=================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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 Identification
of incorporation or organization) Number)
1940 N.W. 67th Place
Gainesville, FL 32653
(Address of principal (Zip Code)
executive offices)
(352)373-4200
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
___________________ _____________________
Common Stock, $.001 Par Value Boston Stock Exchange
Redeemable Warrants Boston Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Class B Warrants
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
_____ ______
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained to the best of the Registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by
nonaffiliates of the Registrant as of March 12, 1999, based on
the closing sale price of such stock as reported by NASDAQ on such
day, was $12,648,341. The Company's Common Stock is listed on the
NASDAQ SmallCap Market and the Boston Stock Exchange.
As of March 12, 1999, there were 12,411,080 shares of the
registrant's Common Stock, $.001 par value, outstanding, excluding
943,000 shares held as treasury stock.
=================================================================
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
INDEX
_____
Page No.
_________
<S> <C> <C>
PART I
Item 1. Business. . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . 10
Item 3. Legal Proceedings . . . . . . . . . . . . . . 11
Item 4A. Executive Officers of the Company. . . . . . . 11
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . 14
Item 6. Selected Financial Data . . . . . . . . . . . 15
Item 7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations . . . . . . . . . . 17
Special Note Regarding Forward-Looking
Statements. . . . . . . . . . . . . . . . . . 27
Item 8. Financial Statements and Supplementary
Data. . . . . . . . . . . . . . . . . . . . . 28
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure. . . . . . . . . . . . . . . . . . 61
PART III
Item 10. Directors and Executive Officers of
the Registrant . . . . . . . . . . . . . . . . 62
Item 11. Executive Compensation . . . . . . . . . . . . 64
Item 12. Security Ownership of Certain Beneficial
Owners and Management. . . . . . . . . . . . . 69
Item 13. Certain Relationships and Related
Transactions . . . . . . . . . . . . . . . . . 74
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K. . . . . . . . . . . . 78
</TABLE>
<PAGE>
<PAGE>
PART I
ITEM 1. BUSINESS
Company Overview and Principal Products and Services
Perma-Fix Environmental Services, Inc. (the Company, which may be
referred to as we, us, or our) is a Delaware corporation, engaged
through its subsidiaries, in:
* Waste Management Services, which includes:
* treatment, storage, processing, and disposal of hazardous
and non-hazardous waste and mixed waste which is
both low-level radioactive and hazardous;
* nuclear mixed and low-level radioactive waste treatment,
processing and disposal, which includes
research, development, on-and off-site waste remediation and
processing; and
* industrial waste and wastewater management services,
including the collection, treatment, processing and
disposal, and the design and construction of on-site waste-
water treatment systems.
* Consulting Engineering Services, which includes:
* broad-scope environmental issues, including environmental
management programs, regulatory permitting, compliance and
auditing, landfill design, field testing and character-
ization.
We service research institutions, commercial companies and
governmental agencies nationwide. The distribution channels for
services are through direct sales to customers or via
intermediaries.
We were incorporated in December of 1990. Our executive offices are
located at 1940 N.W. 67th Place, Gainesville, Florida 32653.
Our home page on the Internet is at www.perma-fix.com. You can
learn more about us by visiting that site.
Operating Segments
We have ten operating segments which represent each separate
facility or location that we operate. Eight of these segments
provide waste management services and two segments provide
consulting engineering services as described below:
*WASTE MANAGEMENT SERVICES, which includes, off-site waste storage,
treatment, processing and disposal services through our four
treatment, storage and disposal ("TSD") facilities and numerous
related operations provided by our four other facilities, as
discussed below.
Perma-Fix of Florida, Inc. ("PFF"), located in Gainesville,
Florida, is our most uniquely permitted and licensed TSD. PFF
specializes in the processing and treatment of certain types of
wastes containing both low-level mixed radioactive and hazardous
wastes, which are known in the industry as mixed waste. PFF is one
of only a few facilities nationally to operate under both a
hazardous waste permit and a nuclear materials license, from which
it has built its reputation based on its ability to treat difficult
waste streams using unique processing technologies and its ability
to provide related research and development services. Its primary
services include the treatment and processing of waste Liquid
Scintillation Vials (LSVs), the processing and handling of other
mixed and radioactive wastes, site remediation, storage of customer
wastes, research and development, as well as more typical services
of hazardous and non-hazardous waste management. The LSVs are
generated primarily by institutional research agencies and
biotechnical companies. These wastes contain mixed (low-level)
radioactive materials and hazardous waste (flammable) constituents.
Management believes that PFF currently processes approximately 80%
of the available LSV waste in the country. The business has
expanded into receiving and handling other types of mixed wastes
primarily from the nuclear utilities, the U.S. Department of Energy
("USDOE") and other government facilities as well as select mixed
1
<PAGE>
waste field remediation projects. PFF manages the activities at
the facility under a license from the State of Florida Office of
Radiation Control and a Resource Conservation and Recovery Act
("RCRA") Part B permit.
Perma-Fix Treatment Services, Inc. ("PFTS") is a permitted TSD
facility located in Tulsa, Oklahoma. PFTS provides waste
transportation and treatment and provides disposal via its on-site
Class I Injection Well located at the facility. The injection well
is permitted for the disposal of non-hazardous liquids and
characteristic hazardous wastes that have been treated to remove
the hazardous characteristic. PFTS operates a non-hazardous
wastewater treatment system for oil and solids removal, a corrosive
treatment system for neutralization and metals precipitation, and
a container stabilization system. The injection well is controlled
by a state-of-the-art computer system to assist in achieving
compliance with all applicable state and federal regulations.
Perma-Fix of Dayton, Inc. ("PFD"), is a permitted TSD facility
located in Dayton, Ohio. PFD has four main disposal production
areas. The four production areas are a RCRA permitted TSD, a
centralized wastewater treatment area, used oil fuel recycling
area, and non-hazardous solids solidification area. Waste accepted
under the RCRA permit is typically drum waste for incineration or
stabilization. Wastewaters accepted at the facility include
hazardous and non-hazardous wastewaters, which are treated by ultra
filtration and metals precipitation to meet the requirements of
PFD's Clean Water Act pretreatment permit. Waste industrial oils
and used motor oils are processed through high-speed centrifuges to
produce a high quality fuel that is burned by industrial burners.
PFD also designs and constructs on-site wastewater pretreatment
systems.
Perma-Fix of Ft. Lauderdale, Inc. ("PFL") is a permitted Treatment
and Storage facility located in Ft. Lauderdale, Florida. PFL
collects and treats hazardous wastewaters, oily wastewaters, used
oil and other off-specification petroleum-based products, some of
which may potentially be recycled into usable products. Key
activities at PFL include process cleaning and material recovery,
production and sales of on-specification fuel oil, custom tailored
waste management programs and hazardous material disposal and
recycling materials from generators such as the cruise line and
marine industries.
Perma-Fix of New Mexico, Inc. ("PFNM"), located in Albuquerque, New
Mexico, provides on-site (at the generator's site) waste treatment
services to convert certain types of characteristic hazardous
wastes into non-hazardous waste by removing those characteristics
which categorize such waste as "hazardous" and treats non-hazardous
waste as an alternative to off-site waste treatment and disposal
methods. PFI does not treat on-site waste that is specifically
listed as hazardous waste by the U.S. Environmental Protection
Agency ("EPA") under RCRA, but treats only non-hazardous waste and
characteristic waste deemed hazardous under RCRA on the generator's
site.
Perma-Fix, Inc. ("PFI") provides on-site waste treatment services
for certain low level radioactive and mixed wastes, for industrial
firms, the USDOE and other governmental facilities under licenses
granted to the generator. PFI, in partnership with PFF, continues
to expand its processing capabilities in the nuclear waste field,
utilizing its technologies and project experience, including the
successful processing of legacy waste at the USDOE Fernald Ohio
facility. In addition, PFI has recently opened an Oak Ridge,
Tennessee office to facilitate future USDOE contracts.
Industrial Waste Management, Inc. ("IWM"), located in St. Louis,
Missouri is engaged in supplying and managing non-hazardous and
hazardous waste to be used by cement plants as a substitute fuel or
as a source of raw materials used in the production of cement.
Reclamation Services, Inc. ("RSI") located in Tulsa, Oklahoma, is
a reseller of by-product materials generated at cement plants for
environmental and engineering applications.
For 1998, the Company's waste management services business
accounted for approximately 85.7% of the Company's total revenue,
as compared to approximately 83.6% for 1997, which excludes
discontinued operations. Contained within this segment is the
nuclear and mixed waste product line, which accounted for
2
<PAGE>
$4,693,000 or 15.36% of total revenue for 1998, as compared to
$5,407,000 or 19.03% of total revenue for 1997, excluding
discontinued operations.
*CONSULTING ENGINEERING SERVICES, which provides environmental
engineering and regulatory compliance consulting services through
two subsidiaries, as discussed below.
Schreiber, Yonley & Associates ("SYA") is located in St. Louis,
Missouri. SYA specializes in environmental management programs,
permitting, compliance and auditing, in addition to landfill
design, field investigation, testing and monitoring. SYA clients
are primarily industrial, including many within the cement
manufacturing industry.
Mintech, Inc. ("Mintech") is located in Tulsa, Oklahoma. Mintech
specializes in environmental and geotechnical consulting,
engineering, geology, hydrogeology and geophysics, including
evaluating, selecting and implementing the appropriate
environmental solutions to problems involving soil and water.
Mintech also provides remediation services. In addition, Mintech
personnel routinely provide training services involving various
environmental regulations to private industry, governmental
agencies and military installations.
The engineering firms also provide the necessary support,
compliance and training as required by our operating facilities.
During 1998 environmental engineering and regulatory compliance
consulting services accounted for approximately 14.3% of our total
revenue, as compared to 16.4% in 1997, which excludes discontinued
operations.
Segment Information and Foreign and Domestic Operations and Export
Sales
During 1998, we were engaged in ten operating segments. Pursuant
to FAS 131, we define an operating segment as:
* A business activity from which we may earn revenue and incur
expenses;
* Whose operating results are regularly reviewed by our chief
operating decision maker to make decisions about resources to
be allocated to the segment and assess its performance; and
* For which discrete financial information is available.
We therefore define our segments as each separate facility or
location that we operate. We clearly view each business as a
separate segment and make decisions based on the activity and
profitability of that particular location. These segments however,
exclude the Corporate headquarters which does not generate revenue
and Perma-Fix of Memphis, Inc. which is reported elsewhere as a
discontinued operation. See Note 4 regarding discontinued
operations.
Pursuant to FAS 131 we have aggregated our operating segments into
two reportable segments to ease in the presentation and
understanding of our business. We used the following criteria to
aggregate our segments:
* The nature of our products and services;
* The nature of the production processes;
* The type or class of customer for our products and services;
* The methods used to distribute our products or provide our
services; and
* The nature of the regulatory environment.
Most of our activities were conducted in the Southeast, Southwest
and Midwest portions of the United States. We had no foreign
operations or export sales during 1998.
3
<PAGE>
Importance of Patents and Trademarks, or Concessions Held
We do not believe that we are dependent on any particular patent or
trademark in order to operate our business or any significant
segment thereof. We have received registration through the year
2000 for the service mark "Perma-Fix" by the U.S. Patent and
Trademark office.
We do not believe that on-site waste treatment processes for the
stabilization of certain hazardous wastes as utilized by PFI are
patentable except as described below. We do, however, believe that
our level of expertise in utilizing such processes is substantial,
and, therefore, we maintain such processes as a trade secret. We
maintain a policy whereby key employees of PFI who are involved
with the implementation of the treatment processes sign
confidentiality agreements with respect to non-disclosure of such
processes.
A new process ("New Process") designed to remove certain types of
organic hazardous constituents from soils or other solids and
sludges ("Solids") has been developed by us. This New Process is
designed to remove the organic hazardous constituents from the
solids through a water based system. We have filed a patent
application with the U.S. Patent and Trademark Office covering the
New Process. As of the date of this report, we have not received a
patent for the New Process, and there are no assurances that such
a patent will be issued. Until development of this New Process, we
were not aware of a relatively simple and inexpensive process that
would remove the organic hazardous constituents from solids without
elaborate and expensive equipment or expensive treating agents. Due
to the organic hazardous constituents involved, the disposal
options for such materials are limited, resulting in high disposal
cost when there is a disposal option available. By reducing the
organic hazardous waste constituents from the solids to a level
where the solids may be returned to the ground, the generator's
disposal options for such waste are substantially increased,
allowing the generator to dispose of such waste at substantially
less cost. As of the date of this report, we have only used the
New Process, on a limited basis, for commercial use. As a result,
there are no assurances that the New Process will perform as
presently expected. It is anticipated that we will begin more
extensive commercial use of the New Process in 1999. Patent
applications have also been filed for processes to treat radon,
selenium and other speciality materials. However, changes to
current environmental laws and regulations could limit the use of
the New Process or the disposal options available to the generator.
See -- "Permits and Licenses."
Permits and Licenses
Waste management companies are subject to extensive, evolving and
increasingly stringent federal, state and local environmental laws
and regulations. Such federal, state and local environmental laws
and regulations govern our activities regarding the treatment,
storage, processing, disposal and transportation of hazardous, non-
hazardous and radioactive wastes, and require us to obtain and
maintain permits, licenses and/or approvals in order to conduct
certain of our waste activities. Failure to obtain and maintain
our permits or approvals would have a material adverse effect on
us, our operations and financial condition. Moreover, as we expand
our operations we may be required to obtain additional approvals,
licenses or permits, and there can be no assurance that we will be
able to do so.
PFTS is a permitted solid and hazardous waste treatment, storage,
and disposal facility. The RCRA part B Permit was issued by the
Waste Management Section of the Oklahoma Department of
Environmental Quality ("ODEQ"). Additionally PFTS maintains an
active Injection Facility Operations Permit issued by the ODEQ
Underground Injection Control Section for our two waste disposal
injection wells, and a Pre-Treatment permit in order to discharge
industrial wastewaters to the City of Tulsa's Publically Owned
Treatment Works. PFTS is also registered with the ODEQ and the
Department of Transportation as a hazardous waste transporter.
PFF operates its hazardous and low-level radioactive waste
activities under a RCRA Part B permit and a radioactive materials
license issued by the state of Florida.
PFL operates under a general permit and used oil processors license
issued by the Florida Department of Environmental Protection
("FDEP"), a transporter license issued by the FDEP and a transfer
4
<PAGE>
facility license issued by Broward County, Florida. Broward County
also issued PFL a discharge pretreatment permit that allows
discharge of treated water to the Broward County Publically Owned
Treatment Works.
PFD operates a hazardous and non-hazardous waste treatment and
storage facility under various permits, including a RCRA Part B
permit. PFD provides wastewater pretreatment under a discharge
permit with Montgomery County Publically Owned Treatment Works and
is a specification and off-specification used oil processor under
the guidelines of the Ohio EPA.
We believe that our TSD facilities presently have obtained all
approvals, licenses and permits necessary to enable them to conduct
their business as they are presently conducted. The failure of our
TSD facilities to renew any of their present approvals, licenses
and permits, or the termination of any such approvals, licenses or
permits, could have a material adverse effect on us, our operations
and financial condition.
We believe that our on-site waste treatment services do not require
federal environmental permits provided certain conditions are met,
and we have received written verification from each state in which
we are presently operating that no such permit is required provided
certain conditions are met. There can be no assurance that states
in which our waste facilities presently do business, other states
in which our waste facilities may do business in the future, or the
federal government will not change policies or regulations
requiring us to obtain permits to carry on our on-site activities.
Seasonality
We experience a seasonal slowdown in operations and revenues during
the winter months extending from late November through early March.
The seasonality factor is a combination of the inability to
generate consistent billable hours in the consulting engineering
segment, along with poor weather conditions in the central plains
and Midwestern geographical markets we serve for on-site and off-
site services, resulting in a decrease in revenues and earnings
during such period.
Dependence Upon a Single or Few Customers
The majority of our revenues for fiscal 1998 have been derived from
hazardous and non-hazardous waste management services provided to
a variety of industrial and commercial customers. Our customers
are principally engaged in research, biotechnical development,
transportation, chemicals, metal processing, electronic,
automotive, petrochemical, refining and other similar industries,
in addition to government agencies that include the U.S. Department
of Energy ("USDOE"), U.S. Department of Defense ("USDOD"), and
other federal, state and local agencies. We are not dependent upon
a single customer, or a few customers, the loss of any one or more
would have a material adverse effect on us, and during 1998 we did
not make sales to any single customer that in the aggregate amount
represented more than ten percent (10%) of our consolidated
revenues.
Competitive Conditions
Competition is intense in most of our businesses, we compete with
numerous companies both large and small, that are able to provide
one or more of the environmental services offered by us and many of
which may have greater financial, human and other resources than we
have. However, we believe that the range of waste management and
environmental consulting, treatment, processing and remediation
services we provide affords us a competitive advantage with respect
to certain of our more specialized competitors. We believe that the
treatment processes we utilize offer a cost savings alternative to
more traditional remediation and disposal methods offered by our
competitors.
The intense competition for performing the services performed by us
within the waste industry has resulted in reduced gross margin
levels for certain of those services. The exception is in the low-
level radioactive and hazardous mixed waste area, which has only a
few competitors. In addition, at present we believe there is only
one other facility in the United States that provides low-level
radioactive and hazardous waste processing of scintillation vials,
which requires both a radioactive materials license and a hazardous
5
<PAGE>
waste permit. Competition in the waste management industry is
likely to increase as the industry continues to mature, as more
companies enter the market and expand the range of services which
they offer and as we move into new geographic markets. We believe
that there are no formidable barriers to entry into certain of the
on-site treatment businesses. However, the permitting requirements,
and the cost to obtain such permits, are barriers to the entry of
hazardous waste TSD facilities and radioactive activities as
presently operated by our subsidiaries. Certain of the non-
hazardous waste operations, however, do not require such permits
and, as a result, entry into these non-hazardous waste businesses
would be easier. If the permit requirements for both hazardous
waste storage, treatment and disposal activities and/or the
licensing requirements for the handling of low level radioactive
matters are eliminated or if such licenses or permits were made
easier to obtain, such would allow more companies to enter into
these markets and provide greater competition.
In the on-site waste treatment service area, we believe that the
major competition to our services is the continued utilization of
traditional off-site disposal methods such as landfilling. As the
viability of our on-site treatment process is demonstrated in the
market, we believe that the potential to reduce costs and the
ability to limit potential liability will persuade waste generators
to utilize our services. In the future, we believe that we will
face direct competition as processes such as those applied by us
are utilized by our competitors.
We believe that we are a significant participant in the delivery of
off-site waste treatment services in the Southeast, Midwest and
Southwest portions of the United States. We compete with TSD
facilities operated by national, regional and independent
environmental services firms located within a several hundred mile
radius of our facilities. Our subsidiary, PFF, with permitted
radiological activities solicits business on a nationwide basis,
including the U.S. Territories and Antarctica.
Our competitors for remediation services include national and
regional environmental services firms that may have larger
environmental remediation staffs and greater resources. We
recognize our lack of financial resources necessary to compete for
larger remediation contracts and therefore, presently concentrate
on remediation services projects within our existing customer base
or projects in our service area which are too small for companies
without a presence in the market to perform competitively.
Environmental engineering and consulting services provided by us
through Mintech and SYA involve competition with larger engineering
and consulting firms. We believe that we are able to compete with
these firms based on our established reputation in these market
areas and our expertise in several specific elements of
environmental engineering and consulting such as environmental
applications in the cement industry.
Capital Spending, Certain Environmental Expenditures and Potential
Environmental Liabilities
During 1998, we spent approximately $2,554,000 in capital
expenditures, which was principally for the expansion and
improvements to our continuing operations. This 1998 capital
spending total includes $564,000 of which was financed. For 1999,
we have budgeted approximately $2,500,000 for capital expenditures
to improve our operations, reduce the cost of waste processing and
handling, expand the range of wastes that can be accepted for
treatment and processing and to maintain permit compliance
requirements, and approximately $437,000 to comply with federal,
state and local regulations in connection with remediation
activities at two locations. See Note 4 and Note 9 to Notes to
Consolidated Financial Statements. However, there is no assurance
that we will have the funds available for such budgeted
expenditures. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and
Capital Resources of the Company". We do not anticipate the
ongoing environmental expenditures to be significant, with the
exception of remedial activities at the two locations discussed
below.
In June 1994, we acquired from Quadrex Corporation and/or a
subsidiary of Quadrex Corporation (collectively, "Quadrex") three
TSD companies, including the Dayton, Ohio, PFD facility. The
former owners of PFD had merged Environmental Processing Services,
Inc. ("EPS") with PFD, which was subsequently sold to Quadrex.
Through our acquisition of PFD in 1994 from Quadrex, we were
indemnified by Quadrex for costs associated with remediating
certain property leased by EPS from an affiliate of EPS on which
6
<PAGE>
EPS operated a RCRA storage and processing facility ("Leased
Property"). Such remediation involves soil and/or groundwater
restoration. The Leased Property used by EPS to operate its
facility is separate and apart from the property on which PFD's
facility is located. During 1995, in conjunction with the
bankruptcy filing by Quadrex, we were required to advance $250,000
into a trust fund to support remedial activities at the Leased
Property used by EPS, which was subsequently increased to $365,000.
As discussed in Note 9 to the Consolidated Financial Statements, we
have accrued approximately $460,000 for the estimated costs of
remediating the Leased Property used by EPS, which will extend for
a period of three (3) to five (5) years.
Due to the acquisition of PFM, we assumed and recorded certain
liabilities to remediate gasoline contaminated groundwater and
investigate, under the hazardous and solid waste amendments,
potential areas of soil contamination on PFM's property. Prior to
our ownership of PFM, the owners installed monitoring and treatment
equipment to restore the groundwater to acceptable standards in
accordance with federal, state and local authorities. We have
accrued approximately $910,000 for the estimated cost of
remediating the groundwater contamination. See "BUSINESS --
Certain Environmental Expenditures".
The PFM facility is situated in the vicinity of the Memphis
Military Defense Depot (the "Defense Facility"), which Defense
Facility is listed as a Superfund Site and is adjacent to the Allen
Well Field utilized by Memphis Light, Gas & Water, a public water
supply utilized in Memphis, Tennessee. Chlorinated compounds have
previously been detected in the groundwater beneath the Defense
Facility, as well as in very limited amounts in certain production
wells in the adjacent Allen Well Field. Very low concentrations of
certain chlorinated compounds have also been detected in the
groundwater beneath the PFM facility and the possible presence of
these compounds are currently being investigated. Based upon a
study performed by our environmental engineering group, we do not
believe the PFM facility is the source of the chlorinated compounds
in a limited number of production wells in the Allen Well Field
and, as a result, do not believe that the presence of the low
concentrations of chlorinated compounds at the PFM facility will
have a material adverse effect upon the Company. We were also
notified in January 1998 by the EPA that it is believed that PFM is
a potentially responsible party ("PRP") regarding the remediation
of a drum reconditioning facility located in Memphis. See "Legal
Proceedings" for further discussion of this environmental
liability.
The nature of our business exposes us to significant risk of
liability for damages. Such potential liability could involve, for
example, claims for clean-up costs, personal injury or damage to
the environment in cases where we are held responsible for the
release of hazardous materials; claims of employees, customers or
third parties for personal injury or property damage occurring in
the course of our operations; and claims alleging negligence or
professional errors or omissions in the planning or performance of
our services or in the providing of our products. In addition, we
could be deemed a responsible party for the costs of required
clean-up of any property which may be contaminated by hazardous
substances generated or transported by us to a site we selected,
including properties owned or leased by us. We could also be
subject to fines and civil penalties in connection with violations
of regulatory requirements.
Research and Development
Innovation by our operations is very important to the success of
our business. Our goal is to discover, develop and bring to market
innovative ways to process waste that address unmet environmental
needs. We are planning for future growth of our research
operations. We conduct research internally, and also through
collaborations with universities. We feel that our investments in
research have been rewarded by the discovery of the Perma-Fix
Process and the New Process. Our competitors also devote resources
to research and development and many such competitors have greater
resources at their disposal than we do.
Number of Employees
In our service-driven business, our employees are vital to our
success. We believe we have good relationships with our employees.
As of December 31, 1998, we employed approximately 226 persons, of
which approximately 52 were assigned to our engineering and
consulting industry segment and approximately 168 to the waste
management industry segment.
7
<PAGE>
Governmental Regulation
Environmental companies and their customers are subject to
extensive and evolving environmental laws and regulations by a
number of national, state and local environmental, safety and
health agencies, the principal of which being the EPA. These laws
and regulations largely contribute to the demand for our services.
Although our customers remain responsible by law for their
environmental problems, we must also comply with the requirements
of those laws applicable to our services. Because the field of
environmental protection is both relatively new and rapidly
developing, we cannot predict the extent to which our operations
may be affected by future enforcement policies as applied to
existing laws or by the enactment of new environmental laws and
regulations. Moreover, any predictions regarding possible
liability are further complicated by the fact that under current
environmental laws we could be jointly and severally liable for
certain activities of third parties over whom we have little or no
control. Although we believe that we are currently in substantial
compliance with applicable laws and regulations, we could be
subject to fines, penalties or other liabilities or could be
adversely affected by existing or subsequently enacted laws or
regulations. The principal environmental laws affecting us and our
customers are briefly discussed below.
The Resource Conservation and Recovery Act of 1976, as amended
("RCRA"). RCRA and its associated regulations establish a strict
and comprehensive regulatory program applicable to hazardous waste.
The EPA has promulgated regulations under RCRA for new and existing
treatment, storage and disposal facilities including incinerators,
storage and treatment tanks, storage containers, storage and
treatment surface impoundments, waste piles and landfills. Every
facility that treats, stores or disposes of hazardous waste must
obtain a RCRA permit or must obtain interim status from the EPA, or
a state agency which has been authorized by the EPA to administer
its program, and must comply with certain operating, financial
responsibility and closure requirements. RCRA provides for the
granting of interim status to facilities that allows a facility to
continue to operate by complying with certain minimum standards
pending issuance or denial of a final RCRA permit.
Boiler and Industrial Furnace Regulations under RCRA ("BIF
Regulations"). BIF Regulations require boilers and industrial
furnaces, such as cement kilns, to obtain permits or to qualify for
interim status under RCRA before they may use hazardous waste as
fuel. If a boiler or industrial furnace does not qualify for
interim status under RCRA, it may not burn hazardous waste as fuel
or use such as raw materials without first having obtained a final
RCRA permit. In addition, the BIF Regulations require 99.99%
destruction of the hazardous organic compounds used as fuels in a
boiler or industrial furnace and impose stringent restrictions on
particulate, carbon monoxide, hydrocarbons, toxic metals and
hydrogen chloride emissions.
The Safe Drinking Water Act, as amended (the "SDW Act"), regulates,
among other items, the underground injection of liquid wastes in
order to protect usable groundwater from contamination. The SDW
Act established the Underground Injection Control Program ("UIC
Program") that provides for the classification of injection wells
into five classes. Class I wells are those which inject
industrial, municipal, nuclear and hazardous wastes below all
underground sources of drinking water in an area. Class I wells
are divided into non-hazardous and hazardous categories with more
stringent regulations imposed on Class I wells which inject
hazardous wastes. PFTS' permit to operate its underground
injection disposal wells is limited to non-hazardous wastewaters.
The Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA", also referred to as the "Superfund
Act"). CERCLA governs the clean-up of sites at which hazardous
substances are located or at which hazardous substances have been
released or are threatened to be released into the environment.
CERCLA authorizes the EPA to compel responsible parties to clean up
sites and provides for punitive damages for noncompliance. CERCLA
imposes joint and several liability for the costs of clean-up and
damages to natural resources.
Health and Safety Regulations. The operation of the Company's
environmental activities is subject to the requirements of the
Occupational Safety and Health Act ("OSHA") and comparable state
laws. Regulations promulgated under OSHA by the Department of
Labor require employers of persons in the transportation and
8
<PAGE>
environmental industries, including independent contractors, to
implement hazard communications, work practices and personnel
protection programs in order to protect employees from equipment
safety hazards and exposure to hazardous chemicals.
Atomic Energy Act. The Atomic Energy Act of 1954 governs the safe
handling and use of Source, Special Nuclear and Byproduct materials
in the U.S. and its territories. This act authorized the Atomic
Energy Commission (now the Nuclear Regulatory Commission) to enter
into "Agreements with States to carry out those regulatory
functions in those respective states except for Nuclear Power
Plants and federal facilities like the VA hospitals and the USDOE
operations." On July 1, 1964, the state of Florida signed this
Agreement. Thus, the state of Florida (with the USNRC oversight),
Office of Radiation Control, regulates the radiological program of
the PFF facility.
