================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
_______________________
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
______________
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 58-1954497
(State or other jurisdiction (IRS Employer
of incorporation or organization Identification Number)
1940 N.W. 67th Place, Gainesville, FL 32653
(Address of principal executive offices) (Zip Code)
(352) 373-4200
(Registrant's telephone number)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
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 the number of shares outstanding of each of the
issuer's classes of common stock, as of the close of the latest
practical date.
Class Outstanding at May 9, 1997
_____ ________________________________
Common Stock, $.001 Par Value 10,095,948
_____________________________ __________
(excluding 920,000 shares
held as treasury stock)
___________________
=================================================================
<PAGE>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
PART I FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 1997 and
December 31, 1995 . . . . . . . . . 2
Consolidated Statements of
Operations - Three Months
Ended March 31, 1997 and 1996 . . . 4
Consolidated Statements of Cash
Flows - Three Months Ended
March 31, 1997 and 1996 . . . . . . 5
Notes to Consolidated Financial
Statements . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations. . . . . . . . . . . . . 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . 18
Item 6. Exhibits. . . . . . . . . . . . . . . . . 18
</TABLE>
<PAGE>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
PART I, ITEM 1
The consolidated financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes the
disclosures which are made are adequate to make the information
presented not misleading. Further, the consolidated financial
statements reflect, in the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to
present fairly the financial position and results of operations as
of and for the periods indicated.
It is suggested that these consolidated financial statements
be read in conjunction with the consolidated financial statements
and the notes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996.
The results of operations for the three months ended March 31,
1997 are not necessarily indicative of results to be expected for
the fiscal year ending December 31, 1997.
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
March 31,
(Amounts in Thousands, 1997 December 31,
Except for Share Amounts) (Unaudited) 1996
___________________________________________________________________
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 79 $ 45
Restricted cash equivalents
and investments 471 448
Accounts receivable, net of
allowance for doubtful accounts
of $373 and $383, respectively 5,372 5,549
Inventories 109 107
Prepaid expense 1,249 549
Other receivables 526 545
_________ ________
Total current assets 7,806 7,243
Property and equipment:
Building and land 5,041 4,894
Equipment 6,317 6,429
Vehicles 1,253 1,421
Leasehold improvements 289 289
Office furniture and equipment 1,144 1,136
Construction in progress 3,258 3,028
_________ ________
17,302 17,197
Less accumulated depreciation (4,893) (4,593)
_________ ________
Net property and equipment 12,409 12,604
Intangibles and other assets:
Permits, net of accumulated
amortization of $655 and $598,
respectively 3,905 3,949
Goodwill, net of accumulated
amortization of $471 and $435,
respectively 4,810 4,846
Covenant not to compete, net of
accumulated amortization of
$391 and $383, respectively - 9
Other assets 390 385
________ ________
Total assets $ 29,320 $ 29,036
======== ========
</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
March 31,
(Amounts in Thousands, 1997 December 31,
Except for Share Amounts) (Unaudited) 1996
___________________________________________________________________
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,785 $ 3,677
Accrued expenses 3,322 2,860
Revolving loan and term note
facility (see Note 2) 4,503 500
Equipment financing agreement 657 646
Current portion of long-term debt 324 333
_________ _______
Total current liabilities 12,591 8,016
Long-term debt, less current portion 950 4,881
Environmental accruals 2,451 2,460
Accrued closure costs 1,107 1,094
_________ _______
Total long-term liabilities 4,508 8,435
Commitments and contingencies (Note 3) - -
Stockholders' equity:
Preferred stock, $.001 par value;
2,000,000 shares authorized,
5,500 shares issued and
outstanding - -
Common stock, $.001 par value;
50,000,000 shares authorized,
11,015,948 and 10,399,947
shares issued and outstanding,
respectively, including 920,000
shares held as treasury stock 11 10
Redeemable warrants 140 140
Additional paid-in capital 29,127 28,495
Accumulated deficit (15,287) (14,290)
________ _______
13,991 14,355
Less common stock in treasury at
at cost; 920,000 shares issued
and outstanding (1,770) (1,770)
________ ________
Total stockholders' equity 12,221 12,585
________ ________
Total liabilities and
stockholders' equity $ 29,320 $ 29,036
======== ========
</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
(Unaudited)
Three Months Ended
March 31,
(Amounts in Thousands, __________________________
Except for Share Amounts) 1997 1996
___________________________________________________________________
<S> <C> <C>
Net revenues $ 6,502 $ 7,572
Cost of goods sold 5,164 5,764
________ ________
Gross profit 1,338 1,808
Selling, general and administrative
expenses 1,525 1,742
Depreciation and amortization 544 619
________ ________
Loss from operations (731) (553)
Other income (expense):
Interest income 11 20
Interest expense (183) (262)
Other (13) 203
________ ________
Net loss $ (916) $ (592)
Preferred stock dividends 81 -
________ _________
Net loss applicable to
common stock $ (997) $ (592)
======== =========
Net loss per common share $ (.10) $ (.08)
======== ========
Weighted average number of common
and common equivalent shares
outstanding 9,719 7,872
======== ========
</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
(Unaudited)
Three Months Ended
March 31,
__________________________
(Amounts in Thousands) 1997 1996
___________________________________________________________________
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (997) $ (592)
Adjustments to reconcile net loss
to cash used in operations:
Depreciation and amortization 544 619
Provision for bad debt and other
reserves 3 12
Gain on sale of plant, property
and equipment (4) (126)
Changes in assets and liabilities:
Accounts receivable 174 (127)
Prepaid expenses, inventories and
other assets 44 194
Accounts payable and accrued
expenses (21) (364)
________ ________
Net cash used in operations (257) (384)
Cash flows from investing activities:
Purchases of property and equipment,
net (245) (536)
Proceeds from disposition of
property and equipment 45 1,196
Change in restricted cash, net (23) (27)
________ _________
Net cash provided by (used in)
investing activities (223) 633
Cash flows from financing activities:
Borrowings (repayments) from revolving
loan and term note facility 241 (877)
Principal repayments on long-term debt (215) (793)
Proceeds from issuance of stock 488 1,307
________ ________
Net cash provided by (used for)
financing activities 514 (363)
Increase (Decrease) in cash and cash
equivalents 34 (114)
Cash and cash equivalents at beginning
of period 45 201
________ ________
Cash and cash equivalents at end
of period $ 79 $ 87
======== ========
________________________________________________________________
Supplemental disclosure:
Interest paid $ 186 $ 263
Income taxes paid - -
Non cash investing and financing
activities:
Insurance financing $ 746 $ 832
Issuance of stock for payment
of dividends 145 -
Long-term debt incurred for
purchase of property and
equipment 48 57
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
Reference is made herein to the notes to consolidated
financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996.
1. Summary of Significant Accounting Policies
The Company's accounting policies are as set forth in the
notes to consolidated financial statements referred to above.
Certain amounts in prior years' consolidated financial
statements have been reclassified to conform to current period
financial statement presentations.
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.
2. Long-Term Debt
Long-term debt consists of the following at March 31, 1997 and
December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
_____________ ____________
<S> <C> <C>
Long-term debt and notes payable:
Revolving loan and term note
facility $ 4,503 $ 4,262
Equipment financing agreement 1,104 1,257
Various mortgage, promissory
and notes payable 827 841
_________ _________
6,434 6,360
Less current portion:
Revolving loan and term note
facility 4,503 500
Equipment financing agreement 657 646
Various mortgage, promissory
and notes payable 324 333
_________ _________
Long-term debt, less current
portion $ 950 $ 4,881
========= =========
</TABLE>
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
<PAGE>
receivable accounts of the Company as defined in the Agreement.
The termination date on the revolving loan facility is also
January 31, 1998. During the first quarter 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.
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
was classified as long-term debt at December 31, 1996, in
compliance with Generally Accepted Accounting Principles. However,
as noted above, the Agreement with Heller has a scheduled
termination date of January 31, 1998. The Company is currently
negotiating with Heller for the renewal of this Agreement and has
discussions with other potential lenders in an effort to obtain
additional credit proposals to replace Heller, although no
assurance can be given that such a renewal or additional credit
proposals will be obtained. Since this scheduled termination date
is less than twelve months from March 31, 1997, the Company has
reclassified as a current liability $4,003,000 outstanding under
the Agreement under Generally Accepted Accounting Principles that
would otherwise be classified as long-term debt.
Pursuant to the 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 received 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. In conjunction with the Third and Sixth
Amendments, applicable interest rates were amended, whereby the
term loan was increased to the base rate plus 2 1/4% and the
revolving loan was increased to the base rate plus 2%. Both the
revolving loan and term loan were prime based loans at March 31,
1997, bearing interest at a rate of 10.50% and 10.75%,
respectively.
As of March 31, 1997, the borrowings under the revolving loan
facility total $3,245,000, an increase of $366,000 from the
December 31, 1996 balance of $2,879,000, with borrowing
availability of $728,000. The balance on the term loan totaled
$1,258,000, as compared to $1,383,000 at December 31, 1996. Total
indebtedness under the Heller Agreement as of March 31, 1997 was
$4,503,000, an increase of $241,000 from the December 31, 1996
balance of $4,262,000.
During October 1994, the Company entered into a $1,000,000
equipment financing agreement with Ally Capital Corporation
("Ally"). During 1995, the Company negotiated an increase in the
total lease line and subsequently utilized $1,553,000 of this
credit facility to purchase new capital equipment. 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%. 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%. The Company was in default of
the "fixed charge coverage" and "capital expenditures" financial
<PAGE>
covenants 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, 1996
and reset certain covenants for 1997. The outstanding balance on
these equipment financing agreements at March 31, 1997 is
$1,104,000, as compared to $1,257,000 at December 31, 1996. As a
result of the above discussed waiver and amendment and the
resetting of certain covenants for 1997, $447,000 has been
classified as long-term debt at March 31, 1997, pursuant to
Generally Accepted Accounting Principles.
3. 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, Perma-Fix of Memphis, Inc. ( PFM ),
formerly American Resource Recovery Corporation ("ARR") and a
subsidiary of the Company, 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
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
<PAGE>
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.
On January 27, 1997, an explosion and resulting tank fire
occurred at PFM s facility in Memphis, Tennessee, a hazardous waste
storage, processing and blending facility. The fire and explosion
resulted in damage to certain hazardous storage tanks located on
the facility and caused certain limited contamination at the
facility. The fire and resulting explosion were caused by the
welding activity of employees of an independent contractor at or
near a hazardous waste tank farm located on the facility contrary
to instructions of PFM. From the date of the fire, this facility
has not been operational. It is anticipated that this facility
will begin limited operations during May, 1997. Since the fire and
explosion, 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. As a result of
the fire and explosion, the Tennessee Department of Environment and
Conservation ( TDEC ) issued an order dated April 23, 1997, which
alleges that the facility violated certain hazardous waste rules
and regulations promulgated by the TDEC and ordered that the
facility, among other things, cease blending operations, within 30
days from the date of the order the facility s permit to construct
a new hazardous waste tank storage area, which has not yet been
constructed, is to be revoked, implement certain actions and
assessed a penalty of approximately $144,000. PFM has responded to
such order and asserted that the TDEC issued the order against the
wrong party, that PFM did not violate any rules and regulations
promulgated by the TDEC, the actions taken by the TDEC were
contrary to applicable rules and regulations and the TDEC is not
entitled to such penalties. The Company intends for PFM to
vigorously defend itself 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.
Permits
The Company is subject to various regulatory requirements,
including the procurement of requisite licenses and permits at
certain of 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. 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.
4. Stock Issuance
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 the issuance of
487,814 shares of common stock and $488,000 of additional
capital/equity.
5. Facility Disruption
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. Such occurrence was
caused by welding activity performed by employees of an independent
contractor at or near the facility's hazardous waste tank farm
contrary to instructions by PFM. From the date of the fire, 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
limited operations at the facility during the month of May, 1997.
The extent of PFM's activities at the facility, once operations are
renewed, is presently being evaluated by the Company.
Net revenues for PFM total $752,000 for the first quarter of
1997, reflecting a decrease of $75,000 from the first quarter of
1996 total of $827,000. However, during this same period, cost of
goods sold increased by $179,000, from a total of $677,000, to
$856,000 for this first quarter of 1997. The result of the above
was a reduction of $254,000 in the PFM gross margin, to a total
loss of $104,000 at the gross margin level for the period. 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.
<PAGE>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART I, ITEM 2
<TABLE>
<CAPTION>
Results of Operations
The table below should be used when reviewing management's
discussion and analysis for the three months ended March 31, 1997
and 1996:
Consolidated
(amounts in thousands) 1997 % 1996 %
______________________ _______ _____ _______ _____
<S> <C> <C> <C> <C>
Net Revenues $ 6,502 100.0 $ 7,572 100.0
Cost of Goods Sold 5,164 79.4 5,764 76.1
______ _____ ______ _____
Gross Profit 1,338 20.6 1,808 23.9
Selling, General and
Administrative 1,525 23.5 1,742 23.0
Depreciation/Amortization 544 8.4 619 8.2
______ _____ ______ ______
Loss from operations $ (731) (11.3) $ (553) (7.3)
====== ===== ====== ======
Interest Expense (183) (2.8) (262) (3.5)
Preferred Stock Dividend $ (81) (1.2) $ - -
</TABLE>
Summary -- Quarter Ended March 31, 1997 and 1996
The Company provides services through two business segments. The
Waste Management Services segment is engaged in on- and off-site
treatment, storage, disposal and blending of a wide variety of by-
products and industrial and hazardous wastes. This segment
competes for materials and services with numerous regional and
national competitors to provide comprehensive and cost-effective
waste management services to a wide variety of customers in the
Midwest, Southeast and Southwest regions of the country. The
Company operates and maintains facilities and businesses in the
waste by-product brokerage, on-site treatment and stabilization,
and off-site blending, treatment and disposal industries. The
Company's Consulting Engineering segment of the pollution control
industry provides a wide variety of environmental related
consulting and engineering services to industry and government.
Through the Company's wholly-owned subsidiaries in Tulsa, Oklahoma
and St. Louis, Missouri, this segment provides 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.
Consolidated net revenues decreased to $6,502,000 from $7,572,000
for the quarter ended March 31, 1997, as compared to 1996. This
decrease of $1,070,000 or 14.1% is attributable to the Waste
Management Services segment which experienced a reduction in
revenues of $1,136,000, partially offset by an increase of $66,000
in revenues from the Consulting Engineering segment. This
reduction within the Waste Management Services segment is
indicative of the traditionally slower first quarter, with 1997
further impacted by the following four (4) factors: (i) the
divestiture of the Company s plastic recycling facility in Houston,
Texas, Re-Tech Systems, Inc., effective March 15, 1996 which
contributed $129,000 of revenue during 1996; (ii) the facility
disruption which occurred at the Perma-Fix of Memphis, Inc. ("PFM")
facility located in Memphis, Tennessee, resulting from an explosion
and tank fire on January 27, 1997, which negatively impacted or
reduced first quarter 1997 revenues by approximately $75,000 as
compared to the first quarter of 1996; (iii) the New Mexico field
services group completed, during the first quarter of 1996, a
$274,000 remedial project, with no comparable large projects
<PAGE>
completed during the first quarter of 1997; and (iv) limited work
was performed during the first quarter of 1997 at the Department of
Energy (DOE) operation in Fernald, Ohio, due to a delay in starting
the Company s third contract with the DOE. Total Fernald DOE
related revenue for the first quarter of 1997 was $44,000, as
compared to $648,000 during the first quarter of 1996. However,
work on the Fernald mixed waste operation resumed in April, 1997.
As a result of the fire and explosion at PFM's facility on
January 27, 1997, PFM's net revenues totaled $752,000 for the first
quarter of 1997, as compared to $827,000 for the first quarter of
1996.
Costs of goods sold decreased to $5,164,000 from $5,764,000 for
the quarter ended March 31, 1997. The $600,000 or 10.4% decrease
is primarily attributable to the reduced revenue during the first
quarter of 1997, as discussed above. As a percent of revenue,
costs of goods sold increased to 79.4% in the first quarter of
1997, compared to 76.1% in the corresponding first quarter of 1996.
This consolidated increase in cost of goods sold as a percent of
revenue reflects principally the additional operating costs
incurred at the PFM facility resulting from the above-discussed
disruption and associated increased operating, disposal, and
transportation costs as a result of such disruption. Cost of goods
sold for PFM was approximately 81% for the first quarter of 1996,
as compared to 114% for the first quarter of 1997, which equates to
additional costs of approximately $255,000. See other sections of
this Management s Discussion and Analysis of Financial Conditions
and Results of Operations and in Note 5 to Notes to Consolidated
Financial Statements for a discussion of certain insurance that the
Company has as a result of the fire and explosion at the PFM
facility. Also impacting cost of goods sold and gross margin was
the above-discussed delayed start-up of the company s third
contract at the Fernald DOE facility, which included not only the
impact of the fixed costs, but also additional expenses related to
process development and enhancements. The Consulting Engineering
segment also experienced additional costs during the first quarter
of 1997 in preparation for several larger contracts to be worked
during the subsequent periods of 1997. The above-discussed
increases in operating costs were partially offset by improvements
within the remaining Waste Management Services segment facilities,
as the Company continued to emphasize cost containment.
