================================================================
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 September 30, 1998
_______________________
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 November 12, 1998
_____ ________________________________
Common Stock, $.001 Par Value 12,270,093
_____________________________ __________
(excluding 920,000 shares
held as treasury stock)
_________________________
=================================================================
<PAGE>
<PAGE>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
INDEX
Page No.
________
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
September 30, 1998 and
December 31, 1997. . . . . . . . . . . . 2
Consolidated Statements of Operations -
Three Months and Nine Months Ended
September 30, 1998 and 1997 . . . . . . . 4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1998
and 1997 . . . . . . . . . . . . . . . . 5
Consolidated Statements of Stockholder
Equity - September 30, 1998 and
December 31, 1997 . . . . . . . . . . . 6
Notes to Consolidated Financial
Statements . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . 16
PART II OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . 25
Item 2. Changes in Securities and Use of
Proceeds . . . . . . . . . . . . . . . . 25
Item 5. Other Information. . . . . . . . . . . . . 29
Item 6. Exhibits and Reports on Form 8-K . . . . . 32
<PAGE>
<PAGE>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
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, 1997.
The results of operations for the nine months ended
September 30, 1998, are not necessarily indicative of results to be
expected for the fiscal year ending December 31, 1998.
1
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
September 30,
(Amounts in Thousands, 1998 December 31,
Except for Share Amounts) (Unaudited) 1997
___________________________________________________________________
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 827 $ 314
Restricted cash equivalents
and investments 112 321
Accounts receivable, net of
allowance for doubtful accounts
of $308 and $374, respectively 5,363 5,282
Insurance claim receivable - 1,475
Inventories 124 119
Prepaid expenses 745 567
Other receivables 15 70
Assets of discontinued operations 471 587
_________ ________
Total current assets 7,657 8,735
Property and equipment:
Buildings and land 5,714 5,533
Equipment 8,822 7,689
Vehicles 1,191 1,202
Leasehold improvements 16 16
Office furniture and equipment 968 1,056
Construction in progress 1,351 1,052
_________ ________
18,062 16,548
Less accumulated depreciation (6,284) (5,564)
_________ ________
Net property and equipment 11,778 10,984
Intangibles and other assets:
Permits, net of accumulated amorti-
zation of $1,021 and $831,
respectively 3,688 3,725
Goodwill, net of accumulated amorti-
zation of $706 and $580,
respectively 4,743 4,701
Other assets 540 425
________ ________
Total assets $ 28,406 $ 28,570
======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS, CONTINUED
September 30,
(Amounts in Thousands, 1998 December 31,
Except for Share Amounts) (Unaudited) 1997
___________________________________________________________________
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,852 $ 2,263
Accrued expenses 2,897 3,380
Revolving loan and term note
facility 625 614
Current portion of long-term debt 269 254
Current liabilities of discontinued
operations 628 1,470
_________ _______
Total current liabilities 6,271 7,981
Environmental accruals 405 525
Accrued closure costs 856 831
Long-term debt, less current portion 2,119 3,997
Long-term liabilities of discontinued
operations 2,839 3,042
_________ _______
Total long-term liabilities 6,219 8,395
Commitments and contingencies
(see Note 4) - -
Stockholders' equity:
Preferred Stock, $.001 par value;
2,000,000 shares authorized,
9,850 and 6,850 shares issued
and outstanding, respectively - -
Common Stock, $.001 par value;
50,000,000 shares authorized,
13,181,107 and 12,540,487 shares
issued, including 920,000
shares held as treasury stock 13 12
Redeemable warrants 140 140
Additional paid-in capital 38,073 34,363
Accumulated deficit (20,540) (20,551)
________ _______
17,686 13,964
Less Common Stock in treasury at
cost; 920,000 shares issued
and outstanding (1,770) (1,770)
________ _______
Total stockholders' equity 15,916 12,194
________ _______
Total liabilities and
stockholders' equity $ 28,406 $ 28,570
======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30,
(Amounts in Thousands, __________________________
Except for Share Amounts) 1998 1997*
___________________________________________________________________
<S> <C> <C>
Net revenues $ 8,065 $ 6,921
Cost of goods sold 5,292 4,630
________ ________
Gross profit 2,773 2,291
Selling, general and administrative
expenses 1,708 1,347
Depreciation and amortization 531 490
________ ________
Income from operations 534 454
Other income (expense):
Interest income 10 11
Interest expense (95) (71)
Other 40 118
________ ________
Net income from
continuing operations 489 512
Loss from discontinued operations - (355)
________ _________
Net income (loss) 489 157
Preferred Stock dividends 115 99
________ _________
Net income (loss) applicable
to Common Stock $ 374 $ 58
======== =========
_________________________________________
Basic income (loss) per common share:
Continuing operations $ 0.3 $ .04
Discontinued operations - (.03)
________ ________
Net income (loss) per share $ .03 $ .01
======== =========
Diluted income (loss) per common share:
Continuing operations $ 0.2 $ .03
Discontinued operations - (.02)
________ ________
Net income (loss) per share $ .02 $ .01
======== ========
Basic weighted average common
shares outstanding 12,164 11,090
======== ========
Diluted weighted average common shares
and dilutive securities outstanding 25,018 17,516
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended
September 30,
(Amounts in Thousands, __________________________
Except for Share Amounts) 1998 1997*
___________________________________________________________________
<S> <C> <C>
Net revenues $ 22,291 $19,368
Cost of goods sold 15,317 13,492
________ ________
Gross profit 6,974 5,876
Selling, general and administrative
expenses 4,942 4,072
Depreciation and amortization 1,566 1,487
________ ________
Income from operations 466 317
Other income (expense):
Interest income 27 31
Interest expense (364) (331)
Other 172 89
________ ________
Net income from
continuing operations 301 106
Loss from discontinued operations - (1,308)
________ _________
Net income (loss) 301 (1,202)
Preferred Stock dividends 291 262
________ _________
Net income (loss) applicable
to Common Stock $ 10 $ (1,464)
======== =========
<PAGE>
_________________________________________
Basic income (loss) per common share:
Continuing operations $ - $ (.01)
Discontinued operations - (.13)
________ ________
Net income (loss) per share $ - $ (.14)
======== ========
Diluted income (loss) per common share:
Continuing operations $ - $ (.01)
Discontinued operations - (.13)
________ ________
Net income (loss) per share $ - $ (.14)
======== ========
Basic weighted average common
shares outstanding 11,947 10,340
======== ========
Diluted weighted average common shares
and dilutive securities outstanding 11,947 10,340
======== ========
<FN>
*Amounts have been restated from that previously reported to
reflect the discontinued operations at Perma-Fix of Memphis, Inc.
(See Note 2).
</FN>
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
4
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
(Amounts in Thousands, __________________________
Except for Share Amounts) 1998 1997*
___________________________________________________________________
<S> <C> <C>
Cash flows from operating activities:
Net income from continuing
operations $ 301 $ 106
Adjustments to reconcile net loss
to cash provided by operations:
Depreciation and amortization 1,566 1,487
Provision for bad debt and other
reserves 30 52
Gain on sale of plant, property
and equipment (12) (1)
Changes in assets and liabilities,
net of effects from business
acquisitions:
Accounts receivable (97) (118)
Prepaid expenses, inventories and
other assets 1,112 913
Accounts payable and accrued expenses (713) (1,748)
________ ________
Net cash provided by continuing
operations 2,187 691
________ ________
Net cash used by discontinued operations (903) (1,309)
Cash flows from investing activities:
Purchases of property and equipment,
net (1,640) (887)
Proceeds from sale of plant,
property and equipment 14 46
Change in restricted cash, net 196 (67)
Net cash used by discontinued
operations (4) (41)
________ _________
Net cash used in investing
activities (1,434) (949)
Cash flows from financing activities:
Repayments) of revolving loan
and term note facility (2,028) (1,097)
Principal repayments on long-term debt (186) (645)
Proceeds from issuance of stock 2,915 3,380
Net cash used by discontinued
operations (52) (6)
________ ________
Net cash provided by
financing activities 649 1,632
Increase in cash and cash equivalents 499 65
Cash and cash equivalents at beginning
of period including discontinued
operations of $12, and $8,
respectively 326 45
________ ________
Cash and cash equivalents at end
of period, including discontinued
operations of ($2), and ($5),
respectively $ 825 $ 110
======== ========
________________________________________________________________
Supplemental disclosure:
Interest paid $ 455 $ 530
Non cash investing and financing
activities:
Issuance of Common Stock for services 230 68
Long-term debt incurred for purchase
of property 330 256
Issuance of stock for payment of
dividends 359 314
<FN>
*Amounts have been restated from that previously reported to
reflect the discontinued operations at Perma-Fix of Memphis, Inc.
(see Note 2).
</FN>
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
5
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(For the nine months ended September 30, 1998)
Preferred Stock Common Stock
Amounts in Thousands, _________________ _________________
Except for Share Amounts Shares Amount Shares Amount
______________________________________________________________________________
<S> <C> <C> <C> <C>
Balance at December 31, 1997 6,850 $ - 12,540,487 $ 12
Net income - - - -
Issuance of Common Stock for
Preferred Stock dividend - - 175,825 1
Issuance of Preferred Stock 3,000 - - -
Issuance of Common Stock
for acquisition - - 108,207 -
Issuance of stock for cash
and services - - 165,488 -
Exercise of warrants - - 190,100 -
Option Exercise - - 1,000 -
_______ _______ __________ _______
Balance at September 30,
1998 9,850 $ - 13,181,107 $ 13
======= ======= ========== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Common
Additional Stock
Redeemable Paid-In Accumulated Held in
Warrants Capital Deficit Treasury
_________________________________________________________
<S> <C> <C> <C> <C>
$ 140 $ 34,363 $ (20,551) $ (1,770)
- - 11 -
- 358 - -
- 2,653 - -
- 207 - -
- 263 - -
- 228 - -
- 1 - -
________ ________ __________ __________
$ 140 $ 38,073 $ (20,540) $ (1,770)
======== ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE>
<PAGE>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(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, 1997.
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.
The Company considers all highly liquid investments with
initial maturities of three months or less to be cash equivalents.
Cash equivalents at September 30, 1998, included overnight
repurchase agreements in the approximate amount of $638,000.
Basic income (loss) per share is computed by dividing net
income, after deducting Preferred Stock dividends, by the weighted
average number of common shares outstanding during each period.
Diluted income per share is computed by dividing net income,
before deduction of Preferred Stock dividends, by the weighted
average number of common shares and potentially common shares
outstanding during each period. Diluted income (loss) per share for
the nine months ended September 30, 1997 and 1998 does not include
Common Stock equivalents of 4,117,000 and 7,687,000 respectively as
their effect would be anti-dilutive.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 "Earnings Per Share"
("SFAS 128"). SFAS 128 establishes new standards for computing and
presenting earnings per share ("EPS"). Specifically, SFAS 128 replaces
the presentation of primary EPS with a presentation of basic EPS and
requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures. SFAS
128 also requires a reconciliation of the numerator and denominator of
the basic EPS computation to the numerator and denominator of the diluted
EPS computation. SFAS 128 was adopted effective December 31, 1997.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," ("FAS 130") and No. 131, "Disclosure about
Segments of an Enterprise and Related Information," ("FAS 131"). FAS
130 establishes standards for reporting and displaying comprehensive
income, its components and accumulated balances. FAS 131 establishes
standards for the way that public companies report information about
operating segments in annual financial statements and requires reporting
of selected information about operating segments in interim financial
statements issued to the public. Both FAS 130 and FAS 131 are effective
for periods beginning after December 15, 1997. FAS 130 has no effect on
the Company's financial statements. FAS 131 is effective for the
Company's financial statements and is discussed in Note 5.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (FAS 133). FAS 133
requires companies to recognize all derivative contracts as either assets
or liabilities in the balance sheet and to measure them at fair value.
FAS 133 is effective for periods beginning after June 15, 1999.
Historically, the Company has not entered into derivative contracts.
Accordingly, FAS 133 is not expected to affect the Company's financial
statements.
7
<PAGE>
2. Discontinued Operations
_______________________
On January 27, 1997, an explosion and resulting tank fire
occurred at the Company's subsidiary, Perma-Fix of Memphis, Inc.
("PFM"), 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. The facility was non-
operational from the date of this event until May 1997, at which
time it began limited operations. Until the time of the incident,
PFM operated as a permitted "fuel blending" facility and serviced
a separate class of customers who generated specific waste streams,
each identified by its waste code and specific characteristics.
As the Company's only such "fuel blending" facility, PFM was
permitted to and capable of mixing certain hazardous liquid, semi-
solid and solid waste in a vat which suspended the solids in order
to pump the mixture into a tank. The tanks also contained mixing
units which kept the solids suspended until the mixture could be
off-loaded into tanker trucks. As a result of the damage to the
tanks and processing equipment and the related cost to rebuild this
operating unit, the Company decided to discontinue this line of
business, which resulted in PFM's inability to service and retain
the existing customer base. The existing customer base represented
principally manufacturing and service companies whose operations
generated certain semi-solid and solid permitted hazardous wastes,
which as a result of permit and processing limitations could not be
served by other Company facilities. The Company continues to
pursue other markets or activities which may be performed at this
facility given the permit limitations, capital requirements and
development of a new line of business and related customer base.
Upon evaluation of the above business decision, and given the loss
of both the existing line of business and its related customer
base, the Company reported the Memphis segment as a discontinued
operation, pursuant to Paragraph 13 of APB 30.
The fuel blending activities were discontinued on the date of
the incident, January 27, 1997. All assets involved in the fuel
blending activities that were not damaged beyond repair in the fire
have subsequently been damaged as a result of the decontamination
process. Accordingly, during the fourth quarter of 1997, the
Company recorded a loss on disposal of discontinued operations of
$3,053,000, which included $1,272,000 for impairment of certain
assets and $1,781,000 for the establishment of certain closure
liabilities.
The net loss from discontinued PFM operations for the nine
months ended September 30, 1998, was $378,000 and was recorded
against the accrued closure cost estimate on the balance sheet.
The net loss for the nine months ended September 30, 1997, was
$1,308,000 and is shown separately in the Consolidated Statements
of Operations. The Company has restated the 1997 operating results
to reflect these discontinued operations. The results of the
discontinued PFM operations do not reflect management fees charged
by the Company, but do include interest expense of $54,000 and
$180,000 during the nine months ended September 30, 1998 and 1997,
respectively, specifically identified to such operations as a
result of such operations incurring debt under the Company's
revolving and term loan credit facility. During March 1998, the
Company received a settlement in the amount of $1,475,000 from its
insurance carrier for the business interruption claim which was
recorded as an insurance claim receivable at December 31, 1997.
This settlement was recognized as a gain in 1997 and thereby
reduced the net loss recorded for the discontinued PFM operations
in 1997.
Revenues of the discontinued PFM operations were $794,000 for
the nine months ended September 30, 1998, and $1,514,000 for the
nine months ended September 30, 1997. These revenues are not
included in revenues as reported in the Consolidated Statements of
Operation.
Net assets and liabilities of the discontinued PFM operations at
the nine months ended September 30, 1998, and December 31, 1997, in
thousands of dollars, consisted of the following:
8
<PAGE>
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
___________ ___________
<S> <C> <C>
Assets of discontinued operations:
Cash and cash equivalents $ (2) $ 12
Restricted cash equivalents and investments 218 214
Accounts receivable, net of allowance
for doubtful accounts $101 and $105,
respectively 241 333
Prepaid expenses and other assets 14 28
__________ _________
$ 471 $ 587
========== ==========
Current liabilities of discontinued operations:
Accounts payable $ 225 $ 277
Accrued expenses 134 259
Accrued environmental costs 227 835
Current portion of long-term debt 42 99
_________ _________
$ 628 $ 1,470
======== =========
Long-term liabilities of discontinued operations:
Long-term debt, less current portion $ 7 $ 17
Accrued environmental and closure costs 2,832 3,025
_______ ________
$ 2,839 $ 3,042
======= ========
</TABLE>
The accrued environmental and closure costs, as related to
PFM, total $3,059,000 at September 30, 1998, which includes the
Company's current closure cost estimate of approximately $700,000
for the complete cessation of operations and closure of the
facility ("RCRA Closure") based upon guidelines of the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"). A
majority of this liability relates to the discontinued fuel
blending and tank farm operations and will be recognized over the
next three years. Also included in this accrual is the Company's
estimate of the cost to complete groundwater remediation at the
site of approximately $916,000, the future operating losses as the
Company discontinues its fuel blending operations and certain other
contingent liabilities.
3. Long-Term Debt
______________
<TABLE>
<CAPTION>
Long-term debt consists of the following at September 30, 1998, and
December 31, 1997 (in thousands):
September 30 December 31,
1998 1997
______________ ___________
<S> <C> <C>
Revolving loan facility dated
January 15, 1998, collateral-
ized by eligible accounts
receivables, subject to monthly
borrowing base calculation,
variable interest paid monthly
at prime rate plus 1 3/4. $ 52 $ 1,664
Term loan agreement dated January 15,
1998, payable in monthly principal
installments of $52, balance due
in January 2001, variable interest
paid monthly at prime rate plus
1 3/4. 2,083 2,500
Mortgage note agreement payable in
quarterly installments of $15,
plus accrued interest at 10%.
Balance due October 1998 secured
by real property. - 61
Various capital lease and promissory
note obligations, payable 1998 to
2002, interest at rates ranging
from 8.0% to 15.9%. 878 640
______ _______
3,013 4,865
Less current portion of revolving
loan and term note facility 625 614
Less current portion of long-term debt 269 254
_______ ________
$ 2,119 $ 3,997
======= ========
</TABLE>
9
<PAGE>
On January 15, 1998, 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 Congress Financial Corporation
(Florida) as lender ("Congress"). The Agreement provides for a
term loan in the amount of $2,500,000, which requires principal
repayments based on a four-year level principal amortization over
a term of 36 months, with monthly principal payments of $52,000.
Payments commenced on February 1, 1998, with a final balloon
payment in the amount of approximately $573,000 due on January 14,
2001. The Agreement also provides for a revolving loan facility in
the amount of $4,500,000. At any point in time the aggregate
available borrowings under the facility are subject to the maximum
credit availability as determined through a monthly borrowing base
calculation, as updated for certain information on a weekly basis,
equal to 80% of eligible accounts receivable accounts of the
Company as defined in the Agreement. The termination date on the
revolving loan facility is also the third anniversary of the
closing date. The Company incurred approximately $237,000 in
financing fees relative to the solicitation and closing of this
loan agreement (principally commitment, legal and closing fees)
which are being amortized over the term of the Agreement.
Pursuant to the Agreement, the term loan and revolving loan
both bear interest at a floating rate equal to the prime rate plus
1 3/4%. The Agreement also provides for a one time rate adjustment
of 1/4%, subject to the Company meeting certain 1998 performance
objectives. The loans also contain certain closing, management and
unused line fees payable throughout the term. The loans are
subject to a 3.0% prepayment fee in the first year, 1.5% in the
second and 1.0% in the third year of the Agreement.
As security for the payment and performance of the Agreement,
the Company granted a first security interest in all accounts
receivable, inventory, general intangibles, equipment and other
assets of the Company and subsidiaries, as well as the mortgage on
two (2) of the Company's facilities. The Agreement contains
affirmative covenants including, but not limited to, certain
financial statement disclosures and certifications, management
reports, maintenance of insurance and collateral. The Agreement
also contains an adjusted net worth financial covenant, as defined
in the Agreement, of $3,000,000.
As of September 30, 1998, the borrowings under the Congress
revolving loan facility totaled $52,000, with borrowing
availability of approximately $3,538,000. The balance under the
Congress term loan at September 30, 1998, was $2,083,000.
During June 1998, the Company entered into a master security
agreement and secured promissory note in the amount of
approximately $317,000 for the purchase and financing of certain
capital equipment at the Perma-Fix of Florida, Inc. facility. The
term of the promissory note is for sixty (60) months, at a rate of
11.58% per annum and monthly installments of approximately $7,000.
As further discussed in Note 2, the long-term debt associated
with the discontinued PFM operation is excluded from the above and
is recorded in the Liabilities of Discontinued Operations total.
The PFM debt obligations total $49,000, of which $42,000 is
current.
4. 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
In the normal course of conducting its business, the Company
is involved in various litigation. There has been no material
changes in legal proceedings from those disclosed previously in the
Company's Form 10-K for year ended December 31, 1997, except as
disclosed below. The Company is not a party to any litigation or
10
<PAGE>
governmental proceeding which its management believes could result
in any judgements or fines against it that would have a material
adverse affect on the Company's financial position, liquidity or
results of operations, other than as disclosed in the Company's
Form 10-K.
As previously disclosed in the Form 10-K, the Company received
correspondence dated January 15, 1998 ("PRP Letter"), from the
United States Environmental Protection Agency ("EPA") that it
believes that PFM, a wholly owned subsidiary of the Company, is a
potentially responsible party ("PRP"), as defined under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA"), regarding the remediation of the W. & R.
Drum, Inc. ("Drum") site in Memphis, Tennessee, ("Drum Site"),
primarily as a result of acts by a predecessor of PFM prior to the
time PFM was acquired by the Company. In addition, the EPA has
advised PFM that it has sent PRP letters to approximately 50 other
PRPs as to the Drum Site. The PRP Letter estimated the remediation
costs incurred by the EPA for the Drum Site to be approximately
$1,400,000 as of November 30, 1997. The EPA has orally informed
the Company that such remediation has been substantially completed
as of such date, and that the EPA believes that PFM supplied a
substantial amount of the drums at the Drum Site. During the
second quarter of 1998, PFM and certain other PRPs began
negotiating with the EPA regarding a potential settlement of the
EPA's claims regarding the Drum Site and such negotiations are
currently continuing. During the third quarter of 1998, the
Company extended an offer of $225,000 ($150,000 payable at closing
and the balance payable over a twelve month period) to settle any
potential liability regarding the Drum Site. Based upon
discussions with government officials, the Company believes the
settlement offer will be accepted, however, no assurance can be
made that the Company's current settlement offer will be accepted
or that the Company will be able to settle its claims regarding the
Drum Site in an amount and manner which the Company believes is
reasonable. If PFM cannot reach a settlement which PFM believes
is reasonable, it will continue to vigorously defend against the
EPA's demand regarding remediation costs of the Drum Site. If PFM
is determined to be liable for a substantial portion of the
remediation cost incurred by the EPA at the Drum Site, such could
have a material adverse effect on the Company.
Permits
The Company is subject to various regulatory requirements,
including the procurement of requisite licenses and permits at its
facilities. These licenses and permits are subject to periodic
renewal without which the Company's operations would be adversely
affected. The Company anticipates that, once a license or permit
is issued with respect to a facility, the license or permit will be
renewed at the end of its term if the facility's operations are in
compliance with the applicable regulatory requirements.
Accrued Closure Costs and Environmental Liabilities
The Company maintains closure cost funds to insure the proper
decommissioning of its RCRA facilities upon cessation of
operations. Additionally, in the course of owning and operating
on-site treatment, storage and disposal facilities, the Company is
subject to corrective action proceedings to restore soil and/or
groundwater to its original state. These activities are governed
by federal, state and local regulations and the Company maintains
the appropriate accruals for restoration. The Company has
recorded accrued liabilities for estimated closure costs and
identified environmental remediation costs.
Discontinued Operations
As previously discussed, the Company made the strategic
decision in February 1998 to discontinue its fuel blending
operations at the PFM facility. The Company has, based upon the
best estimates available, recognized accrued environmental and
closure costs in the aggregate amount of $3,059,000. This
liability includes principally, the RCRA closure liability, the
groundwater remediation liability, the potential additional site
investigation and remedial activity which may arise as PFM proceeds
with its closure activities and the Company's best estimate of the
future operating losses as the Company discontinues its fuel
blending operations and other contingent liabilities.
11
<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 $2 million
per occurrence and $4 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.
5. Business Segment Information
____________________________
The Company provides services through two business segments.
The Waste Management Services segment, which provides on-and-off-
site treatment, storage, processing and disposal of hazardous and
non-hazardous industrial and commercial, mixed waste, and
wastewater through its five treatment, storage and disposal
facilities ("TSD facilities"); Perma-Fix Treatment Services, Inc.
("PFTS"), Perma-Fix of Dayton, Inc. ("PFD"), Perma-Fix of Ft.
Lauderdale, Inc. ("PFFL"), Perma-Fix of Florida, Inc. ("PFF") and
PFM. The Company has discontinued all fuel blending activities at
its PFM facility, the principal business segment for this
subsidiary prior to the January 1997 fire and explosion. PFM
currently provides, on a limited basis, an off-site waste storage
and transfer facility and continues to explore other new markets
for utilization of this facility. The Company also provides
through this segment: (i) on-site waste treatment services to
convert certain types of characteristic hazardous wastes into non-
hazardous waste; and (ii) the supply and management of non-
hazardous and hazardous waste to be used by cement plants as a
substitute fuel or raw material source.
The Company also provides services through the Consulting
Engineering Services segment. The Company provides environmental
engineering and regulatory compliance consulting services through
Schreiber, Yonley & Associates in St. Louis, Missouri, and Mintech,
Inc. in Tulsa, Oklahoma. These engineering groups provide
oversight management of environmental restoration projects, air and
soil sampling and compliance reporting, surface and subsurface
water treatment design for removal of pollutants, and various
compliance and training activities.
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies. The
Company evaluates performance based on profit or loss from
continuing operations.
The Company accounts for inter-company sales as a reduction of
"cost of goods sold" and therefore such inter-company sales are not
included in the consolidated revenue total.
The Company's segments are not dependent upon a single
customer, or a few customers, and the loss of any one or more of
which would not have a material adverse effect on the Company's
segment. During the nine months ended September 30, 1998 and 1997,
the Company did not make sales to any single customer that in the
aggregate amount represented more than ten percent (10%) of the
Company's segment revenues.
The table below shows certain financial information by the
Company's segments for nine months ended September 30, 1998 and
1997 and excludes the results of operations of the discontinued
operations. Income (loss) from operations includes revenues less
operating costs and expenses. Marketing, general and
administrative expenses of the corporate headquarters have not been
allocated to the segments. Identifiable assets are those used in
the operations of each business segment, including intangible
assets and discontinued operations. Corporate assets are
principally cash, cash equivalents and certain other assets.
12
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Waste Consulting Corporate
Management Engineering and
(Dollars in thousand) Services Services Other Consolidated
_______________________________________________________________________________
<S> <C> <C> <C> <C>
1998
Net revenues from
external customers $ 19,102 $ 3,189 $ - $ 22,291
Inter-company revenues 269 395 - 664
Interest income 26 - 1 27
Interest expense 308 39 17 364
Depreciation and
amortization 1,495 59 12 1,566
Income (Loss) from con-
tinuing operations 1,320 91 (1,110) 301
Identifiable assets 11,080 1,845 15,481 28,406
Capital expenditures, net 1,916 12 42 1,970
1997
Net revenues from
external customers $ 15,776 $ 3,592 $ - $ 19,368
Inter-company revenues 834 361 - 1,195
Interest income 29 - 2 31
Interest expense 278 20 33 331
Depreciation and
amortization 1,385 86 16 1,487
Income (Loss) from con-
tinuing operations 1,055 33 (982) 106
Identifiable assets 16,211 2,225 12,879 31,315
Capital expenditures, net 1,122 21 - 1,143
</TABLE>
6. Stock Issuance
______________
On or about June 30, 1998, the Company issued to RBB Bank
Aktiengesellschaft, located in Graz, Austria ("RBB Bank"), 3,000
shares of newly-created Series 10 Class J Convertible Preferred
Stock, par value $.001 per share ("Series 10 Preferred"), at a
price of $1,000 per share, for an aggregate sales price of
$3,000,000. The sale to RBB Bank was made in a private placement
under Section 4(2) of the Securities Act of 1933, as amended (the
"Act") and/or Rule 506 of Regulation D under the Act, pursuant to
the terms of a Subscription and Purchase Agreement, dated June 30,
1998 between the Company and RBB Bank ("Subscription Agreement").
The net proceeds of $2,768,000 from this private placement, after
the deduction for certain fees and expenses, was received by the
Company on July 14, 1998, and has been recorded as a Preferred
Stock Receivable at June 30, 1998. The Company also accrued at
June 30, 1998, approximately $115,000 for certain additional
closing, legal and related expenses. The Series 10 Preferred has
a liquidation preference over the Company's Common Stock, par value
$.001 per share ("Common Stock"), equal to $1,000 consideration per
outstanding share of Series 10 Preferred (the "Liquidation Value"),
plus an amount equal to all unpaid and accrued dividends thereon.