Other Laws. Our activities are subject to other federal
environmental protection and similar laws, including, without
limitation, the Clean Water Act, the Clean Air Act, the Hazardous
Materials Transportation Act and the Toxic Substances Control Act.
Many states have also adopted laws for the protection of the
environment which may affect us, including laws governing the
generation, handling, transportation and disposition of hazardous
substances and laws governing the investigation and clean-up of,
and liability for, contaminated sites. Some of these state
provisions are broader and more stringent than existing federal law
and regulations. Our failure to conform our services to the
requirements of any of these other applicable federal or state laws
could subject us to substantial liabilities which could have a
material adverse affect on us, our operations and financial
condition. In addition to various federal, state and local
environmental regulations, our hazardous waste transportation
activities are regulated by the U.S. Department of Transportation,
the Interstate Commerce Commission and transportation regulatory
bodies in the states in which we operate. We cannot predict the
extent to which we may be affected by any law or rule that may be
enacted or enforced in the future, or any new or different
interpretations of existing laws or rules.
Insurance
We believe we maintain insurance coverage adequate for our needs
and which is similar to, or greater than, the coverage maintained
by other companies of our size in the industry. There can be no
assurances, however, that liabilities which may be incurred by us
will be covered by our insurance or that the dollar amount of such
liabilities which are covered will not exceed our policy limits.
Under our insurance contracts, we usually accept self-insured
retentions which we believe appropriate for our specific business
risks. We are required by EPA regulations to carry environmental
impairment liability insurance providing coverage for damages on a
claims-made basis in amounts of at least $1 million per occurrence
and $2 million per year in the aggregate. To meet the requirements
of customers, we have exceeded these coverage amounts.
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 conserve 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.
We have conducted a review of our computer systems to identify the
systems which we anticipated could be effected by the Year 2000
issue and we believe that all such systems were already, or have
been converted to be, Year 2000 compliant. Such conversion costs,
where required, have not been material and have been expensed as
incurred. Pursuant to our Year 2000 planning, we have requested
information regarding the computer systems of our key suppliers,
customers, creditors, and financial service organizations and have
9
<PAGE>
been informed that they are substantially Year 2000 compliant.
There can be no assurance, however, that such key organizations are
actually Year 2000 compliant and that the Year 2000 issue will not
adversely affect the Company's financial position or results of
operations. We believe that our expenditures in addressing our
Year 2000 issues will not have a material adverse effect on our
financial position or results of operations.
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 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 Company anticipates that, as a member of the team with M&EC in
connection with the 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 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. As of the date of this Report, however, the Company
has engaged in only minimal design work in connection with the M&EC
Contract. The revenues which will be received by the Company, if
any, as a result of the M&EC Contract are subject to a variety of
factors and the Company cannot currently estimate what such amount
of revenue may be. See "Special Note Regarding Forward Looking
Statements" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Oak Ridge System Contract
Award."
Proposed Acquisition
During March, 1999, Chemical Conservation Corporation, Chemical
Conservation of Georgia, Inc., Chem-Met Services, Inc.
(collectively "Chem-Con") and the Company entered into a definitive
agreement whereby the Company agreed to acquire Chem-Con in
exchange for $7.4 million of Perma-Fix Common Stock. In addition,
we agreed to enter into an employment agreement with the president
of Chem-Con, who is also one of the principal stockholders of Chem-
Con, pursuant to which we would pay such person a total of $1.3
million over a four (4) year period.
Chem-Con's revenues are principally generated from collection,
treatment, and recycling of industrial and hazardous waste,
including waste oils, water and miscellaneous solid waste. Chemical
Conservation Corporation operates a permitted treatment and storage
facility and transfer station that also serves as the base for a
private trucking fleet; Chemical Conservation of Georgia, Inc.
treats hazardous waste and recycles solvents; and, Chem-Met
Services, Inc. treats and stabilizes inorganic wastes and maintains
a government services division that is focused principally on the
Defense Revitalization and Marketing Services (DRMS) market.
The transaction is expected to be closed during the summer of 1999.
However, the acquisition is subject to the ability of the parties
to, among other things, qualify the acquisition of Chem-Con as a
pooling of interests transaction, which means that the merged
companies will be treated as if they had always been combined for
accounting and financial reporting purposes, the effectiveness of
a registration statement covering the shares of Perma-Fix Common
Stock to be issued in connection with the acquisition and the
approval of the acquisition by the Company's stockholders entitled
to vote thereon. See "Management Discussion and Analysis of
Financial Condition and Results of Operations" and See Note 5 to
Notes to Consolidated Financial Statements.
ITEM 2. PROPERTIES
Our principal executive offices are in Gainesville, Florida. Our
waste management operations are located in Gainesville and Ft.
Lauderdale, Florida; Dayton, Ohio; Tulsa, Oklahoma; Albuquerque,
New Mexico and Memphis, Tennessee. Our consulting engineering
services are located in Tulsa, Oklahoma and St. Louis, Missouri.
We also maintain sales offices in Laverne, California and Kansas
City, Missouri.
10
<PAGE>
We own five facilities and have an option to purchase another
facility at a nominal amount at the end of the lease term, all of
which are in the United States. In addition, we lease four
properties for office space, one of which also contains a warehouse
and one additional property that is utilized strictly as warehouse
space, all of which are located in the United States as described
above.
We believe that the above facilities currently provide adequate
capacity for our operations and that additional facilities are
readily available in the regions in which we operate.
ITEM 3. LEGAL PROCEEDINGS
In May 1995, PFM, a subsidiary of the Company, became aware that
the U.S. District Attorney for the Western District of Tennessee
and the Department of Justice were investigating certain prior
activities of W. & R. Drum, Inc. ("W.R. Drum") its successor, First
Southern Container Company, and any other facility owned or
operated, in whole or in part, by Johnnie Williams. PFM used W. R.
Drum to dispose of certain of its used drums. In May 1995, PFM
received a Grand Jury Subpoena which demanded the production of any
documents in the possession of PFM pertaining to W. R. Drum, First
Southern Container Company, or any other facility owned or
operated, and holder in part, by Johnnie Williams. PFM complied
with the Grand Jury Subpoena. Thereafter, in September of 1995,
PFM received another Grand Jury Subpoena for documents from the
Grand Jury investigating W. R. Drum, First Southern Container
Company and/or Johnnie Williams. PFM complied with the Grand Jury
Subpoena. In December 1995, representatives of the Department of
Justice advised PFM that it was also currently a subject of the
investigation involving W. R. Drum, First Southern Container
Company, and/or Johnnie Williams. Since 1995, the Company has
received no new information about this matter.
During January 1998, PFM was notified by the EPA that the EPA had
conducted remediation operations at a site owned and operated by
W.R. Drum, Inc. in Memphis, Tennessee (the "Drum Site"). By
correspondence dated January 15, 1998 ("PRP Letter"), the EPA
informed PFM that it believed that PFM was a PRP regarding the
remediation of the Drum Site, primarily as a result of acts by PFM
prior to the time PFM was acquired by the Company. 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, and
the EPA has orally informed the Registrant that such remediation
has been substantially complete as of such date. During the second
quarter of 1998, PFM and certain other PRP's began negotiating with
the EPA regarding a potential settlement of the EPA's claims
regarding the Drum Site and such negotiations have been completed.
During the third quarter of 1998, the government agreed to PFM's
offer to pay $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. During January 1999, the
Company executed a "Partial Consent Decree" pursuant to this
settlement, which settlement is subject to approval of the court.
There are no assurances that the settlement will be approved by the
court.
In addition to the above matters and in the normal course of
conducting our business, we are involved in various other
litigation. We are not a party to any litigation or governmental
proceeding which our management believes could result in any
judgments or fines against us that would have a material adverse
affect on our financial position, liquidity or results of
operations.
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth, as of the date hereof, information
concerning the Executive Officers of the Company:
11
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITION
____ ___ _________
<S> <C> <C>
Dr. Louis F. Centofanti 55 Chairman of the Board, President
and Chief Executive Officer
Mr. Richard T. Kelecy 43 Chief Financial Officer, Vice
President and Secretary
Mr. Roger Randall 55 Vice President, Industrial Services
Mr. Bernhardt Warren 50 Vice President, Nuclear Services
Mr. Timothy Kimball 53 Vice President, Technical Services
</TABLE>
DR. LOUIS F. CENTOFANTI
Dr. Centofanti has served as Chairman of the Board since he joined
the Company in February, 1991. Dr. Centofanti also served as
President and Chief Executive Officer of the Company from
February, 1991 until September, 1995 and again in March, 1996 was
elected to serve as President and Chief Executive Officer of the
Company and continues as Chairman of the Board. From 1985 until
joining the Company, Dr. Centofanti served as Senior Vice President
of USPCI, Inc., a large hazardous waste management company, where
he was responsible for managing the treatment, reclamation and
technical groups within USPCI. In 1981, he founded PPM, Inc., a
hazardous waste management company specializing in the treatment of
PCB contaminated oils which was subsequently sold to USPCI. From
1978 to 1981, Dr. Centofanti served as Regional Administrator of
the U.S. Department of Energy for the southeastern region of the
United States. Dr. Centofanti has a Ph.D. and a M.S. in Chemistry
from the University of Michigan, and a B.S. in Chemistry from
Youngstown State University.
MR. RICHARD T. KELECY
Mr. Kelecy was elected Chief Financial Officer in September 1995.
He previously served as Chief Accounting Officer and Treasurer of
the Company since July 1994. From 1992 until June 1994, Mr. Kelecy
was Corporate Controller and Treasurer for Quadrex Corporation.
From 1990 to 1992 Mr. Kelecy was Chief Financial Officer for
Superior Rent-a-Car, and from 1983 to 1990 held various positions
at Anchor Glass Container Corporation including Assistant
Treasurer. Mr. Kelecy holds a B.A. in Accounting and Business
Administration from Westminster College.
MR. ROGER RANDALL
Mr. Randall has served as Vice-President/General Manager of PFD
since its acquisition by the Company in June, 1994 and was elected
to the position of Vice President Industrial Services of the
Company in December 1997. From June, 1992 to June, 1994, Mr.
Randall served as General Manager of the Dayton facility under the
ownership of Quadrex Corporation. From 1982 to June, 1992, Mr.
Randall served a variety of management roles at the Dayton
facility, ranging from Operations Manager to Chairman of the Board
and Chief Executive Officer under the ownership of Clark
Processing, Inc. Previous to his involvement with the waste
management industry, Mr. Randall spent 17 years in public education
serving a variety of administrative roles. He has a B.S. from
Wittenberg University and an M.A. from Wright State University.
MR. BERNHARDT WARREN
Mr Warren has served as Vice President/General Manager of PFF since
1996 and was elected to the position of Vice President Nuclear
Services of the Company in December 1997. From 1992 to 1996, Mr.
Warren provided contractual consulting services for PFF and other
companies through Applied Environmental Consulting, Inc., of which
Mr. Warren is Owner and President. From 1982 to 1992, Mr. Warren
served a variety of management roles at the Florida facility under
the ownership of Quadrex Corporation. He was involved in
radioactive materials and radioactive waste management from 1973 to
1982, when he was Manager of Radioactive Materials Licensing
Program for the State of Florida. He has a B.S. degree in biology
from Florida Southern College, a Master of Public Administration
from Florida State University and graduated from the United States
Nuclear Regulatory Commission sponsored Oak Ridge Associated
University program. Mr. Warren has authored more than a dozen
technical papers and has achieved Master Level as a Certified
Hazardous Materials Manager.
12
<PAGE>
MR. TIMOTHY KIMBALL
Mr. Kimball has served as Vice President of PFI and PFNM since
January, 1991 and was elected to the position of Vice President
Technical Services of the Company in December 1997. He previously
served as the Hazardous Waste Coordinator and Technical
Representative for Rinchem Company, Inc. from 1985 to 1991. He
also served a variety of management roles ranging from Planning
Director, Partner and President, as well as Technical and Research
Assistant for the University of New Mexico. He has a B.A. in
Political Science and Public Administration from the University of
Louisville, and an M.A. in Anthropology from the University of New
Mexico.
13
<PAGE>
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
<TABLE>
<CAPTION>
Our Common Stock, with a par value of $.001 per share, is traded on
the NASDAQ SmallCap Market ("NASDAQ") and the Boston Stock Exchange
("BSE") under the symbol "PESI" on NASDAQ and "PES" on the BSE.
Effective December 1996, our Common Stock also began trading on the
Berlin Stock Exchange under the symbol "PES.BE." The following
table sets forth the high and low bid prices quoted for the Common
Stock during the periods shown. The source of such quotations and
information is the NASDAQ Stock market statistical summary reports:
1998 1997
__________________ _________________
Low High Low High
_____ _____ ____ _____
<S> <C> <C> <C> <C> <C>
Common Stock: 1st Quarter 1 25/32 2 1/2 1 1/8 1 3/8
2nd Quarter 1 7/16 2 1/32 2 3/16 2 5/16
3rd Quarter 1 3/8 2 25/32 1 15/16 2
4th Quarter 1 1/32 2 7/32 2 1/16 2 1/4
</TABLE>
Such over-the-counter market quotations reflect inter-dealer
prices, without retail mark-ups or commissions and may not
represent actual transactions.
As of December 31, 1998, there were approximately 191 shareholders
of record of our Common Stock, including brokerage firms and/or
clearing houses holding shares of our Common Stock for their
clientele (with each brokerage house and/or clearing house being
considered as one holder). However, the total number of beneficial
shareholders as of January 20, 1999, was approximately 1,645.
Since our inception, we have not paid any cash dividends on our
Common Stock and have no dividend policy. Our loan agreement
prohibits paying any cash dividends on our Common Stock without
prior approval.
In addition to the securities sold by us during 1998, as reported
in the Company's Forms 10-Q for the quarters ended June 30, 1998
and September 30, 1998, which were not registered under the
Securities Act of 1933, as amended ("Securities Act"), we sold or
issued during 1998 the following securities which were also not
registered under the Act:
<TABLE>
<CAPTION>
1. During 1998, we issued RBB Bank Aktiengesellschaft,
located in Graz, Austria, 116,555 shares of the Company's
Common Stock in payment of accrued and unpaid dividends
in the Company's Series 3 Class C Convertible Preferred
Stock ("Series 3 Preferred"), in accordance with the
terms of the Series 3 Preferred. The following shares of
Common Stock were issued to RBB Bank during 1998 in
payment of the accrued and unpaid dividends in the Series
3 Preferred:
Number of
Amount Shares of Date of
of Dividend Common Stock Issuance
___________ ____________ _________
<S> <C> <C>
$ 121,000 54,528 1/22/98
119,000 62,027 7/24/98
</TABLE>
The issuance of the above described shares of Common
Stock in payment of accrued and unpaid dividends in the
Series 3 Preferred, were issued pursuant to an exemption
from registration under Section 4(2) and/or Rule 506 of
Regulation D of the Securities Act. These have been
registered for resale in our Form S-3 Registration
Statement No. 333-14513.
<TABLE>
<CAPTION>
2. During 1998, we issued RBB Bank Aktiengesellschaft,
located in Graz, Austria, 17,420 shares of the Company's
Common Stock in payment of accrued and unpaid dividends
14
<PAGE>
in the Company's Series 8 Class H Convertible Preferred
Stock ("Series 8 Preferred"), in accordance with the
terms of the Series 8 Preferred. The shares of Common
Stock issued to RBB Bank during 1998 in payment of the
accrued and unpaid dividends in the Series 8 Preferred
are shown in the following table:
Number of
Amount Shares of Date of
of Dividend Common Stock Issuance
___________ ____________ _________
<S> <C> <C>
$ 33,000 17,420 7/24/98
</TABLE>
The issuance of the above described shares of Common
Stock in payment of accrued and unpaid dividends in the
Series 8 Preferred, were issued pursuant to an exemption
from registration under Section 4(2) and/or Rule 506 of
Regulation D of the Securities Act.
<TABLE>
<CAPTION>
3. During 1998, we issued The Infinity Fund L.P., located in
Atlanta, Georgia, 2,439 shares of the Company's Common
Stock in payment of accrued and unpaid dividends in the
Company's Series 9 Class I Convertible Preferred Stock
("Series 9 Preferred"), in accordance with the terms of
the Series 9 Preferred. The shares of Common Stock
issued to The Infinity Fund L.P. during 1998 in payment
of the accrued and unpaid dividends in the Series 9
Preferred are shown in the following table:
Number of
Amount Shares of Date of
of Dividend Common Stock Issuance
___________ ____________ _________
<S> <C> <C>
$ 5,000 2,439 7/24/98
</TABLE>
The issuance of the above described shares of Common
Stock in payment of accrued and unpaid dividends in the
Series 9 Preferred, were issued pursuant to an exemption
from registration under Section 4(2) and/or Rule 506 of
Regulation D of the Securities Act.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
The financial data included in this table has been derived
from our consolidated financial statements. Financial statements
for the year ended December 31, 1998, 1997, 1996, 1995, and 1994
have been audited by BDO Seidman, LLP.
Statement of Operations Data:
(Amounts in Thousands,
Except for Share
Amounts) December 31,
____________________________________________________
1998 1997 1996 1995 1994(2)
_______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C>
Revenues(4) $ 30,551 $ 28,413 $ 27,041 $ 31,477 $ 23,522
Net income (loss)
from continuing
operations 462 192 27 (3,494) (1,201)
Net loss from discon-
tinued operations - (4,101) (287) (5,558)(3) (315)
Preferred Stock
dividends (1,160) (1,260)(5) (2,145)(5) - -
Net loss applicable
to Common Stock
from continuing
operations (698) (1,068)(5) (2,118)(5) (3,494) (1,201)
Net loss per common
share from contin-
uing operations(1) (.06) (.10)(5) (.24)(5) (.44) (.20)
Weighted average number
of common shares
outstanding(1) 12,028 10,650 8,761 7,872 5,988
15
<PAGE>
Balance Sheet Data:
December 31,
______________________________________________________
1998 1997 1996 1995 1994(2)
_______ _______ _______ _______ _______
Working capital
(deficit) $ 372 $ 754 $ (773) $(9,372) $ (705)
Total assets 28,748 28,570 29,036 28,873 35,067
Long-term debt 3,042 4,981 6,360 8,478 6,041
Total liabilities 12,795 16,376 16,451 20,935 18,105
Stockholders' equity 15,953 12,194 12,585 7,938 16,962
<FN>
(1) Net loss per share for the fiscal year ended December 31, 1994 has
been restated, in accordance with Accounting Principles Board
Opinion No. 15, "Earnings Per Share," to reflect the issuance of
contingent shares to Quadrex during 1995. As of December 31, 1997,
the Company applied SFAS 128, the new standard of computing and
presenting earnings per share. The adoption of SFAS 128 did not
have a material effect on the Company's EPS presentation since the
effects of potential common shares are antidilutive.
(2) Includes financial data of Perma-Fix of Florida, Inc., Perma-Fix of
Dayton, Inc. and Perma-Fix of Ft. Lauderdale, Inc., as acquired from
Quadrex Corporation and accounted for using the purchase method of
accounting, from June 30, 1994.
(3) Includes write-down of impaired intangible permit related to an
acquisition completed in December of 1993 and certain nonrecurring
charges.
(4) Excludes revenues of Perma-Fix of Memphis, Inc., shown elsewhere as
a discontinued operation.
(5) In March 1997, the Securities and Exchange Commission,
("Commission") announced its position on the accounting for
Preferred Stock which is or may be convertible in Common Stock at
a discount from the market rate on the date of issuance of such
Preferred Stock. The Commission's position pursuant to Emerging
Issues Task Force ("EITF") D-60 regarding beneficial conversion
features is that a Preferred Stock dividend should be recorded for
the difference between the conversion price and quoted market price
of Common Stock as determined on the date of issuance of such
Preferred Stock. To comply with this position, we restated our 1996
consolidated financial statements to reflect a dividend of
approximately $2 million related to the fiscal 1996 sales of
Convertible Preferred Stock. As a result, the amount noted in this
table as our net loss applicable to Common Stock for 1996 reflects
the restated amount from the previously reported net loss applicable
to Common Stock of $405,000 and the amount noted in this table as
our net loss per share of Common Stock for 1996 reflects the
restated amount from the previously reported net loss per share of
Common Stock of ($.05). Pursuant to the Commission's position
regarding EITF D-60 and EITF D-42, we restated our 1997 consolidated
financial statements to reflect a dividend of approximately $908,000
($195,000 attributable to warrants) related to the fiscal 1997 sales
and subsequent exchanges of Convertible Preferred Stock, of which
approximately $111,000 was attributable to the quarter ended
June 30, 1997, and approximately $797,000 was attributable to the
quarter ended September 30, 1997. The impact of the restatement on
the second and third quarters of 1997 and the year ended
December 31, 1997, is shown as follows (amounts in thousands, except
for share amounts):
16
<PAGE>
As Originally Reported As Amended
___________________________ ___________________________
Quarter Ended Year Ended Quarter Ended Year Ended
________________ __________ ________________ _________
6/30/97 9/30/97 12/31/97 6/30/97 9/30/97 12/31/97
_______ _______ ________ _______ _______ _________
Preferred Stock
Dividends $ 82 $ 99 $ 352 $ 193 $ 896 $1,260
Net Loss Applicable
to Common Stock (525) 58 (4,261) (636) (739) (5,169)
Net Loss Per Share (.05) .01 (.40) (.06) (.07) (.49)
</FN>
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Certain statements contained within this "Management's Discussion
and Analysis of Financial Condition and Results of Operations" 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"). See "Special Note regarding Forward-Looking Statements"
contained in this report.
Management's discussion and analysis is based, among other things,
upon our audited consolidated financial statements and includes the
accounts of the Company and our wholly-owned subsidiaries, after
elimination of all significant inter-company balances and
transactions.
Results of Operations
The following discussion and analysis should be read in conjunction
with our consolidated financial statements and the notes thereto
included in Item 8 of this report.
The reporting of financial results and pertinent discussions are
tailored to two reportable segments: Waste Management Services and
Consulting Engineering Services.
<TABLE>
<CAPTION>
Below are the results of operations for our years ended
December 31, 1998, 1997 and 1996 (amounts in thousands, except for
share amounts):
(Consolidated) 1998 % 1997 % 1996 %
______________ _______ _____ _______ _____ _______ _____
<S> <C> <C> <C> <C> <C> <C>
Net Revenue $30,551 100.0 $28,413 100.0 $27,041 100.0
Cost of goods
sold 21,064 68.9 19,827 69.8 18,912 69.9
_______ _____ _______ _____ _______ _____
Gross Profit 9,487 31.1 8,586 30.2 8,129 30.1
Selling, general
and administra-
tive 6,847 22.4 5,682 20.0 5,942 22.0
Depreciation and
amortization 2,109 6.9 1,980 7.0 2,083 7.7
Other income
(expense):
Interest income 35 .1 41 .1 43 .2
Interest expense (294) (1.0) (431) (1.5) (643) (2.4)
Other 190 .6 (342) (1.2) 523 1.9
________ ______ ________ ______ ________ ______
Net income from
continuing
operations 462 1.5 192 .6 27 -
Loss from discon-
tinued opera-
tions(2) - - (4,101) (14.4) (287) (1.1)
Preferred Stock
dividends (1,160) (3.8) (1,260)(1) (4.4) (2,145)(1) (7.9)
________ ______ ________ ______ _________ ______
Net loss applic-
able to Common
Stock $ (698) (2.3) $(5,169)(1) (18.2) $(2,405)(1) (8.9)
======== ====== ======= ====== ======== ======
Net loss per
Common share $ (.06) - $ (.49) - $ (.27) -
======== ====== ======== ====== ======== ======
17
<PAGE>
<FN>
(1) In March 1997, the Securities and Exchange Commission
("Commission") announced its position on the accounting for
Preferred Stock which is convertible into Common Stock at a
discount from the market rate on the date of issuance of such
Preferred Stock. The Commission's position pursuant to EITF D-
60 regarding beneficial conversion features is that a
Preferred Stock dividend should be recorded for the difference
between the conversion price and quoted market price of Common
Stock as determined on the date of issuance of such Preferred
Stock. To comply with this position, we restated our 1996
consolidated financial statements to reflect a dividend of
approximately $2 million related to the fiscal 1996 sales of
Convertible Preferred Stock. As a result, the amount noted in
this table as our net loss applicable to Common Stock for 1996
reflects the restated amount from the previously reported net
loss applicable to Common Stock of $405,000 and the amount
noted in this table as our net loss per share of Common Stock
for 1996 reflects the restated amount from the previously
reported net loss per share of Common Stock of ($.05).
Pursuant to the Commission's position regarding EITF D-60 and
EITF D-42, we restated our 1997 consolidated financial
statements to reflect a dividend of approximately $908,000
($195,000 attributable to warrants) related to the fiscal 1997
sales and subsequent exchanges of Convertible Preferred Stock,
of which approximately $111,000 was attributable to the
quarter ended June 30, 1997, and approximately $797,000 was
attributable to the quarter ended September 30, 1997. The
impact of the restatement on the second and third quarters of
1997 and the year ended December 31, 1997, is shown as follows
(amounts in thousands, except for share amounts):
As Originally Reported As Amended
___________________________ ___________________________
Quarter Ended Year Ended Quarter Ended Year Ended
________________ __________ ________________ _________
6/30/97 9/30/97 12/31/97 6/30/97 9/30/97 12/31/97
_______ _______ ________ _______ _______ ________
Preferred Stock
Dividends $ 82 $ 99 $ 352 $ 193 $ 896 $ 1,260
Net Loss Applicable
to Common Stock (525) 58 (4,261) (636) (739) (5,169)
Net Loss Per Share (.05) .01 (.40) (.06) (.07) (.49)
(2) On January 27, 1997, an explosion and resulting tank fire
occurred at the PFM 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. Due to the nature of the loss,
the significant disruption and limited operating activities at
the facility, we made a strategic decision in February 1998,
to discontinue our fuel blending operations at PFM, which
comprised virtually all of the revenue producing operations of
PFM. See "Business" and Note 4 to Notes to Consolidated
Financial Statements and to "Discontinued Operations" in this
section for further discussion on PFM. Hereafter, PFM will be
referred to as a discontinued operation, and excluded from the
discussions on the operating results of the continuing
operations.
</FN>
</TABLE>
Summary -- Years Ended December 31, 1998 and 1997
Consolidated net revenues increased $2,138,000, or 7.5% for
continuing operations for the year ended December 31, 1998,
compared to the year ended December 31, 1997. This increase is
attributable to the growth in the wastewater treatment market at
PFTS, which totaled approximately $1,283,000 and the growth in the
oily wastewater and field services markets at PFFL, which totaled
approximately $1,168,000. Partially offsetting these increases was
a decrease in the consulting engineering segment of approximately
$287,000 and a decrease in on-site treatment of approximately
$357,000.
Cost of goods sold increased $1,237,000, or 6.2% for the year ended
December 31, 1998, compared to the year ended December 31, 1997.
This increase in cost of goods sold reflects principally the
increased operating, disposal, and transportation costs
corresponding to the increased revenues as discussed above.
Gross profit for the year ended December 31, 1998, increased to
$9,487,000, which as a percentage of revenue is 31.1%, reflecting
a slight improvement over 1997.
18
<PAGE>
Selling, general and administrative expenses increased $1,165,000
or 20.5% for the year ended December 31, 1998, as compared to 1997.
As a percentage of revenue, selling, general and administrative
expenses also increased to 22.4% for the year ended December 31,
1998, compared to 20.0% for the same period of 1997. This increase
reflects an increase in costs of approximately $53,000 in the
consulting engineering segment, approximately $983,000 increase in
costs in the waste management segment, and an increase of
approximately $129,000 in corporate overhead. These increases
reflect our efforts to continue to research and develop new
markets, products and technologies that will allow us to become
more profitable.
Depreciation and amortization expense for the year ended December 31,
1998, reflects an increase of approximately $129,000 or 6.5% as
compared to the year ended December 31, 1997. This increase is
attributable to the capitalization and subsequent depreciation of
completed capital asset projects in 1998. Amortization expense
increased approximately $45,000 for the year ended December 31,
1998, as a result of new capitalized permitting costs and their
subsequent current year amortization and the additional
amortization of goodwill resulting from the 1998 acquisition of
Action Environmental.