Selling, general and administrative expenses decreased to
$1,525,000 for the first quarter of 1997, from $1,742,000 for the
first quarter of 1996. As a percent of revenue, selling, general
and administrative expenses increased to 23.5% for the quarter
ended March 31, 1997 compared to 23.0% for the same period in 1996.
The selling, general and administrative expense decrease of
$217,000 or 12.5% reflects both a reduction in marketing expenses
($25,000), principally within the Waste Management Services segment
and reductions in administrative overhead within both the Waste
Management Services segment ($128,000) and Consulting Engineering
segment ($62,000). During the first quarter of 1996, the Company
made significant reductions in corporate overhead, which the
Company continues to monitor and control closely, as reflected by
a further reduction of approximately $8,000 during the first
quarter of 1997 as compared to the first quarter of 1996.
Depreciation and amortization expense for the quarter ended
March 31, 1997 reflects a total of $544,000, a decrease of $75,000
from the first quarter 1996 total of $619,000. Amortization
expense reflects a total of $103,000 for the first quarter of 1997,
a reduction of $11,000, which is a direct result of the covenant
not to compete having become fully amortized during this first
quarter of 1997. Depreciation expense also reflected a reduction
of $64,000, principally a result of the divestiture of the
Company s plastic recycling facility in Houston, Texas, Re-Tech
Systems, Inc., which resulted in a $14,000 reduction, the sale of
various other non-performing assets during 1996 in conjunction with
the restructuring process and various other assets becoming fully
depreciated.
<PAGE>
Interest expense was $183,000 for the quarter ended March 31,
1997, as compared to $262,000 for the same period of 1996. The
decrease in interest expense of $79,000 reflects the reduced
borrowing levels on the Heller Financial, Inc. revolving loan and
term note, which resulted in a reduction of $34,000 and reduced
overall borrowing of other debt issues related to their scheduled
repayments, which resulted in a reduction of approximately $45,000.
Offsetting this reduced interest expense, during the first quarter
of 1997, was the preferred stock dividend totaling $81,000 incurred
in conjunction with the Series 3 Class C convertible preferred
stock as issued in July 1996.
Other income and expense for the quarter ended March 31, 1997
reflected a net expense total of $13,000, as compared to an income
of $203,000 for the quarter ended March 31, 1996. This 1996 income
total was principally a result of the gain on the sale of certain
nonproductive assets within the Waste Management Services segment.
Facility Disruption
As previously discussed, on January 27, 1997, an explosion and
resulting tank fire occurred at PFM's 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 causing 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 during this
period. 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. As previously discussed, the Company has
experienced a reduction in revenues as a result of this occurrence,
as this facility attempts to selectively accept and reroute waste.
Net revenues for PFM totaled $752,000 for the quarter ended
March 31, 1997, reflecting a decrease of $75,000 from the 1996
first quarter of $827,000. However, during the same period, cost
of goods sold at this facility increased by $179,000 from a total
of $677,000 to $856,000 for the first quarter of 1997. The result
of the above was a reduction of $254,000 in PFM's gross margin and
a loss at PFM of $104,000 for the first quarter of 1997. 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 during the month of May,
1997. The extent of PFM's activities at the facility, once
operations are renewed, are presently being evaluated by the
Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation--Liquidity and Capital
Resources" for further information and discussion of certain
forward-looking statements contained herein and certain cautionary
statements relating thereto. See Note 3 to Notes to Consolidated
Financial Statements and "Legal Proceedings" for a discussion as to
certain administrative action brought by the Tennessee Department
of Environment and Conservation relating to the fire and explosion.
Liquidity and Capital Resources of the Company
At March 31, 1997, the Company had cash and cash equivalents of
$79,000. This cash and cash equivalents total reflects an increase
of $34,000 from December 31, 1996, as a result of net cash used in
operations of $257,000, cash used in investing activities of
$223,000 (principally purchases of equipment, net totaling
$245,000, partially offset by the proceeds from the sale of
property and equipment of $45,000) and cash provided by financing
activities of $514,000 (principally from the exercise of
acquisition warrants for $488,000). Accounts receivable, net of
allowances, totaled $5,372,000, a decrease of $177,000 from the
December 31, 1996 balance of $5,549,000, which reflects the reduced
<PAGE>
revenue levels during the first quarter, partially offset by an
increase in the days sales outstanding, resulting from the first
quarter (seasonal) timing of collections.
In January 1995, the Company entered into a Loan and Security
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
through a monthly borrowing base equal to 80% of the eligible
accounts receivable (as defined in the loan agreement) of the
Company and its subsidiaries. During the first quarter 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. See Note 2 to
Notes to Consolidated Financial Statements.
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
was classified as long-term debt at December 31, 1996, in
compliance with Generally Accepted Accounting Principles. However,
as noted above, the Loan and Security Agreement with Heller has a
scheduled termination date of January 31, 1998. The Company is
currently negotiating with Heller for the renewal of this Agreement
and has had discussions with other potential lenders in an effort
to replace the term and revolving loans provided to the Company by
Heller. There are no assurances that such a renewal or new credit
facility will be obtained. As a result of this scheduled
termination date and in compliance with Generally Accepted
Accounting Principles, the Company has reclassified as a current
liability $4,003,000 outstanding under the Agreement with Heller
that would otherwise be classified as long-term debt.
As of March 31, 1996, the borrowings under the Company's
revolving loan facility with Heller totaled $3,245,000, an increase
of $366,000 from the December 31, 1996 balance of $2,879,000, with
a related borrowing availability of $728,000, based on 80% of the
amount of eligible receivables of the Company as of March 31, 1997.
The balance on the term loan totaled $1,258,000, as compared to
$1,383,000 at December 31, 1996. Total indebtedness under the
Agreement with Heller, as amended, as of March 31, 1997 was
$4,503,000, an increase of $241,000 from the December 31, 1996,
balance of $4,262,000. See Note 2 to Notes to Consolidated
Financial Statements.
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. In conjunction with the Third and Sixth
Amendments, applicable interest rates were amended, whereby the
term loan was increased to the base rate plus 2 1/4% and the
revolving loan was increased to the base rate plus 2%. Both the
revolving loan and term loan were prime based loans at March 31,
1997, bearing interest at a rate of 10.50% and 10.75%,
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, of which $150,000 is to be received 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
<PAGE>
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
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 was 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 $1,175,000 as of May 1,
1997. The Company has completed this analysis and provided Heller
documentation whereby the gross orderly liquidation appraised
value, as provided by a third party appraisal company, was
approximately $2,922,000. This appraised value of owned equipment,
when extended by 75%, totals $2,191,000, an excess of $1,016,000
over the current term loan balance.
Ally Capital Corporation ("Ally") had previously provided the
Company with an equipment financing arrangement to finance the
purchase of capital equipment. As of March 31, 1997, the Company's
outstanding principal balance owing under this equipment financing
arrangement was $1,104,000. The Company has fully utilized this
equipment financing arrangement with Ally. See Note 2 to Notes to
Consolidated Financial Statements.
At March 31, 1997, the Company had $6,434,000 in aggregate
principal amounts of outstanding debt, as compared to $6,360,000 at
December 31, 1996. This increase in outstanding debt of $74,000
during the first quarter of 1997 is principally a result of the
borrowings under the Heller revolving loan facility, as previously
discussed. The revolving loan increased during the first quarter
of 1997 by $366,000 and reflects the additional operational needs
during this traditionally slower first quarter.
As of March 31, 1997, total consolidated accounts payable for the
Company was $3,785,000, an increase of $108,000 from the
December 31, 1996 balance of $3,677,000. This increase in accounts
payable reflects the seasonal trend as the Company emerges from its
slower first quarter, and an increase in resulting payables in
conjunction with revenue increases. As a result of this
seasonality, the balance of payables in excess of sixty (60) days
increased from $1,422,000 at December 31, 1996 to $1,734,000 at
March 31, 1997. This March 1997 payable total over sixty (60) days
does, however, reflect a significant improvement over the March 31,
1996, total of $3,108,000 in payables over sixty (60) days.
The Company's net purchases of new capital equipment for the
three month period ended March 31, 1997 totaled approximately
$245,000, excluding financed capital expenditures of $48,000.
These expenditures were for improvements to the operations,
including two (2) capital expansion projects within the Waste
Management Services segment, and other capital expenditures
necessary to maintain compliance with federal, state or local
permit standards. These capital expenditures were principally
funded through the operating cash flow of the Company and
utilization of the Heller revolving loan facility. 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 estimated
to be approximately $300,000, 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 ability to fund such
capital expenditure is a forward-looking statement and is subject
<PAGE>
to certain factors that could cause actual results to differ
materially from such statement, including, but not limited to, the
ability to obtain such financing, revenues materially decrease from
that budgeted for 1997 or the Company is required to use internally
generated funds for purposes not presently anticipated.
The working capital deficit position at March 31, 1997 was
$4,785,000, as compared to a deficit position of $773,000 at
December 31, 1996. The March 1997, deficit position includes the
reclassification of the Heller long-term debt to current, as a
result of Heller s scheduled termination date of January 31, 1998.
In compliance with Generally Accepted Accounting Principles, the
Company has reclassified as a current liability $4,003,000
outstanding under the agreement that would otherwise be classified
as long-term debt. If the Company would not have had to reclassify
$4,003,000 of the debt due to Heller under the Agreement, the March
1997, deficit position would have been $782,000, which reflects a
change of only $9,000 from the December deficit position.
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 presently
anticipated that such facility will become operational on a limited
basis during May 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. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation--Facility Disruption." 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. The Tennessee Department of Environment and
Conservation ("TDEC") has issued an order as a result of the fire
and explosion alleging that the facility violated certain hazardous
waste rules and regulations and ordering the facility, among other
things, to take certain action and assessing a penalty of
approximately $144,000. PFM has filed a response and intends to
vigorously defend itself in connection therewith. See "Legal
Proceedings." 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 authority prohibits 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.
<PAGE>
In summary, the Company has taken a number of steps to improve
its operations and liquidity as discussed above, which during the
first quarter was negatively impacted by the disruption from the
PFM explosion and fire. If the Company is unable to continue to
improve its operations and to become profitable 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
become profitable or, if the Company is not able to become
profitable, 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. See Note 3
to Notes to Consolidated Financial Statements and "Legal
Proceedings."
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 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, 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. The two locations where these expenditures will be made
are at a certain leased property in Dayton, Ohio, a former RCRA
storage facility operated by the former owners of PFD and leased by
a predecessor of PFD, and PFM's facility in Memphis, Tennessee
(excluding any capital expenditures due to the previously discussed
fire and explosion at PFM). Additional funds will be required for
the next five to fifteen years to properly investigate and
remediate these sites. The Company has accrued $2,085,000 for
estimated costs of remediating these two sites (excluding any
expenditures due to the fire and explosion at PFM), 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>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
PART II - Other Information
Item 1. Legal Proceedings
There are no additional legal proceedings pending against the
Company and/or its subsidiaries not previously reported by the
Company in Item 3 of its Form 10-K for the fiscal year ended
December 31, 1996, except for the following:
In connection with a fire and explosion at Perma-Fix of
Memphis, Inc.'s ("PFM") facility located in Memphis, Tennessee,
that stores, processes and blends hazardous and nonhazardous waste,
the Tennessee Department of Environment and Conservation ("TDEC")
issued an order, dated April 23, 1997, alleging that the facility
violated certain hazardous waste rules and regulations promulgated
by the TDEC and ordered the facility to, among other things, cease
fuel blending, termination within 30 days of the order a permit to
construct a new storage tank area, which had not yet been
constructed, implement certain actions and assessing a penalty of
approximately $144,000. PFM has filed an answer to such order
asserting, among other things, that the order was issued against an
improper party (the order being issued not against PFM but against
another subsidiary of the Company that did not own or operate the
facility), that PFM did not violate any rules or regulations of the
TDEC in connection with, or after, the fire and explosion and that
the assessment of a penalty against the facility was improper. The
Company intends for PFM to vigorously defend itself in connection
with this matter. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation."
Item 6. Exhibits and Reports on Form 8-K
________________________________
(a) Exhibits
________
Exhibit 4.1 - Ally Capital Corporation Equipment Lease
Agreement dated October 12, 1994.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K
___________________
No reports on Form 8-K were filed during the first quarter of
1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PERMA-FIX ENVIRONMENTAL
SERVICES, INC.
Date: May 14, 1997 By: /s/ Dr. Louis F. Centofanti
____________________________
Dr. Louis F. Centofanti
Chairman of the Board
Chief Executive Officer
By: /s/ Richard T. Kelecy
____________________________
Richard T. Kelecy
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Page No.
________
Exhibit 4.1 Ally Capital Corporation Equipment
Lease Agreement Dated October 12,
1994 . . . . . . . . . . . . . . . . . . . . . 21
Exhibit 27 Financial Data Schedule . . . . . . . . . . . . 48
ISTE:\N-P\PESI\10-Q\397\EDGAR\39710q
ALLY CAPITAL CORPORATION
EQUIPMENT LEASE AGREEMENT
THIS EQUIPMENT LEASE AGREEMENT is made as of the 12th day of
October, 1994 by and between ALLY CAPITAL CORPORATION ( Lessor ) and
PERMA-FIX ENVIRONMENTAL SERVICES, INC., a Delaware corporation, and
AMERICAN RESOURCE RECOVERY CORPORATION, a Tennessee corporation, and
INTEGRATED RESOURCE RECOVERY, INC., a Florida corporation, and CLARK
PROCESSING, INC., an Ohio corporation, AS CO-LESSEES ( Lessee ). All
of the defined terms and rules of construction pertaining to this
Lease are set forth in Section 17 hereof.
1. TERM AND RENT. (a) Lessor agrees to lease to Lessee, and
Lessee agrees to lease from Lessor, the Equipment described in each
Equipment Schedule to be executed pursuant hereto. This Lease shall
be effective from and after the date of execution hereof, whether
or not any Equipment Schedule has been entered into, and as an
Inducement to Lessor to enter into this Lease, Lessee agrees that.
it shall, pursuant to the terms hereof, be liable for, subject to,
undertake or comply with, as the case may be, all of the
representations, warranties, agreements, disclaimers, waivers and
indemnifications made herein that pertain to Lessee and Lessor
generally, or to events that arise or occur in connection with
transactions that the parties intend to document under an Equipment
Schedule, whether or not such Equipment Schedule is ever effectively
entered into, and any other provisions of any of the Lease Documents
that may be necessary or appropriate for the interpretation or
enforcement of the foregoing. The Term of this Lease with respect
to any item of the Equipment shall consist of the Term set forth in
the Equipment Schedule relating thereto; and, except as otherwise
expressly provided herein, Lessor's and Lessee's respective rights
and obligations .hereunder (including Lessee's obligation to pay
Basic Rent for the items of Equipment described therein) shall
commence and continue at all times from and after the effective date
thereof, and terminate upon the expiration of the Term thereof and
Lessee's complete performance of all of its obligations thereunder.
(b) Lessee shall pay Lessor Basic Rent for the Equipment,
without any deduction or setoff and without prior notice or demand,
in the aggregate amounts specified in each Equipment Schedule, and
Supplemental Rent, promptly as such Rent shall become due and owing.
In addition to each such payment of Rent, on the due date therefor,
Lessee shall be liable for and shall pay to Lessor an Administrative
Fee; provided, however, to the extent such payment of Rent shall be
received by Lessor in good collected indefeasible funds on the due
date therefor, Lessee shall be relieved of its obligation to pay the
Administrative Fee attributable to such Rent payment. Lessee agrees
that it shall have no right to, and it shall not, pay any Rent prior
to the due date thereof. Each Equipment Schedule shall be and
_________________________________________________________________
THE ONE AND ONLY ORIGINAL OF THIS LEASE IS MARKED "ORIGINAL" AT THE
TOP OF THIS PAGE AND SHALL CONSTITUTE THE ONLY CHATTEL PAPER
ORIGINAL FOR PURPOSES OF ARTICLE NINE OF THE UNIFORM COMMERCIAL
CODE; EACH OTHER SIGNED VERSION IS MARKED "DUPLICATE".
<PAGE>
remain a non-cancellable net lease, and Lessee shall not be entitled
to any abatement or reduction of Rent due thereunder for any reason.