The Series 10 Preferred accrues dividends on a cumulative basis at
a rate of four percent (4%) per annum of the Liquidation Value
("Dividend Rate"), and is payable semi-annually within ten (10)
business days after each subsequent June 30 and December 31 (each
a "Dividend Declaration Date"), and shall be payable in cash or
shares of the Company's Common Stock at the Company's option. The
first Dividend Declaration Date shall be December 31, 1998. No
dividends or other distributions may be paid or declared or set
aside for payment on the Company's Common Stock until all accrued
and unpaid dividends on all outstanding shares of Series 10
Preferred have been paid or set aside for payment. Dividends may be
paid, at the option of the Company, in the form of cash or Common
Stock of the Company. If the Company pays dividends in Common
Stock, such is payable in the number of shares of Common Stock
equal to the product of (a) the quotient of (i) the Dividend Rate
divided by (ii) the average of the closing bid quotation of the
Common Stock as reported on the NASDAQ for the five trading days
immediate prior to the date the dividend is declared, times (b) a
fraction, the numerator of which is the number of days elapsed
during the period for which the dividend is to be paid and the
denominator of which is 365.
The holder of the Series 10 Preferred may convert into Common
Stock any or all of the Series 10 Preferred on and after 180 days
after June 30, 1998 (December 28, 1998). The conversion price per
13
<PAGE>
outstanding share of Preferred Stock ("Conversion Price") is
$1.875; except that if the average of the closing bid price per
share of Common Stock quoted on the NASDAQ (or the closing bid
price of the Common Stock as quoted on the national securities
exchange if the Common Stock is not listed for trading on the
NASDAQ but is listed for trading on a national securities exchange)
for the five (5) trading days immediately prior to the particular
date on which the holder notified the Company of a conversion
("Conversion Date") is less than $2.34, then the Conversion Price
for that particular conversion shall be eighty percent (80 %) of
the average of the closing bid price of the Common Stock on the
NASDAQ (or if the Common Stock is not listed for trading on the
NASDAQ but is listed for trading on a national securities exchange
then eighty percent (80%) of the average of the closing bid price
of the Common Stock on the national securities exchange) for the
five (5) trading days immediately prior to the particular
Conversion Date. As of June 30, 1998, the closing price of Common
Stock on the NASDAQ was $1.875 per share.
As part of the of the sale of the Series 10 Preferred, the
Company also issued to RBB Bank (a) a warrant entitling the holder
to purchase up to an aggregate of 150,000 shares of Common Stock at
an exercise price of $2.50 per share of Common Stock expiring three
(3) years after June 30, 1998 and (b) a warrant entitling the
holder to purchase up to an aggregate of 200,000 shares of Common
Stock at an exercise price of $1.875 per share of Common Stock and
expiring three (3) years after June 30, 1998. Collectively, these
warrants are referred to herein as the "RBB Warrants." The Common
Stock issuable upon the conversion of the Series 10 Preferred and
upon the exercise of the RBB Warrants is subject to certain
registration rights pursuant to the Subscription Agreement.
The Company utilized the proceeds received on the sale of
Series 10 Preferred for working capital and to reduce the
outstanding balance of its credit facilities, subject to the
Company reborrowing under such credit facilities.
In connection with the placement of Series 10 Preferred to RBB
Bank, the Company paid fees (excluding legal and accounting) of
$210,000 and issued to (a) Liviakis Financial Communications, Inc.
("Liviakis") for assistance with the placement of the Series 10
Preferred, warrants entitling the holder to purchase up to an
aggregate of 1,875,000 shares of Common Stock, subject to certain
anti-dilution provisions, at an exercise price of $1.875 per share
of Common Stock which warrants may be exercised after January 15,
1999, and which expire after four (4) years; (b) Robert B. Prag,
an executive officer of Liviakis for assistance with the placement
of the Series 10 Preferred, warrants entitling the holder to
purchase up to an aggregate of 625,000 shares of Common Stock,
subject to certain anti-dilution provisions, at an exercise price
of $1.875 per share of Common Stock, which warrants may be
exercised after January 15, 1999, and which expire after four (4)
years; (c) JW Genesis Financial Corporation for assistance with the
placement of the Series 10 Preferred, warrants entitling the holder
to purchase up to an aggregate of 150,000 shares of Common Stock,
subject to certain anti-dilution provisions, at an exercise price
of $1.875 per share of Common Stock, which warrants expire after
three (3) years; and (d) Fontenoy Investments for assistance with
the placement of the Series 10 Preferred, warrants entitling the
holder to purchase up to an aggregate of 350,000 shares of Common
Stock, subject to certain anti-dilution provisions, at an exercise
price of $1.875 per share of Common Stock, which warrants expire
after three (3) years. Under the terms of each warrant, the holder
is entitled to certain registration rights with respect to the
shares of Common Stock issuable on the exercise of each warrant.
7. Subsequent Events
_________________
During October 1998, the Company entered into a master
security agreement and secured promissory note in the amount of
approximately $207,000 for the purchase and financing of certain
capital equipment at the Perma-Fix of Florida, Inc., Perma-Fix of
Ft. Lauderdale, Inc. and Perma-Fix of Dayton, Inc. facilities. The
term of the promissory note is for sixty (60) months, at a rate of
10.52% per annum and monthly installments of approximately $4,000.
14
<PAGE>
On October 14, 1998, the Board of Directors authorized the
repurchase of up to 500,000 shares of the Company's Common Stock
from time to time in open market or privately negotiated
transactions, in accordance with SEC Rule 10b-18. The repurchases
will be at prevailing market prices. The Company will utilize its
current working capital and available borrowings to acquire such
shares.
During November 1998, the Company signed a letter of intent
("Letter") with the shareholders of Chemical Conservation
Corporation (Florida), Chemical Conversation of Georgia, Inc.
(Collectively, "Chem-Con") and Chem-Met Services, Inc. ("Chem-Met")
regarding a potential acquisition of Chem-Con and Chem-Met by the
Company (the "Acquisition"). Chem-Con and Chem-Met generate, on a
consolidated basis, approximately $24 million in revenue, resulting
principally from the collection, treatment, and recycling of
industrial and hazardous waste, including waste oils, water and
miscellaneous solid waste. Chem-Met Services, Inc. treats and
stabilizes inorganic wastes, Chemical Conservation Corporation runs
a Part B-permitted transfer station that also serves as the base
for the private trucking fleet, and Chemical Conservation of
Georgia, Inc. recycles solvents and treats hazardous waste.
Pursuant to the terms of the Letter, the aggregate purchase price
for the Acquisition is to be approximately $7.4 million, payable in
Common Stock of the Company based upon the closing price of the
Common Stock on the NASDAQ for the five trading days preceding the
closing date. The Company will also enter into a four (4) year
consulting agreement with a certain executive manager of Chem-Con
and Chem-Met in the approximate aggregate amount of $1.3 million.
The Acquisition is subject to the ability of the parties to, among
other things:
* finalize definitive documents satisfactory to all parties;
* qualify the Acquisition as a pooling of interest
transaction, which means that the merged companies will be
treated as if they had always been combined for accounting
and financial reporting purposes;
* resolve certain issues regarding real property used by
Chem-Con and Chem-Met;
* resolve and quantify certain potential environmental
liabilities of Chem-Con and
Chem-Met;
* resolve certain tax treatment issues;
* complete due diligence in a satisfactory manner; and
* obtain approval of the Company's shareholders.
No assurance can be made that the Acquisition will occur.
15
<PAGE>
<PAGE>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART I, ITEM 2
Forward-Looking Statements
Certain statements contained with this report may be deemed
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended (collectively, the
"Private Securities Litigation Reform Act of 1995"). All
statements in this report other than statements of historical fact
are forward-looking statements that are subject to known and
unknown risks, uncertainties and other factors which could cause
actual results and performance of the Company to differ materially
from such statements. The words "believe," "expect," "anticipate,"
"intend," "will," and similar expressions identify forward-looking
statements. In addition, forward-looking statements contained
herein relate to, among other things, (i) anticipated financial
performance, (ii) ability to comply with the Company's general
working capital requirements, (iii) ability to generate sufficient
cash flow from operations to fund all costs of operations and
remediation of certain formerly leased property in Dayton, Ohio,
and the Company's facility in Memphis, Tennessee, (iv) ability to
remediate certain contaminated sites for projected amounts, (v)
"Year 2000" computer issues, (vi) the government's acceptance of
the Company's offer regarding settlement of claims involving the
Drum Site (as defined), (vii) acquisition of Chem-Met and Chem-Con
(as defined), (viii) the Oak Ridge Contracts (as defined), (ix)
anticipated revenues from the Oak Ridge Contracts and completion of
the scope of work with M&EC (as defined), and all other statements
which are not statements of historical fact. While the Company
believes the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance such
expectations will prove to have been correct. There are a variety
of factors which could cause future outcomes to differ materially
from those described in this report, including, but not limited to,
(i) general economic conditions, (ii) inability to maintain
profitability, (iii) material reduction in revenues, (iv) inability
to collect in a timely manner a material amount of receivables, (v)
increased competitive pressures, (vi) the inability to maintain and
obtain required permits and approvals to conduct operations, (vii)
the inability to develop new and existing technologies in the
conduct of operations, (viii) overcapacity in the environmental
industry, (ix) discovery of additional contamination or expanded
contamination at a certain Dayton, Ohio, property formerly leased
by the Company or the Company's facility at Memphis, Tennessee,
which would result in a material increase in remediation
expenditures, (x) changes in federal, state and local laws and
regulations, especially environmental regulations, or
interpretation of such, (xi) potential increases in equipment,
maintenance, operating or labor costs, (xii) management retention
and development, (xiii) the requirement to use internally generated
funds for purposes not presently anticipated, (xiv) inability to
settle on reasonable terms certain claims made by the federal
government against a certain subsidiary of the Company that is a
potentially responsible party for clean up costs incurred by the
government in remediating certain sites owned and operated by
others and (xv) inability or failure to convert the computer
systems of the Company's key suppliers, customers, creditors and
financial services organizations, in order to be "Year 2000"
compliant, (xvi) inability to complete acquisitions of Chem-Met and
Chem-Con because of failure to comply with one or more of the
conditions precedent to the acquisition, (xvii) inability of the
Company and M&EC to finalize the scope of work documents relating
to the Oak Ridge Contracts, (xviii) inability of the Company and
M&EC to design and construct the required processing equipment in
connection with the Oak Ridge Contracts, (xix) the actual volume of
waste to be received under the Oak Ridge Contracts will not meet
the expected totals as presented by the DOE (as defined), (xx) a
determination that the amount of work to be performed by the
Company under the Oak Ridge Contracts is less than anticipated, and
(xxi) the inability of the Company to perform the work assigned to
it under the Oak Ridge Contracts in a profitable manner. The
Company undertakes no obligations to update publicly any forward-
looking statement, whether as a result of new information, future
events or otherwise.
16
<PAGE>
Results of Operations
<TABLE>
<CAPTION>
The table below should be used when reviewing management's
discussion and analysis for the nine months ended September 30,
1998 and 1997:
Three Months Ended
September 30,
_________________________________
Consolidated 1998 % 1997* %
____________ _______ _____ _______ _____
<S> <C> <C> <C> <C>
Net Revenues $ 8,065 100.0 $ 6,921 100.0
Cost of Goods Sold 5,292 65.6 4,630 66.9
______ _____ ______ _____
Gross Profit 2,773 34.4 2,291 33.1
Selling, General &
Administrative 1,708 21.2 1,347 19.5
Depreciation/Amortization 531 6.6 490 7.1
______ _____ ______ _____
Income (Loss) from
from Operations $ 534 6.6 $ 454 6.5
====== ===== ====== =====
Loss from discontinued
Operations $ - - $ (355) (5.1)
Interest Expense (95) (1.2) (71) (1.0)
Preferred Stock Dividends (115) (1.4) (99) (1.4)
====== ====== ====== =====
<PAGE>
Nine Months Ended
September 30,
_________________________________
1998 % 1997* %
_______ _____ _______ _____
<S> <C> <C> <C> <C>
$22,291 100.0 $19,368 100.0
15,317 68.7 13,492 69.7
______ _____ ______ _____
6,974 31.3 5,876 30.3
4,942 22.2 4,072 21.0
1,566 7.0 1,487 7.7
______ _____ ______ _____
$ 466 (2.1) $ 317 1.6
====== ===== ====== =====
$ - - $(1,308) (6.8)
(364) (1.6) (331) (1.7)
(291) (1.3) (262) (1.4)
====== ===== ====== =====
<FN>
* Amounts have been restated from that previously reported
to reflect the discontinued operations at PFM (see Note
2).
</FN>
</TABLE>
Summary Three and Nine Months Ended September 30, 1998 and 1997
_________________________________________________________________
The Company provides services through two business segments.
The Waste Management Services segment is engaged in on-and off-site
treatment, storage, disposal and processing of a wide variety of
by-products and industrial, hazardous and mixed hazardous and low
level radioactive 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 located throughout the continental United
States. 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 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, the
Consulting Engineering segment provides oversight management of
environmental restoration projects, air and soil sampling,
compliance reporting, surface and subsurface water treatment design
for removal of pollutants, and various compliance and training
activities.
Consolidated net revenues increased $1,144,000 for the quarter
ended September 30, 1998, as compared to the quarter ended
September 30, 1997. This increase of 16.5% is attributable to the
Waste Management Services segment which experienced an increase in
revenues of $1,278,000, partially offset by a decrease in revenues
from the Consulting Engineering segment. The increase in the Waste
Management Services segment is the result of the growth in the
wastewater and mixed waste markets. The most significant increases
occurred at the PFF facility, which recognized a $783,000 increase
resulting principally from the completion of various mixed waste
contracts, the PFTS facility, which recognized a $260,000 increase
due to the increased processing capacities at this facility, and
the PFFL facility, which recognized a $485,000 increase resulting
principally from increased services within the cruise ship industry
and other remedial contracts completed. Consolidated net revenues
increased to $22,291,000 from $19,368,000 for the nine months ended
September 30, 1998, as compared to the same nine months ended in
17
<PAGE>
1997. This increase of $2,923,000, or 15.1%, is attributable to
the Waste Management Services segment which experienced an increase
in revenues of $3,325,000, partially offset by a decrease in
revenues from the Consulting Engineering segment. The most
significant increases occurred at the PFF facility which recognized
a $1,422,000 increase resulting principally from the completion of
various mixed waste contracts, the PFTS facility, which recognized
an $837,000 increase due to the increased processing capacities at
this deep-well wastewater disposal facility resulting from a
recently completed upgrade, and the PFFL facility, which recognized
a $725,000 increase resulting principally from growth in services
within the cruise ship industry. This increase in the Waste
Management Services segment was partially offset by a reduction of
$403,000 in the Consulting Engineering segment. This Consulting
Engineering reduction is principally a result of the completion of
several larger contracts in 1997, which were not duplicated in
1998.
Cost of goods sold for the Company increased $662,000, or
14.3%, for the quarter ended September 30, 1998, as compared to the
quarter ended September 30, 1997. This consolidated increase in
cost of goods sold reflects principally the increased disposal,
transportation and operating costs corresponding to the 16.5%
increase in revenues, as discussed above. The resulting gross
profit for the quarter ended September 30, 1998, increased $482,000
to $2,773,000, which as a percentage of revenue is 34.4%,
reflecting an increase over the 1997 percentage of revenue of
33.1%. Cost of goods sold for the Company increased $1,825,000 or
13.5% for the nine months ended September 30, 1998, as compared to
the nine months ended September 30, 1997. This consolidated
increase in cost of goods sold reflects principally the increased
disposal, transportation and operating costs, corresponding to the
15.1% increase in revenues, as discussed above. The resulting
gross profit for the nine months ended September 30, 1998,
increased $1,098,000 to $6,974,000, which as a percentage of
revenue is 31.3%, reflecting an increase over the 1997 percentage
of revenue of 30.3%.
Selling, general and administrative expenses increased
$361,000 or 26.8% for the quarter ended September 30, 1998, as
compared to the quarter ended September 30, 1997. As a percentage
of revenue, selling, general and administrative expense also
increased to 21.2% for the quarter ended September 30, 1998,
compared to 19.5% for the same period in 1997. Selling, general
and administrative expenses increased $870,000, or 21.3%, for the
nine months ended September 30, 1998, as compared to the nine
months ended September 30, 1997. As a percentage of revenue,
selling, general and administrative expense also increased to 22.2%
for the nine months ended September 30, 1998, compared to 21.0% for
the same period in 1997. The increases for both the quarter and
nine months ended September 30, 1998, reflects the increased
expenses associated with the Company's additional sales and
marketing efforts as it continues to refocus its business segments
into new environmental markets, such as nuclear and mixed waste and
the development of certain on-site wastewater services, and the
additional administrative overhead associated with the Company's
research and development efforts, all of which are expensed in the
current period as incurred.
Depreciation and amortization expense for the quarter ended
September 30, 1998, reflects an increase of $41,000 as compared to
the same quarter ended September 30, 1997. This increase is
attributable to a depreciation increase of $23,000 due to capital
improvements being introduced at the Company's transportation,
storage and disposal ("TSD") facilities to improve efficiencies.
Amortization expense reflects a total increase of $18,000 for the
quarter ended September 30, 1998, as compared to the same quarter
1997 due to the increased amortization, resulting from new
capitalized permitting costs. Depreciation and amortization
expense for the nine months ended September 30, 1998, reflects an
increase of $79,000 as compared to the nine months ended September
30, 1997. This increase is attributable to a depreciation expense
increase of $49,000 due to the capital improvements being
introduced at the Company's TSD facilities to improve efficiencies.
Amortization expense reflects a total increase of $30,000 for the
nine months ended September 30, 1998, as compared to the nine
months ended September 30, 1997, due to the increased amortization,
resulting from new capitalized permitting costs.
Interest expense increased $24,000 for the quarter ended
September 30, 1998, as compared to the corresponding period of
1997, and by $33,000 from the nine months ended September 30, 1998,
18
<PAGE>
as compared to the corresponding period of 1997. The increase in
interest expense during 1998 reflects the additional interest as
incurred on the Congress Financial Corporation (Florida)
("Congress") term loan, which as a result of the January 1998
refinancing of the Heller Financial and Ally Capital Corporation
debt obligations was reloaded to an increased balance of $2.5
million. The Congress revolving loan balance and related interest
expense reflected increases during the first six months of 1998,
over the same period of 1997, which were partially offset by
reduced revolving loan interest expense in the third quarter of
1998, resulting from the proceeds of the Series 10 Preferred in
conjunction with improved operating cash flow. The Preferred Stock
dividends increased $29,000 for the nine months ended September 30,
1998, as compared to the same period of 1997, to a total of
$291,000. This increase is principally a result of the $26,000 of
additional dividends incurred relative to the Series 10 Preferred,
issued in July 1998. Also reflected in this increase is a full
nine (9) months of dividends in 1998 for the Series 8 and Series 9
Preferred, as compared to three (3) months in 1997, partially
offset by reduced dividends resulting from the conversion of 1500
shares of Series 3 Preferred during the period May through August
of 1997.
Discontinued Operations
On January 27, 1997, an explosion and resulting tank fire
occurred at the PFM facility, a hazardous waste storage, processing
and blending facility, 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. The facility was non-operational
from the date of this event until May 1997, at which time it began
limited operations. Until the time of the incident, PFM operated as
a permitted "fuel blending" facility and serviced a separate class
of customers who generated specific waste streams, identified by
its waste code and specific characteristics. As the Company's only
such "fuel blending" facility, PFM was permitted to and capable of
mixing certain hazardous liquid, semi-solid and solid waste in a
vat which suspended the solids in order to pump the mixture into a
tank. The tanks also contained mixing units which kept the solids
suspended until the mixture could be off-loaded into tanker trucks.
As a result of the damage to the tanks and processing equipment and
the related cost to rebuild this operating unit, the Company
decided to discontinue this line of business, which resulted in
PFM's inability to service and retain the existing customer base.
The existing customer base represented principally manufacturing
and service companies whose operations generated certain semi-solid
and solid permitted hazardous wastes, which as a result of permit
and processing limitations could not be served by other Company
facilities. The Company continues to pursue other markets or
activities which may be performed at this facility given the permit
limitations, capital requirements and development of a new line of
business and related customer base. Upon evaluation of the above
business decision, and given the loss of both the existing line of
business and its related customer base, the Company reported the
Memphis segment as a discontinued operation, pursuant to Paragraph
13 of APB 30.
The fuel blending activities were discontinued on the date of
the incident, January 27, 1997. All assets involved in the fuel
blending activities that were not damaged beyond repair in the fire
have subsequently been damaged as a result of the decontamination
process. Accordingly, during the fourth quarter of 1997, the Company
recorded a loss on disposal of discontinued operations of $3,053,000,
which included $1,272,000 for impairment of certain assets and $1,781,000
for the establishment of certain closure liabilities.
The net loss from discontinued PFM operations for the nine months
ended September 30, 1998, was $378,000 and was recorded against the
accrued closure cost estimate on the balance sheet. The net loss for the
nine months ended September 30, 1997, was $1,308,000 and is shown
separately in the Consolidated Statements of Operations. The Company has
restated the 1997 operating results to reflect this discontinued
operations. The results of the discontinued PFM operations do not
reflect management fees charged by the Company, but do include
interest expense of $54,000 and $180,000 during the nine months
ended September 30, 1998 and 1997, respectively, specifically
identified to such operations as a result of such operations actual
incurred debt under the Corporation's revolving and term loan
credit facility. During March of 1998, the Company received a
settlement in the amount of $1,475,000 from its insurance carrier
for the business interruption claim. This settlement was
recognized as a gain in 1997 and thereby reducing the net loss
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recorded for the discontinued PFM operations in 1997. Revenues of
the discontinued PFM operations were $794,000 for the nine months
ended September 30, 1998, and $1,514,000 for the nine months ended
September 30, 1997. These revenues are not included in revenues as
reported in the Consolidated Statements of Operation.
Liquidity and Capital Resources of the Company
At September 30, 1998, the Company had cash and cash
equivalents of $825,000, including ($2,000) from discontinued
operations. This cash and cash equivalents total reflects an
increase of $499,000 from December 31, 1997, as a result of net
cash provided by continuing operations of $2,187,000 (including
the PFM insurance settlement of $1,475,000), offset by cash used by
discontinued operation of $903,000, cash used in investing
activities of $1,434,000 (principally purchases of equipment, net
totaling $1,640,000) and cash provided by financing activities of
$649,000 (principally proceeds from the issuance of stock partially
offset by the repayment of the Company's credit facilities).
Accounts receivable, net of allowances for continuing operations,
totaled $5,363,000, an increase of $81,000 over the December 31,
1997, balance of $5,282,000, which principally reflects the impact
of increased sales during the third quarter of 1998.
During fiscal year 1997 and 1998 there were numerous events,
many of which were precipitated by the Company, which served to
increase the Company's liquidity on a short term and long term
basis. During 1997, the Company and certain of its subsidiaries
(i) sold non productive assets in the amount of $245,000. (ii)
entered into and received business interruption insurance proceeds
for Ft. Lauderdale facility in the amount of $231,000, (iii) issued
Common Stock pursuant to certain stock purchase agreements and
warrant and option exercises which yielded $751,000, (iv) issued
two (2) Series of Preferred Stock for $2,850,000, (v) received
insurance proceeds of $422,000 as a result of the fire and
explosion at PFM; and (vi) issued $378,000 of Common Stock for
outstanding debts.
As detailed below, during 1998 the Company entered into the
Loan Agreement with Congress, pursuant to which (i) the previous
loan arrangements with Heller Financial Corporation ("Heller") and
Ally Capital Corporation ("Ally") were replaced, (ii) the then
existing loan covenant violations of the Company under the Heller
and Ally loan arrangements were eliminated, and (iii) the Company
received increased lending availability. During 1998, the Company
also received insurance proceeds related to the fire and explosion
at PFM in the amount of $1,475,000, issued the Series 10 Preferred
for $3,000,000, and issued $588,863 of Common Stock for outstanding
debts.
On January 15, 1998, 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 Congress Financial Corporation
(Florida) as lender ("Congress"). The Agreement provides for a
term loan in the amount of $2,500,000, which requires principal
repayments based on a four-year level principal amortization over
a term of 36 months, with monthly principal payments of $52,000.
Payments commenced on February 1, 1998, with a final balloon
payment in the amount of approximately $573,000 due on January 14,
2001. The Agreement also provides for a revolving loan facility in
the amount of $4,500,000. At any point in time the aggregate
available borrowings under the facility are subject to the maximum
credit availability as determined through a monthly borrowing base
calculation, as updated for certain information on a weekly basis,
equal to 80% of eligible accounts receivable accounts of the
Company as defined in the Agreement. The termination date on the
revolving loan facility is also the third anniversary of the
closing date. The Company incurred approximately $237,000 in
financing fees relative to the solicitation and closing of this
loan agreement (principally commitment, legal and closing fees)
which are being amortized over the term of the Agreement.
Pursuant to the Agreement, the term loan and revolving loan
both bear interest at a floating rate equal to the prime rate plus
1 3/4%. The Agreement also provides for a one time rate adjustment
of 1/4%, subject to the company meeting certain 1998 performance
objectives. The loans also contain certain closing, management and
unused line fees payable throughout the term. The loans are
subject to a 3.0% prepayment fee in the first year, 1.5% in the
second and 1.0% in the third year of the Agreement.
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As security for the payment and performance of the Agreement,
the Company granted a first security interest in all accounts
receivable, inventory, general intangibles, equipment and other
assets of the Company and its subsidiaries, as well as the
mortgage on two (2) facilities owned by subsidiaries of the
Company. The Agreement contains affirmative covenants including,
but not limited to, certain financial statement disclosures and
certifications, management reports, maintenance of insurance and
collateral. The Agreement also contains an Adjusted Net Worth
financial covenant, as defined in the Agreement, of $3,000,000.
Under the Agreement, the Company, and its subsidiaries are limited to
granting liens on their equipment, including capitalized leases, (other
than liens on the equipment to which Congress has a security interest)
in an amount not to exceed $2,500,000 in the aggregate at any time
outstanding.
The proceeds of the Agreement were utilized to repay in full on
January 15, 1998, the outstanding balance of $3,115,000 under the Heller
Loan and Security Agreement which was comprised of a revolving loan and
term loan, and to repay the outstanding balance of $624,000 under the
Ally Equipment Financing Agreements. The Company had borrowing
availability under the Congress Agreement of approximately $1,500,000 as
of the date of closing, based on 80% of eligible accounts receivable
accounts. The Company recorded the December 31, 1997, Heller and Ally
debt balances as though the Congress transaction had been closed as of
December 31, 1997. As a result of this transaction, and the repayment
of the Heller and Ally debt, the combined monthly debt payments were
reduced from approximately $104,000 per month to $52,000 per month. As
of September 30, 1998, the borrowings under the Congress revolving loan
facility totaled $52,000, with borrowing availability of approximately
$3,538,000 based on the amount of outstanding eligible accounts
receivable as of September 30, 1998. The balance under the Congress term
loan at September 30, 1998, was $2,083,000.
At September 30, 1998, the Company had $3,013,000 in aggregate
principal amounts of outstanding debt, related to continuing operations,
as compared to $4,865,000 at December 31, 1997. This decrease in
outstanding debt of $1,852,000 principally reflects the decreased
borrowings under the Company's revolving credit facility ($2,028,000)
resulting from cash provided by continuing operations and cash proceeds
from the Series 10 Preferred, and the new equipment financing at the
Perma-Fix of Florida, Inc. facility ($317,000), partially offset by the
scheduled principal repayments on the Company's other credit agreements.
As of September 30, 1998, the Company had $49,000 in aggregate
principal amounts of outstanding debt related to PFM discontinued
operations, of which $42,000 is classified as current.
As of September 30, 1998, total consolidated accounts payable for
continuing operations of the Company was $1,852,000, a reduction of
$411,000 from the December 31, 1997, balance of $2,263,000.
The Company's net purchases of new capital equipment for continuing
operations for the nine month period ended September 30, 1998, totaled
approximately $1,970,000, including $330,000 of financed purchases.
These expenditures were for expansion and improvements to the operations
principally within the Waste Management segment. These capital
expenditures were principally funded by the $1,475,000 PFM insurance
settlement, utilization of the Company's revolving credit facility,
internally generated funds, and other lease financing. The Company had
budgeted capital expenditures of $1,950,000 for 1998, subsequently
increase to a level of approximately $2,100,000 which includes completion
of certain current projects, as well as other identified capital and
permit compliance purchases, excluding environmental contingencies as
discussed below. The Company anticipates funding the remainder of its
1998 capital expenditures by a combination of lease financing with
lenders other than the equipment financing arrangement discussed above,
proceeds from the Series 10 Preferred Stock, and/or internally generated
funds.
On or about June 30,1998, the Company issued 3,000 shares of newly
created Series 10 Class J Convertible Preferred Stock ("Series 10
Preferred"), as further discussed in Note 6 to Consolidated Financial
Statements and Item 2 "Changes in Securities and Use of Proceeds." The
Company received net proceeds of $2,768,000 (after deduction of the
payment of $210,000 for broker's commission and certain other closing
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costs, but prior to the Company's legal fees and other costs in
connection with the sale of the Series 10 Preferred and the registration
of the Common Stock issuable upon conversion of such Preferred Stock) for
the sale of the Series 10 Preferred. These net proceeds were received
by the Company on July 14, 1998, and have been recorded as a Preferred
Stock receivable at June 30,1998. Each share of Series 10 Preferred sold
for $1,000 per share and has a liquidation value of $1,000 per share.
