
Price"). The Average Stock Price means the lesser of (i) seventy
percent (70%) of the average daily closing bid prices of the common
stock for the period of five (5) consecutive trading days
immediately preceding the date of subscription by the holder or (ii)
seventy percent (70%) of the average daily closing bid prices of the
common stock for a period of five (5) consecutive trading days
immediately preceding the date of conversion of the Preferred Stock.
During the second quarter of 1996, a total of 722 shares of the
Series 1 Preferred were converted into approximately 1,034,000
shares of the Company's common stock and the associated accrued
dividends were paid in the form of approximately 16,000 shares of
the Company's common stock. Pursuant to a subscription and purchase
agreement for the issuance of Series 3 Class C Convertible Preferred
Stock, as discussed below, the remaining 378 shares of the Series
1 Preferred and the 330 shares of the Series 2 Preferred were
converted during July 1996 into 920,000 shares of the Company's
common stock. By terms of the subscription agreement, the 920,000
shares of common stock were purchased by the Company at a purchase
price of $1,770,000 and are included in treasury stock as of
December 31, 1996. As a result of such conversions, the Series 1
Preferred and the Series 2 Preferred are no longer outstanding.
<PAGE>
On July 17, 1996, the Company issued to RBB Bank 5,500 shares
of newly-created Series 3 Class C Convertible Preferred Stock
("Series 3 Preferred") at a price of $1,000 per share, for an
aggregate sales price of $5,500,000, and paid placement and closing
fees as a result of such transaction of approximately $586,000. As
part of the sale of the Series 3 Preferred, the Company also issued
to RBB Bank two (2) common stock purchase warrants entitling RBB
Bank to purchase, after December 31, 1996, until July 18, 2001, an
aggregate of up to 2,000,000 shares of common stock, with 1,000,000
shares exercisable at an exercise price equal to $2.00 per share and
1,000,000 shares exercisable at an exercise price equal to $3.50 per
share. The Series 3 Preferred accrues dividends on a cumulative
basis at a rate of six percent (6%) per annum, and is payable semi-
annually when and as declared by the Board of Directors. Dividends
shall be paid, at the option of the Company, in the form of cash or
common stock of the Company. The holder of the Series 3 Preferred
may convert into common stock of the Company up to (i) 1,833 shares
of the Series 3 Preferred on and after October 1, 1996, (ii) 1,833
shares of the Series 3 Preferred on and after November 1, 1996, and
(iii) the balance of the Series 3 Preferred on and after December 1,
1996. The conversion price shall be the product of (i) the average
closing bid quotation for the five (5) trading days immediately
preceding the conversion date multiplied by (ii) seventy-five
percent (75%). The conversion price shall be a minimum of $.75 per
share or a maximum of $1.50 per share, with the minimum conversion
price to be reduced by $.25 per share each time, if any, after
July 1, 1996, the Company sustains a net loss, on a consolidated
basis, in each of two (2) consecutive quarters. At no time shall
a quarter that has already been considered in such determination be
considered in any subsequent determination. The common stock
issuable on the conversion of the Series 3 Preferred is subject to
certain registration rights pursuant to the subscription agreement.
The subscription agreement also provides that the Company utilize
$1,770,000 of the net proceeds to purchase from RBB Bank 920,000
shares of the Company's common stock owned by RBB Bank. As
discussed above, RBB Bank had previously acquired from the Company
1,100 shares of Series 1 Preferred and 330 shares of Series 2
Preferred and, as of the date of the subscription agreement, was the
owner of record and beneficially owned all of the issued and
outstanding shares of Series 1 Preferred and Series 2 Preferred,
which totalled 378 shares of Series 1 Preferred and 330 shares of
Series 2 Preferred. Pursuant to the terms of the subscription
agreement relating to the Series 3 Preferred, RBB Bank converted all
of the remaining outstanding shares of Series 1 Preferred and Series
2 Preferred into common stock of the Company (920,000 shares)
pursuant to the terms, provisions, restrictions and conditions of
the Series 1 Preferred and Series 2 Preferred, which were in turn
purchased by the Company pursuant to the terms of such subscription
agreement. As of this date, the holder of the Series 3 Preferred
has not elected to convert any of the Series 3 Preferred into common
stock of the Company. The accrued dividends for the period July 17,
<PAGE>
1996 through December 31, 1996 were paid in January 1997, in the
form of approximately 101,000 shares of the Company's common stock.
________________________________________________________________
NOTE 5
LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt at December 31 includes the following (in
thousands):
<S> <C> <C>
Revolving loan facility dated January 27,
1995, collateralized by eligible accounts
receivable, subject to monthly borrowing
base calculation, variable interest paid
monthly at base rate (prime) plus 1 1/2. $ 2,879 $ 3,176
Term loan agreement dated January 27, 1995,
payable in monthly principal installments
of $42, due in January 1998, variable
interest paid monthly at base rate (prime)
plus 1 3/4. Secured by real property. 1,383 2,083
Mortgage note payable under an installment
agreement, payable in monthly principal
and interest installments of $5 (interest
at 8%), collateralized by certain real
estate. - 582
Mortgage note agreement payable in quarterly
installments of $15 plus accrued interest
at 10%. Secured by real property. 123 184
Mortgage note payable in monthly principal
and interest payments of $8, interest at
7.25%, due October 1996. Secured by real
property. - 79
Equipment financing agreements, secured by
equipment, interest ranging from 10.2%
to 13.05%, principal and interest due in
equal installments of $62 through June
1999. 1,257 1,778
Various capital lease and promissory note
obligations, payable 1997 to 2001,
interest at rates ranging from 8.0% to
36.4%. 718 596
_______ _______
6,360 8,378
Less current portion of long-term debt 333 325
Less current portion of revolving loan and
term note facility 500 5,259
Less current portion of equipment financing
agreements 646 1,778
_______ _______
$ 4,881 $ 1,116
======= =======
</TABLE>
<PAGE>
On January 27, 1995, the Company, as parent and guarantor, and
all direct and indirect subsidiaries of the Company, as co-borrowers
and cross-guarantors, entered into a Loan and Security Agreement
("Agreement") with Heller Financial, Inc. ("Heller"). The Agreement
provides for a term loan in the amount of $2,500,000, which requires
principal repayments based on a five-year level principal
amortization over a term of 36 months, with monthly principal
payments of $42,000. Payments commenced on February 28, 1995, with
a final balloon payment in the amount of $846,000 due on January 31,
1998. The Agreement also provides for a revolving loan facility in
the amount of $7,000,000. At any point in time the aggregate
available borrowings under the facility are reduced by any amounts
outstanding under the term loan and are also subject to the maximum
credit availability as determined through a monthly borrowing base
calculation, equal to 80% of eligible accounts receivable accounts
of the Company as defined in the Agreement. The termination date
on the revolving loan facility is also the third anniversary of the
closing date. The Company expensed during 1995 approximately
$281,000 in financing fees relative to the solicitation and closing
of this loan agreement (principally investment banking, legal and
closing fees).
During the second quarter of 1995, the Company became in
violation of certain of the restrictive financial ratio covenants
of the Agreement. During the second quarter of 1996, the Company
negotiated and subsequently entered into an amendment ("Third
Amendment") to the Loan and Security Agreement, whereby, among other
things, Heller waived the existing events of default, amended the
financial covenants and amended certain other provisions of the Loan
Agreement as set forth therein. Applicable interest rate provisions
were also amended, whereby the term loan shall bear interest at a
rate of interest per annum equal to the base rate plus 2 1/4%, and
the revolving loan shall bear interest equal to the base rate plus
2%. The Amendment also contains a performance price adjustment
which provides that upon the occurrence of an "equity infusion,"
applicable interest rates on the loans shall be reduced, in each
instance by 1/2% per annum. Due to the equity infusion as discussed
in Note 4, applicable interest rates on the loans were reduced
pursuant to the terms of the Third Amendment effective August 16,
1996, and were subsequently increased during the first quarter of
1997 back to the base rate plus 2-1/4% on the term loan and the base
rate plus 2% on the revolving loan. Also, during the first quarter
<PAGE>
of 1997, Heller extended to the Company an overformula line in an
amount not to exceed $300,000, for a period ending the earliest of
90 days after the date of first advance or May 20, 1997.
As disclosed at December 31, 1995, Heller had agreed to
forebear from exercising any rights and remedies under the Agreement
as a result of these previous defaults and continued to make normal
advances under the revolving loan facility. However, in compliance
with generally accepted accounting principles, and since there was
no waiver or reset, the Company, at December 31, 1995, reclassified
as a current liability $3,882,000 outstanding under the Agreement
that would otherwise have been classified as long-term debt. The
Company was in default of the "fixed charge coverage" and "capital
expenditures" financial covenants for the year ending December 31,
1996. The Company obtained a waiver from Heller for the year ended
December 31, 1996, and reset certain covenants for 1997, under the
Sixth Amendment to the Agreement (effective April 14, 1997).
Therefore, $3,762,000 of such loans with Heller is classified as
long-term debt at December 31, 1996, in compliance with generally
accepted accounting principles. Pursuant to this Sixth Amendment,
the Company is obligated to raise an additional $700,000 on or
before August 15, 1997, of which $150,000 is to be paid by June 15,
1997. Under such amendment, this additional amount may be in the
form of proceeds received under property and/or business
interruption insurance as a result of the explosion and fire at
PFM's facility, insurance proceeds with regard to the vandalism at
the PFL facility, selling of additional equity securities by the
Company, or other proceeds obtained in a manner approved by Heller.
The Company believes that it will be able to comply with such a
requirement.
Pursuant to the initial agreement, the term loan bears interest
at a floating rate equal to the base rate (prime) plus 1 3/4% per
annum The revolving loan bears interest at a floating rate equal
to the base rate (prime) plus 1 1/2% per annum. The loans also
contain certain closing, management and unused line fees payable
throughout the term. As discussed above, in conjunction with the
Third and Sixth Amendments, applicable interest rates were amended.
Both the revolving loan and term loan were prime based loans at
December 31, 1996, bearing interest at a rate of 9.75% and 10.00%,
respectively.
As of December 31, 1996, the borrowings under the revolving
loan facility total $2,879,000, a decrease of $297,000 from the
December 31, 1995 balance of $3,176,000, with borrowing availability
of $958,000. The balance on the term loan totalled $1,383,000, as
compared to $2,083,000 at December 31, 1995. Total indebtedness
under the Heller Agreement as of December 31, 1996 was $4,262,000,
a reduction of $997,000 from the December 31, 1995 balance of
$5,259,000.
<PAGE>
During October 1994, the Company entered into a $1,000,000
equipment financing agreement with Ally Capital Corporation
("Ally"), which provides lease commitments for the financing of
certain equipment through June 1995. During 1995, the Company
negotiated an increase in the total lease commitment to $1,600,000.
The agreement provides for an initial term of 42 months, which may
be extended to 48, and bears interest at a fixed interest rate of
11.3%. As of December 31, 1995, the Company had utilized $1,496,000
of this credit facility to purchase capital equipment and
subsequently drew down an additional $57,000 in January 1996,
bringing the total financing under this agreement to $1,553,000.
In conjunction with a 1994 acquisition, the Company also assumed
$679,000 of debt obligations with Ally Capital Corporation, which
had terms expiring from September 1997 through August 1998, at a
rate ranging from 10.2% to 13.05%. At December 31, 1995, the
Company was not in compliance with the minimum tangible net worth
covenant of this agreement and Ally had waived compliance with
this covenant and no acceleration was demanded by the lender.
However, in compliance with generally accepted accounting
principles, the Company, at December 31, 1995, reclassified as
a current liability $1,778,000 outstanding under the agreement,
which would otherwise have been classified as long-term debt.
During the second quarter of 1996, the Company negotiated and
subsequently entered into an amendment to the equipment financing
agreement, whereby, among other things, Ally waived the existing
event of default and amended the required covenants. The Company
was in default of the "fixed charge covecoverage" and "capital
expenditures" financial covenant for the year ending December 31,
1996. Pursuant to an amendment to the Lease Agreement dated
April 14, 1997, the Company obtained a waiver from Ally for the year
ended December 31, 1997, and reset certain covenants for 1997. The
outstanding balance on these equipment financing agreements at
December 31, 1996 is $1,257,000, as compared to $1,778,000 at
December 31, 1995. As a result of the above discussed waiver and
amendment and the resetting of certain covenants for 1997, $611,000
has been classified as long-term debt at December 31, 1996, pursuant
to generally accepted accounting principles.
The aggregate amount of the maturities of long-term debt
maturing in future years as of December 31, 1996 is $1,479,000 in
1997; $4,507,000 in 1998; $234,000 in 1999; $130,000 in 2000; and
$10,000 in 2001.
<PAGE>
________________________________________________________________
NOTE 6
ACCRUED EXPENSES
<TABLE>
<CAPTION>
Accrued expenses at December 31 include the following (in
thousands):
1996 1995
________ ________
<S> <C> <C>
Salaries and employee benefits $ 808 $ 818
Accrued sales, property and other tax 365 548
Waste disposal and other related expenses 667 657
Accrued environmental 482 338
Other 538 590
________ ________
Total accrued expenses $ 2,860 $ 2,951
======== ========
</TABLE>
________________________________________________________________
NOTE 7
ACCRUED CLOSURE COSTS AND ENVIRONMENTAL LIABILITIES
The Company accrues for the estimated closure costs of its
fixed-based RCRA regulated facilities upon cessation of operations.
The amount recorded in 1993 in accordance with EPA approved closure
plans was $290,000. With the 1994 acquisition of two RCRA regulated
facilities from Quadrex, the Company increased its liability to
$935,000 as of December 31, 1994, which was subsequently increased
to $1,041,000 in 1995. During 1996, the accrued closure cost
increased by $53,000 to a total of $1,094,000, principally as a
result of inflationary factors. The closure costs will increase in
the future, as indexed to an inflationary factor, and may also
increase or decrease as the Company changes its current operations
at these regulated facilities. Additionally, unlike solid waste
facilities, the Company, consistent with EPA regulations, does not
have post-closure liabilities that extend substantially beyond the
effective life of the facility.
At December 31, 1996 the Company had accrued environmental and
acquisition related liabilities totalling $2,460,000, which reflects
a decrease of $603,000 from the December 31, 1995 balance of
$3,063,000. This amount principally represents management's best
estimate of the costs to remove contaminated sludge and soil, and
to undergo groundwater remediation activities at one of its RCRA
facilities and one former RCRA facility that is under a closure
action from 1989 that its wholly-owned subsidiary, PFD, leases.
Perma-Fix of Memphis, Inc., acquired December 30, 1993, is currently
remediating gasoline contamination from a shallow aquifer on its
property. The Company expects this activity to continue into the
foreseeable future. Perma-Fix of Dayton, Inc. is the owner of a
RCRA facility currently under closure since it ceased operations in
1989. This facility has pursued remedial activities for the last
five years with additional studies forthcoming, and potential
groundwater restoration which could extend five (5) to ten (10)
years. The Company has estimated the potential liability related
<PAGE>
to the remedial activity of the above properties to approximate
$2,085,000 (PFD $925,000 and PFM $1,160,000), which has been
included in the above accrued environmental total.
________________________________________________________________
NOTE 8
INCOME TAXES
<TABLE>
<CAPTION>
The components of the provision for income taxes are as follows
(in thousands):
1996 1995 1994
_______ _______ ________
<S> <C> <C> <C>
Current
Federal $ - $ - $ -
State - - 30
________ _______ ________
$ - $ - $ 30
Deferred - - -
________ _______ ________
Provision for income taxes $ - $ - $ -
======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1996 and 1995 the Company had temporary
differences and net operating loss carryforwards which gave rise to
deferred tax assets and liabilities at December 31, as follows (in
thousands):
1996 1995
________ ________
<S> <C> <C>
Net operating losses $ 3,376 $ 2,770
Environmental reserves 980 1,131
Other 172 453
Valuation allowance (4,034) (3,849)
________ ________
Deferred tax assets 494 505
________ ________
Depreciation 466 493
Other 28 12
________ ________
Deferred tax liability 494 505
________ ________
Net deferred tax asset (liability) $ - $ -
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
A reconciliation between the expected tax benefit using the
federal statutory rate of 34% and the provision for income taxes as
reported in the accompanying consolidated statements of operations
is as follows (in thousands):
1996 1995 1994
_______ ________ _______
<S> <C> <C> <C>
Tax benefit at statutory rate $ (137) $ (3,077) $ (505)
Permit impairment charge and
goodwill amortization 43 1,811 -
Other 85 97
State income taxes - - 30
Increase in valuation
allowance 9 1,169 505
________ _________ ________
Provision for income taxes $ - $ - $ 30
======== ========= ========
</TABLE>
The Company's valuation allowance increased by approximately
$185,000 and $1,169,000 for the years ended December 31, 1996 and
1995, respectively, which represents the effect of changes in the
temporary differences and net operating losses (NOLs), as amended.
The Company has recorded a valuation allowance to state its deferred
tax assets at estimated net realizable value due to the uncertainty
related to realization of these assets through future taxable
income.
The Company had estimated net operating loss carryforwards for
federal income tax purposes of approximately $9,900,000 at
December 31, 1996. These net operating losses can be carried
forward and applied against future taxable income, if any, and
expire in the years 2006 through 2011. However, as a result of
various stock offerings and certain acquisitions, the use of
$7,800,00 of these NOLs will be limited to approximately $1,500,000
per year under the provisions of Section 382 of the Internal Revenue
Code of 1986, as amended. Additionally, NOLs may be further limited
under the provisions of Treasury Regulation 1.1502-21 regarding
Separate Return Limitation Years.
________________________________________________________________
NOTE 9
CAPITAL STOCK, EMPLOYEE STOCK PLAN AND INCENTIVE COMPENSATION
In February 1996, the Company issued 1,100 shares of newly
created Series 1 Class A Preferred Stock at a price of $1,000 per
share, for net proceeds of $920,000. The Company also issued 330
shares of newly created Series 2 Class B Preferred Stock at a price
of $1,000 per share, for net proceeds of $295,000. Both of the
Series 1 and Series 2 Preferred Stock were fully converted into
1,953,467 shares of the Company's common stock. During July 1996,
the Company issued 5,500 shares of newly created Series 3 Class C
Convertible Preferred Stock at a price of $1,000 per share for an
aggregate sales price of $5,500,000. See Note 4 for further
discussion.
<PAGE>
In March 1996, the Company entered into a Stock Purchase
Agreement with Dr. Centofanti, currently the President, Chief
Executive Officer, Chairman of the Board, and Director of the
Company, whereby the Company sold, and Dr. Centofanti purchased,
133,333 shares of the Company's common stock for 75% of the closing
bid price of such common stock as quoted on the NASDAQ on the date
that Dr. Centofanti notified the Company of his desire to purchase
such stock, as authorized by the Board of Directors of the Company.
During February 1996, Dr. Centofanti tendered to the Company
$100,000 for such 133,333 shares by delivering to the Company
$86,028.51 and forgiving $13,971.49 that was owing to Dr. Centofanti
by the Company for expenses incurred by Dr. Centofanti on behalf of
the Company. On the date that Dr. Centofanti notified the Company
of his desire to purchase such shares, the closing bid price as
quoted on the NASDAQ for the Company's common stock was $1.00 per
share.
In June 1996, the Company entered into a second Stock Purchase
Agreement with Dr. Centofanti, whereby the Company sold, and Dr.
Centofanti purchased, 76,190 shares of the Company's common stock
for 75% of the closing bid price of such common stock as quoted on
the NASDAQ on the date that Dr. Centofanti notified the Company of
his desire to purchase such stock (closing bid of $1.75 on June 11,
1996), as previously authorized by the Board of Directors of the
Company. Dr. Centofanti tendered to the Company $100,000 for such
76,190 shares of common stock. During 1996, the Company also issued
347,912 shares of common stock to outside consultants of the Company
for past and future services, valued at approximately $462,000.
At the Company's Annual Meeting of Stockholders ("Annual
Meeting"), as held on December 12, 1996, the stockholders approved
the adoption of the Perma-Fix Environmental Services, Inc. 1996
Employee Stock Purchase Plan. This plan provides eligible employees
of the Company and its subsidiaries who wish to become stockholders,
an opportunity to purchase common stock of the Company through
payroll deductions. The maximum number of shares of common stock
of the Company that may be issued under the plan will be 500,000.
The plan provides that shares will be purchased two (2) times per
year and that the exercise price per share shall be eighty-five
percent (85%) of the market value of each such share of common stock
on the offering date on which such offer commences or on the
exercise date on which the offer period expires, whichever is
lowest. Also approved at the Annual Meeting was the amendment to
the Company's Restated Certificate of Incorporation, as amended, to
increase from 20,000,000 to 50,000,000 shares the Company's
authorized common stock, par value $.001 per share.
In June 1994, the Company acquired from Quadrex Corporation
("Quadrex") and its wholly-owned subsidiary, Quadrex Environmental
Company ("QEC"), three businesses ("Quadrex Acquisitions"). Quadrex
and QEC are collectively referred to as "Quadrex". As consideration
for the Quadrex Acquisitions, the Company assumed certain debts of
<PAGE>
Quadrex and QEC and issued to Quadrex 575,659 shares of the
Company's common stock and agreed to issue to Quadrex up to an
additional 1,479,413 shares of Company common stock upon certain
conditions being met, with such balance being subject to reductions
under certain conditions.
Subsequent to the closing of the Quadrex Acquisitions, the
Company issued to Quadrex during the first quarter of 1995 an
additional 94,377 shares of common stock upon certain conditions
having been met. However, certain disputes and disagreements had
arisen among the parties whether under the terms of the Quadrex
Acquisitions the conditions required for delivery of the balance of
such shares had been met, and even if conditions were met, the
amount of such shares subject to reduction. In February 1995,
Quadrex filed for federal bankruptcy protection. The Company and
Quadrex negotiated and entered into a Settlement Agreement resolving
their differences as a result of the Quadrex Acquisitions without
resorting to litigation. Under the terms of the Settlement
Agreement, the Company issued to Quadrex in November 1995 an
additional 1,041,000 shares of common stock in full and complete
settlement of any and all claims which the parties may have against
each other relating to the Quadrex Acquisitions.
During July 1994, the Company completed the private placement
of 140 units, with each unit consisting of 10,000 shares of its
unregistered common stock and Class B Warrants to purchase up to
20,000 shares of the Company's common stock for $5.00 per share.
The Company closed the private placement on July 30, 1994 and
received total proceeds of $4,200,000, which resulted in the
issuance of 1,400,000 shares of unregistered common stock and Class
B Warrants to purchase 2,800,000 shares of common stock, as
described above. Of the issuance costs of $559,000, the Company
paid approximately $391,000 in fees to brokers, representatives or
finders in connection with the private placement. In addition, the
Company granted two warrants to purchase up to 331,000 shares of
common stock to two investment banking corporations. Each of the
warrants is for a term of five years and provides for an exercise
price of $3.625 per share.
On August 31, 1994, in connection with the conversion of
certain of the Company's notes then outstanding in the principal
amount of $225,000 and accrued interest of $9,000, the Company
issued 78,140 shares of its unregistered common stock and issued
three warrants to purchase 156,280 shares of common stock. The
warrants are exercisable for five years at a price of $5.00 per
share.
On December 30, 1994, the Company registered the above
mentioned shares of common stock and warrants issued during 1994,
as well as previously unregistered shares of common stock and
warrants issued in prior years.
<PAGE>
Stock Options
On December 16, 1991, the Company adopted a Performance Equity
Plan (the "Plan"), under which 500,000 shares of the Company's
common stock are reserved for issuance, pursuant to which officers,
directors and key employees are eligible to receive incentive or
nonqualified stock options. Incentive awards consist of stock
options, restricted stock awards, deferred stock awards, stock
appreciation rights and other stock-based awards. Incentive stock
options granted under the Plan are exercisable for a period of up
to ten years from the date of grant at an exercise price which is
not less than the market price of the common stock on the date of
grant, except that the term of an incentive stock option granted
under the Plan to a stockholder owning more than 10% of the then-
outstanding shares of common stock may not exceed five years and the
exercise price may not be less than 110% of the market price of the
common stock on the date of grant. To date, all grants of options
under the Performance Equity Plan have been made at an exercise
price not less than the market price of the common stock at the date
of grant.
Effective September 13, 1993, the Company adopted a
Nonqualified Stock Option Plan pursuant to which officers and key
employees can receive long-term performance-based equity interests
in the Company. The maximum number of shares of common stock as to
which stock options may be granted in any year shall not exceed
twelve percent (12%) of the number of common shares outstanding on
December 31 of the preceding year, less the number of shares covered
by the outstanding stock options issued under the Company's 1991
Performance Equity Plan as of December 31 of such preceding year.
The option grants under the plan are exercisable for a period of up
to ten years from the date of grant at an exercise price which is
not less than the market price of the common stock at date of grant.
Effective December 12, 1993, the Company adopted the 1992
Outside Directors Stock Option Plan, pursuant to which options to
purchase an aggregate of 100,000 shares of common stock had been
authorized. This Plan provides for the grant of options on an annual
basis to each outside director of the Company to purchase up to
5,000 shares of common stock. The options have an exercise price
equal to the closing trading price, or, if not available, the fair
market value of the common stock on the date of grant. The Plan
also provides for the grant of additional options to purchase up to
10,000 shares of common stock on the foregoing terms to each outside
director upon election to the Board. During the Company's annual
meeting held on December 12, 1994, the stockholders approved the
second amendment to the Company's 1992 Outside Directors Stock
Option Plan which, among other things, (i) increased from 100,000
to 250,000 the number of shares reserved for issuance under the
Plan, and (ii) provides for automatic issuance to each director of
the Company, who is not an employee of the Company, a certain number
of shares of common stock in lieu of sixty-five percent (65%) of the
cash payment of the fee payable to each director for his services
<PAGE>
as director of the Company. The Third Amendment to the Outside
Directors Plan, as approved at the December 1996 Annual Meeting,
provided that each eligible director shall receive, at such eligible
director's option, either sixty-five percent (65%) or one hundred
percent (100%) of the fee payable to such director for services
rendered to the Company as a member of the Board in common stock.
In either case, the number of shares of common stock of the Company
issuable to the eligible director shall be determined by valuing the
common stock of the Company at seventy-five percent (75%) of its
fair market value as defined by the Outside Directors Plan.
The Company applies APB Opinion 25, "Accounting for Stock
Issued to Employees," and related interpretations in accounting for
options issued to employees. Accordingly, no compensation cost has
been recognized for options granted to employees at exercise prices
which equal or exceed the market price of the Company's common stock
at the date of grant. Options granted at exercise prices below
market prices are recognized as compensation cost measured as the
difference between market price and exercise price at the date of
grant.
Statement of Financial Accounting Standards No. 123 (FAS 123)
"Accounting for Stock-Based Compensation," requires the Company to
provide pro forma information regarding net income and earnings per
share as if compensation cost for the Company's employee stock
options had been determined in accordance with the fair market value
based method prescribed in FAS 123. The Company estimates the fair
value of each stock option at the grant date by using the Black-
Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995, respectively: no
dividend yield for both years; an expected life of ten years for
both years; expected volatility of 46.8% and 47.0%; and risk-free
interest rates of 6.63% and 7.69%.
<TABLE>
<CAPTION>
Under the accounting provisions of FASB Statement 123, the
Company's net loss and loss per share would have been reduced to the
pro forma amounts indicated below:
1996 1995
____________ ___________
<S> <C> <C>
Net loss applicable
to common stock
As reported $ (405,000) $ (9,052,000)
Pro forma (758,000) $ (9,553,000)
Net loss per share
As reported $ (.05) $ (1.15)
Pro forma (.09) (1.21)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
A summary of the status of options under the plans as of
December 31, 1996 and 1995, and changes during the years ending on
those dates are presented below:
1996 1995
__________________________________________
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
_________ _________ _________ ________
<S> <C> <C> <C> <C>
Performance Equity Plan:
Balance at beginning
of year 263,282 $3.22 361,615 $3.31
Granted 110,000 1.00 15,000 2.47
Exercised - - - -
Forfeited (57,056) 3.32 (113,333) 3.41
________ ________
Balance at end
of year 316,226 2.43 263,282 3.22
======== ========
Options exercisable
at year end 183,609 3.14 158,874 3.17
Options granted during
the year at exercise
prices which equal
market price of stock
at date of grant:
Weighted average
exercise price 110,000 1.00 15,000 2.47
Weighted average
fair value 110,000 .68 15,000 1.69
Nonqualified Stock Option
Plan:
Balance at beginning
of year 263,995 $3.17 119,295 $3.72
Granted 345,000 1.00 193,000 2.88
Exercised - - - -
Forfeited (133,600) 2.88 (48,300) 3.40
________ ________
Balance at end
of year 475,395 1.68 263,995 3.17
======== ========
Options exercisable
at year end 34,158 3.77 8,079 4.75
Options granted during
the year at exercise
prices which equal
market price of stock
at date of grant:
Weighted average
exercise price 345,000 1.00 193,000 2.88
Weighted average
fair value 345,000 .68 193,000 2.23
Outside Directors Stock
Option Plan:
Balance at beginning
of year 110,000 $3.08 90,000 $3.05
Granted 35,000 1.75 20,000 3.25
Exercised - - - -
Forfeited - - - -
________ ________
Balance at end
of year 145,000 2.76 110,000 3.08
======== ========
Options exercisable
at year end 110,000 3.08 110,000 3.08
Options granted during
the year at exercise
prices which equal
market price of stock
at date of grant:
Weighted average
exercise price 35,000 1.75 20,000 3.25
Weighted average
fair value 35,000 1.25 20,000 2.27
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The following table summarizes information about options under
the plan outstanding at December 31, 1996:
Options Outstanding
________________________________________
Weighted
Average Weighted
Description and Number Remaining Average
Range of Outstanding at Contractual Exercise
Exercise Price Dec. 31, 1996 Life Price
________________________ ______________ ___________ ________
<S> <C> <C> <C>
Performance Equity Plan:
1991/1992 Awards ($3.02) 190,226 5.3 years $3.02
1993 Awards ($5.25) 16,000 6.8 years 5.25
1996 Awards ($1.00) 110,000 9.4 years 1.00
_________
316,226 2.43
=========
Nonqualified Stock
Option Plan:
1994 Awards ($4.75) 40,395 7.7 years $4.75
1995 Awards ($2.88) 90,000 8.0 years 2.88
1996 Awards ($1.00) 345,000 9.4 years 1.00
_________
475,395 1.68
=========
Outside Directors Stock
Option Plan:
1993 Awards ($3.02) 45,000 5.5 years $3.02
1994 Awards ($3.00-$3.22) 45,000 7.5 years 3.07
1995 Awards ($3.25) 20,000 8.0 years 3.25
1996 Awards ($1.75) 35,000 9.9 years 1.75
_________
145,000 2.76
=========
</TABLE>
<TABLE>
<CAPTION>
Options Exercisable
_______________________________
Weighted
Number Average
Exercisable at Exercise
Dec. 31, 1996 Price
_______________ ________
<S> <C>
174,009 $3.02
9,600 5.25
- -
__________
183,609 3.14
==========
16,158 $4.75
18,000 2.88
- 1.00
__________
34,158 3.77
==========
45,000 $3.02
45,000 3.07
20,000 3.25
-
________
110,000 3.08
</TABLE>
Warrants
The Company has issued various warrants pursuant to
acquisitions, private placements, debt and debt conversion and to
facilitate certain financing arrangements. The warrants principally
are for a term of five years and entitle the holder to purchase one
share of common stock for each warrant at the stated exercise price.
Also, the Company had issued certain Redeemable Warrants (Class A)
which entitled the holder to purchase one-quarter share of common
stock at an exercise price of $1.50 per quarter share ($6 per whole
share) commencing on December 8, 1993, all of which expired on
December 7, 1996. During 1996, pursuant to the issuance of the
Series 3 Class C Convertible Preferred Stock, as further discussed
in Note 4, the Company issued to RBB Bank two (2) common stock
purchase warrants entitling RBB Bank to purchase, after December 31,
1996, until July 18, 2001, an aggregate of up to 2,000,000 shares
of common stock, with 1,000,000 shares exercisable at an exercise
price equal to $2.00 per share and 1,000,000 at $3.50 per share.
In connection with the preferred stock issuance as discussed fully
in Note 4, the Company issued additional warrants during 1996 for
the purchase of 1,420,000 shares of common stock which are included
in other financing warrants. Certain of the warrant agreements
contain antidilution provisions which have been triggered by the
various stock and warrant transactions as entered into by the
<PAGE>
Company since the issuance of such warrants by the Company. The
impact of these antidilution provisions was the reduction of certain
warrant exercise prices and the increase in the total number of
underlying shares for all warrants issued prior to 1996 from their
initial amount of 5,902,060 as of December 31, 1995, to an amended
total of 6,893,697, of which 1,126,579 expired during 1996.
<TABLE>
<CAPTION>
The following details the warrants currently outstanding as of
December 31, 1996, after giving effect to antidilution provisions:
Number of
Underlying Exercise Expiration
Warrant Series Shares Price Date
______________ _________ ________ __________
<S> <C> <C> <C>
Class A Warrants 291,316 $4.12 12/97
Class B Warrants 3,963,258 $3.53 6/99
Acquisition Warrants 487,814 $2.15 2/97
Debt Conversion Warrants 219,684 $3.56 8/99
Financing Warrants
(Preferred Stock) 1,000,000 $2.00 7/01
Financing Warrants
(Preferred Stock) 1,000,000 $3.50 7/01
Other Financing Warrants 2,225,046 $.73-$3.63 6/99-9/00
_________
9,187,118
==========
</TABLE>
The above noted acquisition warrants, which were originally set
to expire in February of 1997, were amended and subsequently
exercised in their entirety. See Note 15 for further discussion of
these amended warrants.