Without limiting the foregoing, Lessee's obligation to pay Rent, and
to otherwise perform its obligations under the Lease Documents, are
and shall be absolute and unconditional until, with respect to each
Equipment Schedule, such Equipment Schedule terminates in accordance
with its terms and shall not be affected by any circumstances,
happenings or events whatsoever and whenever and howsoever
occurring, including, any right of setoff, counterclaim, recoupment,
deduction, defame or other fight which Lessee may have against
Lessor, the manufacturer or vendor of the Equipment, or anyone else
for any reason whatsoever. If for any reason whatsoever, any
Equipment Schedule shall be terminated in whole or in part by
operation of law or otherwise (other than pursuant to the expiration
of the Term of the applicable Equipment Schedule), Lessee
nonetheless agrees to pay to Lessor an amount equal to each payment
of Rent at the time such payment would have become due and payable
in accordance with the terms hereof had such equipment Schedule not
been terminated in whole or in part. Rent is payable as and when
specified in the Equipment Schedule, or as otherwise provided
herein, by mailing the same to Lessor at its address specified
pursuant to this Lease; and shall be effective upon receipt.
Timeliness of Lessee's payment and other performance of its
obligations under the Lease Documents is of the essence
Notwithstanding anything in this Section 1(b) to the contrary,
Lessee shall be entitled to a credit in an amount equal to the
Abatement Amount against its obligation to pay Basic Rent for any
item(s) of Equipment suffering an Impairment of Use conditioned upon
the following: (A) Lessee provides Lessor with written notice of
such Impairment of Use within two business days after having written
notice or actual knowledge thereof (whichever occurs first),with a
full and complete description of such Impairment of Use, including
the nature and extent thereof, and (B) Lessee provides to Lessor all
necessary and appropriate cooperation with respect to Lessor's or
its designee's investigation, replacement, curing action or other
action with respect to such Impairment of Use. In furtherance of the
foregoing, Lessee (i) agrees that in the event Lessor replaces any
item of Equipment with Replacement Equipment, Lessor shall be deemed
to have cured any Impairment of Use with respect to such replaced
items of Equipment, on and as of the date of Lessees's acceptance
of such Replacement Equipment; (ii) shall execute a supplement to
the appropriate Equipment Schedule thereby substituting the
Replacement Equipment for such replaced item of Equipment; (iii)
shall without further action be deemed to have conveyed to Lessor
good title, free and clear of all Liens, to any item of Equipment
replaced pursuant hereto or for which the Abatement Period
pertaining thereto extends to the expiration of the Term of the
Equipment Schedule, by making it available to Lessor, and (iv) shall
execute and deliver to Lessor a bill of sale pertaining thereto that
is acceptable to Lessor.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE. Lessee
represents, warrants and covenants that: (a) Perma-Fix
Environmental Services, Inc. is a corporation duly organized and
validly existing in good standing under the laws of the state of
Delaware, American Resource Recovery Corporation is a corporation
duly organized and validly existing in good standing under the laws
of the state of Tennessee, Integrated Resource Recovery, Inc. is a
corporation duly organized and validly existing, in good standing
under the laws the state of Florida, Clark Processing, Inc. is a
corporation duly organized and validly existing in good standing
under the laws of the state of Ohio, is duly qualified to do
business in all jurisdictions where failure to be so qualified would
have a material adverse effect on the financial condition, business
or operations of Lessee, or impair the enforcement of its
obligations under the Lease Documents. (b) The execution, delivery
and performance of the Lease Documents and compliance with the terms
thereof: (i) have been duly authorized by all necessary corporate
action on the part of Lessee; (ii) do not require the approval of
any stockholder, trustee or ,holder of any obligations of Lessee
except such as have been duly obtained; and (iii) do not and will
not contravene any Law, now binding on Lessee, or the charter or by-
laws of Lessee, or contravene the provisions of, or constitute a
default under, or result in the creation of any Lien upon the
property of Lessees under any indenture, mortgage, contract or other
agreement to which Lessee is a party or by which it or its property
is bound. (c) The Lease Documents, when entered into, will
constitute legal, valid and binding obligations of Lessee,
enforceable against Lessee in accordance with the terms thereof.
(d) There are no pending actions or proceedings to which Lessee is
a party, and there are no other pending or threatened actions or
proceedings of which Lessee has knowledge, before any Government
Authority, which, either individually or in the aggregate, would
materially adversely affect the financial condition of Lessee, or
the ability of Lessee to perform obligations under, or comply with
the terms of, the Lease Documents. (e) Lessee is not in default
under any obligation for the payment of borrowed money, for the
deferred purchase price of property or for the payment of any rent
under any lease agreement which, either individually or in the
aggregate, would have the same such effect. (F) With respect to the
Equipment covered by each Equipment Schedule, under the Applicable
Laws of the state(s) in which such Equipment is to be located, such
Equipment consists solely of personal property and not fixtures. (g)
The financial statements of Lessee (copies of which have been
furnished to Lessor) have been prepared in accordance with GAAP, and
fairly present Lessee's financial condition and the results of its
operations as of the date of and for the period covered by such
statements, and since the date of such statements there has been no
material adverse change in such conditions or operations. (h) The
address stated below the signature of Lessee is the chief place of
business and chief executive office (which terms shall have the
meanings provided in Article 9 of the Code) of Lessee; and Lessee
does not conduct business under a trade, assumed or fictitious name.
(i) With respect to the Equipment covered by each Equipment
Schedule, Lessor will have a valid, perfected, first priority
security interest in such Equipment pursuant to the Code and other
Applicable Law upon its purchase of such Equipment and its filing
all of the UCCs executed by Lessee in connection therewith. (j)
With respect hereto and to each Equipment Schedule, Lessee has not
permitted, and will not permit, any person to engage in any activity
that could result in the imposition of liability under Applicable
Law on Lessee, Lessor or any owner or operator of the Equipment, or
would otherwise impair Lessor s rights or title pertaining thereto.
<PAGE
3. FINANCIALS, FURTHER ASSURANCES AND NOTICES. Lessee
covenants and agrees as follows: (a) Lessee will, if requested by
Lessor, furnish Lessor (i) within one hundred twenty (120) days
after the end of each fiscal year of Lessee, a balance sheet of
Lessee as at the end of such year, and the related statement of
income and statement of changes in financial position of Lessee for
such fiscal year, prepared in accordance with GAAP, all in
reasonable detail and certified by independent certified public
accountants of recognized standing selected by Lessee; (ii) within
sixty (60) days after the end of each quarter of Lessee's fiscal
year, a balance sheet of Lessee as at the end of such quarter, and
the related statement of income and statement of changes in
financial position of Lessee for such quarter, prepared in
accordance with GAAP; and (iii) within thirty (30) days after the
date on which they are filed, all regular periodic reports, forms
and other filings required to be made by Lessee to the Securities
and Exchange Commission, if any. (b) Lessee will promptly execute
and deliver to lessor such further documents, instruments and
assurances and take such further action as Lessor from time to time
may reasonably request in order to carry out the intent and purpose
of this Lease and to establish and protect the rights and remedies
created or intended to be created in favor of Lessor under the Lease
Documents. (c) Lessee shall provide written notice to Lessor: (i)
thirty (30) days prior to any contemplated change in the name or
address of Lessee; (ii) promptly upon the occurrence of any default
or Default; and (iii) promptly upon the commencement of proceedings
under Federal bankruptcy laws or any other insolvency laws (as now
or hereafter in effect) involving Lessee or any person (other than
Lessor) holding an interest in the Equipment or related property as
the debtor.
4.CONDITIONS PRECEDENT. Lessor's obligations under each
Equipment Schedule, including Lessor's obligation to purchase and
participate in the financing of any Equipment to be leased
thereunder, are conditioned upon: (a) Lessor having received, at
least two (2) business days prior to the date upon which Lessor
purchases the 'Equipment or has committed to purchase same (if
sooner), all of' the following in form and substance satisfactory
to Lessor: (i) evidence as to due compliance with the insurance
provisions hereof; (ii') UCCs and all other filings and recordings
with respect to the transactions contemplated thereunder which are
necessary or appropriate to establish, protect, perfect or give
first priority to Lessor's title in the Equipment leased thereunder;
(iii) if requested by Lessor, a certificate of Lessee's Secretary
certifying: (1) resolutions of Lessee's Board of Directors duly
authorizing the leasing of the Equipment under such Equipment
Schedule and the execution, delivery and performance thereof and of
all related Lease Documents, and (2) the incumbency and specimen
signatures of the officers of Lessee authorized to execute such
documents; (iv) if requested by Lessor, an opinion of counsel for
Lessee as to each of the matters set forth in subsections (a)
through (i) (other than subsection (g)) of Section 2 hereof; (v) the
only manually executed original of such Equipment Schedule and all
other Lease Documents; (vi) to the extent requested by Lessor,
copies or reports of searches conducted at the appropriate
recordation offices against Lessee, the Equipment and premises at
which the Equipment is or is to be located; (vii) a copy of an
executed bill of sale to Lessor for the Equipment together with an
invoice of the seller specifying the purchase price for such
Equipment; (viii) all Purchase Documents pertaining to the
Equipment, and, to the extent requested by Lessor, an acknowledgment
and assignment of Lessee's rights, if any, under such Purchase
Documents, including all warranties, indemnities, licenses,
remedies, and other rights thereunder, which Lessor shall be
entitled to exercise in connection with its exercise of its remedies
under Section 15 of this Lease; (ix) if Lessor is purchasing the
Equipment from Lessee, all of the operating records pertaining to
the maintenance and use of' the Equipment; and (x) such other
documents, agreements, instruments, certificates, opinions,
assurances, .as Lessor may reasonably require.
(b) (i) The representations and warranties of Lessee herein or
in any of the other Lease Documents, and of each other person (other
than Lessor) in any of the other documents or agreements delivered
to Lessor pursuant hereto or thereto shall be true and correct on
and as of the effective date of such Equipment Schedule with the
same effect as though made on and as of such date (Lessee's
execution and delivery of the Equipment Schedule, shall constitute
an acknowledgment of the same); and (ii) there shall be no default
or Default under the Equipment Schedule or any other Lease
Documents, nor shall there have occurred any casualty or Total Loss,
or event or condition which with notice or passage time, or both,
would constitute a casualty or Total Loss with respect to the
equipment to be leased under the Equipment Schedule.
(c) (i) Lessor shall be permitted under all Applicable Laws to
purchase and provide financing to Lessee for the Equipment and to
enter into the transactions contemplated herein and in the Equipment
Schedule; and (ii) there shall have been no change in Law or
proposed change in Law or in Lessee s financial condition which
could make it inadvisable for Lessor to do so, in Lessor s sole
discretion.
<PAGE>
(d) (i) if Lessor is purchasing the Equipment from Lessee,
Lessee shall have paid all amounts due to the Supplier (including
any vendor or manufacturer) and to any other persons from whom
Lessee acquired any right, title or interest in the Equipment, or
with respect to any improvements thereon, additions thereto, or
transportation or storage thereof, on or prior to the effective date
of the Equipment Schedule; (ii) the Equipment shall have been
delivered to and accepted by Lessee, and be in the condition and
repair required hereby; and (iii) Lessor shall have received a bill
of sale from the Supplier, on or prior to the effective date of the
Equipment Schedule, that is valid and legally binding, and effective
to convey to Lessor good title to the Equipment to be leased
thereunder, free and clear of any Lien.
5. DELIVERY, INSPECTION AND ACCEPTANCE BY LESSEE. Lessee shall
provide an acceptable installation environment as specified in any
applicable manufacturer's manual or by Applicable Law, and, except
as otherwise specified by manufacturer, shall furnish all labor
required to install the Equipment. Upon delivery, Lessee shall
inspect the Equipment and, if the same is found to be in good order
and in compliance with the provisions of any applicable Supply
Contract, accept delivery of the same and execute and deliver to
Lessor an Equipment Schedule containing a complete description of
the accepted Equipment. The Lessee acknowledges that its execution
and delivery of any Equipment Schedule shall constitute conclusive
evidence that as between Lessor and Lessee, the Equipment shall be
deemed to have been finally and irrevocably accepted by Lessee
pursuant to this Lease and such Equipment Schedule. Lessor shall not
be liable for loss or damage occasioned by any cause, circumstance
or event of whatsoever nature relating to delivery, inspection,
installation or acceptance, including the failure of or delay in
delivery, delivery to the wrong place, delivery of improper
equipment or property other than the Equipment, damage to the
Equipment, governmental regulations, strike, embargo or other cause,
circumstance or event, whether or like or unlike nature. All
expenses incurred in connection with Lessor's purchase of the
Equipment (including taxes, shipment, delivery and installation)
shall be the responsibility of Lessee and shall be either, at
Lessor's sole option, capitalized or expensed or paid by Lessee upon
demand. If as a result of any damage to the Equipment, strike,
embargo or other similar cause certified to Lessor in writing by
Lessee s responsible officer and verified to Lessor's satisfaction
by such other evidence relating thereto as Lessor may reasonably
request, Lessee shall refuse to accept delivery of the Equipment,
Lessee will be assigned all rights and shall assume, indemnify and
hold Lessor harmless from all obligations as purchaser of the
Equipment and all other Claims relating thereto pursuant to Section
13 hereof.
6. USE AND MAINTENANCE. (a) Lessee shall (i) use the
Equipment solely in the conduct of its business, for the purpose for
which the Equipment was designed, in a careful and proper manner;
(ii) operate, maintain, inspect,. service, repair, overhaul and test
the Equipment, and maintain all records, logs and other materials
relating thereto, in accordance with (1) all maintenance and
operating manuals or service agreements, whenever furnished, or
entered into, including any subsequent amendments, supplements,
renewals or replacements thereof, issued by the manufacturer or
service provider, (2) the requirements of' all applicable insurance
policies, (3) the Purchase Documents, so as to preserve all of'
Lessee s and Lessor s rights thereunder, including all rights to any
warranties, indemnities or other rights or remedies, (4) Applicable
Laws, and (5) consistent with the prudent practice of other similar
companies in the same business as Lessee, but in any event, to no
lesser standard than that employed by Lessee for comparable
equipment owned or leased by it; (iii) not change the location of'
any Equipment as specified in the Equipment Schedule without the
prior written consent of Lessor; (iv) not attach or incorporate the
Equipment to or in any other item of equipment in such a manner that
the Equipment may be deemed to have become an accession to or a part
of such other item of equipment; (v) cause each principal item of
the Equipment to be continually marked, in a plain and distinct
manner, with the name of Lessor or its designee followed by the
words "Owner and Lessor, or other appropriate words designated by
Lessor on labels furnished by Lessor, and (vi) cause the Equipment
to be kept and maintained in good operating condition and in the
same condition as when delivered to Lessee hereunder, except for
ordinary wear and tear resulting despite Lessee's full compliance
with the terms hereof. With respect to Lessee s agreement in
subclause (ii) above to maintain, inspect, service, repair, overhaul
and test each item of Equipment in accordance with sub-clauses (1),
(3) and (5), Lessee shall undertake and be responsible for the
foregoing in exchange for a credit to Lessee's rental obligations
the amount of which has been calculated and agreed to by both Lessee
and Lessor as fair and complete consideration, for such undertaking
and responsibility as it may now and hereafter exist (including the
payment of all charges, fees, costs and expenses 'relating thereto),
and accounted for in the amount of Basic Rent Lessee has agreed to
pay for such item of Equipment by its execution and delivery of the
Equipment Schedule relating thereto. In furtherance of the
foregoing, Lessee acknowledges and agrees that (A) the credit
<PAGE>
provided for in the preceding sentence shall fully discharge Lessor
for all purposes from performing or complying with any of the
obligations specified in such sentence (to the extent Lessor would
be deemed to have had any responsibility therefor), and (B) it shall
also undertake, be responsible for and otherwise fully perform and
comply with all of the obligations provided for herein that are not
specified in the preceding sentence, and that it shall not be
entitled to any credit or other compensation with respect thereto,
nor shall Lessor have any responsibility to Lessee or any other
person with respect to the performance or non-performance of, or
compliance or non-compliance with, any of such obligations, or any
other obligations not expressly assumed by it hereunder.
(b) If any parts of the Equipment become worn out, lost,
destroyed, damaged beyond repair or otherwise permanently rendered
unfit for use, Lessee, at its own expense, will within a reasonable
time replace such parts with replacement parts that are free and
clear of all Liens and have a value and utility at least equal to
the value, condition and utility that such replaced parts would have
had if maintained in the condition and repair required by the terms
hereof. In the event that any Applicable Law requires alteration
or modification to the Equipment, Lessee will conform thereto or
obtain conformance therewith, and shall otherwise cause the altered
or modified Equipment to comply with the provisions hereof. With
respect to parts, additions or improvements which are added to the
Equipment that are essential to the operation of the Equipment, are
necessary to cause it to be in compliance with the provisions of
this Lease or which cannot be detached from the Equipment without
materially interfering with the operation of the Equipment or
adversely affecting the value, condition and utility which the
Equipment would have had without the addition thereof, title thereto
shall immediately vest in Lessor to the same extent and with the
same priority as Lessor holds in the Equipment, without cost or
expense to Lessor, or any further action by any other person, and
such parts, improvement and additions shall be deemed incorporated
in the Equipment and subject to the terms of this Lease as if
originally leased hereunder. Lessor agrees that upon Lessee's
replacing a part in full compliance with the provisions of this
subsection (b), all of Lessor' right, title and interest in and to
any part so replaced shall without further action vest in Lessee AS
IS, WHERE IS," and otherwise subject to the provisions of Section
7 hereof. Lessee shall not make any material alterations to the
Equipment without the prior written consent of Lessor, which consent
shall not unreasonably withheld.