Interest expense decreased approximately $137,000 from the year
ended December 31, 1998, as compared to the corresponding period of
1997. This decrease reflects reduced borrowing levels on the
Congress Financial revolver and term note.
The Preferred Stock dividends include the dividends recognized upon
the issuance of new series' of Preferred Stock due to the
beneficial conversion feature and dividends paid on a semi-annual
basis on outstanding Preferred Stock, which on a combined basis
decreased approximately $100,000, for the year ended December 31,
1998, as compared to the year ended December 31, 1997. Pursuant to
EITF D-60, we restated our 1997 consolidated financial statements
to record a dividend of approximately $908,000 related to the
fiscal 1997 sales of certain series of Convertible Preferred Stock.
Pursuant to EITF D-60 and D-42, we have recorded a dividend of
approximately $750,000 related to the fiscal 1998 sales of certain
series of Convertible Preferred Stock. However, Preferred Stock
dividends paid during 1998 were approximately $410,000 as compared
to approximately $352,000 during 1997. This increase of
approximately $58,000 is due to the issuance of the new Series 10
Preferred Stock issued in July 1998. See Note 6 to Notes to
Consolidated Financial Statements regarding the issuance of
Preferred Stock. See Note 3 to Notes to Consolidated Financial
Statements regarding the restatements due to the beneficial
conversion features of our various issuances of Preferred Stock.
Summary -- Years Ended December 31, 1997 and 1996
Consolidated net revenues increased $1,372,000, or 5.1% for
continuing operations for the year ended December 31, 1997,
compared to the year ended December 31, 1996. This increase is
attributable to the waste management industry segment, which
experienced an increase in revenues of approximately $2,259,000
during 1997, as compared to 1996. Our four (4) TSD's all
experienced increased revenues during 1997, which in the aggregate
totaled approximately $3,042,000 and were principally attributable
to growth in the wastewater and mixed waste markets. The most
significant TSD increase occurred at the PFF facility, which
recognized a $2,184,000 increase resulting from new mixed waste
contracts. Partially offsetting these increases within the waste
management industry segment were two (2) sale transactions
completed during 1996, whereby we sold our PermaCool Technology
which had generated $689,000 in revenue during 1996 and sold our
plastic recycling subsidiary (Re-Tech Systems, Inc.) which had
generated $129,000 in revenue during 1996. This increase in the
waste management industry segment was partially offset by a
reduction in revenues of $887,000 in the consulting engineering
industry segment. This consulting engineering reduction is
partially a result of two one-time projects for 1996, which totaled
$396,000 and were not duplicated in 1997, and a significant
reduction in the Bartlesville, Oklahoma, three year project that
reduced 1997 consulting engineering revenue by approximately
$554,000 as compared to 1996.
Cost of goods sold increased $915,000 or 4.8% to a total of
$5,682,000 for the year ended December 31, 1997, compared to the
year ended December 31, 1996. This consolidated increase in cost
of goods sold reflects principally the increased operating,
disposal, and transportation costs, corresponding to the increased
19
<PAGE>
revenues as discussed above. The resulting gross profit for the
year ended December 31, 1997, increased to $8,586,000, which as a
percentage of revenue is 30.2%, reflecting a slight improvement
over 1996.
Selling, general and administrative expenses decreased $260,000 or
4.4% for the year ended December 31, 1997, as compared to 1996. As
a percentage of revenue, selling, general and administrative
expense also decreased to 20.0% for the year ended December 31,
1997, compared to 22.0% for the same period in 1996. This decrease
of $260,000 reflects a reduction in costs of $168,000 in the
consulting engineering industry segment and a $153,000 reduction in
costs in the waste management industry segment, which was partially
offset by an increase of approximately $61,000 in corporate
overhead, for certain outside services. The consolidated reduction
in selling, general and administrative expenses reflects our
continued efforts toward reduced cost structure throughout the
organization.
Depreciation and amortization expense for the year ended December 31,
1997, reflects a decrease of $103,000 or .7% of revenue as
compared to the year ended December 31, 1996. This decrease is
attributable to a depreciation expense reduction of 47,000 due to
the sale of certain assets as a result of our previous
restructuring programs and various other assets becoming fully
depreciated. Amortization expense reflects a total decrease of
$67,000 for the year ended December 31, 1997, as compared to the
year ended December 31, 1996, which is a direct result of the
"Covenant Not to Compete" having become fully amortized during the
first quarter of 1997.
Interest expense decreased $212,000 from year ended December 31,
1997, as compared to the corresponding period of 1996. The
decrease in interest expense reflects the reduced borrowing levels
on the Heller Financial, Inc. revolving and term note and the Ally
Capital Equipment Lease Agreements.
The Preferred Stock dividends decreased $885,000 for the year
ended December 31, 1997 as compared to the year ended December 31,
1996. Pursuant to EITF D-60, we previously restated our 1996
consolidated financial statements to record a dividend of
approximately $2,000,000 related to the fiscal 1996 sales of
certain series of Convertible Preferred Stock and have restated our
1997 consolidated financial statements to record a dividend of
approximately $908,000 ($195,000 attributable to warrants) related
to the fiscal 1997 sales of certain series of Convertible Preferred
Stock. However, dividends paid during 1997 were approximately
$352,000 as compared to approximately $145,000 during 1996. This
increase of approximately $207,000 is due to the full year of the
Series 8 and Series 9 Preferred Stock dividends during 1997. See
Note 6 to Notes to Consolidated Financial Statements regarding the
issuance of Preferred Stock. See Note 3 to Notes to Consolidated
Financial Statements regarding the restatements due to the
beneficial conversion features of our various issuances of
Preferred Stock.
Liquidity and Capital Resources of the Company
At December 31, 1998, we had cash and cash equivalents of $776,000,
including discontinued operations. This cash and cash equivalents
total reflects a increase of $450,000 from December 31, 1997, as a
result of net cash provided by continuing operations of
$3,428,000, offset by cash used by discontinued operation of
$1,594,000, cash used in investing activities of $1,749,000
(principally purchases of equipment, net totaling $1,990,000,
partially offset by the proceeds from the sale of property and
equipment of $53,000) and cash provided by financing activities of
$365,000. Accounts receivable, net of allowances for continuing
operations, totaled $5,950,000, an increase of $668,000 over the
December 31, 1997, balance of $5,282,000, which reflects the impact
of increased revenues during the fourth quarter of 1998, over the
same period of 1997.
On January 15, 1998, we, as parent and guarantor, and all of our
direct and indirect subsidiaries, 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
20
<PAGE>
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 our
eligible accounts receivable accounts as defined in the Agreement.
The termination date on the revolving loan facility is also the
third anniversary of the closing date. We incurred approximately
$230,000 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 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, we
granted a first security interest in all of our and our
subsidiaries' accounts receivable, inventory, general intangibles,
equipment and other assets, as well as the mortgage on two (2)
facilities owned by our subsidiaries. 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, we are
limited to granting liens on our 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 the Heller Financial,
Inc. ("Heller") Loan and Security Agreement which was comprised of
a revolving loan and term loan, and to repay and buyout all assets
under the Ally Capital Corporation ("Ally") Equipment Financing
Agreements. The balance of the revolving and term loans on January
15, 1998, as repaid pursuant to the Congress agreement, was
$2,289,000. The outstanding balance, which was principal on the
Ally Equipment Financing Agreement was $624,000, repaid pursuant to
the Congress Agreement. In conjunction with the above debt
repayments, we also repaid a small mortgage, paid certain fees,
taxes and expenses, resulting in an initial Congress term loan of
$2,500,000 and revolving loan balance of $1,705,000 as of the date
of closing. We 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 December 31, 1998, the borrowings under the Congress
revolving loan facility totaled $97,000 with borrowing availability
of approximately $4,009,000. The balance under the Congress term
loan at December 31, 1998, was $1,927,000.
During June 1998, we 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. We subsequently
entered into a second secured promissory note in the amount of
approximately $207,000 for the purchase and financing of certain
capital equipment. The term of the promissory note is for sixty
(60) months, at a rate of 10.54% per annum and monthly installments
of approximately $4,000.
At December 31, 1998, we had $3,014,000 in aggregate principal
amount of outstanding debt, related to continuing operations, as
compared to $4,865,000 at December 31, 1997. This decrease in
outstanding debt of $1,851,000 during 1998 reflects the reduced
borrowing levels on the revolving loan resulting from the proceeds
from issuance of Preferred Stock, positive cash flow of the
operations, and the scheduled principal repayments on other long-
term debt of $320,000, partially offset by the new debt and capital
21
<PAGE>
lease obligations secured during the year of $564,000. As of
December 31, 1998, we had $28,000 in aggregate principal amounts of
outstanding debt related to PFM discontinued operations, of which
$24,000 is classified as current.
As of December 31, 1998, total consolidated accounts payable for
continuing operations was $2,422,000, an increase of $159,000 from
the December 31, 1997, balance of $2,263,000, which resulted from
the increased business activity at year end. This December 1998
balance does however also reflects a reduction of $205,000 in the
balance of payables in excess of sixty (60) days, to a total of
$403,000.
Our net purchases of new capital equipment for continuing
operations for the twelve month period ended December 31, 1998,
totaled approximately $2,554,000. These expenditures were for
expansion and improvements to the operations principally within
the waste management industry segment. These capital expenditures
were principally funded by the cash provided by continuing
operations, the proceeds from the issuance of Preferred Stock, as
discussed below, and $564,000 through various other lease financing
sources. We have budgeted capital expenditures of approximately
$2,500,000 for 1999, which includes completion of certain current
projects, as well as other identified capital and permit compliance
purchases. We anticipate funding these capital expenditures by a
combination of lease financing with lenders other than the
equipment financing arrangement discussed above, and/or internally
generated funds.
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 $2,653,000 (after deduction of the
payment of $210,000 for broker's commission and certain other closing
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. 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.
As of December 31, 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 shares of the Company's Common Stock from time to
time in the open market or privately negotiated transactions, in
accordance with SEC Rule 10b-18, as promulgated under the Exchange
Act, of which we repurchased 23,000 shares during 1998 and if the
remaining authorized shares were purchased as of the date of the
report such would result in the expenditure of approximately
$600,000 in cash. 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 at December 31, 1998, was $372,000, as
compared to $754,000 at December 31, 1997, which reflects a
decrease in this position of $382,000 during 1998. This change in
current working capital principally reflects our continued
repayment of long term debt, including the revolving loan, from the
current cash flow from operations, resulting in our overall reduced
borrowing levels, which includes a revolving loan balance of only
$97,000 at December 31, 1998 as compared to $2,652,000 at December 31,
1997. Additionally, we continue to invest current cash
proceeds into the long term capital improvements of our operating
22
<PAGE>
facilities, with the 1998 purchases of property and equipment
totaling $1,990,000, which exceeds the 1997 total by $486,000.
During 1998, accrued dividends for the period July 1, 1997, through
December 31, 1997, in the amount of approximately $183,000 were
paid in January 1998, in the form of 85,216 shares of Common Stock.
Dividends for the period January 1, 1998, through June 30, 1998, of
approximately $176,000 were paid in the form of 90,609 shares of
Common Stock. The accrued dividends for the period July 1, 1998,
through December 31, 1998, in the amount of approximately $235,000
were paid in January 1999, in the form of $121,000 in cash and
85,802 shares of 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.
During January 1998, PFM was notified by the EPA that it believed
that PFM was a PRP regarding the remediation of a site owned and
operated by W.R. Drum, Inc. ("WR Drum") in Memphis, Tennessee (the
"Drum Site"), as further discussed in Item 3 "Legal Proceedings."
During the third quarter of 1998, the government agreed to PFM's
offer to pay $225,000 ($150,000 payable at closing and the balance
payable over a twelve month period) to settle any potential
liability regarding this Drum Site. During January 1999, the
Company executed a "Partial Consent Decree" pursuant to this
settlement, which settlement is subject to approval of the court.
It is anticipated that the settlement will be approved and the
initial payment of $150,000 will be made during the second quarter
of 1999. However, there are no assurances that the settlement will
be approved by the court.
In summary, we have continued to take steps to improve our
operations and liquidity as discussed above, including the equity
raised in 1998. If we are unable to continue to improve our
operations and to become profitable in the foreseeable future, such
would have a material adverse effect on our liquidity position.
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. During the remainder of 1997, PFM continued to
accept waste for processing and disposal, but arranged for other
facilities owned by us or our subsidiaries or others not affiliated
with us to process such waste. The utilization of other facilities
to process such waste resulted in higher costs to PFM than if PFM
were able to store and process such waste at its Memphis,
Tennessee, TSD facility, along with the additional handling and
transportation costs associated with these activities. As a result
of the significant disruption and the cost to rebuild and operate
this segment, we made a strategic decision, in February 1998, to
discontinue the fuel blending operations at PFM. The fuel blending
operations represented the principal line of business for PFM prior
to this event, which included a separate class of customers, and
its discontinuance has required PFM to attempt to develop new
markets and customers, through the utilization of the facility as
a storage facility under its RCRA permit and as a transfer
facility. 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 the discontinued PFM operations for the years
ended December 31, 1997 and 1996 ($1,048,000, and $287,000,
respectively) are shown separately in the Consolidated Statements
of Operations. The results of the discontinued PFM operations do
not reflect management fees charged by us, but do include interest
expense of $254,000 and $169,000 during 1997 and 1996,
respectively, specifically identified to PFM as a result of PFM's
actual incurred debt under our revolving and term loan credit
facility. The operating expenses incurred during 1998, totaling
$653,000, relate to the closure and remedial activities performed,
23
<PAGE>
and have been recorded to the accrued environmental reserve.
During March of 1998, we 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 recorded for the discontinued PFM operations
in 1997. Earlier in 1997, PFM received approximately $522,000
(less its deductible of $25,000) in connection with its claim for
loss of contents as a result of the fire and explosion which was
utilized to replace certain assets and reimburse us for certain
fire related expense.
The accrued environmental and closure costs related to PFM totals
$2,501,000 as of December 31, 1998, a decrease of $1,359,000 from
the December 31, 1997, accrual balance. This reduction was
principally a result of the specific costs related to the
decomissioning and closure of the fuel blending tank farm and
related processing equipment ($428,000), general closure and
remedial activities, including groundwater remediation and agency
and investigative activities, ($278,000), and the general operating
losses, including indirect labor, materials and supplies, incurred
in conjunction with the above actions ($653,000). The remaining
liability represents the best estimate of the cost to complete the
groundwater remediation at the site of approximately $980,000 (See
Note 9 to the Notes to Consolidated Financial Statements), the
costs to complete the facility closure activities (including agency
and investigative activities) totaling approximately $946,000,
future operating losses to be incurred by PFM as it completes such
closure and remedial activities over the next five (5) to ten (10)
year period ($350,000) and the potential PRP liability of $225,000
as further discussed in Note 12 to the Notes to Consolidated
Financial Statements
Revenues of the discontinued PFM operations were $1,878,000 in 1997
and $3,996,000 in 1996. These revenues are not included in
revenues as reported in the Consolidated Statements of Operation.
See Note 4 to Notes to Consolidated Financial Statements for
further discussion on PFM.
Environmental Contingencies
We are 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, we are subject to rigorous federal, state and
local regulations. These regulations mandate strict compliance and
therefore are a cost and concern to us. Because of their integral
role in providing quality environmental services, we make every
reasonable attempt to maintain complete compliance with these
regulations; however, even with a diligent commitment, we, along
with many of our competitors, may be required to pay fines for
violations or investigate and potentially remediate our waste
management facilities.
We routinely use third party disposal companies, who ultimately
destroy or secure landfill residual materials generated at our
facilities or at a client's site. We, compared to certain of our
competitors, dispose of significantly less hazardous or industrial
by-products from our 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 our aggressive
compliance and auditing procedures for disposal of wastes, we
could, in the future, be notified that we are a PRP at a remedial
action site, which could have a material adverse effect.
In addition to budgeted capital expenditures of $2,500,000 for 1999
at the TSD facilities, which are necessary to maintain permit
compliance and improve operations, as discussed above under
"Business -- Capital Spending, Certain Environmental Expenditures"
and "Liquidity and Capital Resources of the Company" of this
Management's Discussion and Analysis, we have also budgeted for
1999 an additional $437,000 in environmental expenditures to comply
with federal, state and local regulations in connection with
remediation of certain contaminates at two locations. As
previously discussed under "Business -- Capital Spending, Certain
Environmental Expenditures and Potential Environmental
Liabilities," the two locations where these expenditures will be
made are the Leased Property in Dayton, Ohio (EPS), a former RCRA
storage facility as operated by the former owners of PFD, and PFM's
facility in Memphis, Tennessee. We have estimated the expenditures
24
<PAGE>
for 1999 to be approximately $222,000 at the EPS site and $215,000
at the PFM location. Additional funds will be required for the
next five to ten years to properly investigate and remediate these
sites. We expect to fund these expenses to remediate these two
sites from funds generated internally, however, no assurances can
be made that we will be able to do so.
Oak Ridge System Contract Award
The Company and M&EC entered into the 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 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.
In connection with proposals relating to the treatment and disposal
of 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
of the equipment necessary to perform the Oak Ridge Contracts. The
Company anticipates that work, if any, under the Oak Ridge Contracts
will begin during the later part of 1999. There are no assurances that
the Company and M&EC will complete the scope of work documents. 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 Report. 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 Report, 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 the Company, or (iii) the ultimate profitability,
or lack of profitability, of the Oak Ridge Contracts for the Company.
See "Special Note Regarding Forward Looking Statements" and "Business--
Oak Ridge System Contract Award."
Proposed Acquisition
During March 1999, the Company, Chemical Conservation Corporation
(Florida), Chemical Conservation of Georgia, Inc. and Chem-Met
Services, Inc. (Collectively "Chem-Con") entered into a definitive
agreement whereby PESI agreed to acquire all of the outstanding
shares of Common Stock of Chem-Con in exchange for $7.4 million in
the Company's Common Stock, with the number of shares of the
Company's Common Stock to be issued determined by dividing $7.4
million by the average closing price per share of the Company's
25
<PAGE>
Common Stock as quoted on the NASDAQ for the five (5) trading days
immediately preceding the date of closing. The Company would, at
the closing of the acquisition, enter into a four year employment
agreement with an executive of Chem-Con in the approximate amount
of $1.3 million. We expect that the merger will be accounted for
as a pooling of interests, which means that we will treat our
companies as if they had always been combined for accounting and
financial reporting purposes. The transaction is expected to be
closed during the second quarter of 1999, subject to the ability of
the parties to, among other things, qualify the Acquisition as a
pooling of interests transaction, which means that the merged
companies will be treated as if they had always been combined for
accounting and financial reporting purposes and to obtain approval
of the Acquisition by the Company's stockholders entitled to vote
thereon.
No assurances can be made that the Acquisition will occur, or if
such Acquisition occurs, that such Acquisition would be on the same
terms as described above.
Chem-Con reported audited combined net revenues of approximately
$21.8 million and audited combined net income of approximately
$480,000 for fiscal year ended September 30, 1998.
Upon closure of the proposed acquisition, the Company will be
required to pay approximately $900,000 for the settlement of
certain environmental contingencies and $360,000 in connection with
the settlement of another claim against Chem-Con. In addition, the
facilities of Chem-Con located in Michigan and Georgia are
contaminated in certain aspects and, as a result of such
contamination and based upon the Company's due diligence, the
Company believes such remediation costs, which will be incurred
over a ten year period, will not in the aggregate exceed $3.8
million. The Company will also be required to replace Chem-Con's
financing facility which totaled approximately $2 million at
December 31, 1998, through the utilization of the Company's current
loan and security agreement or a new credit facility as obtained by
the Company.
It is anticipated that this acquisition will result in economies of
scale on both the selling and processing activities, as well as
certain overhead related expenses, and will provide access to new
products, new customers, and the ability to offer new services. The
geographic locations, combined with expanded service capabilities,
of the merged companies will provide significant market presence
through the Midwest and Southeastern United States.
Recent Accounting Pronouncements
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, we have not entered into
derivative contracts. Accordingly, FAS 133 is not expected to
affect our financial statements.
26
<PAGE>
<PAGE>
SPECIAL NOTE REGARDING 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 an 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. Forward-looking statements contained herein relate to,
among other things, (i) ability or inability to improve operations
and become profitable on an annualized basis and continue its
operations, (ii) the Company's ability to develop or adopt new and
existing technologies in the conduct of its operations, (iii)
anticipated financial performance, (iv) ability to comply with the
Company's general working capital requirements, (v) ability to
retain or receive certain permits or patents, (vi) ability to be
able to continue to borrow under the Company's revolving line of
credit, (vii) 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, (viii) ability to remediate certain
contaminated sites for projected amounts, (ix) the government's
acceptance of the Company's offer regarding settlement of claims
involving the Drum Site (as defined), (x) ability of the Company to
remediate certain properties of Chem-Con (as defined) for projected
amounts, (xi) ability to obtain a satisfactory line of credit for
Chem-Con, (xii) ability to obtain approval of the acquisition of
Chem-Con by the stockholders of the Company, (xiii) "Year 2000"
computer issues, (xiv) the Oak Ridge Contracts (as defined), (xv)
anticipated revenues resulting from the Oak Ridge Contracts and
completion of the scope of work with M&EC (as defined), (xvi)
acquisition of Chem-Con, 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) material reduction in revenues, (iii) inability to
collect in a timely manner a material amount of receivables, (iv)
increased competitive pressures, (v) the ability to maintain and
obtain required permits and approvals to conduct operations, (vi)
the ability to develop new and existing technologies in the conduct
of operations, (vii) overcapacity in the environmental industry,
(viii) inability of the "New Process" (as defined) to perform as
anticipated or to develop such for commercial use, (ix) "Year 2000"
compliance of the computer system of the Company, its key suppliers,
customers, creditors, and financial service organizations, (x)
ability to receive or retain certain required permits, (xi) 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, (xii) determination that PFM is the source of
chlorinated compounds at the Allen Well Field, (xiii) changes in federal,
state and local laws and regulations, especially environmental regulations,
or in interpretation of such, (xiv) potential increases in equipment,
maintenance, operating or labor costs, (xv) management retention and
development, (xvi) the requirement to use internally generated funds for
purposes not presently anticipated, (xvii) inability to become profitable,
or if unable to become profitable, the inability to secure additional
liquidity in the form of additional equity or debt, (xviii) the
commercial viability of our on-site treatment process, (xix) discovery
of additional contamination or expanded contamination at property owned
or used by Chem-Con, (xx) inability of the Company and M&EC to finalize
the scope of work documents relating to the Oak Ridge Contracts, (xxi)
the actual volume of waste to be received under the Oak Ridge Contracts,
(xxii) a determination that the amount of work to be performed by the
Company under the Oak Ridge Contracts is less than anticipated, (xxiii)
the inability of the Company to perform the work assigned to it under
Oak Ridge Contracts in a profitable manner, (xxiv) the inability of the
Company to obtain under certain circumstances shareholder approval of
the transaction in which the Series 10 Preferred and certain warrants
were issued, and (xxv) the inability of the Company to maintain the
listing of its Common Stock on the NASDAQ. The Company undertakes no
obligations to update publicly any forward-looking statement, whether
as a result of new information, future events or otherwise.
27
<PAGE>
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Consolidated Financial Statements: Page No.
_________________________________ ________
Report of Independent Certified Public
Accountants BDO Seidman, LLP 29
Consolidated Balance Sheets as of
December 31, 1998 and 1997 30
Consolidated Statements of Operations
for the years ended December 31,
1998, 1997 and 1996 32
Consolidated Statements of Cash Flows
for the years ended December 31,
1998, 1997 and 1996 33
Consolidated Statements of Stockholders'
Equity for the years ended December 31,
1998, 1997 and 1996 34
Notes to Consolidated Financial Statements 35
Financial Statement Schedules:
_____________________________
II Valuation and Qualifying Accounts for the
years ended December 31, 1998, 1997 and
1996 80
Schedules Omitted
_________________
In accordance with the rules of Regulation S-X, other schedules are
not submitted because (a) they are not applicable to or required by
the Company, or (b) the information required to be set forth
therein is included in the consolidated financial statements or
notes thereto.
28
<PAGE>
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
Perma-Fix Environmental Services, Inc.
We have audited the accompanying consolidated balance sheets of
Perma-Fix Environmental Services, Inc. and subsidiaries as of
December 31, 1998 and 1997, and the related consolidated statements
of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1998. We have also
audited the schedule listed in the accompanying index. These
consolidated financial statements and schedule are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements
and schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and schedule are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements and schedule. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the
financial statements and schedule. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Perma-Fix Environmental Services, Inc. and subsidiaries
at December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted
accounting principles.
Also, in our opinion, the schedule presents fairly, in all material
respects, the information set forth therein.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
Orlando, Florida
March 5, 1999
29
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31
(Amounts in Thousands,
Except for Share Amounts) 1998 1997
___________________________________________________________________
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 776 $ 314
Restricted cash equivalents
and investments 111 321
Accounts receivable, net of
allowance for doubtful accounts
of $313 and $374, respectively 5,950 5,282
Insurance claim receivable - 1,475
Inventories 145 119
Prepaid expenses 471 567
Other receivables 11 70
Assets of discontinued operations 489 587
_________ ________
Total current assets 7,953 8,735
Property and equipment:
Buildings and land 5,804 5,533
Equipment 8,606 7,689
Vehicles 941 1,202
Leasehold improvements 16 16
Office furniture and equipment 782 1,056
Construction in progress 1,592 1,052
_________ ________
17,741 16,548
Less accumulated depreciation (5,836) (5,564)
_________ ________
Net property and equipment 11,905 10,984
Intangibles and other assets:
Permits, net of accumulated
amortization of $1,088 and
$831, respectively 3,661 3,725
Goodwill, net of accumulated
amortization of $751 and
$580, respectively 4,698 4,701
Other assets 531 425
________ ________
Total assets $ 28,748 $ 28,570
======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
30
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS, CONTINUED
As of December 31
(Amounts in Thousands,
Except for Share Amounts) 1998 1997
___________________________________________________________________
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,422 $ 2,263
Accrued expenses 3,369 3,380
Revolving loan and term note
facility 625 614
Current portion of long-term debt 302 254
Current liabilities of discontinued
operations 863 1,470
_________ _______
Total current liabilities 7,581 7,981
Environmental accruals 520 525
Accrued closure costs 715 831
Long-term debt, less current portion 2,087 3,997
Long term liabilities of discontinued
operations 1,892 3,042
_________ _______
Total long-term liabilities 5,214 8,395
Commitments and contingencies
(see Notes 4, 7, 9 and 12) - -
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,
13,215,093 and 12,540,487
shares issued, including
943,000 and 920,000 shares
held as treasury stock,
respectively 13 12
Redeemable warrants 140 140
Additional paid-in capital 39,769 35,271
Accumulated deficit (22,157) (21,459)
________ _______
17,765 13,964
Less Common Stock in treasury at
cost; 943,000 and 920,000 shares
issued and outstanding, respectively (1,812) (1,770)
________ _______
Total stockholders' equity 15,953 12,194
________ _______
Total liabilities and
stockholders' equity $ 28,748 $ 28,570
======== ========
</TABLE>
31
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31
(Amounts in Thousands,
Except for Share Amounts) 1998 1997 1996
___________________________________________________________________
<S> <C> <C> <C>
Net revenues $ 30,551 $ 28,413 $ 27,041
Cost of goods sold 21,064 19,827 18,912
________ ________ ________
Gross profit 9,487 8,586 8,129
Selling, general and
administrative
expenses 6,847 5,682 5,942
Depreciation and
amortization 2,109 1,980 2,083
_______ ______ ________
Income from operations 531 924 104
Other income (expense):
Interest income 35 41 43
Interest expense (294) (431) (643)
Other 190 (342) 523
________ ________ _______
Net income from
continuing operations 462 192 27
Discontinued Operations:
Loss from operations - (1,048) (287)
Loss on disposal - (3,053) -
_______ ________ _______
Loss from discon-
tinued operations - (4,101) (287)
_______
Net income (loss) 462 (3,909) (260)
_______ ________ _______
Preferred Stock dividends (1,160) (1,260)* (2,145)*
_______ ________ _______
Net loss applicable
to Common Stock $ (698) $ (5,169)* $ (2,405)*
======== ======== ========
____________________________________________________
Basic loss per common share:
Continuing operations $ (.06) $ (.10) $ (.24)
Discontinued operations - (.39) (.03)
_________ _________ ________
Net loss per common
share $ (.06) $ (.49)* $ (.27)*
======== ======== ========
Weighted average number of
common shares outstanding 12,028 10,650 8,761
======== ======== ========
<FN>
*Amounts have been restated from that previously reported to reflect
a stock dividend on Preferred Stock which is convertible at a
discount from market value at the date of issuance (see Note 3).