The Company utilized the proceeds received on the sale of Series 10
Preferred for working capital and/or to reduce the outstanding
balance of its revolving credit facility, subject to the Company
reborrowing under such credit facility.
With the issuance of the Series 10 Preferred, the Company has
outstanding 9,850 shares of Preferred Stock, with each share having
a liquidation preference of $1,000 ("Liquidation Value"). Annual
dividends on the Preferred Stock ranges from 4% to 6% of the
Liquidation Value, depending upon the Series. Dividends on the
Preferred Stock are cumulative, and are payable, if and when
declared by the Company's Board of Directors, on a semi-annual
basis. Dividends on the outstanding Preferred Stock may be paid at
the option of the Company, if declared by the Board of Directors,
in cash or in the shares of the Company's Common Stock as described
under Note 6 of the Consolidated Financial Statements and Item 2 of
Part II hereof. The accrued dividends for the period from January
1, 1998, through June 30, 1998, on the then outstanding shares of
the Company's Preferred Stock in the amount of approximately
$176,000 were paid in July 1998, by the Company issuing 90,609
shares of the Company's Common Stock. It is the present intention
of the Company to pay any dividends declared by the Company's Board
of Directors on its outstanding shares of Preferred Stock in Common
Stock of the Company.
As of September 30, 1998, there are certain events, which may
have a material impact on the Company's liquidity on a short-term
basis. The Company's Board of Directors has authorized the
repurchase of up to 500,000 share of the Company's Common Stock
from time to time in the open market or privately negotiated
transactions, in accordance with SEC Rule 106-18, which if such
shares were purchased as of the date of the report would result in
the expenditure of approximately $1.0 million in cash, (ii)
extended an offer of $225,000 (payable $150,000 at closing and
$75,000 over a twelve month period) to settle any potential
liability regarding the Drum Site as discussed below, and (iii)
signed a letter of intent regarding potential acquisitions as
further discussed in Note 7 to the Notes to Consolidated Financial
Statements. In conjunction with this proposed acquisition, the
Company would fund certain closing costs and accrued liabilities in
amounts yet to be determined. The Company anticipates funding
these activities from cash provided by continuing operations and
borrowings under the Company's revolving credit facility.
The working capital position of the Company at September 30,
1998, was $1,386,000, as compared to $754,000 at December 31, 1997,
which reflects an increase of $632,000 during this first nine
months of 1998. This increased working capital position is
principally a result of the Series 10 Preferred equity proceeds
received in July 1998 and the cash contributions provided by the
continuing operations, partially offset by the fact that the
Company reduced its current liabilities during the first nine
months of 1998 by approximately $1,710,000. The Company also
reduced its long-term liabilities by $2,176,000, to a balance of
$6,219,000 at September 30, 1998.
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. The Company makes every reasonable attempt to maintain
complete compliance with these regulations; however, even with a
diligent commitment, the Company, as with many of its competitors,
may be required to pay fines for violations or investigate and
potentially remediate its waste management facilities.
The Company routinely uses third party disposal companies, who
ultimately destroy landfill residual materials generated at its
facilities or at a client's site. The Company, compared to its
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competitors, disposes of significantly less hazardous or industrial
by-products from its operations due to rendering material non-
hazardous, discharging treated wastewaters to publicly-owned
treatment works and/or processing 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
potentially responsible party ("PRP") at a remedial action site,
which could have a material adverse effect on the Company.
In addition to budgeted capital expenditures of $2,100,000 for
1998 at the TSD facilities of the Company, which are necessary to
maintain permit compliance and improve operations, the Company has
also budgeted for 1998 an additional $1,045,000 in environmental
expenditures to comply with federal, state and local regulations in
connection with remediation of two locations. One location owned
by PFM and the other location leased by a predecessor of another
subsidiary of the Company. The Company has estimated the
expenditures for 1998 to be approximately $210,000 at the site
leased by a predecessor of a subsidiary of the Company and
$835,000 at the PFM location. Additional funds will be required
for the next five to ten years to properly investigate and
remediate these sites. The Company expects to fund these expenses
to remediate these two sites from funds generated internally.
In addition the Company's subsidiary, PFM, has been notified
by the United States Environmental Protection Agency ("EPA") that
it believes that PFM is a PRP regarding the remediation of a drum
reconditioning facility in Memphis, Tennessee, owned by others
("Drum Site"), primarily as a result of activities by PFM prior to
the date that the Company acquired PFM in December 1993. The EPA
has advised PFM that it has spent approximately $1.4 million to
remediate the Drum Site, and that the EPA has sent PRP letters to
approximately 50 other PRPs regarding the Drum Site in addition to
PFM. The EPA has further advised that it believes that PFM
supplied a substantial amount of drums to the Drum Site. The
Company is currently negotiating with the EPA regarding the
possibility of settling the EPA's claims against PFM as to the Drum
Site. During the third quarter of 1998, the Company extended an
offer of $225,000 (payable $150,000 at closing and the balance over
a twelve month period) to settle any potential liability regarding
the Drum Site. Based upon discussions with government officials,
the Company believes the settlement offer will be accepted,
however, no assurance can be made that the Company's current
settlement offer will be accepted or that the Company will be able
to settle its claims regarding the Drum Site in an amount and
manner which the Company believes is reasonable. If PFM is unable
to settle such claims by the EPA and PFM is determined to be
liable for all or a substantial portion of the remediation costs
incurred by the EPA at the Drum Site, such could have a material
adverse effect on the Company.
Year 2000 Issues
The staff of the Securities and Exchange Commission has
indicated that each public company should discuss its "Year 2000"
issues. The Year 2000 problem arises because many computer systems
were designed to identify a year using only two digits, instead of
four digits, in order to converse memory and other resources. For
instance, "1997" would be held in the memory of a computer as "97."
When the year changes from 1999 to 2000, a two digit system
would read the year as changing from "99" to "00." For a variety
of reasons, many computer systems are not designed to make such a
date change or are not designed to "understand" or react
appropriately to such a date change. Therefore, as the date
changes to the year 2000, many computer systems could completely
stop working or could perform in an improper and unpredictable
manner.
The Company has conducted a review of its computer systems to
identify the systems which it anticipated could be affected by the
Year 2000 issue, and the Company believes that all such systems
were already, or have been converted to be, Year 2000 complaint.
Such conversion, when required, did not entail material
expenditures by the Company. Pursuant to the Company's Year 2000
planning, the Company has requested information regarding the
computer systems of its key suppliers, customers, creditors, and
financial service organizations and has been informed that they are
substantially Year 2000 compliant. There can be no assurance,
however, that such key organizations are actually Year 2000
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complaint and that the Year 2000 issue will not adversely affect
the Company's financial position or results of operations. The
Company believes that its expenditures in addressing its Year 2000
issues will not have a material adverse effect on the Company's
financial position or results of operations.
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PERMA-FIX ENVIRONMENTAL SERVICES, INC.
PART II - Other Information
Item 1. Legal Proceedings
_________________
There are no additional material 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 year ended
December 31, 1997. As previously disclosed in such Form 10-K, the
Company received correspondence dated January 15, 1998 ("PRP
Letter"), from the United States Environmental Protection Agency
("EPA") that it believes that PFM, a wholly owned subsidiary of the
Company is a potentially responsible party ("PRP"), as defined
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), regarding the remediation of the
W. & R. Drum, Inc. ("Drum") site in Memphis, Tennessee, ("Drum
Site"), primarily as a result of acts by a predecessor of PFM prior
to the time PFM was acquired by the Company. In addition, the EPA
has advised PFM that it has sent PRP letters to approximately 50
other PRPs as to the Drum Site. The PRP Letter estimated the
remediation costs incurred by the EPA for the Drum Site to be
approximately $1,400,000 as of November 30, 1997. The EPA has
orally informed the Company that such remediation has been
substantially completed as of such date, and that the EPA believes
that PFM supplied a substantial amount of the drums at the Drum
Site. During the second quarter of 1998, PFM and certain other
PRPs began negotiating with the EPA regarding a potential
settlement of the EPA's claims regarding the Drum Site and such
negotiations are currently continuing. During the third quarter of
1998, the Company extended an offer of $225,000 (payable $150,000
at closing and the balance over a twelve month period) to settle
any potential liability regarding the Drum Site. Based upon
discussions with government officials, the Company believes the
settlement offer will be accepted, however, no assurance can be
made that the Company's current settlement offer will be accepted
or that the Company will be able to settle its claims regarding the
Drum Site in an amount and manner which the Company believes is
reasonable. If PFM cannot reach a settlement which PFM believes
is reasonable, it will continue to vigorously defend against the
EPA's demand regarding remediation costs of the Drum Site. If PFM
is determined to be liable for a substantial portion of the
remediation cost incurred by the EPA at the Drum Site, such could
have a material adverse effect on the Company.
Item 2. Changes in Securities and Use of Proceeds
_________________________________________
During the quarter ended September 30, 1998, the Company sold
or entered into an agreement to sell, equity securities that were
not registered under the Securities Act of 1933, as amended
("Securities Act") as follows:
(i) Pursuant to the terms of a Private Securities
Subscription Agreement, dated as of June 30, 1998 ("Subscription
Agreement"), the Company issued to RBB Bank Aktiengesellschaft,
located in Graz, Austria ("RBB Bank"), 3,000 shares of newly-
created Series 10 Class J Convertible Preferred Stock, par value
$.001 per share ("Series 10 Preferred"), at a price of $1,000 per
share, for an aggregate sales price of $3,000,000. The Company
received net proceeds of approximately $2,768,000 from the sale of
the Series 10 Preferred after deducting certain commissions and
expenses. Pursuant to the terms of the Subscription Agreement, the
Company granted to RBB Bank the RBB Series 10 Warrants (as defined
and discussed below). The sale to RBB Bank of the Series 10
Preferred and the granting of the RBB Series 10 Warrants as
described below were made in a private placement under Section 4(2)
of the Securities Act and/or Rule 506 of Regulation D as
promulgated under the Securities Act.
In the Subscription Agreement, RBB Bank represents inter alia,
(i) it is an "accredited investor" as such term is defined in Rule
501 as promulgated under the Securities Act; (ii) the placement was
not made in connection with any general solicitation or
advertising; (iii) RBB Bank alone, or together with its purchaser
representative is a sophisticated investor; and (iv) RBB Bank's
acquisition under the Subscription Agreement is for its own account
and not with a view to resale or distribution of any part thereof.
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The Series 10 Preferred has a liquidation preference over
the Company's Common Stock, par value $.001 per share ("Common
Stock"), equal to $1,000 consideration per outstanding share of
Series 10 Preferred (the "Series 10 Liquidation Value"), plus an
amount equal to all unpaid dividends accrued thereon. The Series
10 Preferred accrues dividends on a cumulative basis at a rate of
four percent (4%) per annum of the Series 10 Liquidation Value
("Dividend Rate"), and is payable semi-annually when and as
declared by the Board of Directors. Dividends, as declared by the
Board of Directors, may be paid at the option of the Company, in
cash or shares of Common Stock. No dividends or other
distributions may be paid or declared or set aside for payment on
the Common Stock until all accrued and unpaid dividends on all
outstanding shares of Series 10 Preferred have been paid or set
aside for payment. If the Company pays dividends in Common Stock,
such are payable in the number of shares of Common Stock equal to
the product of (a) the quotient of (i) the Dividend Rate divided by
(ii) the average of the closing bid quotation of the Common Stock
as reported on the NASDAQ for the five trading days immediately
prior to the date the dividend is declared, time (b) a fraction,
the numerator of which is the number of days elapsed during the
period for which the dividend is to be paid and the denominator of
which is 365.
The holder of the Series 10 Preferred may convert into Common
Stock any or all of the Series 10 Preferred on and after 180 days
after June 30, 1998. The conversion price per outstanding share of
Preferred Stock ("Series 10 Conversion Price") is $1.875; except
that if the average of the closing bid price per share of Common
Stock quoted on the NASDAQ (or the closing bid price of the Common
Stock as quoted on the national securities exchange if the Common
Stock is not listed for trading on the NASDAQ but is listed for
trading on a national securities exchange) for the five (5) trading
days immediately prior to the particular date on which the holder
notified the Company of a conversion ("Series 10 Conversion Date")
is less than $2.34, then the Series 10 Conversion Price for that
particular conversion shall be eighty percent (80%) of the average
of the closing bid price of the Common Stock on the NASDAQ (or if
the Common Stock is not listed for trading on the NASDAQ but is
listed for trading on a national securities exchange then eighty
percent (80%) of the average of the closing bid price of the Common
Stock on the national securities exchange) for the five (5) trading
days immediately prior to the particular Series 10 Conversion Date.
As of June 30,1998, the closing price of Common Stock on the NASDAQ
was $1.875 per share.
As part of the sale of the Series 10 Preferred, the Company
also issued to RBB Bank two warrants: (a) one warrant entitling the
holder to purchase up to an aggregate of 150,000 shares of Common
Stock at an exercise price of $2.50 per share of Common Stock
expiring three (3) years after June 30, 1998 and (b) a second
warrant entitling the holder to purchase up to an aggregate of
200,000 shares of Common Stock at an exercise price of $1.875 per
share of Common Stock and expiring three (3) years after June 30,
1998. Collectively, these warrants are referred to herein as the
"RBB Series 10 Warrants." The shares of Common Stock issuable upon
the conversion of the Series 10 Preferred and upon the exercise of
the RBB Series 10 Warrants are subject to certain registration
rights pursuant to the Subscription Agreement.
The Company intends to utilize the net proceeds received on
the sale of Series 10 Preferred for working capital and/or to
reduce the outstanding balance of its credit facilities, subject to
the Company reborrowing under such credit facilities.
In connection with the placement of Series 10 Preferred with
RBB Bank, the Company paid commissions of $210,000 and issued to
(a) Liviakis Financial Communications, Inc. ("Liviakis") for
assistance with the placement of the Series 10 Preferred, warrants
entitling the holder to purchase up to an aggregate of 1,875,000
shares of Common Stock, subject to certain anti-dilution
provisions, at an exercise price of $1.875 per share of Common
Stock which warrants may be exercised after January 15, 1999, and
which expire after four (4) years; (b) Robert B. Prag, an executive
officer of Liviakis ("Prag"), for assistance with the placement of
the Series 10 Preferred, warrants entitling the holder to purchase
up to an aggregate of 625,000 shares of Common Stock, subject to
certain anti-dilution provisions, at an exercise price of $1.875
per share of Common Stock, which warrants may be exercised after
January 15, 1999, and which expire after four (4) years; (c) JW
Genesis Financial Corporation ("Genesis") for assistance with the
placement of the Series 10 Preferred, warrants entitling the holder
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to purchase up to an aggregate of 150,000 shares of Common Stock,
subject to certain anti-dilution provisions, at an exercise price
of $1.875 per share of Common Stock, which warrants expire after
three (3) years; and (d) Fontenoy Investments ("Fontenoy") for
assistance with the placement of the Series 10 Preferred, warrants
entitling the holder to purchase up to an aggregate of 350,000
shares of Common Stock, subject to certain anti-dilution
provisions, at an exercise price of $1.875 per share of Common
Stock, which warrants expire after three (3) years. Under the
terms of each warrant, the holder is entitled to certain
registration rights with respect to the shares of Common Stock
issuable on the exercise of each warrant. The issuance of the
warrants to Liviakis, Prag, Genesis and Fontenoy was made in a
private placement under Section 4(2) of the Securities Act and/or
Rule 506 of Regulation D as promulgated under the Securities Act.
Under certain circumstances, the Company may not issue shares
of Common Stock upon conversion of the Series 10 Preferred and the
exercise of warrants granted in connection with the issuance of the
Series 10 Preferred ("Series 10 Warrants") without obtaining
shareholder approval as to such transactions. Shareholder approval
is required if (i) the aggregate number of shares of Common Stock
issued by the Company pursuant to the terms of the Series 10
Preferred and the Series 10 Warrants exceeds 2,388,347 shares of
Common Stock (which equals 19.9% of the outstanding shares of
Common Stock of the Company as of June 30, 1998) and (ii) RBB Bank
has converted or elects to convert any of the then outstanding
shares of Series 10 Preferred pursuant to the terms of the Series
10 Preferred at a conversion price of less than $1.875 ($1.875
being the market value per share of Common Stock as quoted on the
NASDAQ as of the close of business on June 30, 1998), other than if
the Conversion Price is less than $1.875 solely as a result of the
anti-dilution provisions of the Series 10 Preferred, then the
Company must obtain shareholder approval before the Company can
issue any additional shares of Common Stock pursuant to the terms
of the Series 10 Preferred and Series 10 Warrants. The requirement
for shareholder approval is set forth in subparagraphs
(25)(H)(i)d, (iv) and (v) of Rule 4310 of the NASDAQ Marketplace
Rules.
(ii) On or about September 10, 1988, pursuant to the terms of
a certain Consulting Agreement ("Consulting Agreement") entered
into effective as of January 1, 1998, the Company issued 2,170
shares of Common Stock in payment of accrued earnings of $3,000 to
Alfred C. Warrington IV, an outside, independent consultant to the
Company, as consideration for certain consulting services rendered
to the Company by Warrington from April through June 1998. The
issuance of Common Stock pursuant to the Consulting Agreement was
a private placement under Section 4(2) of the Securities Act and/or
Rule 506 of Regulation D as promulgated under the Securities Act.
The Consulting Agreement provides that Warrington will be paid
$1,000 per month of service to the Company, payable, at the option
of Warrington (i) all in cash, (ii) sixty-five percent in shares of
Common Stock and thirty-five percent in cash, or (iii) all in
Common Stock. If Warrington elects to receive part or all of his
compensation in Common Stock, such will be valued at seventy-five
percent of its "Fair Market Value" (as defined in the Consulting
Agreement). Warrington elected to receive all of his accrued
compensation through the end of 1997 in Common Stock.
Warrington represented and warranted in the Consulting
Agreement, inter alia, as follows: (i) the Common Stock is being
acquired for Warrington's own account, and not on behalf of any
other persons; (ii) Warrington is acquiring the Common Stock to
hold for investment, and not with a view to the resale or
distribution of all or any part of the Common Stock; (iii)
Warrington will not sell or otherwise transfer the Common Stock in
the absence of an effective registration statement under the
Securities Act, or an opinion of counsel satisfactory to the
Company, that the transfer can be made without violating the
registration provisions of the Securities Act and the rules and
regulations promulgated thereunder; (iv) Warrington is an
"accredited investor" as defined in Rule 501 of Regulation D as
promulgated under the Securities Act; (v) Warrington has such
knowledge, sophistication and experience in financial and business
matters that he is capable of evaluating the merits and risks of
the acquisition of the Common Stock; (vi) Warrington fully
understands the nature, scope and duration of the limitations on
transfer of the Common Stock as contained in the Consulting
Agreement, (vii) Warrington understands that a restrictive legend
as to transferability will be placed upon the certificates for any
of the shares of Common Stock received by Warrington under the
Consulting Agreement and that stop transfer instructions will be
given to the Company's transfer agent regarding such certificates.
27
<PAGE>
(iii) On or about each of July 20, 1998, and August 27, 1998,
Joseph C. Canouse ("Canouse") purchased 30,000 shares each of
Common Stock for $21,900 or an aggregate of 60,000 shares for
$43,800. These shares were purchased pursuant to the terms of a
certain warrant ("Carey Warrant") which had been originally issued
to J.P. Carey Enterprises, Inc., a provider of investment banking
services to the Company ("Carey"), allowing the purchase of 195,000
shares of Common Stock for $0.73 per share and which was partially
assigned on January 5, 1998, to Canouse, a shareholder of Carey.
The issuance to Carey was described in a Form D which was filed
with the Securities and Exchange Commission ("SEC") under Rule 506
on August 3, 1996.
The shares of Common Stock were issued to Canouse in a private
placement under Section 4(2) of the Act as Canouse had access to
the same kind of information which would be included in a
registration statement and is a highly sophisticated investor. The
shares issued to Canouse are restricted shares which were issued
with a restrictive legend, however, such shares are covered by an
effective registration statement on Form S-3, No. 333-14513 ("1996
Registration Statement"), filed with the SEC, effective November
13, 1996, registering for reoffer or resale from time to time
certain shares of Common Stock including the 195,000 shares of
Common Stock, to be issued from time to time upon exercise of the
Carey Warrant.
On January 29, 1998, a Third Supplement to the Prospectus
dated November 13, 1996, ("Third Supplement") was flied with the
SEC, which Third Supplement described, among other things, the
assignment of a portion of the Carey Warrant to Canouse. The Third
Supplement also served to supplement and amend the Selling Security
Holders by, among other things, (i) adding Canouse as a Selling
Shareholder; and (ii) adjusting the offering information applicable
to Carey, to account for the assignment by Carey of the Carey
Warrant.
(iv) On or about July 15, 1998, and July 31, 1998, Dionysus
Limited ("Dionysus"), an Isle of Man corporation, which has since
changed its name to Fontenoy Investments Limited. purchased, 48,800
and 3,000 shares of Common Stock, respectively, or an aggregate of
51,800 shares for an aggregate of $88,060. These shares were
purchased pursuant to the terms of a certain warrant ("Dionysus
Warrant") issued to Dionysus in connection with a private placement
allowing the purchase of 100,000 shares of Common Stock for $1.70
per share. The issuance of the Dionysus Warrant was described in a
Form D which was filed with the SEC under Rule 506 on July 16,
1998.
The shares of Common Stock were issued to Dionysus in a
private placement under Section 4(2) of the Act as Dionysus had
access to the same kind of information which would be included in
a registration statement and is a highly sophisticated investor.
The shares issued to Dionysus are restricted shares which were
issued with a restricted legend and such shares are addressed in a
registration statement on Form S-3, No. 333-43149 ("Registration
Statement"), which has been filed with the SEC, but which has not
been declared effective.
On or about July 15, 1998, Dionysus also purchased 38,300
shares of Common Stock for $57,450 pursuant to the terms of a
certain warrant ("Charles Warrant") which was originally issued to
JW Charles Financial Services, Inc. ("Charles"), which at the time
was a provider of investment banking services to the Company. The
Charles Warrant allowed the purchase of 450,000 shares of Common
Stock for $1.50 per share. On or about July 13, 1997, a portion of
the Charles Warrant was assigned to a principal of Charles, Paul T.
Mannion ("Mannion") and effective August 5, 1997, Mannion assigned
his entire portion of the Charles Warrant to Dionysus. The issuance
to Charles was described in a Form D which was filed with the SEC
under Rule 506 on August 3, 1996.
The shares of Common Stock were issued to Dionysus in a
private placement under Section 4(2) of the Act as Dionysus had
access to the same kind of information which would be included in
a registration statement and is a highly sophisticated investor.
The shares issued to Dionysus under the Charles Warrant are
restricted shares which were issued with a restrictive legend,
however, such shares are covered by the 1996 Registration
Statement, which registered for reoffer or resale from time to time
28
<PAGE>
up to 7,450,000 shares of Common Stock including the 450,000 shares
of Common Stock, to be issued from time to time upon exercise of
the Charles Warrant.
On June 27, 1997, a Supplement to the Prospectus contained
within the 1996 Registration Statement. ("First Supplement") was
filed with the SEC, which First Supplement described, among other
things, the assignment of the portion of the Charles Warrant to
Mannion. The First Supplement also served to supplement and amend
the Selling Security Holders table set forth at page 21 of the
Prospectus by (i) adding as a Selling Stockholder each assignee of
a portion of the Charles Warrant who was not previously listed as
a Selling Stockholder, and (ii) adjusting the offering information
applicable to Charles, to account for the assignment by Charles of
the Charles Warrant.
On September 26, 1997, a Second Supplement to the Prospectus
contained within the 1996 Registration Statement ("Second
Supplement") was filed with the SEC, which Second Supplement
described, among other things, the assignment of the Mannion
Warrant to Dionysus. The Second Supplement also served to
supplement and amend the Selling Security Holders table set forth
at page 21 of the Prospectus by, among other things, (i) adding
Dionysus as a Selling Shareholder, and (ii) adjusting the offering
information applicable to Mannion to account for his assignment of
the Mannion Warrant to Dionysus.
Item 5. Other Information
_________________
Possible Acquisition
During November 1998, the Company signed a letter of intent
("Letter") with the shareholders of Chemical Conservation
Corporation (Florida), Chemical Conversation of Georgia, Inc.
(Collectively, "Chem-Con") and Chem-Met Services, Inc. ("Chem-Met")
regarding a potential acquisition of Chem-Con and Chem-Met by the
Company (the "Acquisition"). Chem-Con and Chem-Met generate, on a
consolidated basis, approximately $24 million in revenue, resulting
principally from the collection, treatment, and recycling of
industrial and hazardous waste, including waste oils, water and
miscellaneous solid waste. Chem-Met Services, Inc. treats and
stabilizes inorganic wastes, Chemical Conservation Corporation runs
a Part B-permitted transfer station that also serves as the base
for the private trucking fleet, and Chemical Conservation of
Georgia, Inc. recycles solvents and treats hazardous waste.
Pursuant to the terms of the Letter, the aggregate purchase price
for the Acquisition is to be approximately $7.4 million, payable in
Common Stock based upon the closing price of the Common Stock on
the NASDAQ for the five trading days preceding the closing date.
The Company will also enter into a four (4) year consulting
agreement with a certain executive manager of Chem-Con and Chem-Met
in the approximate aggregate amount of $1.3 million. The
Acquisition is subject to the ability of the parties to, among
other things:
* finalize definitive documents satisfactory to all
parties;
* qualify the Acquisition as a pooling of interest
transaction, which means that the merged companies will
be treated as if they had always been combined for
accounting and financial reporting purposes;
* resolve certain issues regarding real property used by
Chem-Con and Chem-Met;
* resolve and quantify certain potential environmental
liabilities of Chem-Con and Chem-Met;
* resolve certain tax treatment issues;
* complete due diligence in a satisfactory manner; and
* obtain approval of the Company's shareholders.
29
<PAGE>
No assurance can be made that the Acquisition will occur.
Common Stock Repurchase
On October 14, 1998, the Board of Directors authorized the
repurchase of up to 500,000 shares of the Company's Common Stock
from time to time in open market or privately negotiated
transactions, in accordance with SEC Rule 10b-18. The repurchases
will be at prevailing market prices and subject to approval by
Company's lender. The Company will utilize its current working
capital and available borrowings to acquire such shares. The
Company also announced that certain Directors and Officers may be
acquiring additional shares in open market transaction, pursuant to
SEC Rule 10b-18.
Oak Ridge System Contract Award
The Company and East Tennessee Materials and Energy Corp.
("M&EC") entered into a teaming agreement ("M&EC Contract")
pursuant to which the Company and M&EC agreed to act as a team in
the performance of certain contracts that either the Company or
M&EC may obtain from customers of the U.S. Department of Energy
("DOE") regarding treatment and disposal of certain types of
radioactive, hazardous or mixed waste (waste containing both
hazardous and low level radioactive waste) at DOE facilities. The
teaming agreement provides that if either M&EC or the Company is
issued a contract that comes under the teaming agreement, then the
Company and M&EC must complete a scope of work regarding the work
each party is to perform under such contract. If the parties are
unable to finalize a scope of work, the party receiving the
contract may complete the contract without the other party to the
teaming agreement. In connection with proposals relating to the
treatment and disposal of organic contaminated mixed waste at DOE's
Oak Ridge, Tennessee, system ("Oak Ridge"), M&EC and the Company
made a joint proposal to DOE, with M&EC to act as the team leader.
In August 1998, M&EC, as the team leader, was awarded three
contracts ("Oak Ridge Contracts") by Bechtel Jacobs Company, LLC,
the government-appointed manager of the environmental program for
Oak Ridge, to perform certain treatment and disposal services
relating to Oak Ridge. The Oak Ridge Contracts were issued by DOE
based on proposals by M&EC and the Company.
The Oak Ridge Contracts are similar in nature to a blanket
purchase order whereby the DOE specifies the approved waste
treatment process and team to be used for certain disposal, but the
DOE does not specify a schedule as to dates for disposal or
quantities of disposal material to be processed. The initial term
of the contract will represent a demonstration period for the
team's successful treatment of the waste and the resulting ability
of such processed waste to meet acceptance criteria for its
ultimate disposal location.
As with most such blanket processing agreements, the Oak Ridge
Contracts contain no minimum or maximum processing guarantees, and
may be terminated by either party pursuant to standard DOE
procurement regulation terms. Each specific waste stream processed
under the Oak Ridge Contracts will require a separate work order
from DOE and will be priced separately with an intent of
recognizing an acceptable profit margin.