(c) Upon the twenty-four (24) hours' written or telephonic
request of Lessor, Lessee shall provide to Lessor any information
reasonably requested by Lessor pertaining to the Equipment or
Lessee, including, the location and condition of the Equipment. Upon
reasonable advance notice (which the parties agree shall be no less
than forty-eight (48) hours' written or telephonic request) Lessee
shall afford Lessor access to Lessee's premises where the Equipment
is located for the purpose of inspecting such Equipment, all
applicable maintenance and other records, Permits, licenses and any
notices or directives from any manufacturer, vendor, service
provider or Governmental Authority, at any reasonable time during
normal business hours; provided, however, if a Default or default
shall have occurred and be continuing, twenty-four (24) hours'
notice of any inspection by Lessor shall be required. In the event
Lessee fails or is unable to perform any of its obligations
hereunder, Lessor shall have the right, but not the obligation, to
perform the same, and Lessee shall forthwith reimburse Lessor on an
after-tax basis, as Supplemental Rent, for all reasonable costs and
expenses incurred by Lessor in performing the same. Lessor shall not
have any duty to make or cause to be made any inspection, repair,
restoration, replacement, renewal, addition or improvement of any
nature or description with respect to the Equipment, or the related
property or to incur any cost or expense in connection with any
Lease Document and Lessor shall not incur any liability or
obligation to any person by reason of Lessor's doing, causing to be
done or failing to do any of the foregoing, in its discretion.
7. DISCLAIMER OF WARRANTIES. LESSEE HEREBY ACKNOWLEDGES AND
AGREES THAT: EXCEPT FOR THE WARRANTY INSPECTION 16(d) HEREOF, THE
EQUIPMENT AND THE RIGHTS, TITLE AND INTEREST BEING CONVEYED HEREIN
WITH RESPECT THERETO, ARE BEING CONVEYED AND DELIVERED TO LESSEE AS
IS AND WHERE IS WITHOUT ANY RECOURSE TO LESSOR, AND LESSOR HAS
NOT MADE, AND HEREBY DISCLAIMS, LIABILITY FOR, AND LESSEE HEREBY
WAIVES ALL RIGHTS AGAINST LESSOR RELATING TO, ANY AND ALL
WARRANTIES, GUARANTIES, REPRESENTATIONS OR OBLIGATIONS OF ANY KIND
WITH RESPECT THERETO, EITHER EXPRESS OR IMPLIED, ARISING BY
APPLICABLE LAW OR OTHERWISE, INCLUDING (A) ANY EXPRESS OR IMPLIED
WARRANTIES, GUARANTIES, REPRESENTATIONS OR OBLIGATIONS OF OR ARISING
FROM OR IN (1) MERCHANTABILITY OR FITNESS FOR PARTICULAR USE OR
PURPOSE, (2) COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF
TRADE OR (3) TORT (WHETHER OR NOT ARISING FROM THE ACTUAL IMPLIED
<PAGE>
OR IMPUTED NEGLIGENCE OF LESSOR OR STRICT LIABILITY ) OR UNDER THE
CODE OR OTHER APPLICABLE LAW WITH RESPECT TO THE EQUIPMENT,
INCLUDING ITS TITLE OR FREEDOM FROM LIENS, FREEDOM FROM TRADEMARK,
PATENT OR COPYRIGHT INFRINGEMENT, LATENT DEFECTS (WHETHER OR NOT
DISCOVERABLE), CONDITION, MANUFACTURE, DESIGN, SERVICING OR
COMPLIANCE WITH APPLICABLE LAW AND (B) ALL OBLIGATIONS AND
LIABILITIES OF LESSOR, AND RIGHTS AND REMEDIES OF LESSEE, HOWSOEVER
ARISING UNDER ANY APPLICABLE LAW WITH RESPECT TO THE MATTERS WAIVED
AND DISCLAIMED, INCLUDING, FOR LOSS OF USE, REVENUE, OR PROFIT WITH
RESPECT TO THE EQUIPMENT, OR ANY LIABILITY OF LESSEE OR LESSOR TO
ANY THIRD PARTY, OR ANY OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES (AS SUCH TERMS ARE USED IN SECTION 2719(3) OF THE CODE, OR
OTHER APPLICABLE LAW) EXCEPT TO THE EXTENT THE WAIVER OF SAME IS
PROHIBITED BY APPLICABLE LAW; all such risks, as between Lessor and
Lessee, are to be born by Lessee; and Lessor's agreement to enter
into this Lease and any Equipment Schedule is in reliance upon the
freedom from and the complete negation of liability or
responsibility for the matters waived and disclaimed herein. Lessee
agrees that the only representations, warranties, guaranties or
indemnities made with respect to the Equipment are those made by the
Supplier thereof; and, provided that no Default or default has then
occurred and is continuing under the pertinent Equipment Schedule,
Lessor (a) shall cooperate fully with Lessee with respect to the
resolution of such claims, in good faith and by appropriate
proceedings at Lessee's expense, (b) hereby assigns to Lessee, for
and during the term of this Lease, any applicable warranties,
indemnities or other similar rights under any Supply Contracts
(excluding any refunds or other similar payments reflecting a
decrease in the value of any such Equipment, which amount shall
during the existence of any default or Default be received by and
paid to Lessor, for application to Lessee's obligations under the
Equipment Schedule relating thereto) applicable to any Equipment,
and (c) hereby authorizes Lessee to obtain all services, warranties
or (except as provided in (b) above) amounts from the Supplier of
such Equipment to be used to repair such Equipment (and such amounts
shall be used by Lessee to repair such Equipment). Any such claim
shall not affect in any manner the unconditional obligation of
Lessee to make rent payments hereunder.
8. FEES AND TAXES. (a) To the extent permitted by Law, Lessee
shall file any necessary report and return for, shall pay promptly
when due, shall otherwise be liable to reimburse Lessor (on an
after-tax basis) for, and agrees to indemnify and hold Lessor
harmless from all Impositions.
(b) If any report, return or property listing, or any
Imposition is, by Law, required to be filed by, assessed or billed
to, or paid by, Lessor, Lessee will do all things required to be
done by Lessor (to the extent permitted by Law) in conjunction
therewith and is hereby authorized by Lessor to act on behalf of
Lessor in all respects, including, the contest or protest, in good
faith and by appropriate proceedings, of the validity of any
Imposition, or the amount thereof. Lessor agrees fully to cooperate
with Lessee in any such contest, and Lessee agrees promptly to
indemnify Lessor for all reasonable expenses incurred by Lessor In
the course of such cooperation. An Imposition or Claim therefor
shall be paid, subject to refund proceedings, if failure to pay
would adversely affect the title or rights of Lessor in the
Equipment or otherwise hereunder. Provided that no Default or
default has occurred and is then continuing, if Lessor obtains a
refund of any Imposition which has been paid (by Lessee, or by
Lessor and for which Lessor has been fully reimbursed by Lessee),
Lessor shall promptly pay to Lessee the net amount of such refund
actually received. Lessee will cause all billings of such charges
to Lessor to be made to Lessor in care of Lessee and will, in
preparing any report or return required by Law, show the ownership
of the Equipment in Lessee, and shall send a copy of any such report
or return to Lessor. If Lessee fails to pay any such charges when
due, except any Imposition being contested in good faith and by
appropriate proceedings as above provided for a reasonable period
of time, Lessor at its option may do so, in which event the amount
so paid (including any penalty incurred as a result of Lessee's
failure), plus an Administrative Fee shall be paid by Lessee to
Lessor with the next installment of Basic Rent.
(c) The provisions of this Section 8 shall not apply to any
Imposition (i) imposed as a result of any voluntary transfer or
disposition by Lessor of all or any portion of its interest in the
Equipment pursuant to Section 15 hereof; (ii) that Lessee is
contesting in good faith, by appropriate proceedings and is
otherwise permitted pursuant to provisions of this Lease until the
conclusion of such contest; except, that Lessee's right to contest
any Imposition and thereby avoid its obligation to pay any such
Imposition is conditioned upon the existence of such Imposition
<PAGE>
during any such contest not causing any material danger of the sale,
forfeiture or loss of the Equipment; or (iii) imposed on Lessor that
is based on, or measured by gross or net income taxes (including
capital gains taxes, minimum taxes, income taxes collected by
withholding and taxes on tax preference items), except for Lessee s
obligation to pay indemnities and reimbursements on an "after-tax
basis, and as otherwise expressly provided herein.
9. INTENT, TITLE AND LIENS. (a) The parties intend and agree
that the Equipment shall remain personal property, and that Lessor's
title thereto or the priority of such title not be impaired,
notwithstanding the manner in which it may be affixed to any real
or personal property. Lessee shall obtain and deliver to Lessor (to
be recorded at Lessee's expense), from any person having an interest
in any real or personal property to or upon which the Equipment is
to be attached or located, as the case may be, waivers of any Lien
or which such person might have or hereafter obtain or claim with
respect to Equipment.
(b) During the Term of each Equipment Schedule, and until
Lessee either purchases such Equipment upon the expiration of the
Initial Term, or upon the expiration of any Renewal Term with
respect thereto, and upon Lessee's full performance of all its
obligations under or relating to such Equipment Schedule, Lessor
shall retain title to such Equipment; provided, that, Lessee and
Lessor acknowledge that transactions documented hereunder and under
each Equipment Schedule shall constitute a Lease intended as
security, or security interest, as the case may be, under
Applicable Law (including under Section 1201(37) of the Code). In
furtherance thereof, (i) in order to secure the prompt payment and
performance as and when due of all of Lessee's obligations (both now
existing and hereafter arising) under each such Equipment Schedule
and all of the other Lease Documents, Lessee shall be deemed to have
granted, and it hereby grants to Lessor a first priority security
interest in and assigns and conveys the following (whether now
existing or hereafter created): (A) the Equipment leased pursuant
to such Equipment Schedule, (B) all subleases thereof (including all
of Lessee's rights, but none of its obligations thereunder,
including all amounts payable thereunder) all accounts, contract
rights and general intangibles including all licenses, patents,
copyrights, maskworks and trade secrets) relating to the Equipment,
and (C) all replacements and Proceeds (cash and non-cash),.
including the proceeds of all insurance policies, of the property
and rights described in (A) and (B), and (ii) Lessee agrees that
with respect to the Equipment, in addition to all of the other
rights and remedies available to Lessor hereunder upon the
occurrence of a Default, Lessor shall have all of the rights and
remedies of a first priority perfected security party under the
Code. Lessee may not dispose of any of the Equipment except to the
extent expressly provided herein, notwithstanding the fact that
proceeds constitute a part of the Equipment.
(c) Lessee will not directly or indirectly create, incur,
assume or suffer to exist any Lien on or with respect to any of the
Equipment, title thereto or any interest therein, except Permitted
Liens. Lessee shall notify Lessor immediately upon receipt of notice
of any Lien affecting the Equipment in whole or in part, and defend
Lessor's title therein and the first priority thereof against all
persons holding or claiming to hold a Lien; and any Claims suffered
by Lessor as a result thereof shall be covered by the indemnity in
Section 13 hereof.
(d) Owner for Federal Tax Purposes. It is hereby agreed
between Lessee and Lessor that, for Federal income tax purposes (i)
the Lease is, and will be consistently treated as, a finance lease
rather than a true lease; (ii) Lessee will be the owner of the
Equipment to be delivered under this Lease; (iii) Lessee will not
claim any rental deduction for amounts paid to Lessor under the
Lease; (iv) Lessor will not claim any cost recovery or depreciation
deductions with respect to the Equipment delivered under this Lease;
(v) neither Lessor nor Lessee will at any time take any action,
directly or in directly, or file any returns or other documents
inconsistent with the foregoing; and (vi) Lessor and Lessee will
file such returns, take such actions and execute such documents as
may be reasonable and necessary to facilitate accomplishment of the
intent expressed in subparagraphs (i) through (iv) of this Section
9(d).
10. INSURANCE. (a) Lessee shall obtain and maintain all-risk
insurance coverages with respect to the Equipment insuring against,
among other things: casualty coverage, including, loss or damage to
the Equipment due to fire and the risks normally included in
extended coverage, malicious mischief and vandalism, for not less
than the greater of the Equipment s full replacement value or the
Stipulated Loss Value; and public liability coverage including, both
personal injury and property damage, with a combined single limit
per occurrence of not less than the amount specified .in each
Equipment Schedule, with a deductible of no greater than
$100,000.00. All such insurance shall be in form and amount and
with companies reasonably satisfactory to Lessor. All insurance for
loss or damage shall provide that losses, if any, shall be payable
to Lessor as sole loss payee and Lessee shall utilize its best
efforts to have all checks relating to any such losses delivered
promptly to Lessor. Lessor shall be named as an additional insured
<PAGE>
with respect to all such liability insurance. Lessee shall pay the
premiums therefor and deliver to Lessor evidence satisfactory to
Lessor of such insurance coverage. Lessee shall cause to be provided
to Lessor, not less than fifteen (15) days prior to the scheduled
expiration or lapse of such insurance coverage, evidence
satisfactory to Lessor of renewal or replacement coverage. Each
insurer shall agree, by endorsement upon the policy or policies
issued by it or by independent instrument furnished to Lessor, that
(i) no cancellation, lapse, expiration or adverse change reducing
the coverage thereof shall be effective unless Lessor has been given
thirty (30) days' prior written notice thereof; (ii) insurance as
to the interest of any named additional insured or loss payee other
than Lessee shall not be invalidated by any actions, inactions,
breach of warranty, declaration or condition or negligence of Lessee
or any person other than such additional insured with respect to
such policy or policies; (iii) such insurance is primary with
respect to any other insurance carried by or available to Lessor;
(iv) the insurer waives any right of subrogation and any setoff,
counterclaim, or other deduction, whether by attachment or
otherwise, against Lessor; and (v) with respect to the liability
coverage, all of the provisions of such coverage, except the limits
of liability, shall operate in the same manner as if there were a
separate policy with and covering Lessee and Lessor. The proceeds
of such insurance payable as a result of loss of or damage to the
Equipment shall be applied as required by the provisions of Section
11 hereof.
(b) With respect to Lessee' s agreement to obtain and maintain
the casualty and liability insurance coverage for each item of
Equipment required in clause (a) above, Lessee shall undertake and
be responsible for the foregoing in exchange for a credit to
Lessee's rental obligations the amount of which has been calculated
and agreed to by both Lessee and Lessor as fair and complete
consideration for such undertaking and responsibility as it may now
and hereafter exist (including the payment by Lessor of all
premiums, costs and expenses relating thereto), and accounted for
in the amount of Basic Rent for such item of Equipment by its
execution and delivery of the Equipment Schedule relating thereto.
In furtherance of the foregoing, Lessee acknowledges and agrees that
(A) the credit provided for in the preceding sentence shall fully
discharge Lessor for all purposes from so obtaining or maintaining
any such insurance coverage (to the extent Lessor would be deemed
to have had any responsibility therefor), and (B) it shall also
undertake, be responsible for and otherwise fully perform and comply
with all of' the obligations provided for herein that are not
related to the obtaining and maintaining of such insurance coverage,
and that it shall not be entitled to any credit or other
compensation, nor shall Lessor have any responsibility to Lessee or
any other person, with respect to such obligations or any other
obligations not expressly assumed by it hereunder.
11. LOSS AND DAMAGE. (a) Lessee assumes the risk of direct
and consequential loss and damage to the .Equipment from all causes.