</FN>
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
32
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31
(Amounts in Thousands) 1998 1997 1996
___________________________________________________________________
<S> <C> <C> <C>
Cash flows from operating
activities:
Net income from contin-
uing operations $ 462 $ 192 $ 27
Adjustments to reconcile
net loss to cash pro-
vided by (used in)
operations:
Depreciation and amorti-
zation 2,109 1,980 2,083
Loss on impairment of
assets - 371 -
Provision for bad debt
and other reserves 61 133 17
(Gain) loss on sale of
plant, property and
equipment (24) 21 (4)
Changes in assets and
liabilities, net of
effects from business
acquisitions:
Accounts receivable (715) (770) (38)
Prepaid expenses, inven-
tories and other assets 1,341 303 (513)
Accounts payable and accrued
expenses 194 (809) (1,798)
_______ ________ _______
Net cash provided by
(used in) continuing
operations 3,428 1,421 (226)
_______ ________ _______
Net cash used in discontinued
operations (1,594) (1,398) (1,065)
_______ ________ _______
Cash flows from investing
activities:
Purchases of property and
equipment, net (1,990) (1,504) (1,957)
Proceeds from sale of plant,
property and equipment 53 54 1,214
Change in restricted cash,
net 192 (30) (58)
Net cash used by discon-
tinued operations (4) (41) (162)
_______ ________ _______
Net cash used in
investing activities (1,749) (1,521) (963)
________ ________ _______
Cash flows from financing
activities:
Repayments on revolving
loan and term note
facility (2,140) (743) (997)
Principal repayments on
long-term debt (320) (938) (1,502)
Proceeds from issuance
of stock 2,941 3,480 6,367
Purchase of treasury stock (42) - (1,770)
Net cash used by discon-
tinued operations (74) (20) -
________ ________ ________
Net cash provided by
financing activities 365 1,779 2,098
________ ________ ________
(Decrease) increase in cash and
cash equivalents 450 281 (156)
Cash and cash equivalents at
beginning of period,
including discontinued oper-
ations of $12, $8, and $28,
respectively 326 45 201
________ ________ _______
Cash and cash equivalents at
end of period, including
discontinued operations
of $0, $12, and $8,
respectively $ 776 $ 326 $ 45
======== ======= =======
___________________________________________________________________
Supplemental disclosure:
Interest paid $ 555 $ 710 $ 844
Non-cash investing and
financing activities:
Issuance of Common Stock
for services 241 76 462
Long-term debt incurred
for purchase of property
and equipment, including
discontinued operations
of $31 in 1997 564 294 424
Issuance of stock for pay-
ment of dividends 358 314 -
Issuance of Common Stock for
acquisition 207 - -
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
33
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended December 31
Preferred Stock Common Stock
(Amounts in Thousands, ___________________ __________________
Except for Share Amounts) Shares Amount Shares Amount
_________________________________________________________________________
<S> <C> <C> <C> <C>
Balance at December 31, 1995 - - 7,872,384 8
Net loss - - - -
Preferred Stock dividend - - - -
Issuance of stock for
cash and services - - 573,916 -
Issuance of Preferred Stock
for cash 6,930 - - -
Conversion of Preferred
Stock to common (1,430) - 1,953,647 2
Expiration of redeemable
warrants - - - -
Redemption of common shares
to treasury stock - - - -
______ _______ __________ ______
Balance at December 31, 1996 5,500 $ - 10,399,947 $ 10
====== ======= ========== =======
Net loss - - - -
Preferred Stock dividend - - - -
Issuance of Common Stock for
preferred stock dividend - - 178,781 -
Issuance of stock for cash
and services - - 128,271 -
Exercise of warrants - - 794,514 1
Conversion of Series 3
Preferred Stock to
Common Stock (1,500) - 1,027,974 1
Option Exercise - - 11,000 -
Issuance of Preferred Stock
for cash 2,850 - - -
_______ ______ __________ _______
Balance at December 31, 1997 6,850 $ - 12,540,487 $ 12
======== ====== ========== =======
Net income - - - -
Preferred Stock dividends - - - -
Issuance of Common Stock
for Preferred Stock
dividend - - 175,825 -
Issuance of Preferred Stock 3,000 - - -
Issuance of Common Stock
for acquisition - - 108,207 -
Issuance of stock for cash
and services - - 174,474 -
Exercise of warrants - - 215,100 1
Option Exercise - - 1,000 -
Redemption of common shares
to treasury stock - - - -
_______ ______ __________ _______
Balance at December 31, 1998 9,850 $ - 13,215,093 $ 13
======== ====== ========== =======
<PAGE>
Common
Additional Stock
Redeemable Paid-In Accumulated Held in
Warrants Capital Deficit Treasury
______________________________________________________
<C> <C> <C> <C>
269 21,546 (13,885) -
- - (260) -
- 2,000 (2,145) -
- 693 - -
- 6,129 - -
- (2) - -
(129) 129 - -
- - - (1,770)
__________ ___________ __________ __________
$ 140 $ 30,495 $(16,290) $ (1,770)
========== =========== =========== ===========
- - (3,909) -
- 908 (1,260) -
- 314 - -
- 96 - -
- 932 - -
- (1) - -
- 11 - -
- 2,516 - -
________ __________ ___________ __________
$ 140 $ 35,271 $ (21,459) $ (1,770)
======== ========== =========== ==========
- - 462 -
- 750 (1,160) -
- 358 - -
- 2,653 - -
- 207 - -
- 274 - -
- 255 - -
- 1 - -
- - - (42)
_______ _________ __________ __________
$ 140 $ 39,769 $ (22,157) $ (1,812)
======= ========= ========== ==========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
34
<PAGE>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
Notes to Consolidated Financial Statements
December 31, 1997, 1996 and 1995
________________________________________________________
NOTE 1
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Perma-Fix Environmental Services, Inc. (the Company, which may be
referred to as we, us, or our) is a Delaware corporation, engaged
through its subsidiaries, in:
* Waste Management Services, which includes:
* treatment, storage, processing, and disposal of
hazardous and non-hazardous waste and mixed waste which
is both low-level radioactive and hazardous;
* nuclear mixed and low-level radioactive waste
treatment, processing and disposal, which includes
research, development, on-and off-site waste remediation
and processing; and
* industrial waste and wastewater management services,
including the collection, treatment, processing and
disposal, and the design and construction of on-site
wastewater treatment systems.
* Consulting Engineering Services, which includes:
* broad-scope environmental issues, including
environmental management programs, regulatory
permitting, compliance and auditing, landfill design,
field testing and characterization.
We have grown through both acquisitions and internal development.
Our present objective is to focus on the operations, maximize the
profitability and to continue the research and development of
innovative technologies for the treatment of nuclear, mixed waste
and industrial waste.
We are subject to certain risks: (1) We are involved in the
treatment, handling, storage and transportation of hazardous and
non-hazardous, mixed and industrial wastes and wastewater. Such
activities contain risks against which we believe we are adequately
insured, and (2) in general, the industries in which we operate are
characterized by intense competition among a number of larger, more
established companies with significantly greater resources.
Our consolidated financial statements for the years 1996 through
1998 include the accounts of Perma-Fix Environmental Services, Inc.
("PESI") and our wholly-owned subsidiaries, Perma-Fix, Inc. ("PFI")
and subsidiaries, Industrial Waste Management, Inc. ("IWM") and
subsidiaries, Perma-Fix Treatment Services, Inc. ("PFTS"), Perma-
Fix of Florida, Inc. ("PFF"), Perma-Fix of Dayton, Inc. ("PFD"),
Perma-Fix of Ft. Lauderdale, Inc. ("PFL"), and Perma-Fix
Processing, Inc. ("Re-Tech"). The Perma-Fix Processing, Inc. (Re-
Tech) plastic processing subsidiary was, however, sold effective
March 15, 1996. Due to a fire and resulting explosion during 1997,
the fuel blending operations of Perma-Fix of Memphis, Inc. ("PFM")
were discontinued. See Note 4.
________________________________________________________
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
Our consolidated financial statements include our accounts and our
wholly-owned subsidiaries after elimination of all significant
intercompany accounts and transactions.
Reclassifications
Certain prior year amounts have been reclassified to conform with
the 1998 presentation.
35
<PAGE>
Operating Segments
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131, "Disclosure
about Segments of an Enterprise and Related Information," ("FAS
131"). FAS 131 establishes standards for the way that public
companies report information about operating segments in annual
financial statements. It also requires the disclosure of certain
information regarding services provided, geographic areas of
operation and major customers. See Note 14 for a further
description of these segments and certain business information.
Use of Estimates
In preparing financial statements in conformity with generally
accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements, as well as, the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash Equivalents
We consider all highly liquid investments with initial maturities
of three months or less to be cash equivalents. Cash equivalents at
December 31, 1998, included overnight repurchase agreements in the
approximate amount of $249,000.
Restricted Cash Equivalents and Investments
Restricted cash equivalents and investments for continuing
operation, which are classified as current assets, decreased
$210,000 from the year ended December 31, 1998, as compared to the
same period of 1997, to a balance of $111,000. During 1998, we
replaced a restricted trust fund for the financial guarantee of the
PFTS TSD facility, with an insurance policy which resulted in the
release of $212,000 of restricted funds. In addition to these
current assets, a trust fund of $383,000 is classified as a long
term asset as of December 31, 1998, as compared to $365,000 as of
December 31, 1997. These restricted instruments reflect secured
collateral relative to the various financial assurance instruments
guaranteeing the standard RCRA closure bonding requirements for the
PFTS, PFD and PFL TSD facilities, while the long-term portion
reflects cash held for long-term commitments related to the RCRA
closure action at a facility affiliated with PFD as further
discussed in Note 9. The letters of credit secured by the
restricted cash renew annually, and the Company plans to replace
the letters of credit with other alternative financial assurance
instruments.
PFM has restricted cash equivalents of $218,000 as of December 31,
1998. This restricted cash amount is reported in current assets
(assets of discontinued operations), and includes a trust fund for
$73,000 and certificates of deposit for $145,000. These restricted
instruments reflect secured collateral relative to the various
financial assurance instruments guaranteeing the standard RCRA
closure requirements for the PFM facility. The letters of credit
secured by this restricted cash also renew annually.
Inventories
Inventories consist of fly ash, cement kiln dust and treatment
chemicals. Inventories are valued at the lower of cost or market
with cost determined by the first-in, first-out method.
Property and Equipment
Property and equipment expenditures are capitalized and depreciated
using the straight-line method over the estimated useful lives of
the assets for financial statement purposes, while accelerated
depreciation methods are principally used for tax purposes.
Generally, annual depreciation rates range from ten to forty years
for buildings (including improvements) and three to seven years for
office furniture and equipment, vehicles, and decontamination and
processing equipment. Maintenance and repairs are charged directly
to expense as incurred. The cost and accumulated depreciation of
assets sold or retired are removed from the respective accounts,
and any gain or loss from sale or retirement is recognized in the
36
<PAGE>
accompanying consolidated statements of operations. Renewals and
improvements which extend the useful lives of the assets are
capitalized.
Intangible Assets
Intangible assets relating to acquired businesses consist primarily
of the cost of purchased businesses in excess of the estimated fair
value of net assets acquired ("goodwill") and the recognized permit
value of the business. Goodwill is generally amortized over 40
years and permits are amortized over 20 years. Amortization
expense approximated $429,000, $388,000 and $455,000 for the years
ended 1998, 1997, and 1996, respectively. We continually
reevaluate the propriety of the carrying amount of permits and
goodwill as well as the amortization period to determine whether
current events and circumstances warrant adjustments to the
carrying value and estimates of useful lives. We use an estimate of
the related undiscontinued operating income over the remaining
lives of goodwill and permit costs in measuring whether they are
recoverable. At this time, we believe that no impairment of
goodwill or permits has occurred and that no reduction of the
estimated useful lives of the remaining assets is warranted. This
evaluation policy is in accordance with SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of."
Accrued Closure Costs
Accrued closure costs represent our estimated environmental
liability to clean up our facilities in the event of closure.
Income Taxes
We account for income taxes under Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes", which
requires use of the liability method. SFAS No. 109 provides that
deferred tax assets and liabilities are recorded based on the
differences between the tax basis of assets and liabilities and
their carrying amounts for financial reporting purposes, referred
to as temporary differences. Deferred tax assets or liabilities at
the end of each period are determined using the currently enacted
tax rates to apply to taxable income in the periods in which the
deferred tax assets or liabilities are expected to be settled or
realized.
Net Revenues
Revenues for services and reimbursable costs are recognized at the
time services are rendered or, in the case of fixed price
contracts, under the percentage-of-completion method of accounting.
No customer accounted for more than ten percent (10%) of
consolidated net revenues.
Self-Insurance
We have a self-insurance program for certain health benefits. The
cost of such benefits is recognized as expense in the period in
which the claim occurred, including estimates of claims incurred
but not reported. The claims expense for 1998 was approximately
$807,000, as compared to $663,000 for 1997. This increase
principally reflects the occurrence of several larger claims during
1998.
Net Loss Per Share
Net loss per share has been presented using the weighted average
number of common shares outstanding. Potential common shares have
not been included in the net loss per share calculations since
their effects would be antidilutive. Potential common shares
include 1,687,132 stock options, 13,230,796 warrants and 10,116,667
shares underlying the convertible Preferred Stock at the minimum
conversion price.
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, requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities
with complex capital structures and 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
37
<PAGE>
is effective for financial statements issued for periods ending
after December 15, 1997. The adoption of SFAS 128 did not have a
material effect on our EPS presentation for 1998, 1997 and 1996,
since the effects of potential common shares are antidilutive.
Fair Value of Financial Instruments
The book values of cash, trade accounts receivable, trade accounts
payable, and financial instruments included in current assets and
other assets approximate their fair values principally because of
the short-term maturities of these instruments. The fair value of
our long-term debt is estimated based on the current rates offered
to us for debt of similar terms and maturities. Under this method,
our fair value of long-term debt was not significantly different
from the stated value at December 31, 1998 and 1997.
Recent Accounting Pronouncements
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, we have not entered into
derivative contracts. Accordingly, FAS 133 is not expected to
affect our financial statements.
________________________________________________________
NOTE 3
RESTATEMENT OF 1996 AND 1997 STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
In March 1997, the Securities and Exchange Commission Staff (the
"Staff") announced its position on the accounting for Preferred
Stock which is or may be convertible into Common Stock at a
discount from the market price at the date of issuance. The
Staff's position pursuant to EITF D-60 is that a Preferred Stock
dividend should be recorded for the difference between the
conversion price and the quoted market price of Common Stock as
determined at the date of issuance. To comply with this position,
we previously restated our 1996 consolidated financial statements
to reflect a dividend of approximately $2,000,000 related to the
fiscal 1996 sales of Convertible Preferred Stock discussed in Note
6 (Series 1 Class A, Series 2 Class B, Series 3 Class C Preferred
Stock). We also restated the reported net loss per share of Common
Stock for the year ended December 31, 1996, to ($.27), from the
previously reported amount of ($.05). Pursuant to EITF D-60 and
EITF D-42, we restated our 1997 consolidated financial statements
to reflect a dividend of approximately $713,000 related to the
fiscal 1997 sales and subsequent exchanges of Convertible Preferred
Stock and a dividend of approximately $195,000 related to the
fiscal 1997 issuance of warrants in connection with the issuance of
the Preferred Stock as discussed in Note 6 (Series 4 Class D,
Series 5 Class E, Series 6 Class F, and Series 7 Class G Preferred
Stock). The restatement reflects dividends totaling approximately
$908,000 resulting from Preferred Stock sales, of which
approximately $111,000 was attributable to the quarter ended
June 30, 1997, and approximately $797,000 was attributable to the
quarter ended September 30, 1997. The impact of the restatement on
the second and third quarters of 1997 and the year ended December
31, 1997, is shown as follows (amounts in thousands, except for
share amounts):
As Originally Reported As Amended
___________________________ ___________________________
Quarter Ended Year Ended Quarter Ended Year Ended
________________ __________ ________________ _________
6/30/97 9/30/97 12/31/97 6/30/97 9/30/97 12/31/97
_______ _______ ________ _______ _______ ________
<S> <C> <C> <C> <C> <C> <C>
Preferred Stock
Dividends $ 82 $ 99 $ 352 $ 193 $ 896 $ 1,260
Net Loss Applicable
to Common Stock (525) 58 (4,261) (636) (739) (5,169)
Net Loss Per Share (.05) .01 (.40) (.06) (.07) (.49)
</TABLE>
38
<PAGE>
________________________________________________________
NOTE 4
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, 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 our only such "fuel blending" facility, PFM was
permitted 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, we 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 our other facilities. PFM 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, we
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, we
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 the discontinued PFM operations for the years
ended December 31, 1997 and 1996 ($1,048,000, and $287,000,
respectively) are shown separately in the Consolidated Statements
of Operations. The results of the discontinued PFM operations do
not reflect management fees charged by the Corporation, but does
include interest expense of $254,000 and $169,000 during 1997 and
1996, respectively, specifically identified to such operations as
a result of such operations incurring debt under the Company's
revolving and term loan credit facility. The operating expenses
incurred during 1998, totaling $653,000, relate to the closure and
remedial activities performed, and have been recorded to the
accrued environmental reserve. 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 which is
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. Earlier in 1997, PFM received approximately $522,000
(less its deductible of $25,000) in connection with its claim for
loss of contents as a result of the fire and explosion which was
utilized to replace certain assets and reimburse the Company for
certain fire related expense.
Revenues of the discontinued PFM operations were $1,878,000 in 1997
and $3,996,000 in 1996. These revenues are not included in
revenues as reported in the Consolidated Statements of Operation.
<TABLE>
<CAPTION>
Net assets and liabilities of the discontinued PFM operations at
the end of each year, in thousands of dollars, consisted of the
following:
39
<PAGE>
1998 1997
_______ _______
<S> <C> <C>
Assets of discontinued operations:
Cash and cash equivalents $ - $ 12
Restricted cash equivalents and
investments 218 214
Accounts receivable, net of allowance
for doubtful accounts $101 and
$105, respectively 260 333
Prepaid expenses and other assets 11 28
_______ ______
$ 489 $ 587
======= =======
Current liabilities of discontinued
operations:
Accounts payable $ 100 $ 277
Accrued expenses 126 259
Accrued environmental costs 613 835
Current portion of long-term debt 24 99
_______ _______
$ 863 $ 1,470
======= =======
Long-term liabilities of discontinued
operations:
Long-term debt, less current portion $ 4 $ 17
Accrued environmental and closure costs 1,888 3,025
_______ _______
$ 1,892 $ 3,042
======= =======
</TABLE>
The accrued environmental and closure costs related to PFM totals
$2,501,000 as of December 31, 1998, a decrease of $1,359,000 from
the December 31, 1997, accrual balance. This reduction was
principally a result of the specific costs related to the
decomissioning and closure of the fuel blending tank farm and
related processing equipment ($428,000), general closure and
remedial activities, including groundwater remediation,and agency
and investigative activities, ($278,000), and the general operating
losses, including indirect labor, materials and supplies, incurred
in conjunction with the above actions ($653,000). The remaining
liability represents the best estimate of the cost to complete the
groundwater remediation at the site of approximately $980,000 (see
Note 9), the costs to complete the facility closure activities
(including agency and investigative activities) totaling
approximately $946,000, future operating losses to be incurred by
PFM as it completes such closure and remedial activities over the
next five (5) to ten (10) year period ($350,000) and the potential
PRP liability of $225,000 as further discussed in Note 12.
________________________________________________________
NOTE 5
ACQUISITION AND PROPOSED ACQUISITION
Effective April 1, 1998, the Company entered into an asset purchase
agreement to acquire substantially all of the assets and certain
liabilities of Action Environmental Corp. ("Action") of Miami,
Florida. Action has provided oil filter collection and processing
services to approximately 700 customers in south Florida. The
assets of Action were acquired through a combination of stock
issuance and the assumption of certain liabilities. The
acquisition was accounted for using the purchase method effective
April 1, 1998. The acquisition of Action resulted in an issuance
of 108,207 shares of the Company's Common Stock reflecting a total
purchase price of $207,000.
During March 1999, the Company, Chemical Conservation Corporation
(Florida), Chemical Conservation of Georgia, Inc. and Chem-Met
Services, Inc. (Collectively "Chem-Con") entered into a definitive
agreement whereby PESI agreed to acquire all of the outstanding
shares of Common Stock of Chem-Con in exchange for $7.4 million in
the Company's Common Stock, with the number of shares of the
Company's Common Stock to be issued determined by dividing $7.4
million by the average closing price per share of the Company's
Common Stock as quoted on the NASDAQ for the five (5) trading days
immediately preceding the date of closing. The Company would, at
the closing of the acquisition, enter into a four year employment
agreement with an executive of Chem-Con in the approximate amount
of $1.3 million. The audited combined net revenues of Chem-Con for
40
<PAGE>
the fiscal year ended September 30, 1998, were, in the aggregate,
approximately $21.8 million. We expect that the merger will be
accounted for as a pooling of interests, which means that we will
treat our companies as if they had always been combined for
accounting and financial reporting purposes. The transaction is
expected to be closed during the second quarter of 1999, subject to
the ability of the parties to, among other things, qualify the
Acquisition as a pooling of interests transaction, which means that
the merged companies will be treated as if they had always been
combined for accounting and financial reporting purposes and to
obtain approval of the Acquisition by the Company's stockholders
entitled to vote thereon.
________________________________________________________
NOTE 6
PREFERRED STOCK ISSUANCE AND CONVERSION
We issued, during February 1996, to RBB Bank Aktiengesellschaft,
located in Graz, Austria ("RBB Bank"), 1,100 shares of newly
created Series 1 Class A Preferred Stock ("Series 1 Preferred") at
a price of $1,000 per share, for an aggregate sales price of
$1,100,000, and paid placement and closing fees of $180,000.
During February 1996, we also issued 330 shares of newly created
Series 2 Class B Convertible Preferred Stock ("Series 2 Preferred")
to RBB Bank at a price of $1,000 per share, for an aggregate sales
price of $330,000, and paid placement and closing fees of $35,000.
The Series 1 Preferred and Series 2 Preferred accrued dividends on
a cumulative basis at a rate per share of five percent (5%) per
annum, payable at the option of the Company in cash or Company
Common Stock. All dividends on the Series 1 Preferred and Series
2 Preferred were paid in Common Stock. The Series 1 Preferred and
Series 2 Preferred were convertible, at any time, commencing forty-
five (45) days after issuance into shares of the Company's Common
Stock at a conversion price equal to the aggregate value of the
shares of the Preferred Stock being converted, together with all
accrued but unpaid dividends thereon, divided by the "Average Stock
Price" per share (the "Conversion Price"). The Average Stock Price
means the lesser of (i) seventy percent (70%) of the average daily
closing bid prices of the Common Stock for the period of five (5)
consecutive trading days immediately preceding the date of
subscription by the holder or (ii) seventy percent (70%) of the
average daily closing bid prices of the Common Stock for a period
of five (5) consecutive trading days immediately preceding the date
of conversion of the Preferred Stock. During the second quarter of
1996, a total of 722 shares of the Series 1 Preferred were
converted into approximately 1,034,000 shares of the Company's
Common Stock and the associated accrued dividends were paid in the
form of approximately 16,000 shares of the Company's Common Stock.
Pursuant to a subscription and purchase agreement for the issuance
of Series 3 Class C Convertible Preferred Stock, as discussed
below, the remaining 378 shares of the Series 1 Preferred and the
330 shares of the Series 2 Preferred were converted during July
1996 into 920,000 shares of the Company's Common Stock. By terms
of the subscription agreement, the 920,000 shares of Common Stock
were purchased by us at a purchase price of $1,770,000 and are
included in Treasury Stock as of December 31, 1996. As a result of
such conversions, the Series 1 Preferred and the Series 2 Preferred
are no longer outstanding.
On July 17, 1996, we issued to RBB Bank 5,500 shares of newly-
created Series 3 Class C Convertible Preferred Stock ("Series 3
Preferred") at a price of $1,000 per share, for an aggregate sales
price of $5,500,000, and paid placement and closing fees as a
result of such transaction of approximately $586,000. As part of
the sale of the Series 3 Preferred, we also issued to RBB Bank two
(2) Common Stock purchase warrants entitling RBB Bank to purchase,
after December 31, 1996, until July 18, 2001, an aggregate of up to
2,000,000 shares of Common Stock, with 1,000,000 shares exercisable
at an exercise price equal to $2.00 per share and 1,000,000 shares
exercisable at an exercise price equal to $3.50 per share. The
sale to RBB Bank of the Series 3 Preferred was made in a private
placement under Sections 4(2) and/or 3(b) and/or Rule 506 of
Regulation D under the Securities Act of 1933, as amended. The
Series 3 Preferred accrues dividends on a cumulative basis at a
rate of six percent (6%) per annum, and is payable semi-annually
when and as declared by the Board of Directors. Dividends shall be
paid, at our option, in the form of cash or Common Stock. The
holder of the Series 3 Preferred may convert into Common Stock of
the Company up to (i) 1,833 shares of the Series 3 Preferred on and
after October 1, 1996, (ii) 1,833 shares of the Series 3 Preferred
41
<PAGE>
on and after November 1, 1996, and (iii) the balance of the Series
3 Preferred on and after December 1, 1996. The conversion price
shall be the product of (i) the average closing bid quotation for
the five (5) trading days immediately preceding the conversion date
multiplied by (ii) seventy-five percent (75%). The conversion
price shall be a minimum of $.75 per share or a maximum of $1.50
per share, with the minimum conversion price to be reduced by $.25
per share each time, if any, after July 1, 1996, the Company
sustains a net loss, on a consolidated basis, in each of two (2)
consecutive quarters. At no time shall a quarter that has already
been considered in such determination be considered in any
subsequent determination. The Common Stock issuable on the
conversion of the Series 3 Preferred is subject to certain
registration rights pursuant to the subscription agreement. The
subscription agreement also provides that the Company utilize
$1,770,000 of the net proceeds to purchase from RBB Bank 920,000
shares of the Company's Common Stock owned by RBB Bank. As
discussed above, RBB Bank had previously acquired from the Company
1,100 shares of Series 1 Preferred and 330 shares of Series 2
Preferred and, as of the date of the subscription agreement, was
the owner of record and beneficially owned all of the issued and
outstanding shares of Series 1 Preferred and Series 2 Preferred,
which totaled 378 shares of Series 1 Preferred and 330 shares of
Series 2 Preferred. Pursuant to the terms of the subscription
agreement relating to the Series 3 Preferred, RBB Bank converted
all of the remaining outstanding shares of Series 1 Preferred and
Series 2 Preferred into Common Stock of the Company (920,000
shares) pursuant to the terms, provisions, restrictions and
conditions of the Series 1 Preferred and Series 2 Preferred, which
were in turn purchased by the Company pursuant to the terms of such
subscription agreement. During 1997, the holder of the Series 3
Preferred converted 1,500 shares of the Series 3 Preferred into
1,027,974 shares of Common Stock of the Company. As of the date of
this report, no further shares have been converted. During 1997,
accrued dividends for the period July 17, 1996, through June 30,
1997, and dividends on converted shares, in the combined total of
approximately $314,000 were paid in the form of 178,781 shares of
Common Stock of the Company. The accrued dividends for the period
July 1, 1997, through December 31, 1997, in the amount of
approximately $121,000 were paid in January 1998, in the form of
54,528 shares of Common Stock of the Company. The accrued
dividends for the period January 1, 1998, through June 30, 1998, in
the amount of approximately $119,000 were paid in July 1998, in the
form of 62,027 shares of Common Stock of the Company. The accrued
dividends for the period July 1, 1998, through December 31, 1998,
in the amount of approximately $121,000 were paid in January 1999,
in the form of cash.
As further discussed in Note 3, the Securities and Exchange
Commission Staff (the "Staff") announced its position on accounting
for Preferred Stock which is convertible into Common Stock at a
discount from the market rate at the date of issuance, in March of
1997. The Staffs position is that a Preferred Stock dividend
should be recorded for the difference between the conversion price
and the quoted market price of Common Stock as determined at the
date of issuance. To comply with this position, we recognized a
dividend in 1996 of approximately $2,000,000 as related to the
above discussed Series 1 Class A, Series 2 Class B, and Series 3
Class C Preferred Stock.