Shares Reserved
At December 31, 1996, the Company has reserved approximately
14,300,000 shares of common stock for future issuance under all of
the above arrangements and the convertible Series 3 Preferred Stock
using the maximum conversion price (see Note 4).
Deferred Compensation
The stock grants issued in 1992 in connection with the IWM
acquisition have been accounted for as deferred compensation and
were amortized over three years, the period over which the
respective employees must earn their respective grant. Compensation
expense was $5,000 and $40,000 for 1995 and 1994, respectively,
related to these grants.
During 1993, 25,000 shares of the Company's common stock were
granted to a key employee of the Company at no cost as deferred
compensation. Upon issuance, 8,000 shares vested immediately, 9,000
shares vested on January 1, 1994, and 8,000 shares vested on
January 1, 1995. Compensation expense was $25,000 and $6,000 for
1995 and 1994, respectively, related to this grant.
<PAGE>
_________________________________________________________________
NOTE 10
COMMITMENTS AND CONTINGENCIES
Hazardous Waste
In connection with the Company's waste management services, the
Company handles both hazardous and non-hazardous waste which it
transports to its own or other facilities for destruction or
disposal. As a result of disposing of hazardous substances, in the
event any cleanup is required, the Company could be a potentially
responsible party for the costs of the cleanup notwithstanding any
absence of fault on the part of the Company.
Legal
During September 1994, PFM, formerly American Resource Recovery
Corporation ("ARR"), was sued by Community First Bank ("Community
First") to collect a note in the principal sum of $341,000 that was
allegedly made by ARR to CTC Industrial Services, Inc. ("CTC") in
February 1987 (the "Note"), and which was allegedly pledged by CTC
to Community First in December 1988 to secure certain loans to CTC.
This lawsuit, styled Community First Bank v. American Resource
Recovery Corporation, was instituted on September 14, 1994, and is
pending in the Circuit Court, Shelby County, Tennessee. The Company
was not aware of either the Note or its pledge to Community First
at the time of the Company's acquisition of PFM in December 1993.
The Company intends to vigorously defend itself in connection
therewith. PFM has filed a third party complaint against Billie Kay
Dowdy, who was the sole shareholder of PFM immediately prior to the
acquisition of PFM by the Company, alleging that Ms. Dowdy is
required to defend and indemnify the Company and PFM from and
against this action under the terms of the agreement relating to the
Company's acquisition of PFM. Ms. Dowdy has stated in her answer
to the third party complaint that if the Note is determined to be
an obligation enforceable against PFM, she would be liable to PFM,
assuming no legal or equitable defenses. Management believes that
the final outcome of these proceedings will not have a material
adverse effect on the Company's financial position, liquidity or
results of operations.
In May 1995, Perma-Fix of Memphis, Inc. ("PFM"), a subsidiary
of the Company, became aware that the U.S. District Attorney for the
Western District of Tennessee and the Department of Justice were
investigating certain prior activities of W. R. Drum Company, its
successor, First Southern Container Company, and any other facility
owned or operated, in whole or in part, by Johnnie Williams. PFM
used W. R. Drum Company to dispose of certain of its used drums.
In May 1995, PFM received a Grand Jury Subpoena which demanded the
production of any documents in the possession of PFM pertaining to
W. R. Drum Company, First Southern Container Company, or any other
facility owned or operated, and holder in part, by Johnnie Williams.
PFM complied with the Grand Jury Subpoena. Thereafter, in September
of 1995, PFM received another Grand Jury Subpoena for documents from
<PAGE>
the Grand Jury investigating W. R. Drum Company, First Southern
Container Company and/or Johnnie Williams. PFM complied with the
Grand Jury Subpoena. In December 1995, representatives of the
Department of Justice advised PFM that it was also currently a
subject of the investigation involving W. R. Drum Company, First
Southern Container Company, and/or Johnnie Williams. Since that
time, however, PFM has had no contact with representatives of either
the United States District Attorney's office for the Western
District of Tennessee or the Department of Justice, and is not aware
of why it is also a subject of such investigation. In accordance
with certain provisions of the Agreement and the Plan of Merger
relating to the prior acquisition of PFM, on or about January 2,
1996, PFM notified Ms. Billie K. Dowdy of the foregoing, and advised
Ms. Dowdy that the Company and PFM would look to Ms. Dowdy to
indemnify, defend and hold the Company and PFM harmless from any
liability, loss, damage or expense incurred or suffered as a result
of, or in connection with, this matter. Management believes that
the final outcome of these proceedings will not have a material
adverse effect on the Company's financial position, liquidity or
results of operations.
In addition to the above matters and in the normal course of
conducting its business, the Company is involved in various other
litigation. The Company is not a party to any litigation or
governmental proceeding which its management believes could result
in any judgments or fines against it that would have a material
adverse affect on the Company's financial position, liquidity or
results of operations.
Permits
The Company is subject to various regulatory requirements,
including the procurement of requisite licenses and permits at its
facilities. These licenses and permits are subject to periodic
renewal without which the Company's operations would be adversely
affected. The Company anticipates that, once a license or permit
is issued with respect to a facility, the license or permit will be
renewed at the end of its term if the facility's operations are in
compliance with the applicable regulatory requirements.
Accrued Closure Costs and Environmental Liabilities
The Company maintains closure cost funds to insure the proper
decommissioning of its RCRA facilities upon cessation of operations.
Additionally, in the course of owning and operating on-site
treatment, storage and disposal facilities, the Company is subject
to corrective action proceedings to restore soil and/or groundwater
to its original state. These activities are governed by federal,
state and local regulations and the Company maintains the
appropriate accruals for restoration. As discussed in Note 7, the
Company has recorded accrued liabilities for estimated closure costs
and identified environmental remediation costs.
<PAGE>
Insurance
The business of the Company exposes it to various risks,
including claims for causing damage to property or injuries to
persons or claims alleging negligence or professional errors or
omissions in the performance of its services, which claims could be
substantial. The Company carries general liability insurance which
provides coverage in the aggregate amount of $2 million and an
additional $6 million excess umbrella policy and carries $1 million
per occurrence and $2 million annual aggregate of errors and
omissions/professional liability insurance coverage, which includes
pollution control coverage.
The Company also carries specific pollution liability insurance
for operations involved in the Waste Management Services segment.
The Company believes that this coverage, combined with its various
other insurance policies, is adequate to insure the Company against
the various types of risks encountered.
Operating Leases
The Company leases certain facilities and equipment under
operating leases. Future minimum rental payments as of December 31,
1996 required under these leases are $941,000 in 1997, $848,000 in
1998, $504,000 in 1999, $308,000 in 2000 and $95,000 in 2001.
Net rent expense relating to the Company's operating leases was
$1,657,000, $1,982,000 and $1,349,000 for 1996, 1995 and 1994,
respectively.
________________________________________________________________
NOTE 11
PROFIT SHARING PLAN
The Company adopted the Perma-Fix Environmental Services, Inc.
401(k) Plan (the "401(k) Plan") in 1992, which is intended to comply
under Section 401 of the Internal Revenue Code and the provisions
of the Employee Retirement Income Security Act of 1974. All full-
time employees of the Company and its subsidiaries who have attained
the age of 21 are eligible to participate in the 401(k) Plan.
Participating employees may make annual pre-tax contributions to
their accounts up to 15% of their compensation, up to a maximum
amount as limited by law. The Company, at its discretion, may make
matching contributions based on the employee's elective
contributions. Company contributions vest over a period of six
years. The Company elected not to provide any matching
contributions for the years ended December 31, 1996, 1995 and 1994.
<PAGE>
________________________________________________________________
NOTE 12
BUSINESS SEGMENT INFORMATION
The Company provides services through two business segments.
The Waste Management Services segment, which provides off-site waste
treatment, recycling and disposal services through its five
treatment, storage and disposal facilities (TSD facilities); Perma-
Fix Treatment Services, Inc., Perma-Fix of Dayton, Inc., Perma-Fix
of Memphis, Inc., Perma-Fix of Ft. Lauderdale, Inc. and Perma-Fix
of Florida, Inc. The Company also provides through this segment:
(i) on-site waste treatment services to convert certain types of
characteristic hazardous wastes into non-hazardous waste, through
its Perma-Fix, Inc. subsidiary; and (ii) the supply and management
of non-hazardous and hazardous waste to be used by cement plants as
a substitute fuel or raw material source. Effective June 30, 1994,
the Company acquired Perma-Fix of Dayton, Inc., Perma-Fix of Ft.
Lauderdale, Inc. and Perma-Fix of Florida, Inc., which are included
in the results during 1994.
The Company also provides services through the Consulting
Engineering Services segment. The Company provides environmental
engineering and regulatory compliance consulting services through
Schreiber, Grana & Yonley, Inc. in St. Louis, Missouri, and Mintech,
Inc. in Tulsa, Oklahoma. These engineering groups provide oversight
management of environmental restoration projects, air and soil
sampling and compliance reporting, surface and subsurface water
treatment design for removal of pollutants, and various compliance
and training activities.
The table below shows certain financial information by business
segment for 1996, 1995 and 1994. Income (loss) from operations
includes revenues less operating costs and expenses. Marketing,
general and administrative expenses of the corporate headquarters
have not been allocated to the segments. Identifiable assets are
those used in the operations of each business segment, including
intangible assets. Corporate assets are principally cash, cash
equivalents and certain other assets.
<PAGE>
<TABLE>
<CAPTION>
Waste Consulting Corporate
Management Engineering and
Dollars in Thousands Services Services Other Consolidated
____________________________________________________________________________
<S> <C> <C> <C> <C>
1996
Net revenues $ 25,493 $ 5,544 $ - $ 31,037
Depreciation and amortization 2,075 156 21 2,252
Income (loss) from operations 722 505 (1,298) (71)
Identifiable assets 26,403 2,565 68 29,036
Capital expenditures, net 1,301 (5) - 1,296
1995
Net revenues $ 28,843 $ 6,048 $ - $ 34,891
Depreciation and amortization 2,242 169 20 2,431
Permit write-down 4,712 - - 4,712
Nonrecurring charges 762 - 225 987
Income (loss) from operations (6,260) $ 350 (2,025) (7,935)
Identifiable assets 25,524 2,884 465 28,873
Capital expenditures, net 2,765 69 97 2,931
(exclusive of acquisitions)
1994
Net revenues $ 21,031 $ 7,044 $ - $ 28,075
Depreciation and amortization 1,518 186 14 1,718
Income (loss) from operations 172 283 (1,524) (1,069)
Identifiable assets 31,295 3,237 535 35,067
Capital expenditures, net 1,499 105 300 1,904
(exclusive of acquisitions)
</TABLE>
________________________________________________________________
NOTE 13
PERMIT WRITE-DOWN
During December 1995, the Company recognized a permit
impairment charge of $4,712,000, related to the December 1993
acquisition of Perma-Fix of Memphis, Inc. ("PFM")(f/k/a American
Resource Recovery, Inc.). The acquisition was accounted for under
the purchase method of accounting and the related intangible permit
represents the excess of the purchase price over the fair value of
the net assets of the acquired company and the intrinsic value
related to the Resource Conservation and Recovery Act ("RCRA")
permits maintained by the facility. Subsequent to the acquisition,
PFM, as reported under the waste management services segment of the
Company, has consistently reflected operating losses. As a result,
during late 1994 and the first six (6) months of 1995, PFM had
undergone a series of restructuring programs aimed at the reduction
of operating and overhead costs, and increased gross margin and
revenues. However, PFM continued to experience intense competition
for its services, and a decline in market share and operating
losses. Therefore, as a result of the continued decline in
operating results, the detailed strategic and operational review,
and the application of the Company's objective measurement tests,
<PAGE>
an evaluation of the permit for possible impairment was completed
in December 1995.
The evaluation of such impairment included the development of
the Company's best estimate of the related undiscounted operating
income over the remaining life of the intangible permit.
Consequently, the results of the Company's best estimate of
forecasted future operations, given the consistent prior losses and
uncertainty of the impact of the restructuring programs, was that
they do not support the recoverability of this permit. As a result
of these estimates and related uncertainties, the permit was deemed
to be impaired and a charge was recorded to write-down the full
value of the intangible permit of approximately $5,235,000, net of
the accumulated amortization totaling approximately $523,000. This
net charge of $4,712,000 was recorded through the consolidated
statement of operations in December 1995 as "Permit write-down".
______________________________________________________________
NOTE 14
NONRECURRING CHARGES
During 1995, the Company recorded several nonrecurring charges
totalling $987,000, for certain unrelated events. Of this amount,
$450,000 represents a divestiture reserve as related to the sale of
a wholly-owned subsidiary and $537,000 are one-time charges
resulting from restructuring programs.
As previously disclosed, the Company decided in 1994 to divest
its wholly-owned subsidiary, Re-Tech Systems, Inc., which is engaged
in post-consumer plastics recycling. Effective March 15, 1996, the
Company completed the sale of Re-Tech Systems, Inc., its plastics
recycling subsidiary in Houston, Texas. The sale transaction
included all real and personal property of the subsidiary, for a
total consideration of $970,000. Net cash proceeds to the Company
were approximately $320,000, after the repayment of a mortgage
obligation of $595,000 and certain other closing and real estate
costs. In conjunction with this transaction, the Company also made
a prepayment of $50,000 to Heller Financial, Inc. for application
to the term loan. The Company recorded during 1995 a nonrecurring
charge of $450,000 (recorded as an asset reduction) for the
estimated loss on the sale of this subsidiary, which, based upon the
closing balances, the Company recognized a small gain on this sale
after the asset write-down. The Company sold total assets of
approximately $1,346,000, while retaining certain assets totalling
approximately $94,000 and certain liabilities totalling
approximately $48,000.
The Company also executed restructuring programs within the
waste management services segment. A one-time charge of $237,000
was recorded to provide for costs, principally severance and lease
termination fees, associated with the restructuring of the Perma-
Fix, Inc. service center group. This program entailed primarily the
<PAGE>
consolidation of offices in conjunction with the implementation of
a regional service center concept, and the related closing of seven
(7) of the nine (9) offices. A one-time charge of $75,000 was also
recorded during the second quarter of 1995 to provide for
consolidation costs, principally severance, associated with the
restructuring of the Southeast Region, which is comprised of Perma-
Fix of Florida and Perma-Fix of Ft. Lauderdale. These restructuring
costs were principally incurred and funded during 1995.
In December of 1995, in conjunction with the above referenced
restructuring program, the Company and Mr. Robert W. Foster, Jr.
("Foster") agreed to Foster's resignation as President, Chief
Executive Officer and Director of the Company, thereby terminating
his employment agreement with the Company effective March 15, 1996.
The Company agreed to severance benefits of $30,000 in cash, the
continuation of certain employee benefits for a period of time and
the issuance of $171,000 in the form of common stock, par value
$.001, of the Company. Pursuant to the above, the Company recorded
a nonrecurring charge at December 31, 1995 of $215,000. In
addition, severance costs of approximately $10,000 were incurred
upon the termination of several corporate executives. These
restructuring costs were principally incurred and funded during the
first six months of 1996.
_____________________________________________________________
NOTE 15
SUBSEQUENT EVENTS
Effective February 7, 1997, the Company amended five (5)
warrants with an original issuance date of February 10, 1992 to
purchase an aggregate of 487,814 shares of the Company's common
stock ("Acquisition Warrants"). The Acquisition Warrants were
amended to (i) reduce the exercise price from $2.1475 per share of
common stock to $1.00 per share of common stock, and (ii) extend the
expiration date of the warrants from February 10, 1997 to March 3,
1997. All Acquisition Warrants were subsequently exercised prior
to this March 3, 1997 date, which resulted in $487,814 of additional
capital/equity.
On January 27, 1997, an explosion and resulting tank fire
occurred at the Perma-Fix of Memphis, Inc. ("PFM") facility, a
hazardous waste storage, processing and blending facility, located
in Memphis, Tennessee, which resulted in damage to certain hazardous
waste storage tanks located on the facility and caused certain
limited contamination at the facility. From the date of the fire
through the date of this report, this facility has not been
operational. However, PFM has accepted and will continue to accept
waste for processing and disposal, but has arranged for other
facilities owned by the Company or subsidiaries of the Company or
others not affiliated with the Company to process such waste. The
utilization of other facilities to process such waste results in
higher costs to PFM than if PFM were able to store and process such
<PAGE>
waste at its Memphis, Tennessee, TSD facility, along with the
additional handling and transportation costs associated with these
activities. PFM is in the process of repairing and/or removing the
damaged storage tanks and any contamination resulting from the
occurrence, and, as of the date of this report, anticipates that PFM
will be able to begin certain limited operations at the facility by
the end of April 1997. The extent of PFM's activities at the
facility, once operations are renewed, are presently being evaluated
by the Company. The company and PFM have property and business
interruption insurance and have provided notice to its carriers of
such loss. Although there are no assurances, the Company presently
believes that its property insurance will cover any property loss
suffered by PFM at the facility as a result of such occurrence. The
Company is in the process of determining the amount of business
interruption insurance that may be recoverable by PFM as a result
thereof, if any.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Since information relating to changes in accountants and
engagement of new accountants by the Company during the Company's
two most recent fiscal years or any subsequent interim period have
been previously reported (as that term is defined in Rule 12b-2
under the Securities Exchange Act of 1934, as amended) and there
were no disagreements or reportable events required to be reported
under paragraph (b) of Item 304 of Regulation S-K, the information
called for under this Item 9 is not required to be provided pursuant
to Item 304 of Regulation S-K.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
The following table sets forth, as of the date hereof,
information concerning the directors and executive officers of the
Company:
Directors and Principal Occupation and
Executive Officers Other Information
_______________________ _____________________________________
<S> <C>
Dr. Louis F. Centofanti See Item 4A -- "Executive Officers of
Director since 1991, the Company" of this report for a
Chairman of the Board, discussion of the principal occupa-
President and tion and other information regarding
Chief Executive Officer Dr. Centofanti
Age: 53
Mr. Mark A. Zwecker(1)(2) Mr. Zwecker has served as a Director
Director since 1990 of the Company since its inception in
Age: 46 December 1990. Mr. Zwecker resigned
his position as Secretary of the
Company in June 1996, at which time
Richard T. Kelecy was appointed to
this position. Mr. Zwecker also
resigned his position as Treasurer
and Chief Financial Officer of the
Company in July 1994 and is
currently Vice President of Finance
and Administration for American
Combustion, Inc., a position he
previously held from 1986 to 1990.
In 1983, Mr. Zwecker participated as
a founder with Dr. Centofanti in the
start up of PPM, Inc. He remained
with PPM, Inc. until its acquisition
in 1985 by USPCI. Mr. Zwecker has
an M.B.A. from Harvard University
and a B.S. in Industrial and Systems
Engineering from the Georgia
Institute of Technology.
Mr. Steve Gorlin(1) Mr. Gorlin has served as a Director
Director since 1992 of the Company since October 1992.
Age: 59 Mr. Gorlin is a private investor
working with several technology-
based companies. He was formerly
Chairman of the Board of Directors
of EntreMed, Inc. and currently is a
member of the Board of Directors of
Advanced Aerodynamics & Structures,
Inc. Mr. Gorlin is a co-founder and
served as President and Chairman of
the Board of Directors of CytRx
Corporation until 1990.
Mr. Jon Colin(2) Mr. Colin was elected as a Director
Director since 1996 of the Company on December 12, 1996.
Age: 41 He is a financial consultant for a
variety of technology-based
companies. From 1990 to 1996,
Mr. Colin served as President and
Chief Executive Officer for
Environmental Services of America,
Inc., an environmental services
company traded on the NASDAQ.
Mr. Colin has a B.S. degree in
Accounting from the University of
Maryland.
Mr. Richard T. Kelecy See Item 4A -- "Executive Officers of
Chief Financial Officer the Coompany" of this report for a
Age: 41 discussion of the principal occupa-
tion and other information regarding
Mr. Kelecy.
_________________________
<FN>
(1) Member of Compensation and Stock Option Committee
(2) Member of Audit Committee
</FN>
</TABLE>
<PAGE>
Directors of the Company are elected to serve for a term of one
year or until their successors are elected and qualify, or until
their earlier death, resignation or removal. There are presently
four (4) members serving as directors. Pursuant to the By-Laws of
the Company, the Board of Directors has set the number of directors
at a minimum of three. No family or contractual relationship exist
between or among any directors or officers of the Company. The
Company has agreed that for five years after the effective date of
its Registration Statement on Form S-1 (December 8, 1992), if
requested by A.S. Goldmen & Co., Inc., the managing underwriter of
the Company's initial public offering (the "Underwriter"), it will
use its best efforts to cause one individual designated by the
Underwriter to be elected to the Company's Board of Directors, which
individual may be an officer, director, employee or affiliate of the
Underwriter. At this time the Underwriter has not requested to have
one individual designated to be elected to the Company's Board of
Directors.
In conjunction with the Company's restructuring program, the
Company and Mr. Robert W. Foster, Jr. ("Foster") agreed to Foster's
resignation as President, Chief Executive Officer and Director of
the Company effective March 15, 1996. The Company paid severance
benefits of $30,000 in cash, continued certain employee benefits,
and issued approximately $171,000 in the form of common stock, par
value $.001, of the Company. See "Executive Compensation." In
addition to his position of Chairman of the Board of the Company,
Dr. Louis F. Centofanti was elected as President and Chief Executive
<PAGE>
Officer of the Company to replace Mr. Foster. See "Executive
Officers of the Company."
The Company's officers are elected annually by, and serve at
the pleasure of, the Board of Directors, subject to the terms of any
employment agreements. See "Employment Contracts, Termination of
Employment and Change in Control Arrangements."
Certain Relationships
There are no family relationships between any existing
director, executive officer, or person nominated or chosen by the
Company to become a director or executive officer. Dr. Centofanti
is the only director who is an employee of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the regulations promulgated
thereunder require the Company's executive officers and directors
and beneficial owners of more than ten percent (10%) of any equity
security of the Company registered pursuant to Section 12 of the
Exchange Act to file reports of ownership and changes of ownership
of the Company's equity securities with the Securities and Exchange
Commission, and to furnish the Company with copies of all such
reports. Based solely on a review of the copies of such reports
furnished to the Company and information provided to the Company,
the Company believes that during 1996 none of the executive officers
and directors of the Company failed to timely file reports under
Section 16(a).
RBB Bank Aktiengesellschaft ("RBB Bank"), which may have become
a beneficial owner (as that term is defined under Rule 13d-3 as
promulgated under the Exchange Act) of more than ten percent (10%)
of the Company's common stock on February 9, 1996, as a result of
its acquisition of 1,100 shares of Series 1 Preferred (as defined
in "Certain Relationships and Related Transactions") that were
convertible into a maximum of 1,282,798 shares of common stock of
the Company commencing 45 days after issuance of the Series 1
Preferred, failed to file a Form 3 to report such transaction, if
required. RBB Bank has advised the Company that it acquired such
preferred stock on behalf of numerous clients and no one client is
the beneficial owner of more than 250 shares of such preferred
stock, and thus, RBB Bank believes it was not required to file
reports under Section 16(a).
If RBB Bank became a beneficial owner of more than ten percent
(10%) of the Company's common stock on February 9, 1996 and thereby
required to file reports under Section 16(a) of the Exchange Act,
then RBB Bank may have also failed to file (i) a Form 4 for single
transaction which occurred on February 22, 1996; (ii) a Form 4 for
four transactions which occurred in July 1996; (iii) a Form 4 for
a single transaction which occurred in September 1996; (iv) a Form
4 for a single transaction which occurred in January 1997; and (v)
<PAGE>
a Form 5 for 1996 as a result of not filing the above referenced
reports.
For further discussion of the RBB Bank transactions, see
"Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources of the
Company," "Security Ownership of Certain Beneficial Owners and
Management--Security Ownership of Certain Beneficial Owners," and
"--Potential Change of Control."
ITEM 11. EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
Summary Compensation Table
The following table sets forth the aggregate cash compensation
paid to the Chairman and Chief Executive Officers of the Company.
No executive officer of the Company or its subsidiaries received a
total salary and bonus for 1996 in excess of $100,000.
Annual Compensation
______________________________
Other
Annual
Name and Principal Bonus Compen-
Position Year Salary($) ($) sation($)
_________________________ ____ ________ _______ _________
<S> <C> <C> <C> <C>
Dr. Louis F. Centofanti(1) 1996 65,000 - 66,666(3)
Chairman of the Board 1995 120,000 - -
and Chief Executive 1994 86,000 - -
Officer
Robert W. Foster, Jr.(2) 1996 34,000 - 30,000
President and 1995 130,000 5,000 -
Chief Executive Officer
</TABLE>
<TABLE>
<CAPTION>
Long Term
Compensation
________________________
Restricted All
Stock Options Other
Award(s) SARs Compen-
($) (#) sation ($)
__________ ________ __________
<S> <C> <C>
- - -
- 20,000 -
- - -
- - 171,000
- 78,000 -
_____________
<FN>
(1) Dr. Centofanti, the Company's Chairman of the Board, received
compensation pursuant to an employment agreement, which provided for
annual compensation to Dr. Centofanti of $75,000 beginning June 1992
and expiring in June 1995. Under the expired contract, Dr.
Centofanti received an annual salary of $75,000, which was increased
to $125,000 in October, 1994, and continued until December, 1995,
when Dr. Centofanti's salary was reduced to $65,000.
Dr. Centofanti's current annual salary is $65,000. Dr. Centofanti
also served as President and Chief Executive Officer of the Company
during 1994 and until September 1995, when Robert W. Foster was
elected as President and Chief Executive Officer of the Company.
At such time, Dr. Centofanti continued to serve as Chairman of the
Board of the Company. Upon Mr. Foster's resignation, Dr. Centofanti
resumed the positions of President and Chief Executive Officer
effective March 15, 1996, and continued as Chairman of the Board.
(2) Mr. Foster resigned his positions of President and Chief
Executive Officer effective March 15, 1996, and the parties agreed
to terminate his employment agreement effective as of the date of
such termination. The Company agreed to severance benefits of
$30,000 in cash plus continuation of certain employee benefits. In
addition, concurrently with Mr. Foster's termination, the Company
and Mr. Foster entered into a consulting agreement with a term of
three (3) months and compensation of $171,000, which was paid in the
form of common stock, par value $.001, of the Company. See
"Employment Contracts, Termination of Employment and Change in
Control Arrangements" in Item 11.
(3) The Company entered into two Stock Purchase Agreements with Dr.
Centofanti whereby the Company sold, and Dr. Centofanti purchased,
133,333 shares and 76,190 shares, in March 1996, and in June 1996,
respectively, of the Company's common stock for 75% of the closing
bid price of such common stock as quoted on the NASDAQ on the date
that Dr. Centofanti notified the Company of his desire to purchase
such stock, as authorized by the Board of Directors of the company.
The closing bid price as quoted on the NASDAQ for the Company's
common stock on the dates that Dr. Centofanti notified the Company
of his desire to purchase the shares was $1.00 per share for the
march sale and $1.75 per share for the June sale. As a result, the
difference between the price paid by Dr. Centofanti for such stock
and the fair market value thereof was approximately $33,333 for each
transaction. See "Certain Relationships and Related Transactions."
</FN>
</TABLE>
<PAGE>
Options/SAR Grants in Last Fiscal Year
During 1996, there were no individual grants of stock options
or SAR's made to any of the executive officers named in the summary
compensation table.
Aggregated Option Exercises in 1996 and Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
The following table sets forth information concerning each
exercise of stock options during the last completed fiscal year by
each of the executive officers named in the Summary Compensation
Table and the fiscal year-end value of unexercised options:
Shares Value
Acquired on Realized
Exercise (#)(1) ($)(1)
_______________ ________
<S> <C> <C>
Dr. Louis F. Centofanti 0 $0
Robert W. Foster, Jr.(3) 0 $0
Number of Unexercised
Options at Fiscal Year-End
(#)
_____________________________
Exercisable Unexercisable
___________ _____________
33,763 16,000
0 0(3)
Value of Unexercised
in-the-Money Options
at Fiscal Year End ($)(2)
_____________________________
Exercisable Unexercisable
___________ _____________
$0 $0
$0 $0
_____________
<FN>
(1) No options were exercised during 1996.
(2) Values have been calculated based on the closing bid price of
the Company's common stock reported on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") on
December 31, 1996, which was $1.375 per share. The actual value
realized by a named executive officer on the exercise of these
options depends on the market value of the Company's common stock
on the date of exercise. As of December 31, 1996, the unexercised
options were not in the money since the fair market value of the
underlying securities was less than the exercise price of such
options.
(3) Mr. Foster resigned his position of President and Chief
Executive Officer effective March 15, 1996 and, simultaneous with
such resignation, all unexercised options totaling 155,000 were
forfeited.
</FN>
</TABLE>
<PAGE>
401(k) Plan
The Company has adopted the Perma-Fix Environmental Services,
Inc. 401(k) Plan which is intended to comply under Section 401 of
the Internal Revenue Code and the provisions of the Employee
Retirement Security Act of 1974 (the "401(k) Plan"). All full-time
employees of the Company and its subsidiaries who have attained the
age of twenty-one (21) are eligible to participate in the 401(k)
Plan. Participating employees may make annual pre-tax contributions
to their accounts up to fifteen percent (15%) of their compensation,
up to a maximum amount as limited by law. The Company, at its
discretion, may make matching contributions based on full-time
employees' elective contributions. Company contributions vest
twenty percent (20%) after two (2) years, forty percent (40%) after
three (3) years, sixty percent (60%) after four (4) years, eighty
percent (80%) after five (5) years, and are one hundred percent
(100%) vested thereafter. As of December 31, 1996, the Company has
elected not to provide any matching contributions. Distributions
generally are payable in lump sums after termination, retirement,
death or disability.
Compensation of Directors
In 1996, the two outside directors of the Company, which number
was subsequently increased to three pursuant to the Annual Meeting
in December of 1996, received annual director's fees in the
aggregate amount of $28,000, with each director's fee payable in
shares of common stock of the Company, subject to the election of
each director, based on the fair market value of such stock
determined on the business day immediately preceding the date that
the fee is due and the balance payable in cash. Reimbursement of
expenses for attending meetings of the Board are paid in cash at the
time of occurrence. The director fees in 1996 were based on monthly
payments of $1,000 for each month of service. These directors do
not receive additional compensation for committee participation or
special assignments except for reimbursement of expenses. The
Company does not compensate the directors that also serve as
officers or employees of the Company or its subsidiaries for their
service as directors.
The Company believes that it is important for directors to have
a personal interest in the success and growth of the Company and for
their interests to be aligned with those of its stockholders.
Therefore, under the Company's 1992 Outside Directors Stock Option
and Incentive Plan ("Outside Directors Plan"), each outside director
is granted an option to purchase up to 15,000 shares of common stock
<PAGE>
on the date such director is initially elected to the Board of
Directors and receives on an annual basis an option to purchase up
to another 5,000 shares of common stock, with the exercise price
being the fair market value of the common stock on the date that the
option is granted. No option granted under the Outside Directors
Plan is exercisable until after the expiration of six months from
the date the option was granted and no option shall be exercisable
after the expiration of ten (10) years from the date the option is
granted. As of December 31, 1995, options to purchase 110,000
shares of common stock have been granted under the Outside Directors
Plan. During 1996, the Company granted options to purchase 35,000
shares of common stock under the Outside Directors Plan. In
addition, under the second amendment to the Outside Directors Plan,
approved at the Annual Meeting of Shareholders held in December
1994, beginning January 1995, each outside director was, in lieu of
65% of the fees payable to the outside director, issued a number of
shares of common stock having a value equal to 65% of the fee
payable to each such director based on the fair market value of such
stock determined on the business day immediately preceding the date
that the fee was due, with the remaining 35% paid in cash. The
Third Amendment to the Outside Directors Plan, as approved at the
December 1996 Annual Meeting, provided that each eligible director
shall receive, at such eligible director's option, either sixty-five
percent (65%) or one hundred percent (100%) of the fee payable to
such director for services rendered to the Company as a member of
the Board in common stock. In either case, the number of shares of
common stock of the Company issuable to the eligible director shall
be determined by valuing the common stock of the Company at seventy-
five percent (75%) of its fair market value as defined by the
Outside Directors Plan. The number of shares of common stock which
may be issued in the aggregate under the Outside Directors Plan,
either under options or stock awards, is 250,000 shares, subject to
adjustment.
Robert W. Foster, Jr., formerly President, Chief Executive
Officer and a director of the Company until March 15, 1996, was
compensated pursuant to an employment agreement during 1994, 1995
and 1996, and a consulting agreement during 1996. See "--Employment
Contracts, Termination of Employment and Change in Control
Arrangements" and "EXECUTIVE COMPENSATION--Summary Compensation
Table."
Although Dr. Centofanti is not compensated for his services
provided as a director of the Company, Dr. Centofanti is compensated
for his services rendered to the Company as an officer of the
Company. See "Employment Contracts, Termination of Employment and
Change in Control Arrangements."