Except as provided in this Section 11 for discharge upon payment of
Stipulated Loss Value, no loss or damage to the Equipment or any
part thereof shall release or impair any obligations of Lessee under
this Lease. Without limiting Sections 5, 7, 8, 13 or any other
provision hereof, Lessee agrees that Lessor shall not incur any
liability to Lessee for any loss of business, loss of profits,
expenses, or any other Claims resulting to Lessee by reason of any
failure of or delay in delivery or any delay caused by any non-
performance, defective performance, breakdown of the Equipment, nor
shall Lessor at any time be responsible for personal injury or the
loss or destruction of any other property resulting from the
Equipment. In the event of loss or damage to any item of Equipment
which does not constitute a Total Loss, Lessee shall at its sole
cost and expense, promptly repair and restore such item of Equipment
to the condition required by this Lease. Provided that no Default
or default has occurred and is then continuing, upon receipt of
evidence reasonably satisfactory to Lessor of completion of such
repairs, Lessor will apply any net insurance proceeds received by
Lessor on account of such loss to the cost of repairs. Upon the
occurrence of Total Loss during the Term of this Lease, Lessee shall
give prompt notice thereof to Lessor. On the next date for the
payment of Basic Rent, Lessee shall pay to Lessor the Rent due on
that date plus the Stipulated Loss Value of the item or items of the
Equipment with respect to which the Total Loss has occurred and any
other sums due hereunder with respect to that Equipment (less any
net insurance proceeds or net condemnation award actually paid to
Lessor to compensate it for such Total Loss). Upon Lessor's receipt
of such payment in good collected indefeasible funds with respect
to an Equipment Schedule, such Equipment Schedule and the obligation
to make future payments of Basic Rent thereunder shall terminate
solely with respect to the Equipment or items thereof so paid for
and (unless any insurer shall otherwise demand) Lessor shall be
deemed to have conveyed all of its right, title and interest therein
to Lessee "AS IS, WHERE IS" and otherwise subject to Section 7
hereof. Stipulated Loss Value shall be determined as of the next
date on which a payment of Basic Rent is or would be due after a
<PAGE>
Total Loss or other termination of the subject Equipment Schedule,
after payment of any Basic Rent due on such date, and the applicable
percentage factor shall be that which is set forth on the SLV
Schedule with respect to such Basic Rent payment.
(b) Notwithstanding the foregoing or any other provision
hereof to the contrary, in the event any item(s) of Equipment
suffers a Total Loss and the insurance carrier providing coverage
obtained by Lessee against such Total Loss, has as a result of such
Total Loss, agreed in writing to pay to Lessor as the sole loss
payee proceeds of such coverage in an amount equal to the Stipulated
Loss Value (determined as of the Basic Rent payment date next
preceding such Total Loss, but otherwise in accordance with the
preceding clause (b)), Lessee' s obligation to pay future
installments of Basic Rent for such item(s) of Equipment suffering
a Total Loss shall cease as of the Basic Rent payment date preceding
the Total Loss thereof, and Lessee shall thereupon be relieved of
its obligation to pay the Stipulated Loss Value thereof; provided,
that (i) Lessee has given prompt written notice of such Total Loss
to Lessor and the appropriate insurer(s) (which notice shall include
Lessee's written election that it intends that this clause (b) shall
apply to such Total Loss); (ii) no default or Default occurs prior
to Lessor's receipt of all amounts due from Lessee and such insurer
pursuant hereto in good collected indefeasible funds; (iii) such
insurer neither (A) repudiates its obligation to the amount required
above or fails to pay such amount to Lessor in good collected
indefeasible funds within 90 days after the date of the Total Loss,
nor (B) suffers an event of the type described in Section 14(a)(iv);
and (iv) Lessee takes all actions as shall be requested by Lessor
with respect to the insurance coverage, or otherwise necessary to
facilitate the payment of the insurance proceeds required above.
Upon the failure of any of the conditions set forth in the proviso
in the preceding sentence, Lessee shall immediately be liable to and
pay to Lessor the full amounts that would otherwise have been due
pursuant to paragraph (a) of this Section 11. To the extent Lessee's
obligation to pay the Stipulated Loss Value of any item of Equipment
is satisfied by Lessor's receipt of insurance proceeds as provided
above, and not by funds in such amount paid by Lessee in the manner
required herein, Lessor shall have no obligation to convey such item
of Equipment to Lessee.
12. REDELIVERY. (a) In the event Lessor exercises its remedies
under Section 14(c)(2) hereof, Lessee shall, at its own expense,
return the Equipment to Lessor within the period designated by
Lessor, in a condition that satisfies all of the requirements of
this Lease (including Section 6 hereof), and free and clear of all
Liens except Liens resulting from claims against Lessor not relating
to the ownership or operation of such Equipment, by delivery to such
place within the Continental United States as Lessor shall specify.
In addition to Lessor's other rights and remedies hereunder, if
repairs are necessary to place the .Equipment in the condition
required in this Section, Lessee shall be liable for and pay to
Lessor the full amount of the costs and expenses incurred and/or
paid by Lessor to accomplish such repairs.
13. INDEMNITY. Lessee assumes and agrees to indemnify, defend
and keep harmless, even if such Claims are groundless, false or
fraudulent, Lessor (which for the purposes of this Section 13 shall
also include AllyCapital Corporation and its affiliates ( Ally ) and
any assignee of Lessor's rights, obligations, title or interest
under any Equipment Schedule notwithstanding any assignment made by
Ally of its interests herein), its agents and employees, from and
against any and all Claims (other than with respect to any such
indemnitee, such as may directly and proximately result from the
gross negligence or wilful misconduct of such indemnitee; but Lessee
does agree to indemnify each such indemnitee against its own
negligence), by paying (on an after-tax-basis, if to Lessor) or
otherwise discharging same, when and as such Claims shall become
due, including any Claims arising on account of (a) this Lease, any
Equipment Schedule, or any other Lease Documents, or (b) the
Equipment, or any part thereof, including the ordering, acquisition,
delivery, installation or rejection of the Equipment, the
possession, maintenance, use, condition, or ownership of operation
of any item of Equipment, and by whomsoever owned, used or operated,
during the term of this Lease or any Equipment Schedule with respect
to that item of Equipment, the existence of latent and other defects
(whether or not discoverable by Lessor or Lessee) any claim in tort
for negligence or strict liability, and any claim for patent,
trademark or copyright infringement, or the loss, damage,
destruction, removal, return, surrender, sale or other disposition
of the Equipment, or any item thereof, or for whatever other reason
whatsoever. Lessor shall give Lessee prompt notice of any claim or
liability hereby indemnified against and Lessee shall be entitled
to control the defense thereof, so long as Lessee is not in Default;
provided, however, that Lessor shall have the right to approve
defense counsel selected by Lessee.
14. DEFAULT; REMEDIES. (a) A default shall be deemed to have
occurred hereunder (solely with respect to the obligations and other
matters addressed in the second sentence of Section 1 hereof) and
under an Equipment Schedule ("Default ) if (i) Lessee shall fail to
make any payment of Rent or any other payment hereunder, thereunder,
<PAGE>
or under any other Lease Document relating thereto, within ten (10)
days after the same shall have become due; or (ii) Lessee shall
fail to obtain and maintain the insurance required pursuant thereto;
(iii) (1) Lessee shall fail to perform or observe any other
covenant, condition or agreement to be performed or observed by it
thereunder or under any other Lease Document relating thereto and
such failure shall continue unremedied for a period of thirty (30)
days after the earlier of (A) actual knowledge thereof by any
officer of Lessee, or (B) written notice thereof to Lessee by
Lessor; or (2) Lessee repudiates this Lease or such Equipment
Schedule, or any pan hereof or thereof, or attempts to reject or
revoke acceptance of any Equipment to be leased or leased thereunder
(except for any rejection permitted by the last sentence of Section
5 of this Lease), or (iv) Lessee shall (1) be generally not paying
its debts as they become due, which, in the aggregate, amount to
greater than $100,000.00; or (2) take action for the purpose of
invoking the protection of any bankruptcy or insolvency law, or any
such law is invoked against or with respect to Lessee or its
property, and any such petition filed against Lessee is not
dismissed within sixty (60) days; or (v) Lessee shall make or permit
any .unauthorized Lien against or assignment or transfer thereof or
of the Equipment or of any interest therein; (vi) any certificate,
statement, representation, warranty or audit contained herein,
therein or in any other Lease Document heretofore or hereafter
furnished with respect thereto by or on behalf of Lessee proving to
have been false in any material respect at the time as of which the
facts therein set forth were stated or certified, or having omitted
any substantial contingent or unliquidated liability or claim
against Lessee; or (vii) Lessee shall be in default under any
material obligation for the payment of borrowed money, for the
deferred purchase price of property or for the payment of any rent
under any lease agreement, and the applicable grace period with
respect thereto shall have expired; or (viii) Lessee shall have
terminated its corporate existence, consolidated with, merged into,
or conveyed or leased substantially all of its assets as an entirety
to any person (such actions being referred to as an "Event"), unless
such person is organized and existing under the laws of the United
States or any state, and not and delivers to Lessor an agreement
satisfactory in form and substance to Lessor, in its sole
discretion, containing an effective assumption by such persons of
the sole responsibility for, and agreement to pay, perform, comply
with and otherwise be liable for, in a due and punctual manner, all
of Lessee's obligations having previously arisen, or then or
thereafter arising, under any and all of the Lease Documents; and
(2) Lessor is satisfied as to the credit worthiness of such person,
and of its conformance to the other standard criteria used by Lessor
(or Lessor's affiliate or agent to the extent such affiliate or
agent and not Lessor, regularly makes decisions on Lessor s behalf
to participate or not participate in the extension of lease
financing to an equipment user); or (ix) there occurs a default
under any guaranty executed in connection with such Equipment
Schedule; or if there is an anticipatory repudiation of Lessee's
obligations hereunder, under such Equipment Schedule or any other
Lease Documents; or (x) if Lessee is a privately held corporation
and effective control of Lessee's voting capital stock, issued and
outstanding from time to time, is not retained by the present
stockholders (unless Lessee shall have provided sixty (60) days'
prior written notice to Lessor of the proposed disposition of stock
and Lessor shall have consented thereto in writing); if Lessee is
a publicly held corporation and, as a result of or in connection
with a material change in the ownership of Lessee's capital stock,
Lessee's debt to worth ratio then equals or exceeds twice Lessee s
debt to worth ratio as of the date of this Lease, without the prior
written consent of Lessor. As used herein, "debt to worth ratio"
shall mean the ratio of (1) Lessee's total liabilities which, in
accordance with GAAP, would be included in the liability side of a
balance sheet, to (2) Lessee's tangible net worth including the sum
of the par or stated value of all outstanding capital stock, surplus
and undivided profits, less any amounts attributable to goodwill,
patents, copyrights, mailing lists, catalogs, trademarks, bond
discount and underwriting expenses, organization expense and other
intangibles, all as determined in accordance with GAAP.
(b) Although each Equipment Schedule executed pursuant
to this Lease shall constitute a separate instrument of lease, the
occurrence of a Default hereunder or with respect to any Equipment
Schedule shall, at the sole discretion of Lessor constitute a
Default with respect to any one or more of the remaining Equipment
Schedules. Notwithstanding anything set forth herein, Lessor may,
but shall not have any obligation to (Lessee hereby waiving any
rights it may have to require Lessor to marshall assets), (i)
exercise all rights and remedies hereunder independently with
respect to each Equipment Schedule; or (ii) apply any collateral and
the proceeds thereof in which Lessor holds a security interest with
respect to a particular Equipment Schedule to Lessee's obligations
under such Equipment Schedule or any one or all of the remaining
Equipment Schedules.
(c) Upon a Default hereunder or under an Equipment
Schedule, as the case may be, Lessor may, at its option, declare
this Lease or such Equipment Schedule to be in default and,
effective ten days after the date of written notice to Lessee
(without election of remedies), and at any time thereafter, may
<PAGE>
exercise any and all rights and remedies of a secured party under
the Code and in addition thereto, at its sole discretion, do any one
or more of the following, all of which are authorized by Lessee with
respect to such Equipment Schedule as Lessor in its sole discretion
shall elect (the extent permitted by, and subject to compliance
with, any mandatory requirements of Applicable Law then in effect):
(i)(1) declare the following amounts to be
immediately due and payable, as liquidated damages and not as a
penalty (and in lieu of future rentals and other obligations then
due thereunder), and demand or sue for, collect and apply, (A) all
Basic Rent due and unpaid as of the payment date immediately
preceding the Default, plus a pro-rated daily rent in the amount set
forth in Section 3(b)(i) of such Equipment Schedule for the period
from such preceding payment date to the date of Lessor's declaration
(to the extent such daily rent is not accounted for in clause (B),
(B) by acceleration, the unpaid principal portion of the aggregate
Basic Rent payments due on or after such date for the remaining
period of the Initial Term and the Renewal Term (whether or not
Lessee has exercised its renewal option thereunder) of such
Equipment Schedule, which principal amount shall be equal to the
Stipulated Loss Value of' the Equipment leased thereunder
(determined as of the Basic Rent date next preceding the Default),
(C) all Supplemental Rent and all other sums due thereunder as of
the date of such Default; and (D) all such other charges permitted
by Applicable Law that, when received by Lessor together with all
other payments due to Lessor under this Section 15(c), shall make
Lessor whole with respect to all harms, damages, losses and expenses
suffered by Lessor as a result of the Default and Lessee's failure
to pay any Rent due as a result thereof on the date required
hereunder; provided, that if a Default described in subsection
(a)(iv) above, or if a Default shall have occurred and be continuing
at any time after the occurrence of an event that is similar in
nature to any of the events described in subsection (a)(iv), then,
without further action or notice of any kind, the amounts described
above shall immediately become due and payable; and/or
(ii)(1) require Lessee to assemble any or all of the
Equipment at the location to which the Equipment was delivered or
the location to which such Equipment may .have been moved by Lessee
or to return promptly, any or all of the Equipment to Lessor at the
location, and otherwise in accordance with all of the terms of
Section 12 hereof; and/or (2) take possession of and render unusable
by Lessee any or all of the Equipment, wherever it may be located,
without any court order or other process of law (and if Lessor does
seek the entry of such an order, Lessee agrees to waive any notice
or opportunity to be heard with respect thereto) and without
liability for any damages occasioned by such taking of possession
(any such taking of possession shall constitute an automatic
termination of this Lease as it applies to those items taken without
further notice, and such taking of possession shall not prohibit
Lessor from exercising its other remedies hereunder); and/or (3) at
Lessor's request, Lessee shall promptly execute and deliver to
Lessor such instruments of title and other documents as Lessor may
deem necessary or advisable to enable Lessor or an agent or
representative designated by Lessor, at such time or times and place
or places as Lessor may specify, to obtain possession of all or any
part of any rights in respect of' the Equipment the possession of
which Lessor shall at the time be entitled hereunder; and if Lessee
shall for any reason fail to execute and deliver such instruments
and documents after such demand by Lessor, Lessor may (A)obtain a
judgment conferring on Lessor the right to immediate possession and
requiring Lessee to deliver such instruments and documents to
Lessor, to the entry of which judgment Lessee hereby specifically
consents, and (B) pursue all or part of such Equipment wherever it
may be found and may enter any of the premises wherever such
Equipment may be, or is supposed to be, and search for such
equipment and take possession of and remove same; and/or (4) have
the right, but without any obligation to (A) use, operate, store,
control, insure or manage the Equipment and to carry on the business
and to exercise all rights and powers of Lessee relating to the
Equipment as Lessor shall deem best, including the right to remove
Liens, cure violations of Applicable Law, and enter into any and all
such agreements with respect thereto and with respect to the
maintenance, condition, operation, leasing, storage or disposition
of the Equipment or any part thereof as Lessor may determine, (B)
collect and receive all Proceeds, without prejudice, however, to
the right of Lessor under any provision of this Lease to collect and
receive all cash held by, or required to be deposited with Lessor
hereunder, and (C) apply such Proceeds, less costs of collections,
in the manner provided in clause (iii)(A) below; and/or
(iii) subject to any right of Lessee to redeem such
Equipment, sell or otherwise dispose of any or all of such Equipment
whether or not in Lessor's possession, and without instituting any
legal proceedings whatsoever, in a commercially reasonable manner
at public or private sale with notice to Lessee (the parties
agreeing that ten (10) days' prior written notice shall constitute
adequate notice of any such sale); and such sale or disposition may
be (1) by public auction to the highest bidder, in one lot as an
<PAGE>
entirety or in separate lots, either for cash or on credit and on
such terms as Lessor may determine, and at any place (whether or not
it be the location of the Equipment or any part thereof) designated
in such notice, and (2) be adjourned from time to by announcement
at the time and place appointed for such sale or sales or for any
such adjourned sale or sales, without further published notice, and
Lessor may bid for and purchase, at its sole discretion, the
Equipment or any part thereof at such sale, it being understood,
however, that without the consent of' Lessor, neither Lessee nor any
affiliate of or any other person acting directly or indirectly for
or on behalf of Lessee or any affiliate of Lessee may be the
purchaser at any such private sale (except for the full amount due
to Lessor under such Equipment Schedule, and under any other Lease
Documents collateralized thereby); and apply the proceeds of such
disposition and all Proceeds: (A) First, to the payment of all
costs of enforcement, including expenses of any sale, lease or other
disposition, expenses of any taking, attorneys' fees, court costs
and other expenses incurred or advances made by Lessor in protection
of its rights or otherwise pursuant to its exercise of remedies and
to provide adequate indemnity to Lessor against all Impositions and
Liens which by Law have, or may have, priority over the rights of
Lessor to the money so received by Lessor; (B) Second, to the
payment of Lessee s obligations under the Equipment Schedule, and
under any other Lease Documents collateralized thereby; (C) Third,
to the payment of any surplus thereafter remaining to Lessee or to
whosoever may be entitled thereto; and in the event that the
Proceeds and Remaining Proceeds are insufficient to pay the amounts
specified in clauses (A) and (B) above, Lessor may collect such
deficiency from Lessee; and/or
(iv) terminate this Lease or such Equipment
Schedule; and/or
(v) proceed by appropriate court action, either
at law or in equity in bankruptcy, whether for the specific
performance of any covenant or agreement herein contained or in
execution or aid of any power herein granted; or for foreclosure
hereunder, or for the appointment of a receiver or receivers for the
Equipment or any part thereof, for the recovery of a judgment for
the obligations thereby secured or for the enforcement of any other
proper, legal or equitable remedy available under Applicable Law,
including Section 9501 et seq. of the Code.