On or about June 11, 1997, we issued to RBB Bank 2,500 shares of
newly-created Series 4 Class D Convertible Preferred Stock, par
value $.001 per share ("Series 4 Preferred"), at a price of $1,000
per share, for an aggregate sales price of $2,500,000. The sale to
RBB Bank was made in a private placement under Sections 4(2) and/or
3(b) and/or Rule 506 of Regulation D under the Securities Acts of
1933, as amended, pursuant to the terms of a Subscription and
Purchase Agreement, dated June 9, 1997, between us and RBB Bank
("Subscription Agreement"). The Series 4 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 4 Preferred (the "Liquidation Value"),
plus an amount equal to all unpaid dividends accrued thereon. The
Series 4 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 when and as
declared by the Board of Directors. 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 4 Preferred have been paid or
set aside for payment. Dividends shall be paid, at our option, in
the form of cash or Common Stock. If we pay 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) four percent (4%)
of $1,000 divided by (ii) the average of the closing bid quotation
42
<PAGE>
of the Common Stock as reported on the NASDAQ for the five trading
days immediately prior to the applicable dividend declaration date,
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 4 Preferred may convert into Common Stock
up to 1,250 shares of the Series 4 Preferred on and after October
5, 1997, and the remaining 1,250 shares of the Series 4 Preferred
on and after November 5, 1997. The conversion price per share is
the lesser of (a) the product of the average closing bid quotation
for the five (5) trading days immediately preceding the conversion
date multiplied by eighty percent (80%) or (b) $1.6875. The minimum
conversion price was $.75, which minimum was eliminated as of
September 6, 1998. The Company will have the option to redeem the
shares of Series 4 Preferred (a) between June 11, 1998, and
June 11, 2001, at a redemption price of $1,300 per share if at any
time the average closing bid price of the Common Stock for ten
consecutive trading days is in excess of $4.00, and (b) after
June 11, 2001, at a redemption price of $1,000 per share. The
holder of the Series 4 Preferred will have the option to convert
the Series 4 Preferred prior to redemption by the Company.
As part of the sale of the Series 4 Preferred, we also issued to
RBB Bank two Common Stock purchase warrants (collectively, the
"Warrants ") entitling RBB Bank to purchase, after December 31,
1997, and until June 9, 2000, an aggregate of up to 375,000 shares
of Common Stock, subject to certain anti-dilution provisions, with
187,500 shares exercisable at a price equal to $2.10 per share and
187,500 shares exercisable at a price equal to $2.50 per share. A
certain number of shares of Common Stock issuable on the conversion
of the Series 4 Preferred and on the exercise of the Warrants is
subject to certain registration rights pursuant to the Subscription
Agreement.
We paid fees (excluding legal and accounting) of $200,000 to an
investment banker in connection with the placement of Series 4
Preferred to RBB Bank and issued to the investment banking firm
that handled the placement two (2) Common Stock purchase warrants
entitling the investment banking firm to purchase an aggregate of
up to 300,000 shares of Common Stock, subject to certain anti-
dilution provisions, with one warrant for a five year term to
purchase up to 200,000 shares at an exercise price of $2.00 per
share and the second warrant for a three year term to purchase up
to 100,000 shares of Common Stock at an exercise price of $1.50 per
share, subject to certain anti-dilution provisions. Under the terms
of each warrant, the investment banking firm is entitled to certain
registration rights with respect to the shares of Common Stock
issuable on the exercise of each warrant.
We negotiated an Exchange Agreement with RBB Bank ("RBB Exchange
Agreement") which provided that the 2,500 shares of Series 4
Preferred and the RBB Series 4 Warrants were tendered to us in
exchange for (i) 2,500 shares of a newly created Series 6 Class F
Preferred Stock, par value $.001 per share ("Series 6 Preferred"),
(ii) two warrants each to purchase 187,500 shares of Common Stock
exercisable at $1.8125 per share, and (iii) one warrant to purchase
281,250 shares of Common Stock exercisable at $2.125 per share
(collectively, the "RBB Series 6 Warrants"). The RBB Series 6
Warrants will be for a term of three (3) years and may be exercised
at any time after December 31, 1997, and until June 9, 2000.
The conversion price of the Series 6 Preferred shall be $1.8125 per
share, unless the closing bid quotation of the Common Stock is
lower than $2.50 in twenty (20) out of any thirty (30) consecutive
trading days after March 1, 1998, in which case, the conversion
price per share shall be the lesser of (A) the product of the
average closing bid quotation for the five (5) trading days
immediately preceding the conversion date multiplied by eighty
percent (80%) or (B) $1.8125 with the minimum conversion price
being $.75, which minimum will be eliminated from and after
September 6, 1998. The remaining terms of the Series 6 Preferred
will be substantially the same as the terms of the Series 4
Preferred. As of the date of this report no shares of the Series
6 Preferred have been converted.
43
<PAGE>
Effective February 28, 1998, the Company entered into an Exchange
Agreement with RBB Bank (the "Second RBB Exchange Agreement"),
which provided that the 2,500 shares of Series 6 Preferred were
tendered to the Company in exchange for 2,500 of a newly-created
Series 8 Class H Preferred Stock, par value $.001 per share
("Series 8 Preferred"). The exchange was made in an exchange offer
exempt from registration pursuant to Section 3(a)(9) of the
Securities Act, and/or Section 4(2) of the Securities Act and/or
Regulation D as promulgated under the Securities Act. The Series
8 Preferred was issued to RBB Bank during July 1998.
The rights under the Series 8 Preferred are the same as the rights
under the Series 6 Preferred, except for the conversion price. The
Series 8 Preferred is convertible at $1.8125 per share, except
that, in the event the average closing bid price reported in the
over-the-counter market, or the closing sale price if listed on a
national securities exchange for the five (5) trading days prior to
a particular date of conversion, shall be less than $2.50, the
conversion price for only that particular conversion shall be the
average of the closing bid quotations of the Common Stock as
reported on the over-the-counter market, or the closing sale price
if listed on a national securities exchange, for the five (5)
trading days immediately proceeding the date of such particular
conversion notice provided by the holder to the Company multiplied
by 80%. Notwithstanding the foregoing, the conversion price shall
not be less than a minimum of $.75 per share, which minimum shall
be eliminated from and after September 6, 1998.
The terms of the Series 8 Preferred has a liquidation preference
over the Company's Common Stock equal to $1,000 consideration per
outstanding share of Series 8 Preferred (the "Series 8 Liquidation
Value"), plus an amount equal to all accrued and unpaid dividends.
The Series 8 Preferred accrues dividends on a cumulative basis at
a rate of four percent (4%) per annum of the Series 8 Liquidation
Value ("Series 8 Dividend Rate"), and is payable semi-annually when
and as declared by the Board of Directors. 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 8 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 Series 8 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, 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.
Except for the exchange of the Series 6 Preferred for the Series 8
Preferred, the Second RBB Exchange Agreement does not terminate the
First RBB Exchange Agreement. In addition, the RBB Series 6
Warrants were not affected by the Second RBB Exchange Agreement.
The Company paid to RBB Bank the dividends on the Series 6
Preferred which accrued from the date of its issuance through
February 28, 1998, the effective date of the Second RBB Exchange
Agreement by issuing to RBB Bank 7,652 shares of Common Stock in
payment of such accrued dividends. By letter dated July 14, 1998,
RBB Bank agreed to waive certain penalties regarding the Series 4
Preferred and Series 6 Preferred. The accrued dividends for the
period July 1, 1997, through December 31, 1997, for the Series 4
and Series 6 Preferred, total approximately $55,000, which were
paid in January 1998, in the form of 27,377 shares of Common Stock
of the Company. The accrued dividends for the Series 6 and 8
Preferred for the period January 1, 1998, through June 30, 1998, in
the amount of approximately $49,000, were paid in July 1998, in the
form of 25, 072 shares of Common Stock of the Company. The accrued
dividends for the Series 8 Preferred for the period July 1, 1998,
through December 31, 1998, in the amount of approximately $50,000,
were paid in February 1999, the form of 38,046 shares of Common
Stock of the Company.
As further discussed in Note 3, the Securities and Exchange
Commission Staff (the "Staff") announced its position on accounting
for Preferred Stock which is convertible into Common Stock at a
discount from the market rate at the date of issuance, in March of
1997. The Staffs position pursuant to EITF D-60 relating to
beneficial conversion features is that a preferred stock dividend
44
<PAGE>
should be recorded for the difference between the conversion price
and the quoted market price of common stock as determined at the
date of issuance. To comply with this position, we recognized a
dividend in 1997 of approximately $798,000 as related to the
issuance of the Series 4 Class D, and Series 6 Class F Preferred
Stock and the related warrants.
On or about July 14, 1997, we issued to the Infinity Fund, L.P.
("Infinity"), 350 shares of newly-created Series 5 Class E
Convertible Preferred Stock, par value $.001 per share ("Series 5
Preferred"), at a price of $1,000 per share, for an aggregate sales
price of $350,000. The sale to Infinity was made in a private
placement under Rule 506 of Regulation D under the Securities Acts
of 1933, as amended, pursuant to the terms of a Subscription and
Purchase Agreement, dated July 7, 1997, between us and Infinity
("Infinity Subscription Agreement"). We utilized the proceeds
received on the sale of Series 5 Preferred for the payment of debt
and general working capital.
The Series 5 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 5
Preferred (the "Liquidation Value"), plus an amount equal to all
unpaid dividends accrued thereon. The Series 5 Preferred accrues
dividends on a cumulative basis at a rate of four percent (4%) per
annum of the Liquidation Value ("Dividend Rate"). Dividends are
payable semi-annually when and as declared by the Board of
Directors. 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 5 Preferred have been paid or set aside for payment.
Dividends may be paid, at our option, in the form of cash or Common
Stock. If we pay 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 immediately prior to the date the
dividend is declared, multiplied by (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 5 Preferred may convert into Common Stock
up to 175 shares of the Series 5 Preferred on and after November 3,
1997, and the remaining 175 shares of the Series 5 Preferred on and
after December 3, 1997. The conversion price per share is the
lesser of (a) the product of the average closing bid quotation for
the five trading days immediately preceding the conversion date
multiplied by 80% or (b) $1.6875. The minimum conversion price is
$.75, which minimum will be eliminated from and after September 6,
1998. The Company will have the option to redeem the shares of
Series 5 Preferred (a) between July 14, 1998, and July 13, 2001, at
a redemption price of $1,300 per share if at any time the average
closing bid price of the Common Stock for ten consecutive trading
days is in excess of $4.00, and (b) after July 13, 2001, at a
redemption price of $1,000 per share. The holder of the Series 5
Preferred will have the option to convert the Series 5 Preferred
prior to redemption by the Company. A certain number of shares of
Common Stock issuable upon conversion of the Series 5 Preferred is
subject to certain registration rights pursuant to the Infinity
Subscription Agreement.
We negotiated an Exchange Agreement with Infinity ("Infinity Fund
Exchange Agreement") which provided that the 350 shares of Series
5 Preferred will be tendered to us in exchange for (i) 350 shares
of a newly created Series 7 Class G Preferred Stock, par value
$.001 per share ("Series 7 Preferred"), and (ii) one Warrant to
purchase up to 35,000 shares of Common Stock exercisable at $1.8125
per share ("Series 7 Warrant"). The Series 7 Warrant will be for
a term of three (3) years and may be exercised at any time after
December 31, 1997, and until July 7, 2000.
The conversion price of the Series 7 Preferred shall be $1.8125 per
share, unless the closing bid quotation of the Common Stock is
lower than $2.50 per share in twenty (20) out of any thirty (30)
consecutive trading days after March 1, 1998, in which case, the
conversion price per share shall be the lesser of (i) the product
of the average closing bid quotation for the five (5) trading days
immediately preceding the conversion date multiplied by eighty
percent (80%) or (ii) $1.8125, with the minimum conversion price
being $.75, which minimum was eliminated as of September 6, 1998.
45
<PAGE>
The remaining terms of the Series 7 Preferred will be substantially
the same as the terms of the Series 5 Preferred. As of the date of
this report no shares of the Series 7 Preferred have been
converted.
Effective February 28, 1998, the Company entered into an Exchange
Agreement with Infinity (the "Second Infinity Exchange Agreement"),
which provided that the 350 shares of Series 7 Preferred were
tendered to the Company in exchange for 350 shares of a newly-
created Series 9 Class I Preferred Stock, par value $.001 per share
("Series 9 Preferred"). The exchange was made as an exchange offer
pursuant to Section 3(a)(9) of the Securities Act, and/or Section
4(2) of the Securities Act and/or Registration D as promulgated
under the Securities Act.
The rights of the Series 9 Preferred are the same as the rights
under the Series 7 Preferred, except for the conversion price. The
conversion price for the Series 9 Preferred is $1.8125 per share,
except that, in the event the average closing bid price of the
Common Stock as reported in the over the counter market, or the
closing sale price if listed on a national securities exchange, for
the five (5) trading days prior to a particular date of conversion,
shall be less than $2.265, the conversion price for only such
particular conversion shall be the average of the closing bid
quotations of the Common Stock as reported on the over the counter
market, or the closing sale price if listed on a national
securities exchange for the five (5) trading days immediately
proceeding the date of such particular conversion notice provided
by the holder to the Company multiplied by 80%. Notwithstanding
the foregoing, the conversion price shall not be less than a
minimum of $.75 per share, which minimum shall be eliminated from
and after September 8, 1998.
The Series 9 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 9 Preferred (the "Series 9 Liquidation Value"), plus an
amount equal to all unpaid dividends accrued thereon. The Series 9
Preferred accrues dividends on a cumulative basis at a rate of four
percent (4%) per annum of the Series 9 Liquidation Value ("Series
9 Dividend Rate"). Dividends are payable semi-annually when and as
declared by the Board of Directors. 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 9 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 are payable in the
number of shares of Common Stock equal to the product of (a) the
quotient of (i) the Series 9 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, multiplied by (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.
Except for the exchange of the Series 7 Preferred for the Series 9
Preferred, the Second Infinity Exchange Agreement does not
terminate the First Infinity Exchange Agreement. In addition, the
Infinity Series 7 Warrants were not affected by the Second Infinity
Exchange Agreement. The Company has paid Infinity the dividends on
the Series 7 Preferred which accrued from the date of its issuance
through February 28, 1998, the effective date of the Second
Infinity Exchange Agreement, by issuing to Infinity 1,071 shares of
Common Stock in payment of such accrued dividends. The accrued
dividends for the period July 1, 1997, through December 31, 1997,
for the Series 5 and Series 7 Preferred, total approximately
$7,000, which were paid in January 1998, in the form of 3,311
shares of Common Stock of the Company. The accrued dividends for
the Series 7 and 9 Preferred for the period January 1, 1998,
through June 30, 1998, in the amount of approximately $7,000, were
paid in July 1998, in the form of 3,510 shares of Common Stock of
the Company. The accrued dividends for the Series 9 Preferred for
the period July 1, 1998, through December 31, 1998, in the amount
of approximately $7,000, were paid in February 1999, in the form of
5,326 shares of Common Stock of the Company.
As further discussed in Note 3, the Securities and Exchange
Commission Staff (the "Staff") announced its position on accounting
for Preferred Stock which is convertible into Common Stock at a
discount from the market rate at the date of issuance, in March of
1997. The Staff's position pursuant to EITF D-60 relating to
46
<PAGE>
beneficial conversion features is that a preferred stock dividend
should be recorded for the difference between the conversion price
and the quoted market price of common stock as determined at the
date of issuance. To comply with this position, we recognized a
dividend in 1997 of approximately $110,000 as related to the
issuance of the Series 5 Class E, and Series 7 Class G Preferred
Stock and the related warrants.
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 $2,653,000 from this private placement, after
the deduction for certain fees and expenses, was received by the
Company on July 14, 1998. 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 was 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
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 of the date of this
report, no shares of the Series 10 Preferred have been converted.
As part 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.
47
<PAGE>
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.
In March, 1999, the Company entered into an Exchange Agreement
dated March 14, 1999, with Liviakis and Prag whereby the warrants
described in the preceding paragraph for the purchase of 2,500,000
shares of Common Stock (1,875,000 and 625,000 respectively) were
canceled and exchanged for 200,000 shares of Common Stock.
The accrued dividends for the Series 10 Preferred for the period
July 14, 1998, through December 31, 1998, in the amount of
approximately $56,000, were paid in February 1999, in the form of
42,430 shares of Common Stock of the Company.
As further discussed in Note 3, in March of 1997, the Securities
and Exchange Commission Staff (the "Staff") announced its position
on the accounting for Preferred Stock which is or may be
convertible into Common Stock at a discount from the market rate at
the date of issuance. The Staff's position pursuant to EITF D-60
relating to beneficial conversion features is that a Preferred
Stock dividend should be recorded for the difference between the
conversion price and the quoted market price of Common Stock as
determined at the date of issuance. To comply with this position,
the Company recognized a dividend in the total amount of $750,000,
with approximately $383,000 recorded in the third quarter of 1998
and $367,000 recorded in the fourth quarter of 1998.
<TABLE>
<CAPTION>
In summary, we recorded the following dividends related to
Preferred Stock issuances:
1998 1997 1996
__________ __________ _________
<S> <C> <C> <C>
Paid Dividends $ 410,000 $ 352,000 $ 145,000
Beneficial Conversion
Feature 750,000(3) 908,000(2) 2,000,000(1)
__________ __________ __________
Total Dividends Reported $1,160,000 $1,260,000 $2,145,000
========== ========== ==========
<FN>
(1) Amounts for 1996 reflect beneficial conversion feature on Series
3 Class C Preferred Stock.
(2) Amounts for 1997 reflect beneficial conversion feature on Series
4 Class C, Series 6 Class F, Series 5 Class E and Series 7 Class
G Preferred Stock and related warrants.
(3) Amounts for 1998 reflect beneficial conversion feature on Series
10 Class J Preferred Stock. See Note 3 related to the beneficial
conversion feature.
</FN>
</TABLE>
48
<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. On
November 18, 1998, we purchased 7,000 shares of our stock at the
market price of $1.856 per share for an aggregate of approximately
$13,000. On November 19, 1998, we purchased 16,000 shares of our
stock at the market price of $1.8425 per share for an aggregate of
approximately $29,000.
________________________________________________________
NOTE 7
LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt at December 31 includes the following (in
thousands):
<PAGE>
1998 1997
_______ _______
<S> <C> <C>
Revolving loan facility dated January 15,
1998, collateralized by eligible
accounts receivables, subject to monthly
borrowing base calculation, variable
interest paid monthly at prime rate
plus 1 3/4. $ 97 $ 1,664
Term loan agreement dated January 15, 1998,
payable in monthly principal install-
ments of $52, balance due in January
2001, variable interest paid monthly
at prime rate plus 1 3/4. 1,927 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 1999 to 2003,
interest at rates ranging from 8.0% to
15.9%. 990 640
_______ _______
3,014 4,865
Less current portion of revolving loan
and term note facility 625 614
Less current portion of long-term debt 302 254
_______ _______
$ 2,087 $ 3,997
======= =======
</TABLE>
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
$230,000 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.
49
<PAGE>
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
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, we
granted a first security interest in all accounts receivable,
inventory, general intangibles, equipment and other assets of the
Company and our subsidiaries, as well as the mortgage on two (2) of
our 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.
The proceeds of the Agreement were utilized to repay in full on
January 15, 1998, the outstanding balance of the Heller Financial,
Inc. ("Heller") which was comprised of a revolving loan and security
agreement, loan and term loan, and to repay and buyout all assets
under the Ally Capital Corporation ("Ally") equipment financing
agreements. As of December 31, 1997, the borrowings under the Heller
revolving loan facility totaled $2,652,000. The balance of the
revolving loan on January 15, 1998, as repaid pursuant to the
Congress agreement was $2,289,000. The balance under the Heller term
loan at December 31, 1997, was $867,000. The Company subsequently
made a term loan payment of $41,000 on January 2, 1998, resulting in
a balance of $826,000, as repaid pursuant to the Congress Agreement.
As of December 31, 1997, the outstanding balance on the Ally
Equipment Financing Agreement was $624,000 which represented the
principal balance repaid pursuant to the Congress Agreement. In
conjunction with the above debt repayments, we also repaid a small
mortgage, paid certain fees, taxes and expenses, resulting in an
initial Congress term loan of $2,500,000 and revolving loan balance
of $1,705,000 as of the date of closing. As of December 31, 1998, the
borrowings under the Congress revolving loan facility totaled $97,000
with borrowing availability of approximately $4,009,000. The balance
under the Congress term loan at December 31, 1998, was $1,927,000.
During June 1998, we 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. We subsequently entered into
a second secured promissory note in the amount of approximately
$207,000 for the purchase and financing of certain capital equipment.
The term of the promissory note is for sixty (60) months, at a rate
of 10.54% per annum and monthly installments of approximately $4,000.
We recorded the December 31, 1997, Heller and Ally debt balances as
though the Congress transaction had been closed as of December 31,
1997.
As further discussed in Note 4, the long-term debt associated with
the discontinued Memphis operation is excluded from the above and is
recorded in the "Long-Term Liabilities of Discontinued Operations"
total. The Memphis debt obligations total $28,000, of which $24,000
is current.
The aggregate amount of the maturities of long-term debt maturing in
future years as of December 31, 1998, is $951,000 in 1999; $910,000
in 2000; $953,000 in 2001; $145,000 in 2002; and $83,000 in 2003.
________________________________________________________
NOTE 8
ACCRUED EXPENSES
<TABLE>
<CAPTION>
Accrued expenses at December 31 include the following (in
thousands):
50
<PAGE>
1998 1997
_______ _______
<S> <C> <C>
Salaries and employee benefits $ 783 $ 927
Accrued sales, property and other
tax 387 484
Waste disposal and other operating
related expenses 1,608 1,240
Accrued environmental 278 305
Other 313 424
_______ _______
Total accrued expenses $ 3,369 $ 3,380
======= =======
</TABLE>
The above amounts exclude Perma-Fix of Memphis, Inc. accrued
expenses for the years ended December 31, 1998, and 1997 of $739
and $1,094, respectively, which are reported as current
liabilities of discontinued operations. See Note 4 for further
discussion of this discontinued operation.
________________________________________________________
NOTE 9
ACCRUED CLOSURE COSTS AND ENVIRONMENTAL LIABILITIES
We accrue for the estimated closure costs as determined pursuant to
RCRA guidelines for all fixed-based regulated facilities, which
represents the potential future liability to close and remediate such
a facility, should such a cessation of operations ever occur. During
1998, the accrued long-term closure cost for its continuing
operations decreased by $116,000 to a total of $715,000 as compared
to the 1997 total of $831,000. This decrease is principally a result
of the reduced calculated closure liability which occurred at one TSD
facility due to changes in operational activities. The closure costs
are based upon RCRA guidelines and will increase in the future, as
indexed to an inflationary factor, and may also increase or decrease
as we change our current operations at these regulated facilities.
Additionally, unlike solid waste facilities, we, consistent with EPA
regulations, do not have post-closure liabilities that extend
substantially beyond the effective life of the facility.
At December 31, 1998, we have accrued long-term environmental and
acquisition related liabilities totaling $520,000, which reflects a
decrease of $5,000 from the December 31, 1997, balance of $525,000.
This amount principally represents management's best estimate of the
long term costs to remove contaminated soil and to undergo
groundwater remediation activities at one former RCRA facility that
is under a closure action from 1989 that our wholly-owned subsidiary,
PFD, leases. In June 1994, we acquired from Quadrex Corporation
and/or a subsidiary of Quadrex Corporation (collectively, "Quadrex")
three TSD companies, including the PFD facility. The former owners
of PFD had merged EPS with PFD, which was subsequently sold to
Quadrex. Through our acquisition of PFD in 1994 from Quadrex, we
were indemnified by Quadrex for costs associated with remediating the
Leased Property, which entails remediation of soil and/or groundwater
restoration. The Leased Property used by EPS to operate its facility
is separate and apart from the property on which PFD's facility is
located. In conjunction with the subsequent bankruptcy filing by
Quadrex, and our recording of purchase accounting for the acquisition
of PFD, we recognized an environmental liability of approximately
$1,200,000 for the remediation of this leased facility. This facility
has pursued remedial activities for the last five years with
additional studies forthcoming, and potential groundwater restoration
which could extend three (3) to five (5) years. We have estimated the
potential liability related to the remaining remedial activity of
the above property to be approximately $460,000, representing the
remaining acquisition reserve balance, of which we anticipate
spending approximately $222,000 during 1999. No insurance or third
party recovery was taken into account in determining our cost
estimates or reserve, nor do our cost estimates or reserves reflect
any discount for present value purposes.
Pursuant to our acquisition, effective December 31, 1993, of Perma-
Fix of Memphis, Inc. (F/N/A American Resource Recovery, Inc.), we
assumed certain liabilities relative to the removal of contaminated
soil and to undergo groundwater remediation at the facility. Prior
to our ownership of PFM, the owners installed monitoring and
treatment equipment to restore the groundwater to acceptable
standards in accordance with federal, state and local authorities.
Based upon technical information available to it, we estimated, and
recorded through purchase accounting, the remaining cost of such
remedial action. To-date, we have spent approximately $260,000 and
have a reserve balance of approximately $980,000 as of December 31,
51
<PAGE>
1998. Neither our cost estimates nor reserves reflect any discount
for present value purpose and such remediation is expected to extend
for a period of five to ten years. We have recorded approximately
$170,000 as a portion of the current liability under "Current
Liabilities of Discontinued Operations" and the remainder under
"Long-term Liabilities of Discontinued Operations." See Note 4 for
additional discussion of discontinued operations.
________________________________________________________
NOTE 10
INCOME TAXES
The components of the provision for income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
At December 31, 1998, we had temporary differences and net operating
loss carry forwards which gave rise to deferred tax assets and
liabilities at December 31, as follows (in thousands):
1998 1997 1996
_______ _______ _______
<S> <C> <C> <C>
Net operating losses $ 3,684 $ 3,393 $ 3,376
Environmental reserves 990 1,498 980
Impairment of assets 560 560 -
Other 210 213 172
Valuation allowance (5,015) (5,139) (4,034)
_______ _______ _______
Deferred tax assets 429 525 494
_______ _______ _______
Depreciation and
amortization 429 525 466
Other - - 28
_______ _______ _______
Deferred tax liability 429 525 494
_______ _______ _______
Net deferred tax asset
(liability) $ - $ - $ -
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
A reconciliation between the expected tax benefit using the federal
statutory rate of 34% and the provision for income taxes as reported
in the accompanying consolidated statements of operations is as
follows (in thousands):
1998 1997 1996
_______ _______ _______
<S> <C> <C> <C>
Tax benefit at statutory
rate $ 157 $(1,329) $ (88)
Goodwill amortization 76 77 43
Other (109) 147 (140)
Increase (decrease) in
valuation allowance (124) 1,105 185
_______ _______ _______
Provision for income taxes $ - $ - $ -
======= ======= =======
</TABLE>
Our valuation allowance decreased by approximately $124,000 for the
year ended December 31, 1998, and increased $1,105,000 and $185,000
for the years ended December 31, 1997 and 1996, which represents the
effect of changes in the temporary differences and net operating
losses (NOLs), as amended. We have recorded a valuation allowance to
state our deferred tax assets at estimated net realizable value due
to the uncertainty related to realization of these assets through
future taxable income.
We have estimated net operating loss carry forwards for federal
income tax purposes of approximately $10,835,000 at December 31,
1998. These net operating losses can be carried forward and applied
against future taxable income, if any, and expire in the years 2006
through 2012. However, as a result of various stock offerings and
certain acquisitions, the use of these NOLs will be limited under the
provisions of Section 382 of the Internal Revenue Code of 1986, as
amended. Additionally, NOLs may be further limited under the
provisions of Treasury Regulation 1.1502-21 regarding Separate Return
Limitation Years.
52
<PAGE>
________________________________________________________
NOTE 11
CAPITAL STOCK, EMPLOYEE STOCK PLAN AND INCENTIVE COMPENSATION
In February 1996, we issued 1,100 shares of newly created Series 1
Preferred at a price of $1,000 per share, for net proceeds of
$924,000. We also issued 330 shares of newly created Series 2
Preferred at a price of $1,000 per share, for net proceeds of
$297,000. During 1996, of the Series 1 and Series 2 Preferred were
fully converted into 1,953,467 shares of the Company's Common Stock.