Employment Contracts, Termination of Employment and Change in
Control Arrangements
In June 1994, the Company entered into a three (3) year
employment agreement with Robert W. Foster, Jr. Under the
<PAGE>
Agreement, Mr. Foster was to receive an annual salary of $110,000,
which was subsequently increased to $135,000 during 1995, as
determined by the Compensation and Stock Option Committee. However,
in conjunction with the Company's restructuring program, the Company
and Mr. Robert W. Foster, Jr. ("Foster") agreed to Foster's
resignation as President, Chief Executive Officer and Director of
the Company, thereby terminating his employment agreement with the
Company effective March 15, 1996. The Company agreed to severance
benefits of $30,000 in cash plus continuation of certain employee
benefits. In addition, the Company and Foster entered into a
consulting agreement with a term of three (3) months and
compensation of a minimum of approximately $171,000 payable in the
form of common stock, par value $.001, of the Company. Based upon
a stock price at the close of business on April 1, 1996, the Company
issued approximately 152,000 shares of common stock to Mr. Foster
relative to this agreement. The fair market value of the 152,000
shares exceeded $171,000 on the 90th day after March 15, 1996 and,
as a result, Mr. Foster reimbursed to the Company approximately
$41,000 of such excess proceeds. Foster is engaged as an
independent, outside consultant to the Company and agrees to certain
non-competition conditions for a period of one (1) year following
the date of this agreement.
The Company's 1991 Performance Equity Plan and the 1993
Nonqualified Stock Option Plan (collectively, the "Plans") provide
that in the event of a change in control (as defined in the Plans)
of the Company, each outstanding option and award granted under the
Plans shall immediately become exercisable in full notwithstanding
the vesting or exercise provisions contained in the stock option
agreement. As a result, all outstanding stock options and awards
granted under the Plans to the executive officers of the Company
shall immediately become exercisable upon such a change in control
of the Company.
Compensation Committee Interlocks and Insider Participation
During 1996, the Compensation and Stock Option Committee for
the Company's Board of Directors was composed of Steve Gorlin and
Mark Zwecker. Neither Mr. Gorlin nor Mr. Zwecker is or was, during
the year, an officer or employee of the Company.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
<TABLE>
<CAPTION>
Security Ownership of Certain Beneficial Owners
The following table sets forth information as to the shares of
voting securities beneficially owned as of March 14, 1997 by each
person known by the Company to be the beneficial owner of more than
five percent (5%) of any class of the Company's voting securities.
Beneficial ownership by the Company's stockholders has been
determined in accordance with the rules promulgated under Section
13(d) of the Securities Exchange Act of 1934, as amended. A person
is deemed to be a beneficial owner of any securities of which that
person has the right to acquire beneficial ownership of such
securities within 60 days from March 14, 1997.
Amount and
Nature of Percent
Name of Title Beneficial of
Beneficial Owner of Class Ownership Class(1)
______________________________ ________ _____________ _________
<S> <C> <C> <C>
Dr. Louis F. Centofanti(2) Common 674,438(2) 6.62%
American Ecology Corporation(3) Common 795,000(3) 7.87%
RBB Bank Aktiengesellschaft(4) Common 6,823,728(4) 42.32%
Preferred 5,500(4) 100.00%
____________________
<FN>
(1) In computing the number of shares and the percentage of
outstanding common stock "beneficially owned" by a person, the
calculations are based upon 10,095,948 shares of common stock
issued and outstanding on March 14, 1997, plus the number of
shares of common stock which such person has the right to
acquire beneficial ownership of within (60) days.
(2) These shares include (i) 571,744 shares held of record by Dr.
Centofanti; (ii) 61,618 shares receivable upon exercise of
warrants to purchase common stock; and (iii) options to
purchase 33,763 shares granted pursuant to the 1991
Performance Equity Plan and the 1993 Nonqualified Stock Option
Plan, which are immediately exercisable. This amount does not
include options to purchase 16,000 shares granted pursuant to
the above referenced plans which are not exercisable within
sixty (60) days. Dr. Centofanti has sole voting and
investment power of these shares, except the following shares
for which Dr. Centofanti shares voting and investment power:
4,000 shares and 500 shares receivable upon the exercise of
warrants to purchase common stock held by the wife of Dr.
Centofanti and 2,500 shares and 313 shares receivable upon the
exercise of warrants to purchase common stock held by the son
of Dr. Centofanti's wife. The business address of Dr.
Centofanti, for the purposes hereof, is c/o Perma-Fix
Environmental Services, Inc., 1940 N.W. 67th Place,
Gainesville, Florida 32653.
(3) American Ecology Corporation ("AEC") has sole voting and
investment power over these shares. The address for AEC is
805 West Idaho, Suite 200, Boise, Idaho 83702-8916.
(4) The outstanding shares of Preferred Stock consist of the
Series 3 Preferred that RBB Bank acquired from the Company
pursuant to the Subscription Agreement. The holders of the
Series 3 Preferred have no voting rights, except as required
by law. The shares of common stock included as beneficially
owned by RBB Bank in this table are shares that RBB Bank would
be entitled to receive upon conversion of all of the Series 3
Preferred Stock held by RBB Bank (assuming that the average of
the closing bid prices of the common stock for the five (5)
trading days prior to conversion equals or exceeds $2.00 per
share), and the number of shares of common stock noted is
based on the assumption that RBB Bank converted such shares of
Series 3 Preferred into the maximum number possible. The
above calculation does include 2,000,000 shares of common
stock that RBB Bank has the right to acquire upon exercise of
the RBB Warrants, which entitle RBB Bank to purchase 2,000,000
shares of common stock after December 31, 1996, at an exercise
price of $2.00 per share for 1,000,000 shares, and $3.50 a
share for 1,000,000 shares. However, the above calculation
does include approximately 300,000 shares of common stock that
RBB Bank may receive in payment of the accrued dividends on
the Series 3 Preferred. RBB Bank has advised the Company that
it is holding the Preferred Stock on behalf of 43 clients of
RBB Bank and that no client is the beneficial owner of more
than 250 shares of such Preferred Stock. RBB Bank may be
considered to be the beneficial owner of these shares with its
clients. See "Certain Relationships and Related
Transactions." RBB Bank's address is Burgring 16, 8010 Graz,
Austria.
</FN>
</TABLE>
<PAGE>
Security Ownership of Management
<TABLE>
<CAPTION>
The following table sets forth information as to the shares of
voting securities beneficially owned as of March 14, 1997 by each
Director and Named Executive Officers of the Company listed in the
Summary Compensation table and all Directors and executive officers
of the Company as a group. Beneficial ownership by the Company's
stockholders has been determined in accordance with the rules
promulgated under Section 13(d) of the Exchange Act. A person is
deemed to be a beneficial owner of any voting securities for which
that person has the right to acquire beneficial ownership within
sixty (60) days. All voting securities are owned both of record and
beneficially unless otherwise indicated.
Number of
Shares of Percentage
Common Stock of
Name of Benefically Common
Beneficial Owner Owned Stock(1)
_____________________________ ____________ ___________
<S> <C> <C>
Dr. Louis F. Centofanti(2)(3) 674,438(3) 6.62%
Richard T. Kelecy(2)(4) 6,000(4) *
Mark A. Zwecker(2)(5) 176,628(5) 1.74%
Steve Gorlin(2)(6) 393,793(6) 3.89%
Jon Colin(7) - -
Directors and Executive 1,250,859(8) 12.19%
Officers as a Group
(5 persons)
*Indicates beneficial ownership of less than one percent (1%).
____________________
<FN>
(1) See footnote (1) of the table under "Security Ownership of
Certain Beneficial Owners."
(2) The business address of such person, for the purposes hereof,
is c/o Perma-Fix Environmental Services, Inc., 1940 N.W. 67th
Place, Gainesville, Florida 32653.
(3) See footnote (2) of the table under "Security Ownership of
Certain Beneficial Owners."
(4) Does not include options to purchase 84,000 shares of common
stock granted pursuant to the 1993 Nonqualified Stock Option
Plan which are not exercisable within sixty (60) days.
(5) Mr. Zwecker has sole voting and investment power over these
shares which include (i) 145,746 shares of common stock held
of record by Mr. Zwecker; (ii) 14,882 options to purchase
common stock granted pursuant to the 1991 Performance Equity
Plan; (iii) 1,000 options to purchase common stock pursuant to
the 1993 Nonqualified Stock Option Plan, which are immediately
exercisable; and (iv) options to purchase 15,000 shares
granted pursuant to the 1992 Outside Directors Stock Option
and Incentive Plan which are immediately exercisable. Does
not include options to purchase 4,000 shares of common stock
granted pursuant to the 1993 Nonqualified Stock Option Plan
which are not exercisable within sixty (60) days.
(6) Mr. Gorlin has sole voting and investment power over these
shares which include: (i) 363,793 shares held of record by Mr.
Gorlin; and (ii) options to purchase 30,000 shares granted
pursuant to the 1992 Outside Directors Stock Option and
Incentive Plan which are immediately exercisable. Does not
include 200,000 shares which Mr. Gorlin has the right to
acquire on and after January 1, 1997, until September 15,
1999, under the terms of a warrant granted by the Company to
Mr. Gorlin in September 1996. See "Certain Relationships and
Related Transactions."
(7) As of March 14, 1997, Mr. Colin did not beneficially own any
voting securities of the Company. Does not include the 15,000
options issued to Mr. Colin upon his election as an outside
director of the Company, pursuant to the terms of the 1992
Outside Directors Stock Option and Incentive Plan, which are
not exercisable until six (6) months after his election. His
address is 13 Meadow Lane, Old Bridge, New Jersey 08857.
(8) Includes 62,431 shares receivable upon exercise of warrants to
purchase common stock and options and warrants to purchase
107,145 shares of common stock which are immediately
exercisable. Does not include 319,000 shares of common stock
covered by options and warrants which are not exercisable
within sixty (60) days from the Record Date.
</FN>
</TABLE>
<PAGE>
Potential Change in Control
If RBB Bank were to acquire approximately 7,300,000 shares of
common stock upon conversion of the Series 3 Preferred, which is the
maximum number of shares of common stock that RBB Bank could acquire
upon conversion of the Series 3 Preferred assuming the conversion
price is based on the minimum conversion price of $.75 a share and
as a result of the average of fair market value of the common stock
being $1.00 or less within five (5) trading days immediately
preceding the conversion date and assuming such minimum conversion
price is not reduced pursuant to the terms of the Series 3 Preferred
and it exercised all of the RBB Warrants, RBB Bank would own
approximately 10,100,000 shares of common stock, or approximately
fifty percent (50%) of the outstanding shares of common stock of the
Company, assuming no other shares of common stock are issued by the
Company, no other warrants or options issued by the Company are
exercised, the Company does not acquire additional shares of common
stock as treasury shares and RBB Bank does not dispose of any such
shares. In such event, RBB Bank would have a sufficient number of
voting shares of the Company to result in a change in control of the
Company. See "--Security Ownership of Certain Beneficial Owners"
and "Certain Relationships and Related Transactions."
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1994, the Company made a private offering to accredited
investors (the "Private Placement") of units ("Units"), each Unit
consisting of 10,000 shares of common stock and 20,000 Class B
Warrants to Purchase common stock (the "Class B Warrants"). The
Class B Warrants are for a term of five (5) years from June 17,
1994. Each Class B Warrant entitles the holder thereof to purchase
one (1) share of common stock for $5.00. The Class B Warrants are
subject to certain antidilution provisions. Under certain
conditions, the Class B Warrants are redeemable by the Company at
a redemption price of $0.05 per Class B Warrant, provided that the
market price of the common stock shall exceed an average price of
$8.00 per share. In connection with the Private Placement, Dr.
Louis F. Centofanti, Chairman of the Board and Chief Executive
Officer of the Company, purchased two Units from the Company, which
consisted of 20,000 shares of common stock and Class B Warrants to
purchase up to 40,000 shares of common stock. The purchase price
paid for the two Units was $60,000.
In September 1996, the Company issued a warrant ("Gorlin
Warrant") to Steve Gorlin, a Director of the Company, for services
rendered, other than those rendered as a Director, to the Company.
The Gorlin Warrant allows the holder to purchase 200,000 shares of
common stock of the Company for $1.75 per share from January 1,
1997, until September 15, 1999. The Gorlin Warrant is subject to
certain antidilution provisions.
In March 1996, the Company entered into a Stock Purchase
Agreement with Dr. Centofanti, currently the President, Chief
Executive Officer, Chairman of the Board, and Director of the
Company, whereby the Company sold, and Dr. Centofanti purchased,
133,333 shares of the Company's common stock for 75% of the closing
bid price of such common stock as quoted on the NASDAQ on the date
that Dr. Centofanti notified the Company of his desire to purchase
such stock, as authorized by the Board of Directors of the Company.
During February 1996, Dr. Centofanti tendered to the Company
$100,000 for such 133,333 shares by delivering to the Company
$86,028.51 and forgiving $13,971.49 that was owing to Dr. Centofanti
by the Company for expenses incurred by Dr. Centofanti on behalf of
the Company. On the date that Dr. Centofanti notified the Company
of his desire to purchase such shares, the closing bid price as
quoted on the NASDAQ for the Company's common stock was $1.00 per
share.
In June 1996, the Company entered into a second Stock Purchase
Agreement with Dr. Centofanti, whereby the Company sold, and
Dr. Centofanti purchased, 76,190 shares of the Company's common
stock for 75% of the closing bid price of such common stock as
quoted on the NASDAQ on the date that Dr. Centofanti notified the
Company of his desire to purchase such stock (closing bid of $1.75
on June 11, 1996), as previously authorized by the Board of
<PAGE>
Directors of the Company. Dr. Centofanti tendered to the Company
$100,000 for such 76,190 shares of common stock.
In March 1996, Robert W. Foster, Jr. resigned as President,
Chief Executive Officer and a Director of the Company, and as an
officer and Director of the Company's subsidiaries and terminated
his employment agreement with the Company pursuant to the terms of
a Termination and Severance Agreement (the "Termination Agreement")
between the Company and Mr. Foster, and effective as of the date of
such termination, the Company and Mr. Foster entered into a
consulting agreement dated March 15, 1996. See "Executive
Compensation--Employment Contracts, Termination of Employment and
Change in Control Arrangements" for further discussion.
During February 1996, the Company entered into two (2)
different offshore transactions with RBB Bank Aktiengesellschaft
("RBB Bank"). In the first transaction, the Company sold to RBB
Bank 1,100 shares of a newly created Series 1 Class A Preferred
Stock, par value $.001 ("Series 1 Preferred"), for $1,000 per share,
for an aggregate purchase price of $1,100,000, pursuant to an
Offshore Securities Subscription Agreement, dated February 9, 1996.
In the second transaction, the Company sold to RBB Bank 330 shares
of a newly created Series 2 Class B Preferred Stock, par value $.001
("Series 2 Preferred"), for $1,000 per share for an aggregate sales
price of $330,000, pursuant to an Offshore Securities Subscription
Agreement, dated February 22, 1996. The Series 1 Preferred and the
Series 2 Preferred are collectively referred to herein as "RBB
Preferred Stock." In connection with both transactions, the Company
paid placement fees totaling $209,000. The RBB Preferred Stock was
convertible at any time, commencing forty-five (45) days after
issuance, into shares of the Company's common stock at a conversion
price equal to the aggregate value of the shares of the RBB
Preferred Stock being converted, together with all accrued but
unpaid dividends thereon, divided by the "Average Stock Price" per
share (the "Conversion Price"). The Average Stock Price was defined
as the lesser of (i) seventy percent (70%) of the average daily
closing bid prices of the common stock for the period of five (5)
consecutive trading days immediately preceding the date of
subscription by the holder or (ii) seventy percent (70%) of the
average daily closing bid prices of the common stock for a period
of five (5) consecutive trading days immediately preceding the date
of conversion of the RBB Preferred Stock. The RBB Preferred Stock
entitled the holder thereof to receive dividends accruing at the
rate per share of five percent (5%) per annum of consideration paid
for each share of the RBB Preferred Stock, or $50.00 per annum,
payable in arrears at the rate of $12.50 for each full calendar
quarter. Dividends on the RBB Preferred Stock were paid at the
election of the Company by the issuance of shares of common stock.
During 1996, all outstanding shares of the RBB Preferred Stock were
converted into approximately 1,970,000 shares of common stock of the
Company, which includes approximately 17,000 shares issued by the
Company in satisfaction of accrued dividends. Pursuant to the
<PAGE>
Subscription Agreement for the issuance of Series 3 Class C
Convertible Preferred Stock, as discussed below, 920,000 of these
shares of converted common stock were purchased by the Company at
a purchase price of $1,770,000. As a result of such conversions,
the RBB Preferred Stock is no longer outstanding.
During July 1996, the Company issued 5,500 shares of newly-
created Series 3 Class C Convertible Preferred Stock, par value
$.001 per share ("Series 3 Preferred") at a price of $1,000 per
share, for an aggregate sales price of $5,500,000, and paid
placement and closing fees as a result of such transaction of
approximately $586,000. The transaction was pursuant to a
Subscription and Purchase Agreement ("Subscription Agreement")
between the Company and RBB Bank and included the Company granting
to RBB Bank two Warrants to purchase up to 2,000,000 shares of the
Company's common stock, with 1,000,000 shares of common stock
exercisable at $2.00 per share and 1,000,000 shares of common stock
exercisable at $3.50 per share (collectively, the "RBB Warrants").
The RBB Warrants are for a term of five (5) years and may be
exercised at any time after December 31, 1996, and until the end of
the term of such Warrants. The Series 3 Preferred is not entitled
to any voting rights, except as required by law. Dividends on the
Series 3 Preferred accrue at a rate of six percent (6%) per annum,
payable semi-annually as and when declared by the Board of
Directors, and such dividends are cumulative. Dividends shall be
paid, at the option of the Company, in the form of cash or common
stock of the Company. If the Dividends are paid in common stock,
each share of outstanding Series 3 Preferred shall receive shares
of common stock equal to the quotient of (i) six percent (6%) of
$1,000 divided by (ii) the average closing bid quotation of the
common stock as reported on the over-the-counter market, or the
closing sale price if listed on a national securities exchange, for
the five (5) trading days immediately prior to the applicable
dividend declaration date. The Company issued 100,387 shares during
January 1997 in payment of accrued dividends for the period July
through December 1996.
RBB Bank may convert the Series 3 Preferred into common stock
of the Company as follows: (i) up to 1,833 shares on or after
October 1, 1996; (ii) an additional 1,833 shares on or after
November 1, 1996; and (iii) the balance on or after December 1,
1996. The conversion price shall be the product of (i) the average
closing bid quotation for the five (5) trading days immediately
preceding the conversion date multiplied by (ii) seventy-five
percent (75%). The conversion price shall be a minimum of $.75 per
share or a maximum of $1.50 per share, with the minimum conversion
price to be reduced by $.25 per share each time, if any, after July
1, 1996, the Company sustains a net loss, on a consolidated basis,
in each of two (2) consecutive quarters ("Minimum Conversion Price
Reduction"). For the purpose of determining whether the Company has
had a net loss in each of two (2) consecutive quarters, at no time
shall a quarter that has already been considered in such
<PAGE>
determination be considered in any subsequent determination.
Subject to the closing bid price of the Company's common stock at
the time of conversion and the other conditions which could increase
the number of shares to be issued upon conversion, the Series 3
Preferred, if all of the shares of Series 3 Preferred were
converted, such could be converted into between approximately
3,700,000 and approximately 7,300,000 shares of common stock, or
more pursuant to the Minimum Conversion Price Reduction. The common
stock issuable on the conversion of the Series 3 Preferred is
subject to certain registration rights pursuant to the Subscription
Agreement, pursuant to which a Form S-3 Registration Statement was
filed by the Company with the Securities and Exchange Commission on
October 21, 1996.
Under the terms of the Subscription Agreement, from the net
proceeds of the sale of the Series 3 Preferred (approximately
$4,900,000) received by the Company after payment of placement fees
to brokers, legal fees and other expenses, the Company purchased
from RBB Bank 920,000 shares of common stock of the Company acquired
by RBB Bank upon conversion of the Company's Series 1 Preferred and
Series 2 Preferred for $1,770,000.
In June 1995, the Company entered into a consulting agreement
("Zwecker Consulting Agreement") with Mark A. Zwecker, a Director,
to provide certain financial consulting services to the Company.
Under this arrangement, the Company paid to Mr. Zwecker a consulting
fee of $1,500 per month. Mr. Zwecker agreed to accept, in lieu of
65% of the consulting fee due at any time, to be issued a number of
shares of common stock having a value equal to 65% of the fee based
on the fair market value of such stock determined on the business
day immediately preceding that date such fee is due. The consulting
agreement was terminated effective June 30, 1996, pursuant to Mr.
Zwecker's resignation as Secretary and the corresponding appointment
of Richard Kelecy as the Company's Secretary. As a result of the
above, Mr. Zwecker will receive compensation consistent with all
other outside Directors. From January 1995, through September 30,
1996, Mr. Zwecker received, or is to receive, from the Company
approximately $19,000 under the Zwecker Consulting Agreement and
subject to the above-described arrangements.
The Company acquired Perma-Fix of Memphis, Inc., a subsidiary
of the Company (f/k/a American Resource Recovery Corporation
["ARR"]), located in Memphis, Tennessee ("PFM"), in December 1993,
from Billie Kay Dowdy ("Dowdy"), who was the sole stockholder of PFM
immediately prior to such acquisition, and, in connection therewith,
issued to Dowdy 601,500 shares of common stock, which represented
more than five percent (5%) of the Company's outstanding shares of
common stock. During 1996, Dowdy ceased being the beneficial owner
of more than five percent (5%) of the Company's outstanding shares
of common stock. In connection with such acquisition, Ms. Dowdy
agreed to defend, indemnify and hold harmless the Company and PFM
under certain conditions. During September 1994, PFM was sued by
<PAGE>
Community First Bank ("Community First") to collect a note in the
principal sum of $341,000 that was allegedly made by ARR to CTC
Industrial Services, Inc. ("CTC") in February 1987 (the "Note"), and
which was allegedly pledged by CTC to Community First in December
1988, to secure certain loans to CTC. This lawsuit, styled
Community First Bank v. American Resource Recovery Corporation, was
instituted on September 14, 1994, and is pending in the Circuit
Court, Shelby County, Tennessee. The Company was not aware of the
Note nor its pledge to Community First at the time of the Company's
acquisition of PFM in December 1993. The Company has filed a third
party complaint against Dowdy in the lawsuit to defend and indemnify
the Company and PFM from and against this action under the terms of
the agreement relating to the Company's acquisition of PFM. Dowdy
has agreed to indemnify and defend the Company and PFM under certain
conditions. The Company intends to vigorously defend itself in
connection with this lawsuit.
In May 1995, PFM became aware that the U.S. District Attorney
for the Western District of Tennessee and the Department of Justice
were investigating certain prior activities of W. R. Drum Company,
its successor, First Southern Container Company, and any other
facility owned or operated, in whole or in part, by Johnnie
Williams, which activities were generally prior to the time the
Company acquired PFM. PFM used W. R. Drum Company to dispose of
certain of its used drums. In May 1995, PFM received a Grand Jury
Subpoena which demanded the production of any documents in the
possession of PFM pertaining to W. R. Drum Company, First Southern
Container Company, or any other facility owned or operated, or held
in part, by Johnnie Williams. PFM complied with the Grand Jury
Subpoena. Thereafter, in September of 1995, PFM received another
Grand Jury Subpoena for documents from the Grand Jury investigating
W. R. Drum Company, First Southern Container Company and/or Johnnie
Williams. PFM complied with the Grand Jury Subpoena. In December
1995, representatives of the Department of Justice advised PFM that
it was also currently a subject of the investigation involving W.
R. Drum Company, First Southern Container Company, and/or Johnnie
Williams. Since that time, however, PFM has had no contact with
representatives of either the United States District Attorney's
office for the Western District of Tennessee or the Department of
Justice, and is not aware of why it is also a subject of such
investigation. In accordance with certain provisions of the
Agreement and the Plan of Merger relating to the prior acquisition
of PFM, on or about January 2, 1996, PFM notified Ms. Billie K.
Dowdy of the foregoing, and advised Ms. Dowdy that the Company and
PFM would look to Ms. Dowdy to indemnify, defend and hold the
Company and PFM harmless from any liability, loss, damage or expense
incurred or suffered as a result of, or in connection with, this
matter.
The Company believes that each of the transactions set forth
above involving affiliates, officers or Directors of the Company was
or is on terms at least as favorable to the Company as could have
<PAGE>
been obtained from an unaffiliated third party. The Company has
adopted a policy that any transactions or loans between the Company
and its Directors, principal stockholders or affiliates must be
approved by a majority of the disinterested Directors of the Company
and must be on terms no less favorable to the Company than those
obtainable from unaffiliated third parties.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
The following documents are filed as a part of this report:
(a)(1) Consolidated Financial Statements
See Item 8 for the Index to Consolidated Financial
Statements.
(a)(2) Financial Statement Schedules
See Item 8 for the Index to Consolidated Financial
Statements (which includes the Index to Financial
Statement Schedules)
(a)(3) Exhibits
The Exhibits listed in the Exhibit Index on page 102
are filed or incorporated by reference as a part of
this report.
(b) Reports on Form 8-K
A current report on Form 8-K (Item 4 -- Changes in
Registrant's Certifying Accountant) was filed on
November 21, 1996 reporting that on November 15,
1996 Arthur Andersen LLP, the outside independent
auditors of the Registrant, notified the Registrant
that it was resigning, effective immediately, as the
Registrant's independent auditors.
A current report on Form 8-K (Item 4 -- Changes in
Registrant's Certifying Accountant) was filed on
December 20, 1996 reporting that on December 18,
1996 the Registrant's Board of Directors approved
the employment of BDO Seidman, LLP as the
Registrant's new independent auditors.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Perma-Fix Environmental Services, Inc.
By: /s/ Dr. Louis F. Centofanti Date: April 14, 1997
______________________________ ____________________
Dr. Louis F. Centofanti
Chairman of the Board
Chief Executive Officer
By: /s/ Richard T. Kelecy Date: April 14, 1997
______________________________ ___________________
Richard T. Kelecy
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in capacities and on the dates
indicated.
/s/ Mark A. Zwecker Date: April 14, 1997
_________________________ ____________________
Mark A. Zwecker, Director
/s/ Steve Gorlin Date: April 14, 1997
_________________________ ____________________
Steve Gorlin, Director
/s/ Jon Colin Date: April 14, 1997
________________________ ___________________
Jon Colin, Director
/s/ Louis F. Centofanti Date: April 14, 1997
_________________________ ____________________
Dr. Louis F. Centofanti, Director
<PAGE>
SCHEDULE II
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
<TABLE>
<CAPTION>
VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 1996, 1995 and 1994
(Dollars in thousands)
Additions
Charged to
Balance at Costs, Balance
Beginning Expenses at End
Description of Year and Other Deductions of Year
_________________________________________________________________
<S> <C> <C> <C> <C>
Year ended December 31,
1996:
Allowance for doubtful
accounts $ 392 $ 17 $ 26 $ 383
Divestiture reserve 450 - 450 -
Restructuring reserve 257 - 257 -
Year ended December 31,
1995:
Allowance for doubtful
accounts $ 689 $ 610(1) $ 907 $ 392
Divestiture reserve - 450(2) - 450
Restructuring reserve - 537(3) 280 257
Year ended December 31,
1994:
Allowance for doubtful
accounts $ 414 $ 311(4) $ 36 $ 689
<FN>
(1) Includes $26 recorded in conjunction with the asset purchase
of Industrial Compliance and Safety, Inc. on June 1, 1995.
(2) Reflects the divestiture reserve for the Company's wholly-
owned subsidiary Re-Tech Systems, Inc., recorded as a
reduction to the asset value in the second quarter of 1995.
The sale transaction was completed in the first quarter of
1996.
(3) Includes one-time charges resulting from restructuring charges
within the waste management services segment.
(4) Includes $197 acquired in the acquisition of Perma-Fix of
Florida, Inc., Perma-Fix of Dayton, Inc. and Perma-Fix of Ft.
Lauderdale, Inc. on June 30, 1994.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit
No. Description
______ ___________
<S> <C>
3(i) Restated Certificate of Incorporation, as amended, and
all Certificates of Designations.
3(ii) Bylaws, as incorporated by reference from Exhibit 3.2 to
the Company's Registration Statement, No. 33-51874.
4.1 Warrant Agreement, dated May 15, 1994, between the
Company and Continental Stock Transfer & Trust Company,
as Warrant Agent, as incorporated by reference from
Exhibit 4.2 to the Company's Form 10-Q for the quarter
ended June 30, 1994.
4.2 Specimen Warrant Certificate relating to Class B
Warrants, as incorporated by reference from Exhibit 4.9
to the Company's Registration Statement, No. 33-85118.
4.3 Specimen Common Stock Certificate as incorporated by
reference from Exhibit 4.3 to the Company's Registration
Statement, No. 33-51874.
4.4 Loan and Security Agreement, dated January 31, 1995,
between the Company, subsidiaries of the Company, and
Heller Financial, Inc., as incorporated by reference from
Exhibit 4.4 to the Company's Form 10-K for the year ended
December 31, 1994. The Loan and Security Agreement
contains a list briefly identifying the schedules and
exhibits included therein, all of which are omitted from
this filing, and the Company agrees to furnish
supplementally a copy of any omitted schedule and exhibit
to the Commission upon request.
4.5 First Amendment to Loan and Security Agreement with
Heller Financial, Inc. and forbearance letter dated
March 31, 1996 from Heller Financial, Inc., as
incorporated by reference from Exhibit 4.5 to the
Company's Form 10-K for the year ended December 31,
1995.
4.6 Second Amendment to Loan and Security Agreement with
Heller Financial, Inc. and forbearance letter, dated
May 10, 1996, from Heller Financial, Inc., as
incorporated by reference from Exhibit 4.1 and Exhibit
4.2, respectively, to the Company's Form 10-Q for the
quarter ended March 31, 1996.
4.7 Third Amendment to Loan and Security Agreement with
Heller Financial, Inc. and Letter Agreement with Heller
Financial, Inc., dated June 19, 1996, as incorporated by
reference from Exhibit 4.1 and Exhibit 4.2, respectively,
to the Company's Form 10-Q for the quarter ended June 30,
1996.
4.8 Fourth Amendment to Loan and Security Agreement with
Heller Financial, Inc., as incorporated by reference from
Exhibit 4.4 to the Company's Form 10-Q for the quarter
ended September 30, 1996.
4.9 Fifth Amendment to Loan and Security Agreement with
Heller Financial, Inc., dated December 5, 1996.
4.10 Letter Agreement with Heller Financial, Inc., dated
February 25, 1997.
4.11 Sixth Amendment to Loan and Security Agreement with
Heller Financial, Inc., dated April 14, 1997.
4.12 Amendment to Ally Capital Corporation Lease Agreement
dated August 16, 1996, as incorporated by reference from
Exhibit 4.3 to the Company's Form 10-Q for the quarter
ended June 30, 1996.
4.13 Amendment to Ally Capital Corporation Lease Agreement
dated November 14, 1996, as incorporated by reference
from Exhibit 4.5 to the Company's Form 10-Q for the
quarter ended September 30, 1996.
4.14 Amendment to Ally Capital Corporation Lease Agreement
dated April 14, 1997.
4.15 Warrant Agreement between the Company and the Warrant
Agent, dated December 8, 1992, as incorporated by
reference from Exhibit 4.2 to the Company's Registration
Statement, No. 33-51874.
4.16 Form of Subscription Agreement, as incorporated by
reference from Exhibit 4.1 to the Company's Form 10-Q for
the quarter ended June 30, 1994.
4.17 Offshore Securities Subscription Agreement, dated
February 9, 1996, between the Company and RBB Bank
Aktiengesellschaft, as incorporated by reference from
Exhibit 4.10 to the Company's Form 10-K for the year
ended December 31, 1995.
4.18 Offshore Securities Subscription Agreement, dated
February 22, 1996, between the Company and RBB Bank
Aktiengesellschaft, as incorporated by reference from
Exhibit 4.11 to the Company's Form 10-K for the year
ended December 31, 1995.
4.19 Subscription and Purchase Agreement dated July 17, 1996,
between the Company and RBB Bank Aktiengesellschaft, as
incorporated by reference from Exhibit 4.4 to the
Company's Form 10-Q for the quarter ended June 30, 1996.
4.20 Form of Certificate for Series 3 Preferred, as
incorporated by reference from Exhibit 4.6 to the
Company's Form 10-Q for the quarter ended June 30,
1996.
10.1 Note and Warrant Purchase Agreement, dated February 10,
1992, between the Company and Al Warrington, Productivity
Fund II, L.P. ("Productivity Fund"), Environmental
Venture Fund, L.P. ("Environmental Venture Fund"), and
Steve Gorlin, as incorporated by reference from Exhibit
4.1 of the Company's Registration Statement, No. 33-
85118.
10.2 Investors' Rights Agreement, dated February 10, 1992,
between the Company and Al Warrington, Productivity Fund,
Environmental Venture Fund, and Steve Gorlin, as
incorporated by reference from Exhibit 4.2 of the
Company's Registration Statement, No. 33-85118.