(d) Unless otherwise provided above, a termination
pursuant hereto shall occur only upon written notice by Lessor to
Lessee and, unless Lessor is terminating this Lease, only with
respect to the Equipment Schedule as Lessor specifically elects to
terminate in such notice. Except as to the Equipment Schedule with
respect to which there is a termination, the remaining Equipment
Schedules shall continue in full force and effect and Lessee shall
be and remain liable for the full performance of all its obligations
thereunder and under the remaining Lease Documents. In addition,
Lessee shall be liable for all reasonable legal fees, all court
costs and other expenses incurred by reason of any Default or the
exercise of Lessor's remedies, including all expenses incurred in
connection with the return of any Equipment in accordance with the
terms of Section 12 hereof or in placing such Equipment in the
condition required by Section 12. No right or remedy referred to
in this Section 14 is intended to be exclusive, but each shall be
cumulative and shall be in addition to any other remedy referred to
above or otherwise available at law or in equity, and may be
exercised concurrently or separately from time to time. The failure
of Lessor to exercise the rights granted hereunder upon any default
or Default by Lessee shall not constitute a waiver of any such right
upon the continuation or reoccurrence of any such' default or
Default. In no event shall the execution of an Equipment Schedule
constitute a waiver by Lessor of any preexisting default or Default
in the performance of the terms and conditions hereof.
15. ASSIGNMENT BY LESSOR AND LESSEE. WITHOUT THE PRIOR
WRITTEN CONSENT OF LESSOR (WHICH SHALL NOT UNREASONABLY BE
WITHHELD), LESSEE WILL NOT ASSIGN ANY OF ITS RIGHTS NOR DELEGATE ANY
OF ITS OBLIGATIONS HEREUNDER, SUBLET THE EQUIPMENT OR OTHERWISE
PERMIT THE EQUIPMENT TO BE OPERATED OR. USED BY, OR TO COME INTO OR
REMAIN IN THE POSSESSION OF ANYONE BUT LESSEE. ANY UNPERMITTED
SUBLEASE OR ASSIGNMENT BY LESSEE SHALL BE VOID AB INITIO. No
assignment or sublease, whether authorized in this Section or in
violation of the terms hereof, shall relieve Lessee of its
obligations under any Lease Document and Lessee shall remain
primarily liable under all of the. Lease Documents. Lessor may at
any time assign any or all of its rights, obligations, title and
interest under any or all of the Lease Documents, to any other
person, so long as notice is sent to Lessee. Such notice shall
provide the name and address of Lessor's assignee and the percentage
interest such assignee has acquired in the Lease. Lessee shall
acknowledge receipt of such notice in writing. Upon receipt of such
notice from Lessor, Lessee shall enter in its books and records the
name and address of the assignee (and its percentage interest in the
Lease) as the new Lessor under the Lease. In the event Lessor
<PAGE>
expressly retains the obligations of the lessor under any Lease
Document in any such assignment, Lessor's assignee shall not be
obligated to perform any duty, covenant or condition required to be
performed by the lessor under the terms of such Lease Document
(other than the covenant of quiet enjoyment specified in Section
16(d) hereof); and no breach or default by Lessor hereunder or
pursuant to any other agreement between Lessor and Lessee, should
there be one, shall excuse performance by Lessee of any provision
hereof; it being understood that in the event of a default or breach
by Lessor that Lessee shall pursue any rights on account thereof
solely against Lessor. Lessee agrees that any such assignment shall
not materially change Lessee's duties or obligations under the Lease
or any Equipment Schedule nor materially increase Lessee's risks or
burdens. Upon such assignment and except as may otherwise by
provided therein all references in this Lease, or such other
assigned Lease Document, to Lessor shall include such assignee.
Subject always to the foregoing, this Lease inures to the benefit
of, and is binding upon, the successors and assignees of the parties
hereto.
16. MISCELLANEOUS. (a) This Lease, each Equipment
Schedule, any other Lease Documents and any commitment letter
executed by the parties pertaining to such Equipment Schedules,
constitute the entire agreement between the parties with respect to
the subject matter hereof and thereof and shall not be amended or
altered in any manner except by a document in writing executed by
both parties. This Lease and all of the other Lease Documents may
be executed in any number of counterparts and by different parties
hereto or thereto on separate counterparts, each of which, when so
executed and delivered, shall be an original, but all such
counterparts shall together consist of but one and the same
instrument; provided, however, that to the extent that this Lease
or any Equipment Schedule constitutes chattel paper (as such term
is defined in the Code) no security interest in this Lease or such
Equipment Schedule may be created thereby by the transfer or
possession of any counterpart hereof or thereof, as the case may be,
other than the originally executed counterpart bearing the mark
'Original' on the first page hereof or thereof, which counterpart
shall constitute the 'Original' hereof or thereof as the case may
be, for purposes of the Code.
(b) Any provision of this Lease or any other Lease
Document which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or enforcability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction. Without limiting the
generality of the foregoing, in the event any court shall determine
that any provision hereof was unconscionable when made, such court
is hereby authorized by Lessor and Lessee to limit the application
of such unconscionable provision to the extent necessary to avoid
any unconscionable result.
(c) Each execution by Lessee of an Equipment Schedule
shall be deemed a reaffirmation and warranty that there shall have
been no material adverse change in the business or financial
condition of Lessee from the date of execution hereof. Except as
otherwise expressly provided herein, it is hereby agreed that (i)
all agreements, indemnities, representations and warranties
contained herein or in any other Lease Document shall survive, and
shall continue in effect following the execution and delivery of
this Lease and all such other Lease Documents; and (ii) with respect
to each Equipment Schedule, the provisions of Sections 7, 8, 12 and
14, together with any of Lessee's obligations under the other
provisions of this Lease, as incorporated therein, which have
accrued but not been fully satisfied, performed or complied with
prior to the termination of such Equipment Schedule, shall survive
the termination thereof to the extent necessary for their full and
complete performance.
(d) Subject to the terms and conditions hereof, neither
Lessor nor any person authorized by Lessor shall interfere with
Lessee's right to peaceably and quietly hold, possess and use the
Equipment during the term of the Equipment Schedule relating
thereto. Any action by Lessee against Lessor for any default by
Lessor under this Lease or any Equipment Schedule, shall be
commenced within one (1) year after any such cause of action
accrues.
(e) Lessee irrevocably appoints Lessor as Lessee's
attorney-in-fact (which power shall be deemed coupled with an
interest) to execute on Lessee's behalf and file all UCCs and
amendments Lessor deems advisable to establish, protect, perfect or
obtain priority for the security interest granted herein, to
execute, endorse and deliver any documents and checks or drafts
relating to or received in payment for any loss or damage under the
policies of insurance required by the provisions of Section 10
hereof, but only to the extent that the same relates to the
Equipment.
(f) LESSOR AND LESSEE HEREBY WAIVE TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO WHICH LESSEE AND/OR LESSOR MAY BE PARTIES
ARISING OUT OF OR IN ANY WAY PERTAINING TO ANY OF THE LEASE
DOCUMENTS. IT IS HEREBY AGREED AND UNDERSTOOD THAT THIS WAIVER
<PAGE>
CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST PARTIES
TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES
WHO ARE NOT PARTIES TO THIS LEASE OR SUCH OTHER LEASE DOCUMENTS.
THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE
PARTIES AND THE PARTIES HEREBY ACKNOWLEDGE THAT NO REPRESENTATIONS
OF THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY
ITS EFFECT. EACH OF LESSOR AND LESSEE FURTHER ACKNOWLEDGE THAT IT
HAS BEEN REPRESENTED IN THE SIGNING OF THIS LEASE AND THE OTHER
LEASE DOCUMENTS AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT
LEGAL COUNSEL, SELECTED OF THEIR OWN FREE WILL, AND THAT THEY HAVE
HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
(g) All notices (excluding billings and communications in
the ordinary course of business) hereunder shall be in writing,
delivered personally or by overnight courier service, sent by
facsimile transmission (with confirmation of receipt), or sent by
certified mail, return receipt requested, addressed to the other
party at its respective address stated below the signature of such
party or at such other address as such party shall from time to
time designate in writing to the other party, and shall be effective
from the date of mailing.
(h) This Lease and all of the other Lease Documents shall
not be effective unless and until accepted by execution by an
officer of Lessor at the address, in the State of California, as set
forth below the signature of Lessor. THIS LEASE AND ALL OF THE
OTHER LEASE DOCUMENTS, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER AND THEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA (WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF
SUCH STATE), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, REGARDLESS OF THE LOCATION OF THE EQUIPMENT. The
parties agree that any action or proceeding arising out of or
relating to this Lease may be commenced in any state or Federal
court in the State of California, and agree that a summons and
complaint commencing an action or proceeding in any such court shall
be property served and shall confer personal jurisdiction if served
personally or by certified mail to it at its address herein below
set forth, or as it may provide in writing from time to time, or as
otherwise provided under the laws of the State of California.
17. DEFINITIONS AND RULES OF CONSTRUCTION. (a) The following
terms, when capitalized (if applicable) or otherwise used below,
have the following meanings:
"Abatement Amount": with respect to any Abatement Period,
an amount equal to (i) any installment(s) of Basic Rent, any
fraction thereof accruing pursuant to the Equipment Schedule
covering the item of Equipment having suffered an Impairment & Use,
multiplied by (ii) a fraction having (x) a numerator equal to the
amount of Total Invoice Cost allocable to such item of Equipment,
and (y) a denominator equal to the Total Invoice Cost of all of the
items of Equipment then being leased to Lessee under such Equipment
Schedule.
"Abatement Period": with respect to any item of Equipment,
that period commencing upon the Impairment Date relating thereto,
and continuing until the earlier of (i) Lessor having either (x)
cured the Impairment of Use relating thereto, or (y)provided Lessee
with Replacement Equipment in substitution therefor, or (ii) the
expiration of the Term of such Equipment Schedule.
"Administrative Fee": with respect to each payment of Rent
that shall become due and payable hereunder or under or with respect
to any Equipment Schedule, an amount equal to five (5) percent of
such Rent payment; provided, that if such charge exceeds the highest
charges of such type permitted by Applicable Law, then the
Administrative Fee shall be the highest such charges permitted by
Applicable Law.
"Applicable Law": any applicable Law, including any Law that
may apply to Lessee, its properties and operations, the Equipment
or related property or the operation, modification, condition,
maintenance, ownership, leasing or use thereof (including any
product thereof), or any transaction contemplated hereunder or under
any other Lease Document, including any environmental law, federal
or state securities law, commercial law (pertaining to the rights
and obligations of sellers, purchasers, debtors, secured parties,
or to any other pertinent matter), zoning, sanitation, siting or
building law, energy, occupational safety and health practices, or
any other Law.
"Base Lease Commencement Date": for each Equipment Schedule,
as defined in Section 2 thereof.
<PAGE>
"Basic Rent": the rental installments payable pursuant to each
Equipment Schedule for the Interim Term, the Basic Term and the
Renewal Term, in the amounts and on the dates set forth therein.
"business day": any day, other than Saturday, Sunday, or legal
holiday for commercial banks under the laws of the State of the
governing Law of this Lease.
"Claims": all claims, harms, judgments, good faith settlements
entered into, suits, actions, debts, obligations, damages (whether
incidental, consequential or direct), demands (for compensation,
indemnification, reimbursement or otherwise) losses, penalties,
fines, liabilities (including strict liability), charges that Lessor
has incurred or is responsible for in the nature of interest, Liens,
and costs (including attorneys' fees and disbursements and any other
legal or non legal expenses of investigation or defense of any
Claim, whether or not such Claim is ultimately defeated, or
enforcing the rights, remedies or indemnities provided for
hereunder, or otherwise available at law or equity to Lessor), of
whatever kind or nature, contingent or otherwise, matured or
unmatured, foreseeable or unforeseeable, by or against any person.
"Code" or "Uniform Commercial Code": the Uniform Commercial
Code as in effect in California or in any other applicable
jurisdiction; and any reference to an article or section thereof
shall mean the corresponding article or section (however termed) of
any such other applicable version of the Uniform Commercial Code.
"default": except when inconsistent with the context of any
provision hereof, an event which, but for the lapse of time or the
giving of notice or both would be a Default.
"Equipment": with respect to each Equipment Schedule, the
property described therein, together with all appliances, parts,
instruments, accessories, furnishings, which are from time to time
incorporated in the Equipment, or having been so incorporated, are
later removed therefrom, unless title thereto is expressly released
by Lessor, and all replacements of, and all additions, improvements
and accessions to any and all thereof, and all books and records and
general intangibles (including all licenses, patents, copyrights and
trade secrets) relating thereto; and when used in the context of
Lessor's title to the Equipment (whether relating to the creation,
grant, perfection, release, priority, enforcement or application of
proceeds thereof) shall also include all other property in which
Lessor is granted a security interest hereunder or from time to time
under any Equipment Schedule.
"Equipment Schedule": any Equipment Schedule to be executed
pursuant hereto.
"GAAP": generally accepted accounting principle, applied
consistently.
"Governmental Authority": any federal, state, county,
municipal, regional or other governmental authority, agency, board,
body, instrumentality or court, in each case, whether domestic or
foreign.
"Impairment Date": the date of the occurrence of' any
Impairment of Use.
"Impairment Event": with respect to any item of Equipment,
Lessor's breach of its agreements in Section 16(d).
"Impairment of Use": Lessee is denied use or possession any
item of Equipment to a material extent, as a direct and primary
result of an Impairment Event; provided, that such event is
certified to Lessor in writing by Lessee's responsible officer, and
verified to Lessor's satisfaction by Lessor's independent
investigation or such other evidence relating thereto as Lessor may
reasonably request.
"Imposition": with respect to each Equipment Schedule, any
title, recordation, documentary stamp and other fees, taxes,
assessments and all other charges or withholdings of any nature
(together with any penalties or fines thereon) arising at any time
upon or relating thereto or to the Equipment leased thereunder, or
to the delivery, acquisition, ownership, use, operation, leasing or
other disposition of such Equipment or upon the Rent payable
thereunder, whether the same be assessed to Lessor or Lessee.
"Initial Term": for each Equipment Schedule, the monthly
period specified in Section 2 thereof commencing on the Base Lease
Commencement Date.
"Interim Term": for each Equipment Schedule, the period from
the effective date thereof to the Base Lease Commencement Date.
"Law": any law, rule, regulation, ordinance, order, code,
common law, interpretation, judgment, directive, decree, treaty,
injunction, writ, determination, award, Permit or similar norm or
decision of any Governmental Authority.
"Lease": this Equipment Lease Agreement.
<PAGE>
"Lease Documents": collectively, the Lease, the Equipment
Schedules, and all instruments, documents, certificates and
agreements delivered pursuant hereto.
"Lien": any mortgage, pledge, lease, sublease, security
interest, attachment, charge, encumbrance or right or claim of
others whatsoever (including any conditional sale or other retention
agreement).
"Permit": any action, approval, certificate of occupancy,
consent, waiver, exemption, variance, franchise, order, permit,
authorization, right or license, or other form of legally required
permission, of or from a Governmental Authority.
"Permitted Lien": (a) Lessor s and Lessee s respective rights,
titles and interest in the Equipment, (b) mechanics, materialmen,
laborers, employees or suppliers Liens and similar Liens arising by
operation of Law and incurred by Lessee in the ordinary course of
business for sums that are not yet delinquent or are being contested
in good faith by negotiations or by appropriate proceedings which
suspend the collection and enforcement thereof (provided, that the
existence of such Lien while such negotiations or proceedings are
pending does not involve any substantial risk (in Lessor's
discretion) of the sale, forfeiture or loss of the Equipment or any
therein, and for which adequate reserves have been provided in
accordance with GAAP), and (c) Liens arising out of any judgments
or awards against Lessee which have been adequately bonded to
protect Lessor's interests or with respect to which a stay of
execution has been obtained pending an appeal or a proceeding for
review.
"person": any individual, corporation, partnership, joint
venture, or other legal entity or Governmental Authority, whether
related or unrelated to Lessee or Lessor.
"Proceeds": all tolls, rents, revenues, issues, income,
products, profits and other proceeds of the Equipment or any part
thereof.
"Purchase Documents": all documents, instruments, licenses and
agreements pertaining to the acquisition of any of the rights, title
and interests in the Equipment.