During July 1996, we issued 5,500 shares of newly created Series 3
Preferred at a price of $1,000 per share for an aggregate sales price
of $5,500,000. During June 1997, we issued 2,500 shares of newly
created Series 4 Preferred at a price of $1,000 per share for an
aggregate sales price of $2,500,000. During July 1997, we issued 350
shares of newly created Series 5 Preferred at a price of $1,000 per
share for an aggregate sales price of $350,000. During 1997, 1,500
shares of the Series 3 Preferred were converted into 1,027,974 shares
of the Company's Common Stock. See Note 6 for further discussion.
In March 1996, we entered into a Stock Purchase Agreement with
Dr. Centofanti, the President, Chief Executive Officer, Chairman of
the Board of the Company, whereby we sold, and Dr. Centofanti
purchased, 133,333 shares of the Company's Common Stock for 75% of
the closing bid price of such Common Stock as quoted on the NASDAQ on
the date that Dr. Centofanti notified us of his desire to purchase
such stock, as authorized by the Board of Directors of the Company.
During February 1996, Dr. Centofanti tendered to the Company $100,000
for such 133,333 shares by delivering to us $86,000 and forgiving
$14,000 that was owing to Dr. Centofanti by us for expenses incurred
by Dr. Centofanti on our behalf. On the date that Dr. Centofanti
notified us of his desire to purchase such shares, the closing bid
price as quoted on the NASDAQ for the Company's Common Stock was
$1.00 per share.
In June 1996, we entered into a second Stock Purchase Agreement with
Dr. Centofanti, whereby we sold, and Dr. Centofanti purchased, 76,190
shares of the Company's Common Stock for 75% of the closing bid price
of such Common Stock as quoted on the NASDAQ on the date that Dr.
Centofanti notified us of his desire to purchase such stock (closing
bid of $1.75 on June 11, 1996), as previously authorized by our Board
of Directors. Dr. Centofanti tendered to us $100,000 for such 76,190
shares of Common Stock. During 1997, Dr. Centofanti also purchased
12,190 shares of Common Stock for $20,000, representing 75% of the
closing bid price. During 1996, we issued 347,912 shares of Common
Stock to our outside consultants and directors for past and future
services, valued at approximately $462,000, during 1997, we issued
116,081 shares of Common Stock to our outside consultants and
directors, valued at approximately $148,000 and during 1998, we
issued 60,769 shares of Common Stock to our outside consultants and
directors, valued at approximately $73,650.
At the Company's Annual Meeting of Stockholders ("Annual Meeting") as
held on December 12, 1996, the stockholders approved the adoption of
the Perma-Fix Environmental Services, Inc. 1996 Employee Stock
Purchase Plan. This plan provides eligible employees of the Company
and its subsidiaries, who wish to become stockholders, an opportunity
to purchase Common Stock of the Company through payroll deductions.
The maximum number of shares of Common Stock of the Company that may
be issued under the plan will be 500,000 shares. The plan provides
that shares will be purchased two (2) times per year and that the
exercise price per share shall be eighty-five percent (85%) of the
market value of each such share of Common Stock on the offering date
on which such offer commences or on the exercise date on which the
offer period expires, whichever is lowest. The first purchase period
commenced July 1, 1997, and ended December 31, 1997. Proceeds
totaled $16,000 for this purchase period which resulted in the
purchase of 8,276 shares of Common Stock in January 1998, pursuant to
the 1996 Employee Stock Purchase Plan. The second purchase period
commenced January 1, 1998, and ended June 30, 1998. Proceeds totaled
$16,849 for this purchase period which resulted in the purchase of
10,732 shares of Common Stock in July 1998. The third purchase
period commenced July 1, 1998, and ended December 31, 1998. Proceeds
totaled $22,334 for this purchase period which resulted in the
purchase of 17,517 shares of Common Stock in January 1999.
53
<PAGE>
During October 1997, Dr. Centofanti entered into a three (3) year
Employment Agreement with us which provided for, among other things,
an annual salary of $110,000, subject to annual inflationary
increases and the issuance of Non-Qualified Stock Options ("Non-
Qualified Stock Options"). The Non-Qualified Stock Options provide
Dr. Centofanti with the right to purchase an aggregate of 300,000
shares of Common Stock as follows: (i) after one year 100,000 shares
of Common Stock at a price of $2.25 per share, (ii) after two years
100,000 shares of Common stock at a price of $2.50 per share, and
(iii) after three years 100,000 shares of Common Stock at a price of
$3.00 per share. The Non-Qualified Stock Options expire ten years
after the date of the Employment Agreement.
Stock Options
On December 16, 1991, we adopted a Performance Equity Plan (the
"Plan"), under which 500,000 shares of the Company's Common Stock are
reserved for issuance, pursuant to which officers, directors and key
employees are eligible to receive incentive or Non-Qualified stock
options. Incentive awards consist of stock options, restricted stock
awards, deferred stock awards, stock appreciation rights and other
stock-based awards. Incentive stock options granted under the Plan
are exercisable for a period of up to ten years from the date of
grant at an exercise price which is not less than the market price of
the Common Stock on the date of grant, except that the term of an
incentive stock option granted under the Plan to a stockholder owning
more than 10% of the then-outstanding shares of Common Stock may not
exceed five years and the exercise price may not be less than 110% of
the market price of the Common Stock on the date of grant. To date,
all grants of options under the Performance Equity Plan have been
made at an exercise price not less than the market price of the
Common Stock at the date of grant.
Effective September 13, 1993, we adopted a Non-Qualified Stock Option
Plan pursuant to which officers and key employees can receive long-
term performance-based equity interests in the Company. The maximum
number of shares of Common Stock as to which stock options may be
granted in any year shall not exceed twelve percent (12%) of the
number of common shares outstanding on December 31 of the preceding
year, less the number of shares covered by the outstanding stock
options issued under the Company's 1991 Performance Equity Plan as of
December 31 of such preceding year. The option grants under the plan
are exercisable for a period of up to ten years from the date of
grant at an exercise price which is not less than the market price of
the Common Stock at date of grant.
Effective December 12, 1993, we adopted the 1992 Outside Directors
Stock Option Plan, pursuant to which options to purchase an aggregate
of 100,000 shares of Common Stock had been authorized. This Plan
provides for the grant of options on an annual basis to each outside
director of the Company to purchase up to 5,000 shares of Common
Stock. The options have an exercise price equal to the closing
trading price, or, if not available, the fair market value of the
Common Stock on the date of grant. The Plan also provides for the
grant of additional options to purchase up to 10,000 shares of Common
Stock on the foregoing terms to each outside director upon election
to the Board. During our annual meeting held on December 12, 1994,
the stockholders approved the Second Amendment to our 1992 Outside
Directors Stock Option Plan which, among other things, (i) increased
from 100,000 to 250,000 the number of shares reserved for issuance
under the Plan, and (ii) provides for automatic issuance to each
director of the Company, who is not an employee of the Company, a
certain number of shares of Common Stock in lieu of sixty-five
percent (65%) of the cash payment of the fee payable to each director
for his services as director. The Third Amendment to the Outside
Directors Plan, as approved at the December 1996 Annual Meeting,
provided that each eligible director shall receive, at such eligible
director's option, either sixty-five percent (65%) or one hundred
percent (100%) of the fee payable to such director for services
rendered to the Company as a member of the Board in Common Stock. In
either case, the number of shares of Common Stock of the Company
issuable to the eligible director shall be determined by valuing the
Common Stock of the Company at seventy-five percent (75%) of its fair
market value as defined by the Outside Directors Plan. The Fourth
Amendment to the Outside Directors Plan, was approved at the May
1998 Annual Meeting and increased the number of authorized shares
from 250,000 to 500,000 reserved for issuance under the Plan.
54
<PAGE>
We applied APB Opinion 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for options
issued to employees. Accordingly, no compensation cost has been
recognized for options granted to employees at exercise prices which
equal or exceed the market price of the Company's Common Stock at the
date of grant. Options granted at exercise prices below market
prices are recognized as compensation cost measured as the difference
between market price and exercise price at the date of grant.
Statement of Financial Accounting Standards No. 123 ("FAS 123")
"Accounting for Stock-Based Compensation," requires us to provide pro
forma information regarding net income and earnings per share as if
compensation cost for our employee stock options had been determined
in accordance with the fair market value based method prescribed in
FAS 123. We estimate the fair value of each stock option at the
grant date by using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in 1998, 1997
and 1996, respectively: no dividend yield for all years; an expected
life of ten years for all years; expected volatility of 45.0%, 42.0%
and 46.8%; and risk-free interest rates of 4.58%, 6.91% and 6.63%.
<TABLE>
<CAPTION>
Under the accounting provisions of FASB Statement 123, our net loss
and loss per share would have been reduced to the pro forma amounts
indicated below:
1998 1997 1996
____________ ______________ _____________
<S> <C> <C> <C>
Net loss applicable to Common
Stock from continuing
operations
As reported $ (698,000) $ (1,068,000) $ (2,118,000)
Pro forma (962,000) (1,666,000) (2,471,000)
Net loss per share applicable
to Common Stock from con-
tinuing operations
As reported $ (.06) $ (.10) $ (.24)
Pro forma (.08) (.16) (.28)
_______________________________________________________________
Net loss applicable to Common
Stock
As reported $ (688,000) $ (5,169,000) $ (2,405,000)
Pro forma (962,000) (5,767,000) $ (2,758,000)
Net loss per share
As reported $ (.06) $ (.49) $ (.27)
Pro forma (.08) (.54) (.31)
</TABLE>
<TABLE>
<CAPTION>
A summary of the status of options under the plans as of December 31,
1998, 1997 and 1996 and changes during the years ending on those
dates are presented below:
1998 1997
___________________ ____________________
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
_________ _________ _________ ________
<S> <C> <C> <C> <C>
Performance Equity Plan:
_______________________
Balance at beginning
of year 288,138 $2.54 316,226 $2.43
Granted 70,000 1.25 - -
Exercised (1,000) 1.00 - -
Forfeited (15,306) 3.66 (28,088) 1.34
________ ________
Balance at end
of year 341,832 2.23 288,138 2.54
======== ========
55
<PAGE>
Options exercisable
at year end 223,832 2.80 217,238 2.98
Options granted during
the year at exercise
prices which equal
market price of stock
at date of grant:
Weighted average
exercise price 70,000 1.25 - -
Weighted average
fair value 70,000 .78 - -
Non-qualified Stock
Option Plan:
___________________
Balance at beginning
of year 650,710 $1.41 475,395 $1.68
Granted 255,000 1.25 290,000 1.375
Exercised - - (11,000) 1.00
Forfeited (20,410) 1.375 (103,685) 2.54
________ ________
Balance at end
of year 885,300 1.37 650,710 1.41
======== ========
Options exercisable
at year end 216,240 1.54 90,426 1.72
Options granted during
the year at exercise
prices which equal
market price of stock
at date of grant:
Weighted average
exercise price 255,000 1.25 290,000 1.375
Weighted average
fair value 255,000 .78 290,000 .90
Outside Directors Stock
Option Plan:
_______________________
Balance at beginning
of year 160,000 $2.69 145,000 $2.76
Granted - - 15,000 2.13
Exercised - - - -
Forfeited - - - -
________ ________
Balance at end
of year 160,000 2.69 160,000 2.69
======== ========
Options exercisable
at year end 160,000 2.69 160,000 2.69
Options granted during
the year at exercise
prices which equal
market price of stock
at date of grant:
Weighted average
exercise price - - 15,000 2.13
Weighted average
fair value - - 15,000 1.34
<PAGE>
1996
____________________
Weighted
Average
Exercise
Shares Price
_________ __________
<C> <C>
263,282 $ 3.22
110,000 1.00
- -
(57,056) 3.32
_________
316,226 2.43
=========
183,609 3.14
110,000 1.00
110,000 .68
263,995 $ 3.17
345,000 1.00
- -
(133,600) 2.88
_________
475,395 1.68
=========
34,158 3.77
345,000 1.00
345,000 .68
110,000 $ 3.08
35,000 1.75
- -
- -
________
145,000 2.76
========
110,000 3.08
35,000 1.75
35,000 1.25
</TABLE>
<TABLE>
<CAPTION>
The following table summarizes information about options under the
plan outstanding at December 31, 1998:
Options Outstanding
________________________________________
Weighted
Average Weighted
Description and Number Remaining Average
Range of Outstanding at Contractual Exercise
Exercise Price Dec. 31, 1998 Life Price
________________________ ______________ ___________ ________
<S> <C> <C> <C>
Performance Equity Plan:
_______________________
1991/1992 Awards ($3.02) 185,332 3.1 years $3.02
1993 Awards ($5.25) 6,500 4.8 years 5.25
1996 Awards ($1.00) 80,000 7.4 years 1.00
1998 Awards ($1.25) 70,000 9.8 years 1.25
_________
341,832 5.5 years 2.23
=========
Non-Qualified Stock
Option Plan:
___________________
1994 Awards ($4.75) 300 5.2 years $4.75
1995 Awards ($2.88) 85,000 6.0 years 2.88
1996 Awards ($1.00) 280,000 7.4 years 1.00
1997 Awards ($1.375) 265,000 8.3 years 1.38
1998 Awards ($1.25) 255,000 9.8 years 1.25
_________
885,300 8.2 years 1.37
=========
Outside Directors Stock
Option Plan:
_______________________
1993 Awards ($3.02) 45,000 3.5 years $3.02
1994 Awards ($3.00-$3.22) 45,000 5.5 years 3.07
1995 Awards ($3.25) 20,000 6.0 years 3.25
1996 Awards ($1.75) 35,000 7.9 years 1.75
1997 Awards ($2.125) 15,000 8.9 years 2.13
_________
160,000 5.9 years 2.69
=========
<PAGE>
Options Exercisable
_______________________________
Weighted
Number Average
Exercisable at Exercise
Dec. 31, 1998 Price
_______________ ________
<C> <C>
185,332 $3.02
6,500 5.25
32,000 1.00
-
__________
223,832 2.80
==========
240 $4.75
51,000 2.88
112,000 1.00
53,000 1.38
-
__________
216,240 1.54
==========
45,000 $3.02
45,000 3.07
20,000 3.25
35,000 1.75
15,000 2.13
________
160,000 2.69
</TABLE>
56
<PAGE>
Warrants
We have issued various warrants pursuant to acquisitions, private
placements, debt and debt conversion and to facilitate certain
financing arrangements. The warrants principally are for a term of
three to five years and entitle the holder to purchase one share of
Common Stock for each warrant at the stated exercise price. During
1998, pursuant to the issuance of the Series 10 Class J Convertible
Preferred Stock, as further discussed in Note 6, we issued to
Liviakis one (1) Common Stock purchase warrant entitling Liviakis
to purchase, after January 15, 1999, until June 29, 2002, an
aggregate of up to 1,875,000 shares of Common Stock exercisable at
a price equal to $1.875 per share and we issued to Prag one (1)
Common Stock purchase warrant entitling Prag to purchase, after
January 15, 1999, until June 29, 2002, an aggregate of up to
625,000 shares of Common Stock exercisable at a price equal to
$1.875 per share. In connection with the Preferred Stock issuances
as discussed fully in Note 6, we issued additional warrants during
1998 for the purchase of 850,000 shares which are included in the
Series 10 Class J warrants. During 1996, pursuant to the issuance
of the Series 3 Class C Convertible Preferred Stock, as further
discussed in Note 6, we issued to RBB Bank two (2) Common Stock
purchase warrants entitling RBB Bank to purchase, after
December 31, 1996, until July 18, 2001, an aggregate of up to
2,000,000 shares of Common Stock, with 1,000,000 shares exercisable
at an exercise price equal to $2.00 per share and 1,000,000 at
$3.50 per share. In connection with the Preferred Stock issuances
as discussed fully in Note 6, we issued additional warrants during
1997 and 1996 for the purchase of 1,591,250 and 1,420,000 shares,
respectively, of Common Stock which are included in other financing
warrants. Certain of the warrant agreements contain antidilution
provisions which have been triggered by the various stock and
warrant transactions as entered into by us since the issuance of
such warrants. The impact of these antidilution provisions was the
reduction of certain warrant exercise prices and in some cases the
increase in the total number of underlying shares for certain
warrants issued prior to 1996. During 1998, a total of 215,100
warrants were exercised for proceeds in the amount of $255,000 and
no warrants expired.
<TABLE>
<CAPTION>
The following details the warrants currently outstanding as of
December 31, 1998, after giving effect to antidilution provisions:
Number of
Underlying Exercise Expiration
Warrant Series Shares Price Date
________________ __________ ____________ __________
<S> <C> <C> <C>
Class B Warrants 4,273,445 $3.28 6/99
Class C Preferred Stock Warrants 2,950,300 $.73-$3.50 9/99-7/01
Class H Preferred Stock Warrants 1,504,450 $1.50-$3.00 6/00-7/02
Class I Preferred Stock Warrants 35,000 $1.8125 6/00
Class J Preferred Stock Warrants 3,350,000 $1.875-$2.50 6/01-6/02
Other Financing Warrants 1,117,901 $1.936-$3.625 6/99-9/00
__________
13,230,796
===========
</TABLE>
In March, 1999, the Company entered into an Exchange Agreement with
Liviakis and Prag whereby the warrants described in the preceding
paragraph issued to Liviakis and Prag for the purchase of an
aggregate of 2,500,000 shares of Common Stock (1,875,000 and
625,000 respectively) were exchanged for 200,000 shares of Common
Stock. This will reduce the number of shares of Common Stock
underlying Warrants outstanding relating to the Class J Preferred
Stock from 3,350,000 to 850,000 shares.
57
<PAGE>
Shares Reserved
At December 31, 1998, we have reserved approximately 25 million
shares of Common Stock for future issuance under all of the above
arrangements and the convertible Series 3, Series 8, Series 9 and
Series 10 Preferred Stock. (See Note 6.)
________________________________________________________
NOTE 12
COMMITMENTS AND CONTINGENCIES
Hazardous Waste
In connection with our waste management services, we handle both
hazardous and non-hazardous waste which we transport to our own or
other facilities for destruction or disposal. As a result of
disposing of hazardous substances, in the event any cleanup is
required, we could be a potentially responsible party for the costs
of the cleanup notwithstanding any absence of fault on our part.
Legal
In May 1995, PFM, our subsidiary, became aware that the U.S.
District Attorney for the Western District of Tennessee and the
Department of Justice were investigating certain prior activities
of W. & R. Drum, Inc. ("W.R. Drum") its successor, First Southern
Container Company, and any other facility owned or operated, in
whole or in part, by Johnnie Williams. PFM used W. R. Drum to
dispose of certain of its used drums. In May 1995, PFM received a
Grand Jury Subpoena which demanded the production of any documents
in the possession of PFM pertaining to W. R. Drum, First Southern
Container Company, or any other facility owned or operated, and
holder in part, by Johnnie Williams. PFM complied with the Grand
Jury Subpoena. Thereafter, in September of 1995, PFM received
another Grand Jury Subpoena for documents from the Grand Jury
investigating W. R. Drum, First Southern Container Company and/or
Johnnie Williams. PFM complied with the Grand Jury Subpoena. In
December 1995, representatives of the Department of Justice advised
PFM that it was also currently a subject of the investigation
involving W. R. Drum, First Southern Container Company, and/or
Johnnie Williams. Since 1995, the Company has received no new
information about this matter.
During January 1998, PFM was notified by the EPA that the EPA had
conducted remediation operations at a site owned and operated by
W.R. Drum in Memphis, Tennessee (the "Drum Site"). By
correspondence dated January 15, 1998 ("PRP Letter"), the EPA
informed PFM that it believed that PFM was a PRP regarding the
remediation of the Drum Site, primarily as a result of acts by PFM
prior to the time PFM was acquired by the Company. 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, and
the EPA has orally informed the Registrant that such remediation
has been substantially complete as of such date. During the second
quarter of 1998, PFM and certain other PRP's began negotiating with
the EPA regarding a potential settlement of the EPA's claims
regarding the Drum Site and such negotiations have been completed.
During the third quarter of 1998, the government agreed to the
PFM's offer to pay $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. During January 1999, the Company
executed a "Partial Consent Decree" pursuant to this settlement,
which settlement is subject to approval of the court. There are no
assurances that the settlement will be approved by the court.
In addition to the above matters and in the normal course of
conducting its business, we are involved in various other
litigation. We are not a party to any litigation or governmental
proceeding which our management believes could result in any
judgments or fines against us that would have a material adverse
affect on our financial position, liquidity or results of
operations.
Permits
We are subject to various regulatory requirements, including the
procurement of requisite licenses and permits at our facilities.
These licenses and permits are subject to periodic renewal without
which our operations would be adversely affected. We anticipate
58
<PAGE>
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
We maintain closure cost funds to insure the proper decommissioning
of our RCRA facilities upon cessation of operations. Additionally,
in the course of owning and operating on-site treatment, storage
and disposal facilities, we are 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 we maintain the appropriate accruals for
restoration. As discussed in Note 9, we have recorded accrued
liabilities for estimated closure costs and identified
environmental remediation costs.
Discontinued Operations
As previously discussed, we made the strategic decision in February
1998 to discontinue our fuel blending operations at the PFM
facility. We have, based upon the best estimates available,
recognized accrued environmental and closure costs in the aggregate
amount of $2,501,000 as of December 31, 1998. This liability
includes principally, the RCRA closure liability, the groundwater
remediation liability (see Note 9), the potential additional site
investigation and remedial activity which may arise as PFM proceeds
with its closure activities, our best estimate of the future
operating losses as we discontinue our fuel blending operations and
other contingent liabilities, including the above discussed PRP
liability. See Note 4 for further discussion of PFM.
Insurance
Our business exposes us 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. We
believe that our coverage is adequate to insure us against the
various types of risks encountered.
Operating Leases
We lease certain facilities and equipment under operating leases.
Future minimum rental payments as of December 31, 1998 required
under these leases are $777,000 in 1999, $534,000 in 2000, $275,000
in 2001, $151,000 in 2002 and $115,000 in 2003.
Net rent expense relating to our operating leases was $1,465,000,
$1,533,000 and $1,657,000 for 1998, 1997 and 1996, respectively.
________________________________________________________
NOTE 13
PROFIT SHARING PLAN
We adopted the Perma-Fix Environmental Services, Inc. 401(k) Plan
(the "401(k) Plan") in 1992, which is intended to comply under
Section 401 of the Internal Revenue Code and the provisions of the
Employee Retirement Income Security Act of 1974. All full-time
employees who have attained the age of 21 are eligible to
participate in the 401(k) Plan. Participating employees may make
annual pre-tax contributions to their accounts up to 15% of their
compensation, up to a maximum amount as limited by law. We, at our
discretion, may make matching contributions based on the employee's
elective contributions. Company contributions vest over a period
of six years. We elected not to provide any matching contributions
for the years ended December 31, 1998, 1997, and 1996. However,
beginning January 1, 1999 we have decided to match up to 25% of our
employees contributions, not to exceed 3% of a participants
compensation.
59
<PAGE>
________________________________________________________
NOTE 14
OPERATING SEGMENTS
During 1998, we were engaged in ten operating segments. Pursuant
to FAS 131, we define an operating segment as:
* A business activity from which we may earn revenue and
incur expenses;
* Whose operating results are regularly reviewed by our
chief operating division maker to make decisions about
resources to be allocated to the segment and assess its
performance; and
* For which discrete financial information is available.
We therefore define our segments as each separate facility or
location that we operate. We clearly view each business as a
separate segment and make decisions based on the activity and
profitability of that particular location. These segments however,
exclude the Corporate headquarters which does not generate revenue
and Perma-Fix of Memphis, Inc. which is reported elsewhere as a
discontinued operation. See Note 4 regarding discontinued
operations.
Pursuant to FAS 131 we have aggregated two or more operating
segments into two reportable segments to ease in the presentation
and understanding of our business. We used the following criteria
to aggregate our segments:
* The nature of our products and services;
* The nature of the production processes;
* The type or class of customer for our products and
services;
* The methods used to distribute our products or provide
our services; and
* The nature of the regulatory environment.
Our reportable segments are defined as follows:
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 our four TSD facilities; Perma-Fix Treatment
Services, Inc., Perma-Fix of Dayton, Inc., Perma-Fix of Ft.
Lauderdale, Inc. and Perma-Fix of Florida, Inc. We provide through
Perma-Fix Inc. and Perma-Fix of New Mexico, Inc. on-site waste
treatment services to convert certain types of characteristic
hazardous wastes into non-hazardous waste. We also provide through
Reclamation Systems, Inc. and Industrial Waste Management, Inc. the
supply and management of non-hazardous and hazardous waste to be
used by cement plants as a substitute fuel or raw material source
and the resell of by-product materials generated at cement plants
for environmental applications.
The Consulting Engineering Services segment provides environmental
engineering and regulatory compliance services through Schreiber,
Yonley & Associates, Inc. and Mintech, Inc. These engineering
groups provide oversight management of environmental restoration
projects, air and soil sampling and compliance and training
activities, as well as, engineering support as needed by our other
segment.
60
<PAGE>
<TABLE>
<CAPTION>
The table below shows certain financial information by business
segment for 1998, 1997, and 1996 and excludes the results of
operations of the discontinued operations:
Segment Reporting 12/31/98
Waste Segment
Services Engineering Total
________ ___________ _______
Revenue from external customers $26,181 $4,370 $30,551
Intercompany revenues 329 510 839
Interest income 31 - 31
Interest expense 369 54 423
Depreciation and amortization 2,015 77 2,092
Segment profit (loss) 265 (213) 52
Segment assets(1) 24,882 2,326 27,208
Expenditures for segment assets 2,492 20 2,512
Segment Reporting 12/31/97
Waste Segment
Services Engineering Total
________ ___________ _______
Revenue from external customers $23,756 $4,657 $28,413
Intercompany revenues 932 522 1,454
Interest income 38 - 38
Interest expense 366 30 396
Depreciation and amortization 1,850 110 1,960
Segment profit (loss) 402 (421) (19)
Segment assets(1) 23,576 2,593 26,169
Expenditures for segment assets 1,744 21 1,765
Segment Reporting 12/31/96
Waste Segment
Services Engineering Total
________ ___________ _______
Revenue from external customers $21,497 $5,544 $27,041
Intercompany revenues 723 292 1,015
Interest income 41 - 41
Interest expense 532 55 587
Depreciation and amortization 1,876 156 2,032
Segment profit (loss) (11) 84 73
Segment assets(1) 23,546 2,565 26,111
Expenditures for segment assets 2,371 8 2,379
Consolidated
Corp.(2) Memphis(3) Total
________ ___________ ____________
<S> <C> <C>
$ - $ - $30,551
- - 839
4 - 35
(129)(5) - 294
17 - 2,109
(750)(4) - (698)
1,051 489 28,748
42 - 2,554
Consolidated
Corp.(2) Memphis(3) Total
________ ___________ _______
$ - $ - $28,413
- - 1,454
3 - 41
35 - 431
20 - 1,980
(1,049)(4) (141) (1,068)
171 2,230 28,570
8 45 1,812
Consolidated
Corp.(2) Memphis(3) Total
________ ___________ ____________
$ - $ - $27,041
- - 1,015
2 - 43
56 - 643
51 - 2,083
(2,191)(4) (191) (2,118)
68 2,855 29,034
- 125 2,506
<FN>
(1) Segment assets have been adjusted for intercompany accounts to
reflect actual assets for each segment.
(2) Amounts reflect the activity for corporate headquarters.
(3) Amounts reflect the activity for Perma-Fix of Memphis, Inc.,
which is a discontinued operation, not included in the segment
information (See Note 4).
(4) Amounts reflect beneficial conversion feature of the Preferred
Stock of the Company and Corporate overhead not allocated to
discontinued operations (See Note 3).
(5) Amount reflects interest expense adjustment to Perma-Fix of
Memphis, Inc. allocated to discontinued operations.
</FN>
</TABLE>
________________________________________________________
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Since information relating to changes in accountants and engagement
of new accountants by the Company during the Company's two most
recent fiscal years or any subsequent interim period have been
previously reported (as that term is defined in Rule 12b-2 under
the Securities Exchange Act of 1934, as amended) and there were no
disagreements or reportable events required to be reported under
paragraph (b) of Item 304 of Regulation S-K, we have no information
to be reported hereunder pursuant to Item 304 of Regulation S-K.