10.3 Warrant to Purchase Common Stock, dated February 10,
1992, issued by the Company to Al Warrington, as
incorporated by reference from Exhibit 4.3 of the
Company's Registration Statement, No. 33-85118.
10.4 Warrant to Purchase Common Stock, dated February 10,
1992, issued by the Company to Productivity Fund, as
incorporated by reference from Exhibit 4.4 of the
Company's Registration Statement, No. 33-85118.
10.5 Warrant to Purchase Common Stock, dated February 10,
1992, issued by the Company to Environmental Venture
Fund, as incorporated by reference from Exhibit 4.5 of
the Company's Registration Statement, No. 33-85118.
10.6 Warrant to Purchase Common Stock, dated February 10,
1992, issued by the Company to Steve Gorlin, as
incorporated by reference from Exhibit 4.6 to the
Company's Registration Statement, No. 33-85118.
10.7 Warrant to Purchase Common Stock, dated February 10,
1992, issued by the Company to D.H. Blair Investment
Banking Corporation, as incorporated by reference from
Exhibit 4.1 to the Company's Form 8-K dated February 7,
1997.
10.8 Amendments, dated February 7, 1997, to Common Stock
Warrants for the Purchase of Shares of Common Stock,
dated February 10, 1992, between the Company and each of
Alfred C. Warrington, IV, Productivity Fund II, L.P.,
Environmental Venture Fund II, L.P., Steve Gorlin, and
D.H. Blair Investment Banking Corporation, as
incorporated by reference from, respectively, Exhibits
4.2, 4.3, 4.4, 4.5 and 4.6 to the Company's Form 8-K
dated February 7, 1997.
10.9 1991 Performance Equity Plan of the Company, as
incorporated herein by reference from Exhibit 10.3 to the
Company's Registration Statement, No. 33-51874.
10.10 Warrant, dated September 1, 1994, granted by the Company
to Productivity Fund, as incorporated herein by reference
from Exhibit 4.12 to the Company's Registration Statement
No. 33-85118.
10.11 Warrant, dated September 1, 1994, for the Purchase of
Common Stock granted by the Company to Environmental
Venture Fund, as incorporated by reference from Exhibit
4.14 to the Company's Registration Statement No. 33-
85118.
10.12 Warrant, dated September 1, 1994, for the Purchase of
Common Stock granted by the Company to Warrington, as
incorporated by reference from Exhibit 4.16 to the
Company's Registration Statement No. 33-85118.
10.13 Warrant, dated September 1, 1994, for the Purchase of
Common Stock granted by the Company to Joseph Stevens &
Company, L.P. ("Stevens"), as incorporated by reference
from Exhibit 4.17 to the Company's Registration Statement
No. 33-85118.
10.14 Warrant, dated October 6, 1994, for the Purchase of
Common Stock granted by the Company to Stevens, as
incorporated by reference from Exhibit 4.20 to the
Company's Registration Statement No. 33-85118.
10.15 Agreement, dated September 30, 1994, between AEC,
Quadrex, QEC, and the Company, as incorporated by
reference from Exhibit 4.21 to the Company's Registration
Statement No. 33-85118.
10.16 Restricted Stock Award between the Company and Dominic
Grana, as incorporated by reference from Exhibit 4.23 to
the Company's Registration Statement No. 33-85118.
10.17 Restricted Stock Award between the Company and Robert
Schreiber, as incorporated by reference from Exhibit 4.25
to the Company's Registration Statement No. 33-85118.
10.18 Restricted Stock Award between the Company and Carolyn
Yonley, as incorporated by reference from Exhibit 4.26 to
the Company's Registration Statement No. 33-85118.
10.19 Warrant, dated September 30, 1994, for the Purchase of
Shares of Common Stock granted by the Company to Ally
Capital Management, Inc., as incorporated by reference
from Exhibit 4.27 to the Company's Registration Statement
No. 33-85118.
10.20 Warrant, dated June 17, 1994, for the purchase of Common
Stock granted by the Company to Sun Bank, National
Association, as incorporated by reference from Exhibit
4.2 to the Company's Form 8-K dated June 17, 1994.
10.21 Warrant, dated September 1, 1994, for the Purchase of
Shares of Common Stock granted by the Company to D. H.
Blair Investment Banking Corporation, as incorporated by
reference from Exhibit 10.24 to the Company's Form 10-K
for the year ended December 31, 1994. Blair assigned a
portion of its initial warrant to certain officers and
directors of Blair. The warrants issued to such officers
and directors are substantially similar to the warrant
issued to Blair, except as to name of the warrant holder
and the number of shares covered by each such warrant, as
follows:
J. Morton Davis 9,775 shares
Martin A. Bell 8,000 shares
Alan Stahler 39,100 shares
Kalman Renov 39,100 shares
Richard Molinsky 25,125 shares
Jeff Berns 25,500 shares
Nick DiFalco 21,000 shares
Richard Molinsky 50,250 shares
and the Company agrees to file copies of the omitted
documents to the Commission upon the Commission's
request.
10.22 1992 Outside Directors' Stock Option Plan of the Company,
as incorporated by reference from Exhibit 10.4 to the
Company's Registration Statement, No. 33-51874.
10.23 First Amendment to the Company's 1992 Outside Directors'
Stock Option Plan, as incorporated by reference from
Exhibit 10.29 to the Company's Form 10-K for the year
ended December 31, 1994.
10.24 Second Amendment to the Company's 1992 Outside Directors'
Stock Option Plan, as incorporated by reference from the
Company's Proxy Statement, dated November 4, 1994.
10.25 Third Amendment to the Company's 1992 Outside Directors'
Stock Option Plan, as incorporated by reference from the
Company's Proxy Statement, dated November 8, 1996.
10.26 1993 Nonqualified Stock Option Plan, as incorporated by
reference from the Company's Proxy Statement, dated
October 12, 1993.
10.27 401(K) Profit Sharing Plan and Trust of the Company, as
incorporated by reference from Exhibit 10.5 to the
Company's Registration Statement, No. 33-51874.
10.28 Stock Purchase Agreement between the Company and Dr.
Louis F. Centofanti, dated March 1, 1996, as incorporated
by reference from Exhibit 10.30 to the Company's Form 10-
K for the year ended December 31, 1995.
10.29 Stock Purchase Agreement between the Company and Dr.
Louis F. Centofanti, dated June 11, 1996.
10.30 Termination and Severance Agreement, dated March 15,
1996, between the Company and Robert W. Foster, Jr., as
incorporated by reference from Exhibit 10.31 to the
Company's Form 10-K for the year ended December 31,
1995.
10.31 Consulting Agreement, dated March 15, 1996, between the
Company and Robert W. Foster, Jr., as incorporated by
reference from Exhibit 10.32 to the Company's Form 10-K
for the year ended December 31, 1995.
10.32 Consulting Agreement with Bobby Meeks, as incorporated by
reference from Exhibit 99.2 to the Company's Registration
Statement No. 333-3664.
10.33 Consulting Agreement with Gary Myers, as incorporated by
reference from Exhibit 99.3 to the Company's Registration
Statement No. 333-3664.
10.34 Consulting Agreement with David Cowherd, as incorporated
by reference from Exhibit 99.4 to the Company's
Registration Statement No. 333-3664.
10.35 Common Stock Purchase Warrant Certificate, dated July 19,
1996, granted to RBB Bank Aktiengesellschaft, as
incorporated by reference from Exhibit 10.1 to the
Company's Form 10-Q for the quarter ended June 30, 1996.
10.36 Common Stock Purchase Warrant Certificate, dated July 19,
1996, between the Company and RBB Bank
Aktiengesellschaft, as incorporated by reference from
Exhibit 10.2 to the Company's Form 10-Q for the quarter
ended June 30, 1996.
10.37 Common Stock Purchase Warrant Certificate No. 1-9-96,
dated September 16, 1996, between the Company and J. P.
Carey Enterprises, Inc., as incorporated by reference
from Exhibit 4.8 to the Company's Registration Statement,
No. 333-14513.
10.38 Common Stock Purchase Warrant Certificate No. 2-9-96,
dated September 16, 1996, between the Company and J. P.
Carey Enterprises, Inc., as incorporated by reference
from Exhibit 4.9 to the Company's Registration Statement,
No. 333-14513.
10.39 Common Stock Purchase Warrant Certificate No. 3-9-96,
dated September 16, 1996, between the Company and J W
Charles Financial Services, Inc., as incorporated by
reference from Exhibit 4.10 to the Company's Registration
Statement, No. 333-14513.
10.40 Common Stock Purchase Warrant Certificate No. 4-9-96,
dated September 16, 1996, between the Company and Search
Group Capital, Inc., as incorporated by reference from
Exhibit 4.11 to the Company's Registration Statement, No.
333-14513.
10.41 Common Stock Purchase Warrant Certificate No. 5-9-96,
dated September 16, 1996, between the Company and Search
Group Capital, Inc., as incorporated by reference from
Exhibit 4.12 to the Company's Registration Statement, No.
333-14513.
10.42 Common Stock Purchase Warrant Certificate No. 6-9-96,
dated September 16, 1996, between the Company and Search
Group Capital, Inc., as incorporated by reference from
Exhibit 4.13 to the Company's Registration Statement, No.
333-14513.
10.43 Common Stock Purchase Warrant Certificate No. 7-9-96,
dated September 16, 1996, between the Company and Marvin
S. Rosen, as incorporated by reference from Exhibit 4.14
to the Company's Registration Statement, No. 333-14513.
10.44 Common Stock Purchase Warrant Certificate No. 8-9-96,
dated September 16, 1996, between the Company and D. H.
Blair Investment Banking Corporation, as incorporated by
reference from Exhibit 4.15 to the Company's Registration
Statement, No. 333-14513.
10.45 Common Stock Purchase Warrant Certificate No. 9-9-96,
dated September 16, 1996, between the Company and Steve
Gorlin, as incorporated by reference from Exhibit 4.16 to
the Company's Registration Statement, No. 333-14513.
10.46 Consulting Agreement with C. Lee Daniel, Jr., as
incorporated by reference from Exhibit 99.1 to the
Company's Registration Statement No. 333-17899.
10.47 Consulting Agreement with Rita D. Durocher, as
incorporated by reference from Exhibit 99.2 to the
Company's Registration Statement No. 333-17899.
10.48 Consulting Agreement with Sam Elam, as incorporated by
reference from Exhibit 99.3 to the Company's Registration
Statement No. 333-17899.
10.49 Consulting Agreement with R. Keith Fetter, as
incorporated by reference from Exhibit 99.4 to the
Company's Registration Statement No. 333-17899.
10.50 Consulting Agreement with John Henderson, as incorporated
by reference from Exhibit 99.5 to the Company's
Registration Statement No. 333-17899.
10.51 Consulting Agreement with Robert Hicks, as incorporated
by reference from Exhibit 99.6 to the Company's
Registration Statement No. 333-17899.
10.52 Consulting Agreement with Dr. Jeffrey Sherman, as
incorporated by reference from Exhibit 99.7 to the
Company's Registration Statement No. 333-17899.
10.53 Consulting Agreement with Gary Thomas, as incorporated by
reference from Exhibit 99.8 to the Company's Registration
Statement No. 333-17899.
22.1 List of Subsidiaries.
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule.
</TABLE>
State of Delaware
Office of the Secretary of State Page 1
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY
OF THE CERTIFICATE OF RESTATED CERTIFICATE OF INCORPORATION OF
"NATIONAL ENVIRONMENTAL INDUSTRIES, LTD." FILED IN THIS OFFICE ON
THE TWENTY-SIXTH DAY OF NOVEMBER, A.D. 1991 AT 10 O'CLOCK A.M.
* * * * * * * *
/s/ William T. Quillen
_______________________________
William T. Quillen,
Secretary of State
Authentication: 3909777
Date: 05/24/1993
931445217
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
NATIONAL ENVIRONMENTAL INDUSTRIES, LTD.
1. The present name of the corporation (hereinafter
called the "Corporation") is National Environmental Industries,
Ltd., and the date of filing the original certificate of
incorporation of the Corporation with the Secretary of State of the
State of Delaware is December 19, 1990.
2. The certificate of incorporation of the Corporation
is hereby amended by striking out Articles FOURTH through NINTH
thereof and by substituting in lieu thereof new Articles FOURTH
through NINTH as set forth in the Restated Certificate of
Incorporation hereinafter provided for.
3. The provisions of the certificate of incorporation
as heretofore amended and/or supplemented, and as herein amended,
are hereby restated and integrated into the single instrument which
is hereinafter set forth, and which is entitled Restated
Certificate of Incorporation of National Environmental Industries,
Ltd. without any further amendment other than the amendment
certified herein and without any discrepancy between the provisions
of the certificate of incorporation as heretofore amended and
supplemented and the provisions of the said single instrument
hereinafter set forth.
4. The amendment and restatement of the certificate of
incorporation herein certified have been duly adopted by the
stockholders in accordance with the provisions of Sections 228, 242
and 245 of the General Corporation Law of the State of Delaware.
Prompt written notice of the adoption of the amendment and of the
restatement of the certificate of incorporation herein certified
has been given to those stockholders who have not consented in
writing thereto, as provided in Section 228 of the General
Corporation Law of the State of Delaware.
5. The certificate of incorporation of the Corporation,
as amended and restated herein, shall at the effective time of this
Restated Certificate of Incorporation, read as follows:
"Restated Certificate of Incorporation
of
National Environmental Industries, Ltd.
FIRST: The name of the Corporation is National
Environmental Industries, Ltd.
SECOND: The address of the Corporation's registered
office in the State of Delaware is 32 Loockerman Square, Suite L-
100, City of Dover, County of Dover. The name of its registered
agent at such address is The Prentice-Hall Corporation System, Inc.
<PAGE>
THIRD: The purpose of the Corporation is to engage in
any lawful act or activity for which a corporation may be organized
under the laws of the General Corproation Law of the State of
Delaware.
FOURTH: The total number of shares of capital stock
which the Corporation shall have authority to issue is Twenty-Two
Million (22,000,000) shares, of which Twenty Million (20,000,000)
shares shall be Common Stock, par value $.001 per share, and Two
Million (2,000,000) shares shall be Preferred Stock, $.001 par
value per share.
The Preferred Stock may be issued from time to time in
one or more series. The Board of Directors is hereby expressly
authorized to provide, by resolution or resolutions duly adopted by
it prior to issuance, for the creation of each such series and to
fix the designation and the powers, preferences, rights,
qualifications, limitations and restrictions relating to the shares
of each such series. The authority of the Board of Directors with
respect to each such series of Preferred Stock shall include, but
not be limited to, determining the following:
(a) the designation of such series, the number of shares
to constitute such series and the stated value if different
from the par value thereof;
(b) whether the shares of such series shall have voting
rights, in addition to any voting rights provided by law, and,
if so, the terms of such voting rights, which may be general
or limited;
(c) the dividends, if any, payable on such series,
whether any such dividends shall be cumulative, and, if so,
from what dates, the conditions and dates upon which such
dividends shall be payable, and the preference or relation
which such dividends shall bear to the dividends payable on
any shares of stock of any other class or any other series of
Preferred Stock;
(d) whether the shares of such series shall be subject
to redemption by the Corporation, and, if so, the times,
prices and other conditions of such redemption;
(e) the amount or amounts payable upon shares of such
series upon, and the rights of the holders of such series in,
the voluntary or involuntary liquidation, dissolution or
winding up, or upon any distribution of the assets of the
Corporation;
(f) whether the shares of such series shall be subject
to the operation of a retirement or sinking fund and, if so,
the extent to and manner in which any such retirement or
sinking fund shall be applied to the purchase or redemption of
the shares of such series for retirement or other corporate
<PAGE>
purposes and the terms and provisions relating to the
operation thereof;
(g) whether the shares of such series shall be
convertible into, or exchangeable for, shares of stock of any
other class or any other series of Preferred Stock or any
other securities and, if so, the price or prices or the rate
or rates of conversion or exchange and the method, if any, of
adjusting the same, and any other terms and conditions of
conversion or exchange;
(h) the limitations and restrictions, if any, to be
effective while any shares of such series are outstanding upon
the payment of dividends or the making of other distributions
on, and upon the purchase, redemption or other acquisition by
the Corporation of, the Common Stock or shares of stock of any
other class or any other series of Preferred Stock;
(i) the conditions or restrictions, if any, upon the
creation of indebtedness of the Corporation or upon the issue
of any additional stock, including additional shares of such
series or of any other series of Preferred Stock or of any
other class; and
(j) any other powers, preferences and relative
participating, optional and other special rights, and any
qualifications, limitations and restrictions thereof.
The powers, preferences and relative, participating,
optional and other special rights of each series of Preferred
Stock, and the qualifications, limitations or restrictions thereof,
if any, may differ from those of any and all other series at any
time outstanding. All shares of any one series of Preferred Stock
shall be identical in all respects with all other shares of such
series, except that shares of any one series issued at different
times may differ as to the dates from which dividends thereof shall
be cumulative.
FIFTH: Unless required by law or determined by the
chairman of the meeting to be advisable, the vote by stockholders
on any matter, including the election of directors, need not be by
written ballot.
SIXTH: The Corporation reserves the right to increase or
decrease its authorized capital stock, or any class or series
thereof, and to reclassify the same, and to amend, alter, change or
repeal any provision contained in the Certificate of Incorporation
under which the Corporation is organized or in any amendment
thereto, in the manner now or hereafter prescribed by law, and all
rights conferred upon stockholders in said Certificate of
Incorporation or any amendment thereto are granted subject to the
aforementioned reservation.
<PAGE>
SEVENTH: The Board of Directors shall have the power at
any time, and from time to time, to adopt, amend and repeal any and
all By-Laws of the Corporation.
EIGHTH: All persons who the Corporation is empowered to
indemnify pursuant to the provisions of Section 145 of the General
Corporation Law of the State of Delaware (or any similar provision
or provisions of applicable law at the time in effect), shall be
indemnified by the Corporation to the full extent permitted
thereby. The foregoing right of indemnification shall not be
deemed to be exclusive of any other rights to which those seeking
indemnification maybe entitled under any by-law, agreement, vote of
stockholders or disinterested directors, or otherwise. No repeal
or amendment of this Article EIGHTH shall adversely affect any
rights of any person pursuant to this Article Eighth which existed
at the time of such repeal or amendment with respect to acts or
omissions occurring prior to such repeal or amendment.
NINTH: No director of the Corporation shall be
personally liable to the Corporation or its stockholders for any
monetary damages for breaches of fiduciary duty as a director,
provided that this provisions shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; (iii) under Section 174 of the
General Corporation Law of the State of Delaware; or (iv) for any
transaction from which the director derived an improper personal
benefit. No repeal or amendment of this Article NINTH shall
adversely affect any rights of any person pursuant to this Article
NINTH which existed at the time of such repeal or amendment with
respect to acts or omissions occurring prior to such repeal or
amendment."
IN WITNESS WHEREOF, we have signed this Certificate this
22nd day of November, 1991.
/s/ Louis Centofanti
____________________________________
ATTEST:
/s/ Carol A. Dixon
______________________
Secretary
<PAGE>
State of Delaware
Office of the Secretary of State Page 1
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY
OF THE CERTIFICATE OF AMENDMENT OF "NATIONAL ENVIRONMENTAL
INDUSTRIES, LTD." FILED IN THIS OFFICE ON THE SEVENTEENTH DAY OF
DECEMBER, A.D. 1991, AT 4:30 O'CLOCK P.M.
* * * * * * * *
/s/ William T. Quillen
_______________________________
William T. Quillen,
Secretary of State
Authentication: 3909774
Date: 05/24/1993
931445217
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
NATIONAL ENVIRONMENTAL INDUSTRIES, LTD.
It is hereby certified that:
1. The name of the corporation (hereinafter called the
"Corporation") is National Environmental Industries, Ltd.
2. The Restated Certificate of Incorporation is hereby
amended by striking out Article FIRST thereof and by substituting
in lieu of said Article FIRST the following new Article:
"FIRST: The name of the Corporation is
Perma-Fix Environmental Services, Inc."
3. The amendment of the Certificate of Incorporation
herein certified has been duly adopted in accordance with the
provisions of Sections 228 and 242 of the General Corporation Law
of the State of Delaware. Prompt written notice of the adoption of
the amendment herein certified has been given to those stockholders
who have not consented in writing thereto, as provided in Section
228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, we have signed this Certificate this
16th day of December, 1991.
/s/ Louis Centofanti
______________________________
Louis Centofanti, President
ATTEST:
/s/ Mark Zwecker
_________________________
Mark Zwecker, Secretary
<PAGE>
State of Delaware
Office of the Secretary of State Page 1
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY
OF THE CERTIFICATE OF AMENDMENT OF "PERMA-FIX ENVIRONMENTAL
SERVICES, INC." FILED IN THIS OFFICE ON THE FOURTH DAY OF
SEPTEMBER, A.D. 1992, AT 11:30 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO
KENT COUNTY RECORDER OF DEEDS FOR RECORDING.
* * * * * * * *
/s/ William T. Quillen
_______________________________
William T. Quillen,
Secretary of State
Authentication: 3909773
Date: 05/24/1993
931445217
<PAGE>
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED
OF
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
Perma-Fix Environmental Services, Inc., a Delaware
corporation (the "Corporation"), does hereby certify:
That the amendment set forth below to the Corporation's
Restated Certificate of Incorporation, as amended, was duly adopted
in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware and written notice thereof
has been given as provided in Section 228 thereof:
I) The first paragraph of Article FOURTH of the
Corporation's Restated Certificate of Incorporation, as amended, is
hereby deleted and replaced in its entirety by the following:
Fourth: The total number of shares of capital
stock that the Corporation shall have authority to
issue is 22,000,000 shares of which 20,000,000
shares of the par value of $.001 per share shall be
designated Common Stock ("Common Stock"), and
2,000,000 shares of the par value of $.001 per
share shall be designated Preferred Stock.
As of September 4, 1992 (the "Effective Time"),
each share of Common Stock issued and outstanding
immediately prior to the Effective Time shall
automatically be changed and converted, without any
action on the part of the holder thereof, into
1/3.0236956 of a share of Common Stock and, in
connection with fractional interests in shares of
Common Stock of the Corporation, each holder whose
aggregate holdings of shares of Common stock prior
to the Effective Time amounted to less than
3.0236956, or to a number not evenly divisible by
3.0236956 shares of Common Stock shall be entitled
to receive for such fractional interest, and at
such time, any such fractional interest in shares
of Common Stock of the Corporation shall be
converted into the right to receive, upon surrender
of the stock certificates formerly representing
shares of Common Stock of the Corporation, one
whole share of Common Stock.
<PAGE>
IN WITNESS whereof, Perma-Fix Environmental Services,
Inc. has caused this Certificate to be signed and attested to by
its duly authorized officers as of this first day of September,
1992.
Perma-Fix Environmental Services, Inc.
By: /s/ Louis Centofanti
_____________________________________
ATTEST:
By: /s/ Mark Zwecker
___________________
<PAGE>
State of Delaware
Office of the Secretary of State Page 1
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY
OF THE CERTIFICATE OF DESIGNATION OF "PERMA-FIX ENVIRONMENTAL
SERVICES, INC." FILED IN THIS OFFICE ON THE SIXTH DAY OF FEBRUARY,
A.D. 1996 AT 4 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE
NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
_______________________________
Edward J. Freel,
Secretary of State
Authentication: 7818327
Date: 02/07/1996
960035778
<PAGE>
CERTIFICATE OF DESIGNATIONS
OF SERIES I CLASS A PREFERRED STOCK
OF
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
Perma-Fix Environmental Services, Inc. (the "Corporation"), a
corporation organized and existing under the General Corporation
Law of the State of Delaware, does hereby certify:
That, pursuant to authority conferred upon by the Board of
Directors by the Corporation's Certificate of Incorporation, as
amended, and pursuant to the provisions of Section 151 of the
Delaware Corporation Law, said Board of Directors, acting by
unanimous written consent in lieu of a meeting dated February 2,
1996, hereby adopted the terms of the Series I Class A Preferred
Stock, which resolutions are set forth on the attached page.
Dated: February 2, 1996
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
By /s/ Louis F. Centofanti
_____________________________________
Dr. Louis F. Centofanti
Chairman of the Board
ATTEST:
/s/ Mark A. Zwecker
__________________________
Mark A. Zwecker, Secretary
ISTE:\N-P\PESI\CERT.DES
<PAGE>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
(the "Corporation")
RESOLUTION OF THE BOARD OF DIRECTORS
FIXING THE NUMBER AND DESIGNATING THE RIGHTS, PRIVILEGES,
RESTRICTIONS AND CONDITIONS ATTACHING TO THE SERIES I CLASS A
PREFERRED STOCK
WHEREAS,
A. The Corporation's share capital includes Preferred Stock, par
value $.001 per share ("Preferred Stock"), which Preferred
Stock may be issued in one or more series with the directors
of the Corporation (the "Board") being entitled by resolution
to fix the number of shares in each series and to designate
the rights, designations, preferences, and relative,
participating, optional or other special rights, privileges,
restrictions and conditions attaching to the shares of each
such series; and
B. It is in the best interests of the Corporation for the Board
to create a new series from the Preferred Stock designated as
the Series I Class A Preferred Stock, par value $.001.
NOW, THEREFORE, BE IT RESOLVED, THAT:
The Series I Class A Preferred Stock, par value $.001 (the
"Series I Class A Preferred Stock") of the Corporation shall
consist of 1,100 shares and no more and shall be designated as
the Series I Class A Preferred Stock and in addition to the
preferences, rights, privileges, restrictions and conditions
attaching to all the Series I Class A Preferred Stock as a
series, the rights, privileges, restrictions and conditions
attaching to the Series I Class A Preferred Stock shall be as
follows:
Part 1 - Voting and Preemptive Rights.
1.1 Except as otherwise provided herein, in the Certificate of
Incorporation (the "Articles") or the General Corporation Law of
the State of Delaware (the "GCL"), each holder of Series I Class A
Preferred Stock, by virtue of his ownership thereof, shall be
entitled to cast that number of votes per share thereof on each
matter submitted to the Corporation's shareholders for voting which
equals the number of votes which could be cast by such holder of
the number of shares of the Corporation's Common Stock, par value
$.001 per share (the "Common Shares") into which such shares of
Series I Class A Preferred Stock would be converted into pursuant
to Part 5 hereof immediately prior to the record date of such vote.
The outstanding Series I Class A Preferred Stock and the Common
Shares of the Corporation shall vote together as a single class,
except as otherwise expressly required by the GCL or Part 7 hereof.
<PAGE>
The Series I Class A Preferred Stock shall not have cumulative
voting rights.
1.2 The Series I Class A Preferred Stock shall not give its
holders any preemptive rights to acquire any other securities
issued by the Corporation at any time in the future.
Part 2 - Liquidation Rights.
2.1 If the Corporation shall be voluntarily or involuntarily
liquidated, dissolved or wound up at any time when any Series I
Class A Preferred Stock shall be outstanding, the holders of the
then outstanding Series I Class A Preferred Stock shall have a
preference in distribution of the Corporation's property available
for distribution to the holders of the Common Shares equal to
$1,000 consideration per outstanding share of Series I Class A
Preferred Stock, together with an amount equal to all unpaid
dividends accrued thereon, if any, to the date of payment of such
distribution, whether or not declared by the Board; provided,
however, that the merger of the Corporation with any corporation or
corporations in which the Corporation is not the survivor, or the
sale or transfer by the Corporation of all or substantially all of
its property, or any reduction by at least seventy percent (70%) of
the then issued and outstanding Common Shares of the Corporation,
shall be deemed to be a liquidation of the Corporation within the
meaning of any of the provisions of this Part 2.
2.2 Subject to the provisions of Part 6 hereof, all amounts to be
paid as preferential distributions to the holders of Series I Class
A Preferred Stock, as provided in this Part 2, shall be paid or set
apart for payment before the payment or setting apart for payment
of any amount for, or the distribution of any of the Corporation's
property to the holders of Common Shares, whether now or hereafter
authorized, in connection with such liquidation, dissolution or
winding up.
Part 3 - Dividends.
3.1 Holders of record of Series I Class A Preferred Stock, out of
funds legally available therefor and to the extent permitted by
law, shall be entitled to receive dividends on their Series I Class
A Preferred Stock, which dividends shall accrue at the rate per
share of five percent (5%) per annum of consideration paid for each
share of Series I Class A Preferred Stock ($50.00 per share per
year for each full year) commencing on the date of the issuance
thereof, payable, at the option of the Corporation, (i) in cash, or
(ii) by the issuance of that number of whole Common Shares computed
by dividing the amount of the dividend by the market price
applicable to such dividend.
3.2 For the purposes of this Part 3 and Part 4 hereof, "market
price" means the average of the daily closing prices of Common
Shares for a period of five (5) consecutive trading days ending on
the date on which any dividend becomes payable or of any notice of
<PAGE>
redemption as the case may be. The closing price for each trading
day shall be (i) for any period during which the Common Shares
shall be listed for trading on a national securities exchange, the
last reported bid price per share of Common Shares as reported by
the primary stock exchange, or the Nasdaq Stock Market, if the
Common Shares are quoted on the Nasdaq Stock Market, or (ii) if
last sales price information is not available, the average closing
bid price of Common Shares as reported by the Nasdaq Stock Market,
or if not so listed or reported, then as reported by National
Quotation Bureau, Incorporated, or (iii) in the event neither
clause (i) nor (ii) is applicable, the average of the closing bid
and asked prices as furnished by any member of the National
Association of Securities Dealers, Inc., selected from time to time
by the Corporation for that purpose.
3.3 Dividends on Series I Class A Preferred Stock shall be
cumulative, and no dividends or other distributions shall be paid
or declared and set aside for payment on the Common Shares until
full cumulative dividends on all outstanding Series I Class A
Preferred Stock shall have been paid or declared and set aside for
payment.
3.4 Dividends shall be payable in arrears, at the rate of $12.50
per share for each full calendar quarter on each February 28, May
31, August 31, and November 30 of each calendar year, to the
holders of record of the Series I Class A Preferred Stock as they
appear in the securities register of the Corporation on such record
dates not more than sixty (60) nor less than ten (10) days
preceding the payment date thereof, as shall be fixed by the Board;
provided, however, that the initial dividend for the Series I Class
A Preferred Stock shall accrue for the period commencing on the
date of the issuance thereof to and including December 31, 1995.
3.5 If, in any quarter, insufficient funds are available to pay
such dividends as are then due and payable with respect to the
Series I Class A Preferred Stock and all other classes and series
of the capital stock of the Corporation ranking in parity therewith
(or such payment is otherwise prohibited by provisions of the GCL,
such funds as are legally available to pay such dividends shall be
paid or Common Shares will be issued as stock dividends to the
holders of Series I Class A Preferred Stock and to the holders of
any other series of Class A Preferred Stock then outstanding as
provided in Part 6 hereof, in accordance with the rights of each
such holder, and the balance of accrued but undeclared and/or
unpaid dividends, if any, shall be declared and paid on the next
succeeding dividend date to the extent that funds are then legally
available for such purpose.
Part 4 - Redemption.
4.1 At any time, and from time to time, on and after one hundred
twenty (120) days from the date of the issuance of any Series I
Class A Preferred Stock, if the average of the closing bid prices
for the Common Shares for five (5) consecutive trading days shall
<PAGE>
be in excess of $1.50, the Corporation may, at its sole option, but
shall not be obligated to, redeem, in whole or in part, the then
outstanding Series I Class A Preferred Stock at a price per share
of U. S. $1,000 each (the "Redemption Price") (such price to be
adjusted proportionately in the event of any change of the Series
I Class A Shares into a different number of Shares).
4.2 Thirty (30) days prior to any date stipulated by the
Corporation for the redemption of Series I Class A Preferred Stock
(the "Redemption Date"), written notice (the "Redemption Notice")
shall be mailed to each holder of record on such notice date of the
Series I Class A Preferred Stock. The Redemption Notice shall
state: (i) the Redemption Date of such Shares, (ii) the number of
Series I Class A Preferred Stock to be redeemed from the holder to
whom the Redemption Notice is addressed, (iii) instructions for
surrender to the Corporation, in the manner and at the place
designated of a share certificate or share certificates
representing the number of Series I Class A Preferred Stock to be
redeemed from such holder, and (iv) instructions as to how to
specify to the Corporation the number of Series I Class A Preferred
Stock to be redeemed as provided in this Part 4, and the number of
shares to be converted into Common Shares as provided in Part 5
hereof.
4.3 Upon receipt of the Redemption Notice, any Eligible Holder (as
defined in Section 5.2 hereof) shall have the option, at its sole
election, to specify what portion of its Series I Class A Preferred
Stock called for redemption in the Redemption Notice shall be
redeemed as provided in this Part 4 or converted into Common Shares
in the manner provided in Part 5 hereof, except that,
notwithstanding any provision of such Part 5 to the contrary, any
Eligible Holder shall have the right to convert into Common Shares
that number of Series I Class A Preferred Stock called for
redemption in the Redemption Notice.