"Purchase Price": for each Equipment Schedule, the amount
specified as such therein.
"Renewal Term": for each Equipment Schedule, unless Lessee
elects to purchase the Equipment on the last day of the Initial
Term, the consecutive monthly period set forth therein.
"Rent": collectively, the Basic Rent and the Supplemental Rent.
"Replacement Equipment": any item(s) of Equipment substituted
by Lessor for any item of Equipment suffering an Impairment of Use,
having the same value, utility and condition that the replaced item
of Equipment had on the date next preceding the Impairment Date.
"Stipulated Loss Value": with respect to each Equipment
Schedule, the product of the Total Invoice Cost of the Equipment
leased thereunder, and the applicable percentage factors set forth
on the Schedule of Stipulated Loss Values attached hereto.
"Supplemental Rent": all amounts, liabilities and obligations
(other than Basic Rent) which" Lessee assumes or agrees to pay to
Lessor or others hereunder, or under any other Lease Document, with
respect to an Equipment Schedule, including the Stipulated Loss
Value, the Purchase Price, all Administrative Fees and payments
constituting indemnities, reimbursements, expenses and other charges
payable pursuant to the terms thereof.
"Supplier": the person from whom Lessor is purchasing the
Equipment.
"Supply Contract": any written contract from the Supplier of
the Equipment, pursuant to which Lessor has purchased the Equipment
for lease to Lessee under an Equipment Schedule.
"Term": the period for which Equipment is leased under any
Equipment Schedule, including the Interim Term, the Initial Term
and, to the extent Lessee does not purchase the Equipment on the
last day of the Initial Term, the Renewal Term.
"title": when used in the context of Lessor's title to any
Equipment, such title retained by Lessor, which, after giving effect
to the provisions of this Lease, constitutes a first priority
security interest in such Equipment under Applicable Law.
"Total Invoice Cost": with respect to each Equipment Schedule,
the amount specified as such thereon.
"Total Loss": any of (a) the actual or constructive total loss
of any item of the Equipment; or (b) the loss, disappearance, theft
or destruction of any item of the Equipment; or (c) damage
(including any contamination by hazardous substances) to any item
of the Equipment to such extent as shall make repair thereof
uneconomical, or shall render any item of the Equipment permanently
unfit for normal use, for any reason whatsoever; or (d) the
condemnation, confiscation, requisition, seizure, forfeiture or
other taking of title to or use of any item of the Equipment, or any
imposition of a Lien thereon by any Governmental Authority in excess
of $___________; or (e) as a result of any Law or other action taken
by any Governmental Authority, the use of the Equipment in the
<PAGE>
normal course of Lessee's business shall have been prohibited (i)
indefinitely or (ii) for a period in excess of (1) 60 days, or (2)
for a period that extends beyond the then existing Term; all of the
foregoing, to the extent established to the reasonable satisfaction
of Lessor.
"UCC": a Uniform Commercial Code financing statement.
(b) Any defined term used in the singular preceded by "any"
indicates any number of the members of the relevant class. (i)
"including shall mean containing, embracing or involving all of the
enumerated items, but not limited to such items unless such term is
followed by the words "and limited to, or similar words; and (ii)
use of the word "or" shall mean at least one, but not necessarily
one, of the alternatives enumerated. Any Lease Document or other
agreement or instrument referred to herein means such agreement or
instrument as supplemented and amended from time to time. Any
reference to Lessor or Lessee shall include their permitted
successors and assigns. Any reference to a Law shall also mean such
Law as amended, superseded or replaced from to time. Unless
otherwise expressly provided herein to the contrary, all actions
that Lessee takes or is required to take under this Lease or any
other Lease Document, shall be taken at Lessee s sole cost and
expense, and all such costs and expenses shall constitute Claims and
be covered by Section 14 hereof. To the extent Lessor is required
to give its consent to Lessee with respect to any matter, the
reasonableness of Lessor's withholding of such consent shall be
determined based on the then existing circumstances; provided, that
Lessor's withholding of its consent shall be deemed reasonable for
all purposes if (i) the taking of the action that is the subject of
such request, might result (in Lessor s discretion), in (1) an
impairment of Lessor's rights, title or interests hereunder or under
any Equipment Schedule or other Lease Document, or to the Equipment,
or (2) expose Lessor to any Claims, or (ii) to the extent Lessee
fails to provide promptly to Lessor any filings, certificates,
opinions or indemnities specified by Lessor to Lessee in writing.
(c) Lessor and Lessee agree that the definitions and rules
of construction herein shall constitute an integral part of this
Lease.
IN WHEREOF, the parties hereto have caused this Lease to be
duly executed as of the day and year first above set forth.
ALLY CAPITAL CORPORATION PERMA-FIX ENVIRONMENTAL SERVICES,
INC. and AMERICAN RESOURCE RECOVERY
CORPORATION and INTEGRATED RESOURCE
RECOVERY, INC. and CLARK PROCESSING,
INC. AS CO-LESSEES
PERMA-FIX ENVIRONMENTAL SERVICES,
INC.
By: /s/ James A. Kamradt By: /s/ Robert W. Foster, Jr.
_____________________ ____________________________
Name: James A. Kamradt Name: Robert W. Foster, Jr.
Title: Vice President- Title: President
Production
2330 Marinship Way, Suite 300 5775 Peachtree-Dunwoody Road,
Sausalito, California 94965 Building G, Suite 520
Atlanta, George 30342
<PAGE>
AMERICAN RESOURCE RECOVERY
CORPORATION
By: /s/ Robert W. Foster, Jr.
_____________________________
Name: Robert W. Foster, Jr.
Title: President
1827 Latham Street
Memphis, Tennessee 38106
INTEGRATED RESOURCE RECOVERY, INC.
By: /s/ Robert W. Foster, Jr.
_______________________________
Name: Robert W. Foster, Jr.
Title: President
4001 South West 47th Avenue,
Suite 211
Davie, Florida 33314
CLARK PROCESSING, INC.
By: /s/ Robert W. Foster, Jr.
__________________________________
Name: Robert W. Foster, Jr.
Title: President
300 South West End Avenue
Dayton, Ohio 45427
<PAGE>
ENVIRONMENTAL RIDER
RIDER NO. 01
This Rider is a part of that certain Equipment Lease Agreement
dated as of October 12, 1994 (the "Lease") between ALLY CAPITAL
CORPORATION ("Lessor") and PERMA-FIX ENVIRONMENTAL SERVICES, INC.,
a Delaware corporation, and AMERICAN RESOURCE RECOVERY CORPORATION,
a Tennessee corporation, and INTEGRATED RESOURCE RECOVERY, INC., a
Florida corporation, and CLARK PROCESSING, INC., an Ohio corporation
AS CO-LESSEES ("Lessee").
In addition to and without limiting any of the other provisions
of this Lease, Lessee and Lessor hereby agree as follows:
A. DEFINITIONS AND RULES OF CONSTRUCTION. Section 17 of this
Lease is hereby supplemented by adding the following terms, which
when capitalized (or otherwise used) as below, shall have the
following meanings:
"Applicable Law": shall also include any Applicable Permit.
"Applicable Permit": any Permit, including any zoning,
environmental protection, pollution, sanitation, safety, energy,
siting or building Permit that Lessee shall be required to obtain
to comply with Applicable Law, including any Permit that is
necessary to operate, modify, construct, convey, maintain, acquire,
own, lease, sublease or use the Equipment (including any product
thereof), or related property, to own, lease or operate Lessee's
properties, conduct its business or necessary to enter into any of
these Lease Documents or to consummate any of the transactions
contemplated thereby.
"Claims": shall also include all Environmental Claims.
"Environmental Claims": any Claims by a Governmental Authority or
other person that are incurred, arise or effectuated at any time as
a result of existence of any Environmental Contamination or
violation of any Environmental Law pertaining to any Equipment or
related property, or allegation thereof, regardless of whether the
existence (alleged or otherwise) of such Environmental Contamination
or the violation of Environmental Law originated or resulted from
Equipment or related property, or arose prior to the present
ownership or operation of the Equipment or related property,
including: (a) Claims for personal injury or injury to or
destruction, loss or diminution in value of property or natural
resources occurring to, upon, near or off any Equipment or related
properly, foreseeable or unforeseeable; (b) Claims relating to any
Remedial Action, including any demolition and rebuilding of any
improvements on real property; (c) Claims for indemnity or
reimbursement or for the disgorgement of amounts paid to Lessor or
on its behalf, or resulting from any failure to report discharges
promptly; and (d) Claims incurred for the services of attorneys,
engineers, consultants, contractors, experts, laboratories and all
other costs reasonably incurred in connection with the investigation
or Remedial Actions taken with respect to Hazardous Substances or
violation of Environmental Law, including the preparation of any
feasibility studies or reports of the performance of any Remedial
Action.
"Environmental Contamination": any existence, uncontained
presence, leak, discharge, emission, aggregation, release, or
abandonment, or threat or suspicion of any of the foregoing, or
abandonment of Hazardous Substances in, upon, about, beneath, or off
the Equipment or related property or arising from the Equipment or
related property, that may require Remedial Action or may result in
a violation of any Environmental Law pertaining to the Equipment or
related property, or may result in Claims.
"Environmental Law" or "environmental law": any Applicable Law
relating to safety, land use, pollution or protection of human
health or species of wildlife or plants or the environment
(including ambient air, surface water, groundwater, land surface or
subsurface strata), including, Laws relating to (a) maintenance of
a public or private nuisance, (b) carrying on of an abnormally
dangerous activity, (c) industrial hygiene, (d) Environmental
Contamination, including to air, water, land, groundwater or
personal property, (e) withdrawal or use of groundwater, (f)
Hazardous Substances, including the treatment, manufacture,
processing, distribution, use, analysis, generation, storage
disposal, handling or transportation thereof and (g) any regulation,
order, notice or demand issued pursuant to such Laws, in each case,
applicable to Lessee or Lessor, the Equipment or any related
property, or the ownership or operation thereof, including the
following: (i) the Clean Air Act, (ii) the Federal Water Pollution
Control Act, the Clean Water Act and the Safe Drinking Water Act,
(iii) the Toxic Substances Control Act, (iv) the Comprehensive
Environmental Response Compensation Liability Act of 1980, as
amended ("CERCLA"), (v) the Resource Conservation and Recovery Act
("RCRA"), (vi) the Solid and Hazardous Waste Amendments of 1984,
(vii) the Occupational Safety and Health Act, (viii) the Emergency
Planning and Community Right-to-Know Act of 1978, (ix) the Solid
Waste Disposal Act, (x) the Superfund Amendment and Reauthorization
Act ("SARA"), (xi) the Hazardous Material Transportation Act, (xii)
the Endangered Species Act, (xiii) the Federal Insecticide,
Fungicide and Rodenticide Act, (xiv) the Environmental Laws listed
on Annex No. 2 to each Equipment Schedule and (xv) any other
Applicable Laws addressing matters similar to the foregoing Laws.
"Hazardous Substances" or "hazardous substances": any and all
hazardous or toxic substances, materials, and wastes, including any
material, waste or substance which is (a) oil or petroleum, or their
products or by-products (including sludge or residue), chemical
liquids or solid, liquid or gaseous products or by-products, (b)
asbestos, (c) polychlorinated biphenils, or (d) designated as
hazardous or toxic or regulated as such under any Applicable Law,
including RCRA, CERCLA, SARA, the Clean Water Act, the United States
Department of Transportation Hazardous Materials Table or by the
Environmental Protection Agency, or defined as a "hazardous
material," "hazardous substance" or "hazardous waste" under any
other Applicable Laws.
"herein," "hereof," "hereunder," etc.: in, of, under, etc. this
Lease (and not merely in, of, under, etc. the section or provision
where the reference occurs).
"related property": with respect to any Equipment, the land and
buildings at which such Equipment is or shall become located or any
personalty or real property (including any body of water) to or upon
which the Equipment may now or hereafter be attached, situated on
or near, or adjacent to.
"Remedial Action": any clean-up, remedial action, removal,
response, abatement, containment, closure, excavation, restoration
or monitoring where undertaken to comply with Environmental Law,
whether or not required by any Government Authority, or reasonably
necessary to make full economic use of the Equipment or related
property.
B. REPRESENTATIONS, WARRANTIES AND COVENANTS. In addition to
the representations, warranties and covenants provided in Section
2 of this Lease, Lessee hereby represents, warrants to and covenants
with Lessor that:
With respect to the Equipment covered by each Equipment Schedule:
(i) There are no unpermitted Hazardous Substances contained therein
<PAGE>
or at, upon, under or within any related property that does or shall
cause Lessee to be in violation of this Lease or Applicable Law;
(ii) Lessee has not caused or permitted to occur, or suffered the
occurrence of and shall not permit to exist any condition which may
cause any Environmental Contamination of such Equipment or at, upon,
under or within any related property that does or shall cause Lessee
to be in violation of this Lease or result in a violation of
Applicable Law; (iii) neither Lessee, nor any other party has been,
is or will be involved in activities relating to the Equipment or
any related property that could lead to (1) the imposition of
liability on Lessor, Lessee, or on any subsequent or former owner
or operator of the Equipment or (2) the creation of a Lien on the
Equipment under Applicable Law (including any Environmental Laws);
(iv) Lessee has not permitted, and will not permit, any person to
engage in any activity that could result in the imposition of
liability under any Environmental Laws on Lessee, Lessor or any
owner or operator of the Equipment, or would otherwise impair
Lessor's rights or title pertaining thereto; (v) all of the
Environmental Laws applicable to the Equipment, or to the operation
or ownership thereof, are listed on Annex No. 1 to such Equipment
Schedule, and Lessee is in full compliance therewith; and (vi) all
Applicable Permits, registrations, filings or notices necessary for
Lessee to comply with any Applicable Laws, are listed on Annex No.
2 to such Equipment Schedule, Lessee has obtained, completed or
given, as the case may be, and is maintaining in good standing, all
such Permits, registrations, filings or notices and is in full
compliance with all of the terms thereof; all actions necessary for
the renewal thereof have timely been taken (including the filing of
any applications); and all oft he foregoing are in full force and
effect and there are no proceedings or investigations pending or,
to the best knowledge of Lessee, threatened that seek the
revocation, cancellation, suspension or adverse modification
thereof.
C. NOTICES. In addition to the notices required by Section 3
of this Lease, Lessee shall provide written notice to Lessor (i)
promptly upon Lessee becoming aware of (A) any alleged violation of
Applicable Law, or (B) any threatened or actual suspension,
revocation or recission of any Permit necessary for Lessee to be in
compliance with the terms hereof; and (ii) promptly afar any of the
Equipment becomes lost, stolen, missing, destroyed, materially
damaged, worn out, or subject to or causing, or threatening to
cause, any Environmental Contamination.
D. CONDITIONS PRECEDENT. In addition to the conditions precedent
set forth in Section 4 of this Lease, Lessor's obligations under
each Equipment Schedule (including Lessor's obligation to purchase
and participate in the financing of the Equipment to be leased
thereunder) are conditioned upon Lessor's having received all of the
following, in form and substance satisfactory to Lessor, at least
two (2) business days prior to the date upon which Lessor purchases
the Equipment or has committed to purchase same (if sooner): (i) to
the extent requested by Lessor, a report, audit or opinion, as the
case may be, from an appraiser, environmental engineer, or other
expert, regarding any matters specified by Lessor (1) including the
value of the Equipment, as of the effective date of the Equipment
Schedule, and at the expiration of the Initial Term and any Renewal
Term, or (2) the then existing condition of the Equipment or any of
the related property, including, the absence of any past or existing
violations of Applicable Law (including any Environmental Laws); and
(ii) if Lessor is purchasing the Equipment from Lessee, (1) all of
the operating records pertaining to the storage or transportation
of the Equipment and any Environmental Contamination relating to the
Equipment Or the related property and (2) copies of all enforcement
actions for alleged violations of Applicable Laws (including
Environmental Laws), and any and all information concerning any
pending investigations pertaining to alleged violations of
Applicable Laws (including any Environmental Laws).