61
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
The following table sets forth, as of the date hereof, information
concerning the Directors and Executive Officers of the Company:
NAME AGE POSITION
____ ___ ________
<S> <C> <C>
Dr. Louis F. Centofanti 55 Chairman of the Board, President
and Chief Executive Officer
Mark A. Zwecker 48 Director
Steve Gorlin 61 Director
Jon Colin 43 Director
Mr. Richard T. Kelecy 43 Chief Financial Officer, Vice
President and Secretary
Mr. Roger Randall 55 Vice President, Industrial Services
Mr. Bernhardt Warren 50 Vice President, Nuclear Services
Mr. Timothy Kimball 53 Vice President, Technical Services
</TABLE>
Each director is elected to serve until the next annual meeting of
stockholders.
DR. LOUIS F. CENTOFANTI
The information set forth under the caption "Executive Officers of
the Company" on page 11 is incorporated by reference.
MR. MARK A. ZWECKER
Mark Zwecker has served as a Director of the Company since its
inception in January 1991. Mr. Zwecker is currently President of
ACI Technology, LLC, a position he has held since 1997. Previously,
Mr. Zwecker was Vice President of Finance and Administration for
American Combustion, Inc., a position he held from 1986 until 1998.
In 1983, Mr. Zwecker participated as a founder with Dr. Centofanti
in the start up of PPM, Inc. He remained with PPM, Inc. until its
acquisition in 1985 by USPCI. Mr. Zwecker has a B.S. in Industrial
and Systems Engineering from the Georgia Institute of Technology
and an M.B.A. from Harvard University.
MR. STEVE GORLIN
Steve Gorlin has served as a Director of the Company since its
inception in January 1991. Over the past 25 years he has founded
several biotechnology and pharmaceutical companies, including Hycor
Biomedical, Inc., Theregenics Corporation, CytRx Corporation, and
Medicis Corporation, which are public companies, and SeaLite
Sciences, Inc., which is a private company. Mr. Gorlin founded and
served as Chairman of the Board of EntreMed, Inc., a public
company, from its inception in 1991 until December 1995. He is a
member of the Board of Directors of Advanced Aerodynamic &
Structures, Inc., a publicly traded manufacturing firm. Mr. Gorlin
also established the Touch Foundation, a non-profit organization
for the blind.
MR. JON COLIN
Jon Colin has served as a Director of the Company since December 1996.
He is a financial consultant for a variety of technology-based companies.
From 1990 to 1996, Mr. Colin served as President and Chief Executive
Officer for Environmental Services of America, Inc., a publicly traded
environmental services company. Mr. Colin has a B.S. degree in
Accounting from the University of Maryland.
MR. RICHARD T. KELECY
The information set forth under the caption "Executive Officers of the
Company" on page 11 is incorporated by reference.
62
<PAGE>
MR. ROGER RANDALL
The information set forth under the caption "Executive Officers of the
Company" on page 11 is incorporated by reference.
MR. BERNHARDT WARREN
The information set forth under the caption "Executive Officers of the
Company" on page 11 is incorporated by reference.
MR. TIMOTHY KIMBALL
The information set forth under the caption "Executive Officers of the
Company" on page 11 is incorporated by reference.
Certain Relationships
There are no family relationships between any of our existing
Directors, executive officers, or persons nominated or chosen to
become a Director or executive officer. Dr. Centofanti is the only
Director who is our employee.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the regulations promulgated thereunder
require the Company's executive officers and directors and
beneficial owners of more than ten percent (10%) of any equity
security of the Company registered pursuant to Section 12 of the
Exchange Act to file reports of ownership and changes of ownership
of the Company's equity securities with the Securities and Exchange
Commission, and to furnish the Company with copies of all such
reports. Based solely on a review of the copies of such reports
furnished to the Company and information provided to the Company,
the Company believes that during 1998 none of the executive
officers and directors of the Company failed to timely file reports
under Section 16(a).
RBB Bank Aktiengesellschaft ("RBB Bank"), which may have become a
beneficial owner (as that term is defined under Rule 13d-3 as
promulgated under the Exchange Act) of more than ten percent (10%)
of the Company's Common Stock on February 9, 1996, as a result of
its acquisition of 1,100 shares of Series 1 Preferred (as defined
in "Certain Relationships and Related Transactions") that were
convertible into a maximum of 1,282,798 shares of Common Stock of
the Company commencing 45 days after issuance of the Series 1
Preferred, failed to file a Form 3 to report such transaction, if
required. RBB Bank has advised us that it acquired such Preferred
Stock on behalf of numerous clients and no one client is the
beneficial owner of more than 250 shares of such Preferred Stock,
and thus, RBB Bank believes it is not required to file reports
under Section 16(a).
If RBB Bank became a beneficial owner of more than ten percent
(10%) of the Company's Common Stock on February 9, 1996, the date
of RBB's initial Preferred Stock Agreement, and thereby required
to file reports under Section 16(a) of the Exchange Act, then RBB
Bank also failed to file (i) a Form 4 for three transactions which
occurred in January 1998; (ii) a Form 4 for one transaction which
occurred in June 1998; (iii) a Form 4 for three transactions which
occurred in July 1998; and (iv) a Form 5 for 1998.
63
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
Summary Compensation Table
The following table sets forth the aggregate cash compensation paid
to our Chairman and Chief Executive Officer, the Vice President of
Nuclear Services, Chief Financial Officer and Vice President of
Industrial Services:
Annual Compensation
_____________________________
Other
Annual
Name and Principal Salary Bonus Compen-
Position Year ($) ($) sation($)
__________________________ ____ ________ ________ _________
<S> <C> <C> <C> <C>
Dr. Louis F. Centofanti(1) 1998 $112,250 $ - $ -
Chairman of the Board, 1997 75,431 - 6,667(2)
President and 1996 65,000 - 66,666(3)
Chief Executive Officer
Bernhardt C. Warren(4) 1998 87,341 223,800 56,950
Vice President of 1997 87,341 88,629 -
Nuclear Services 1996 36,476 20,330 -
Richard T. Kelecy(5) 1998 102,553 15,000 -
Chief Financial Officer 1997 91,250 - -
1996 82,750 8,000 -
Roger Randall(6) 1998 101,268 12,710 -
Vice President of 1997 80,000 - -
Industrial Services 1996 80,000 21,254 -
<PAGE>
Long-Term
Compensation
_______________________________
Restricted Underlying All
Stock Options/ Other
Award(s) SARs Compen-
($) (#) sation($)
________ ________ _________
<C> <C> <C>
$ - $ - $ -
- 300,000 -
- - -
- 25,000 -
- 30,000 -
- - -
- 30,000 -
- 40,000 -
- 60,000 -
- 30,000 9,039(6)
- 40,000 9,042
- 60,000 9,042
<FN>
(1) Dr. Centofanti, the Company's Chairman of the Board, received
compensation pursuant to an employment agreement, which provided
for annual compensation to Dr. Centofanti of $75,000 beginning June
1992 and expiring in June 1995. Under the expired contract,
Dr. Centofanti received an annual salary of $75,000, which was
increased to $125,000 in October 1994 and continued until December
1995, when Dr. Centofanti's salary was voluntarily reduced to
$65,000. Dr. Centofanti currently receives compensation pursuant
to an employment agreement dated October 1, 1997, which provides,
among other things, for an annual salary of $110,000, subject to
annual inflation factor increases, and the issuance of Non-
Qualified Stock Options ("Non-Qualified Stock Options"). Pursuant
to the terms of the agreement Dr. Centofanti's annual salary was
increased to $112,250 effective October 1, 1998. The Non-Qualified
Stock Options provide Dr. Centofanti with the right to purchase an
aggregate of 300,000 shares of Common Stock as follows: (i) after
one year 100,000 shares of Common Stock at a price of $2.25 per
share, (ii) after two years 100,000 shares of Common Stock at a
price of $2.50 per share, and (iii) after three years 100,000
shares of Common Stock at a price of $3.00 per share. The Non-
Qualified Stock Options expire ten years after the date of the
Employment Agreement. Dr. Centofanti also served as President and
Chief Executive Officer of the Company during 1994 and until
September 1995, when Robert W. Foster was elected as President and
Chief Executive Officer of the Company. At such time, Dr.
Centofanti continued to serve as Chairman of the Board of the
Company. Upon Mr. Foster's resignation, Dr. Centofanti resumed the
positions of President and Chief Executive Officer effective March 15,
1996, and continued as Chairman of the Board.
(2) The Company entered into one Stock Purchase Agreement ("1997
Centofanti Agreement") with Dr. Centofanti on or about June 30,
1997, pursuant to which the Company agreed to sell, and
Dr. Centofanti agreed to buy, 24,381 shares of the Company's Common
Stock for 75% of the closing bid price of such Common Stock as
quoted on he NASDAQ on the date Dr. Centofanti notified the Company
64
of his desire to purchase such stock, as authorized by the Board of
Directors. The closing bid price as quoted by the NASDAQ for the
Common Stock on the date Dr. Centofanti notified the Company of his
desire to purchase the shares was $2.1875, leading to a purchase
price of $1.6406 and an aggregate purchase price of $40,000 for the
24,381 shares of Common Stock. The 1997 Centofanti Agreement was
amended in October to reduce the number of shares purchased
thereunder to 12,190 for an aggregate purchase price of $20,000,
upon consideration of certain recent accounting pronouncements
related to stock based compensation. The difference between the
price paid by Dr. Centofanti for such stock and the fair market
value thereof was approximately $6,667. See "Certain Relationships
and Related Transactions."
(3) The Company entered into two Stock Purchase Agreements with
Dr. Centofanti during 1996 whereby the Company sold, and
Dr. Centofanti purchased, 133,333 shares and 76,190 shares, in
March 1996, and in June 1996, respectively, of the Company's Common
Stock for 75% of the closing bid price of such Common Stock as
quoted on the NASDAQ on the date that Dr. Centofanti notified the
Company of his desire to purchase such stock, as authorized by the
Board of Directors of the Company. The closing bid price as quoted
on the NASDAQ for the Company's Common Stock on the dates that Dr.
Centofanti notified the Company of his desire to purchase the
shares was $1.00 per share for the March sale and $1.75 per share
for the June sale. As a result, the difference between the price
paid by Dr. Centofanti for such stock and the fair market value
thereof was approximately $33,333 for each transaction. See
"Certain Relationships and Related Transactions."
(4) Mr. Warren was General Manager of Perma-Fix of Florida, Inc.
from July 16, 1996, until December 8, 1997. During this time,
Mr. Warren received compensation pursuant to an employment
agreement, which provided for annual compensation to Mr. Warren of
$87,000 beginning July 16, 1996, and expiring in July 1999.
Mr. Warren also received additional compensation pursuant to the
employment agreement paid on a variable rate in proportion to
certain revenue goals. Effective December 8, 1997, Mr. Warren also
became the Vice President of Nuclear Services for the Company.
Mr. Warren currently receives compensation pursuant to an
employment agreement dated April 7, 1998, which provides for
annual compensation of $87,000 plus additional compensation in the
form of Company Common Stock and cash payments for bonus. Upon
execution of the agreement, Mr. Warren received a bonus of
approximately $168,000 which was paid in the form of 94,697 shares
of Common Stock, as determined by dividing the bonus amount by the
average of the closing bid price of the Common Stock on the NASDAQ
Small Cap for the five trading days prior to the date of execution
of this agreement. Mr. Warren also received a bonus of
approximately $57,000 in December, 1998, which was intended to pay
for taxes on the stock bonus. Under the terms of his employment
agreement, Mr. Warren is also to be paid a bonus of $168,000 which
is to be paid in monthly installments over the two years of the
agreement, with approximately $112,000 of such bonus paid in 1998.
Stock Options were granted to Mr. Warren on April 8, 1997 and
October 14, 1998, pursuant to the 1993 Non-Qualified Stock Option
Plan.
(5) Mr. Kelecy, the Chief Financial Officer, receives annual
compensation of $102,000. Mr. Kelecy may also receive at the
discretion of the Board additional compensation in the form of a
bonus. Stock Options were granted to Mr. Kelecy on January 11,
1995, May 24, 1996, April 8, 1997 and October 14, 1998, pursuant
to the 1993 Non-Qualified Stock Option Plan.
(6) Mr. Randall was General Manager of Perma-Fix of Dayton, Inc.
from its acquisition in 1994 until December 8, 1997. Mr. Randall
receives annual compensation of $94,000. Effective December
1998, Mr. Randall receives a monthly car allowance compensation in
the amount of $750, in lieu of a Company car, as previously
provided. Mr. Randall may also received additional compensation
paid on a variable rate in proportion to certain revenue goals.
Effective December 8, 1997, Mr. Randall became the Vice President
of Industrial Services for the Company. Stock Options were granted
to Mr. Randall on January 11, 1995, May 24, 1996, April 8, 1997 and
October 14, 1998, pursuant to the 1993 Non-Qualified Stock Option
Plan.
</FN>
</TABLE>
65
<PAGE>
Option/SAR Grants in Last Fiscal Year
<TABLE>
The following table sets forth certain information relating to
individual grants of stock options made to each of the named
executive officers in the above Summary Compensation Table during
the last fiscal year and the potential realizable value of each
grant of options, assuming that the market price of the underlying
Common Stock appreciates in value during the ten-year option term
at annualized rates of 5% and 10%.
Individual Grants
_____________________________________________________
Number of % of
Shares of Total Options
Common Stock Granted to Exercise
Underlying Employees Price Expiration
Name Options Granted in 1998 ($/sh)(1) Date
_____________________ _______________ ____________ _________ __________
<S> <C> <C> <C> <C>
Bernhardt C. Warren(3) 25,000 7.7% $1.25 10/14/08
Richard T. Kelecy(4) 30,000 9.2 1.25 10/14/08
Roger Randall(5) 30,000 9.2 1.25 10/14/08
Potential Realizable
Value at Assumed
Annual
Rates of Stock Price
Appreciation
for Option Term(2)
_____________________
5%($) 10%($)
_____ ______
<C> <C>
$ 19,656 $ 40,809
23,588 59,771
23,588 59,771
<FN>
(1) All options were granted at or above market price (the closing
price of the Common Stock on the NASDAQ SmallCap Market on the date
of grant.
(2) The potential realizable value of each grant of options assumes
that the market price of the Company's Common Stock appreciates in
value from the date of grant to the end of the option term at the
annualized rates shown above each column. The actual value that an
executive may realize, if any, will depend on the amount by which
the market price of the Company's Common Stock at the time of
exercise exceeds the exercise price of the option. As of
December 31, 1998, the closing price of a share of the Company's
Common Stock as quoted on NASDAQ was $1.50. There is no assurance
that any executive will receive the amounts estimated in this
table.
(3) The Company has adopted a 1993 Non-Qualified Stock Option Plan
(the "1993 Plan"). Mr. Warren was granted options to purchase
25,000 shares of the Company's Common Stock pursuant to the 1993
Plan. The 1993 Plan provides that the options granted vest at the
end of years one through five in 20% increments.
(4) The Company has adopted a 1993 Non-Qualified Stock Option Plan
(the "1993 Plan"). Mr. Kelecy was granted options to purchase
30,000 shares of the Company's Common Stock pursuant to the 1993
Plan. The 1993 Plan provides that the options granted vest at the
end of years one through five in 20% increments.
(5) The Company has adopted a 1993 Non-Qualified Stock Option Plan
(the "1993 Plan"). Mr. Randall was granted options to purchase
30,000 shares of the Company's Common Stock pursuant to the 1993
Plan. The 1993 Plan provides that the options granted vest at the
end of years one through five in 20% increments.
</FN>
</TABLE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values
<TABLE>
<CAPTION>
The following table sets forth information concerning each exercise
of stock options during the last completed fiscal year by each of
the executive officers named in the Summary Compensation Table and
the fiscal year-end value of unexercised options:
66
<PAGE>
Number of Unexercised
Shares Options at Fiscal Year-End
Acquired on Value (#)
Exercise Realized ___________________________
Name (#)(1) ($)(1) Exercisable Unexercisable
_______________________ _____________ _________ ___________ _____________
<S> <C> <C> <C> <C>
Dr. Louis F. Centofanti - $ - 145,763 204,000
Bernhardt C. Warren - - 6,000 49,000
Richard Kelecy - - 56,000 104,000
Roger Randall - - 40,000 100,000
<PAGE>
Value of Unexercised
in-the-Money Options
at Fiscal Year End ($)(2)
__________________________
Exercisable Unexercisable
___________ _____________
<C> <C>
$ - $ -
8,250 64,250
35,000 117,500
35,000 117,500
<FN>
(1) No options were exercised during 1998.
(2) Represents the difference between $1.50 (the closing bid price
of the Company's Common Stock reported on the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") on December 31, 1998), and the option exercise price.
The actual value realized by a named executive officer on the
exercise of these options depends on the market value of the
Company's Common Stock on the date of exercise.
</FN>
</TABLE>
401(k) Plan
We have adopted the Perma-Fix Environmental Services, Inc. 401(k)
Plan which is intended to comply under Section 401 of the Internal
Revenue Code of 1986, as amended (the "Code"), and the provisions
of the Employee Retirement Security Act of 1974 (the "401(k)
Plan"). All full-time employees who have attained the age of
twenty-one (21) are eligible to participate in the 401(k) Plan.
Participating employees may make annual pre-tax contributions to
their accounts up to fifteen percent (15%) of their compensation,
up to a maximum amount as limited by law. We, at our discretion,
may make matching contributions based on full-time employees'
elective contributions. Company contributions vest twenty percent
(20%) after two (2) years, forty percent (40%) after three (3)
years, sixty percent (60%) after four (4) years, eighty percent
(80%) after five (5) years, and are one hundred percent (100%)
vested thereafter. As of December 31, 1998, we have elected not to
provide any matching contributions. However, effective January 1,
1999, we have agreed to match 25% of the employees contributions,
not to exceed 3% of compensation. Distributions generally are
payable in lump sums upon termination, retirement, death or
disability.
Employee Stock Purchase Plan
We have adopted the Perma-Fix Environmental Services, Inc. 1996
Employee Stock Purchase Plan (the "1996 Plan") which is intended to
comply under Section 423 of the Code. All full-time employees who
have completed at least six (6) months of continuous service, other
than those that are deemed, for the purpose of Section 423(b)(3) of
the Code, to own stock possessing five percent (5%) or more the
total combined voting power or value of all classes of stock of the
Company, are eligible to participate in the 1996 Plan.
Participating employees ("Participants") may authorize for payroll
periods beginning on or after January 1, 1997, payroll deductions
from compensation for the purpose of funding the Participant's
stock purchase account ("Stock Purchase Account"). This deduction
shall be not less than one percent (1%) nor more than five percent
(5%) of the Participant's gross amount of compensation. The
purchase price per share of the Common Stock to be sold to
Participants pursuant to the 1996 Plan is the sum of (a) eighty-
five percent (85%) of the fair market value of each share on the
Offering Date on which such Offering commences or on the Exercise
Date (as defined in the 1996 Plan) on which such Offering expires,
whichever is the lower, and (b) any transfer, excise or similar tax
imposed on the transaction pursuant to which shares of Common Stock
are purchased. The "Offering Date" means the first day of each
January and July during which the 1996 Plan is in effect,
commencing with January 1, 1997. There is no holding period
regarding Common Stock purchased under the 1996 Plan, however, in
order for a participant to be entitled to the tax treatment
described in Section 423 of the Code with respect to the
Participant's sale of Common Stock purchased under the 1996 Plan,
such Stock must not be sold for at least one (1) year after
67
<PAGE>
acquisition under the 1996 Plan, except in the case of death. Any
Participant may voluntarily withdraw from the 1996 Plan by filing
a notice of withdrawal with the Board of Directors prior to the
fifteenth (15th) day of the last month in a Purchase Period (as
defined in the 1996 Plan). Upon such withdrawal, there shall be
paid to the Participant the amount, if any, standing to the
Participant's credit in the Participant's Stock Purchase Account.
If a Participant ceases to be an eligible employee, the entire
amount standing to the Participant's credit in the Participant's
Stock Purchase Account on the effective date of such occurrence
shall be paid to the Participant. The total deductions made by
Participants pursuant to the offering period of January 1, 1998,
through July 31, 1998, was $16,849 which was used to purchase
10,732 shares of the Company's Common Stock in August 1998. The
total deductions made by Participants pursuant to the offering
period of July 1, 1998, through December 31, 1998, was $22,334
which was used to purchase 17,517 shares of the Company's Common
Stock in January 1999.
Compensation of Directors
In 1998, we paid our outside director's fees based on monthly
payments of $1,000 for each month of service, resulting in the
three outside directors earning annual director's fees in the
total amount of $36,000. Subject to the election of each director,
either sixty-five percent (65%) or one hundred percent (100%) of
each director's fee is payable, in shares of our Common Stock
based on seventy-five percent (75%) of the fair market value of
the Common Stock determined on the business day immediately
preceding the date that the fee is due. The balance of each
director fee, if any, is payable in cash. The aggregate amount of
accrued director's fees paid during 1998 to the three outside
directors (Messrs. Colin, Gorlin and Zwecker) were as follows:
$24,000 was paid by the issuance of 22,834 shares of Common Stock
and approximately $12,000 was paid in cash, which included all
balance forward amounts from 1997. Reimbursement of expenses for
attending meetings of the Board are paid in cash at the time of the
applicable Board meeting. The outside directors do not receive
additional compensation for committee participation or special
assignments except for reimbursement of expenses. We do not
compensate the directors that also serve as our officers or
employees of our subsidiaries for their service as directors.
In September 1996, we issued a warrant ("Gorlin Warrant") to Steve
Gorlin, a Director, for services rendered, other than those
rendered as a Director. The Gorlin Warrant allows the holder to
purchase 200,000 shares of Common Stock of the Company for $1.75
per share from January 1, 1997, until September 15, 1999. The
Gorlin Warrant is subject to certain antidilution provisions.
We believe that it is important for our directors to have a
personal interest in our success and growth and for their interests
to be aligned with those of our stockholders. Therefore, under the
Company's 1992 Outside Directors Stock Option and Incentive Plan
("Outside Directors Plan"), each outside director is granted an
option to purchase up to 15,000 shares of Common Stock on the date
such director is initially elected to the Board of Directors and
receives on an annual basis an option to purchase up to another
5,000 shares of Common Stock, with the exercise price being the
fair market value of the Common Stock on the date that the option
is granted. No option granted under the Outside Directors Plan is
exercisable until after the expiration of six months from the date
the option is granted and no option shall be exercisable after the
expiration of ten (10) years from the date the option is granted.
As of December 31, 1998, options to purchase 160,000 shares of
Common Stock had been granted under the Outside Directors Plan.
The Outside Directors Plan also provides that each eligible
director shall receive, at such eligible director's option, either
sixty-five percent (65%) or one hundred percent (100%) of the fee
payable to such director for services rendered as a member of our
Board in Common Stock. In either case, the number of shares of our
Common Stock issuable to the eligible director shall be determined
by valuing the Common Stock of the Company at seventy-five percent
(75%) of its fair market value as defined by the Outside Directors
Plan. As of the date of this proxy statement, we have issued
248,615 shares of the Company's Common Stock in payment of director
fees, covering the period January 1, 1995 through December 31,
1998. The number of shares of Common Stock which may be issued in
the aggregate under the Outside Directors Plan, either under
options or stock awards, is 500,000 shares subject to adjustment.
68
<PAGE>
Although Dr. Centofanti is not compensated for his services
provided as a director, Dr. Centofanti is compensated for his
services rendered as an officer of the Company. See "Employment
Contracts, Termination of Employment and Change in Control
Arrangements" and "EXECUTIVE COMPENSATION -- Summary Compensation
Table."
Employment Contracts, Termination of Employment and Change in
Control Arrangements
During October 1997, Dr. Centofanti entered into a three (3) year
Employment Agreement which provided for, among other things, an
annual salary of $110,000 and the issuance of Non-Qualified Stock
Options ("Non-Qualified Stock Options"). The Non-Qualified Stock
Options provide Dr. Centofanti with the right to purchase an
aggregate of 300,000 shares of Common Stock as follows: (i) after
one year 100,000 shares of Common Stock at a price of $2.25 per
share, (ii) after two years 100,000 shares of Common Stock at a
price of $2.50 per share, and (iii) after three years 100,000
shares of Common Stock at a price of $3.00 per share. The Non-
Qualified Stock Options expire ten years after the date of the
Employment Agreement.
During April 1998, Mr. Warren entered into a two (2) year
employment agreement which provided for, among other things, an
annual salary of $87,000 and certain bonus payments. Upon
execution of the agreement, Mr. Warren received a bonus of
approximately $168,000 which was paid in the form of 94,697 shares
of Common Stock, as determined by dividing the bonus amount by the
average of the closing bid prices of the Common Stock on the NASDAQ
Small Cap for the five trading days prior to the date of execution
of this agreement. Mr. Warren is also to receive a bonus of
approximately $168,000 which is to be paid in monthly installments
over the two years of the agreement, with approximately $112,000
paid in 1998.
The Company's 1991 Performance Equity Plan and the 1993 Non-
Qualified Stock Option Plan (collectively, the "Plans") provide
that in the event of a change in control (as defined in the Plans)
of the Company, each outstanding option and award granted under the
Plans shall immediately become exercisable in full notwithstanding
the vesting or exercise provisions contained in the stock option
agreement. As a result, all outstanding stock options and awards
granted under the Plans to our executive officers shall
immediately become exercisable upon such a change in control of the
Company.
Compensation Committee Interlocks and Insider Participation
During 1998, the Compensation and Stock Option Committee for the
Company's Board of Directors was composed of Mark Zwecker and
Steve Gorlin. Mr. Zwecker was neither an officer nor an employee
during the year 1998, however, Mr. Zwecker did serve as our
Secretary from June 1995 until June 30, 1996. Mr. Gorlin was
neither an officer nor an employee of the Company during 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table sets forth information as to the shares of
voting securities beneficially owned as of March 15, 1999, by each
person known by us to be the beneficial owner of more than five
percent (5%) of any class of our voting securities. Beneficial
ownership by our stockholders has been determined in accordance
with the rules promulgated under Section 13(d) of the Securities
Exchange Act of 1934, as amended. A person is deemed to be a
beneficial owner of any securities of which that person has the
right to acquire beneficial ownership of such securities within 60
days from March 15, 1999.
69
<PAGE>
<TABLE>
<CAPTION>
Amount and Percent
Name of Title Nature of of
Beneficial Owner of Class Ownership Class(1)
_______________________ _________ ____________ ________
<S> <C> <C> <C>
Dr. Louis F. Centofanti(2) Common 976,745(2) 7.74%
Steve Gorlin(3) Common 647,607(3) 5.12%
RBB Bank
Aktiengesellschaft(4) Common 15,367,911(4) 57.50%
<FN>
(1) In computing the number of shares and the percentage of
outstanding Common Stock "beneficially owned" by a person, the
calculations are based upon 12,411,080 shares of Common Stock
issued and outstanding on March 15, 1999 (excluding 943,000
Treasury Shares), plus the number of shares of Common Stock which
such person has the right to acquire beneficial ownership of within
(60) days.
(2) These shares include (i) 463,434 shares held of record by
Dr. Centofanti; (ii) 61,048 shares receivable upon exercise of
warrants to purchase Common Stock; (iii) options to purchase 45,763
shares granted pursuant to the 1991 Performance Equity Plan and the
1993 Non-qualified Stock Option Plan, which are immediately
exercisable; (iv) 100,000 shares granted pursuant to Dr.
Centofanti's Employment Agreement, which are immediately
exercisable; and (v) 304,000 shares held by the wife of Dr.
Centofanti and 2,500 shares held by the son of Dr. Centofanti's
wife. This amount does not include options to purchase 4,000
shares granted pursuant to the above referenced plans or the
options to purchase 200,000 shares granted pursuant to Dr.
Centofanti's Employment Agreement with the Company, which are not
exercisable within sixty (60) days. Dr. Centofanti has sole voting
and investment power of these shares, except for the shares held by
Dr. Centofanti's wife and his wife's son, for which Dr. Centofanti
shares voting and investment power. The business address of Dr.
Centofanti, for the purposes hereof, is c/o Perma-Fix Environmental
Services, Inc., 1940 N.W. 67th Place, Gainesville, Florida 32653.
(3) Mr. Gorlin has sole voting and investment power over these
shares which include: (i) 412,607 shares held of record by
Mr. Gorlin; (ii) 200,000 shares which Mr. Gorlin has the right to
acquire, until September 15, 1999, under the terms of a Warrant
granted by the Company to Mr. Gorlin in September 1996; (iii)
Options to purchase 35,000 shares granted pursuant to the 1992
Outside Directors Stock Option and Incentive Plan which are
immediately exercisable. The business address of Mr. Gorlin, for
the purposes hereof, is c/o Perma-Fix Environmental Services, Inc.,
1940 N.W. 67th Place, Gainesville, Florida 32653. See "Certain
Relationships and Related Transactions."