The Company anticipates that, as a member of the team with
M&EC in connection with the Oak Ridge Contracts and finalization of
the scope of work documents with M&EC relating to the work to be
performed by each of the Company and M&EC under the Oak Ridge
Contracts, it will (i) provide certain of the Company's
environmental remediation technologies, (ii) install equipment
necessary to apply the Company's technology, and (iii) supervise
certain aspects of the remediation process operations. In
addition, the teaming agreement provides that M&EC will purchase
all equipment necessary to perform under the Oak Ridge Contract.
The Company anticipates that work, if any, related to the Oak Ridge
Contract will begin during the later part of 1999. The Company
also anticipates that a substantial portion of any work performed
under the Oak Ridge Contracts will be performed at M&EC's facility
at Oak Ridge currently under development as of the date of this
filing. The DOE estimates that the Oak Ridge Contracts have the
potential to generate up to $100 million in gross revenues over an
estimated time span of more than five years. As of the date of
this filing, however, the Company cannot estimate (i) the amount of
work or revenues, if any, which will be received by M&EC under the
Oak Ridge Contracts, (ii) the percentage or amount of work received
by M&EC under the Oak Ridge Contracts which will be performed by
30
<PAGE>
the Company, or (iii) the ultimate profitability, or lack of
profitability, of the Oak Ridge Contracts for the Company. The
Company and M&EC have not completed, as of the date of this report,
the scope of work relating to the Oak Ridge Contracts, and there
are no assurances that the parties will complete the scope of work
documents. See "Special Note Regarding Forward Looking
Statements."
31
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
_________________________________
<TABLE>
<CAPTION>
(a) Exhibits
________
<S> <C>
4.1 Congress Financial, Inc. subordination and consent letter
dated June 25, 1998.
4.2 Congress Financial, Inc. subordination and consent letter
dated October 16, 1998.
4.3 Congress Financial Corporation (Florida) consent letter
dated October 26, 1998.
10.1 Basic Oak Ridge Agreement between East Tennessee
Materials and Energy Corporation (M&EC) and Bechtel
Jacobs Company, LLC No. 1GB-99446V dated June 23, 1998.
(Exhibits to this contract as listed in the index are
omitted, but will be provided to the Commission upon
request.)
10.2 Basic Oak Ridge Agreement between East Tennessee
Materials and Energy Corporation (M&EC) and Bechtel
Jacobs Company, LLC No. 1GB-99447V dated June 23, 1998.
(Exhibits to this contract as listed in the index are
omitted, but will be provided to the Commission upon
request.)
10.3 Basic Oak Ridge Agreement between East Tennessee
Materials and Energy Corporation (M&EC) and Bechtel
Jacobs Company, LLC No. 1GB-99448V dated June 23, 1998.
(Exhibits to this contract as listed in the index are
omitted, but will be provided to the Commission upon
request.)
10.4 General agreement between East Tennessee Materials and
Energy Corporation (M&EC) and Perma-Fix Environmental
Services, Inc. dated May 27, 1998.
10.5 Appendix B to general agreement between East Tennessee
Materials and Energy Corporation (M&EC) and Perma-Fix
Environmental Services, Inc. dated November 6, 1998.
27 Financial Data Sheet
99.1 Letter of intent Chem-Con/Chem-Met acquisition dated
November 5, 1998, with letter of intent relating to
Chemical Conservation Corporation (Florida) and Chemical
Conservation of Georgia, Inc. and letter of intent
relating to Chem-Met Services, Inc. attached thereto.
</TABLE>
(b) Report on Form 8-K
__________________
A current report on Form 8-K (Item 5 - Other Events),
dated June 30, 1998, was filed on July 17, 1998 of (i)
the newly-created Series 10 Preferred Stock and the RBB
Series 10 Warrants to RBB Bank, (ii) the Liviakis Warrant
to Liviakis, (iii) the Prag Warrant to Prag, (iv) the
Genesis Warrant to Genesis, and (v) the Fontenoy Warrant
to Fontenoy.
32
<PAGE>
<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: November 16, 1998 By: /s/ Louis F. Centofanti
___________________________
Chairman of the Board
Chief Executive Officer
By: /s/ Richard T. Kelecy
__________________________
Richard T. Kelecy
Chief Financial Officer
33
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit
No. Description Page No.
________ ___________ ________
<S> <C> <C>
4.1 Congress Financial, Inc. subordination and
consent letter dated June 25, 1998.
4.2 Congress Financial, Inc. subordination and
consent letter dated October 16, 1998.
4.3 Congress Financial Corporation (Florida)
consent letter dated October 26, 1998.
10.1 Basic Oak Ridge Agreement between
East Tennessee Materials and Energy
Corporation (M&EC) and Bechtel Jacobs
Company, LLC No. 1GB-99446V dated
June 23, 1998. (Exhibits to this contract
as listed in the index are omitted, but
will be provided to the Commission upon
request.)
10.2 Basic Oak Ridge Agreement between
East Tennessee Materials and Energy
Corporation (M&EC) and Bechtel Jacobs
Company, LLC No. 1GB-99447V dated
June 23, 1998. (Exhibits to this contract
as listed in the index are omitted, but
will be provided to the Commission upon
request.)
10.3 Basic Oak Ridge Agreement between
East Tennessee Materials and Energy
Corporation (M&EC) and Bechtel Jacobs
Company, LLC No. 1GB-99448V dated
June 23, 1998. (Exhibits to this contract
as listed in the index are omitted, but
will be provided to the Commission upon
request.)
10.4 General Agreement between East Tennessee
Materials and Energy Corporation (M&EC)
and Perma-Fix Environmental Services, Inc.
dated May 27, 1998.
10.5 Appendix B to General Agreement between
East Tennessee Materials and Energy
Corporation (M&EC) and Perma-Fix
Environmental Services, Inc. dated
November 6, 1998.
27 Financial Data Sheet
99.1 Letter of intent Chem-Con/Chem-Met
acquisition dated November 5, 1998, with
letter of intent relating to Chemical
Conservation Corporation (Florida)
and Chemical Conservation of Georgia, Inc.
and letter of intent relating to Chem-Met
Services, Inc. attached thereto.
</TABLE>
Dated: June 25, 1998
ICON FUNDING CORP.
600 Mamaroneck Avenue
Harrison, NY 10528
Re: Master Security Agreement dated as of June 8, 1998, between
ICON Funding Corp., as lender (together with its successors
and assigns, "you" or "Lender") and Perma-Fix Environmental
Services, Inc., Perma-Fix Treatment Services, Inc., Perma-Fix
of Dayton, Inc., Perma-Fix of Ft. Lauderdale, Inc., Perma-Fix
of Florida, Tile., Perma-Fix of Memphis, Inc., Perma-Fix,
Inc., and Perma-Fix of New Mexico, Inc., as co-borrowers
(collectively, "Borrower"), and Secured Promissory Note(s)
thereunder dated as of October 16, 1998 ("Note") by Borrower
(tile Master Security Agreement and Note collectively,
hereinafter referred to as the "Agreement")
Ladies and Gentlemen:
We, the undersigned, understand that you are contemplating a
financing (a "Loan") of the equipment as more fully described on
the Schedule attached hereto to Borrower pursuant to tile above-
referenced Agreement (such equipment, together with all attachments
and accessions thereto and all replacements, substitutions,
products and proceeds thereof, hereinafter tile "Collateral").
Effective upon your making the Loan contemplated by the Agreement
and for so long as any amounts remain outstanding under such Loan,
we hereby agree that any and all liens or security interests we may
have or later acquire in the Collateral pursuant to any agreement,
indenture, or other instrument executed by Borrower, or which we
may have by virtue of any Uniform Commercial Code financing
statements filed by us against Borrower, shall be subject,
subordinate and inferior to your liens or security interests you
may have in the Collateral; provided only that your security
interest in the Collateral is properly perfected and to the extent
of that perfection. We hereby agree not to enforce or attempt to
enforce any rights we may have against the Collateral unless we
have obtained your prior written consent and in accordance with the
terms of such consent. We further agree to hold in trust and
promptly to remit to you any proceeds of the Collateral received by
us and to cooperate with and assist you, upon your reasonable
request and at your expense, in effecting the perfection of your
security interest in the Collateral pursuant to the Agreement.
Promptly upon your receipt of all sums payable to you by Borrower
under the Agreement, you agree to so notify us and to terminate and
release your security interest in the Collateral.
We make this statement knowing that you will rely upon it in making
the Loan to Borrower.
Very truly yours,
CONGRESS FINANCIAL, INC.
By: /s/Gary Dixon
___________________________
Name: Gary Dixon
_________________________
Title: Vice President
_________________________
Dated: October 16, 1998
ICON FUNDING CORP.
600 Mamaroneck Avenue
Harrison, NY 10528
Re: Master Security Agreement dated as of June 8, 1998, between
ICON Funding Corp., as lender (together with its successors
and assigns, "you" or "Lender") and Perma-Fix Environmental
Services, Inc., Perma-Fix Treatment Services, Inc., Perma-Fix
of Dayton, Inc., Perma-Fix of Ft. Lauderdale, Inc., Perma-Fix
of Florida, Tile., Perma-Fix of Memphis, Inc., Perma-Fix,
Inc., and Perma-Fix of New Mexico, Inc., as co-borrowers
(collectively, "Borrower"), and Secured Promissory Note(s)
thereunder dated as of October 16, 1998 ("Note") by Borrower
(tile Master Security Agreement and Note collectively,
hereinafter referred to as the "Agreement")
Ladies and Gentlemen:
We, the undersigned, understand that you are contemplating a
financing (a "Loan") of the equipment as more fully described on
the Schedule attached hereto to Borrower pursuant to tile above-
referenced Agreement (such equipment, together with all attachments
and accessions thereto and all replacements, substitutions,
products and proceeds thereof, hereinafter tile "Collateral").
Effective upon your making the Loan contemplated by the Agreement
and for so long as any amounts remain outstanding under such Loan,
we hereby agree that any and all liens or security interests we may
have or later acquire in the Collateral pursuant to any agreement,
indenture, or other instrument executed by Borrower, or which we
may have by virtue of any Uniform Commercial Code financing
statements filed by us against Borrower, shall be subject,
subordinate and inferior to your liens or security interests you
may have in the Collateral; provided only that your security
interest in the Collateral is properly perfected and to the extent
of that perfection. We hereby agree not to enforce or attempt to
enforce any rights we may have against the Collateral unless we
have obtained your prior written consent and in accordance with the
terms of such consent. We further agree to hold in trust and
promptly to remit to you any proceeds of the Collateral received by
us and to cooperate with and assist you, upon your reasonable
request and at your expense, in effecting the perfection of your
security interest in the Collateral pursuant to the Agreement.
Promptly upon your receipt of all sums payable to you by Borrower
under the Agreement, you agree to so notify us and to terminate and
release your security interest in the Collateral.
We make this statement knowing that you will rely upon it in making
the Loan to Borrower.
Very truly yours,
CONGRESS FINANCIAL, INC.
By: /s/Gary Dixon
_______________________
Name: Gary Dixon
_____________________
Title: Vice President
____________________
Congress Financial Corporation (Florida)
777 Brickell Avenue Miami Florida 33131
PO Box 010550 Miami Florida 33101
305 371 6671 Fax 305 371 9456
Congress Financial
October 26, 1998
Mr. Richard T Kelecy
Chief Financial: Officer
Perma-Fix Environmental Services, Inc:
1940 NW 67th Place, Suite A
Gainesville, FL 32653
Dear Dick:
In response to your fax dated October 21, 1998, subject to our Loan
and Security Agreement dated January 15, 1998, we do not object to
the company' s repurchase of up to 500,000 shares of the company's
common stock.
Sincerely,
Congress Financial Corporation
(Florida)
/s/Gary Dixon
_______________________________
Gary Dixon
Vice President
GD/ha
BASIC AGREEMENT BETWEEN
EAST TENNESSEE MATERIALS AND ENERGY CORPORATION
AND
BECHTEL JACOBS COMPANY, LLC.
BASIC AGREEMENT NUMBER
1GB-99446V
___________________________________________________
This Basic Agreement (BA) between East Tennessee Materials and Energy
Corporation (hereinafter "Seller") and Bechtel Jacobs Company, LLC
(hereinafter "Company") on its behalf, acting under its Prime Contract
Number DE-AC05-98OR22700 with the United States Department of Energy
(DOE), is entered into to provide services to the DOE Management and
Operating Contractors, Management and Integration Contractors, and
designated affiliates in accordance with the following:
1. This Agreement is on behalf of the Department of Energy and
those contractors and designated affiliates named in
Attachment A.
2. The pricing for each line item of mixed waste covered under
this Agreement is in accordance with Attachment B. The waste
disposal calculation shall be in accordance with Attachment B
and transportation shall be in accordance with Attachment B.
3. The ordering provisions are contained in Attachment C.
4. General Terms and Conditions Fixed Price (FP 10-97) are
included in Attachment D and made a part herein.
5. Agreement is contingent on completion of the National
Environmental Policy Act (NEPA) within two years from date of
Agreement. If the NEPA requirements have not been completed
within two years, the Agreement may be terminated, at no cost
to the Company or Government, or an extension of required
schedules may be negotiated at the discretion of the Company
or Government. The Seller shall support the DOE in completion
of the NEPA requirement.
6. Any news release, public announcement, advertisement or
publicity proposed to be released by either party concerning
the existence of this Agreement, its terms or conditions or
the activities of either party in connection with the
resulting Agreement shall be subject to the approval of both
parties prior to release.
The parties agree that any entity having a prime contract with the DOE
awarded pursuant to Federal Acquisition Regulations (FAR) Subpart 17.6
and Department of Energy Acquisition Regulation (DEAR) Subpart 917.60
(collectively hereinafter called "Contractor") may place orders under
this Agreement and receive the appropriate discounted prices.
Each Contractor shall place its own orders under this Agreement and shall
be direct-billed accordingly. Contractors' may jointly place orders, or
a series of individual orders, to secure the most favorable price. The
Company, Contractor, and DOE reserve the right to assign raw waste to the
appropriate category and resulting treatment Agreement and reserves the
right to order treatment under the most favorable price.
<PAGE>
<PAGE>
BASIC Agreement 1GB-99446V
Page 2 of 10
ARTICLE I - DEFINITIONS
_______________________
The following special definitions are provided for this Agreement:
Agreement Administrator - The person with the authority to enter into
Agreements who is assigned as responsible for this Agreement as a whole
and who is specified in Article VII - Administration.
Order Administrator - The person with the authority to enter into
Agreements who is assigned as responsible for the specific Order issued
under this Agreement and who is specified in the Order.
Disposal Facility - The Department of Energy disposal facility under
contract at the time of disposal.
Any reference to Lockheed Martin Energy Systems, Inc., shall be
interpreted as Bechtel Jacobs Company, LLC., in any document made a part
of this Agreement.
ARTICLE II - SCOPE OF WORK
__________________________
All orders placed hereunder shall reference the number of this BA (1GS-
99446V). The term of this BA is five years from the date this Agreement
is signed by the Agreement Administrator. The Company has the option of
extending this Agreement annually, after the initial term has expired,
based on the Company's analysis of the Seller's performance and
cost/pricing history.
The Seller agrees to treat mixed waste in quantities described herein as
any Contractor may order during the term of this Agreement. The Seller's
obligation to each Contractor shall become effective upon acceptance of
particular orders issued under this Agreement. The Agreement
Administrator shall be furnished a copy of each order placed under this
Agreement. In the event the Seller rejects an order, for any reason, the
Agreement Administrator shall be notified in writing within five days of
such rejection by the Seller stating the reason for rejection. Three
rejections of orders by the Seller, for any reason other than non-
conforming materials, shall be sufficient grounds for termination of this
Agreement. The Company, Contractors, and DOE reserve the right to
classify raw waste by category and to assign the treatment of raw waste
among the categories covered by the Statement of Work dated December 8,
1997 and made a part hereof.
ARTICLE III - DELIVERY OR PERFORMANCE
_____________________________________
(a) Delivery or performance shall be made only as authorized by orders
issued in accordance with the Ordering Provisions contained in Attachment
C. The Seller shall furnish to the Company or the Contractor, when and
if ordered, the supplies or services specified in the order.
(b) There is no limit on the number of orders that may be issued.
(c) Any order issued during the effective period of this Agreement and
not completed within that period shall be completed by the Seller within
the time specified in the order. The Agreement shall govern the Seller's and
Contractors rights and obligations with respect to that order to the same
extent as if the order were completed during the Agreement's effective period.
<PAGE>
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BASIC Agreement 1GB-99446V
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(d) Disposal of treated waste shall be under the existing DOE contract
for waste disposal in effect at the
time of disposal. The DOE contract will govern demurrage and other
administrative matters.
(e) The Seller is not obligated to accept any individual order less than
6,000kg of mass weight of raw waste.
ARTICLE IV - FUNDING
____________________
Funding will only be authorized under individual orders issued under this
Agreement. There shall be no funding provided in the Basic Agreement.
The level of performance requested will depend entirely upon requirements
of the Company and the DOE affiliates for the period of performance
covered by-the Agreement.
ARTICLE V - FIRST ARTICLE TESTING
_________________________________
First Article Testing will be authorized to commence only as a part of
the first order issued under this Agreement and shall be at the same
price per kg as the production quantities to be treated in the first
order. Treatment of production quantities may not proceed until written
authorization is granted by the Company, DOE or Contractor based upon
completion of a successful First Article Test.
(a) The first article is (tbd by vendor requirements) (kg) of each
treatment category which shall be tested in accordance with the
provisions contained or referenced in this Agreement. At least 10
calendar days prior to the beginning of first article approval tests, the
Seller shall furnish written notice to the Company or Contractor of the
time and location of the testing so that the Company or Contractor may
witness such testing if it so elects.
(b) Within 116 weeks from the date of this Agreement, the first article
approval test report shall be forwarded to the Agreement Administrator
or his designee, marked "FIRST ARTICLE: Basic Agreement No. 1GB-99446V,
Order No.______." The Company or the Contractor shall, by written
notice to the Seller within 20 calendar days after receipt of such test
report, approve, conditionally approve, or disapprove such first article.
The notice of approval or conditional approval shall not relieve the
Seller from complying with all requirements of the specifications and all
other provisions of this Agreement. A notice of conditional approval
shall state any further action required of the Seller. A notice of
disapproval shall cite reasons therefor.
(c) If the first article is disapproved by the Company or the
Contractor, the Seller may be required, at the option of the Company or
the Contractor, to repeat any or all of the first article approval tests.
After each notification by the Company or the Contractor of the
requirement for additional tests, the Seller shall at no additional cost
to the Company or the Contractor make any necessary changes,
modifications, or repairs required for another first article test.
Thereafter, the Seller shall perform the required additional approval
tests and deliver another report to the Company or the Contractor under
the terms and conditions and within the time specified by the Company or
the Contractor. The Company or the Contractor shall take action on this
report within the time limit specified in (b) above. All costs related
to additional approval tests shall be borne by the Seller.
(d) If the Seller fails to deliver any first article approval test
report within the time or times specified, or if the Company or the
Contractor disapproves any first article, the Seller shall be deemed to
have failed to make
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BASIC Agreement 1GB-99446V
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delivery within the meaning of the "Termination" clause of this
Agreement, and this Agreement shall be subject to termination.
(e) Where the approved first article is not consumed or destroyed in
testing, and unless otherwise provided in this Agreement, the first
article may be delivered as part of the Agreement quantity if it meets
all terms and conditions of the Agreement for acceptance.
(f) In the event the Company or the Contractor does not approve,
conditionally approve, or disapprove the first article within the time
specified in (b) or (c) above, the Company shall, upon timely written
request made by the Seller, make a determination of the delay occasioned
the Seller thereby, and shall equitably adjust the delivery or
performance dates, and any other contractual provision affected by such
delay, in accordance with the procedures provided in the "Changes"
clause.
(g) Until first article approval is granted, no costs for the first
article shall be allocable to this Agreement for the purpose of
termination settlements, if this Agreement is terminated for convenience.
(h) The first article test must be performed at the facilities in which
the treatment is to be performed under the Agreement. A certification
by the Seller to this effect must accompany each first article which is
offered.
ARTICLE VII - PAYMENT
_____________________
Payment terms - 85% of invoice total within 30 days of receipt of proper
invoice. Invoice will be submitted with certification that all treated
waste meets the applicable LDR treatment standards. The remaining 15%
will be paid within 30 days of acceptance of treated mixed waste at the
disposal facility as evidenced by Certificate of Disposal, Payment shall
be based on the quantity of waste treated, in kg, multiplied by the unit
price per kg per schedule contained in Attachment B. Adjustments to the
payment price will be in the following manner: The Seller shall include
on each invoice the calculation of the projected disposal volume, in
accordance with the disposal formula contained in Attachment B, and the
actual disposal volume. If the actual volume of the treated waste is
less than the projected volume of waste based on the disposal formula
contained in Attachment B, the Company will provide compensation at 50
percent of the calculated projected volume minus the actual treated waste
volume times $45.00 per cubic foot. If the actual treated waste volume
is greater that the calculated projected volume, the Company will
withhold compensation at 100 percent of the actual treated waste volume
minus the calculated projected volume times $45.00 per cubic foot. If
the volume of treated waste from treatment is equal to the calculated
projected volume, the disposal ratio will no affect compensation.
ARTICLE VII- FIXED PRICES
_________________________
The Company or Contractor shall be entitled to purchase services at the
fixed prices identified in Attachment B. The prices identified in
Attachment 8 are firm for the effective period of this Agreement,
described in Article II - Scope of Work.
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BASIC Agreement 1GB-99446V
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ARTICLE VIII - ADMINISTRATION
_____________________________
BA Procurement Administrator address is as follows:
Bechtel Jacobs Company LLC
Attn: Kenneth D. Simpson
K1001 MS 7596
Hwy 58
Oak Ridge, Tennessee 37831-7596
Telephone: (423) 241-9324
Fax: (423) 241-5312
Email: [email protected]
The work to be performed under this Agreement is subject to the
monitoring of the Agreement Administrator.
Notwithstanding any of the other provisions of this Agreement, the
Agreement Administrator shall be the only individual authorized to : (1)
waive any requirement of this Agreement or (2) modify any terms or
conditions of this Agreement. The Ordering Administrator shall be the
only individual authorized to modify any terms or conditions of the
Agreement only as they apply to a specific Order and waive any
requirement of the Agreement only as it applies to a specific Order.
The Order Administrator's name, address, and phone number shall appear
on each Order issued under this Agreement.
East Tennessee Materials and Energy Corporation
Attn: Bill Hillis
109 Jefferson Avenue
Oak Ridge, Tennessee 37830
Telephone: 423-425-1257
Fax: 423-425-1253
ARTICLE IX - OTHER ITEMS
________________________
COMPLIANCE WITH LAWS
____________________
All permits, licenses, and government approvals of whatever nature
relating to the performance of the work, any part thereof, or any things
used in connection therewith, will be obtained by the Seller at its own
cost and expense, and the Seller will furnish copies of the same to the
Company upon request. Failure to obtain and maintain current all
permits, licenses, and government approvals of whatever nature relating
to the performance of the work shall be grounds for termination of the
Agreement at no cost to the Company or Government.
Seller will comply with all laws and ordinances and all pertinent lawful
orders, rules and regulations relating to the work, to any activities,
labor, equipment, vehicles, containers, facilities, of disposal areas
<PAGE>
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BASIC Agreement 1GB-99446V
Page 6 of 10
provided by Seller in connection with the work, and to the preservation
of the public health and safety and environment. Seller will indemnify
and hold harmless the Company, the DOE, and the Contractor against all
fines, penalties, assessments, damages, and other liabilities of whatever
nature arising out of or resulting from Seller's failure to comply as set
forth herein.
INDEMNIFICATION
_______________
Seller agrees to indemnify, save harmless and defend the Company,
the DOE, and the Contractor from and against any and all
liabilities, claims, penalties, forfeitures, suits and the costs
and expenses incident thereto (including costs of defense,
settlement and reasonable attorneys' fees), which it may hereafter
incur, become responsible for or pay out as a result of death or
bodily injuries to any person, destruction or damage to any
property, contamination of or adverse effects on the environment, or any
violation of governmental laws, regulations or orders.
Seller indemnifies and holds the Department of Energy (DOE), and Bechtel
Jacobs Company LLC and the present and future officers, directors,
shareholders, employees and agents of these entities (hereinafter, these
entities and individuals shall be referred to as "indemnified parties")
and the Contractor, harmless from "any and all claims and liabilities"
arising from the Seller's (i) treatment, generation, and management of
waste, including any release or threat of release of the waste or
constituents thereof resulting from the Seller's management thereof; (ii)
any contamination of or adverse effects on the environment as a result
of the Seller's management of the waste; and/or (iii) Seller's breach of
the terms of this Agreement.
The phrase "any and all claims and liabilities" shall be understood
in its most comprehensive sense, which includes any and all claims,
losses, damages, fines, costs, reasonable attorney fees, or other
detriments, and, without limiting the foregoing, specifically
includes all statutory or common law claims brought against
indemnified parties, Seller, and/or Sellers Subcontractor(s),
including claims brought pursuant to sections 106, 107 or 113 of the
Comprehensive Environmental Response, Compensation and Liability
Act, or sections 7002 and 7003 of the Resource Conservation and
Recovery Act, and similar state and local environmental laws.
In connection with the foregoing, Seller specifically waives and
relinquishes all statutory or common law claims against the
indemnified parties that Seller may otherwise have in connection
with transfer to Seller of title and responsibility for the
material, including any claims arising under environmental laws,
claims for property damage or bodily injuries, including death.
Notice of Claim
_______________
With respect to any claim for indemnification, the indemnified party
(or parties) making such claim shall give written notice of the
claim within a reasonable period following the event or occurrence
and identify the basis of the indemnification asserted, and allow
Seller (including its employees, agents, insurers and counsel)
reasonable access to any of its employees, property and records for
the purpose of conducting an investigation of such claim and for the
purpose of obtaining statements, photographs, physical evidence and
chemical analyses and taking such other steps as may be necessary
to preserve evidence of the occurrence on which the claim is based.
<PAGE>
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BASIC Agreement 1GB-99446V
Page 7 of 10
Preservation of Rights Against Third Parties
____________________________________________
In the event any third party, including any government agency,
asserts any claim, demand or cause of action arising out of
the performance of this Agreement, Seller and the Company
agree to maintain their respective rights, as well as for
their mutual benefit, any rights that each may have resulting
from either (i) an action against, or (ii) a hold harmless or
indemnification Agreement with any transporter, disposal site
operator or any other party who may share liability.
Survival
________
The indemnity and waiver provisions in paragraph 2 shall
survive the expiration or termination of this Agreement.
TITLE TO WASTE
______________
Upon the Seller accepting and taking possession at the place(s)
designated in each release of raw waste awarded, title, risk of
loss, and all other incidents of ownership to the raw waste and
resulting treatment shall thereupon transfer from DOE and shall be
held by the Seller. All raw waste delivered under this Agreement
shall be as described in the individual order releases. The
Company nor the Contractor shall have no right to recovery of any
material encountered in the raw waste nor any credit for its
potential value. Recycle material becomes property of the Seller.
TRANSPORTATION
______________
The Seller must provide Certification of Insurance which meets the
requirements of the clause entitled Insurance as referenced below,
Certification documents shall be forwarded to the Agreement
Administrator within 30 day of Agreement date. The Company
requires trained drivers familiar with EPA, DOE and DOT procedures
with regard to shipment of low-level radioactive materials and
emergency spill procedures. The transporting vehicle will be
placarded by Seller's personnel in accordance with DOT regulations
found in 49 CFR 100-199 and transported in accordance with DOT and
other applicable regulations,
INSURANCE
_________
(a) Seller will be responsible for, and assumes all liability for,
loss or destruction, of or physical damage to, all vehicles,
equipment, and containers owned or leased by Seller or any
subcontractor and all personal property of employees of Seller
or of any subcontractor unless such loss or damage was caused
by the negligence of the Company or any of its employees or
agents.
(b) Seller will insure, or cause to be insured, each and every
workman employed in the performance of the work, the
compensation provided for in and by each and every statute
applicable thereto with respect to Workers' Compensation and
Employers' liability, and will procure and maintain until
termination of this Agreement the following insurance in not
less than the following amounts with reputable and financially
responsible insurance companies:
1. Seller's public liability insurance properly
safeguarding Seller against liability for injuries
to persons, including injuries resulting in death
and damage to or destruction of property, in no
less than the following amounts: $500,000 for
injuries to one
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BASIC Agreement 1GB-99446V
Page 8 of 10
person and $1,000,000 for injuries to two or more
persons in any one accident; and $500,000 for damage to
or destruction of property in any one accident.
2. Contractual liability insurance properly safeguarding
Seller against liability assumed by Seller for injuries
to persons including injuries resulting in death, in
amounts of not less than $500,000 for injuries to one
person and $1,000,000 for injuries to two or more
persons, in any one accident; and $500,000 for damage to
or destruction of property in any accident.