E. USE AND MAINTENANCE. In addition to the requirements of
Section 6 of this Lease, and without limiting the generality of
subsection (a) of Section 4 of this Lease, Lessee agrees to comply
<PAGE>
strictly and in all respects with all Applicable Laws (including all
Environmental Laws) pertaining to the Equipment or related property
(without regard to which person such Applicable Laws shall, by their
terms, be nominally imposed), unless Lessee shall be contesting the
validity thereof in good faith and by appropriate proceedings, but
only so long as Lessee's failure to so comply during the existence
of such proceedings shall not (i) involve any material risk of the
sale, forfeiture or loss of such Equipment, or any part thereof or
interest therein, (ii) result in, or involve any substantial
probability of resulting in, the creation of any Lien (other than
a Permitted Lien) on or with respect to such Equipment, or any part
thereof or interest therein, and (iii) involve the risk of the
imposition of civil or criminal fines or penalties on Lessor,
Lessee, or generally to the operators or holders of title to or
other interests in the Equipment. Lessee will maintain all records,
logs and other materials required by any Governmental Authority
having jurisdiction to be maintained in respect of any Equipment,
without regard to which person any such requirements shall, by their
terms, be nominally imposed. Lessee will procure and pay for all
Permits, franchises, inspections and licenses necessary or
appropriate in connection with any Equipment and any repair,
restoration, replacement, renewal, addition or improvement thereof
and thereto that may be required pursuant to the first sentence
of this paragraph. Lessee shall promptly forward to Lessor copies
of all orders, notices, permits, applications or other
communications and reports in connection with any discharge or the
presence of any Hazardous Substance or any other matters relating
to the Environmental Laws or similar Applicable Laws, as they may
affect Lessee, the Equipment or Lessor's or Lessee's right, title,
or interest therein. Promptly upon the written request of Lessor,
from time to time, Lessee shall provide Lessor with environmental
site assessments or environmental audit reports prepared by an
environmental engineering firm acceptable to Lessor, to assess with
a reasonable degree of certainty the presence or absence of any
Hazardous Substances and the potential cost in connection with any
Remedial Action pertaining to the Equipment or related property.
F. DISCLAIMER OF WARRANTIES. In addition to the waivers,
disclaimers and acknowledgments made in the Lease and each Equipment
Schedule, Lessee further acknowledges that: Lessor has made the
Equipment available to Lessee for examination, demanded that Lessee
inspect the Equipment using a professional in the field of
inspections pertaining to such Equipment (including compliance with
the Environmental Laws), and Lessee has, pursuant to such demand
examined the Equipment (using such an experienced inspector); the
Equipment is not to be used, and is not being acquired hereby for
use in any respect for Lessee's or any other person's personal or
family purpose, and as such, the Equipment does not constitute
"consumer goods" as such term is defined under Applicable Law; the
Equipment was selected by Lessee on the basis of its own respective
judgment, Lessee has not asked for, been given or relied upon any
statements, representations, guaranties or warranties of Lessor;
Lessor is not in the business of manufacturing or assembling
Equipment or otherwise in the business of being a vendor or
supplier, but is instead in the business of providing financial
accommodations including lease financing; AND THE PROVISIONS OF THIS
PARAGRAPH F AND SECTION 7 OF THIS LEASE HAVE BEEN NEGOTIATED BY
LESSOR AND LESSEE AND, EXCEPT FOR THE WARRANTY MADE BY LESSOR IN
SECTION 16(d) HEREOF, ARE INTENDED TO BE A COMPLETE EXCLUSION AND
NEGATION OF ANY REPRESENTATIONS, GUARANTIES, OBLIGATIONS OR
WARRANTIES OF LESSOR EXPRESS OR IMPLIED WITH RESPECT TO THE
EQUIPMENT THAT MAY ARISE PURSUANT TO ANY APPLICABLE LAW (INCLUDING
ANY ENVIRONMENTAL LAW) NOW OR HEREAFTER IN EFFECT.
G. INSURANCE. In addition to the requirements of Section 10
of this Lease, to the extent available, both the casualty and
liability insurance coverage shall insure against loss of or damage
to the Equipment, or liability to Lessor or Lessee, resulting from
Environmental Claims; provided, that Lessee shall only be obligated
<PAGE>
to obtain coverage against such Environmental Claims to the extent
such insurance shall be available at an aggregate cost, with respect
to the Equipment, of no greater than 2.5 % of the Total Invoice Cost
thereof; provided, further, that notwithstanding the then current
cost of said coverage, Lessee shall obtain such coverage to the
extent it is typically obtained and maintained by companies and
businesses similar to Lessee, in connection with their ownership or
operation of, or other activities in connection with, equipment that
is the same as or similar to the Equipment, or to the extent Lessee
currently maintains such coverage with respect to its other similar
equipment. all said insurance shall be in form and amount and with
companies reasonably satisfactory to Lessor.
H. REDELIVERY. In addition to the requirements of Section
12 of this Lease, Lessee agrees that with respect to any Equipment
or item thereof that Lessee shall be required to return or turn over
to Lessor, to the extent the continued possession and operation of
the Equipment or item of Equipment is necessary for Lessee to remain
in compliance with Applicable Law, Lessee shall immediately replace
such Equipment or item of Equipment, and in any event, Lessee shall
not upon such removal take any action or fail to take any action the
effect of which will result in a violation of Applicable Law
(including any Environmental Law); and without limiting the
generality of any other provision hereof, Lessee agrees to return
such Equipment or item of Equipment to Lessor, free from any
Hazardous Substances, and dispose of such Hazardous Substances in
compliance with all Applicable Law.
I. REMEDIES. Section 14 of the Lease shall be supplemented
as follows: (a) Lessee agrees that Lessor s remedies provided in
Section 14 and certain other Sections of this Lease shall also
expressly include the right to take Remedial Action and be
reimbursed, made whole, indemnified, held harmless and otherwise
protected by Lessee against any resulting or related Claims incurred
or suffered in connection therewith; except that Lessee agrees that
Lessor shall not have any obligation whatsoever to undertake or
consummate the same or to take or refrain from taking any other
action with respect thereto or otherwise relating to or arising in
connection with any Environmental Claim, Environmental
Contamination, Environmental Law or Hazardous Substance pursuant to
the pertinent terms of this Lease including Sections 12, 13 and 14;
(b) Lessee agrees that to the extent Lessor's ability to
dispose of the Equipment in a commercially reasonable manner may be
impeded by any violations of Applicable Law that have occurred with
respect thereto, or Lessor's actions with respect to same might
result in an Environmental Claim, Lessee hereby waives, without
limiting the generality of any other waivers, disclaimers or
indemnities herein, any claim, right, action or defense otherwise
available to it against Lessor in connection with such disposition
or Lessor's deficiency claim. Lessee hereby acknowledges that: (i)
Lessor's election to dispose of the Equipment at any point after a
Default has occurred with respect to an Equipment Schedule may be
affected by the Equipment's non-compliance with the provisions
hereof; (ii) Lessee, pursuant to its representations, agreements and
indemnities hereunder, is ultimately responsible to Lessor for any
harms (including any Environmental Claims) suffered by Lessor in
connection with any such non-compliance; and (iii) to avoid or
mitigate the imposition of Claims (including Environmental Claims)
resulting from such non-compliance it will benefit Lessee even if
such efforts (which may include abandoning the Equipment or selling
it expeditiously or after an extended period) result in there being
a deficiency, or greater amount thereof, under the Equipment
Schedules; and (iv) in furtherance thereof, Lessee hereby waives,
without limiting the generality of any other waivers, disclaimers
or indemnities herein, any claim, fight, action or defense otherwise
available to it against Lessor in connection with such disposition
or deficiency claim.
<PAGE>
J. EFFECT OF RIDER. Except as supplemented hereby, this
Lease remains unmodified by the provisions of this Rider, which
provisions are, for all purposes, hereby incorporated into and made
a part of this Lease and each Equipment Schedule.
ALLY CAPITAL CORPORATION PERMA-FIX ENVIRONMENTAL SERVICES,
INC. and AMERICAN RESOURCE RECOVERY
CORPORATION and INTEGRATED RESOURCE
RECOVERY, INC. and CLARK PROCESSING,
INC. AS CO-LESSEES
PERMA-FIX ENVIRONMENTAL SERVICES,
INC.
By: /s/ James A. Kamradt By: /s/ Robert W. Foster, Jr.
_____________________ ____________________________
Name: James A. Kamradt Name: Robert W. Foster, Jr.
Title: Vice President- Title: President
Production
2330 Marinship Way 5775 Peachtree-Dunwoody Road,
Suite 300 Building G, Suite 520
Sausalito, California 94965 Atlanta, George 30342
AMERICAN RESOURCE RECOVERY
CORPORATION
By: /s/ Robert W. Foster, Jr.
_____________________________
Name: Robert W. Foster, Jr.
Title: President
1827 Latham Street
Memphis, Tennessee 38106
INTEGRATED RESOURCE RECOVERY, INC.
By: /s/ Robert W. Foster, Jr.
_______________________________
Name: Robert W. Foster, Jr.
Title: President
4001 South West 47th Avenue,
Suite 211
Davie, Florida 33314
CLARK PROCESSING, INC.
By: /s/ Robert W. Foster, Jr.
__________________________________
Name: Robert W. Foster, Jr.
Title: President
300 South West End Avenue
Dayton, Ohio 45427
<PAGE>
Rider No. 02.
This Rider is a part of that certain Equipment Lease Agreement
dated as of October 12, 1994 (this "Lease") between ALLY CAPITAL
CORPORATION ("Lessor") and PERMA-FIX ENVIRONMENTAL SERVICES, INC.,
a Delaware corporation, and AMERICAN RESOURCE RECOVERY CORPORATION,
a Tennessee corporation, and INTEGRATED RESOURCE RECOVERY, INC., a
Florida corporation, and CLARK PROCESSING, INC., an Ohio corporation
AS CO-LESSEES ("Lessee").
In addition to and without limiting any of the other provisions
of this Lease, Lessee and Lessor hereby agree to the following
covenants:
1) Lessee shall issue to Lessor a Warrant to purchase Lessee's
Common Stock on the terms set forth in the Warrant .
2) Lessee shall, during the full Term of the Lease, provide 10Q,
10K and any Form 8K financial statements and or change forms
within 15 days of the end of said period.
3) Lessor acknowledges receipt of Lessee's June 30, 1994 10Q
report, and is of the opinion that Lessee s performance to
plan is progressing satisfactorily according to the
consolidated projections. Therefore, Lessor shall make
available immediately the full $1,000,000.00 as proposed in
the Commitment Letter dated as of August 4, 1994.
4) Shall maintain a minimum tangible net worth of $3,000,000.00
during the full Term of the Lease.
5) Lessee's current primary lender, Sun Bank, shall issue an
Intercreditor Agreement to Lessor satisfactory to all parties
prior to the first closing of funds. Additionally, Lessee
shall assist Lessor to obtain an Intercreditor Agreement with
any future primary lenders.
Except as supplemented hereby, this Lease remains unmodified by the
provisions of this Rider, which provisions are, for all purposes,
hereby incorporated into and made a part of this Lease and each
Equipment Schedule.
ALLY CAPITAL CORPORATION PERMA-FIX ENVIRONMENTAL SERVICES, INC.
AS LESSOR and AMERICAN RESOURCE RECOVERY
CORPORATION and INTEGRATED RESOURCE
RECOVERY, INC. and CLARK PROCESSING,
INC. AS CO-LESSEES
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
By: /s/ James A. Kamradt By: /s/ Robert W. Foster, Jr.
______________________ __________________________________
Name: James A. Kamradt Name: Robert W. Foster, Jr.
Title: Vice President- Title: President
Production
AMERICAN RESOURCE RECOVERY CORPORATION
By: /s/ Robert W. Foster, Jr.
___________________________________
Name: Robert W. Foster, Jr.
Title: President
INTEGRATED RESOURCE RECOVERY, INC.
By: /s/ Robert W. Foster, Jr.
___________________________________
Name: Robert W. Foster, Jr.
Title: President
CLARK PROCESSING, INC.
By: /s/ Robert W. Foster, Jr.
___________________________________
Name: Robert W. Foster, Jr.
Title: President
<PAGE>
AMENDMENT NO. 01
This Amendment effective as of December 11, 1994 is a part of that
certain Equipment Lease Agreement dated as of October 12, 1994
(the "Lease") between ALLY CAPITAL CORPORATION ("Lessor") and PERMA-
FIX ENVIRONMENTAL SERVICES, INC. and AMERICAN RESOURCE RECOVERY
CORPORATION and INTEGRATED RESOURCE RECOVERY, INC. and CLARK
PROCESSING, INC. AS CO-LESSEES ("Lessee").
In addition to and without limiting any of the other provisions of
the Lease, Lessee and Lessor hereby agree that the names of three
of the Lessees shall be changed as follows:
Former name: Changed to:
___________ __________
American Resource Recovery Perma-Fix of Memphis, Inc.
Corporation
Integrated Resource Recovery, Inc. Perma-Fix of Ft. Lauderdale,
Inc.
Clark Processing, Inc. Perma-Fix of Dayton, Inc.
This constitutes a name change only. No entities have been deleted
from or added to the Lease.
Except as supplemented hereby, the Lease remains unmodified by the
provisions of this Amendment, which provisions are, for all
purposes, hereby incorporated into and made a part of the Lease and
each Equipment Schedule.
ALLY CAPITAL CORPORATION PERMA-FIX ENVIRONMENTAL SERVICES, INC.
AS LESSOR and AMERICAN RESOURCE RECOVERY
CORPORATION and INTEGRATED RESOURCE
RECOVERY, INC. and CLARK PROCESSING,
INC. AS CO-LESSEES
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
By: /s/ James A. Kamradt By: /s/ Robert W. Foster, Jr.
______________________ __________________________________
Name: James A. Kamradt Name: Robert W. Foster, Jr.
Title: Vice President- Title: President
Production
PERMA-FIX OF MEMPHIS, INC.
By: /s/ Robert W. Foster, Jr.
___________________________________
Name: Robert W. Foster, Jr.
Title: President
PERMA-FIX OF FT. LAUDERDALE, INC.
By: /s/ Robert W. Foster, Jr.
___________________________________
Name: Robert W. Foster, Jr.
Title: President
PERMA-FIX OF DAYTON, INC.
By: /s/ Robert W. Foster, Jr.
___________________________________
Name: Robert W. Foster, Jr.
Title: President
<PAGE>
AMENDMENT NO. 02
This Amendment effective as of December 12, 1994 is a part of that
certain Equipment Lease Agreement dated as of October 12, 1994 (the
"Lease") between ALLY CAPITAL CORPORATION ( Lessor ) and PERMA-FIX
ENVIRONMENTAL SERVICES, INC. and PERMA-FIX OF MEMPHIS, INC. AND
PERMA-FIX OF FT. LAUDERDALE, INC. AND PERMA-FIX OF DAYTON, INC. AS
CO-LESSEES ("Lessee").
In addition to and without limiting any of the other
provisions of the Lease, Lessee and Lessor hereby agree
that PERMA-FIX TREATMENT SERVICES, INC., an Oklahoma
corporation shall be added to the Lease and be jointly
and severally liable, with PERMA-FIX ENVIRONMENTAL
SERVICES, INC. and PERMA-FIX OF MEMPHIS, INC. and PERMA-
FIX OF FT. LAUDERDALE, INC. and PERMA-FIX OF DAYTON, INC.
and each of them, who shall also be jointly and severally
liable, for all obligations of Lessee under the Lease.
Except as supplemented hereby, the Lease remains unmodified by the
provisions of this Amendment, which provisions are, for all
purposes, hereby incorporated into and made a part of the Lease and
each Equipment Schedule.
ALLY CAPITAL CORPORATION PERMA-FIX ENVIRONMENTAL SERVICES, INC.
AS LESSOR and AMERICAN RESOURCE RECOVERY
CORPORATION and INTEGRATED RESOURCE
RECOVERY, INC. and CLARK PROCESSING,
INC. AS CO-LESSEES
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
By: /s/ James A. Kamradt By: /s/ Robert W. Foster, Jr.
______________________ __________________________________
Name: James A. Kamradt Name: Robert W. Foster, Jr.
Title: Vice President- Title: President
Production
PERMA-FIX OF MEMPHIS, INC.
By: /s/ Robert W. Foster, Jr.
___________________________________
Name: Robert W. Foster, Jr.
Title: President
PERMA-FIX OF FT. LAUDERDALE, INC.
By: /s/ Robert W. Foster, Jr.
___________________________________
Name: Robert W. Foster, Jr.
Title: President
PERMA-FIX OF DAYTON, INC.
By: /s/ Robert W. Foster, Jr.
___________________________________
Name: Robert W. Foster, Jr.
Title: President
ISTE:\N-P\PESI\10Q\397\EXHIBIT4.1
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> $ 550,000
<SECURITIES> 0
<RECEIVABLES> 5,745,000
<ALLOWANCES> 373,000
<INVENTORY> 109,000
<CURRENT-ASSETS> 7,806,000
<PP&E> 17,302,000
<DEPRECIATION> 4,893,000
<TOTAL-ASSETS> 29,320,000
<CURRENT-LIABILITIES> 12,591,000
<BONDS> 950,000
0
0
<COMMON> 11,000
<OTHER-SE> 12,210,000
<TOTAL-LIABILITY-AND-EQUITY> 29,320,000
<SALES> 0
<TOTAL-REVENUES> 6,502,000
<CGS> 0
<TOTAL-COSTS> 5,164,000
<OTHER-EXPENSES> 544,000
<LOSS-PROVISION> 3,000
<INTEREST-EXPENSE> 183,000
<INCOME-PRETAX> (916,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (916,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (916,000)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