4.4 On or before the Redemption Date in respect of any Series I
Class A Preferred Stock, each holder of such shares shall surrender
the required certificate or certificates representing such shares
to the Corporation in the manner and at the place designated in the
Redemption Notice, and upon the Redemption Date, the Redemption
Price for such shares shall be made payable, in the manner provided
in Section 5.5 hereof, to the order of the person whose name
appears on such certificate or certificates as the owner thereof,
and each surrendered share certificate shall be canceled and
retired. If a share certificate is surrendered and all the shares
evidenced thereby are not being redeemed (as described below), the
Corporation shall cause the Series I Class A Shares which are not
being redeemed to be registered in the names of the persons whose
names appear as the owners on the respective surrendered share
certificates and deliver such certificate to such person.
4.5 On the Redemption Date in respect of any Series I Class A
Shares or prior thereto, the Corporation shall deposit with any
bank or trust company having a capital and surplus of at least
<PAGE>
U.S. $50,000,000, as a trust fund, a sum equal to the aggregate
Redemption Price of all such shares called from redemption (less
the aggregate Redemption Price for those Series I Class A Shares in
respect of which the Corporation has received notice from the
Eligible Holder thereof of its election to convert Series I Class
A Shares in to Common Shares), with irrevocable instructions and
authority to the bank or trust company to pay, on or after the
Redemption Date, the Redemption Price to the respective holders
upon the surrender of their share certificates. The deposit shall
constitute full payment for the shares to their holders, and from
and after the date of the deposit the redeemed share shall be
deemed to be no longer outstanding, and holders thereof shall cease
to be shareholders with respect to such shares and shall have no
rights with respect thereto except the rights to receive from the
bank or trust company payments of the Redemption price of the
shares, without interest, upon surrender of their certificates
thereof. Any funds so deposited and unclaimed at the end of one
year following the Redemption Date shall be released or repaid to
the Corporation, after which the former holders of shares called
for redemption shall be entitled to receive payment of the
Redemption Price in respect of their shares only from the
Corporation.
Part 5 - Conversion.
5.1 For the purposes of conversion of the Series I Class A
Preferred Stock shall be valued at $1,000 per share ("Value"), and,
if converted, the Series I Class A Preferred Stock shall be
converted into such number of Common Shares (the "Conversion
Shares") as is obtained by dividing the aggregate Value of the
shares of Series I Class A Preferred Stock being so converted,
together with all accrued but unpaid dividends thereon, by the
"Average Stock Price" per share of the Conversion Shares (the
"Conversion Price"), subject to adjustment pursuant to the
provisions of this Part 5. For purposes of this Part 5, the
"Average Stock Price" means the lesser of (x) seventy percent
(70%) of the average daily closing bid prices of the Common Shares
for the period of five (5) consecutive trading days immediately
preceding the date of subscription by the Holder or (y) seventy
percent (70%) of the daily average closing bid prices of Common
Shares for the period of five (5) consecutive trading days
immediately preceding the date of the conversion of the Series I
Class A Preferred Stock in respect of which such Average Stock
Price is determined. The closing price for each trading day shall
be determined as provided in the last sentence of Section 3.2.
5.2 Any holder of Series I Class A Preferred Stock (an "Eligible
Holder") may at any time commencing forty-five (45) days after the
issuance of any Series I Class A Preferred Stock convert up to one
hundred percent (100%) of his holdings of Series I Class A
Preferred Stock in accordance with this Part 5.
5.3 The conversion right granted by Section 5.2 hereof may be
exercised only by an Eligible Holder of Series I Class A Preferred
<PAGE>
Stock, in whole or in part, by the surrender of the share
certificate or share certificates representing the Series I Class
A Preferred Stock to be converted at the principal office of the
Corporation (or at such other place as the Corporation may
designate in a written notice sent to the holder by first class
mail, postage prepaid, at its address shown on the books of the
Corporation) against delivery of that number of whole Common Shares
as shall be computed by dividing (1) the aggregate Value of the
Series I Class A Preferred Stock so surrendered for conversion plus
any accrued but unpaid dividends thereon, if any, by (2) the
Conversion Price in effect at the date of the conversion. At the
time of conversion of a share of the Series I Class A Preferred
Stock, the Corporation shall pay in cash to the holder thereof an
amount equal to all unpaid dividends, if any, accrued thereon to
the date of conversion, or, at the Corporation's option, issue that
number of whole Common Shares which is equal to the product of
dividing the amount of such unpaid dividends by the Average Stock
Price whether or not declared by the Board. Each Series I Class A
Preferred Stock share certificate surrendered for conversion shall
be endorsed by its holder. In the event of any exercise of the
conversion right of the Series I Class A Preferred Stock granted
herein (i) share certificate representing the Common Shares
purchased by virtue of such exercise shall be delivered to such
holder within three (3) days of notice of conversion, and (ii)
unless the Series I Class A Preferred Stock has been fully
converted, a new share certificate representing the Series I Class
A Preferred Stock not so converted, if any, shall also be delivered
to such holder within three (3) days of notice of conversion. Any
Eligible Holder may exercise its right to convert the Series I
Class A Preferred Stock by telecopying an executed and completed
Notice of Conversion to the Corporation, and within seventy-two
(72) hours thereafter, delivering the original Notice of Conversion
and the certificate representing the Series I Class A Preferred
Stock to the Corporation by express courier. Each date on which a
Notice of Conversion is telecopied to and received by the
Corporation in accordance with the provisions hereof shall be
deemed a conversion date. The Corporation will transmit the Common
Shares certificates issuable upon conversion of any Series I Class
A Preferred Stock (together with the certificates representing the
Series I Class A Preferred Stock not so converted) to the Eligible
Holder via express courier within three (3) business days after the
conversion date if the Corporation has received the original Notice
of Conversion and the Series I Class A Shares certificates being so
converted by such date.
5.4 All Common Shares which may be issued upon conversion of
Series I Class A Preferred Stock will, upon issuance, be duly
issued, fully paid and nonassessable and free from all taxes,
liens, and charges with respect to the issue thereof. At all times
that any Series I Class A Preferred Stock is outstanding, the
Corporation shall have authorized, and shall have reserved for the
purpose of issuance upon such conversion, a sufficient number of
Common Shares to provide for the conversion into Common Shares of
all Series I Class A Preferred Stock then outstanding at the then
<PAGE>
effective Conversion Price. Without limiting the generality of the
foregoing, if, at any time, the Conversion Price is decreased, the
number of Common Shares authorized and reserved for issuance upon
the conversion of the Series I Class A Preferred Stock shall be
proportionately increased.
5.5 The number of Common Shares issued upon conversion of Series
I Class A Preferred Stock and the Conversion Price shall be subject
to adjustment from time to time upon the happening of certain
events, as follows:
5.5.1 Change of Designation of the Common Shares or the
rights, privileges, restrictions and conditions in respect of
the Common Shares or division of the Common Shares into
series. In the case of any amendment to the Articles to
change the designation of the Common Shares or the rights,
privileges, restrictions or conditions in respect of the
Common Shares or division of the Common Shares into series the
rights of the holders of the Series I Class A Preferred Stock
shall be adjusted so as to provide that upon conversion
thereof, the holder of the Series I Class A Preferred Stock
being converted shall procure, in lieu of each Common Share
theretofore issuable upon such conversion, the kind and amount
of shares, other securities, money and property receivable
upon such designation, change or division by the holder of one
Common Share issuable upon such conversion had conversion
occurred immediately prior to such designation, change or
division. The Series I Class A Preferred Stock shall be
deemed thereafter to provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments
provided for in this Part 5. The provisions of this
subsection 5.5.1 shall apply in the same manner to successive
reclassifications, changes, consolidations, and mergers.
5.5.2 If the Corporation, at any time while any of the
Series I Class A Preferred Stock is outstanding, shall amend
the Articles so as to change the Common Shares into a
different number of shares, the Conversion Price shall be
proportionately reduced, in case of such change increasing the
number of Common Shares, as of the effective date of such
increase, or if the Corporation shall take a record of holders
of its Common Shares for the purpose of such increase, as of
such record date, whichever is earlier, or the Conversion
Price shall be proportionately increased, in the case of such
change decreasing the number of Common Shares, as of the
effective date of such decrease or, if the Corporation shall
take a record of holders of its Common Stock for the purpose
of such decrease, as of such record date, whichever is
earlier.
5.5.3 If the Corporation, at any time while any of the
Series I Class A Preferred Stock is outstanding, shall pay a
dividend payable in Common Shares (except for any dividends of
Common Shares payable pursuant to Part 3 hereof), the
<PAGE>
Conversion Price shall be adjusted, as of the date the
Corporation shall take a record of the holders of its Common
Shares for the purposes of receiving such dividend (or if no
such record is taken, as of the date of payment of such
dividend), to that price determined by multiplying the
Conversion Price therefor in effect by a fraction (1) the
numerator of which shall be the total number of Common Shares
outstanding immediately prior to such dividend, and (2) the
denominator of which shall be the total number of Common
Shares outstanding immediately after such dividend (plus in
the event that the Corporation paid cash for fractional
shares, the number of additional shares which would have been
outstanding had the Corporation issued fractional shares in
connection with said dividend).
5.6 Whenever the Conversion Price shall be adjusted pursuant to
Section 5.5 hereof, the Corporation shall make a certificate signed
by its President, or a Vice President and by its Treasurer,
Assistant Treasurer, Secretary or Assistant Secretary, setting
forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the
Board of Directors made any determination hereunder), and the
Conversion Price after giving effect to such adjustment, and shall
cause copies of such certificates to be mailed (by first class
mail, postage prepaid) to each holder of the Series I Class A
Preferred Stock at its address shown on the books of the
Corporation. The Corporation shall make such certificate and mail
it to each such holder promptly after each adjustment.
5.7 No fractional Common Shares shall be issued in connection with
any conversion of Series I Class A Preferred Stock, but in lieu of
such fractional shares, the Corporation shall make a cash payment
therefor equal in amount to the product of the applicable fraction
multiplied by the Conversion Price then in effect.
5.8 No Series I Class A Preferred Stock which has been converted
into Common Shares shall be reissued by the Corporation; provided,
however, that each such share shall be restored to the status of
authorized but unissued Preferred Stock without designation as to
series and may thereafter be issued as a series of Preferred Stock
not designated as Series I Class A Preferred Stock.
Part 6 - Parity with Other Shares of Class A Preferred Shares.
6.1 If any cumulative dividends or accounts payable or return of
capital in respect of Series I Class A Preferred Stock are not paid
in full, the owners of all series of outstanding Preferred Stock
shall participate rateably in respect of accumulated dividends and
return of capital.
<PAGE>
Part 7 - Amendment.
7.1 In addition to any requirement for a series vote pursuant to
the GCL in respect of any amendment to the Corporation's
Certificate of Incorporation that adversely affects the rights,
privileges, restrictions and conditions of the Series I Class A
Preferred Stock, the rights, privileges, restrictions and
conditions attaching to the Series I Class A Preferred Stock may be
amended by an amendment to the Corporation's Certificate of
Incorporation so as to affect such adversely only if the
Corporation has obtained the affirmative vote at a duly called and
held series meeting of the holders of the Series I Class A
Preferred Stock or written consent by the holders of a majority of
the Series I Class A Preferred Stock then outstanding.
Notwithstanding the above, the number of authorized shares of such
class or classes of stock may be increased or decreased (but not
below the number of shares thereof outstanding) by the affirmative
vote of the holders of a majority of the stock of the Corporation
entitled to vote thereon, voting as a single class, irrespective of
this Section 7.1.
ISTE:\N-P\PESI\RESOLUT.S1P
<PAGE>
State of Delaware
Office of the Secretary of State Page 1
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY
OF THE CERTIFICATE OF DESIGNATION OF "PERMA-FIX ENVIRONMENTAL
SERVICES, INC." FILED IN THIS OFFICE ON THE TWENTIETH DAY OF
FEBRUARY, A.D. 1996, AT 10:45 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE
NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
_______________________________
Edward J. Freel,
Secretary of State
Authentication: 7832562
Date: 02/20/1996
960047351
<PAGE>
CERTIFICATE OF DESIGNATIONS
OF SERIES 2 CLASS B CONVERTIBLE PREFERRED STOCK
OF
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
Perma-Fix Environmental Services, Inc. (the "Corporation"), a
corporation organized and existing under the General Corporation
Law of the State of Delaware, does hereby certify:
That, pursuant to authority conferred upon by the Board of
Directors by the Corporation's Restated Certificate of
Incorporation, as amended, and pursuant to the provisions of
Section 151 of the Delaware Corporation Law, the Board of Directors
of the Corporation has adopted resolutions, a copy of which is
attached hereto, establishing and providing for the issuance of a
series of Preferred Stock designated as Series 2 Class B
Convertible Preferred Stock and has established and fixed the
voting powers, designations, preferences and relative
participating, optional and other special rights and
qualifications, limitations and restrictions of such Series 2 Class
B Convertible Preferred Stock as set forth in the attached
resolutions.
Dated: February 16, 1996
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
By /s/ Louis F. Centofanti
____________________________________
Dr. Louis F. Centofanti
Chairman of the Board
ATTEST:
/s/ Mark A. Zwecker
__________________________
Mark A. Zwecker, Secretary
ISTE:\N-P\PESI\CERT-DES.S2B
<PAGE>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
(the "Corporation")
RESOLUTION OF THE BOARD OF DIRECTORS
FIXING THE NUMBER AND DESIGNATING THE RIGHTS, PRIVILEGES,
RESTRICTIONS AND CONDITIONS ATTACHING TO THE
SERIES 2 CLASS B CONVERTIBLE PREFERRED STOCK
WHEREAS,
A. The Corporation's share capital includes Preferred Stock, par
value $.001 per share ("Preferred Stock"), which Preferred
Stock may be issued in one or more series with the directors
of the Corporation (the "Board") being entitled by resolution
to fix the number of shares in each series and to designate
the rights, designations, preferences, and relative,
participating, optional or other special rights, privileges,
restrictions and conditions attaching to the shares of each
such series; and
B. It is in the best interests of the Corporation for the Board
to create a new series from the Preferred Stock designated as
the Series 2 Class B Convertible Preferred Stock, par value
$.001.
NOW, THEREFORE, BE IT RESOLVED, THAT:
The Series 2 Class B Convertible Preferred Stock, par value
$.001 (the "Series 2 Class B Preferred Stock") of the
Corporation shall consist of 2,500 shares and no more and
shall be designated as the Series 2 Class B Preferred Stock
and in addition to the preferences, rights, privileges,
restrictions and conditions attaching to all the Series 2
Class B Preferred Stock as a series, the rights, privileges,
restrictions and conditions attaching to the Series 2 Class B
Preferred Stock shall be as follows:
Part 1 - Voting and Preemptive Rights.
1.1 Except as otherwise provided herein, in the Corporation's
Certificate of Incorporation (the "Articles") or the General
Corporation Law of the State of Delaware (the "GCL"), each holder
of Series 2 Class B Preferred Stock, by virtue of his ownership
thereof, shall be entitled to cast that number of votes per share
thereof on each matter submitted to the Corporation's shareholders
for voting which equals the number of votes which could be cast by
such holder of the number of shares of the Corporation's Common
Stock, par value $.001 per share (the "Common Shares") into which
such shares of Series 2 Class B Preferred Stock would be entitled
to be converted into pursuant to Part 5 hereof on the record date
of such vote. The outstanding Series 2 Class B Preferred Stock,
the Common Shares of the Corporation and any other series of
<PAGE>
Preferred Stock of the Corporation having voting rights shall vote
together as a single class, except as otherwise expressly required
by the GCL or Part 7 hereof. The Series 2 Class B Preferred Stock
shall not have cumulative voting rights.
1.2 The Series 2 Class B Preferred Stock shall not give its
holders any preemptive rights to acquire any other securities
issued by the Corporation at any time in the future.
Part 2 - Liquidation Rights.
2.1 If the Corporation shall be voluntarily or involuntarily
liquidated, dissolved or wound up at any time when any Series 2
Class B Preferred Stock shall be outstanding, the holders of the
then outstanding Series 2 Class B Preferred Stock shall have a
preference in distribution of the Corporation's property available
for distribution to the holders of the Common Shares equal to
$1,000 consideration per outstanding share of Series 2 Class B
Preferred Stock, together with an amount equal to all unpaid
dividends accrued thereon, if any, to the date of payment of such
distribution, whether or not declared by the Board; provided,
however, that the merger of the Corporation with any corporation or
corporations in which the Corporation is not the survivor, or the
sale or transfer by the Corporation of all or substantially all of
its property, or a reduction by at least seventy percent (70%) of
the then issued and outstanding Common Shares of the Corporation,
shall be deemed to be a liquidation of the Corporation within the
meaning of any of the provisions of this Part 2.
2.2 Subject to the provisions of Part 6 hereof, all amounts to be
paid as preferential distributions to the holders of Series 2 Class
B Preferred Stock, as provided in this Part 2, shall be paid or set
apart for payment before the payment or setting apart for payment
of any amount for, or the distribution of any of the Corporation's
property to the holders of Common Shares, whether now or hereafter
authorized, in connection with such liquidation, dissolution or
winding up.
2.3 After the payment to the holders of the shares of the Series
2 Class B Preferred Stock of the full preferential amounts provided
for in this Part 2, the holders of the Series 2 Class B Preferred
Stock as such shall have no right or claim to any of the remaining
assets of the Corporation.
2.4 In the event that the assets of the Corporation available for
distribution to the holders of shares of the Series 2 Class B
Preferred Stock upon any dissolution, liquidation or winding up of
the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are
entitled pursuant to this Part 2, no such distribution shall be
made on account of any shares of any other class or series of
Preferred Stock ranking on a parity with the shares of this Series
2 Class B Preferred Stock upon such dissolution, liquidation or
winding up unless proportionate distributive amounts shall be paid
<PAGE>
on account of the shares of this Series 2 Class B Preferred Stock
and shares of such other class or series ranking on a parity with
the shares of this Series 2 Class B Preferred Stock, ratably, in
proportion to the full distributable amounts for which holders of
all such parity shares are respectively entitled upon such
dissolution, liquidation or winding up.
Part 3 - Dividends.
3.1 Holders of record of Series 2 Class B Preferred Stock, out of
funds legally available therefor and to the extent permitted by
law, shall be entitled to receive dividends on their Series 2 Class
B Preferred Stock, which dividends shall accrue at the rate per
share of five percent (5%) per annum of consideration paid for each
share of Series 2 Class B Preferred Stock ($50.00 per share per
year for each full year) commencing on the date of the issuance
thereof, payable, at the option of the Corporation, (i) in cash, or
(ii) by the issuance of that number of whole Common Shares computed
by dividing the amount of the dividend by the market price
applicable to such dividend.
3.2 For the purposes of this Part 3 and Part 4 hereof, "market
price" means the average of the daily closing prices of Common
Shares for a period of five (5) consecutive trading days ending on
the date on which any dividend becomes payable or of any notice of
redemption as the case may be. The closing price for each trading
day shall be (i) for any period during which the Common Shares
shall be listed for trading on a national securities exchange, the
last reported bid price per share of Common Shares as reported by
the primary stock exchange, or the Nasdaq Stock Market, if the
Common Shares are quoted on the Nasdaq Stock Market, or (ii) if
last sales price information is not available, the average closing
bid price of Common Shares as reported by the Nasdaq Stock Market,
or if not so listed or reported, then as reported by National
Quotation Bureau, Incorporated, or (iii) in the event neither
clause (i) nor (ii) is applicable, the average of the closing bid
and asked prices as furnished by any member of the National
Association of Securities Dealers, Inc., selected from time to time
by the Corporation for that purpose.
3.3 Dividends on Series 2 Class B Preferred Stock shall be
cumulative, and no dividends or other distributions shall be paid
or declared and set aside for payment on the Common Shares until
full cumulative dividends on all outstanding Series 2 Class B
Preferred Stock shall have been paid or declared and set aside for
payment.
3.4 Dividends shall be payable in arrears, at the rate of $12.50
per share for each full calendar quarter on each February 28, May
31, August 31, and November 30 of each calendar year, to the
holders of record of the Series 2 Class B Preferred Stock as they
appear in the securities register of the Corporation on such record
dates not more than sixty (60) nor less than ten (10) days
preceding the payment date thereof, as shall be fixed by the Board;
<PAGE>
provided, however, that the initial dividend for the Series 2 Class
B Preferred Stock shall accrue for the period commencing on the
date of the issuance thereof.
3.5 If, in any quarter, insufficient funds are available to pay
such dividends as are then due and payable with respect to the
Series 2 Class B Preferred Stock and all other classes and series
of the capital stock of the Corporation ranking in parity therewith
(or such payment is otherwise prohibited by provisions of the GCL,
such funds as are legally available to pay such dividends shall be
paid or Common Shares will be issued as stock dividends to the
holders of Series 2 Class B Preferred Stock and to the holders of
any other series of Class B Preferred Stock then outstanding as
provided in Part 6 hereof, in accordance with the rights of each
such holder, and the balance of accrued but undeclared and/or
unpaid dividends, if any, shall be declared and paid on the next
succeeding dividend date to the extent that funds are then legally
available for such purpose.
Part 4 - Redemption.
4.1 At any time, and from time to time, on and after one hundred
twenty (120) days from the date of the issuance of any Series 2
Class B Preferred Stock, if the average of the closing bid prices
for the Common Shares for five (5) consecutive trading days shall
be in excess of $1.50 per share, the Corporation may, at its sole
option, but shall not be obligated to, redeem, in whole or in part,
the then outstanding Series 2 Class B Preferred Stock at a price
per share of U. S. $1,000 each (the "Redemption Price") (such price
to be adjusted proportionately in the event of any change of the
Series 2 Class B Preferred Stock into a different number of shares
of Series 2 Class B Preferred Stock).
4.2 Thirty (30) days prior to any date stipulated by the
Corporation for the redemption of Series 2 Class B Preferred Stock
(the "Redemption Date"), written notice (the "Redemption Notice")
shall be mailed to each holder of record on such notice date of the
Series 2 Class B Preferred Stock. The Redemption Notice shall
state: (i) the Redemption Date of such shares, (ii) the number of
Series 2 Class B Preferred Stock to be redeemed from the holder to
whom the Redemption Notice is addressed, (iii) instructions for
surrender to the Corporation, in the manner and at the place
designated of a share certificate or share certificates
representing the number of Series 2 Class B Preferred Stock to be
redeemed from such holder, and (iv) instructions as to how to
specify to the Corporation the number of Series 2 Class B Preferred
Stock to be redeemed as provided in this Part 4, and the number of
shares to be converted into Common Shares as provided in Part 5
hereof.
4.3 Upon receipt of the Redemption Notice, any Eligible Holder (as
defined in Section 5.2 hereof) shall have the option, at its sole
election, to specify what portion of its Series 2 Class B Preferred
Stock called for redemption in the Redemption Notice shall be
<PAGE>
redeemed as provided in this Part 4 or converted into Common Shares
in the manner provided in Part 5 hereof, except that,
notwithstanding any provision of such Part 5 to the contrary, any
Eligible Holder shall have the right to convert into Common Shares
that number of Series 2 Class B Preferred Stock called for
redemption in the Redemption Notice.
4.4 On or before the Redemption Date in respect of any Series 2
Class B Preferred Stock, each holder of such shares shall surrender
the required certificate or certificates representing such shares
to the Corporation in the manner and at the place designated in the
Redemption Notice, and upon the Redemption Date, the Redemption
Price for such shares shall be made payable, in the manner provided
in Section 4.5 hereof, to the order of the person whose name
appears on such certificate or certificates as the owner thereof,
and each surrendered share certificate shall be canceled and
retired. If a share certificate is surrendered and all the shares
evidenced thereby are not being redeemed (as described below), the
Corporation shall cause the Series 2 Class B Preferred Stock which
are not being redeemed to be registered in the names of the persons
whose names appear as the owners on the respective surrendered
share certificates and deliver such certificate to such person.
4.5 On the Redemption Date in respect of any Series 2 Class B
Preferred Stock or prior thereto, the Corporation shall deposit
with any bank or trust company having a capital and surplus of at
least U. S. $50,000,000, as a trust fund, a sum equal to the
aggregate Redemption Price of all such shares called from
redemption (less the aggregate Redemption Price for those Series 2
Class B Preferred Stock in respect of which the Corporation has
received notice from the Eligible Holder thereof of its election to
convert Series 2 Class B Preferred Stock in to Common Shares), with
irrevocable instructions and authority to the bank or trust company
to pay, on or after the Redemption Date, the Redemption Price to
the respective holders upon the surrender of their share
certificates. The deposit shall constitute full payment for the
shares to their holders, and from and after the date of the deposit
the redeemed share shall be deemed to be no longer outstanding, and
holders thereof shall cease to be shareholders with respect to such
shares and shall have no rights with respect thereto except the
rights to receive from the bank or trust company payments of the
Redemption price of the shares, without interest, upon surrender of
their certificates thereof. Any funds so deposited and unclaimed
at the end of one year following the Redemption Date shall be
released or repaid to the Corporation, after which the former
holders of shares called for redemption shall be entitled to
receive payment of the Redemption Price in respect of their shares
only from the Corporation.
Part 5 - Conversion.
5.1 For the purposes of conversion of the Series 2 Class B
Preferred Stock shall be valued at $1,000 per share ("Value"), and,
if converted, the Series 2 Class B Preferred Stock shall be
<PAGE>
converted into such number of Common Shares (the "Conversion
Shares") as is obtained by dividing the aggregate Value of the
shares of Series 2 Class B Preferred Stock being so converted,
together with all accrued but unpaid dividends thereon, by the
"Average Stock Price" per share of the Conversion Shares (the
"Conversion Price"), subject to adjustment pursuant to the
provisions of this Part 5. For purposes of this Part 5, the
"Average Stock Price" means the lesser of (x) seventy percent (70%)
of the average daily closing bid prices of the Common Shares for a
period of five (5) consecutive trading days immediately preceding
the date of subscription by the Holder or (y) seventy percent (70%)
of the average daily closing bid prices of Common Shares for the
period of five (5) consecutive trading days immediately preceding
the date of the conversion of the Series 2 Class B Preferred Stock
in respect of which such Average Stock Price is determined. The
closing price for each trading day shall be determined as provided
in the last sentence of Section 3.2.
5.2 Any holder of Series 2 Class B Preferred Stock (an "Eligible
Holder") may at any time commencing forty-five (45) days after the
issuance of any Series 2 Class B Preferred Stock convert up to one
hundred percent (100%) of his holdings of Series 2 Class B
Preferred Stock in accordance with this Part 5.
5.3 The conversion right granted by Section 5.2 hereof may be
exercised only by an Eligible Holder of Series 2 Class B Preferred
Stock, in whole or in part, by the surrender of the share
certificate or share certificates representing the Series 2 Class
B Preferred Stock to be converted at the principal office of the
Corporation (or at such other place as the Corporation may
designate in a written notice sent to the holder by first class
mail, postage prepaid, at its address shown on the books of the
Corporation) against delivery of that number of whole Common Shares
as shall be computed by dividing (1) the aggregate Value of the
Series 2 Class B Preferred Stock so surrendered for conversion plus
any accrued but unpaid dividends thereon, if any, by (2) the
Conversion Price in effect at the date of the conversion. At the
time of conversion of a share of the Series 2 Class B Preferred
Stock, the Corporation shall pay in cash to the holder thereof an
amount equal to all unpaid dividends, if any, accrued thereon to
the date of conversion, or, at the Corporation's option, issue that
number of whole Common Shares which is equal to the product of
dividing the amount of such unpaid dividends by the Average Stock
Price whether or not declared by the Board. Each Series 2 Class B
Preferred Stock share certificate surrendered for conversion shall
be endorsed by its holder. In the event of any exercise of the
conversion right of the Series 2 Class B Preferred Stock granted
herein (i) share certificate representing the Common Shares
purchased by virtue of such exercise shall be delivered to such
holder within three (3) days of notice of conversion, and (ii)
unless the Series 2 Class B Preferred Stock has been fully
converted, a new share certificate representing the Series 2 Class
B Preferred Stock not so converted, if any, shall also be delivered
to such holder within three (3) days of notice of conversion. Any
<PAGE>
Eligible Holder may exercise its right to convert the Series 2
Class B Preferred Stock by telecopying an executed and completed
Notice of Conversion to the Corporation, and within seventy-two
(72) hours thereafter, delivering the original Notice of Conversion
and the certificate representing the Series 2 Class B Preferred
Stock to the Corporation by express courier. Each date on which a
Notice of Conversion is telecopied to and received by the
Corporation in accordance with the provisions hereof shall be
deemed a conversion date. The Corporation will transmit the Common
Shares certificates issuable upon conversion of any Series 2 Class
B Preferred Stock (together with the certificates representing the
Series 2 Class B Preferred Stock not so converted) to the Eligible
Holder via express courier within three (3) business days after the
conversion date if the Corporation has received the original Notice
of Conversion and the Series 2 Class B Shares certificates being so
converted by such date.
5.4 All Common Shares which may be issued upon conversion of
Series 2 Class B Preferred Stock will, upon issuance, be duly
issued, fully paid and nonassessable and free from all taxes,
liens, and charges with respect to the issue thereof. At all times
that any Series 2 Class B Preferred Stock is outstanding, the
Corporation shall have authorized, and shall have reserved for the
purpose of issuance upon such conversion, a sufficient number of
Common Shares to provide for the conversion into Common Shares of
all Series 2 Class B Preferred Stock then outstanding at the then
effective Conversion Price. Without limiting the generality of the
foregoing, if, at any time, the Conversion Price is decreased, the
number of Common Shares authorized and reserved for issuance upon
the conversion of the Series 2 Class B Preferred Stock shall be
proportionately increased.
5.5 The number of Common Shares issued upon conversion of Series
2 Class B Preferred Stock and the Conversion Price shall be subject
to adjustment from time to time upon the happening of certain
events, as follows:
5.5.1 In the case of any amendment to the Articles to
change the designation of the Common Shares or the rights,
privileges, restrictions or conditions in respect of the
Common Shares or division of the Common Shares into series the
rights of the holders of the Series 2 Class B Preferred Stock
shall be adjusted so as to provide that upon conversion
thereof, the holder of the Series 2 Class B Preferred Stock
being converted shall procure, in lieu of each Common Share
theretofore issuable upon such conversion, the kind and amount
of shares, other securities, money and property receivable
upon such designation, change or division by the holder of one
Common Share issuable upon such conversion had conversion
occurred immediately prior to such designation, change or
division. The Series 2 Class B Preferred Stock shall be
deemed thereafter to provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments
provided for in this Part 5. The provisions of this
<PAGE>
subsection 5.5.1 shall apply in the same manner to successive
reclassifications, changes, consolidations, and mergers.
5.5.2 If the Corporation, at any time while any of the
Series 2 Class B Preferred Stock is outstanding, shall amend
the Articles so as to change the Common Shares into a
different number of shares, the Conversion Price shall be
proportionately reduced, in case of such change increasing the
number of Common Shares, as of the effective date of such
increase, or if the Corporation shall take a record of holders
of its Common Shares for the purpose of such increase, as of
such record date, whichever is earlier, or the Conversion
Price shall be proportionately increased, in the case of such
change decreasing the number of Common Shares, as of the
effective date of such decrease or, if the Corporation shall
take a record of holders of its Common Stock for the purpose
of such decrease, as of such record date, whichever is
earlier.
5.5.3 If the Corporation, at any time while any of the
Series 2 Class B Preferred Stock is outstanding, shall pay a
dividend payable in Common Shares (except for any dividends of
Common Shares payable pursuant to Part 3 hereof), the
Conversion Price shall be adjusted, as of the date the
Corporation shall take a record of the holders of its Common
Shares for the purposes of receiving such dividend (or if no
such record is taken, as of the date of payment of such
dividend), to that price determined by multiplying the
Conversion Price therefor in effect by a fraction (1) the
numerator of which shall be the total number of Common Shares
outstanding immediately prior to such dividend, and (2) the
denominator of which shall be the total number of Common
Shares outstanding immediately after such dividend (plus in
the event that the Corporation paid cash for fractional
shares, the number of additional shares which would have been
outstanding had the Corporation issued fractional shares in
connection with said dividend).
5.6 Whenever the Conversion Price shall be adjusted pursuant to
Section 5.5 hereof, the Corporation shall make a certificate signed
by its President, or a Vice President and by its Treasurer,
Assistant Treasurer, Secretary or Assistant Secretary, setting
forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the
Board of Directors made any determination hereunder), and the
Conversion Price after giving effect to such adjustment, and shall
cause copies of such certificates to be mailed (by first class
mail, postage prepaid) to each holder of the Series 2 Class B
Preferred Stock at its address shown on the books of the
Corporation. The Corporation shall make such certificate and mail
it to each such holder promptly after each adjustment.
<PAGE>
5.7 No fractional Common Shares shall be issued in connection with
any conversion of Series 2 Class B Preferred Stock, but in lieu of
such fractional shares, the Corporation shall make a cash payment
therefor equal in amount to the product of the applicable fraction
multiplied by the Conversion Price then in effect.
5.8 No Series 2 Class B Preferred Stock which has been converted
into Common Shares shall be reissued by the Corporation; provided,
however, that each such share shall be restored to the status of
authorized but unissued Preferred Stock without designation as to
series and may thereafter be issued as a series of Preferred Stock
not designated as Series 2 Class B Preferred Stock.
Part 6 - Parity with Other Shares of Series 2 Class B Preferred
Stock and Priority.
6.1 If any cumulative dividends or accounts payable or return of
capital in respect of Series 2 Class B Preferred Stock are not paid
in full, the owners of all series of outstanding Preferred Stock
shall participate rateably in respect of accumulated dividends and
return of capital.