3. Automobile liability insurance properly
safeguarding Seller against liability for injuries
to persons, including injuries resulting in death
and damage to or destruction of property, arising
out of the ownership, maintenance or use of
automobiles in not less than the following amounts:
$500,000 for injuries to one person and $1,000,000
for injuries to two or more persons, in any one
accident; and $500,000 for damage to or destruction
of property in any one accident.
4. If any portion of the work is subcontracted,
Seller's protective liability insurance properly
safeguarding Seller against claims for injuries to
persons, including injuries resulting in death, and
damage to or destruction of property, in not less
than the following amounts: $500,000 for injuries
to one person and $1,000,000 for injuries to two or
more persons, in any one accident; and $500,000 for
damage to or destruction of property in any one
accident,
5. Before commencing work under this Agreement, the
Seller shall certify to the Company, in writing,
that the required insurance has been obtained. The
policies evidencing required insurance shall
contain an endorsement to the effect that any
cancellation or any material change adversely
affecting the Government's interest shall not be
effective: (1) for such period as the laws of the
State in which this Agreement is to be performed
prescribe, or (2) until 30 days after the insurer
or the Seller gives written notice to the Company,
whichever period is longer,
6. The Seller shall insert the substance of this
clause, including this paragraph (f), in
subcontracts under this Agreement that require work
on a Government installation and shall require
subcontractors to provide and maintain the
insurance required in paragraph (a-d) above. At
lease five (5) days before entry of each
subcontractor's personnel on the Government
installation, the Seller shall furnish (or ensure
that there has been furnished) to the Company a
current certificate of insurance, meeting the
requirements of paragraph (b) above, for each such
subcontractor.
<PAGE>
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BASIC Agreement 1GB-99446V
Page 9 of 10
SHIPPING DOCUMENTS
__________________
A shipping manifest will be completed by the Company or Contractor in
accordance with 49 CFR 100-199 and-49 CFR 761.202 -.218 and signed by the
transporter and facility operator upon receipt of material. The
owner/operator will mail the manifest original to the Company or
Contractor within 30 days after receipt of material. Manifest shall be
mailed to Bechtel Jacobs Company, LLC, K1001 MS 7596, Oak Ridge, TN.
37831-7596; Attention: Ken Simpson.
FINES, PENALTIES AND ASSESSMENTS
________________________________
(a) If the Seller fails to perform the services within the time
specified in this Agreement or any order placed under this
Agreement, or any extension, the Seller shall pay to DOE or the
Company or the Contractor the amount of any fine or penalty imposed
on DOE or the Company or the Contractor for failing to have that
waste treated and disposed in accordance with the Site Treatment
Plan (STP).
(b) Additionally, if performance is so delayed, the Company may
terminate this Agreement in whole or in part under the Default clause in
this Agreement
(c) The Seller shall not be charged with for any fine or penalty imposed
when the delay in performance arises out of causes beyond the control and
without the fault or negligence of the Seller as defined in the Default
clause in this Agreement.
RIGHTS TO PROPOSAL DATA
_______________________
Except for technical data contained in page NONE of the Proposer's
proposal dated May 1, 1998, which is asserted by the Proposer as being
proprietary data, it is agreed that as a condition of the award of this
Agreement, and notwithstanding the provisions of any notice appearing on
the proposal, the Company and the Government shall have the right to use,
duplicate, and disclose and have others do so for any purpose whatsoever,
the technical data contained in the proposal upon which this Agreement
is based.
Key Personnel and Point of Contact
__________________________________
East Tennessee Materials and Energy Corporation
Mr. Bill Hillis
109 Jefferson Avenue
Oak Ridge, Tennessee 37830
Phone: 423-425-1257
Fax: 423-425-1253
Labor Personnel and Work Rules
______________________________
Seller shall employ only competent and skilled personnel to perform the
Work and shall remove from the Work any Seller personnel determined to
be unfit or acting in violation of any provision of this Agreement.
<PAGE>
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BASIC Agreement 1GB-99446V
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ARTICLE X - Agreements CONTENTS
_______________________________
The provisions of the following articles and documents are made a
part of this Agreement:
1. Exhibit 5 - Patent Indemnity
2. Exhibit 9 - Technical Data
3. General Terms & Conditions Fixed Price (FF10-97)
4. Attachment A - List of Eligible DOE Site, Contractors, or
Designated Affiliates
5. Attachment B - Pricing Proposal
6. Attachment C - Ordering Provisions
7. Statement of Work dated December 8, 1997
8. FAR clauses: 53.203-1 Gratuities
52.222-1 Notice to Government of Labor Disputes
52.222-3 Convict Labor
52.223-14 Toxic Chemical Release Reporting
52.223-7 Notice of Radioactive Materials
IN WITNESS WHEREOF, the parties hereto have executed this document
as of the day and year of the Bechtel Jacobs representative's
signature.
EAST TENNESSEE MATERIALS AND BECHTEL JACOBS COMPANY, LLC.
ENERGY CORPORATION
Name /s/ Bill J. Hills Name /s/ Ken D. Simpson
______________________ ____________________________
Title President Title Procurement Representative
_____________________ ___________________________
Date 6/23/98 Date 6/23/98
______________________ ____________________________
BASIC AGREEMENT BETWEEN
EAST TENNESSEE MATERIALS AND ENERGY CORPORATION
AND
BECHTEL JACOBS COMPANY, LLC.
BASIC AGREEMENT NUMBER
1GB-99447V
________________________________________________
This Basic Agreement (BA) between East Tennessee Materials and Energy
Corporation (hereinafter "Seller") and Bechtel Jacobs Company, LLC
(hereinafter "Company") on its behalf, acting under its Prime Contract
Number DE-AC05-98OR22700 with the United States Department of Energy
(DOE), is entered into to provide services to the DOE Management and
Operating Contractors, Management and Integration Contractors, and
designated affiliates in accordance with the following:
1. This Agreement is on behalf of the Department of Energy and
those contractors and designated affiliates named in
Attachment A.
2. The pricing for each line item of mixed waste covered under
this Agreement is in accordance with Attachment B. The waste
disposal calculation shall be in accordance with Attachment B
and transportation shall be in accordance with Attachment B.
3. The ordering provisions are contained in Attachment C.
4. General Terms and Conditions Fixed Price (FP 10-97) are
included in Attachment D and made a part herein.
5. Agreement is contingent on completion of the National
Environmental Policy Act (NEPA) within two years from date of
Agreement. If the NEPA requirements have not been completed
within two years, the Agreement may be terminated, at no cost
to the Company or Government, or an extension of required
schedules may be negotiated at the discretion of the Company
or Government. The Seller shall support the DOE in completion
of the NEPA requirement.
6. Any news release, public announcement, advertisement or
publicity proposed to be released by either party concerning
the existence of this Agreement, its terms or conditions or
the activities of either party in connection with the
resulting Agreement shall be subject to the approval of both
parties prior to release.
The parties agree that any entity having a prime contract with the DOE
awarded pursuant to Federal Acquisition Regulations (FAR) Subpart 17.6
and Department of Energy Acquisition Regulation (DEAR) Subpart 917.60
(collectively hereinafter called "Contractor") may place orders under
this Agreement and receive the appropriate discounted prices.
Each Contractor shall place its own orders under this Agreement and shall
be direct-billed accordingly. Contractors' may jointly place orders, or
a series of individual orders, to secure the most favorable price. The
Company, Contractor, and DOE reserve the right to assign raw waste to the
appropriate category and resulting treatment Agreement and reserves the
right to order treatment under the most favorable price.
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BASIC Agreement 1GB-99446V
Page 2 of 10
ARTICLE I - DEFINITIONS
_______________________
The following special definitions are provided for this Agreement:
Agreement Administrator - The person with the authority to enter
into Agreements who is assigned as responsible for this Agreement
as a whole and who is specified in Article VII - Administration.
Order Administrator - The person with the authority to enter into
Agreements who is assigned as responsible for the specific Order
issued under this Agreement and who is specified in the Order.
Disposal Facility - The Department of Energy disposal facility
under contract at the time of disposal.
Any reference to Lockheed Martin Energy Systems, Inc., shall be
interpreted as Bechtel Jacobs Company, LLC., in any document made
a part of this Agreement.
ARTICLE II - SCOPE OF WORK
__________________________
All orders placed hereunder shall reference the number of this BA
(1GS-99447V). The term of this BA is five years from the date this
Agreement is signed by the Agreement Administrator. The Company
has the option of extending this Agreement annually, after the
initial term has expired, based on the Company's analysis of the
Seller's performance and cost/pricing history.
The Seller agrees to treat mixed waste in quantities described
herein as any Contractor may order during the term of this
Agreement. The Seller's obligation to each Contractor shall become
effective upon acceptance of particular orders issued under this
Agreement. The Agreement Administrator shall be furnished a copy
of each order placed under this Agreement. In the event the Seller
rejects an order, for any reason, the Agreement Administrator shall
be notified in writing within five days of such rejection by the
Seller stating the reason for rejection. Three rejections of
orders by the Seller, for any reason other than non-conforming
materials, shall be sufficient grounds for termination of this
Agreement. The Company, Contractors, and DOE reserve the right to
classify raw waste by category and to assign the treatment of raw
waste among the categories covered by the Statement of Work dated
December 8, 1997 and made a part hereof.
ARTICLE III - DELIVERY OR PERFORMANCE
_____________________________________
(a) Delivery or performance shall be made only as authorized by
orders issued in accordance with the Ordering Provisions contained
in Attachment C, The Seller shall furnish to the Company or the
Contractor, when and if ordered, the supplies or services specified
in the order.
(b) There is no limit on the number of orders that may be issued.
(c) Any order issued during the effective period of this Agreement
and not completed within that period shall be completed by the Seller
within the time specified in the order. The Agreement shall govern
the Seller's and Contractors rights and obligations with respect to
that order to the same extent as if the order were completed during
the Agreement's effective period.
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BASIC Agreement 1GB-99447V
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(d) Disposal of treated waste shall be under the existing DOE
contract for waste disposal in effect at the time of disposal. The
DOE contract will govern demurrage and other administrative
matters.
(e) The Seller is not obligated to accept any individual order
less than 6,000kg of mass weight of raw waste.
ARTICLE IV - FUNDING
____________________
Funding will only be authorized under individual orders issued
under this Agreement. There shall be no funding provided in the
Basic Agreement. The level of performance requested will depend
entirely upon requirements of the Company and the DOE affiliates
for the period of performance covered by-the Agreement.
ARTICLE V - FIRST ARTICLE TESTING
_________________________________
First Article Testing will be authorized to commence only as a part
of the first order issued under this Agreement and shall be at the
same price per kg as the production quantities to be treated in the
first order. Treatment of production quantities may not proceed
until written authorization is granted by the Company, DOE or
Contractor based upon completion of a successful First Article
Test.
(a) The first article is (tbd by vendor requirements) (kg) of each
treatment category which shall be tested in accordance with the
provisions contained or referenced in this Agreement. At least 10
calendar days prior to the beginning of first article approval
tests, the Seller shall furnish written notice to the Company or
Contractor of the time and location of the testing so that the
Company or Contractor may witness such testing if it so elects.
(b) Within 116 weeks from the date of this Agreement, the first
article approval test report shall be forwarded to the Agreement
Administrator or his designee, marked "FIRST ARTICLE: Basic
Agreement No. 1GB-99447V, Order No.______." The Company or the
Contractor shall, by written notice to the Seller within 20
calendar days after receipt of such test report, approve,
conditionally approve, or disapprove such first article. The
notice of approval or conditional approval shall not relieve the
Seller from complying with all requirements of the specifications
and all other provisions of this Agreement. A notice of
conditional approval shall state any further action required of the
Seller. A notice of disapproval shall cite reasons therefor.
(c) If the first article is disapproved by the Company or the
Contractor, the Seller may be required, at the option of the
Company or the Contractor, to repeat any or all of the first
article approval tests. After each notification by the Company or
the Contractor of the requirement for additional tests, the Seller
shall at no additional cost to the Company or the Contractor make
any necessary changes, modifications, or repairs required for
another first article test. Thereafter, the Seller shall perform
the required additional approval tests and deliver another report
to the Company or the Contractor under the terms and conditions and
within the time specified by the Company or the Contractor. The
Company or the Contractor shall take action on this report within
the time limit specified in (b) above. All costs related to
additional approval tests shall be borne by the Seller.
(d) If the Seller fails to deliver any first article approval test
report within the time or times specified, or if the Company or the
Contractor disapproves any first article, the Seller shall be
deemed to have failed to make
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BASIC Agreement 1GB-99447V
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delivery within the meaning of the "Termination" clause of this
Agreement, and this Agreement shall be subject to termination.
(e) Where the approved first article is not consumed or destroyed in
testing, and unless otherwise provided in this Agreement, the first
article may be delivered as part of the Agreement quantity if it meets
all terms and conditions of the Agreement for acceptance.
(f) In the event the Company or the Contractor does not approve,
conditionally approve, or disapprove the first article within the time
specified in (b) or (c) above, the Company shall, upon timely written
request made by the Seller, make a determination of the delay occasioned
the Seller thereby, and shall equitably adjust the delivery or
performance dates, and any other contractual provision affected by such
delay, in accordance with the procedures provided in the "Changes"
clause.
(g) Until first article approval is granted, no costs for the first
article shall be allocable to this Agreement for the purpose of
termination settlements, if this Agreement is terminated for convenience.
(h) The first article test must be performed at the facilities in which
the treatment is to be performed under the Agreement. A certification
by the Seller to this effect must accompany each first article which is
offered.
ARTICLE VI - PAYMENT
_____________________
Payment terms - 85% of invoice total within 30 days of receipt of proper
invoice. Invoice will be submitted with certification that all treated
waste meets the applicable LDR treatment standards. The remaining 15%
will be paid within 30 days of acceptance of treated mixed waste at the
disposal facility as evidenced by Certificate of Disposal, Payment shall
be based on the quantity of waste treated, in kg, multiplied by the unit
price per kg per schedule contained in Attachment B. Adjustments to the
payment price will be in the following manner: The Seller shall include
on each invoice the calculation of the projected disposal volume, in
accordance with the disposal formula contained in Attachment B, and the
actual disposal volume. If the actual volume of the treated waste is
less than the projected volume of waste based on the disposal formula
contained in Attachment B, the Company will provide compensation at 50
percent of the calculated projected volume minus the actual treated waste
volume times $45.00 per cubic foot. If the actual treated waste volume
is greater that the calculated projected volume, the Company will
withhold compensation at 100 percent of the actual treated waste volume
minus the calculated projected volume times $45.00 per cubic foot. If
the volume of treated waste from treatment is equal to the calculated
projected volume, the disposal ratio will no affect compensation.
ARTICLE VII- FIXED PRICES
__________________________
The Company or Contractor shall be entitled to purchase services at the
fixed prices identified in Attachment B. The prices identified in
Attachment 8 are firm for the effective period of this Agreement,
described in Article II - Scope of Work.
<PAGE>
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BASIC Agreement 1GB-99447V
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ARTICLE VIII - ADMINISTRATION
_____________________________
BA Procurement Administrator address is as follows:
Bechtel Jacobs Company LLC
Attn: Kenneth D. Simpson
K1001 MS 7117
Hwy 58
Oak Ridge, Tennessee 37831-7117
Telephone: (423) 241-9324
Fax: (423) 241-5312
Email: [email protected]
The work to be performed under this Agreement is subject to the
monitoring of the Agreement Administrator.
Notwithstanding any of the other provisions of this Agreement, the
Agreement Administrator shall be the only individual authorized to:
(1) waive any requirement of this Agreement or (2) modify any
terms or conditions of this Agreement. The Ordering Administrator
shall be the only individual authorized to modify any terms or
conditions of the Agreement only as they apply to a specific Order
and waive any requirement of the Agreement only as it applies to a
specific Order.
The Order Administrator's name, address, and phone number shall
appear on each Order issued under this Agreement.
East Tennessee Materials and Energy Corporation
Attn: Bill Hillis
109 Jefferson Avenue
Oak Ridge, Tennessee 37830
Telephone: 423-425-1257
Fax: 423-425-1253
ARTICLE IX - OTHER ITEMS
________________________
COMPLIANCE WITH LAWS
____________________
All permits, licenses, and government approvals of whatever nature
relating to the performance of the work, any part thereof, or any
things used in connection therewith, will be obtained by the Seller
at its own cost and expense, and the Seller will furnish copies of
the same to the Company upon request. Failure to obtain and
maintain current all permits, licenses, and government approvals of
whatever nature relating to the performance of the work shall be
grounds for termination of the Agreement at no cost to the Company
or Government.
Seller will comply with all laws and ordinances and all pertinent
lawful orders, rules and regulations relating to the work, to any
activities, labor, equipment, vehicles, containers, facilities, of
<PAGE>
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BASIC Agreement 1GB-99447V
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disposal areas provided by Seller in connection with the work, and to
the preservation of the public health and safety and environment. Seller
will indemnify and hold harmless the Company, the DOE, and the Contractor
against all fines, penalties, assessments, damages, and other liabilities
of whatever nature arising out of or resulting from Seller's failure to
comply as set forth herein.
INDEMNIFICATION
_______________
Seller agrees to indemnify, save harmless and defend the Company,
the DOE, and the Contractor from and against any and all
liabilities, claims, penalties, forfeitures, suits and the costs
and expenses incident thereto (including costs of defense,
settlement and reasonable attorneys' fees), which it may hereafter
incur, become responsible for or pay out as a result of death or
bodily injuries to any person, destruction or damage to any
property, contamination of or adverse effects on the environment, or any
violation of governmental laws, regulations or orders.
Seller indemnifies and holds the Department of Energy (DOE), and Bechtel
Jacobs Company LLC and the present and future officers, directors,
shareholders, employees and agents of these entities (hereinafter, these
entities and individuals shall be referred to as "indemnified parties")
and the Contractor, harmless from "any and all claims and liabilities"
arising from the Seller's (i) treatment, generation, and management of
waste, including any release or threat of release of the waste or
constituents thereof resulting from the Seller's management thereof; (ii)
any contamination of or adverse effects on the environment as a result
of the Seller's management of the waste; and/or (iii) Seller's breach of
the terms of this Agreement.
The phrase "any and all claims and liabilities" shall be understood
in its most comprehensive sense, which includes any and all claims,
losses, damages, fines, costs, reasonable attorney fees, or other
detriments, and, without limiting the foregoing, specifically
includes all statutory or common law claims brought against
indemnified parties, Seller, and/or Sellers Subcontractor(s),
including claims brought pursuant to sections 106, 107 or 113 of the
Comprehensive Environmental Response, Compensation and Liability
Act, or sections 7002 and 7003 of the Resource Conservation and
Recovery Act, and similar state and local environmental laws.
In connection with the foregoing, Seller specifically waives and
relinquishes all statutory or common law claims against the
indemnified parties that Seller may otherwise have in connection
with transfer to Seller of title and responsibility for the
material, including any claims arising under environmental laws,
claims for property damage or bodily injuries, including death.
Notice of Claim
_______________
With respect to any claim for indemnification, the indemnified party
(or parties) making such claim shall give written notice of the
claim within a reasonable period following the event or occurrence
and identify the basis of the indemnification asserted, and allow
Seller (including its employees, agents, insurers and counsel)
reasonable access to any of its employees, property and records for
the purpose of conducting an investigation of such claim and for the
purpose of obtaining statements, photographs, physical evidence and
chemical analyses and taking such other steps as may be necessary
to preserve evidence of the occurrence on which the claim is based.
<PAGE>
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BASIC Agreement 1GB-99447V
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Preservation of Rights Against Third Parties
____________________________________________
In the event any third party, including any government agency,
asserts any claim, demand or cause of action arising out of
the performance of this Agreement, Seller and the Company
agree to maintain their respective rights, as well as for
their mutual benefit, any rights that each may have resulting
from either (i) an action against, or (ii) a hold harmless or
indemnification Agreement with any transporter, disposal site
operator or any other party who may share liability.
Survival
________
The indemnity and waiver provisions in paragraph 2 shall
survive the expiration or termination of this Agreement.
TITLE TO WASTE
______________
Upon the Seller accepting and taking possession at the place(s)
designated in each release of raw waste awarded, title, risk of
loss, and all other incidents of ownership to the raw waste and
resulting treatment shall thereupon transfer from DOE and shall be
held by the Seller. All raw waste delivered under this Agreement
shall be as described in the individual order releases. The
Company nor the Contractor shall have no right to recovery of any
material encountered in the raw waste nor any credit for its
potential value. Recycle material becomes property of the Seller.
TRANSPORTATION
______________
The Seller must provide Certification of Insurance which meets the
requirements of the clause entitled Insurance as referenced below,
Certification documents shall be forwarded to the Agreement
Administrator within 30 day of Agreement date. The Company
requires trained drivers familiar with EPA, DOE and DOT procedures
with regard to shipment of low-level radioactive materials and
emergency spill procedures. The transporting vehicle will be
placarded by Seller's personnel in accordance with DOT regulations
found in 49 CFR 100-199 and transported in accordance with DOT and
other applicable regulations,
INSURANCE
_________
(a) Seller will be responsible for, and assumes all liability for,
loss or destruction, of or physical damage to, all vehicles,
equipment, and containers owned or leased by Seller or any
subcontractor and all personal property of employees of Seller
or of any subcontractor unless such loss or damage was caused
by the negligence of the Company or any of its employees or
agents.
(b) Seller will insure, or cause to be insured, each and every
workman employed in the performance of the work, the
compensation provided for in and by each and every statute
applicable thereto with respect to Workers' Compensation and
Employers' liability, and will procure and maintain until
termination of this Agreement the following insurance in not
less than the following amounts with reputable and financially
responsible insurance companies:
1. Seller's public liability insurance properly
safeguarding Seller against liability for injuries
to persons, including injuries resulting in death
and damage to or destruction of property, in no
less than the following amounts: $500,000 for
injuries to one
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<PAGE>
BASIC Agreement 1GB-99447V
Page 8 of 10
person and $1,000,000 for injuries to two or more
persons in any one accident; and $500,000 for damage to
or destruction of property in any one accident.
2. Contractual liability insurance properly safeguarding
Seller against liability assumed by Seller for injuries
to persons including injuries resulting in death, in
amounts of not less than $500,000 for injuries to one
person and $1,000,000 for injuries to two or more
persons, in any one accident; and $500,000 for damage to
or destruction of property in any accident.
3. Automobile liability insurance properly safeguarding
Seller against liability for injuries to persons,
including injuries resulting in death and damage to or
destruction of property, arising out of the ownership,
maintenance or use of automobiles in not
less than the following amounts:
$500,000 for injuries to one person and $1,000,000
for injuries to two or more persons, in any one
accident; and $500,000 for damage to or destruction
of property in any one accident.
4. If any portion of the work is subcontracted,
Seller's protective liability insurance properly
safeguarding Seller against claims for injuries to
persons, including injuries resulting in death, and
damage to or destruction of property, in not less
than the following amounts: $500,000 for injuries
to one person and $1,000,000 for injuries to two or
more persons, in any one accident; and $500,000 for
damage to or destruction of property in any one
accident,
5. Before commencing work under this Agreement, the
Seller shall certify to the Company, in writing,
that the required insurance has been obtained. The
policies evidencing required insurance shall
contain an endorsement to the effect that any
cancellation or any material change adversely
affecting the Government's interest shall not be
effective: (1) for such period as the laws of the
State in which this Agreement is to be performed
prescribe, or (2) until 30 days after the insurer
or the Seller gives written notice to the Company,
whichever period is longer,
6. The Seller shall insert the substance of this
clause, including this paragraph (f), in
subcontracts under this Agreement that require work
on a Government installation and shall require
subcontractors to provide and maintain the
insurance required in paragraph (a-d) above. At
lease five (5) days before entry of each
subcontractor's personnel on the Government
installation, the Seller shall furnish (or ensure
that there has been furnished) to the Company a
current certificate of insurance, meeting the
requirements of paragraph (b) above, for each such
subcontractor.
<PAGE>
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BASIC Agreement 1GB-99447V
Page 9 of 10
SHIPPING DOCUMENTS
__________________
A shipping manifest will be completed by the Company or Contractor
in accordance with 49 CFR 100-199 and-49 CFR 761.202 -.218 and
signed by the transporter and facility operator upon receipt of
material. The owner/operator will mail the manifest original to
the Company or Contractor within 30 days after receipt of material.
Manifest shall be mailed to Bechtel Jacobs Company, LLC, K1001 MS
7596, Oak Ridge, TN. 37831-7596; Attention: Ken Simpson.
FINES, PENALTIES AND ASSESSMENTS
________________________________
(a) If the Seller fails to perform the services within the time
specified in this Agreement or any order placed under this
Agreement, or any extension, the Seller shall pay to DOE or the
Company or the Contractor the amount of any fine or penalty imposed
on DOE or the Company or the Contractor for failing to have that
waste treated and disposed in accordance with the Site Treatment
Plan (STP).
(b) Additionally, if performance is so delayed, the Company may
terminate this Agreement in whole or in part under the Default clause in
this Agreement
(c) The Seller shall not be charged with for any fine or penalty imposed
when the delay in performance arises out of causes beyond the control and
without the fault or negligence of the Seller as defined in the Default
clause in this Agreement.
RIGHTS TO PROPOSAL DATA
_______________________
Except for technical data contained in page NONE of the Proposer's
proposal dated May 1, 1998, which is asserted by the Proposer as being
proprietary data, it is agreed that as a condition of the award of this
Agreement, and notwithstanding the provisions of any notice appearing on
the proposal, the Company and the Government shall have the right to use,
duplicate, and disclose and have others do so for any purpose whatsoever,
the technical data contained in the proposal upon which this Agreement
is based.
Key Personnel and Point of Contact
__________________________________
Mr. Bill Hillis
109 Jefferson Avenue
Oak Ridge, Tennessee 37830
Phone: 423-425-1257
Fax: 423-425-1253
Labor Personnel and Work Rules
______________________________
Seller shall employ only competent and skilled personnel to perform the
Work and shall remove from the Work any Seller personnel determined to
be unfit or acting in violation of any provision of this Agreement.
<PAGE>
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BASIC Agreement 1GB-99447V
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ARTICLE X - Agreements CONTENTS
_______________________________
The provisions of the following articles and documents are made a part
of this Agreement:
1. Exhibit 5 - Patent Indemnity
2. Exhibit 9 - Technical Data
3. General Terms & Conditions Fixed Price (FF10-97)
4. Attachment A - List of Eligible DOE Site, Contractors, or Designated
Affiliates
5. Attachment B - Pricing Proposal
6. Attachment C - Ordering Provisions
7. Statement of Work dated December 8, 1997
8. FAR clauses: 53.203-1 Gratuities
52.222-1 Notice to Government of Labor Disputes
52.222-3 Convict Labor
52.223-14 Toxic Chemical Release Reporting
52.223-7 Notice of Radioactive Materials
IN WITNESS WHEREOF, the parties hereto have executed this document as of
the day and year of the Bechtel Jacobs representative's signature.
EAST TENNESSEE MATERIALS AND BECHTEL JACOBS COMPANY, LLC.
ENERGY CORPORATION
Name /s/ Bill J. Hills Name /s/ Ken D. Simpson
______________________ ____________________________
Title President Title Procurement Representative
_____________________ ___________________________
Date 6/23/98 Date 6/23/98
______________________ ____________________________
BASIC AGREEMENT BETWEEN
EAST TENNESSEE MATERIALS AND ENERGY CORPORATION
AND
BECHTEL JACOBS COMPANY, LLC.
BASIC AGREEMENT NUMBER
1GB-99448V
________________________________________________
This Basic Agreement (BA) between East Tennessee Materials and
Energy Corporation (hereinafter "Seller") and Bechtel Jacobs
Company, LLC (hereinafter "Company") on its behalf, acting under
its Prime Contract Number DE-AC05-98OR22700 with the United States
Department of Energy (DOE), is entered into to provide services to
the DOE Management and Operating Contractors, Management and
Integration Contractors, and designated affiliates in accordance
with the following:
1. This Agreement is on behalf of the Department of Energy
and those contractors and designated affiliates named in
Attachment A.
2. The pricing for each line item of mixed waste covered
under this Agreement is in accordance with Attachment B.
The waste disposal calculation shall be in accordance
with Attachment B and transportation shall be in
accordance with Attachment B.
3. The ordering provisions are contained in Attachment C.
4. General Terms and Conditions Fixed Price (FP 10-97) are
included in Attachment D and made a part herein.
5. Agreement is contingent on completion of the National
Environmental Policy Act (NEPA) within two years from
date of Agreement. If the NEPA requirements have not
been completed within two years, the Agreement may be
terminated, at no cost to the Company or Government, or
an extension of required schedules may be negotiated at
the discretion of the Company or Government. The Seller
shall support the DOE in completion of the NEPA
requirement.
6. Any news release, public announcement, advertisement or
publicity proposed to be released by either party
concerning the existence of this Agreement, its terms or
conditions or the activities of either party in
connection with the resulting Agreement shall be subject
to the approval of both parties prior to release.
The parties agree that any entity having a prime contract with the
DOE awarded pursuant to Federal Acquisition Regulations (FAR)
Subpart 17.6 and Department of Energy Acquisition Regulation (DEAR)
Subpart 917.60 (collectively hereinafter called "Contractor") may
place orders under this Agreement and receive the appropriate
discounted prices.
Each Contractor shall place its own orders under this Agreement and
shall be direct-billed accordingly. Contractors' may jointly place
orders, or a series of individual orders, to secure the most
favorable price. The Company, Contractor, and DOE reserve the
right to assign raw waste to the appropriate category and resulting
treatment Agreement and reserves the right to order treatment under
the most favorable price.
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BASIC Agreement 1GB-99448V
Page 2 of 10
ARTICLE I - DEFINITIONS
________________________
The following special definitions are provided for this Agreement:
Agreement Administrator - The person with the authority to enter
into Agreements who is assigned as responsible for this Agreement
as a whole and who is specified in Article VII - Administration.
Order Administrator - The person with the authority to enter into
Agreements who is assigned as responsible for the specific Order
issued under this Agreement and who is specified in the Order.
Disposal Facility - The Department of Energy disposal facility
under contract at the time of disposal.
Any reference to Lockheed Martin Energy Systems, Inc., shall be
interpreted as Bechtel Jacobs Company, LLC., in any document made
a part of this Agreement.
ARTICLE II - SCOPE OF WORK
__________________________
All orders placed hereunder shall reference the number of this BA
(1GS-99448V). The term of this BA is five years from the date this
Agreement is signed by the Agreement Administrator. The Company
has the option of extending this Agreement annually, after the
initial term has expired, based on the Company's analysis of the
Seller's performance and cost/pricing history.
The Seller agrees to treat mixed waste in quantities described
herein as any Contractor may order during the term of this
Agreement. The Seller's obligation to each Contractor shall become
effective upon acceptance of particular orders issued under this
Agreement. The Agreement Administrator shall be furnished a copy
of each order placed under this Agreement. In the event the Seller
rejects an order, for any reason, the Agreement Administrator shall
be notified in writing within five days of such rejection by the
Seller stating the reason for rejection. Three rejections of
orders by the Seller, for any reason other than non-conforming
materials, shall be sufficient grounds for termination of this
Agreement. The Company, Contractors, and DOE reserve the right to
classify raw waste by category and to assign the treatment of raw
waste among the categories covered by the Statement of Work dated
December 8, 1997 and made a part hereof.
ARTICLE III - DELIVERY OR PERFORMANCE
_____________________________________
(a) Delivery or performance shall be made only as authorized by
orders issued in accordance with the Ordering Provisions contained
in Attachment C. The Seller shall furnish to the Company or the
Contractor, when and if ordered, the supplies or services specified
in the order.
(b) There is no limit on the number of orders that may be issued.
(c) Any order issued during the effective period of this
Agreement and not completed within that period shall be completed by
the Seller within the time specified in the order. The Agreement shall
govern the Seller's and Contractors rights and obligations with
respect to that order to the same extent as if the order were completed
during the Agreement's effective period.
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BASIC Agreement 1GB-99448V
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(d) Disposal of treated waste shall be under the existing DOE
contract for waste disposal in effect at the
time of disposal. The DOE contract will govern demurrage and other
administrative matters.
(e) The Seller is not obligated to accept any individual order
less than 6,000kg of mass weight of raw waste.
ARTICLE IV - FUNDING
____________________
Funding will only be authorized under individual orders issued
under this Agreement. There shall be no funding provided in the
Basic Agreement. The level of performance requested will depend
entirely upon requirements of the Company and the DOE affiliates
for the period of performance covered by-the Agreement.
ARTICLE V - FIRST ARTICLE TESTING
_________________________________
First Article Testing will be authorized to commence only as a part
of the first order issued under this Agreement and shall be at the
same price per kg as the production quantities to be treated in the
first order. Treatment of production quantities may not proceed
until written authorization is granted by the Company, DOE or
Contractor based upon completion of a successful First Article
Test.
(a) The first article is (tbd by vendor requirements) (kg) of each
treatment category which shall be tested in accordance with the
provisions contained or referenced in this Agreement. At least 10
calendar days prior to the beginning of first article approval
tests, the Seller shall furnish written notice to the Company or
Contractor of the time and location of the testing so that the
Company or Contractor may witness such testing if it so elects.
(b) Within 116 weeks from the date of this Agreement, the first
article approval test report shall be forwarded to the Agreement
Administrator or his designee, marked "FIRST ARTICLE: Basic
Agreement No. 1GB-99448V, Order No.______." The Company or the
Contractor shall, by written notice to the Seller within 20
calendar days after receipt of such test report, approve,
conditionally approve, or disapprove such first article. The
notice of approval or conditional approval shall not relieve the
Seller from complying with all requirements of the specifications
and all other provisions of this Agreement. A notice of
conditional approval shall state any further action required of the
Seller. A notice of disapproval shall cite reasons therefor.
(c) If the first article is disapproved by the Company or the
Contractor, the Seller may be required, at the option of the
Company or the Contractor, to repeat any or all of the first
article approval tests. After each notification by the Company or
the Contractor of the requirement for additional tests, the Seller
shall at no additional cost to the Company or the Contractor make
any necessary changes, modifications, or repairs required for
another first article test. Thereafter, the Seller shall perform
the required additional approval tests and deliver another report
to the Company or the Contractor under the terms and conditions and
within the time specified by the Company or the Contractor. The
Company or the Contractor shall take action on this report within
the time limit specified in (b) above. All costs related to
additional approval tests shall be borne by the Seller.
(d) If the Seller fails to deliver any first article approval test
report within the time or times specified, or if the Company or the
Contractor disapproves any first article, the Seller shall be
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BASIC Agreement 1GB-99448V
Page 4 of 10
deemed to have failed to make delivery within the meaning of the
"Termination" clause of this Agreement, and this Agreement shall be
subject to termination.
(e) Where the approved first article is not consumed or destroyed
in testing, and unless otherwise provided in this Agreement, the
first article may be delivered as part of the Agreement quantity if
it meets all terms and conditions of the Agreement for acceptance.
(f) In the event the Company or the Contractor does not approve,
conditionally approve, or disapprove the first article within the
time specified in (b) or (c) above, the Company shall, upon timely
written request made by the Seller, make a determination of the
delay occasioned the Seller thereby, and shall equitably adjust the
delivery or performance dates, and any other contractual provision
affected by such delay, in accordance with the procedures provided
in the "Changes" clause.
(g) Until first article approval is granted, no costs for the
first article shall be allocable to this Agreement for the purpose
of termination settlements, if this Agreement is terminated for
convenience.
(h) The first article test must be performed at the facilities in
which the treatment is to be performed under the Agreement. A
certification by the Seller to this effect must accompany each
first article which is offered.
ARTICLE VI - PAYMENT
____________________
Payment terms - 85% of invoice total within 30 days of receipt of
proper invoice. Invoice will be submitted with certification that
all treated waste meets the applicable LDR treatment standards.
The remaining 15% will be paid within 30 days of acceptance of
treated mixed waste at the disposal facility as evidenced by
Certificate of Disposal, Payment shall be based on the quantity of
waste treated, in kg, multiplied by the unit price per kg per
schedule contained in Attachment B. Adjustments to the payment
price will be in the following manner: The Seller shall include on
each invoice the calculation of the projected disposal volume, in
accordance with the disposal formula contained in Attachment B, and
the actual disposal volume. If the actual volume of the treated
waste is less than the projected volume of waste based on the
disposal formula contained in Attachment B, the Company will
provide compensation at 50 percent of the calculated projected
volume minus the actual treated waste volume times $45.00 per cubic
foot. If the actual treated waste volume is greater that the
calculated projected volume, the Company will withhold compensation
at 100 percent of the actual treated waste volume minus the
calculated projected volume times $45.00 per cubic foot. If the
volume of treated waste from treatment is equal to the calculated
projected volume, the disposal ratio will no affect compensation.
ARTICLE VII- FIXED PRICES
_________________________
The Company or Contractor shall be entitled to purchase services at
the fixed prices identified in Attachment B. The prices identified
in Attachment 8 are firm for the effective period of this
Agreement, described in Article II - Scope of Work.
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BASIC Agreement 1GB-99448V
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ARTICLE VIII - ADMINISTRATION
_____________________________
BA Procurement Administrator address is as follows:
Bechtel Jacobs Company LLC
Attn: Kenneth D. Simpson
K1001 MS 7596
Hwy 58
Oak Ridge, Tennessee 37831-7596
Telephone: (423) 241-9324
Fax: (423) 241-5312
Email: [email protected]
The work to be performed under this Agreement is subject to the
monitoring of the Agreement Administrator.
Notwithstanding any of the other provisions of this Agreement, the
Agreement Administrator shall be the only individual authorized to:
(1) waive any requirement of this Agreement or (2) modify any terms
or conditions of this Agreement. The Ordering Administrator shall
be the only individual authorized to modify any terms or conditions
of the Agreement only as they apply to a specific Order and waive
any requirement of the Agreement only as it applies to a specific
Order.
The Order Administrator's name, address, and phone number shall
appear on each Order issued under this Agreement.
East Tennessee Materials and Energy Corporation
Attn: Bill Hillis
109 Jefferson Avenue
Oak Ridge, Tennessee 37830
Telephone: 423-425-1257
Fax: 423-425-1253
ARTICLE IX - OTHER ITEMS
________________________
COMPLIANCE WITH LAWS
____________________
All permits, licenses, and government approvals of whatever nature
relating to the performance of the work, any part thereof, or any
things used in connection therewith, will be obtained by the Seller
at its own cost and expense, and the Seller will furnish copies of
the same to the Company upon request. Failure to obtain and
maintain current all permits, licenses, and government approvals of
whatever nature relating to the performance of the work shall be
grounds for termination of the Agreement at no cost to the Company
or Government.
Seller will comply with all laws and ordinances and all pertinent
lawful orders, rules and regulations relating to the work, to any
activities, labor, equipment, vehicles, containers, facilities, of
disposal areas provided by
<PAGE>
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BASIC Agreement 1GB-99448V
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Seller in connection with the work, and to the preservation of the
public health and safety and environment. Seller will indemnify
and hold harmless the Company, the DOE, and the Contractor against
all fines, penalties, assessments, damages, and other liabilities
of whatever nature arising out of or resulting from Seller's
failure to comply as set forth herein.
INDEMNIFICATION
_______________
Seller agrees to indemnify, save harmless and defend the Company,
the DOE, and the Contractor from and against any and all
liabilities, claims, penalties, forfeitures, suits and the costs
and expenses incident thereto (including costs of defense,
settlement and reasonable attorneys' fees), which it may hereafter
incur, become responsible for or pay out as a result of death or
bodily injuries to any person, destruction or damage to any
property, contamination of or adverse effects on the environment,
or any violation of governmental laws, regulations or orders.
Seller indemnifies and holds the Department of Energy (DOE), and
Bechtel Jacobs Company LLC and the present and future officers,
directors, shareholders, employees and agents of these entities
(hereinafter, these entities and individuals shall be referred to
as "indemnified parties") and the Contractor, harmless from "any
and all claims and liabilities" arising from the Seller's (i)
treatment, generation, and management of waste, including any
release or threat of release of the waste or constituents thereof
resulting from the Seller's management thereof; (ii) any
contamination of or adverse effects on the environment as a result
of the Seller's management of the waste; and/or (iii) Seller's
breach of the terms of this Agreement.
The phrase "any and all claims and liabilities" shall be
understood in its most comprehensive sense, which includes any
and all claims, losses, damages, fines, costs, reasonable
attorney fees, or other detriments, and, without limiting the
foregoing, specifically includes all statutory or common law
claims brought against indemnified parties, Seller, and/or
Sellers Subcontractor(s), including claims brought pursuant to
sections 106, 107 or 113 of the Comprehensive Environmental
Response, Compensation and Liability Act, or sections 7002 and
7003 of the Resource Conservation and Recovery Act, and
similar state and local environmental laws.
In connection with the foregoing, Seller specifically waives
and relinquishes all statutory or common law claims against
the indemnified parties that Seller may otherwise have in
connection with transfer to Seller of title and responsibility
for the material, including any claims arising under
environmental laws, claims for property damage or bodily
injuries, including death.
Notice of Claim
_______________
With respect to any claim for indemnification, the indemnified
party (or parties) making such claim shall give written notice
of the claim within a reasonable period following the event or
occurrence and identify the basis of the indemnification
asserted, and allow Seller (including its employees, agents,
insurers and counsel) reasonable access to any of its
employees, property and records for the purpose of conducting
an investigation of such claim and for the purpose of
obtaining statements, photographs, physical evidence and
chemical analyses and taking such other steps as may be
necessary to preserve evidence of the occurrence on which the
claim is based.
<PAGE>
<PAGE>
BASIC Agreement 1GB-99448V
Page 7 of 10
Preservation of Rights Against Third Parties
____________________________________________
In the event any third party, including any government agency,
asserts any claim, demand or cause of action arising out of
the performance of this Agreement, Seller and the Company
agree to maintain their respective rights, as well as for
their mutual benefit, any rights that each may have resulting
from either (i) an action against, or (ii) a hold harmless or
indemnification Agreement with any transporter, disposal site
operator or any other party who may share liability.
Survival
________
The indemnity and waiver provisions in paragraph 2 shall
survive the expiration or termination of this Agreement.
TITLE TO WASTE
______________
Upon the Seller accepting and taking possession at the place(s)
designated in each release of raw waste awarded, title, risk of
loss, and all other incidents of ownership to the raw waste and
resulting treatment shall thereupon transfer from DOE and shall be
held by the Seller. All raw waste delivered under this Agreement
shall be as described in the individual order releases. The
Company nor the Contractor shall have no right to recovery of any
material encountered in the raw waste nor any credit for its
potential value. Recycle material becomes property of the Seller.
TRANSPORTATION
______________
The Seller must provide Certification of Insurance which meets the
requirements of the clause entitled Insurance as referenced below,
Certification documents shall be forwarded to the Agreement
Administrator within 30 day of Agreement date. The Company
requires trained drivers familiar with EPA, DOE and DOT procedures
with regard to shipment of low-level radioactive materials and
emergency spill procedures. The transporting vehicle will be
placarded by Seller's personnel in accordance with DOT regulations
found in 49 CFR 100-199 and transported in accordance with DOT and
other applicable regulations,
INSURANCE
_________
(a) Seller will be responsible for, and assumes all liability for,
loss or destruction, of or physical damage to, all vehicles,
equipment, and containers owned or leased by Seller or any
subcontractor and all personal property of employees of Seller
or of any subcontractor unless such loss or damage was caused
by the negligence of the Company or any of its employees or
agents.
(b) Seller will insure, or cause to be insured, each and every
workman employed in the performance of the work, the
compensation provided for in and by each and every statute
applicable thereto with respect to Workers' Compensation and
Employers' liability, and will procure and maintain until
termination of this Agreement the following insurance in not
less than the following amounts with reputable and financially
responsible insurance companies:
1. Seller's public liability insurance properly
safeguarding Seller against liability for injuries
to persons, including injuries resulting in death
and damage to or destruction of property, in no
less than the following amounts: $500,000 for
injuries to one
<PAGE>
<PAGE>
BASIC Agreement 1GB-99448V
Page 8 of 10
person and $1,000,000 for injuries to two or more
persons in any one accident; and $500,000 for
damage to or destruction of property in any one
accident.
2. Contractual liability insurance properly
safeguarding Seller against liability assumed by
Seller for injuries to persons including injuries
resulting in death, in amounts of not less than
$500,000 for injuries to one person and $1,000,000
for injuries to two or more persons, in any one
accident; and $500,000 for damage to or destruction
of property in any accident.
3. Automobile liability insurance properly
safeguarding Seller against liability for injuries
to persons, including injuries resulting in death
and damage to or destruction of property, arising
out of the ownership, maintenance or use of
automobiles in not less than the following amounts:
$500,000 for injuries to one person and $1,000,000
for injuries to two or more persons, in any one
accident; and $500,000 for damage to or destruction
of property in any one accident.
4. If any portion of the work is subcontracted,
Seller's protective liability insurance properly
safeguarding Seller against claims for injuries to
persons, including injuries resulting in death, and
damage to or destruction of property, in not less
than the following amounts: $500,000 for injuries
to one person and $1,000,000 for injuries to two or
more persons, in any one accident; and $500,000 for
damage to or destruction of property in any one
accident,
5. Before commencing work under this Agreement, the
Seller shall certify to the Company, in writing,
that the required insurance has been obtained. The
policies evidencing required insurance shall
contain an endorsement to the effect that any
cancellation or any material change adversely
affecting the Government's interest shall not be
effective: (1) for such period as the laws of the
State in which this Agreement is to be performed
prescribe, or (2) until 30 days after the insurer
or the Seller gives written notice to the Company,
whichever period is longer,
6. The Seller shall insert the substance of this
clause, including this paragraph (f), in
subcontracts under this Agreement that require work
on a Government installation and shall require
subcontractors to provide and maintain the
insurance required in paragraph (a-d) above. At
lease five (5) days before entry of each
subcontractor's personnel on the Government
installation, the Seller shall furnish (or ensure
that there has been furnished) to the Company a
current certificate of insurance, meeting the
requirements of paragraph (b) above, for each such
subcontractor.
<PAGE>
<PAGE>
BASIC Agreement 1GB-99448V
Page 9 of 10
SHIPPING DOCUMENTS
__________________
A shipping manifest will be completed by the Company or Contractor
in accordance with 49 CFR 100-199 and-49 CFR 761.202 -.218 and
signed by the transporter and facility operator upon receipt of
material. The owner/operator will mail the manifest original to
the Company or Contractor within 30 days after receipt of material.
Manifest shall be mailed to Bechtel Jacobs Company, LLC, K1001 MS
7596, Oak Ridge, TN. 37831-7596; Attention: Ken Simpson.
FINES, PENALTIES AND ASSESSMENTS
________________________________
(a) If the Seller fails to perform the services within the time
specified in this Agreement or any order placed under this
Agreement, or any extension, the Seller shall pay to DOE or the
Company or the Contractor the amount of any fine or penalty imposed
on DOE or the Company or the Contractor for failing to have that
waste treated and disposed in accordance with the Site Treatment
Plan (STP).
(b) Additionally, if performance is so delayed, the Company may
terminate this Agreement in whole or in part under the Default
clause in this Agreement
(c) The Seller shall not be charged with for any fine or penalty
imposed when the delay in performance arises out of causes beyond
the control and without the fault or negligence of the Seller as
defined in the Default clause in this Agreement.
RIGHTS TO PROPOSAL DATA
_______________________
Except for technical data contained in page NONE of the Proposer's
proposal dated May 1, 1998, which is asserted by the Proposer as
being proprietary data, it is agreed that as a condition of the
award of this Agreement, and notwithstanding the provisions of any
notice appearing on the proposal, the Company and the Government
shall have the right to use, duplicate, and disclose and have
others do so for any purpose whatsoever, the technical data
contained in the proposal upon which this Agreement is based.
Key Personnel and Point of Contact
__________________________________
Mr. Bill Hillis
109 Jefferson Avenue
Oak Ridge, Tennessee 37830
Phone: 423-425-1257
Fax: 423-425-1253
Labor Personnel and Work Rules
______________________________
Seller shall employ only competent and skilled personnel to perform
the Work and shall remove from the Work any Seller personnel
determined to be unfit or acting in violation of any provision of
this Agreement.
<PAGE>
<PAGE>
BASIC Agreement 1GB-99448V
Page 10 of 10
ARTICLE X - Agreements CONTENTS
_______________________________
The provisions of the following articles and documents are made a
part of this Agreement:
1. Exhibit 5 - Patent Indemnity
2. Exhibit 9 - Technical Data
3. General Terms & Conditions Fixed Price (FF10-97)
4. Attachment A - List of Eligible DOE Site, Contractors, or
Designated Affiliates
5. Attachment B - Pricing Proposal
6. Attachment C - Ordering Provisions
7. Statement of Work dated December 8, 1997
8. FAR clauses: 53.203-1 Gratuities
52.222-1 Notice to Government of Labor Disputes
52.222-3 Convict Labor
52.223-14 Toxic Chemical Release Reporting
52.223-7 Notice of Radioactive Materials
IN WITNESS WHEREOF, the parties hereto have executed this document
as of the day and year of the Bechtel Jacobs representative's
signature.
EAST TENNESSEE MATERIALS AND BECHTEL JACOBS COMPANY, LLC.
ENERGY CORPORATION
Name /s/ Bill J. Hills Name /s/ Ken D. Simpson
______________________ ____________________________
Title President Title Procurement Representative
_____________________ ___________________________
Date 6/23/98 Date 6/23/98
______________________ ____________________________
GENERAL AGREEMENT
THIS GENERAL AGREEMENT (this "Agreement") entered into this 2nd day
of May, 1998, by and between EAST TENNESSEE MATERIALS & ENERGY
CORPORATION (a Tennessee Corporation), having a place of business
in Oak Ridge, Tennessee, hereinafter referred to as M&EC, and
PERMA-FIX ENVIRONMENTAL SERVICES, INC. (a Delaware Corporation),
having its corporate offices in Gainesville, Florida, hereinafter
referred to as PESI, agree to as the date above to work together
and/or separately as provided in this Agreement. The parties may
alternate as contractor or subcontractor in contracts with
customers under this agreement. They will each be bound by the laws
of the contractors state of corporate residence and in the state in
which the work is performed under such contracts.
The terms "Party" and "Parties" shall mean M&EC and PESI as used in
this Agreement.
WITNESSETH
WHEREAS, the parties hereto desire to obtain contracts with
USDOE customer(s) that possess and need to treat and dispose of
certain types of radioactive, mixed or hazardous wastes and/or
environmental restoration projects in accordance with the
Description of Services as contained in Appendices A, B and C
(attached), hereinafter called "Services."
WHEREAS, since certain customers may require these selected
Services, the parties have agreed that in some cases, a mutual
effort in offering and performing Services to/for selected
customers may enhance the likelihood of contract awards to the
parties in accordance with the terms of this Agreement.
1. CONTRACTOR-SUBCONTRACTOR RELATIONSHIP
_____________________________________
Throughout the term of this Agreement, in connection with the
activities described in Appendices A, B and C of this General
Agreement, M&EC or PESI can act as a Contractor for work described,
subject to the exceptions noted herein, and M&EC or PESI can act as
subcontractor for that specific scope of work that are specifically
described and attached to the respective appendices. Upon agreeing
upon a specific scope of work (which must be attached to the
Services described in the appendices), the specific
contractor/subcontractor relationship, financial agreements and
term shall be specifically established.
2. PROPOSAL PREPARATION
____________________
a. The parties to this Agreement in response to requests for
active proposals ("RFPs") may use the Services described
in Appendix A, B or C to this Agreement of the other
party to provide the Services that such other party is
capable0f performing as a subcontractor. The parties
acknowledge and agree that either party may participate
in an agreement to provide services described in the
attached Appendix A, B or C without the other party to
this Agreement.
b. The parties shall use their best efforts in preparing and
submitting to the other party (the "Contracting Party")
those portions of a proposal or other information
relating to their Services for use in a proposal being
submitted to a prospective customer by the Contracting
Party.
c. The parties will negotiate proposed contracts with
customers in good faith. Any subcontract resulting from
EAST TENNESSEE MATERIALS & ENERGY CORPORATION/
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
FI/M&EC598.END Page 1 of 11 May 27, 1998
<PAGE>
<PAGE>
the contract negotiations with a customer shall reflect
the final scope of work negotiated between the customer
and M&EC or PESI and be attached to this Agreement as a
numbered Addendum.
d. It is agreed that the parties will bid wherever
appropriate; however, if the RFP issued by the customer
requires that bids for Services be submitted to the
customer on a basis other than a unit price basis, then,
the other party shall offer their Services as a
subcontractor on the basis of the same price structure
that the Contracting Party shall be performing their
Services.
e. Both parties may prepare the proposals, integrate the
data provided by the other company and submit the
proposals to the customer. Both parties should consult
with each other on decisions affecting input to such
proposals.
f. Parties may identify the contribution of the other party
in the proposal and the other contracts with their
customers and shall propose the other party as the
subcontractor for that work to the customer, and shall
provide appropriate information about the other party, if
requested by the customer.
g. Each party agrees to bear all costs and expenses incurred
by it in the preparation of proposals, marketing, sales
or any other direct or indirect costs not otherwise
specified in Appendix A, B, or C.
3. AWARD OF SUBCONTRACT
____________________
a. If either party enters into a contractual relationship
with a customer to provide Services, the other party if
designated as subcontractor, is subject to any specific
requirements by the customer, then the Subcontractor
shall use its best efforts to satisfy the specific
requirements of the customer so as not to jeopardize the
contract obtained by the Contractor.
b. The subcontractor shall be subject to the mutual
agreement of the parties relative to terms and conditions
including price and delivery schedule; except that they
may contain clauses required by the applicable
regulations and by the prime contract, which by its terms
are to be accepted by the subcontractor.
4. DISCLOSURE AND PROTECTION OF INFORMATION
________________________________________
a. Any proprietary and/or confidential information and
documents exchanged by the parties shall be identified by
the furnishing party as such by (i) appropriate stamp or
marking on the documents exchanged, or (ii) written
notice of proprietorship, sent to the receiving party no
later than two (2) weeks after disclosure, with listing
of all proprietary material and appropriately stamped or
marked summaries of such other disclosures.
b. The receiving party will hold such proprietary
information in confidence for a period of five (5) years
from the date of receipt of the information, except as
noted below. During this period each party will use such
information available only to its employees having a
"need to know" in order to carry out their functions in
connection with such effort. Unless authorized in writing
by the party originally transmitting such proprietary
EAST TENNESSEE MATERIALS & ENERGY CORPORATION/
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
FI/M&EC598.END Page 2 of 11 May 27, 1998<PAGE>
<PAGE>
information hereunder, the receiving party will not
otherwise use or disclose such proprietary information
during the above-mentioned five (5) year period except
that it may be disclosed to customers for evaluation in
connection with proposals submitted in accordance with
the terms of this Agreement, provided any such disclosure
bears an appropriate restrictive legend and is agreed to
in writing by the party whose information is being
disclosed.
c. Confidential information shall not be afforded the
protection of this Agreement, if on the effective date
hereof, such information has been, or from the time
thereafter such information is:
i. developed by the receiving party independently of
the furnishing party;
ii. rightly obtained without restriction by the
receiving party from a third party;
iii. publicly available other than through the fault or
negligence of the receiving party; or
iv. released without restriction by the furnishing
party to anyone, including the United States
Government.
d. Should the receiving party be faced with legal action Or
a requirement under regulatory authority to disclose
proprietary information received hereunder, the receiving
party shall forthwith notify the furnishing party, and,
upon the request of the latter, shall cooperate with the
furnishing party in contesting such a disclosure. Except
in connection with failure to discharge responsibilities
set forth in the preceding sentence, neither party shall
be liable in. damages for any disclosures pursuant to
judicial action or regulatory regulations or for
inadvertent disclosure where the customary degree of care
has been exercised; provided, that upon discovery of such
inadvertent disclosure, it shall have endeavored to
prevent any further inadvertent disclosure.
e. No license under any patents is granted or conveyed by
one party's transmitting proprietary information to the
other party hereunder, nor shall such a transmission
constitute any representation, warranty, assurance,
guarantee or inducement by the transmitting party to the
other party with respect to infringement of patent or
other fights of others.
f. All proprietary information furnished hereunder shall
remain the property of the furnishing party. The
receiving party shall return or destroy all copies of
proprietary information received under this Agreement as
directed by the party supplying the information. Upon
request, the receiving party shall send the furnishing
party a destruction certificate.
5. RIGHTS IN INVENTIONS. DATA AND INFORMATION
__________________________________________
Inventions shall be and remain the property of the party making
such inventions. In the event joint inventions are made by the
parties in the course of the work under the Agreement, such
inventions shall be jointly owned by the parties. In this regard
the parties may be required to and shall grant license or other
rights to customers for inventions, data, and for information under
provision which may be contained in the Customer's prime contracts,
provided, such license or other fights shall not exceed those
required by said contract.
EAST TENNESSEE MATERIALS & ENERGY CORPORATION/
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
FI/M&EC598.END Page 3 of 11 May 27, 1998
<PAGE>
<PAGE>
6. EXPENSES
________
Except for the compensation which may be paid to the parties in
accordance with any contracts and subcontracts with customers, each
party shall bear all its own expenses incurred in connection with
activities undertaken pursuant to this Agreement.