6.2 For purposes of this resolution, any stock of any class or
series of the Corporation shall be deemed to rank:
6.2.1 Prior or senior to the shares of this Series 2 Class
B Preferred Stock either as to dividends or upon liquidation,
if the holders of such class or classes shall be entitled to
the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation,
whether voluntary or involuntary, as the case may be, in
preference or priority to the holders of shares of this Series
2 Class B Preferred Stock;
6.2.2 On a parity with, or equal to, shares of this Series
2 Class B Preferred Stock, either as to dividends or upon
liquidation, whether or not the dividend rates, dividend
payment dates, or redemption or liquidation prices per share
or sinking fund provisions, if any, are different from those
of this Series 2 Class B Preferred Stock, if the holders of
such stock are entitled to the receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding
up of the Corporation, whether voluntary or involuntary, in
proportion to their respective dividend rates or liquidation
prices, without preference or priority, one over the other, as
between the holders of such stock and over the other, as
between the holders of such stock and the holders of shares of
this Series 2 Class B Preferred Stock; and,
6.2.3 Junior to shares of this Series 2 Class B Preferred
Stock, either as to dividends or upon liquidation, if such
class or series shall be Common Shares or if the holders of
shares of this Series 2 Class B Preferred Stock shall be
entitled to receipt of dividends or of amounts distributable
<PAGE>
upon dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, as the case may
be, in preference or priority to the holders of shares of such
class or series.
Part 7 - Amendment.
7.1 In addition to any requirement for a series vote pursuant to
the GCL in respect of any amendment to the Articles that adversely
affects the rights, privileges, restrictions and conditions of the
Series 2 Class B Preferred Stock, the rights, privileges,
restrictions and conditions attaching to the Series 2 Class B
Preferred Stock may be amended by an amendment to the Corporation's
Certificate of Incorporation so as to affect such adversely only if
the Corporation has obtained the affirmative vote at a duly called
and held series meeting of the holders of the Series 2 Class B
Preferred Stock or written consent by the holders of a majority of
the Series 2 Class B Preferred Stock then outstanding.
Notwithstanding the above, the number of authorized shares of such
class or classes of stock may be increased or decreased (but not
below the number of shares thereof outstanding) by the affirmative
vote of the holders of a majority of the stock of the Corporation
entitled to vote thereon, voting together as a single class,
irrespective of this Section 7.1.
ISTE:\N-P\PESI\RESOLUT.S2B
<PAGE>
State of Delaware
Office of the Secretary of State Page 1
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY
OF THE CERTIFICATE OF DESIGNATION OF "PERMA-FIX ENVIRONMENTAL
SERVICES, INC." FILED IN THIS OFFICE ON THE NINETEENTH DAY OF JULY,
A.D. 1996, AT 12:30 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE
NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
_______________________________
Edward J. Freel,
Secretary of State
Authentication: 8033738
2249849 8100 Date: 07-19-96
960210746
<PAGE>
CERTIFICATE OF DESIGNATIONS
OF SERIES 3 CLASS C CONVERTIBLE PREFERRED STOCK
OF
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
Perma-Fix Environmental Services, Inc. (the "Corporation"), a
corporation organized and existing under the General Corporation
Law of the State of Delaware, does hereby certify:
That, pursuant to authority conferred upon by the Board of
Directors by the Corporation's Restated Certificate of
Incorporation, as amended, and pursuant to the provisions of
Section 151 of the Delaware Corporation Law, the Board of Directors
of the Corporation has adopted resolutions, a copy of which is
attached hereto, establishing and providing for the issuance of a
series of Preferred Stock designated as Series 3 Class C
Convertible Preferred Stock and has established and fixed the
voting powers, designations, preferences and relative
participating, optional and other special rights and
qualifications, limitations and restrictions of such Series 3 Class
C Convertible Preferred Stock as set forth in the attached
resolutions.
Dated: July 17, 1996
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
By /s/ Louis F. Centofanti
_____________________________________
Dr. Louis F. Centofanti
Chairman of the Board
ATTEST:
/s/ Richard T. Kelecy
____________________________
Richard T. Kelecy, Secretary
ISTE:\N-P\PESI\REG-D\CERT-DES.S3C
<PAGE>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
(the "Corporation")
RESOLUTION OF THE BOARD OF DIRECTORS
FIXING THE NUMBER AND DESIGNATING THE RIGHTS, PRIVILEGES,
RESTRICTIONS AND CONDITIONS ATTACHING TO THE
SERIES 3 CLASS C CONVERTIBLE PREFERRED STOCK
WHEREAS,
A. The Corporation's share capital includes Preferred Stock, par
value $.001 per share ("Preferred Stock"), which Preferred
Stock may be issued in one or more series by the Board of
Directors of the Corporation (the "Board") being entitled by
resolution to fix the number of shares in each series and to
designate the rights, designations, preferences, and relative,
participating, optional or other special rights, privileges,
restrictions and conditions attaching to the shares of each
such series; and
B. It is in the best interests of the Corporation for the Board
to create a new series from the Preferred Stock designated as
the Series 3 Class C Convertible Preferred Stock, par value
$.001.
NOW, THEREFORE, BE IT RESOLVED, THAT:
The Series 3 Class C Convertible Preferred Stock, par value
$.001 (the "Series 3 Class C Preferred Stock") of the
Corporation shall consist of 5,500 shares and no more and
shall be designated as the Series 3 Class C Convertible
Preferred Stock, and the preferences, rights, privileges,
restrictions and conditions attaching to the Series 3 Class C
Preferred Stock shall be as follows:
Part 1 - Voting and Preemptive Rights.
1.1 Voting Rights. Except as otherwise provided herein, in the
Corporation's Certificate of Incorporation (the "Articles") or the
General Corporation Law of the State of Delaware (the "GCL"), the
holders of the Series 3 Class C Preferred Stock shall have no
voting rights whatsoever. To the extent that under the GCL the
vote of the holders of the Series 3 Class C Preferred Stock, voting
separately as a class or series as applicable, is required to
authorize a given action of the Corporation, the affirmative vote
or consent of the holders of at least a majority of the shares of
the Series 3 Class C Preferred Stock represented at a duly held
meeting at which a quorum is present or by written consent of a
majority of the shares of Series 3 Class C Preferred Stock (except
as otherwise may be required under the GCL) shall constitute the
approval of such action by the series. To the extent that under
the GCL the holders of the Series 3 Class C Preferred Stock are
<PAGE>
entitled to vote on a matter with holders of Corporation's Common
Stock and/or any other class or series of the Corporation's voting
securities, the Series 3 Class C Preferred Stock, the Corporation's
Common Stock and all other classes or series of the Corporation's
voting securities shall vote together as one class, with each share
of Series 3 Class C Preferred Stock entitled to a number of votes
equal to the number of shares of the Corporation's Common Stock
into which it is then convertible using the record date for the
taking of such vote of stockholders as the date as of which the
Conversion Price (as defined in Section 4.2 hereof) is calculated
and conversion is effected. Holders of the Series 3 Class C
Preferred Stock shall be entitled to notice of (and copies of proxy
materials and other information sent to stockholders) for all
shareholder meetings or written consents with respect to which they
would be entitled to vote, which notice would be provided pursuant
to the Corporation's bylaws and applicable statutes.
1.2 No Preemptive Rights. The Series 3 Class C Preferred Stock
shall not give its holders any preemptive rights to acquire any
other securities issued by the Corporation at any time in the
future.
Part 2 - Liquidation Rights.
2.1 Liquidation. If the Corporation shall be voluntarily or
involuntarily liquidated, dissolved or wound up at any time when
any shares of the Series 3 Class C Preferred Stock shall be
outstanding, the holders of the then outstanding Series 3 Class C
Preferred Stock shall have a preference in distribution of the
Corporation's property available for distribution to the holders of
the Corporation's Common Stock equal to $1,000 consideration per
outstanding share of Series 3 Class C Preferred Stock, plus an
amount equal to all unpaid dividends accrued thereon to the date of
payment of such distribution ("Liquidation Preference"), whether or
not declared by the Board.
2.2 Payment of Liquidation Preferences. Subject to the provisions
of Part 6 hereof, all amounts to be paid as Liquidation Preference
to the holders of Series 3 Class C Preferred Stock, as provided in
this Part 2, shall be paid or set apart for payment before the
payment or setting apart for payment of any amount for, or the
distribution of any of the Corporation's property to the holders of
the Corporation's Common Stock, whether now or hereafter
authorized, in connection with such liquidation, dissolution or
winding up.
2.3 No Rights After Payment. After the payment to the holders of
the shares of the Series 3 Class C Preferred Stock of the full
Liquidation Preference amounts provided for in this Part 2, the
holders of the Series 3 Class C Preferred Stock as such shall have
no right or claim to any of the remaining assets of the
Corporation.
<PAGE>
2.4 Assets Insufficient to Pay Full Liquidation Preference. In
the event that the assets of the Corporation available for
distribution to the holders of shares of the Series 3 Class C
Preferred Stock upon any dissolution, liquidation or winding up of
the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are
entitled pursuant to this Part 2, no such distribution shall be
made on account of any shares of any other class or series of
Preferred Stock ranking on a parity with the shares of this Series
3 Class C Preferred Stock upon such dissolution, liquidation or
winding up unless proportionate distributive amounts shall be paid
on account of the shares of this Series 3 Class C Preferred Stock
and shares of such other class or series ranking on a parity with
the shares of this Series 3 Class C Preferred Stock, ratably, in
proportion to the full distributable amounts for which holders of
all such parity shares are respectively entitled upon such
dissolution, liquidation or winding up.
Part 3 - Dividends.
3.1 The holders of the Series 3 Class C Preferred Stock are
entitled to receive if, when and as declared by the Board out of
funds legally available therefor, cumulative dividends, payable in
cash or Common Stock of the Corporation, par value $.001 per share
(the "Common Stock"), at the Corporation's election, at the rate of
six percent (6%) per annum of the Liquidation Value of the Series
3 Class C Preferred Stock. The Liquidation Value of the Series 3
Class C Preferred Stock shall be $1,000.00 per share (the "Dividend
Rate"). The dividend is payable semi-annually within seven (7)
business days after each of December 31 and June 30 of each year,
commencing December 31, 1996 (each, a "Dividend Declaration Date").
Dividends shall be paid only with respect to shares of Series 3
Class C Preferred Stock actually issued and outstanding on a
Dividend Declaration Date and to holders of record as of the
Dividend Declaration Date. Dividends shall accrue from the first
day of the semi-annual period in which such dividend may be
payable, except with respect to the first semi-annual dividend
which shall accrue from the date of issuance of the Series 3 Class
C Preferred Stock. In the event that the Corporation elects to pay
dividends in Common Stock of the Corporation, each holder of the
Series 3 Class C Preferred Stock shall receive shares of Common
Stock of the Corporation equal to the quotient of (i) the Dividend
Rate in effect on the applicable Dividend Declaration Date dividend
by (ii) the average of the closing bid quotation of the Common
Stock as reported on the over-the-counter market, or the closing
sale price if listed on a national securities exchange, for the
five (5) trading days immediately prior to the Dividend Declaration
Date (the "Stock Dividend Price"). Dividends on the Series 3 Class
C Preferred Stock shall be cumulative, and no dividends or other
distributions shall be paid or declared or set aside for payment on
the Common Stock until all accrued and unpaid dividends on all
outstanding shares of Series 3 Class C Preferred Stock shall have
been paid or declared and set aside for payment.
<PAGE>
Part 4 - Conversion. The holders of the Series 3 Class C Preferred
Stock shall have rights to convert the shares of Series 3 Class C
Preferred Stock into shares of the Corporation's Common Stock, par
value $.001 per share ("Common Stock"), as follows (the "Conversion
Rights"):
4.1 Right to Convert. The Series 3 Class C Preferred Stock shall
be convertible into shares of Common Stock, as follows:
4.1.1 Up to one thousand eight hundred thirty-three
(1,833) shares of Series 3 Class C Preferred Stock
may be converted at the Conversion Price (as that
term is defined in Section 4.2 below) at any time
on or after October 1, 1996;
4.1.2 Up to one thousand eight hundred thirty-three
(1,833) shares of Series 3 Class C Preferred Stock
may be converted at the Conversion Price at any
time on or after November 1, 1996; and,
4.1.3 Up to one thousand eight hundred thirty-four
(1,834) shares of Series 3 Class C Preferred Stock
may be converted at the Conversion Price on or
after December 1, 1996.
4.2 Conversion Price. As used herein, the term Conversion Price
shall be the product of (i) the average closing bid quotation of
the Common Stock as reported on the over-the-counter market, or the
closing sale price if listed on a national securities exchange, for
the five (5) trading days immediately preceding the date of the
Conversion Notice referred to in Section 4.3 below multiplied by
(ii) seventy-five percent (75%). Notwithstanding the foregoing,
the Conversion Price shall not be (i) less than a minimum of $.75
per share ("Minimum Conversion Price") or (ii) more than a maximum
of $1.50 per share ("Maximum Conversion Price"). If, after July 1,
1996, the Corporation sustains a net loss, on a consolidated basis,
in each of two (2) consecutive quarters, as determined under
generally accepted accounting principles, the Minimum Conversion
Price shall be reduced $.25 a share, but there shall be no change
to, or reduction of, the Maximum Conversion Price. For the purpose
of determining whether the Corporation has had a net loss in each
of two (2) consecutive quarters, at no time shall a quarter that
has already been considered in such determination be considered in
any subsequent determination (as an example the third quarter of
1996 in which there is a net profit and the fourth quarter of 1996
in which there is a net loss shall be considered as two consecutive
quarters, and, as a result, the fourth quarter of 1996 shall not be
considered along with the first quarter of 1997 as two (2)
consecutive quarters, but the first quarter of 1997 must be
considered with the second quarter of 1997 for the purposes of such
determination). For the purposes of this Section 4.2, a "quarter"
is a three (3) month period ending on March 31, June 30, September
30, and December 31. If any of the outstanding shares of Series 3
Class C Preferred Stock are converted, in whole or in part, into
<PAGE>
Common Stock pursuant to the terms of this Part 4, the number of
shares of whole Common Stock to be issued to the holder as a result
of such conversion shall be determined by dividing (a) the
aggregate Liquidation Value of the Series 3 Class C Preferred Stock
so surrendered for conversion by (b) the Conversion Price in effect
at the date of the conversion. At the time of conversion of shares
of the Series 3 Class C Preferred Stock, the Corporation shall pay
in cash to the holder thereof an amount equal to all unpaid and
accrued dividends, if any, accrued thereon to the date of
conversion, or, at the Corporation's option, in lieu of paying cash
for the accrued and unpaid dividends, issue that number of shares
of whole Common Stock which is equal to the product of dividing the
amount of such unpaid and accrued dividends to the date of
conversion on the shares of Series 3 Class C Preferred Stock so
converted by the Conversion Price in effect at the date of
conversion.
4.3 Mechanics of Conversion. Any holder of the Series 3 Class C
Preferred Stock who wishes to exercise its Conversion Rights
pursuant to Section 4.1 of this Part 4 must, if such shares are not
being held in escrow by the Corporation's attorneys, surrender the
certificate therefor at the principal executive office of the
Corporation, and give written notice, which may be via facsimile
transmission, to the Corporation at such office that it elects to
convert the same (the "Conversion Notice"). In the event that the
shares of Series 3 Class C Preferred Stock are being held in escrow
by the Corporation's attorneys, no delivery of the certificates
shall be required. No Conversion Notice with respect to any shares
of Series 3 Class C Preferred Stock can be given prior to the time
such shares of Series 3 Class C Preferred Stock are eligible for
conversion in accordance with the provision of Section 4.1 above.
Any such premature Conversion Notice shall automatically be null
and void. The Corporation shall, within five (5) business days
after receipt of an appropriate and timely Conversion Notice (and
certificate, if necessary), issue to such holder of Series 3 Class
C Preferred Stock or its agent a certificate for the number of
shares of Common Stock to which he shall be entitled; it being
expressly agreed that until and unless the holder delivers written
notice to the Corporation to the contrary, all shares of Common
Stock issuable upon conversion of the Series 3 Class C Preferred
Stock hereunder are to be delivered by the Corporation to a party
designated in writing by the holder in the Conversion Notice for
the account of the holder and such shall be deemed valid delivery
to the holder of such shares of Common Stock. Such conversion
shall be deemed to have been made only after both the certificate
for the shares of Series 3 Class C Preferred Stock to be converted
have been surrendered and the Conversion Notice is received by the
Corporation (or in the event that no surrender of the Certificate
is required, then only upon the receipt by the Corporation of the
<PAGE>
Conversion Notice) (the "Conversion Documents"), and the person or
entity whose name is noted on the certificate evidencing such
shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder of such shares of
Common Stock at and after such time. In the event that the
Conversion Notice is sent via facsimile transmission, the
Corporation shall be deemed to have received such Conversion Notice
on the first business day on which such facsimile Conversion Notice
is actually received. If the Corporation fails to deliver to the
holder or its agent the certificate representing the shares of
Common Stock that the holder is entitled to receive as a result of
such conversion within five (5) business days after receipt by the
Corporation from the holder of an appropriate and timely Conversion
Notice and certificates pursuant to the terms of this Section 4.3,
the Corporation shall pay to the holder U.S. $1,000 for each day
that the Corporation is late in delivering such certificate to the
holder or its agent.
4.4 Adjustments to Conversion Price for Stock Dividends and for
Combinations or Subdivisions of Common Stock. If the Corporation
at any time or from time to time while shares of Series 3 Class C
Preferred Stock are issued and outstanding shall declare or pay,
without consideration, any dividend on the Common Stock payable in
Common Stock, or shall effect a subdivision of the outstanding
shares of Common Stock into a greater number of shares of Common
Stock (by stock split, reclassification or otherwise than by
payment of a dividend in Common Stock or in any right to acquire
Common Stock), or if the outstanding shares of Common Stock shall
be combined or consolidated, by reclassification or otherwise, into
a lesser number of shares of Common Stock, then the Conversion
Price in effect immediately before such event shall, concurrently
with the effectiveness of such event, be proportionately decreased
or increased, as appropriate. If the Corporation shall declare or
pay, without consideration, any dividend on the Common Stock
payable in any right to acquire Common stock for no consideration,
then the Corporation shall be deemed to have made a dividend
payable in Common Stock in an amount of shares equal to the maximum
number of shares issuable upon exercise of such rights to acquire
Common Stock.
4.5. Adjustments for Reclassification and Reorganization. If the
Common Stock issuable upon conversion of the Series 3 Class C
Preferred Stock shall be changed into the same or a different
number of shares of any other class or classes of stock, whether by
capital reorganization, reclassification or otherwise (other than
a subdivision or combination of shares provided for in Section 4.4
hereof), the Conversion Price then in effect shall, concurrently
with the effectiveness of such reorganization or reclassification,
be proportionately adjusted so that the Series 3 Class C Preferred
Stock shall be convertible into, in lieu of the number of shares of
Common Stock which the holders of Series 3 Class C Preferred Stock
would otherwise have been entitled to receive, a number of shares
of such other class or classes of stock equivalent to the number of
shares of Common Stock that would have been subject to receipt by
the holders upon conversion of the Series 3 Class C Preferred Stock
immediately before that change.
4.6 Common Stock Duly Issued. All Common Stock which may be
issued upon conversion of Series 3 Class C Preferred Stock will,
<PAGE>
upon issuance, be duly issued, fully paid and nonassessable and
free from all taxes, liens, and charges with respect to the issue
thereof.
4.7 Notice of Adjustments. Upon the occurrence of each adjustment
or readjustment of any Conversion Price pursuant to this Part 4,
the Corporation, at its expense, within a reasonable period of
time, shall compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of
Series 3 Class C Preferred Stock a notice setting forth such
adjustment or readjustment and showing in detail the facts upon
which such adjustment is based.
4.8 Issue Taxes. The Corporation shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery
of shares of Common Stock on conversion of the Series 3 Class C
Preferred Stock pursuant thereto; provided, however, that the
Corporation shall not be obligated to pay any transfer taxes
resulting from any transfer requested by any holder of Series 3
Class C Preferred Stock in connection with such conversion.
4.9 Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the shares of the Series 3
Class C Preferred Stock, such number of its shares of Common Stock
as shall, from time to time, be sufficient to effect the conversion
of all outstanding shares of the Series 3 Class C Preferred stock,
and, if at any time, the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of
all then outstanding shares of the Series 3 Class C Preferred
Stock, the Corporation will take such corporate action as may be
necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such
purposes, including, without limitation, engaging in reasonable
efforts to obtain the requisite stockholder approval of any
necessary amendment to its Certificate of Incorporation.
4.10 Fractional Shares. No fractional share shall be issued upon
the conversion of any share or shares of Series 3 Class C Preferred
Stock. All shares of Common Stock (including fractions thereof)
issuable upon conversion of more than one share of Series 3 Class
C Preferred Stock by a holder thereof shall be aggregated for
purposes of determining whether the conversion would result in the
issuance of any fractional share. If, after the aforementioned
aggregation, the conversion would result in the issuance of a
fractional share of Common Stock, such fractional share shall be
rounded up to the nearest whole share.
4.11 Notices. Any notices required by the provisions of this Part
4 to be given to the holders of shares of Series 3 Class C
Preferred Stock shall be deemed given if deposited in the United
States mail, postage prepaid, and addressed to each holder of
record at his address appearing on the books of the Corporation.
<PAGE>
4.12 Business Day. As used herein, the term "business day" shall
mean any day other than a Saturday, Sunday or a day when the
federal and state banks located in the State of New York are
required or permitted to close.
Part 5 - Redemption.
5.1 Redemption During First 180 Days. At any time, and from time
to time, during the first one hundred eighty (180) days from the
date of issuance of the Series 3 Class C Preferred Stock, the
Corporation may, at its sole option, but shall not be obligated to,
redeem, in whole or in part, the then outstanding Series 3 Class C
Preferred Stock at a price per share of U. S. $1,300.00 each
("First Six Months Redemption Price"). The Company may exercise
such redemption by giving the holder of the Series 3 Class C
Preferred Stock written notice of such redemption at any time
during such 180-day period.
5.2 Other Rights of Redemption by the Corporation. At any time,
and from time to time, after one hundred eighty (180) days from the
date of the issuance of any Series 3 Class C Preferred Stock, if
the average of the closing bid price of the Common Stock for ten
(10) consecutive days shall be in excess of $2.50 per share, the
Corporation may, at its sole option, but shall not be obligated to,
redeem, in whole or in part, the then outstanding Series 3 Class C
Preferred Stock at a price per share of U. S. $1,000 each (the
"Redemption Price") (such price to be adjusted proportionately in
the event of any change of the Series 3 Class C Preferred Stock
into a different number of shares of Series 3 Class C Preferred
Stock).
5.3 Mechanics of Redemption. Thirty (30) days prior to any date
stipulated by the Corporation for the redemption of Series 3 Class
C Preferred Stock (the "Redemption Date"), written notice (the
"Redemption Notice") shall be mailed to each holder of record on
such notice date of the Series 3 Class C Preferred Stock. The
Redemption Notice shall state: (i) the Redemption Date of such
shares, (ii) the number of Series 3 Class C Preferred Stock to be
redeemed from the holder to whom the Redemption Notice is
addressed, (iii) instructions for surrender to the Corporation, in
the manner and at the place designated, of a share certificate or
share certificates representing the number of Series 3 Class C
Preferred Stock to be redeemed from such holder, and (iv)
instructions as to how to specify to the Corporation the number of
Series 3 Class C Preferred Stock to be redeemed as provided in this
Part 5 and, if the Redemption Notice is mailed to the Holder after
the first one hundred eighty (180) days from the date of issuance
of the Series 3 Class C Preferred Stock, the number of shares to be
converted into Common Stock as provided in Part 4 hereof.
5.4 Rights of Conversion Upon Redemption. If the redemption
occurs pursuant to Section 5.1 hereof, the Holder of the Series 3
Class C Preferred Stock shall not have the right to convert those
outstanding shares of Series 3 Class C Preferred Stock that the
<PAGE>
Company is redeeming after receipt of the Redemption Notice. If
the redemption occurs pursuant to Section 5.2 hereof, then, upon
receipt of the Redemption Notice, any holder of Series 3 Class C
Preferred Stock shall have the option, at its sole election, to
specify what portion of its Series 3 Class C Preferred Stock called
for redemption in the Redemption Notice shall be redeemed as
provided in this Part 5 or converted into Common Stock in the
manner provided in Part 4 hereof, except that, notwithstanding any
provision of such Part 4 to the contrary, such holder shall have
the right to convert into Common Stock that number of Series 3
Class C Preferred Stock called for redemption in the Redemption
Notice.
5.5 Surrender of Certificates. On or before the Redemption Date
in respect of any Series 3 Class C Preferred Stock, each holder of
such shares shall surrender the required certificate or
certificates representing such shares to the Corporation in the
manner and at the place designated in the Redemption Notice, and
upon the Redemption Date, the Redemption Price for such shares
shall be made payable, in the manner provided in Section 5.5
hereof, to the order of the person whose name appears on such
certificate or certificates as the owner thereof, and each
surrendered share certificate shall be canceled and retired. If a
share certificate is surrendered and all the shares evidenced
thereby are not being redeemed (as described below), the
Corporation shall cause the Series 3 Class C Preferred Stock which
are not being redeemed to be registered in the names of the persons
or entity whose names appear as the owners on the respective
surrendered share certificates and deliver such certificate to such
person.
5.6 Payment. On the Redemption Date in respect of any Series 3
Class C Preferred Stock or prior thereto, the Corporation shall
deposit with any bank or trust company having a capital and surplus
of at least U. S. $50,000,000, as a trust fund, a sum equal to the
aggregate First Six Months Redemption Price or the Redemption
Price, whichever is applicable, of all such shares called from
redemption (less the aggregate Redemption Price for those Series 3
Class C Preferred Stock in respect of which the Corporation has
received notice from the holder thereof of its election to convert
Series 3 Class C Preferred Stock into Common Stock), with
irrevocable instructions and authority to the bank or trust company
to pay, on or after the Redemption Date, the First Six Months
Redemption Price or the Redemption Price, whichever is applicable,
to the respective holders upon the surrender of their share
certificates. The deposit shall constitute full payment for the
shares to their holders, and from and after the date of the deposit
the redeemed shares shall be deemed to be no longer outstanding,
and holders thereof shall cease to be shareholders with respect to
such shares and shall have no rights with respect thereto except
the rights to receive from the bank or trust company payments of
the First Six Months Redemption Price or the Redemption Price,
whichever is applicable, of the shares, without interest, upon
surrender of their certificates thereof. Any funds so deposited
<PAGE>
and unclaimed at the end of one year following the Redemption Date
shall be released or repaid to the Corporation, after which the
former holders of shares called for redemption shall be entitled to
receive payment of the First Six Months Redemption Price or the
Redemption Price, whichever is applicable, in respect of their
shares only from the Corporation.
Part 6 - Parity with Other Shares of Series 3 Class C Preferred
Stock and Priority.
6.1 Rateable Participation. If any cumulative dividends or return
of capital in respect of Series 3 Class C Preferred Stock are not
paid in full, the owners of all series of outstanding Preferred
Stock shall participate rateably in respect of accumulated
dividends and return of capital.
6.2 Ranking. For purposes of this resolution, any stock of any
class or series of the Corporation shall be deemed to rank:
6.2.1 Prior or senior to the shares of this Series 3 Class
C Preferred Stock either as to dividends or upon liquidation,
if the holders of such class or classes shall be entitled to
the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation,
whether voluntary or involuntary, as the case may be, in
preference or priority to the holders of shares of this Series
3 Class C Preferred Stock;
6.2.2 On a parity with, or equal to, shares of this Series
3 Class C Preferred Stock, either as to dividends or upon
liquidation, whether or not the dividend rates, dividend
payment dates, or redemption or liquidation prices per share
or sinking fund provisions, if any, are different from those
of this Series 3 Class C Preferred Stock, if the holders of
such stock are entitled to the receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding
up of the Corporation, whether voluntary or involuntary, in
proportion to their respective dividend rates or liquidation
prices, without preference or priority, one over the other, as
between the holders of such stock and over the other, as
between the holders of such stock and the holders of shares of
this Series 3 Class C Preferred Stock; and,
6.2.3 Junior to shares of this Series 3 Class C Preferred
Stock, either as to dividends or upon liquidation, if such
class or series shall be Common Stock or if the holders of
shares of this Series 3 Class C Preferred Stock shall be
entitled to receipt of dividends or of amounts distributable
upon dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, as the case may
be, in preference or priority to the holders of shares of such
class or series.
<PAGE>
Part 7 - Amendment and Reissue.
7.1 Amendment. If any proposed amendment to the Corporation's
Certificate of Incorporation would alter or change the powers,
preferences or special rights of the Series 3 Class C Preferred
Stock so as to affect such adversely, then the Corporation must
obtain the affirmative vote of such amendment to the Certificate of
Incorporation at a duly called and held series meeting of the
holders of the Series 3 Class C Preferred Stock or written consent
by the holders of a majority of the Series 3 Class C Preferred
Stock then outstanding. Notwithstanding the above, the number of
authorized shares of any class or classes of stock may be increased
or decreased (but not below the number of shares thereof
outstanding) by the affirmative vote of the holders of a majority
of the stock of the Corporation entitled to vote thereon, voting
together as a single class, irrespective of this Section 7.1 or the
requirements of Section 242 of the GCL.
7.2 Authorized. Any shares of Series 3 Class C Preferred Stock
acquired by the Corporation by reason of purchase, conversion,
redemption or otherwise shall be retired and shall become
authorized but unissued shares of Preferred Stock, which may be
reissued as part of a new series of Preferred Stock hereafter
created.
<PAGE>
State of Delaware
Office of the Secretary of State Page 1
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY
OF THE CERTIFICATE OF DESIGNATION OF "PERMA-FIX ENVIRONMENTAL
SERVICES, INC.," FILED IN THIS OFFICE ON THE SIXTHTEENTH DAY OF
DECEMBER, A.D. 1996, AT 4:30 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE
NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
* * * * * * * *
/s/ Edward J. Freel
_______________________________
Edward J. Freel,
Secretary of State
Authentication: 8244552
Date: 12/17/96
960370787
<PAGE>
CERTIFICATE OF ELIMINATION
OF
SERIES I CLASS A PREFERRED STOCK
AND
SERIES 2 CLASS B CONVERTIBLE PREFERRED STOCK
OF
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
____________________________________________
PERMA-FIX ENVIRONMENTAL SERVICES, INC., a corporation
organized and existing under the General Corporation Law of the
State of Delaware (hereinafter called the "Corporation"), hereby
certifies the following:
1. That the Certificate of Designations of Series I Class A
Preferred Stock of the Corporation (the "Series I Preferred") was
filed on February 6, 1996 (the "Series I Certificate of
Designations").
2. That all outstanding shares of the Series I Preferred
have been converted into shares of common stock of the Company
pursuant to the terms and conditions of the Series I Certificate of
Designations.
3. That no shares of Series I Preferred remain outstanding.
4. That all shares of the Series I Preferred which have been
converted have the status of authorized and unissued shares of the
Preferred Stock of the Corporation without designation as to
series, until such shares are once more designated as part of a
particular series by the Board of Directors.
5. That on September 19, 1996, the Board of Directors of the
Company duly adopted the following resolution:
RESOLVED, that no authorized shares of Series
I Class A Preferred Stock remain outstanding
and no shares of Series I Class A Preferred
Stock will be issued subject to the
Certificate of Designation previously filed
with respect to the Series I Class A Preferred
Stock.
6. That the Certificate of Designations of the Series 2
Class B Convertible Preferred Stock of the Corporation (the "Series
2 Preferred") was filed on February 20, 1996 (the "Series 2
Certificate of Designations").
7. That all outstanding shares of the Series 2 Preferred
have been converted into shares of common stock of the Company
pursuant to the terms and conditions of the Series 2 Certificate of
Designations.
<PAGE>
8. That no shares of Series 2 Preferred remain outstanding.
9. That all shares of the Series 2 Preferred which have been
converted have the status of authorized and unissued shares of the
Preferred Stock of the Corporation without designation as to
series, until such shares are once more designated as part of a
particular series by the Board of Directors.
10. That on September 19, 1996, the Board of Directors of the
Company duly adopted the following resolution:
RESOLVED, that no authorized shares of Series
2 Class B Convertible Preferred Stock remain
outstanding and no shares of Series 2 Class B
Convertible Preferred Stock will be issued
subject to the Certificate of Designation
previously filed with respect to the Series 2
Class B Convertible Preferred Stock.
11. That pursuant to the provisions of Section 151(g) of the
Delaware General Corporation Law, upon the effective date of the
filing of this Certificate, this Certificate will have the effect
of eliminating from the Restated Certificate of Incorporation only
those matters set forth in the Restated Certificate of
Incorporation with respect to the Series I Class A Preferred Stock
and the Series 2 Class B Convertible Preferred Stock.
IN WITNESS WHEREOF, this Certificate of Elimination has been
executed this 4th day of December, 1996, by the President of the
Company.
PERMA-FIX ENVIRONMENTAL
ATTEST: SERVICES, INC.