7. CHANGES
________
a. Affiliation Changes
___________________
If affiliation changes are made, the party requesting a
change shall provide a 60 day notice to the affected
party describing the planned changes. The affected party
may accept the changes or terminate the Agreement.
b. Process Changes
_______________
Both companies reserve the right to make changes in the
services furnished by the company which, in its opinion,
may be required in order to meet the requirements of a
purchase order or contract and all applicable
regulations. The party making changes shall submit to the
other party prospective modifications to the prices that
they will charge for services. Either party shall have
the option of accepting the proposed modifications or
terminating their services under the subject purchase
order or contract.
c. Codes, Laws, and Regulations
____________________________
Both companies will comply with all applicable codes and
federal, state, and local laws and regulations, including
the applicable requirements of governmental authorities,
regarding (i) transportation, inspection, handling,
processing, and disposal of the materials and wastes
generated from the materials; and (ii) the design,
construction, operation, and maintenance of the
facilities and transportation equipment.
8. PUBLICITY
_________
No publicity or advertising regarding any proposal or contract
resulting from or relating to this Agreement shall be released by
either party without the prior written approval of the other party.
9. INDEPENDENT CONTRACTOR RELATIONSHIP
___________________________________
The parties have entered into this Agreement as independent
contractors; and this Agreement does not establish, create, nor
should it in any way be interpreted as establishing, or creating a
joint venture, partnership or formal business organization of any
kind. Any exclusive relationship must be specifically stated in the
scope of work which is further described as an addendum to Appendix
A, B or C and signed by both parties.
10. TERMINATION
___________
This Agreement and all fights and duties hereunder, except those in
paragraph 4 will cease and terminate upon the first to occur of the
following:
a. There is no expiration to this General Agreement;
however, each Appendix attached must have a time period
described unless it is further described in the specific
scopes of work attached to each Appendix;
EAST TENNESSEE MATERIALS & ENERGY CORPORATION/
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
FI/M&EC598.END Page 4 of 11 May 27, 1998
<PAGE>
<PAGE>
b. Substantial failure of either party to perform as
provided in this Agreement. The affected party can notify
the other party that it plans to terminate with 30 days
written notice;
c. Mutual agreement by the parties. In the absence of such
agreement, no party may unilaterally withdraw; or
d. Both companies shall remain in regulatory compliance to
the best of their abilities during the term of the
Agreement. In the event either party feels the compliance
status of the other may be jeopardizing the reputation of
the other due to association, the non-compliant company
has 90 days to rectify its regulatory posture to the
satisfaction of the other party. Failure to obtain this
satisfaction shall make this Agreement null and void.
e. If either company significantly affiliates with an
organization that provides the same service that is
offered by the other party in this Agreement, or if the
other party develops or acquires the capability to
provide this same service from within its own resources,
then either party may terminate the provisions of this
Agreement by giving 60 days written notice of termination
to the other party. The contract may be terminated
additionally as follows:
i. If either party loses or permits to lapse any
license or permit required to legally perform the
Services they have agreed to provide under the
Agreement;
ii. If either party breaches any of the terms of this
Agreement or fails to make payments due to the
other party, and after notification by the other
party, fails to cure the breach or make such
payment within a reasonable period of time, then
the non-breaching party shall have the option of
terminating the Agreement;
iii. If either party becomes insolvent, makes an
assignment for the benefit of creditors, files a
petition for bankruptcy, or if an involuntary
petition in bankruptcy is filed against one of the
parties;
iv. If a party to the Agreement commits a criminal act
or engages in any activity or conduct which. in the
reasonable judgement of the other party, is
detrimental to the name of goodwill associated with
the other party to this Agreement; or
v. If both parties have the opportunity to cure the
occurrence of an event of termination upon a
party's failure to comply with Subsection 10(b),
10(ii). In the case of 10(ii) and 10(iii), the time
period to resolve is to be mutually decided.
11. ASSIGNMENT
__________
Neither party may assign or transfer its interest herein without
the prior consent of the other party; except that either party may,
without such prior written consent, assign or transfer its interest
herein to a wholly-owned subsidiary. In this event, the wholly-
owned subsidiary shall be bound by the terms of this Agreement.
EAST TENNESSEE MATERIALS & ENERGY CORPORATION/
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
FI/M&EC598.END Page 5 of 11 May 27, 1998
<PAGE>
<PAGE>
12. INDEMNIFICATION
_______________
a. M&EC and PESI shall ensure that its employees shall obey
all pertinent rules and regulations of the other party
while said employees are present on the premises of the
other party, including those relative to the safeguarding
of proprietary information.
b. M&EC agrees to indemnify PESI, its officers, employees,
and agents against all loss and liability whatsoever if
such damage, injury, or death is caused by any act or
omission to the act by M&EC in connection with
performance under this Agreement.
c. PESI agrees to indemnify M&EC, its officers, employees,
and agents against all loss and liability whatsoever if
such damage, injury. or death is caused by any act or
omission to the act by PESI in connection with
performance under this Agreement.
d. Reversion
_________
i. For services that pertain to the management of
wastes:
If it is determined that a certain waste does not
conform to the provisions of the waste profile
approval, regulations, permits and/or licenses of
the receiving party, the contractor is to make
arrangement for the waste materials to be removed
within 30 days of written notification of
nonconformance by the receiving party. The
contractor shall assume all costs of shipping and
any removal costs incurred by the receiving party
for repackaging the waste for transportation.
13. PAYMENT
_______
a. Payment shall be made within fifty (50) days of the date
of invoice. Invoices shall be furnished in accordance
with scope of work outlining the pricing schedule or as
otherwise provided. Unless otherwise agreed to by the
parties, any balance outstanding after fifty (50) days
shall be subject to a monthly service charge of one
percent (1%) for each full and each partial month from
the original due date to the date of payment. Service
charges can be Billed on a monthly basis.
b. In the event that either party is unable to abide by the
terms of payment, the party not paying may be considered
in breach of contract. This breach does not release the
company of other terms of contract nor assume termination
of the contract.
14. TAXES
_____
Prices do not include any sales, use, excise, ad valorem (including
property), or similar taxes applicable to the materials, the
services, or the work performed by the receiving party.
Consequently, in addition to the prices, the amount of any present
or future sales, use, excise, ad valorem, or other similar tax
applicable to the materials or services or disposal services shall
be paid by the party requesting the service.
EAST TENNESSEE MATERIALS & ENERGY CORPORATION/
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
FI/M&EC598.END Page 6 of 11 May 27, 1998
<PAGE>
<PAGE>
15. DELAYS
______
a. Unless otherwise specified, if no materials or part
thereof are to be returned to the other company, any
Schedule for performance of the services is solely within
the discretion of the company in possession of the waste
as long as all applicable governmental regulations are
met.
b. The companies shall not be liable for delays or
interruptions in the performance of services which arise
from any act, delay, or failure to act on the part of any
governmental authority, including delays or failure to
act in the issuance of permits or licenses; war (declared
or undeclared); riot; revolution; acts of God; suspension
or interruption in the operations of the facilities, for
any reason, including changes in or compliance with
applicable codes. laws, and regulations of governmental
authorities or process or order of any court or
administrative agency; accidents or disruptions such as
fire, explosion. or major equipment breakdown; failure or
delay, beyond the company's reasonable control in
secluding necessary supplies, materials, equipment,
services, or facilities; transportation Shortages; labor
difficulties such as strikes. slowdowns, shortages, or
jurisdictional disputes; availability of acceptable
transportation facilities or disposal facilities and
sites at reasonable cost; or any cause beyond the
company's reasonable control. The time for performance
shall be extended for a period equal to the time lost by
reason of the delay.
16. GENERAL LIMITATIONS OF LIABILITY
________________________________
a. The total liability between the companies for all claims
of any kind, whether based upon contract obligations.
tort liability (including negligence) or otherwise, for
any loss or damage arising out of, connected with, or
resulting from this Agreement or from the performance or
breach thereof, or from the services performed by one of
the companies or from the materials or the sale,
delivery, resale or use of the materials, shall in no
case exceed the aggregate purchase order price or amount
of sale.
b. In no event, whether as a result of breach of contract,
tort liability (including negligence), or otherwise, and
whether arising before or after performance of any
services by either company shall the liability to the
other for any damages caused by reason of unavailability
of, or failure or delay in obtaining any packaging,
transportation. inspection, handling, processing
(including decontamination) or disposal equipment or
beyond either company's reasonable control;
unavailability of the facility or shutdowns or service
interruptions thereof; loss of anticipated profits, loss
of use of revenue, inventory or use charges, cost of
capital, or claims of customers; or for any special.
incidental, or consequential damages of any nature.
c. Neither party shall be liable for regulatory violations
by the other or any liabilities arising from such
violations.
d. The provisions of this section shall have precedence over
any other provisions of this Agreement and any other
agreement between the parties.
e. The provisions of this section and of other sections of
this Agreement providing for limitation of or protection
against liability of the companies shall apply to the
EAST TENNESSEE MATERIALS & ENERGY CORPORATION/
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
FI/M&EC598.END Page 7 of 11 May 27, 1998
<PAGE>
<PAGE>
full extent permitted by law and regardless of fault and
shall survive either cancellation or termination of this
Agreement.
17. POSSESSION
__________
a. Upon either company taking possession from the other,
responsibility for the material which meets the
possession requirements of the receiver shall pass from
the shipper to the receiver.
b. Material and Waste Products.
___________________________
The shipping company represents and warrants that data
set forth in the radioactive wastes shipment and/or
hazardous waste manifests are true and correct in all
respects and is in accordance with all applicable
government laws, rules, and regulations.
c. Rejection
_________
Either company may reject the waste from the other
company if the waste does not comply with the applicable
waste acceptance criteria as established by the receiving
company. However, the receiving company shall endeavor to
assist the shipper to try to rectify any and all problems
prior to resorting to the return of the waste. In the
event the waste is returned, the company returning the
waste may impose a reasonable surcharge to cover for
handling of the materials.
18. NON COMPETE
___________
PESI agrees to not actively pursue existing customers of M&EC and
vice-versa. In the event that a M&EC customer is inadvertently
contacted by PESI (and vice-versa) and is identified as an existing
customer, efforts by the selling company will be to encourage the
current relationship. If the customer wishes to change vendors, the
selling company will contact the vendor holding the account with
the customer and advise them of this intent. In the event that both
companies have made contact with a prospect (or customer), there is
no "non-compete" claim by either party.
19. SURVIVAL OF TERMS
_________________
The terms described below shall survive the termination or
expiration of the Agreement for three (3) years:
a. Paragraph 4 - Disclosure and Protection of Information
b. Paragraph 5 - Rights in Inventions Data and Information
c. Paragraph 8 - Publicity
d. Paragraph 12 - Indemnification
e. Paragraph 13 - Payment
f. Paragraph 16 - General Limitations of Liability
20. GENERAL
_______
a. Both companies represent that services performed by their
companies will be performed in compliance with the
requirements of the Fair Labor Standards Act of 1938, as
amended.
b. Any assignment of all or any of the rights hereunder by
either party without the written consent of the other
shall be void.
c. The provisions of this contract are for the benefit of
both companies and not for any other person.
EAST TENNESSEE MATERIALS & ENERGY CORPORATION/
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
FI/M&EC598.END Page 8 of 11 May 27, 1998
<PAGE>
<PAGE>
d. Waiver by either company of any default by the other
shall not be deemed a waiver of any other default.
e. Notices
_______
Any notice or other communication required or which may
be given hereunder shall be in writing and either be
delivered personally or be mailed, certified or
registered mail, postage prepaid, and shall be deemed
given when so delivered personally, or if mailed, two (2)
days after the date of mailing, as follows:
M&EC: East TENNESSEE Materials & Energy Corporation
109 Jefferson Avenue
Oak Ridge, TN
Attn: Bill Hillis
PESI: Perma-Fix Environmental Services, Inc.
1940 N.W. 67th Place
Gainesville, FL 32653-1692
Attn: Lou Centofanti
The parties may change the person and addresses to which
the notices or other communications are to be sent by
giving written notice of any such change in the manner
provided herein for giving notice.
f. Each company shall designate in writing a representative
to receive notices or other communications hereunder. All
notices and communications shall be given in writing by
mail or telegraph.
g. Exceptions to the Agreement are noted on a separate
attachment and must be agreed to by both companies in
writing before being a part of this Agreement.
h. Prices for other sized containers or types of waste or
services not specifically stated in this contract shall
be obtained from the respective company prior to shipment
of waste or performing the service.
i. Prices do not normally include transportation of
materials to either company.
j. Services do not include supplying of drums, liners,
absorbent materials or the ancillary items used for
packaging, shipping or transporting.
k. The handling and processing of special problems
associated with authorized services shall be performed
and billed on a time and materials basis after agreement
of the companies with respect to the scope, schedule and
cost for such services.
EAST TENNESSEE MATERIALS & ENERGY CORPORATION/
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
FI/M&EC598.END Page 9 of 11 May 27, 1998
<PAGE>
<PAGE>
l. Both companies agree to provide the other the most
favorable discount and fee schedule available to their
other customers.
m. PESI shall provide M&EC Certificates of Destruction of
all materials as appropriate assuming M&EC is the
contractor for waste management services.
21. ADDITIONAL TERMS
________________
a. Exhibits
_________
All Exhibits annexed hereto and the documents and
instruments referred to herein or required to be
delivered simultaneously herewith are expressly made a
part of this Agreement as fully as though completely set
forth herein, and all references to this Agreement herein
or in any of such Exhibits, documents or instruments
shall be deemed to refer to and include all such
exhibits, documents and instruments.
b. Applicable Law and Binding Effect
_________________________________
This Agreement shall be construed and enforced in
accordance with the laws of the State of Florida
applicable to agreements to be executed and performed
wholly within said state, with the State of TENNESSEE
applicable to agreements to be executed and performed
wholly within the State of TENNESSEE, and shall insure to
the benefit of and be binding upon the parties hereto and
their heirs, personal representatives, successors and
assigns.
c. Invalid Provision
_________________
The invalidity or unenforceability of any term or
provision of this Agreement or the non-applicability of
any such term or provision to the companies or
circumstances shall not impair or affect the remainder of
this Agreement, and the remaining terms and provision
thereof shall not be invalidated, but shall remain in
full force and effect and shall be construed as if such
invalid, unenforceable or non-applicable provisions were
omitted.
22. ENTIRE AGREEMENT
________________
This is the .entire Agreement between the parties including any
contractor agreement between Performance Development Corporation
(PDC) and Perma-Fix Environmental Services, Inc. (PESl) concerning
Services and it supersedes any prior written or oral agreements
thereon and may not be amended or modified except by the subsequent
Agreement in writing by duly authorized officers or representatives
of the parties.
EAST TENNESSEE MATERIALS & ENERGY CORPORATION/
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
FI/M&EC598.END Page 10 of 11 May 27, 1998
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed in duplicate originals by its duly authorized
representatives on the day and year first above written.
Perma-Fix Environmental East Tennessee Materials
Services, Inc. and Energy Corp.
By: /s/ Louis F. Centofanti By: /s/ Bill J. Hillis
________________________ _______________________
Signature Signature
Louis F. Centofanti Bill J. Hillis
___________________________ _______________________
Please Print Name Please Print Name
Title: President Title: President
_____________________ ____________________
Date: May 27, 1998 Date: May 27, 1998
______________________ _____________________
May 27, 1998
EAST TENNESSEE MATERIALS & ENERGY CORPORATION/
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
FI/M&EC598.END Page 11 of 11 May 27, 1998
<PAGE>
<PAGE>
Appendix A
This Appendix to the M&EC and PESI GENERAL Agreement sets forth the
special conditions applicable to the arrangement when M&EC performs
as a "broker of wastes.
1. East TENNESSEE Materials and Energy Corporation GENERAL
Description of Services Responsibilities
________________________________________________________________
a. M&EC shall furnish to PESI, waste manifests, shipping
papers, certifications, and related documentation with
respect to the Materials necessary for PESI to perform
the services required of it under this Agreement.
b. All information, equipment, personnel, facilities, and
other items to be furnished by M&EC shall be furnished in
a timely manner so as to facilitate and not delay the
orderly performance of the services.
c. M&EC shall deliver the Materials properly packaged and
labeled in accordance with the specifications set forth
above and all regulations of federal, state, and local
regulatory authorities (hereinafter called "governmental
authorities") which may be applicable thereto, together
with all requisite shipping documentation and radiation
and other survey data. M&EC shall conduct all requisite
inspections of the Materials prior to shipment or provide
assurance that the wastes conform to the Waste Acceptance
Criteria (WAC) of PESI.
d. Delivery and Risk of Loss
_________________________
The Materials shall be delivered to PESI at the Central
Processing Facility (CPF) in Gainesville, Florida. All
shipments must be pre-approved. Subject to the terms of
this Agreement, unless otherwise agreed to by the
parties, neither the authorized Materials nor any part
thereof shall be retumed to M&EC and PESI shall dispose
of the same in accordance with all applicable
regulations, including, but not limited to, any sale or
other disposition for the PESI's benefit.
e. Delay
_____
Unless otherwise specified, if no Materials or part
thereof are to be retumed to M&EC, any Schedule for
performance of the Services is solely within the
discretion of the PESI as long as all applicable
governmental regulations are met.
APPENDIX A
M&EC\PESI - GENERAL AGREEMENT
CJW/M&EC598.END Page 1 of 3 May 27, 1998
<PAGE>
<PAGE>
2. Perma-Fix Environmental Services. Inc. GENERAL Description
of Services Responsibilities
_________________________________________________________
a. PESI shall process, handle, store, test and arrange for
disposal of such material. Such storing. processing and
disposal services are herein after referred to as the
"Services." PESI shall maintain records of receipt,
inventory, and disposal for each shipment received.
b. PESI reserves the right to make changes in the Services
furnished by PESI which, in its opinion, may be required
in order to meet the requirements of the purchase order
and all applicable regulations. No such change will
result in a change in the prices or schedules. In any
case where Materials are to be returned to M&EC, PESI
will consult with M&EC regarding any significant changes
by Company.
c. Codes, Laws and Regulations
___________________________
PESI will comply with all applicable codes and federal,
state, and local laws and regulations, including the
applicable requirements of governmental authorities.
regarding (i) transportation, inspection, handling,
processing, and disposal of the Materials and wastes
generated from the Materials, and (ii) the design,
construction, operation, and maintenance of the CPF and
transportation equipment and facilities.
d. If any date is provided to M&EC for performance of
Services by PESI with respect to the Materials, such date
shall be deemed to be an estimate only, and PESI shall
not be liable for delays or interruptions in the
performance of Services, which arise from any act, delay,
or failure to act on the part of any governmental
authority, including delays or failure to act in the
issuance of permits or licenses; war (declared or
undeclared); riot; revolution; acts of God; suspension or
interruption in the operations of the CPF, for any
reason, including changes in or compliance with
applicable codes, laws. and regulations of governmental
authorities or process or order of any court or
administrative agency; accidents or disruptions such as
fire, explosion, or major equipment breakdown; failure or
delay, beyond PESI's reasonable control in securing
necessary supplies, materials, equipment, services, or
facilities; transportation shortages; labor difficulties
such as strikes, slowdowns, shortages, or jurisdictional
disputes; availability of acceptable transportation
facilities or disposal facilities and sites at reasonable
cost; or any cause beyond PESI's reasonable control. The
time for performance shall be extended for a period equal
to the time lost by reason of the delay.
e. Upon PESI's taking possession of the material at its CPF
via delivery by own or contract carrier, responsibility
shall pass from the generator to PESI.
f. Prices for other sized containers not specifically stated
in this Agreement shall be obtained from PESI prior to
shipment.
g. The handling and processing of special problems
associated with authorized services shall be performed
and billed on a time and materials basis after
notification has been provided M&EC by PESI.
APPENDIX A
M&EC\PESI - GENERAL AGREEMENT
CJW/M&EC598.END Page 2 of 3 May 27, 1998
<PAGE>
<PAGE>
3. Miscellaneous
_____________
a. Prior to beginning work a Scope of Work (SOW) specific to
each client must be attached outlining the duration (or
specific event) and financial arrangements (unless a
price sheet is attached).
b. If exclusivity is expected in the Scope of Work, it is to
be specifically stated as a condition of the addendum and
mutually agreed upon; otherwise, it is assumed that
multiple vendors may be used, especially for a bid
placement.
APPENDIX A
M&EC\PESI - GENERAL AGREEMENT
CJW/M&EC598.END Page 3 of 3 May 27, 1998
Appendix B
M&EC/PESI General Agreement
Addendum B1
November 6, 1998
Contract Award
______________
On June 23, 1998, East Tennessee Materials and Energy
Corporation (M&EC) entered into Basic Agreement 1GB-99446V
with Bechtel Jacobs Company LLC for treatment of Treatment
Category A: Non-TSCA, RCRA Hazardous Waste with Organics and
Metals. Perma-Fix Environmental Services, Inc. (PESI) will
serve as a subcontractor to M&EC for performance of the work
on this contract. The full text of the Basic Agreement is
provided as an attachment to this Addendum.
Scope of Work
_____________
PESI will support M&EC in providing mixed waste treatment
services to the Department of Energy (DOE) Management and
Operating Contractors, Management and Integration Contractors,
and designated affiliates as listed in Attachment A of the
contract. Any supplies and services to be furnished under the
Basic Ordering Agreement shall be ordered by issuance of
delivery orders to M&EC by the entities listed in Attachment A
of the contract. When an order is received, M&EC will issue a
task order to PESI defining each company's role in completing
the delivery order.
The waste offered for treatment under this Basic Agreement is
generally expected to consist of non-combustible, low-level,
contact-handled soils, sludge, and other solid material
meeting the Environmental Protection Agency (EPA) definition
of debris, all of which is contaminated with organic
constituents alone, or organic constituents and Resource
Conservation and Recovery Act (RCRA) metals, including
mercury. Some of the waste is contaminated with mercury above
260 ppm. The predominant waste codes in this category
(Treatment Category A) will be D004 through D011 and F001
through F007. Additional codes that are expected include D018
through D043 and those listed codes that may need similar
treatment technology. Polychlorinated Biphenyls (PCBs), at
levels requiring regulation under the Toxic Substances Control
Act (TSCA) are not present in this waste. Cyanide levels in
the raw waste will be less than 30 mg/kg (amenable) and 590
mg/kg (total). The radionuclides in the raw waste will be
below licensing levels at the disposal facility and consist of
radioactive elements that are accepted for disposal at the
disposal facility.
Time Frame for the Project
__________________________
The term of the Basic Agreement is five years from the date
signed (June 28, 1998). Bechtel Jacobs Company has the option
of extending this Agreement annually after the initial term
has expired.
APPENDIX B
ADDENDUM B1
M&EC/PESI - GENERAL AGREEMENT
November 6, 1998
PAGE 1 of 1
<PAGE>
<PAGE>
Roles and Expectations from Each Company
________________________________________
Each delivery order will provide:
A complete description of waste, quantity (in kg) of waste,
and unit price of Waste based on the tier pricing
structure per Attachment B of the contract.
Delivery or performance period.
Place of delivery or performance.
Packaging, packing, and shipping instructions, if any.
Any other pertinent information.
At the time delivery orders are received, Task Orders will be
attached to this Addendum that specifically define the roles
of M&EC and PESI in performance of the delivery order. Task
Orders will be numbered in the following manner: Task B1.XX
with B1 referring to this addendum and .XX being the
sequentially numbered task.
Price for Specific Services
___________________________
The price for specific services provided by PESI will be
determined on a per task basis and will be based on the
portion of the work scope performed by PESI.
Contact Person for each Company
_______________________________
East Tennessee Materials and Energy Corporation
Mr. Bill Hillis
109 Jefferson Avenue
Oak Ridge, Tennessee 37830
Phone: (423) 425-1257
Fax: (423) 425-1253
Perma-Fix Environmental Services, Inc.
Mr. Tim Kimball
7928 Ranchitos Loop, N.E.
Albuquerque, New Mexico 87113
Phone: (505) 897-7537
Fax: (505) 898-1832
In addition to the contact persons named above, contact
persons may be named for specific tasks.
Additional Conditions Required
______________________________
All terms and conditions included in Basic Agreement Number
1GB-99446V that govern M&EC's work on this contract also apply
to PESI.
APPENDIX B
ADDENDUM B1
M&EC/PESI - GENERAL AGREEMENT
November 6, 1998
PAGE 2 of 1
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
document as of the day and year of the M&EC representative's
signature.
EAST TENNESSEE MATERIALS AND PERMA-FIX ENVIRONMENTAL
ENERGY CORPORATION SERVICES, INC.
Name: /s/ Bill J. Hillis Name: /s/ Tim Kimball
________________________ _________________________
Title: President Title: Vice President
________________________ _________________________
Date: 11/5/98 Date: 11/5/98
________________________ _________________________
APPENDIX B
ADDENDUM B1
M&EC/PESI - GENERAL AGREEMENT
November 6, 1998
PAGE 3 of 1
<PAGE>
<PAGE>
Appendix B
M&EC/PESI General Agreement
Addendum B2
November 6, 1998
Contract Award
______________
On June 23, 1998, East Tennessee Materials and Energy
Corporation (M&EC) entered into Basic Agreement 1GB-99447V
with Bechtel Jacobs Company LLC for treatment of Treatment
Category B: TSCA and RCRA Hazardous Waste with Organics and
Metals. Perma-Fix Environmental Services, Inc. (PESI) will
serve as a subcontractor to M&EC for performance of the work
on this contract. The full text of the Basic Agreement is
provided as an attachment to this Addendum.
Scope of Work
_____________
PESI will support M&EC in providing mixed waste treatment
services to the Department of Energy (DOE) Management and
Operating Contractors, Management and Integration Contractors,
and designated affiliates as listed in Attachment A of the
contract. Any supplies and services to be furnished under the
Basic Ordering Agreement shall be ordered by issuance of
delivery orders to M&EC by the entities listed in Attachment A
of the contract. When an order is received, M&EC will issue a
task order to PESI defining each company's role in completing
the delivery order.
The waste offered for treatment under this Basic Agreement is
generally expected to consist of non-combustible, low-level,
contact-handled soils, sludge, and other solid material
meeting the Environmental Protection Agency (EPA) definition
of debris, all of which is contaminated with Polychlorinated
Biphenyls (PCBs) requiring regulation under the Toxic
Substances Control Act (TSCA). The waste will also contain
organic constituents alone, or organic constituents and
Resource Conservation and Recovery Act (RCRA) metals,
including mercury. Some of the waste is contaminated with
mercury above 260 ppm. The predominant waste codes in this
category will be D004 through D011 and F001 through F007.
Additional codes that are expected include D018 through D043
and those listed codes that may need similar treatment
technology. Cyanide levels in the raw waste will be less than
30 mg/kg (amenable) and 590 mg/kg (total). The radionuclides
in the raw waste will be below licensing levels at the
disposal facility and consist of radioactive elements that are
accepted for disposal at the disposal facility.
Time Frame for the Project
__________________________
The term of the Basic Agreement is five years from the date
signed (June 28, 1998). Bechtel Jacobs Company has the option
of extending this Agreement annually after the initial term
has expired.
APPENDIX B
ADDENDUM B2
M&EC/PESI - GENERAL AGREEMENT
November 6, 1998
PAGE 1 of 1
<PAGE>
<PAGE>
Roles and Expectations from Each Company
________________________________________
Each delivery order will provide:
A complete description of waste, quantity (in kg) of waste,
and unit price of Waste based on the tier pricing
structure per Attachment B of the contract.
Delivery or performance period.
Place of delivery or performance.
Packaging, packing, and shipping instructions, if any.
Any other pertinent information.
At the time delivery orders are received, Task Orders will be
attached to this Addendum that specifically define the roles
of M&EC and PESI in performance of the delivery order. Task
Orders will be numbered in the following manner: Task B2.XX
with B2 referring to this addendum and .XX being the
sequentially numbered task.
Price for Specific Services
___________________________
The price for specific services provided by PESI will be
determined on a per task basis and will be based on the
portion of the work scope performed by PESI.
Contact Person for each Company
_______________________________
East Tennessee Materials and Energy Corporation
Mr. Bill Hillis
109 Jefferson Avenue
Oak Ridge, Tennessee 37830
Phone: (423) 425-1257
Fax: (423) 425-1253
Perma-Fix Environmental Services, Inc.
Mr. Tim Kimball
7928 Ranchitos Loop, N.E.
Albuquerque, New Mexico 87113
Phone: (505) 897-7537
Fax: (505) 898-1832
In addition to the contact persons named above, contact
persons may be named for specific tasks.
Additional Conditions Required
______________________________
All terms and conditions included in Basic Agreement Number
1GB-99447V that govern M&EC's work on this contract also apply
to PESI.
APPENDIX B
ADDENDUM B2
M&EC/PESI - GENERAL AGREEMENT
November 6, 1998
PAGE 2 of 1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
document as of the day and year of the M&EC representative's
signature.