/s/ Richard T. Kelecy By /s/ Louis F. Centofanti
___________________________ _________________________
Richard T. Kelecy, Secretary Dr. Louis F. Centofanti,
President
(SEAL)
<PAGE>
State of Delaware
Office of the Secretary of State Page 1
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY
OF THE CERTIFICATE OF AMENDMENT OF "PERMA-FIX ENVIRONMENTAL
SERVICES, INC.," FILED IN THIS OFFICE ON THE SIXTH DAY OF JANUARY,
A.D. 1997, AT 4:30 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE
NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
* * * * * * * *
/s/ Edward J. Freel
_______________________________
Edward J. Freel,
Secretary of State
Authentication: 8274371
Date: 01/07/97
971005393
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
___________________________________________
Perma-Fix Environmental Services, Inc., a Delaware
corporation (the "Corporation"), for purposes of amending its
Restated Certificate of Incorporation, as amended ("Restated
Certificate of Incorporation"), as provided by Section 242 of the
Delaware General Corporation Law, does hereby certify:
1. The amendment set forth below to the Corporation's
Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware:
The first paragraph of Article Fourth of the
Corporation's Restated Certificate of Incorporation is hereby
deleted and replaced in its entirety by the following:
The total number of shares of capital stock
that the Corporation shall have authority to
issue is 52,000,000, of which 50,000,000 shall
be designated as common stock of the par value
of $.001 per share ("Common Stock") and
2,000,000 shall be designated as preferred
stock of the par value of $.001 per share
("Preferred Stock").
2. Only the first paragraph of Article Fourth is amended by
this Amendment, and the remainder of Article Fourth shall remain in
full force and effect. No other provision, paragraph or article of
the Restated Certificate of Incorporation is amended or changed by
this Amendment. The Restated Certificate of Incorporation, as
expressly amended by paragraph 1 of this Amendment, shall be in
full force and effect.
3. At a meeting of the Board of Directors held on the 19th
day of September, 1996, a resolution was duly adopted setting forth
the foregoing proposed amendment to the first paragraph of Article
Fourth of the Restated Certificate of Incorporation, declaring such
amendment to be advisable and setting the next Annual Meeting of
Stockholders for consideration thereof.
4. Thereafter, pursuant to said resolution of its Board of
Directors, the Annual Meeting of Stockholders was duly called and
held on December 12, 1996, at which meeting the necessary number of
shares as required by statute were voted in favor of such
amendment.
<PAGE>
IN WITNESS whereof, Perma-Fix Environmental Services,
Inc. has caused this Certificate to be signed and attested to by
its duly authorized officers as of this 16th day of December, 1996.
Perma-Fix Environmental
Services, Inc.,
a Delaware corporation
By: /s/ Louis F. Centofanti
_________________________
Dr. Louis F. Centofanti
President and
Chief Executive Officer
ATTEST:
/s/ Richard T. Kelecy
_____________________
Richard T. Kelecy,
Secretary
BALL:\N-P\PESI\10K\EXHIBIT3.1
FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
_____________________________________________
THIS FIFTH AMENDMENT ("Amendment"), dated as of the 5th
day of December, 1996, by and among PERMA-FIX ENVIRONMENTAL
SERVICES, INC., a Delaware corporation ("Parent"), each of those
direct and indirect subsidiaries of Parent whose names are inscribed
on the signature pages to the "Loan Agreement" referenced below
(Parent and such direct and indirect subsidiaries, collectively, the
"Borrowers" or, individually, a "Borrower") and HELLER FINANCIAL,
INC., a Delaware corporation ("Lender");
W I T N E S S E T H T H A T:
WHEREAS, Borrowers and Lender are parties to a certain
Loan and Security Agreement, dated as of January 27, 1995 (as
amended to date, the "Loan Agreement"; capitalized terms used herein
and not defined herein have the meanings assigned to them in the
Loan Agreement), pursuant to which, subject to the terms and
conditions set forth therein, Lenders have made and continue to make
certain financial accommodations available to Borrowers; and
WHEREAS, Borrowers have requested that Lender agree to
amend the Loan Agreement in certain respects as hereinafter set
forth, and, subject to the terms and conditions set forth herein,
Lender is willing to do so; and
WHEREAS, Borrowers and Lenders desire to enter into this
Amendment in order to memorialize their mutual understandings in
regard to the foregoing matters;
NOW, THEREFORE, in consideration of the foregoing premises
and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrowers and Lender
agree as follows:
1. Amendment to Section 7.6 of the Loan Agreement. Section
7.6 of the Loan Agreement is hereby amended by deleting the proviso
at the end of such Section (beginning with the words "provided,
however," and ending with the words "Second Offering Shares") and
substituting in lieu thereof the following:
"provided, however, that Parent may issue (i)
the Shares pursuant to the Offering; (ii) the
Second Offering Shares pursuant to the Second
Offering, (iii) the Third Offering Shares
pursuant to the Third Offering, (iv) the Third
Offering Warrants pursuant to the Third
Offering, (v) shares of common stock upon
conversion of the Shares, (vi) shares of common
stock upon conversion of the Second Offering
Shares, (vii) shares of common stock upon
conversion of the Third Offering Shares, (viii)
<PAGE>
shares of common stock upon exercise of the
Third Offering Warrants, (ix) 133,333 shares of
common stock to Louis Centofanti in
reimbursement for certain expenses incurred by
him in the amount of $13,971 on behalf of
Borrowers and 76,190 shares of common stock to
Louis Centofanti in exchange for certain cash
equity contributions previously made by him to
parent, (x) up to 152,000 shares of common
stock to Robert Foster as compensation for
consulting services, up to 30,000 shares of
common stock to Gary Myers as compensation for
consulting services, up to 40,000 shares of
common stock to Bobby Meeks as compensation for
consulting services and up to 12,000 shares of
common stock to David Cowherd as compensation
for consulting services, (xi) shares of common
stock pursuant to its 1992 Outside Directors
Stock Option Plan, its 1993 Nonqualified Stock
Option Plan and its 1991 Performance Equity
Plan, (xii) warrants to J.P. Carey Enterprises,
Inc. to purchase (A) up to 195,000 shares of
Parent's common stock at an exercise price of
$.73 per share and (B) up to 100,000 shares of
Parent's common stock at an exercise price of
$1.75 per share, as compensation for investment
banking services provided to Parent, and shares
of common stock upon exercise of such warrants
in up to the amounts described hereinabove,
(xiii) warrants to J.W. Charles Financial
Services to purchase up to 450,000 shares of
Parent's common stock at an exercise price of
$1.50 per share, as compensation for investment
banking and financial consulting services
provided to Parent, and shares of common stock
upon exercise of such warrants in up to the
amount described hereinabove, (xiv) warrants to
Search Capital Group, Inc. to purchase (A) up
to 75,000 shares of parent's common stock at an
exercise price of $1.06 per share, (B) up to
50,000 shares of Parent's common stock at an
exercise price of $1.50 per share, (C) up to
50,000 shares of Parent's common stock at an
exercise price of $1.06 per share, as
compensation for consulting services provided
to Parent, and shares of common stock upon
exercise of such warrants to Marven S. Rosen to
purchase up to 100,000 shares of Parent's
common stock at an exercise price of $1.75 per
share, as compensation for consulting services
provided to Parent, and shares of common stock
upon exercise of such warrants to D.H. Blair
Investment Banking Corporation to purchase up
to 200,000 shares of Parent's common stock at
<PAGE>
an exercise price of $1.75 per share, as
compensation for investment banking services
provided to Parent, and shares of common stock
upon exercise of such warrants in up to the
amounts described hereinabove, (xvii) warrants
to Steve Gorlin to purchase up to 200,000
shares of the Parent's common stock at an
exercise price of $1.75 per share, as
compensation for certain consulting services
provided to Parent, and shares of common stock
upon exercise of such warrants and (xviii)
shares of Parent's common stock in up to the
amounts described below to certain consultants
to Parent as follows (A) up to 13,000 shares to
Gary Thomas, (B) up to 62,500 shares to R.
Keith Fetter, (C) up to 12,500 shares to C. Lee
Daniel, (D) up to 45,000 shares to John
Henderson, (E) up to 11,000 shares to Sam Elam,
(F) up to 20,000 shares to Jeffrey Sherman, (G)
up to 9,412 shares to Rita Durosher and (H) up
to 3,500 shares to Robert Hicks.
2. Conditions Precedent. This Amendment shall not become
effective unless and until each of the following conditions shall
have been satisfied on or prior to August 16, 1996, as determined
by Lender in its sole discretion:
(a) No Default or Event of Default shall have occurred and be
continuing.
(b) Since December 31, 1995, there shall have occurred no
material adverse change in the business, operations,
financial conditions, profits or prospect of any Loan
Party or in the Collateral.
3. Miscellaneous.
(a) Effect of Amendment. Except as set forth expressly
herein, all terms of the Loan Agreement and the other
Loan Documents shall be and remain in full force and
effect and shall constitute the legal, valid, binding and
enforceable obligations of Borrowers. Without limitation
of the foregoing, Parent and each Borrower hereby ratify
and reaffirm the Parent Guaranty or Cross-Guaranty, as
applicable, to which it is party, after giving effect to
this Amendment. To the extent that any terms and
conditions in any of the Loan Documents shall contradict
or be in conflict with any terms or conditions of the
Loan Agreement, after giving effect to this Amendment,
such terms and conditions are hereby deemed modified and
amended accordingly to reflect the terms and conditions
of the Loan Agreement as modified and amended hereby.
Nothing contained herein shall be construed as a consent
<PAGE>
to any matter prohibited by the Loan Agreement (except as
expressly provided herein).
(b) Reaffirmation of Representations and Warrants. Borrowers
hereby ratify and reaffirm each and every representation
and warranty set forth in the Loan Agreement and the
other Loan Documents effective as of the date hereof.
(c) Ratification. Borrowers hereby restate, ratify and
reaffirm each and every term and condition set forth in
the Loan Agreement, as amended hereby, and the other Loan
Documents effective as of the date hereof.
(d) Estoppel. To induce Lender to enter into this Amendment
and to continue to make Revolving Loans to Borrowers
under the Loan Agreement, each Borrower hereby
acknowledges and agrees that, as of the date hereof,
there exists no Event of Default or Default and no right
of offset, defense, counterclaim or objection in favor of
any Borrower as against Lender with respect to the
Obligations.
(e) Waiver and Release. Each Borrower waives and
affirmatively agrees not to allege or otherwise pursue
any or all defenses, affirmative defenses, counterclaims,
claims, causes of action, set-offs, or other rights that
any of them may have to contest (i) any provision of the
Loan Agreement, this Amendment, or other Loan Documents;
(ii) the right of Lender to all proceeds from the
Collateral; (iii) the ownership and security interest of
Lender in any property (whether real or personal tangible
or intangible), right or other interest, now or hereafter
arising in connection with the Collateral; (iv) the
conduct of Lender in administering this Amendment, the
Loan Agreement, the other Loan Documents or otherwise.
In consideration of the terms and conditions of this
Amendment, the receipt and sufficiency of which
consideration are hereby acknowledged by each Borrower,
each Borrower hereby releases Lender, its parents and
affiliates, its agents, servants, employees, directors,
attorneys, successors, and assigns from any and all
liabilities, claims, actions, or causes of action
accruing to any Borrower or their respective affiliates,
arising out of or in any manner connected with this
Amendment, the Loan Agreement, the other Loan Documents
or Lender's activities, including, without limitation,
all actions taken or not taken by Lender in connection
with the administration of this Amendment, the Loan
Agreement, the other Loan Documents or otherwise.
(f) Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of
Illinois without regard to its conflicts of law rules.
<PAGE>
(g) Costs and Expenses. Borrowers agree to pay promptly on
demand all reasonable costs and expenses of Lender in
connection with the preparation, execution, delivery and
enforcement of this Amendment, including, without
limitation, the reasonable fees and out-of-pocket
expenses of Lender's counsel.
(h) Counterparts. This Amendment may be executed by one or
more of the parties to this Amendment on any number of
separate counterparts and all of said counterparts taken
together shall be deemed to constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their proper and duly authorized
officers as of the day and year first above written.
"LENDER"
HELLER FINANCIAL, INC., a
Delaware corporation
By: /s/ Miles D. McManus
_______________________
Miles D. McManus
Senior Vice President
<PAGE>
"PARENT" AND "BORROWER"
PERMA-FIX ENVIRONMENTAL SERVICES,
INC., a Delaware corporation
By: /s/ Louis F. Centofanti
______________________________
Name: Louis F. Centofanti
Title: CEO
"BORROWERS"
INDUSTRIAL WASTE MANAGEMENT,
INC., a Missouri corporation
By: /s/ Louis F. Centofanti
_________________________
Name: Louis F. Centofanti
Title: CEO
PERMA-FIX, INC., an Oklahoma
corporation
By: /s/ Louis F. Centofanti
________________________
Name: Louis F. Centofanti
Title: CEO
PERMA-FIX OF DAYTON, INC.,
an Ohio corporation
By: /s/ Louis F. Centofanti
________________________
Name: Louis F. Centofanti
Title: CEO
<PAGE>
PERMA-FIX OF FLORIDA, INC.,
a Florida corporation
By: /s/ Louis F. Centofanti
________________________
Name: Louis F. Centofanti
Title: CEO
PERMA-FIX OF FORT LAUDERDALE,
INC., a Florida corporation
By: /s/ Louis F. Centofanti
_________________________
Name: Louis F. Centofanti
Title: CEO
PERMA-FIX OF MEMPHIS, INC.
By: /s/ Louis F. Centofanti
________________________
Name: Louis F. Centofanti
Title: CEO
PERMA-FIX OF NEW MEXICO, INC.,
a New Mexico corporation
By: /s/ Louis F. Centofanti
___________________________
Name: Louis F. Centofanti
Title: CEO
<PAGE>
PERMA-FIX TREATMENT SERVICES,
INC., an Oklahoma corporation
By: /s/ Louis F. Centofanti
__________________________
Name: Louis F. Centofanti
Title: CEO
SCHREIBER, GRANA & YONLEY,
INC., a Missouri corporation
By: /s/ Louis F. Centofanti
_________________________
Name: Louis F. Centofanti
Title: CEO
MINTECH, INC., an Oklahoma
corporation
By: /s/ Louis Centofanti
________________________
Name: Louis F. Centofanti
Title: CEO
RECLAMATION SYSTEMS, INC., an
Oklahoma corporation
By: /s/ Louis Centofanti
____________________________
Name: Louis F. Centofanti
Title: CEO
ISTE:\N-P\PESI\10k\1996\EXHIBIT4.9
Heller Financial, Inc.
500 West Monroe Street
Chicago, Illinois 60661
(312) 441-7000
Heller Business Credit
February 25, 1997
Perma-Fix Environmental Services, Inc.
1940 N.W. 67th Place
Gainesville, FL 32653
Attention: Dr. Louis Centofanti
RE: LOAN AND SECURITY AGREEMENT DATED AS OF JANUARY 27, 1995 (THE
LOAN AGREEMENT ), AS AMENDED, BETWEEN PERMA-FIX ENVIRONMENTAL
SERVICES, INC., A DELAWARE CORPORATION ( PARENT ) AND EACH OF THOSE
DIRECT AND INDIRECT SUBSIDIARIES OF PARENT WHOSE NAMES ARE
INSCRIBED ON THE SIGNATURE PAGES OF THE LOAN AGREEMENT
(COLLECTIVELY, WITH PARENT, BORROWERS OR INDIVIDUALLY, A
BORROWER ) AND HELLER FINANCIAL, INC., A DELAWARE CORPORATION
( LENDER )
Gentlemen:
Reference is made to the Loan Agreement. Capitalized terms used
but not defined herein shall have the meanings assigned to such
terms in the Loan Agreement.
This letter evidences the agreement of Lender and each Borrower as
follows:
1. Establishment of Overformula Line. (a) Lender shall make
available to Borrowers, during the Overformula Line Period (as
defined below), a temporary overformula line of credit
( Overformula Line ) in the amount of the Overformula Line Amount
(as defined below). As a result of the establishment of the
Overformula Line, during the Overformula Line Period, the aggregate
outstanding amount of Revolving Loans may exceed the Borrowing Base
by an amount of up to the Overformula Line Amount, provided that in
no event shall the aggregate outstanding amount of Revolving Loans
at any time exceed the Revolving Loan Commitment amount. On the
<PAGE>
last day of the Overformula Line Period, the Overformula Line shall
terminate, and Borrowers shall pay to Lender, in immediately
available funds, without demand or notice, all outstanding advances
under the Overformula Line, together with all accrued but unpaid
interest thereon.
(b) As used herein, the term Overformula Line Period
shall mean the period commencing on the date of the first advance
to any Borrower under the Overformula Line and ending on the
earliest of (i) 90 days after the date of such first advance, (ii)
May 20, 1997, (iii) the termination of the Revolving Loan
Commitment pursuant to subsection 8.3 of the Loan Agreement, or
(iv) the Termination Date.
(c) As used herein, the term Overformula Line Amount
means, at any time of determination thereof, $300,000.
(d) The making of advances by Lender to Borrowers under the
Overformula Line shall be subject to all of the terms and
conditions set forth in the Loan Agreement for the making of
advances under the Revolving Loan, including, without limitation,
satisfaction of the conditions set forth in subsection 3.1 of the
Loan Agreement, with the exception of section 3.1 (c) and 3.1 (f).
All advances under the Overformula Line shall constitute
Obligations, shall bear interest at the same rate of interest
applicable to all other advances under the Revolving Loan and shall
be secured by Lender s security interest in the Collateral and by
all other security interests, liens, mortgages, claims, and
encumbrances now or from time to time hereafter granted by any
Borrower to Lender.
2. Overformula Line Fee. As consideration for Lender s
establishment of the Overformula Line, Borrowers shall pay to
Lender on the last day of the Overformula Line Period a fee in the
amount of $3,000.00. This fee shall be in addition to all fees and
expenses that are due to Lender and payable under the Loan
Agreement.
3. Conditions. The effectiveness of the Overformula Line and
the obligation of Lender to make advances to Borrowers thereunder
are subject to satisfaction of the following:
(a) Each Borrower shall have duly executed and delivered
this letter agreement;
(b) The execution, delivery and performance of this letter
agreement shall have been authorized by all requisite corporate
action on the part of each Borrower and will not violate the
Articles of Incorporation or Bylaws of each such Borrower.
<PAGE>
4. Delivery of Motor Vehicle Titles. Lender has determined
that Borrowers have not executed or delivered to Lender motor
vehicle lien applications for certain motor vehicles owned by
Borrowers (the Vehicles ). Each Borrower hereby agrees that it
shall, on or before April 21, 1997, deliver to Lender, with respect
to each of the Vehicles owned by such Borrower (i) a motor vehicle
title and (ii) a motor vehicle lien application executed and
prepared in proper form to allow Lender to record its lien at the
appropriate jurisdictional authorities. Additionally, each
Borrower agrees to take all actions requested by Lender to allow
Lender to properly record such lien applications. The failure by
any Borrower to satisfy the terms set forth in this paragraph 4 in
the time period set forth in this paragraph 4 shall constitute an
Event of Default under the Loan Agreement.
5. Loan Agreement Representations; Ratification. All of the
representations set forth in the Loan Agreement are accurate in all
material respects as of the date hereof. The terms and provisions
set forth in this letter agreement shall modify and supersede all
inconsistent terms and provisions set forth in the Loan Agreement
and, except as expressly modified and superseded by this letter
agreement, the terms and provisions of the Loan Agreement are
ratified and confirmed and shall continue in full force and effect.
Please evidence your acknowledgment of and agreement to the terms
and conditions of this letter by executing this letter in the place
indicated below.
Cordially,
HELLER FINANCIAL, INC.
By: /s/ Mike D. McManus
________________________
Its: Sr. Vice President
_________________________
Accepted and Agreed this ______ day of February 1997.
<PAGE>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
a Delaware corporation
By: /s/ Louis Centofanti
___________________________
Name: Louis F. Centofanti
_________________________
Title: CEO
________________________
Attest: Richard T. Kelecy
________________________
Name: Richard T. Kelecy
_________________________
Title: CFO
________________________
INDUSTRIAL WASTE MANAGEMENT, INC.
a Missouri corporation
By: /s/ Louis Centofanti
____________________________
Name: Louis F. Centofanti
_________________________
Title: CEO
________________________
Attest: Richard T. Kelecy
________________________
Name: Richard T. Kelecy
_________________________
Title: CFO
_________________________
(SIGNATURES CONTINUED ON NEXT PAGE)
<PAGE
PERMA-FIX, INC., an Oklahoma
corporation
By: /s/ Louis Centofanti
___________________________
Name: Louis F. Centofanti
_________________________
Title: CEO
________________________
Attest: /s/ Richard T. Kelecy
_______________________
Name: Richard T. Kelecy
_________________________
Title: CFO
________________________
PERMA-FIX OF DAYTON, INC., an
Ohio corporation
By: /s/ Louis Centofanti
___________________________
Name: Louis F. Centofanti
_________________________
Title: CEO
________________________
Attest: Richard T. Kelecy
_______________________
Name: /s/ Richard T. Kelecy
________________________
Title: CFO
________________________
PERMA-FIX OF FLORIDA, INC., a
Florida corporation
By: /s/ Louis Centofanti
__________________________
Name: Louis F. Centofanti
________________________
Title: CEO
_______________________
Attest: /s/ Richard T. Kelecy
______________________
Name: Richard T. Kelecy
________________________
Title: CFO
_______________________
(SIGNATURES CONTINUED ON NEXT PAGE)
<PAGE>
PERMA-FIX OF FORT LAUDERDALE,
INC., a Florida corporation
By: /s/ Louis Centofanti
___________________________
Name: Louis F. Centofanti
_________________________
Title: CEO
________________________
Attest: /s/ Richard T. Kelecy
_______________________
Name: Richard T. Kelecy
_________________________
Title: CFO
________________________
PERMA-FIX OF MEMPHIS, INC.,
a Tennessee corporation
By: /s/ Louis Centofanti
___________________________
Name: Louis F. Centofanti
_________________________
Title: CEO
________________________
Attest: /s/ Richard T. Kelecy
_______________________
Name: Richard T. Kelecy
_________________________
Title: CEO
________________________
PERMA-FIX OF NEW MEXICO, INC.,
a New Mexico corporation
By: /s/ Louis F. Centofanti
___________________________
Name: Louis F. Centofanti
_________________________
Title: CEO
________________________
Attest: /s/ Richard T. Kelecy
_______________________
Name: Richard T. Kelecy
_________________________
Title: CFO
________________________
(SIGNATURES CONTINUED ON NEXT PAGE)
PERMA-FIX TREATMENT SERVICES, INC.,
an Oklahoma corporation
By: /s/ Louis Centofanti
___________________________
Name: Louis F. Centofanti
_________________________
Title: CEO
________________________
Attest: /s/ Richard T. Kelecy
_______________________
Name: Richard T. Kelecy
_________________________
Title: CFO
________________________
SCHREIBER, GRANA & YONLEY, INC.,
a Missouri corporation
By: /s/ Louis Centofanti
___________________________
Name: Louis F. Centofanti
_________________________
Title: CEO
________________________
Attest: /s/ Richard T. Kelecy
_______________________
Name: Richard T. Kelecy
_________________________
Title: CFO
________________________
MINTECH, INC., an Oklahoma
corporation
By: /s/ Louis F. Centofanti
__________________________
Name: Louis F. Centofanti
________________________
Title: CEO
_______________________
Attest: /s/ Richard T. Kelecy
______________________
Name: Richard T. Kelecy
________________________
Title: CFO
_______________________
(SIGNATURES CONTINUED ON NEXT PAGE)
<PAGE>
RECLAMATION SERVICES, INC.,
an Oklahoma corporation
By: /s/ Louis Centofanti
__________________________
Name: Louis F. Centofanti
________________________
Title: CEO
_____________________
Attest: /s/ Richard T. Kelecy
______________________
Name: Richard T. Kelecy
________________________
Title: CFO
_______________________
P:\HEGGEN\PERMA-FI\PERMA-FI.DOC
SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
_____________________________________________
THIS SIXTH AMENDMENT ("Amendment"), dated as of the __ day
of April, 1997, by and among PERMA-FIX ENVIRONMENTAL SERVICES, INC.,
a Delaware corporation ("Parent"), each of those direct and indirect
subsidiaries of Parent whose names are inscribed on the signature
pages to the "Loan Agreement" referenced below (Parent and such
direct and indirect subsidiaries, collectively, the "Borrowers" or,
individually, a "Borrower") and HELLER FINANCIAL, INC., a Delaware
corporation ("Lender");
W I T N E S S E T H T H A T:
WHEREAS, Borrowers and Lender are parties to a certain
Loan and Security Agreement, dated as of January 27, 1995 (as
amended to date, the "Loan Agreement"; capitalized terms used herein
and not defined herein have the meanings assigned to them in the
Loan Agreement), pursuant to which, subject to the terms and
conditions set forth therein, Lenders have made and continue to make
certain financial accommodations available to Borrowers; and
WHEREAS, certain Events of Default have occurred and are
continuing under the Loan Agreement as described on Exhibit A
attached hereto (the "Existing Events of Default"); and
WHEREAS, Borrowers have requested that Lender waive the
Existing Events of Default, amend the financial covenants set forth
in Section 6 of the Loan Agreement in certain respects, and amend
certain other provisions of the Loan Agreement as set forth
hereinbelow; and
WHEREAS, pursuant to Borrowers request and subject to all
of the terms and conditions set forth herein (including, without
limitation, payment by Borrowers to Lender of the fee described in
Section 10(d) hereof), Lender is willing to waive the existing
Events of Default, and to amend the Loan Agreement in the manner
hereinafter set forth; and
WHEREAS, Borrowers and Lender desire to enter into this
Amendment in order to memorialize their mutual understandings in
regard to the foregoing matters;
NOW, THEREFORE, in consideration of the foregoing premises
and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrowers and Lender
agree as follows:
1. Amendment to Definition of Capital Expenditures.
(a) The definition of Capital Expenditures set
forth in Section 1.1 of the Loan Agreement is hereby amended by
deleting the parenthetical therein which reads "(including the
<PAGE>
principal portion of payments made during such period under or with
respect to Capital Leases)" and substituting in lieu thereof the
following parenthetical:
(excluding the principal portion of payments
made during such period under or with respect
to Capital Leases to the extent otherwise
included as Capital Expenditures on Parent's
consolidated financial statements)
2. Amendments to Section 5.1 of the Loan Agreement.
(a) Section 5.1(M) of the Loan Agreement is hereby
deleted in its entirety and the following revised Section 5.1(M) is
substituted in lieu thereof:
(M) Projections. As soon as available and in
any event no later than July 31 of each Fiscal Year,
Parent will deliver consolidated and consolidating
Projections of Parent and its Subsidiaries for the
forthcoming Fiscal Year, month-by-month.
(b) The following sentence is hereby added at the
end of Section 5.1(O) of the Loan Agreement:
Without limitation of the foregoing, Borrowers
shall deliver to Lender on a monthly basis, on
or prior to the thirtieth (30th) business day
of each month, a report as to its financed and
unfinanced capital expenditures for the
preceding month, which report shall include a
comparison to budgeted amounts and shall
otherwise be in form satisfactory to Lender.
3. Addition of New Section 5.14 to the Loan Agreement.
5.14 Cash Infusion. Borrowers shall obtain an infusion of at
least Seven Hundred Thousand Dollars ($700,000) in unrestricted cash
on a basis satisfactory to Lender as set forth below, with an
initial infusion of at least One Hundred Fifty Thousand Dollars
($150,000) to be obtained on or prior to June 15, 1997 and the
balance to be obtained on or prior to August 15, 1997. Such cash
may consist of insurance proceeds with regard to the accident at
Borrowers' Memphis, Tennessee facility and the vandalism at
Borrowers' Fort Lauderdale, Florida facility, proceeds of capital
contributions, proceeds of stock or other securities offerings
consented to by Lender in writing pursuant to the requirements of
Section 7.6 of this Agreement, other proceeds obtained in a manner
approved by Lender in writing or some combination of the foregoing.
On June 15, 1997 and August 15, 1997, Parent shall report to Lenders
in writing as to Borrowers' compliance (or failure to comply) with
the foregoing covenant.
<PAGE>
4. Amendment to Section 6.2 of the Loan Agreement.
Section 6.2 of the Loan Agreement is hereby deleted in its entirety
and the following revised Section 6.2 is substituted in lieu
thereof:
6.2 Minimum EBITDA.
Parent shall achieve an EBITDA of at least the amount set forth
below for each applicable period set forth below (or with respect
to each period for which a negative amount is set forth below, shall
not permit EBITDA to be more negative than such amount):
Applicable Period Amount
_________________ ______
Three Months Ended 3/31/97 $(340,000)
Six Months Ended 6/30/97 $320,000
Nine Months Ended 9/30/97 $1,360,000
Twelve Months Ended 12/31/97 $2,275,000
and for each twelve month
period ending on the last
day of each fiscal quarter
thereafter
5. Amendment to Section 6.3 of the Loan Agreement. Section
6.3 of the Loan Agreement is hereby deleted in its entirety and the
following revised Section 6.3 is hereby substituted in lieu thereof:
6.3 Capital Expenditures Limits.
The aggregate amount of all Capital
Expenditures of Parent and its Subsidiaries
(excluding trade-ins and excluding Capital
Expenditures financed pursuant to Capital
Leases permitted pursuant to Section 7.1
hereof) will not exceed the amount set forth
below for each applicable period set forth
below (on a cumulative basis for all periods
ending on or prior to December 31, 1997):
Applicable Period Amount
_________________ ______
Three Months Ended 3/31/97 $ 266,000
Six Months Ended 6/30/97 $ 416,000
Nine Months Ended 9/30/97 $ 516,000
Twelve Months Ended 12/31/97 $ 591,000
Each fiscal Quarter Ending $ 100,000
After 12/31/97
In addition, if pursuant to Section 5.14 hereof Borrowers obtain
aggregate cash infusions in excess of Seven Hundred Thousand Dollars
<PAGE>
($700,000) on or prior to August 15, 1997, then the Capital
Expenditures limitation for the remainder of Borrowers' 1997 Fiscal
Year shall be increased by the amount by which such cash infusions
exceed Seven Hundred Thousand Dollars ($700,000); provided, however,
that Borrowers will be permitted to make Capital Expenditures in
such increased amount only if (a) for the thirty (30) days prior the
making of each such Capital Expenditure and after giving effect
thereto, the Maximum Revolving Loan Amount shall exceed the
outstanding amount of the Revolving Loan by at least Two Hundred
Thousand Dollars ($200,000) and (b) at the time any such Capital
Expenditures are to be made no Default or Event of Default has
occurred and is continuing or would result therefrom.
6. Amendment to Section 6.4 of the Loan Agreement.
Section 6.4 of the Loan Agreement is hereby deleted in its entirety
and the following revised Section 6.4 is hereby substituted in lieu
thereof.
6.4 Fixed Charge Coverage.
Parent shall not permit Fixed Charge
Coverage for each applicable period set forth
below to be less than the ratio set forth below
for such period (or if the ratio set forth
below for any applicable period is negative,
shall not permit Fixed Charge Coverage for such
applicable period to be a larger negative ratio
than that set forth below):
Applicable Period Ratio
_________________ _____
Three Months Ended 3/31/97 (1.20:1.0)
Four Months Ended 4/30/97 (.75:1.0)
Five Months Ended 5/31/97 (.45:1.0)
Six Months Ended 6/30/97 (.15:1.0)
Seven Months Ended 7/31/97 .05:1.0
Eight Months Ended 8/31/97 .25:1.0
Nine Months Ended 9/30/97 .45:1.0
Ten Months Ended 10/31/97 .60:1.0
Eleven Months Ended 11/30/97 .65:1.0
Twelve Months Ended 12/31/97 .70:1.0
Twelve Months ending on the
last day of each fiscal
month ending thereafter 1.0:1.0
In computing Fixed Charge Coverage for purposes
hereof, (a) Capital Expenditures pursuant to Capital Leases
permitted pursuant to Section 7.1 hereof and Indebtedness paid by
Perma-Fix, Inc. in connection with the sale of its Re-Tech division
<PAGE>
shall be excluded and (b) insurance proceeds or any benefit
therefrom (if otherwise included) shall be excluded from net income.
7. Amendment to Section 7.5 of the Loan Agreement.
Section 7.5 of the Loan Agreement is hereby amended by deleting the
words "either cash or" from clause (d) thereof such that hereafter
Parent will not be permitted to pay cash dividends on the Third
Offering Shares.
8. Amendment to Section 8.1 of the Loan Agreement.
Section 8.1(C) of the Loan Agreement is hereby amended by adding
immediately after the reference to subsection 5.6 therein the words
"or Section 5.14".
9. Waiver of Existing Events of Default. Lender hereby
waives the Existing Events of Default; provided, however, that (i)
such waivers and the amendments set forth in Sections 4, 5 and 6
hereof shall become void and of no further force or effect if (a)
Parent's audited financial statements for its 1996 Fiscal Year
evidence that Borrowers' Fixed Charge Coverage for such Fiscal Year
was less than .26:1.0 or that Borrowers made Capital Expenditures
in excess of $2,166,000 (calculated by including the principal
portion of payments made during such period under or with respect
to Capital Leases) for such Fiscal Year, (b) such financial
statements differ in any material adverse respect from the draft
thereof provided to Lender pursuant to Section 10(f) hereof, or (c)
Borrowers fail to deliver such audited financial statements to
Lender on or prior to April 16, 1997, accompanied by the unqualified
opinion of Parent's accountants and (ii) such waivers shall not be,
or be deemed to be, waivers of any other Defaults or Events of
Default which may presently or hereafter exist.
10. Conditions Precedent. The amendments and waivers
set forth herein shall not become effective unless and until each
of the following conditions shall have been satisfied, as determined
by Lender in its sole discretion:
(a) The Loan Parties party thereto and Ally
Capital shall have entered into an amendment to the Ally Capital
Lease, in form and substance satisfactory to Lender, pursuant to
which all violations of the financial covenants set forth therein
shall be waived on a basis satisfactory to Lender and all such
covenants applicable to future periods which correspond to the
financial covenants amended hereby shall be amended so that such
covenants are no more restrictive than the covenants set forth
herein, as determined by Lender in its sole discretion .
(b) Each of the Loan Parties shall have executed
and delivered in favor of Lender such additional Loan Documents and
amendments to existing Loan Documents as Lender shall deem to be
necessary or appropriate in connection herewith.
<PAGE>
(c) After giving effect to the waivers set forth in
Section 9 hereof, no Default or Event of Default shall have
occurred and be continuing.
(d) In consideration of the accommodations by
Lender to the Loan Parties contemplated hereby the Loan Parties
shall have paid to Lender a fee of $25,000, which fee shall be
fully-earned on the date hereof and non-refundable, and shall be in
addition to, and not in lieu of, all fees, interest and expenses
payable by the Loan Parties under the Loan Agreement.
(e) Since December 31, 1996, there shall have
occurred no material adverse change in the business, operations,
financial conditions, profits or prospect of any Loan Party or in
the Collateral, except for the explosion at Borrowers' Memphis,
Tennessee facility.
(f) Borrowers shall have delivered to Lender a
draft of Parent's consolidated audited financial statements for its
1996 Fiscal Year and the same shall be satisfactory to Lender in all
respects.
11. Condition Subsequent. To induce Lender to enter
into this Amendment with Borrowers, Borrowers hereby agree that on
or prior to May 9, 1997. Borrowers shall deliver to Lender a report
in form and substance satisfactory to Lender which shall adjust the
orderly liquidation value of Borrowers' Equipment shown in the
report of Collateral Evaluation Associates, Inc. dated December 26,
1996 to exclude therefrom the value of all leased equipment and all
equipment which is partially owned and partially leased.
Thereafter, if it is determined that the outstanding principal
balance of the Term Loan exceeds seventy-five percent (75%) of such
adjusted orderly liquidation value, Borrowers and Lender shall
discuss the appropriate required prepayment of the Term Loan. If
Borrowers and Lender are unable to agree on an amount on or prior
to May 23, 1997, then on such date Lender shall make such
determination and advise Borrowers of the required prepayment
amount. Borrowers shall pay such amount on or prior to May 26,
1997, or, in lieu thereof, Lender may cause such amount to be paid
by making a Revolving Loan in the amount thereof.
12. Miscellaneous.
(a) Effect of Amendment. Except as set forth
expressly herein, all terms of the Loan Agreement and the other Loan
Documents shall be and remain in full force and effect and shall
constitute the legal, valid, binding and enforceable obligations of
Parent and Borrowers. Without limitation of the foregoing, Parent
and each other Borrower hereby ratify and reaffirm the Parent
Guaranty or Cross-Guaranty, as applicable, to which it is party,
after giving effect to this Amendment. To the extent that any terms
and conditions in any of the Loan Documents shall contradict or be
<PAGE>
in conflict with any terms or conditions of the Loan Agreement,
after giving effect to this Amendment, such terms and conditions are
hereby deemed modified and amended accordingly to reflect the terms
and conditions of the Loan Agreement as modified and amended hereby.
Nothing contained herein shall be construed as a consent to any
matter prohibited by the Loan Agreement
(b) Reaffirmation of Representations and
Warranties. Borrowers hereby ratify and reaffirm each and every
representation and warranty set forth in the Loan Agreement and the
other Loan Documents effective as of the date hereof.
(c) Ratification. Borrowers hereby restate, ratify
and reaffirm each and every term and condition set forth in the Loan
Agreement, as amended hereby, and the other Loan Documents effective
as of the date hereof.
(d) Estoppel. To induce Lender to enter into this
Amendment and to continue to make Revolving Loans to Borrowers under
the Loan Agreement, Borrowers hereby acknowledge and agree that, as
of the date hereof, there exists no Event of Default or Default and
no right of offset, defense, counterclaim or objection in favor of
any Borrower as against Lender with respect to the Obligations.
(e) Waiver and Release. Borrowers waive and
affirmatively agree not to allege or otherwise pursue any or all
defenses, affirmative defenses, counterclaims, claims, causes of
action, set-offs, or other rights that any of them may have to
contest (I) any provision of the Loan Agreement, this Amendment, or
the other Loan Documents; (ii) the right of Lender to all proceeds
from the Collateral; (iii) the ownership and security interest of
Lender in any property (whether real or personal, tangible or
intangible), right or other interest, now or hereafter arising in
connection with the Collateral; (iv) the conduct of Lender in
administering this Amendment, the Loan Agreement, the other Loan
Documents or otherwise. In consideration of the terms and
conditions of this Amendment, the receipt and sufficiency of which
consideration are hereby acknowledged by each Borrower, each
Borrower hereby releases Lender, its parent and affiliates, its
agents, servants, employees, directors, attorneys, successors, and
assigns from any and all liabilities, claims, actions, or causes of
action accruing to any Borrower or its affiliates, arising out of
or in any manner connected with this Amendment, the Loan Agreement,
the other Loan Documents or Lender's activities, including, without
limitation, all actions taken or not taken by Lender in connection
with the administration of this Amendment, the Loan Agreement, the
other Loan Documents or otherwise.
(f) Governing Law. This Amendment shall be
governed by, and construed in accordance with, the laws of the State
of Illinois without regard to its conflicts of law rules.
<PAGE>
(g) Costs and Expenses. Parent and Borrowers agree
to pay promptly on demand all reasonable costs and expenses of
Lender in connection with the preparation, execution, delivery and
enforcement of this Amendment, including, without limitation, the
reasonable fees and out-of-pocket expenses of Lender's counsel.
(h) Counterparts. This Amendment may be executed
by one or more of the parties to this Amendment on any number of
separate counterparts and all of said counterparts taken together
shall be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their proper and duly authorized
officers as of the day and year first above written.
"LENDER"
HELLER FINANCIAL, INC., a
Delaware corporation
By: /s/ Joan Heggen
__________________________
Joan Heggen
Vice President
<PAGE>
"PARENT" AND "BORROWER"
PERMA-FIX ENVIRONMENTAL
SERVICES, INC., a Delaware
corporation
By: /s/ Louis Centofanti
___________________________
Name: /s/ Louis F. Centofanti
______________________
Title: CEO
_____________________
"BORROWERS"
INDUSTRIAL WASTE MANAGEMENT,
INC., a Missouri corporation
By: /s/ Louis Centofanti
___________________________
Name: Louis F. Centofanti
______________________
Title: CEO
_____________________
PERMA-FIX, INC., an Oklahoma
corporation
By: /s/ Louis Centofanti
___________________________
Name: Louis F. Centofanti
______________________
Title: CEO
_____________________
PERMA-FIX OF DAYTON, INC.,
an Ohio corporation
By: /s/ Louis Centofanti
___________________________
Name: Louis F. Centofanti
______________________
Title: CEO
_____________________
PERMA-FIX OF FLORIDA, INC.,
a Florida corporation
By: /s/ Louis Centofanti
___________________________
Name: Louis F. Centofanti
______________________
Title: CEO
_____________________
<PAGE>
PERMA-FIX OF FORT LAUDERDALE,
INC., a Florida corporation
By: /s/ Louis F. Centofanti
___________________________
Name: Louis F. Centofanti
______________________
Title: CEO
_____________________
PERMA-FIX OF MEMPHIS, INC.,
a Tennessee corporation
By: /s/ Louis Centofanti
___________________________
Name: Louis F. Centofanti
______________________
Title: CEO
_____________________
PERMA-FIX OF NEW MEXICO, INC.,
a New Mexico corporation
By: /s/ Louis Centofanti
___________________________
Name: Louis F. Centofanti
______________________
Title: CEO
_____________________
PERMA-FIX TREATMENT SERVICES,
INC., an Oklahoma corporation
By: /s/ Louis F. Centofanti
___________________________
Name: Louis F. Centofanti
______________________
Title: CEO
_____________________
SCHREIBER, GRANA & YONLEY,
INC., a Missouri corporation
By: /s/ Louis Centofanti
___________________________
Name: Louis F. Centofanti
______________________
Title: CEO
_____________________
<PAGE>
MINTECH, INC., an Oklahoma
corporation
By: /s/ Louis F. Centofanti
___________________________
Name: Louis F. Centofanti
______________________
Title: CEO
_____________________
RECLAMATION SYSTEMS, INC., an
Oklahoma corporation
By: /s/ Louis Centofanti
___________________________
Name: Louis F. Centofanti
______________________
Title: CEO
_____________________
<PAGE>
EXHIBIT A
EXISTING EVENTS OF DEFAULT
1. Event of Default under Section 8.1(C) of the Loan Agreement as
a result of Parent s failure to deliver an accountant s report
as to its and its Subsidiaries financial statements for the
fiscal year ending December 31, 1996 on or prior to March 31,
1997 without a going-concern qualification as required
pursuant to Section 5.1(B) of the Loan Agreement.
2. Events of Default under Section 8.1(C) of the Loan Agreement
as a result of Parent s failure to comply with the financial
covenants set forth in Sections 6.3 (Capital Expenditures) and
6.4 (Fixed Charge Coverage) of the Loan Agreement for its
Fiscal Year ending December 31, 1996 and its failure to comply
with the financial covenant set forth in Section 6.4 of the
Loan Agreement for the months of January, 1997 and February,
1997.
AMENDMENT TO LEASE AGREEMENT
DATED April 14, 1997
_______________
This Amendment becomes a part of the Equipment Lease Agreement dated
as of October 12, 1994, and the accompanied Rider No. 2, amended as
of November 14, 1996, wherein Perma-Fix Environmental Services Inc.,
Perma-Fix of Memphis Inc., Perma-Fix of Ft. Lauderdale Inc., Perma-
Fix of Dayton Inc., and Perma-Fix Treatment Services Inc. as Lessees
and Ally Capital Corporation is Lessor, whereas the attached Exhibit
A Sections 1.2, 1.3 and 1.4 are further amended. All other conditions
of the Equipment Lease Agreement including the August 16, 1996, and
November 14, 1996, amendments remain in force and effect.
WITNESSETH THAT:
WHEREAS, certain Events of Default have occurred and are
continuing under the Equipment Lease Agreement as described on
Exhibit A-1 attached hereto (the "Existing Events of Default"); and
WHEREAS, Lessees have requested that Lessor waive the Existing
Events of Default, amend the financial covenants set forth in
Section 1 of the Equipment Lease Agreement in certain respects, and
amend certain other provisions of the Equipment Lease Agreement as
set forth hereinbelow; and
WHEREAS, pursuant to Lessees request and subject to all of the
terms and conditions set forth herein (including, without
limitation, payment by Lessees to Lessor of the fee described in
Section 5 hereof), Lessor is willing to waive the existing Events
of Default, and to amend the Equipment Lease Agreement in the manner
hereinafter set forth; and
WHEREAS, Lessees and Lessor desire to enter into this Amendment
in order to memorialize their mutual understandings in regard to the
foregoing matters.
<PAGE>
PERMA-FIX SERVICES INC. AND PERMA-
FIX OF MEMPHIS INC. AND PERMA-FIX OF
FT. LAUDERDALE INC. AND PERMA-FIX OF
DAYTON INC. AND PERMA-FIX TREATMENT
SERVICES INC. -- CO-LESSEES.
ALLY CAPITAL CORPORATION PERMA-FIX ENVIRONMENTAL
AS LESSOR SERVICES, INC.
By: /s/ Stephen Pickens By: /s/ Louis Centofanti
_______________________ _________________________________
Name: Stephen M. Pickens Name: Louis F. Centofanti
Title: Vice President Title: CEO
PERMA-FIX OF MEMPHIS INC.
By: /s/ Louis Centofanti
_________________________________
Name: Louis F. Centofanti
Title: CEO
PERMA-FIX OF FT. LAUDERDALE INC.
By: /s/ Louis Centofanti
_________________________________
Name: Louis F. Centofanti
Title: CEO
PERMA-FIX OF DAYTON INC.
By: /s/ Louis Centofanti
_________________________________
Name: Louis F. Centofanti
Title: CEO
PERMA-FIX TREATMENT SERVICES INC.
By: /s/ Louis Centofanti
_________________________________
Name: Louis F. Centofanti
Title: CEO
<PAGE>
EXHIBIT "A"
__________
TO AMENDMENT TO LEASE AGREEMENT
_______________________________
Dated April 14, 1997
FINANCIAL COVENANTS Section 1.
_____________________________
Perma-Fix Environmental Services Inc. and its subsidiaries on a
consolidated basis covenant and agree that until payment in full of
all Obligations owed by Perma-Fix Environmental Services Inc. to
Ally Capital are paid, Perma-Fix shall comply with all covenants in
Section 1, as previously defined. Sections 1.2, 1.3, and 1.4 are
hereby deleted in their entirety and the following revised sections
substituted in lieu thereof. The terms used in this Exhibit "A" to
amendment to lease agreement shall have the meanings as defined in
the loan and security agreement dated as of January 27, 1995 among
Perma-Fix Environmental Services Inc. and subsidiaries and Heller
Financial Inc. as amended to the date of this amendment.
1.2 Minimum EBITDA.
______________
Parent shall achieve an EBITDA of at least the amount set
forth below for each applicable period set forth below (or with
respect to each period for which a negative amount is set forth
below, shall not permit EBITDA to be more negative than such
amount):
Applicable Period Amount
_________________ ______
Three Months Ended 3/31/97 $(340,000)
Six Months Ended 6/30/97 $320,000
Nine Months Ended 9/30/97 $1,360,000
Twelve Months Ended 12/31/97 $2,275,000
and for each twelve month
period ending on the last
day of each fiscal quarter
thereafter
1.3 Capital Expenditures Limits
___________________________
The aggregate amount of all Capital Expenditures of Parent
and its Subsidiaries (excluding trade-ins and excluding Capital
Expenditures financed pursuant to Capital Leases permitted will not
exceed the amount set forth below for each applicable period set forth
below (on a cumulative basis for all periods ending on or prior to
December 31, 1997):
<PAGE>
Applicable Period Amount
_________________ ______
Three Months Ended 3/31/97 $ 266,000
Six Months Ended 6/30/97 $ 416,000
Nine Months Ended 9/30/97 $ 516,000
Twelve Months Ended 12/31/97 $ 591,000
Each fiscal Quarter Ending $ 100,000
After 12/31/97
In addition, if pursuant to Section 2 hereof Lessees
obtain aggregate cash infusions in excess of Seven Hundred Thousand
Dollars ($700,000) on or prior to August 15, 1997, then the Capital
Expenditures limitation for the remainder of Lessees' 1997 Fiscal
Year shall be increased by the amount by which such cash infusions
exceed Seven Hundred Thousand Dollars ($700,000); provided, however,
that Lessees will be permitted to make Capital Expenditures in
such increased amount only if (a) for the thirty (30) days prior the
making of each such Capital Expenditure and after giving effect
thereto, the Maximum Revolving Loan Amount shall exceed the
outstanding amount of the Revolving Loan by at least Two Hundred
Thousand Dollars ($200,000) and (b) at the time any such Capital
Expenditures are to be made no Default or Event of Default has
occurred and is continuing or would result therefrom.
1.4 Fixed Charge Coverage.
_____________________
Parent shall not permit Fixed Charge Coverage for each
applicable period set forth below to be less than the ratio set
forth below for such period (or if the ratio set forth below for any
applicable period is negative, shall not permit Fixed Charge
Coverage for such applicable period to be a larger negative ratio
than that set forth below):
Applicable Period Ratio
_________________ _____
Three Months Ended 3/31/97 (1.20:1.0)
Four Months Ended 4/30/97 (.75:1.0)
Five Months Ended 5/31/97 (.45:1.0)
Six Months Ended 6/30/97 (.15:1.0)
Seven Months Ended 7/31/97 .05:1.0
Eight Months Ended 8/31/97 .25:1.0
Nine Months Ended 9/30/97 .45:1.0
Ten Months Ended 10/31/97 .60:1.0
Eleven Months Ended 11/30/97 .65:1.0
Twelve Months Ended 12/31/97 .70:1.0
Twelve Months ending on the
last day of each fiscal
month ending thereafter 1.0:1.0
In computing Fixed Charge Coverage for purposes hereof,
(a) Capital Expenditures pursuant to Capital Leases permitted and
<PAGE>
Indebtedness paid by Perma-Fix, Inc. in connection with the sale of
its Re-Tech division shall be excluded and (b) insurance proceeds
or any benefit therefrom (if otherwise included) shall be excluded
from net income.
CASH INFUSION Section 2.
_______________________
Lessees shall obtain an infusion of at least Seven Hundred Thousand
Dollars ($700,000) in unrestricted cash on a basis as set forth
below, with an initial infusion of at least One
Hundred Fifty Thousand Dollars ($150,000) to be obtained on or prior
to June 15, 1997 and the balance to be obtained on or prior to
August 15, 1997. Such cash may consist of insurance proceeds with
regard to the accident at Lessees' Memphis, Tennessee facility and
the vandalism at Lessees' Fort Lauderdale, Florida facility,
proceeds of capital contributions, proceeds of stock or other
securities offerings, other proceeds obtained in a manner approved
by Heller Financial, Inc. in writing or some combination of the foregoing.
On June 15, 1997 and August 15, 1997, Parent shall report to Lessor in
writing as to Lessees' compliance (or failure to comply) with the
foregoing covenant.
PROJECTIONS Section 3.
_____________________
As soon as available and in any event no later than July 31 of each
Fiscal Year, Parent will deliver consolidated and consolidating
Projections of Parent and its Subsidiaries for the forthcoming
Fiscal Year, month-by-month.
WAIVER OF EXISTING EVENTS OF DEFAULT Section 4.
______________________________________________
Lessor hereby waives the Existing Events of Default; provided,
however, that (i) such waivers and the amendments set forth in
Section 1 hereof shall become void and of no further force or effect
if (a) Parent's audited financial statements for its 1996 Fiscal
Year evidence that Lessees' Fixed Charge Coverage for such Fiscal
Year was less than .26:1.0 or that Lessees made Capital Expenditures
in excess of $2,166,000 (calculated by including the principal
portion of payments made during such period under or with respect
to Capital Leases) for such Fiscal Year, (b) such financial
statements differ in any material adverse respect from the draft
thereof provided to Lessor, or (c) Lessees fail to deliver such
audited financial statements to Lessor on or prior to April 16,
1997, accompanied by the unqualified opinion of Parent's accountants
and (ii) such waivers shall not be, or be deemed to be, waivers of
any other Defaults or Events of Default which may presently or
hereafter exist, or (d) any payment defaults now exist or remain
uncured for any period in excess of ten (10) days.
<PAGE>
CONDITIONS PRECEDENT Section 5.
______________________________
The amendments and waivers set forth herein shall not become
effective unless and until each of the following conditions shall
have been satisfied, as determined by Lessor in its sole discretion:
(a) The Lease Parties party thereto and Heller Financial, Inc.
shall have entered into an amendment to the Heller Loan Agreement,
in form and substance as previously provided to Lessor, pursuant to which
all violations of the financial covenants set forth therein shall be
waived and all such covenants applicable to future periods which
correspond to the financial covenants amended hereby shall be
amended so that such covenants are no more restrictive than the
covenants set forth herein, as determined by Lessor in its sole
discretion.
(b) Each of the Lease Parties shall have executed and
delivered in favor of Lessor such additional Lease Documents and
amendments to existing Loan Documents as Lesser shall deem to be
necessary or appropriate in connection herewith.
(c) After giving effect to the waivers set forth in
Section D hereof, no Default or Event of Default shall have
occurred and be continuing.
(d) In consideration of the accommodations by Lessor to
the Lease Parties contemplated hereby the Lease Parties shall have
paid to Lessor a fee of $5,000, which fee shall be fully-earned on
the date hereof and non-refundable, and shall be in addition to, and
not in lieu of, all fees, interest and expenses payable by the Loan
Parties under the Equipment Lease Agreement.
(e) Since December 31, 1996, there shall have occurred
no material adverse change in the business, operations, financial
conditions, profits or prospect of any Lease Party or in the
Collateral, except for the explosion at Lessees' Memphis, Tennessee
facility.
(f) Lessees shall have delivered to Lessor a draft of
Parent's consolidated audited financial statements for its 1996
Fiscal Year and the same shall be satisfactory to Lessor in all
respects.
<PAGE>
EXHIBIT A
EXISTING EVENTS OF DEFAULT
1. Event of Default under Section 2 of Rider No. 2 of the Equipment
Lease Agreement as a result of Parent's failure to deliver an
accountant's report as to its and its Subsidiaries' financial
statements for the fiscal year ending December 31, 1996 on or
prior to March 31, 1997.
2. Events of Default under Section 1 of Rider No. 2 of the Equipment
Lease Agreement as a result of Parent's failure to comply with
the financial covenants set forth in Sections 1.3 (Capital
Expenditures) and 1.4 (Fixed Charge Coverage) of the Equipment
Leae Agreement for its Fiscal Year ending December 31, 1996 and
its failure to comply with the financial covenant set forth in
Section 1 of the Equipment Lease Agreement for the months of
January, 1997 and February, 1997.
ISTE:\N-P\PESI\10K\1996\EXHIBIT4.14
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into
this 11th day of June, 1996, by and between PERMA-FIX ENVIRONMENTAL
SERVICES, INC., a Delaware corporation ("PESI"), and DR. LOUIS F.
CENTOFANTI, an individual ("Centofanti").
W I T N E S S E T H:
WHEREAS, Centofanti is the Chairman of the Board and President
of PESI;
WHEREAS, PESI's lender has agreed to provide PESI with certain
additional financing and certain waivers to the Company's Loan
Agreement if, among other things, Centofanti invests an additional
$100,000 into PESI;
WHEREAS, Centofanti and PESI have negotiated this Agreement in
which Centofanti would acquire 76,190 shares of PESI Common Stock
for $100,000, which is seventy-five percent (75%) of the closing
bid price of each share of PESI Common Stock as quoted on the
Nasdaq on the date hereof;
WHEREAS, the closing bid price of the PESI Common Stock was
$1.75, as reported on the Nasdaq as of June 11, 1996;
WHEREAS, Centofanti desires to purchase seventy-six thousand
one hundred ninety (76,190) shares of PESI Common Stock, par value
$.001 per share, and PESI desires to sell to Centofanti such shares
of Common Stock, upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and
the respective covenants and agreements contained herein, the
parties hereto agree as follows:
1. Purchase and Sale.
1.1 Purchase of Shares. Subject to the terms and
conditions of this Agreement, Centofanti hereby
purchases seventy-six thousand one hundred ninety
(76,190) shares of PESI Common Stock (the "Shares"),
and PESI hereby issues and delivers the Shares to
Centofanti.
1.2 Purchase Price; Payment of Purchase Price. The per
share purchase price of the Shares shall be $1.3125,
calculated at seventy-five percent (75%) of $1.75 (the
closing bid price of the Common Stock on June 11, 1996,
as reported on the National Association of Securities
Dealers Automated Quotation System ("Nasdaq")). In
consideration for the Shares, Centofanti hereby tenders
to the Company One Hundred Thousand Dollars
($100,000.00).
<PAGE>
2. Representations and Warranties of Centofanti. Centofanti
represents and warrants as follows:
2.1 Purchase for Investment. Centofanti is acquiring, or
will acquire, the Shares to hold for investment, with
no present intention of dividing Centofanti's
participation with others or reselling or otherwise
participating, directly or indirectly, in a
distribution thereof, and not with a view to or for
sale in connection with any distribution thereof,
except pursuant to a registration statement under the
Securities Act of 1933, as amended (the "Securities
Act"), and any applicable state securities laws, or a
transaction exempt from registration thereunder, and
shall not make any sale, transfer or other disposition
of the Shares in violation of any applicable state
securities laws, including in each instance any
applicable rules and regulations promulgated
thereunder, or in violation of the Securities Act or
the rules and regulations promulgated thereunder by the
Securities and Exchange Commission (the "SEC").
2.2 No Registration. Centofanti acknowledges that the
Shares are not being registered under any state
securities laws, and are not being registered under the
Securities Act on the ground that this transaction is
exempt from registration under Section 3(b) and/or 4(2)
of the Securities Act, and that reliance by PESI on
such exemptions is predicated in part on Centofanti's
representations set forth herein.
2.3 Restricted Transfer. Centofanti agrees that PESI may
refuse to permit the sale, transfer or disposition of
any of the Shares received by Centofanti unless there
is in effect a registration statement under the Secur-
ities Act and any applicable state securities law
covering such transfer or Centofanti furnishes an
opinion of counsel or other evidence, reasonably
satisfactory to counsel for PESI, to the effect that
such registration is not required.
2.4 Legend. Centofanti understands and agrees that stop
transfer instructions will be given to PESI's transfer
agent and that there will be placed on the certificate
or certificates for any of the Shares received by
Centofanti, any substitutions therefor and any certif-
icates for any additional shares which might be dis-
tributed with respect to such Shares, a legend stating
in substance:
<PAGE>
"The shares of stock evidenced by this
certificate have been acquired for investment
and have not been registered under the
Securities Act of 1933, as amended (the Secur-
ities Act"). These shares may not be sold or
transferred except pursuant to an effective
registration statement under the Securities Act
and any applicable state securities laws unless
there is furnished to the issuer an opinion of
counsel or other evidence, reasonably satis-
factory to the issuer's counsel, to the effect
that such registration is not required."
2.5 Indefinite Holding Period. Centofanti understands that
under the Securities Act, the Shares received by
Centofanti must be held indefinitely unless they are
subsequently registered under the Securities Act or
unless an exemption from such registration is available
with respect to any proposed transfer or disposition of
such shares.
2.6 Rule 144 Compliance. Centofanti understands that PESI
is required to file periodic reports with the SEC and
that certain sales of the Shares received by Centofanti
may be exempt from registration under the Securities
Act by virtue of Rule 144 promulgated by the SEC under
the Securities Act, provided that such sales are made
in accordance with all of the terms and conditions of
that Rule including compliance with the required two-
year holding period. Centofanti further understands
that if Rule 144 is not available for sales of the
Shares received by Centofanti, such Shares may not be
sold without registration under the Securities Act or
compliance with some other exemption from such
registration, and that PESI has no obligation to
register the Shares received by Centofanti or take any
other action necessary in order to make compliance with
an exemption from registration available.
2.7 Sophisticated Investor. Centofanti, as President and
Chairman of the Board of PESI, possesses extensive
knowledge as to the business and operation of PESI and
has such knowledge and experience in financial and
business matters that he is capable of evaluating the
merits and risks of the acquisition of the Shares.
<PAGE>
3. Representations and Warranties of PESI. PESI represents and
warrants as follows:
3.1 Organization and Standing. PESI is a corporation duly
organized, validly existing and in good standing under
the laws of the State of Delaware.
3.2 Power, Authority and Validity. PESI has full right,
power and corporate authority to enter into this
Agreement and to perform the transactions contemplated
hereby, and this Agreement is valid and binding upon
and enforceable against PESI in accordance with its
terms. The execution, delivery and the performance of
this Agreement by PESI has been duly and validly
authorized and approved by all requisite action on the
part of PESI and Buyer.
3.3 Status of PESI Common Stock. The PESI Common Stock to
be issued pursuant to this Agreement, when so issued,
will be duly and validly authorized and issued, fully
paid and nonassessable.
4. Miscellaneous.
4.1 Notices. All notices, requests, demands, and other
communications under this Agreement shall be in writing
and shall be deemed to have been duly given if
delivered or mailed, first-class postage prepaid, to
the following at the addresses indicated:
To PESI: Perma-Fix Environmental
Services, Inc.
1940 Northwest 67th Place
Gainesville, Florida 32606-1649
To Centofanti: Dr. Louis F. Centofanti
Perma-Fix Environmental
Services, Inc.
6075 Roswell, Suite 602
Atlanta, Georgia 30328
or to any other address that PESI or Centofanti shall
designate in writing.
4.2 Brokers. Each party represents and warrants that all
negotiations related to this Agreement have been
carried on by the parties without the intervention of
any broker. Each party agrees to indemnify, and hold
the other party harmless against any claims for fees or
<PAGE>
commissions employed or alleged to have been employed
by such party.
4.3 Amendment. This Agreement shall not be amended,
altered or terminated except by a writing executed by
each party.
4.4 Governing Law. This Agreement shall be governed in all
respects by the law of the State of Delaware.
4.5 Headings. The paragraph headings used in this
Agreement are included solely for convenience, and
shall not in any way affect the meaning or
interpretation of this Agreement.
4.6 Entire Agreement. This Agreement sets forth the entire
understanding of the parties; further, this Agreement
shall supersede and/or replace any oral or written
Agreements relating to this subject matter entered into
by the parties before the date of this Agreement.
4.7 Binding Effect. This Agreement shall be binding on and
inure to the benefit of, and be enforceable by, the
respective heirs, legal representatives, successors,
and assigns of the parties pursuant to its terms.
PESI and Centofanti have executed this Agreement as of
the 11th day of June, 1996.
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
By: /s/ Richard T. Kelecy
_____________________________________
Name: Richard T. Kelecy
________________________________
Title: Chief Financial Officer
_______________________________
/s/ Louis F. Centofanti
________________________________________
DR. LOUIS F. CENTOFANTI, individually
ISTE:\N-P\PESI\10K\1996\EXHB10.29
Exhibit 22.1
LIST OF SUBSIDIARIES OF PERMA-FIX ENVIRONMENTAL SERVICES, INC.
(THE "COMPANY")
Industrial Waste Management, Inc. ("IWM"), a Missouri corporation,
is a 100% owned subsidiary of the Company.
Schreiber, Grana & Yonley, Inc. ("SG&Y"), a Missouri corporation,
is a 100% owned subsidiary of IWM.
Mintech, Inc., an Oklahoma corporation, is a 100% owned subsidiary
of PFI.
Reclamation Systems, Inc., an Oklahoma corporation, is a 100% owned
subsidiary of PFI.
Perma-Fix, Inc. ("PFI"), an Oklahoma corporation, is a 100% owned
subsidiary of the Company.
Perma-Fix of New Mexico, Inc., a New Mexico corporation, is a 100%
owned subsidiary of PFI.
Perma-Fix Treatment Services, Inc. ("PFTS"), an Oklahoma
corporation, is a 100% owned subsidiary of the Company.
Perma-Fix of Memphis, Inc. ("PFM"), a Tennessee corporation, is a
100% owned subsidiary of the Company.
Perma-Fix of Dayton, Inc. ("PFD"), an Ohio corporation, is a 100%
owned subsidiary of the Company.
Perma-Fix of Florida, Inc. ("PFF"), a Florida corporation, is a 100%
owned subsidiary of the Company.
Perma-Fix of Fort Lauderdale, Inc. ("PFL"), a Florida corporation,
is a 100% owned subsidiary of the Company.
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Perma-Fix Environmental Services, Inc.
Gainesville, Florida
We hereby consent to the incorporation by reference of our report
dated February 14, 1997, except for Note 5 which is as of April
14, 1997, relating to the consolidated financial statements and
schedule of Perma-Fix Environmental Services, Inc. appearing in the
Company's Annual Report on Form 10-K for the year ended December 31,
1996, into the Company's previously filed Form S-3 and Form S-8
Registration Statements, File Nos. 33-85118 (S-3), 333-14513 (S-3,
33-80580 (S-8), 333-3664 (S-8) and 333-17899 (S-8).
/s/ BDO Seidman, LLP
BDO Seidman, LLP
Orlando, Florida
April 14, 1997
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
___________________________________________
As independent certified public accountants, we hereby consent to
the incorporation of our report included in this Form 10-K, into the
Company's previously filed Registration Statement File No. 333-
14513.
/s/ Arthur Andersen LLP
Jacksonville, Florida
April 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> $ 493,000
<SECURITIES> 0
<RECEIVABLES> 5,932,000
<ALLOWANCES> 383,000
<INVENTORY> 107,000
<CURRENT-ASSETS> 7,243,000
<PP&E> 17,197,000
<DEPRECIATION> 4,593,000
<TOTAL-ASSETS> 29,036,000
<CURRENT-LIABILITIES> 8,016,000
<BONDS> 4,881,000
0
0
<COMMON> 10,000
<OTHER-SE> 12,575,000
<TOTAL-LIABILITY-AND-EQUITY> 29,036,000
<SALES> 0
<TOTAL-REVENUES> 31,037,000
<CGS> 0
<TOTAL-COSTS> 21,934,000
<OTHER-EXPENSES> 2,252,000
<LOSS-PROVISION> 17,000
<INTEREST-EXPENSE> 812,000
<INCOME-PRETAX> (405,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (405,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (405,000)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