EAST TENNESSEE MATERIALS AND PERMA-FIX ENVIRONMENTAL
ENERGY CORPORATION SERVICES, INC.
Name: /s/ Bill J. Hillis Name: /s/ Tim Kimball
________________________ _________________________
Title: President Title: Vice President
________________________ _________________________
Date: 11/5/98 Date: 11/5/98
________________________ _________________________
APPENDIX B
ADDENDUM B2
M&EC/PESI - GENERAL AGREEMENT
November 6, 1998
PAGE 3 of 1
<PAGE>
<PAGE>
Appendix B
M&EC/PESI General Agreement
Addendum B3
November 6, 1998
Contract Award
______________
On June 23, 1998, East Tennessee Materials and Energy
Corporation (M&EC) entered into Basic Agreement 1GB-99448 with
Bechtel Jacobs Company LLC for treatment of Treatment Category
D: TSCA and RCRA Hazardous Waste with Organics and Metals and
with EPA Waste Codes Requiring Incineration. Perma-Fix
Environmental Services, Inc. (PESI) will serve as a
subcontractor to M&EC for performance of the work on this
contract. The full text of the Basic Agreement is provided as
an attachment to this Addendum.
Scope of Work
_____________
PESI will support M&EC in providing mixed waste treatment
services to the Department of Energy (DOE) Management and
Operating Contractors, Management and Integration Contractors,
and designated affiliates as listed in Attachment A of the
Basic Agreement. Any supplies and services to be furnished
under the Basic Ordering Agreement shall be ordered by
issuance of delivery orders to M&EC by the entities listed in
Attachment A of the contract. When an order is received, M&EC
will issue a task order to PESI defining each company's role
in completing the delivery order.
The waste offered for treatment under this Basic Agreement is
generally expected to consist of low-level, contact-handled
combustible and non-combustible soils and sludges, and may
contain some material meeting the Environmental Protection
Agency (EPA) definition of debris. All of which is
contaminated with Polychlorinated Biphenyls (PCBs) requiring
regulation under the Toxic Substances Control Act (TSCA). The
waste will also contain Resource Conservation and Recovery Act
(RCRA) constituents that require incineration and may contain
other RCRA constituents that may be treated by incineration or
stabilization. Mercury levels will not exceed 260 ppm.
Cyanide levels in the raw waste will be less than 30 mg/kg
(amenable) and 590 mg/kg (total). The radionuclides in the
raw waste will be below licensing levels at the disposal
facility and consist of radioactive elements that are accepted
for disposal at the disposal facility.
Time Frame for the Project
__________________________
The term of the Basic Agreement is five years from the date
signed (June 28, 1998). Bechtel Jacobs Company has the option
of extending this Agreement annually after the initial term
has expired.
APPENDIX B
ADDENDUM B3
M&EC/PESI - GENERAL AGREEMENT
November 6, 1998
PAGE 1 of 1
<PAGE>
<PAGE>
Roles and Expectations from Each Company
________________________________________
Each delivery order will provide:
A complete description of waste, quantity (in kg) of waste,
and unit price of Waste based on the tier pricing structure
per Attachment B of the contract.
Delivery or performance period.
Place of delivery or performance.
Packaging, packing, and shipping instructions, if any.
Any other pertinent information.
At the time delivery orders are received, Task Orders will be
attached to this Addendum that specifically define the roles
of M&EC and PESI in performance of the delivery order. Task
Orders will be numbered in the following manner: Task B3.XX
with B3 referring to this addendum and .XX being the
sequentially numbered task.
Price for Specific Services
___________________________
The price for specific services provided by PESI will be
determined on a per task basis and will be based on the
portion of the work scope performed by PESI.
Contact Person for each Company
_______________________________
East Tennessee Materials and Energy Corporation
Mr. Bill Hillis
109 Jefferson Avenue
Oak Ridge, Tennessee 37830
Phone: (423) 425-1257
Fax: (423) 425-1253
Perma-Fix Environmental Services, Inc.
Mr. Tim Kimball
7928 Ranchitos Loop, N.E.
Albuquerque, New Mexico 87113
Phone: (505) 897-7537
Fax: (505) 898-1832
In addition to the contact persons named above, contact
persons may be named for specific tasks.
Additional Conditions Required
______________________________
All terms and conditions included in Basic Agreement Number 1GB-
99448V that govern M&EC's work on this contract also apply to
PESI.
APPENDIX B
ADDENDUM B3
M&EC/PESI - GENERAL AGREEMENT
November 6, 1998
PAGE 2 of 1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
document as of the day and year of the M&EC representative's
signature.
EAST TENNESSEE MATERIALS AND PERMA-FIX ENVIRONMENTAL
ENERGY CORPORATION SERVICES, INC.
Name: /s/ Bill J. Hillis Name: /s/ Tim Kimball
________________________ _________________________
Title: President Title: Vice President
________________________ _________________________
Date: 11/5/98 Date: 11/5/98
________________________ _________________________
APPENDIX B
ADDENDUM B3
M&EC/PESI - GENERAL AGREEMENT
November 6, 1998
PAGE 3 of 1
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1998
<CASH> $ 827,000
<SECURITIES> 0
<RECEIVABLES> 5,671,000
<ALLOWANCES> 308,000
<INVENTORY> 124,000
<CURRENT-ASSETS> 7,657,000
<PP&E> 18,062,000
<DEPRECIATION> 6,284,000
<TOTAL-ASSETS> 28,406,000
<CURRENT-LIABILITIES> 6,271,000
<BONDS> 2,119,000
0
0
<COMMON> 13,000
<OTHER-SE> 15,903,000
<TOTAL-LIABILITY-AND-EQUITY> 28,406,000
<SALES> 0
<TOTAL-REVENUES> 22,291,000
<CGS> 0
<TOTAL-COSTS> 15,317,000
<OTHER-EXPENSES> 1,566,000
<LOSS-PROVISION> 30,000
<INTEREST-EXPENSE> 364,000
<INCOME-PRETAX> 301,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 301,000
<DISCONTINUED> 0
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<NET-INCOME> 301,000
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</TABLE>
November 5, 1998
Mr. Bob Lindquist
WHCA Partners
Two Prudential Plaza
Suite 5050
1800 North Stetson Avenue
Chicago, IL 60601
Re: Letter of Intent - Chem-Con/Chem-Met Acquisitions
Dear Bob:
1. Perma-Fix Environmental Services, Inc. ("PESI") has
completed an initial due diligence of Chemical Conservation
Corporation (Florida), Chemical Conservation of Georgia, Inc. and
Chem-Met Services, Inc. and is very interested in acquiring these
companies by merger or other means acceptable to PESI that
qualifies as a pooling of interest. It is the intent that PESI
would acquire 100% of the issued and outstanding capital stock of
the following companies through a merger with PESI or a
subsidiary of PESI or other means acceptable to PESI which
qualifies as a pooling of interest:
* Chemical Conservation Corporation (Florida)
and Chemical Conservation of Georgia, Inc.
(collectively "Chem-Con").
* Chem-Met Services, Inc. ("Chem-Met").
2. It is understood that all of the issued and outstanding
shares of capital stock of Chem-Con is owned by the Ann L.
Sullivan Trust ("ALS Trust"), and all of the issued and
outstanding shares of capital stock of Chem-Met is owned by the
Thomas P. Sullivan Trust ("TPS Trust"). No other person, firm,
entity, trust, corporation, partnership, limited liability
company or other enterprise has any options, warrants or other
rights to acquire any capital stock or assets of Chem-Con or
Chem-Met. Thomas P. Sullivan and Ann L. Sullivan (collectively
the "Sullivans"), are husband and wife. The ALS Trust and the
TPS Trust collectively called "Trusts".
3. Certain real estate located in Orlando, Florida, and all
improvements thereon are currently used by and associated with
Chemical Conservation Corporation (Florida) ("Orlando Real
Estate"), which Orlando Real Estate is owned by the ALS Trust.
Prior to the closing of the acquisition by PESI of Chem-Met and
Chem-Con and as a condition precedent to such closing, the owner
of the Orlando Real Estate shall convey title in and to the
Orlando Real Estate and all improvements thereon to Chemical
Conservation Corporation (Florida) in the form of a capital
contribution and by a general warranty deed, free and clear of
any and all liens, mortgages, encumbrances, security interest,
claims and rights of any other party, except for two mortgages
currently on the Orlando Real Estate owed to and held by SunTrust
Bank in the approximate amount of $121,000 and Commercial Carrier
in the approximate amount of $142,000 (collectively, the
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Letter to Bob Lindquist
November 5, 1998
"Orlando Mortgages"). Upon the transfer of title to the Orlando
Real Estate to Chemical Conservation Corporation (Florida),
Chemical Conservation Corporation (Florida) will assume the
Orlando Mortgages. The Orlando Mortgages shall be current and
without default and no event shall have occurred under the
Orlando Mortgages which would, with the passage of time, result
in a default.
4. It is understood and agreed that each of the above
transactions are subject to and conditioned upon the closing of
the acquisition by PESI of Chem-Con and Chem-Met, and that no
transaction may be closed individually. It is the intent that
one definitive agreement will be executed for the merger of Chem-
Con and Chem-Met into PESI or a subsidiary of PESI. All such
merger documents will be drafted by PESI and presented to the
shareholders of Chem-Met and Chem-Con for review. This letter
and the letters of intent regarding PESI's acquisition of Chem-
Con and Chem-Met attached hereto are subject to the terms hereof
and the terms and conditions set forth in such separate letters
attached hereto.
5. It is understood and agreed that prior to closing of the
transactions with PESI as contemplated by this letter and the
letters attached hereto relating to PESI's acquisition of Chem-
Met and Chem-Con, the Quanta Corporation's ("Quanta") sale
transaction, as is currently pending, will be completed. The
proposed Quanta sale will be for certain assets (excluding the
warehouse facility located on and the 10 acre tract ("the Real
Estate") owned by a third party, adjacent to Chem-Met) and
certain liabilities, in the manner previously disclosed to PESI.
Prior to closing of the transactions contemplated by this letter
and the letters attached hereto, but after the sale of Quanta
assets, Quanta will be merged into Chem-Met and the then combined
officer's note receivable in the sum of approximately $1,064,000
payable to Chem-Met will be exchanged with the third party owner
of the Real Estate, for title to the Real Estate, with such Real
Estate being transferred to Chem-Met by a general warranty deed
free and clear of any liens, encumbrances, claims, mortgages,
security interest or rights of any other party. It is understood
and agreed that the final terms and conditions of the Quanta sale
cannot, as a condition of closing, violate or break the
accounting requirements for this pooling transaction. It is
also understood that the combined value of the Real Estate will
approximate the recorded amount of the officer note receivable
($1,064,000 at June 30, 1998).
6. In addition to the indemnification provisions to be
contained in the definitive merger agreement relating to PESI's
acquisition of Chem-Met and Chem-Con, PESI will be indemnified by
the Sullivans and the Trusts, jointly and severally, for any and
all federal or state income tax liability which Chem-Con, Chem-
Met and/or Quanta may be liable to pay for any reason whatsoever
for any and all periods prior to the date of closing of the
acquisition of Chem-Con and Chem-Met by PESI. PESI will also be
indemnified for all other liabilities as related to Quanta
operations. To be negotiated are the number of shares of Common
Stock issuable by PESI in connection with the acquisition of
Chem-Met and Chem-Con that are to be held in escrow and the terms
of such escrow in connection with the indemnification of PESI
relating to any tax liability of Chem-Met, Chem-Con and Quanta
discussed in this paragraph.
7. The Sullivans and the Trusts shall bear all of the expenses
and legal fees incurred by them, following the date of acceptance
of this letter and PESI shall bear its own expenses incurred by
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Letter to Bob Lindquist
November 5, 1998
it in connection with the transactions contemplated by this
letter and the attachments. The shareholders of Chem-Con and
Chem-Met shall be responsible for any brokerage fees associated
with the transactions contemplated by this letter and the
attachments.
8. The closing of the acquisition of Chem-Con and Chem-Met by
PESI are subject to the terms and conditions of this letter and
those separate letters of intent relating to PESI's acquisition
of Chem-Con and Chem-Met, both dated as of the date of this
letter and attached hereto. In addition to all other conditions
precedents, consummation of the transactions contemplated in this
letter and the letters attached hereto is subject to the parties
negotiating, completing and executing a definitive merger
agreement in a form and substance acceptable to the parties
hereto and compliance with all of the terms and provisions of the
definitive merger agreement and this letter and the letters
attached hereto.
9. From the date of this letter until the earlier of (i)
February 28, 1998, or (ii) execution of the definitive merger
agreement relating to PESI's acquisition of Chem-Con and Chem-
Met, neither the Sullivans, the Trusts, Chem-Con, Chem-Met nor
any of their respective shareholders, directors, officers,
employees, or agents will, directly or indirectly, solicit,
initiate or encourage any acquisition proposal (as defined below)
as to Chem-Con and/or Chem-Met or any of the stock or assets of
Chem-Con and/or Chem-Met, whether by sale, lease or otherwise,
nor will Chem-Con or Chem-Met nor any of their respective
shareholders, directors, officers, employees or agents
participate, directly or indirectly, in any negotiations with any
person or party other than PESI with respect to an acquisition
proposal of Chem-Con and/or Chem-Met or any stock or assets of
Chem-Con and/or Chem-Met, whether by sale, lease or otherwise.
The Sullivans will promptly notify PESI of the person or party
making any inquiry or proposal relating to an acquisition
proposal pursuant to which a person or entity other than PESI
would (i) acquire or participate in a merger of other business
combination involving Chem-Con or Chem-Met or (ii) acquire assets
of Chem-Con or Chem-Met or (iii) acquire any stock from any of
Chem-Con, Chem-Met, the Sullivans or the Trusts or acquire any of
the outstanding common stock of Chem-Con or Chem-Met.
10. The Sullivans and the Trusts shall cause Chem-Con and Chem-
Met to allow PESI, through its employees or agents to examine the
business, properties and personnel of Chem-Con and Chem-Met as
PESI may deem necessary or advisable. During normal business
hours and upon reasonable notice, PESI and its agents shall have
full access to the premises and to all the properties, books,
contracts, commitments and records of Chem-Con and Chem-Met and
Chem-Con and Chem-Met shall furnish to PESI such financial and
operating data and other information with respect to the
business, properties and personnel of Chem-Con and Chem-Met as
PESI may from time to time reasonably request.
11. This letter and the attachments hereto shall be construed
and governed by the laws of the State of Florida.
12. As you appreciate, this letter and the letters attached
hereto relating to PESI's acquisition of Chem-Con and Chem-Met
are merely an expression of our mutual intent with respect to
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Letter to Bob Lindquist
November 5, 1998
certain terms of a proposed transaction regarding PESI's
acquisition of Chem-Met and Chem-Con and except as set forth in
paragraphs 7, 9, 10 and 11 is not intended as an offer or any
type of commitment by PESI, or any acceptance or commitment by
you and any obligation on the part of you or us will be dependent
upon the execution and delivery of mutually negotiated definitive
merger agreement.
If this proposal is agreeable to the parties involved, please
have the Sullivans and the Trust sign in the space indicated
below and return an executed copy to me at your convenience.
Sincerely,
/s/Dr. Louis F. Centofanti
_________________________________
Dr. Louis F. Centofanti, Chairman
Agreed and Accepted this 6th day of November, 1998.
/s/Thomas P. Sullivan
_________________________________
Thomas P. Sullivan
/s/Ann L. Sullivan
_________________________________
Ann L. Sullivan
/s/Thomas P. Sullivan
__________________________________
Trustee of the Thomas P. Sullivan Trust
/s/Ann L. Sullivan
__________________________________
Trustee of the Ann L. Sullivan Trust
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November 5, 1998
Mr. Bob Lindquist
WHCA Partners
Two Prudential Plaza
Suite 5050
1800 North Stetson Avenue
Chicago, IL 60601
Re: Letter of Intent -
Chemical Conservation Corporation (Florida) and Chemical
Conservation of Georgia, Inc.
Dear Bob:
Please be advised that Perma-Fix Environmental Services, Inc.
("PESI") has completed an initial due diligence of Chemical
Conservation Corporation (Florida) and Chemical Conservation of
Georgia, Inc. (collectively referred to as "Chem-Con") and is
very interested in acquiring Chem-Con by means of a merger or
other means acceptable to PESI, with such qualifying as a pooling
of interest. We would be interested in acquiring 100% of the
capital stock of the following companies:
* Chemical Conservation Corporation (Florida)
* Chemical Conservation Corporation of Georgia, Inc.
Certain real estate located in Orlando, Florida and all
improvements thereon are currently used by and associated with
Chemical Conservation Corporation (Florida) ("Orlando Real
Estate"), which Orlando Real Estate is owned by the ALS Trust.
Prior to the closing of the acquisition by PESI of Chem-Con and
as a condition precedent to such closing, the owner of the
Orlando Real Estate shall convey title in and to the Orlando Real
Estate and all improvements thereon to Chemical Conservation
Corporation (Florida) in the form of a capital contribution by a
general warranty deed, with the Orlando Real Estate being free
and clear of any and all liens, mortgages, encumbrances, security
interest, claims and rights of any other party, except for two
mortgages currently on the Orlando Real Estate owed to and held
by Sun Trust Bank in the approximate amount of $121,000 and
Commercial Carrier in the approximate amount of $142,000
(collectively, the "Orlando Mortgages"). Upon the transfer of
title to the Orlando Real Estate to Chemical Conservation
Corporation (Florida), Chemical Conservation Corporation
(Florida) will assume the Orlando Mortgages. The Orlando
Mortgages shall be current and without default and no event shall
have occurred under the Orlando Mortgages which would, with the
passage of time, result in a default.
The following offer is based on the ability to acquire Chem-Con
on terms that qualify as a pooling of interest. It would be our
intention to expedite the closing and final due diligence
process, with a proposed closing to occur by February 28, 1999,
subject to shareholder approval and satisfaction of the other
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Letter to Bob Lindquist
November 5, 1998
conditions specified herein, in the letter of intent dated as of
the date hereof and addressed to Bob Lindquist styled "Re: Letter
of Intent - Chem-Met Services, Inc. and the letter of intent
dated as of the date hereof and addressed to Bob Lindquist styled
"Letter of Intent - Chem-Con/Chem-Met Acquisitions." The
consideration to be paid for Chem-Con is as follows:
* $6.5 million in PESI Common Stock for Chem-Con, with
the number of shares of PESI Common Stock to be issued
determined by dividing $6.5 million by the average
closing price per share of PESI Common Stock as quoted
on the NASDAQ for the five (5) trading days immediately
preceding the date of closing.
PESI would, at the closing of the acquisition of Chem-Con by
PESI, enter into a four year consulting agreement with Tom
Sullivan, based on terms satisfactory to PESI and Mr. Sullivan
and at the rate of $400,000 in the first year and $300,000 per
year thereafter for the remaining three years.
Environmental Liability Issues:
This offer is conditioned on the assumption that the cost
relating to the Valdosta Ground Remediation does not exceed
$1,800,000, which would be assumed and paid by Chem-Con.
However, this transaction is also contingent upon PESI's ability
to obtain an insurance policy on the Valdosta Ground Remediation
liability on terms satisfactory to PESI prior to closing of the
PESI acquisition of Chem-Con and based upon the agreed upon and
documented costs. We will require the assistance of Chem-Con in
this documentation and support process.
This offer is also subject to satisfaction of the following:
* No material adverse change in financial position
of Chem-Con from the June 30, 1998, financial
statements;
* State/EPA approval of permit transfers, where
appropriate;
* Completion of audited financial statements of
Chem-Con and Chem-Met Services, Inc. ("Chem-Met")
for the twelve month periods ended September 30,
1996, 1997 and 1998, meeting the requirements of
Regulation S-X for inclusion in a Form S-1
Registration Statement pursuant to the Securities
Act of 1933, as amended. PESI would pay for this
audit, unless the audit finds that the combined
income of Chem-Con and Chem-Met is 20% less than
that represented, prior to the appropriate
reversal of officer notes receivable and those
adjustments as previously discussed, which
adjustments PESI has estimated as described in the
Exhibit A attached hereto. Prior to the audit
described above, Chem-Met and Chem-Con will make
certain adjustments to their financial statements
as previously discussed with PESI and estimated in
Exhibit A attached hereto;
* Completion by PESI of a final financial and
environmental due diligence;
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Letter to Bob Lindquist
November 5, 1998
* PESI obtaining the appropriate insurance policy
insuring the predetermined liability for
remediation of Valdosta;
* Tom Sullivan would have the right to appoint a
board member as long as stock held represented an
agreed upon percentage for a period to be
negotiated;
* Completion and execution of a definitive merger
agreement in which PESI would acquire Chem-Con and
Chem-Met which qualifies as a pooling of interest
and is acceptable to respective Board of Directors
of PESI, Chem-Con and Chem-Met;
* Completion of proxy material relating to the
acquisition of Chem-Met and Chem-Con in
accordance with the requirements of the Securities
Exchange Act of 1934, as amended and receipt of
PESI shareholder approval;
* No public announcement without prior approval by
both parties except as required by law;
* Completion of the acquisition of Chem-Met;
* Listing of the shares of Common Stock to be issued
hereunder on the Boston Stock Exchange and NASDAQ;
* Such other terms as reasonably requested by the
parties.
If this proposal is agreeable to the parties involved, please
have Thomas P. Sullivan, Ann L. Sullivan, the Thomas P. Sullivan
Trust and the Ann L. Sullivan Trust sign in the space indicated
below and return to me an executed copy of this letter at your
convenience.
Sincerely,
/s/Dr. Louis F. Centofanti
_________________________________
Dr. Louis F. Centofanti, Chairman
Agreed and Accepted this 6th day of November, 1998.
/s/Thomas P. Sullivan
_________________________________
Thomas P. Sullivan
/s/Ann L. Sullivan
__________________________________
Ann L. Sullivan
/s/Thomas P. Sullivan
___________________________________
Trustee of the Thomas P. Sullivan Trust
/s/Ann L. Sullivan
____________________________________
Trustee of the Ann L. Sullivan Trust
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Chem-Con-ChemMet Adjusting Entries Exhibit A
Pooling Entries
Description Amount
________________________________________________________________
P & L Impact
Increase Allowance for Doubtful Accounts 200,000
Increase Four County Reserve 220,000
Establish Accrued Expenses 600,000
Establish Valdosta Remediation Reserve 1,800,000
Establish Accrued Closure Costs 635,802
_________
TOTAL EXPENSES 3,455,802
=========
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November 5, 1998
Mr. Bob Lindquist
WHCA Partners
Two Prudential Plaza
Suite 5050
1800 North Stetson Avenue
Chicago, IL 60601
Re: Letter of Intent -
Chem-Met Services, Inc.
Dear Bob:
Please be advised that Perma-Fix Environmental Services, Inc.
("PESI") has completed an initial due diligence of Chem-Met
Services, Inc. ("Chem-Met") and is very interested in acquiring
Chem-Met. We would be interested in acquiring 100% of the
capital stock of Chem-Met by means of a merger or other means
acceptable to PESI, with such qualifying as a pooling of
interest.
The following offer is based on the ability to acquire Chem-Met
in a pooling of interest. It would be our intention to expedite
the closing and due diligence process, with a proposed closing to
occur by February 28, 1999, subject to shareholder approval and
satisfaction of the other conditions specified herein, in the
separate letter of intent dated as of the date hereof addressed
to Bob Lindquist involving the acquisition of Chemical
Conservation Corporation (Florida) and Chemical Conservation of
Georgia, Inc. (collectively, "Chem-Con") by PESI styled "Re:
Letter of Intent - Chemical Conservation Corporation (Florida)
and Chemical Conservation of Georgia, Inc. ("Chem-Con Letter")
and the letter dated as of the date hereof addressed to Bob
Lindquist relating to the proposed acquisition by PESI of Chem-
Met and Chem-Con styled "Letter of Intent-Chem-Con/Chem-Met
Acquisitions" ("Chem-Met - Chem-Con Letter"). PESI would be
willing to pay the following consideration for Chem-Met:
* $900,000 in PESI Common Stock for Chem-Met, with the
number of shares of PESI Common Stock to be issued
determined by dividing $900,000 by the average closing
price per share of PESI Common Stock over the 5 trading
days as quoted on the NASDAQ immediately prior to the
date of closing of PESI's acquisition of Chem-Met and
Chem-Con. As discussed, our analysis has placed a
value of $1.8 million on Chem-Met, less the approximate
$900,000 PRP liability in connection with the Four
County Landfill Superfund Site.
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Letter o Bob Lindquist
November 5, 1998
Environmental Liability Issues:
This offer is based on and subject to the assumption that the
following balance sheet issues and their respective costs would
be assumed or paid by Chem-Met and the liability of Chem-Met for
such shall not exceed the following amounts:
* Chem-Fix Settlement Agreement, not to exceed
$360,000;
* Four County Landfill PRP liability, not to
exceed $900,000; and
* Chem-Met Area 4 Remediation, not to exceed $2,000,000.
However, this transaction is also contingent upon PESI's
obtaining an insurance policy on the Chem-Met Area 4 Remediation
liability prior to closing upon terms satisfactory to PESI and
based upon the agreed upon and documented costs. We will
required the assistance of Chem-Met in this documentation and
support process.
This offer is also subject to satisfaction of the following:
* No material adverse change in financial condition
of Chem-Met/Chem-Con from the June 30, 1998,
financial statements of Chem-Met and Chem-Con;
* State/EPA approval of permit transfers, where
appropriate;
* Completion of audited financial statements of
Chem-Met and Chem-Con for the twelve month periods
ended September 30, 1996, 1997 and 1998, meeting
the requirements of Regulation S-X for inclusion
in a Form S-1 Registration Statement pursuant to
the Securities Act of 1933, as amended. PESI
would pay for this audit, unless the audit finds
that the combined income of Chem-Met and Chem-Con
is 20% less than that represented, prior to the
appropriate reversal of officer notes receivable
described in paragraphs 5 of the Chem-Met-Chem-Con
Letter and those certain adjustments as previously
discussed, which adjustments PESI has estimated as
described in the attached Exhibit A. Prior to the
audit described above, Chem-Met and Chem-Con will
make certain adjustments to their financial
statements as previously discussed with PESI and
estimated in Exhibit A attached hereto;
* Completion by PESI of a final financial and
environmental due diligence of Chem-Met and Chem-
Con;
* PESI obtaining the appropriate insurance policy,
insuring the predetermined liability for Chem-Met
Area 4 Remediation;
* The completion of an appropriate and definitive
settlement agreement on the Four County Landfill,
based upon liability of Chem-Met not to exceed
$900,000 and such settlement approved by an
appropriate government agency, all in a manner as
recently discussed and satisfactory to PESI;
* The completion of an appropriate settlement of the
Chem-Fix judgement in a manner satisfactory to
PESI, based upon a liability not to exceed
$360,000;
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Letter to Bob Lindquist
November 5, 1998
* Tom Sullivan would have the right to appoint a
board member as long as stock held represented an
agreed upon percentage for a period to be
determined;
* Completion of a definitive merger agreement, in
which PESI would acquire Chem-Met and Chem-Con in
a transaction qualifying as a pooling of interest,
and acceptable to the respective Board of
Directors of PESI, Chem-Met and Chem-Con and
satisfaction of the conditions precedent thereof;
* Completion of the required proxy material relating
to PESI's acquisition of Chem-Met and Chem-Con
pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, and receipt of
PESI shareholder approval;
* No public announcement without prior approval by
both parties except as required by law;
* Completion of the acquisition of Chem-Con by PESI;
* Listing of the shares of Common Stock to be issued
hereunder and in connection with the acquisition
of Chem-Con on the NASDAQ and Boston Stock
Exchange;
* Such other conditions precedent as reasonably
required by the parties.
If this proposal is agreeable to the parties involved, please
have Mr. Thomas P. Sullivan, Ann L. Sullivan, the Thomas P.
Sullivan Trust and the Ann L. Sullivan Trust sign in the space
indicated below and return an executed copy to me at your
convenience.
Sincerely,
/s/Dr. Louis F. Centofanti
________________________________
Dr. Louis F. Centofanti, Chairman
Agreed and Accepted this 6th day of November, 1998.
__________
/s/Thomas P. Sullivan
___________________________
Thomas P. Sullivan
/s/Ann L. Sullivan
____________________________
Ann L. Sullivan
/s/Thomas P. Sullivan
____________________________
Trustee of the Thomas P. Sullivan Trust
/s/Ann L. Sullivan
_____________________________
Trustee of the Ann L. Sullivan Trust
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Chem-Con-ChemMet Adjusting Entries Exhibit A
Pooling Entries
Description Amount
_______________________________________________________________
P & L Impact
Increase Allowance for Doubtful Accounts 200,000
Establish Accrued Expenses 600,000
Increase Four County Reserve 220,000
Establish Valdosta Remediation Reserve 1,800,000
Establish Accrued Closure Costs 635,802
TOTAL EXPENSES 3,455,802
=========