(4) These outstanding shares of Preferred Stock consist of the
Series 3 Preferred, Series 8 Preferred and Series 10 Preferred
(collectively, the "RBB Preferred") that RBB Bank acquired from the
Company pursuant to the Subscription Agreements and the RBB
Exchange Agreements. The RBB Preferred have no voting rights,
except as required by law. The shares of Common Stock included as
beneficially owned by RBB Bank in this table include: (i) 1,051,361
shares of Common Stock directly held by RBB Bank; (ii) 4,612,613
shares that RBB Bank is entitled to receive upon conversion of the
4,000 shares of Series 3 Preferred held by RBB Bank (assuming the
average of the closing bid quotations for the Common Stock for the
five trading days immediately preceding each conversion date equals
$1.15625 per share, which was the closing bid of the Common Stock
on March 15, 1999); (iii) 2,702,703 shares that RBB Bank is
entitled to receive upon conversion of the 2,500 shares of Series
8 Preferred (assuming the Conversion Price Adjustment (as defined
in "Certain Relationships and Related Party Transactions") is in
effect and the average of the closing bid quotations for the Common
Stock for the five trading days immediately preceding each
conversion date equals $1.15625 per share, which was the closing
bid of the Common Stock on March 15, 1999); (iv) 34,666 shares of
Common Stock that RBB Bank may receive in payment of the accrued
dividends on the Series 3 Preferred; (v) 159,505 shares that RBB
70
<PAGE>
Bank may receive in payment of the accrued dividends on the Series
8 Preferred; (vi) 3,243,243 shares that RBB Bank is entitled to
receive upon conversion of the 3,000 shares of Series 10 Preferred
(assuming the Conversion Price Adjustment (as defined in "Certain
Relationships and Related Party Transactions") is in effect and
the average of the closing bid quotations for the Common Stock for
the five trading days immediately preceding each conversion date
equals $1.15625 per share, which was the closing bid of the Common
Stock on March 15, 1999); and (vii) 557,570 shares that RBB Bank
may receive in payment of the accrued dividends on the Series 10
Preferred. The above calculation also includes 3,006,250 shares of
Common Stock that RBB Bank has the right to acquire upon exercise
of various warrants, (i) to purchase up to 2,000,000 shares of
Common Stock after December 31, 1996, which were granted to RBB
Bank in connection with the sale to RBB Bank of the Series 3
Preferred at an exercise price of $2.00 per share for 1,000,000
shares, and $3.50 per share for 1,000,000 shares; (ii) to purchase
up to 656,250 shares of Common Stock after December 31, 1997,
which were granted to RBB Bank in connection with the sale to RBB
Bank of the Series 4 Preferred at an exercise price of $1.8125 per
share for 375,000 shares and $2.125 per share for 281,250 shares;
and (iii) to purchase up to 350,000 shares of Common Stock after
June 30, 1998, which were granted to RBB Bank in connection with
the sale to RBB Bank of the Series 10 Preferred at an exercise
price of $2.50 per share for 150,000 shares, and $1.875 per share
for 200,000 shares. RBB Bank has advised the Company that it is
holding the RBB Preferred on behalf of various clients of RBB Bank
and that no client is the beneficial owner of more than 250 shares
of such RBB Preferred. RBB Bank may be considered to be the
beneficial owner of these shares with its clients. See "Potential
Change in Control" and "Certain Relationships and Related
Transactions." RBB Bank's address is Burgring 16, 8010 Graz,
Austria.
</FN>
</TABLE>
Security Ownership of Management
<TABLE>
<CAPTION>
The following table sets forth information as to the shares of
voting securities beneficially owned as of March 15, 1999, by each
Director and Named Executive Officers of the Company listed in the
Summary Compensation table and all Directors and executive officers
of the Company as a group. Beneficial ownership by the Company's
stockholders has been determined in accordance with the rules
promulgated under Section 13(d) of the Exchange Act. A person is
deemed to be a beneficial owner of any voting securities for which
that person has the right to acquire beneficial ownership within
sixty (60) days. All voting securities are owned both of record
and beneficially unless otherwise indicated.
Number of Shares
Name of of Common Stock Percentage of
Beneficial Owner Beneficially Owned Common Stock(1)
_____________________________ __________________ _______________
<S> <C> <C>
Dr. Louis F. Centofanti(2)(3) 976,745(3) 7.74%
Steve Gorlin(2)(4) 647,607(4) 5.12%
Mark A. Zwecker(2)(5) 210,209(5) 1.69%
Jon Colin(2)(6) 33,582(6) *
Richard T. Kelecy(2)(7) 58,740(7) *
Timothy Kimball(2)(8) 42,067(8) *
Roger Randall(2)(9) 40,000(9) *
Bernhardt Warren(2)(10) 105,073(10) *
Directors and Executive Officers
as a Group (8 persons) 2,111,023 16.20%
<FN>
*Indicates beneficial ownership of less than one percent (1%).
(1) See footnote (1) of the table under "Security Ownership of
Certain Beneficial Owners."
71
<PAGE>
(2) The business address of such person, for the purposes hereof,
is c/o Perma-Fix Environmental Services, Inc., 1940 N.W. 67th
Place, Gainesville, Florida 32653.
(3) See footnote (2) of the table under "Security Ownership of
Certain Beneficial Owners."
(4) See footnote (3) of the table under "Security Ownership of
Certain Beneficial Owners."
(5) Mr. Zwecker has sole voting and investment power over these
shares which include: (i) 171,327 shares of Common Stock held
of record by Mr. Zwecker; (ii) 14,882 options to purchase
Common Stock granted pursuant to the 1991 Performance Equity
Plan; (iii) 4,000 options to purchase Common Stock pursuant to
the 1993 Non-Qualified Stock Option Plan, which are
immediately exercisable; and (iv) options to purchase 20,000
shares granted pursuant to the 1992 Outside Directors Stock
Option and Incentive Plan which are immediately exercisable.
Does not include options to purchase 1,000 shares of Common
Stock granted pursuant to the 1993 Non-Qualified Stock Option
Plan which are not exercisable within sixty (60) days.
(6) Mr. Colin has sole voting and investment power over these
shares which include: (i) 13,582 shares held of record by
Mr. Colin, and (ii) options to purchase 20,000 shares granted
pursuant to the 1992 Outside Directors Stock Option and
Incentive Plan which are immediately exercisable.
(7) Mr. Kelecy has sole voting and investment power over 2,740
shares of Common Stock held of record by Mr. Kelecy and 56,000
options to purchase Common Stock granted pursuant to the 1993
Non-Qualified Stock Option Plan. Does not include options to
purchase 104,000 shares of Common Stock granted pursuant to
the 1993 Non-Qualified Stock Option Plan which are not
exercisable within sixty (60) days.
(8) Mr. Kimball has sole voting and investment power over these
shares which include: (i) 3,184 shares held of record by Mr.
Kimball, (ii) 14,883 options to purchase Common Stock granted
pursuant to the 1991 Performance Equity Plan, and (iii)
24,000 options to purchase Common Stock pursuant to the 1993
Non-Qualified Stock Option Plan, which are immediately
exercisable. Does not include options to purchase 61,000
shares of Common Stock granted pursuant to the 1993 Non-
Qualified Stock Option Plan which are not exercisable within
sixty (60) days.
(9) Mr. Randall has sole voting and investment power over these
shares which include: (i) 40,000 options to purchase Common
Stock pursuant to the 1993 Non-Qualified Stock Option Plan,
which are immediately exercisable. Does not include options
to purchase 100,000 shares of Common Stock granted pursuant to
the 1993 Non-Qualified Stock Option Plan which are not
exercisable within sixty (60) days.
(10) Mr. Warren has sole voting and investment power over these
shares which include 99,073 shares held by record by Mr.
Warren and 6,000 options to purchase Common Stock granted
pursuant to the 1993 Non-Qualified Stock Option Plan. Does
not include options to purchase 49,000 shares of Common Stock
granted pursuant to the 1993 Non-Qualified Stock Option Plan
which are not exercisable within sixty (60) days.
</FN>
</TABLE>
Potential Change in Control
RBB Bank has the right to acquire an aggregate of approximately
14,616,170 shares of Common Stock, consisting of (i) 4,612,613
shares upon conversion of the issued and outstanding Series 3
Preferred assuming the average closing bid quotation for the Common
Stock for five trading days immediately preceding each of the
conversion date or dates equals $1.15625 per share, which was the
closing bid price of the Common Stock on March 15, 1999, and (ii)
2,702,703 shares upon conversion of the issued and outstanding
Series 8 Preferred assuming the Conversion Price Adjustment (as
defined in "Certain Relationships and Related Transactions") is in
effect and the average closing bid quotation for the Common Stock
for five trading days immediately preceding each of the conversion
date or dates equals as illustrated above, depending upon the
average closing bid price of Common Stock at the date of
conversion; (iii) 3,006,250 shares upon the exercise of the RBB
72
<PAGE>
Series 3 Warrants, RBB Series 4 Warrants and RBB Series 10
Warrants and (iv) 3,243,243 shares upon conversion of the issued
and outstanding Series 10 Preferred assuming the Conversion Price
Adjustment (as defined in "Certain Relationships and Related
Transactions") is in effect and the average closing bid quotation
for the Common Stock for five trading days immediately preceding
each of the conversion date or dates equals $1.15625 per share,
which was the closing bid price of the Common Stock on March 15,
1999. Upon such conversion and exercise, RBB Bank will own
approximately 56.3% of the outstanding shares of Common Stock of
the Company, which includes the 1,051,361 shares of Common Stock
directly held by RBB Bank as of March 15, 1999, but does not
include the 751,741 shares of Common Stock which have previously
been or will be registered, to be issuable for payment of
dividends on the Series 3 Preferred, Series 4 Preferred (prior to
its exchange), Series 6 Preferred (prior to its exchange) and
Series 10 Preferred.
<TABLE>
<CAPTION>
The table below is provided in an attempt to approximate the
potential issuance of Common Stock which could result from
conversion of the Company's currently outstanding preferred stock
assuming various average closing bid prices for the five days prior
to conversion. As the price of the Common Stock moves downward,
the number of shares of Common Stock which may be issued upon
conversion of the Series 3 Preferred, Series 8 Preferred, Series 9
Preferred and Series 10 Preferred increases as follows:
<S> <C> <C> <C> <C>
Average Closing Bid Price $2.50 $2.00 $1.00 $0.25
of Common Stock for five
days prior to conversion
Series 3 Conversion Price $1.50(1) $1.50(1) $0.75(1) $0.50(1)
(minimum of $0.50, maximum
$1.50)
Number of Shares of Common 2,666,667 2,666,667 5,333,333 8,000,000
Stock Issuable upon Series
3 Conversion
Series 8 Conversion Price $1.8125(2) $1.60(2) $0.80(2) $0.20(2)
(maximum $1.8125)
Number of Shares of Common 1,379,311 1,562,500 3,125,000 12,500,000
Stock Issuable upon Series 8
Conversion
Series 9 Conversion Price $1.8125(2) $1.60(2) $0.80(2) $0.20(2)
(maximum $1.8125)
Number of Shares of Common 193,103(3) 218,750 437,500 1,750,000
Stock Issuable upon Series
9 Conversion
Series 10 Conversion Price $1.875(2) $1.60(2) $0.80(2) $0.20(2)
(maximum $1.875)
Number of Shares of Common 1,600,000 1,875,000 3,750,000 15,000,000
Stock Issuable upon Series
10 Conversion
Total shares of Common Stock 5,839,081 6,322,917 12,645,833 37,250,000(4)
Issuable Upon Conversion
<FN>
(1) 75% of the product of the average of the closing bid quotation
of the Common Stock for the five trading days immediately
preceding the conversion date.
(2) 80% of the product of the average of the closing bid quotation
of the Common Stock for the five trading days immediately
preceding the conversion date.
(3) Although conversion at the maximum conversion price would
result in the issuance of 193,103 shares of Common Stock, the
Company agreed to register 200,000 shares to be issuable upon
conversion of the Series 9 Preferred.
73
<PAGE>
(4) The Company has 50,000,000 shares of Common Stock authorized
for issuance. There are 12,267,631 shares of Common Stock
issued and outstanding as of the date of this Prospectus, and
13,255,796 shares are issuable upon exercise of warrants
outstanding as of the date of this Prospectus. The Company
would probably not have sufficient shares of Common Stock
authorized but unissued if it were required to issue
37,250,000 shares upon conversion of the Series 3 Preferred,
Series 8 Preferred, Series 9 Preferred and Series 10 Preferred
and 13,255,796 shares upon exercise of all such outstanding
warrants.
</FN>
</TABLE>
As illustrated above, depending upon the average closing bid price
of Common Stock at the date of conversion, RBB Bank could be the
largest single shareholder of the Company, and the Company may not
be able to avoid an actual change in control of the Company if RBB
Bank seeks such a change in control. Moreover, if such conversion
and exercise results in RBB Bank acquiring more than 50% of the
then outstanding Common Stock of the Company, the Company would not
be able to avoid a change in control. The foregoing estimates
assume that no other shares of Common Stock are issued by the
Company, no other warrants or options are exercised, the Company
does not acquire additional shares of Common Stock as Treasury
Stock, and RBB Bank does not dispose of any shares of Common Stock.
See "Certain Relationships and Related Transactions."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of January 1, 1998, Dr. Louis F. Centofanti, Chairman of the
Board and Chief Executive Officer of the Company , held 40,000
Class B Warrants to purchase Common Stock ("Class B Warrants") each
of which expires on June 17, 1999 and entitles the holder thereof to
purchase one (1) share of Common Stock for $5.00 per share. The Class B
Warrants are subject to certain antidilution provisions, which have
resulted in an adjustment of such purchase price from $5.00 to $3.28 per
share.
As of January 1, 1998 RBB Bank Aktiengesellschaft, located in Graz,
Austria ("RBB Bank") was the holder of 4,000 shares of Series 3 Class C
Convertible Preferred Stock, par value $.001 ("Series 3 Preferred"). The
Company issued 54,528 shares during January 1998 in payment of accrued
dividends for the period July through December 1997. The accrued
dividends for the period January 1, 1998, through June 3, 1998, in the
amount of approximately $119,000 were paid in July 1998, in the form of
62,027 shares of Common Stock of the Company. The accrued dividends for
the period July 1, 1998, through December 31, 1998, in the amount of
approximately $121,000 were paid in January 1999, in the form of cash.
Effective February 28, 1998, the Company entered into an Exchange
Agreement with RBB Bank (the "Second RBB Exchange Agreement"),
which provided that the 2,500 shares of Series 6 Preferred held by
RBB Bank were tendered to the Company in exchange for 2,500 of a
newly-created Series 8 Class H Preferred Stock, par value $.001 per
share ("Series 8 Preferred"). The exchange was made in an exchange
offer exempt from registration pursuant to Section 3(a)(9) of the
Securities Act, and/or Section 4(2) of the Securities Act and/or
Regulation D as promulgated under the Securities Act. The Series
8 Preferred was issued to RBB Bank during July 1998.
The rights under the Series 8 Preferred are the same as the rights
under the Series 6 Preferred, except for the conversion price. The
Series 8 Preferred is convertible at $1.8125 per share, except
that, in the event the average closing bid price reported in the
over-the-counter market, or the closing sale price if listed on a
national securities exchange for the five (5) trading days prior to
a particular date of conversion, shall be less than $2.50, the
conversion price for only that particular conversion shall be the
average of the closing bid quotations of the Common Stock as
reported on the over-the-counter market, or the closing sale price
if listed on a national securities exchange, for the five (5)
trading days immediately proceeding the date of such particular
conversion notice provided by the holder to the Company multiplied
by 80%. Notwithstanding the foregoing, the conversion price shall
not be less than a minimum of $.75 per share, which minimum shall
be eliminated from and after September 6, 1998.
74
<PAGE>
The terms of the Series 8 Preferred has a liquidation preference
over the Company's Common Stock equal to $1,000 consideration per
outstanding share of Series 8 Preferred (the "Series 8 Liquidation
Value"), plus an amount equal to all accrued and unpaid dividends.
The Series 8 Preferred accrues dividends on a cumulative basis at
a rate of four percent (4%) per annum of the Series 8 Liquidation
Value ("Series 8 Dividend Rate"), and is payable semi-annually when
and as declared by the Board of Directors. 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 8 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 Series 8 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, 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 Company paid to RBB Bank the dividends on the Series 6
Preferred which accrued from the date of its issuance through
February 28, 1998, the effective date of the Second RBB Exchange
Agreement by issuing to RBB Bank 7,652 shares of Common Stock in
payment of such accrued dividends. By letter dated July 14, 1998,
RBB Bank agreed to waive certain penalties regarding the Series 4
Preferred and Series 6 Preferred. The accrued dividends for the
period July 1, 1997, through December 31, 1997, for the Series 4
and Series 6 Preferred, total approximately $55,000, which were
paid in January 1998, in the form of 27,377 shares of Common Stock
of the Company. The accrued dividends for the Series 6 and 8
Preferred for the period January 1, 1998, through June 30, 1998, in
the amount of approximately $49,000, were paid in July 1998, in the
form of 25, 072 shares of Common Stock of the Company. The accrued
dividends for the Series 8 Preferred for the period July 1, 1998,
through December 31, 1998, in the amount of approximately $50,000,
were paid in February 1999, the form of 38,046 shares of Common
Stock of the Company.
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. 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 was 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.
75
<PAGE>
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
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 of the date of this
report, no shares of the Series 10 Preferred have been converted.
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.
In March, 1999, the Company entered into an Exchange Agreement
dated March 14, 1999, with Liviakis and Prag whereby the warrants
described in the preceding paragraph for the purchase of 2,500,000
shares of Common Stock were canceled and exchanged for 200,000
shares of Common Stock.
76
<PAGE>
The accrued dividends for the Series 10 Preferred for the period
July 14, 1998, through December 31, 1998, in the amount of
approximately $56,000, were paid in February 1999, in the form of
42,430 shares of Common Stock of the Company.
The Company believes that each of the transactions set forth above
involving affiliates, officers or Directors of the Company was or
is on terms at least as favorable to the Company as could have been
obtained from an unaffiliated third party. The Company has adopted
a policy that any transactions or loans between the Company and its
Directors, principal stockholders or affiliates must be approved by
a majority of the disinterested Directors of the Company and must
be on terms no less favorable to the Company than those obtainable
from unaffiliated third parties.
77
<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
The following documents are filed as a part of this report:
(a)(1) Consolidated Financial Statements
See Item 8 for the Index to Consolidated Financial
Statements.
(a)(2) Financial Statement Schedules
See Item 8 for the Index to Consolidated Financial
Statements (which includes the Index to Financial
Statement Schedules)
(a)(3) Exhibits
The Exhibits listed in the Exhibit Index are filed or
incorporated by reference as a part of this report.
(b) Reports on Form 8-K
No report on Form 8-K was filed by the Company during the
fourth quarter of 1998.
78
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Perma-Fix Environmental Services, Inc.
By /s/ Dr. Louis F. Centofanti Date March 26, 1999
_______________________________ ___________________
Dr. Louis F. Centofanti
Chairman of the Board
Chief Executive Officer
By /s/ Richard T. Kelecy Date March 26, 1999
__________________________________ ___________________
Richard T. Kelecy
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in capacities and on the dates
indicated.
/s/ Steve Gorlin Date March 26, 1999
___________________________________ ____________________
Steve Gorlin, Director
/s/ Mark A. Zwecker Date March 26, 1999
___________________________________ ____________________
Mark A. Zwecker, Director
/s/ Jon Colin Date March 26, 1999
___________________________________ ____________________
Jon Colin, Director
/s/ Dr. Louis F. Centofanti Date March 26, 1999
___________________________________ ____________________
Dr. Louis F. Centofanti, Director
79
<PAGE>
<PAGE>
SCHEDULE II
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
<TABLE>
<CAPTION>
VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 1998, 1997 and 1996
(Dollars in thousands)
Additions
Charged to
Balance at Costs, Balance
Beginning Expenses At End
Description of Year and Other Deductions of Year
______________________ __________ __________ __________ _______
<S> <C> <C> <C> <C>
Year ended December 31, 1998:
Allowance for doubtful accounts(1) $ 374 $ 61 $ 122 $ 313
Year ended December 31, 1997:
Allowance for doubtful accounts(1) $ 340 $ 133 $ 99 $ 374
Year ended December 31, 1996:
Allowance for doubtful accounts(1) $ 351 $ 17 $ 28 $ 340
Divestiture reserve 450 - 450 -
Restructuring reserve 257 - 257 -
<FN>
(1) Excludes Perma-Fix of Memphis, Inc. facility considered a
discontinued operation. See Note 4 of Notes to Consolidated
Financial Statements.
</FN>
</TABLE>
80
<PAGE>
<PAGE>
EXHIBIT INDEX
Exhibit Sequential
No. Description Page No.
_______ ___________ __________
3(i) Restated Certificate of Incorporation, as amended, and
all Certificates of Designations are incorporated by
reference from Exhibit 3(i) to the Company's Form 10-Q
for the quarter ended June 30, 1998
3(ii) Bylaws are incorporated by reference from the Company's
Registration Statement, No. 33-51874
4.1 Warrant Agreement, dated May 15, 1994, between the
Company and Continental Stock Transfer & Trust Company,
as Warrant Agent, is incorporated by reference from
Exhibit 4.2 to the Company's Form 10-Q for the quarter
ended June 30, 1994
4.2 Specimen Warrant Certificate relating to Class B
Warrants, is incorporated by reference from Exhibit 4.9
to the Company's Registration Statement, No. 33-85118
4.3 Specimen Common Stock Certificate is incorporated by
reference from Exhibit 4.3 to the Company's Registration
Statement, No. 33-51874
4.4 Form of Subscription Agreement is incorporated by
reference from Exhibit 4.1 to the Company's Form 10-Q for
the quarter ended June 30, 1994
4.5 Subscription and Purchase Agreement dated July 17, 1996,
between the Company and RBB Bank Aktiengesellschaft is
incorporated by reference from Exhibit 4.4 to the
Company's Form 10-Q for the quarter ended June 30, 1996
4.6 Form of Certificate for Series 3 Preferred is
incorporated by reference from Exhibit 4.6 to the
Company's Form 10-Q for the quarter ended June 30, 1996
4.7 Exchange Agreement dated November 6, 1997, to be
considered effective as of September 16, 1997, between
the Company and RBB Bank is incorporated by reference
from Exhibit 4.11 to the Company's Form 10-Q for the
quarter ended September 30, 1997
4.8 Exchange Agreement dated as of October 31, 1997, to be
considered effective as of September 16, 1997, between
the Company and the Infinity Fund, L.P. is incorporated
by reference from Exhibit 4.12 to the Company's Form 10-Q
for the quarter ended September 30, 1997
4.9 Loan and Security Agreement, dated January 15, 1998,
between the Company, subsidiaries of the Company and
Congress Financial Corporation (Florida) is incorporated
by reference from Exhibit 4.1 to the Company's Form 8-K
dated January 15, 1998
4.10 Private Securities Subscription Agreement, dated June 30,
1998, between the Company and RBB Bank Aktiengesellschaft
as incorporated by reference from Exhibit 4.1 to the
Company's Form 8-K dated June 30, 1998.
4.11 Certificate of Designations of Series 10 Class J
Convertible Preferred Stock, dated July 16, 1998, as
incorporated by reference from Exhibit 3(i) above.
4.12 Specimen copy of Certificate relating to the Series 10
Class J Convertible Preferred Stock as incorporated by
reference from Exhibit 4.3 to the Company's Form 8-K,
dated June 30, 1998.
81
<PAGE>
4.13 Certificate of Designations of Series 8 Class H
Convertible Preferred Stock as incorporated by reference
from Exhibit 3(i) above.
4.14 Specimen copy of Certificate relating to the Series 8
Class H Convertible Preferred Stock as incorporated by
reference from Exhibit 4.5 to the Company's Form 10-Q for
the quarter ended June 30, 1998.
4.15 Certificate of Designations of Series 9 Class I
Convertible Preferred Stock as incorporated by reference
from Exhibit 3(i) above.
4.16 Specimen copy of Certificate relating to the Series 9
Class I Convertible Preferred Stock as incorporated by
reference from Exhibit 4.7 to the Company's Form 10-Q for
the quarter ended June 30, 1998.
4.17 Congress Financial, Inc. subordination and consent letter
dated June 25, 1998, as incorporated by reference from
Exhibit 4.1 to the Company's Form 10-Q for the quarter
ended September 30, 1998.
4.18 Congress Financial, Inc. subordination and consent letter
dated October 16, 1998, as incorporated by reference from
Exhibit 4.2 to the Company's Form 10-Q for the quarter
ended September 30, 1998.
4.19 Congress Financial, Inc. subordination and consent letter
dated October 16, 1998, as incorporated by reference from
Exhibit 4.3 to the Company's Form 10-Q for the quarter
ended September 30, 1998.
10.1 Note and Warrant Purchase Agreement, dated February 10,
1992, between the Company and Al Warrington, Productivity
Fund II, L.P. ("Productivity Fund"), Environmental
Venture Fund, L.P. ("Environmental Venture Fund"), and
Steve Gorlin is incorporated by reference from Exhibit
4.1 of the Company's Registration Statement, No. 33-85118
10.2 Amendments, dated February 7, 1997, to Common Stock
Warrants for the Purchase of Shares of Common Stock,
dated February 10, 1992, between the Company and each of
Alfred C. Warrington, IV, Productivity Fund II, L.P.,
Environmental Venture Fund II, L.P., Steve Gorlin, and
D.H. Blair Investment Banking Corporation is incorporated
by reference from, respectively, Exhibits 4.2, 4.3, 4.4,
4.5 and 4.6 to the Company's Form 8-K dated February 7,
1997
10.3 1991 Performance Equity Plan of the Company is
incorporated herein by reference from Exhibit 10.3 to the
Company's Registration Statement, No. 33-51874
10.4 Warrant, dated September 1, 1994, granted by the Company
to Productivity Fund is incorporated herein by reference
from Exhibit 4.12 to the Company's Registration Statement
No. 33-85118
10.5 Warrant, dated September 1, 1994, for the Purchase of
Common Stock granted by the Company to Environmental
Venture Fund is incorporated by reference from Exhibit
4.14 to the Company's Registration Statement No. 33-85118
10.6 Warrant, dated September 1, 1994, for the Purchase of
Common Stock granted by the Company to Warrington is
incorporated by reference from Exhibit 4.16 to the
Company's Registration Statement No. 33-85118
82
<PAGE>
10.7 Warrant, dated September 1, 1994, for the Purchase of
Common Stock granted by the Company to Joseph Stevens &
Company, L.P. ("Stevens") is incorporated by reference
from Exhibit 4.17 to the Company's Registration Statement
No. 33-85118
10.8 Warrant, dated October 6, 1994, for the Purchase of
Common Stock granted by the Company to Stevens is
incorporated by reference from Exhibit 4.20 to the
Company's Registration Statement No. 33-85118.
10.9 Warrant, dated September 30, 1994, for the Purchase of
Shares of Common Stock granted by the Company to Ally
Capital Management, Inc. is incorporated by reference
from Exhibit 4.27 to the Company's Registration Statement
No. 33-85118.
10.10 Warrant, dated June 17, 1994, for the purchase of Common
Stock granted by the Company to Sun Bank, National
Association is incorporated by reference from Exhibit 4.2
to the Company's Form 8-K dated June 17, 1994.
10.11 Warrant, dated September 1, 1994, for the Purchase of
Shares of Common Stock granted by the Company to D. H.
Blair Investment Banking Corporation is incorporated by
reference from Exhibit 10.24 to the Company's Form 10-K
for the year ended December 31, 1994. Blair assigned a
portion of its initial warrant to certain officers and
directors of Blair. The warrants issued to such officers
and directors are substantially similar to the warrant
issued to Blair, except as to name of the warrant holder
and the number of shares covered by each such warrant, as
follows:
J. Morton Davis 9,775 shares
Martin A. Bell 8,000 shares
Alan Stahler 39,100 shares
Kalman Renov 39,100 shares
Richard Molinsky 25,125 shares
Jeff Berns 25,500 shares
Nick DiFalco 21,000 shares
Richard Molinsky 50,250 shares
and the Company agrees to file copies of the omitted
documents to the Commission upon the Commission's
request.
10.12 1992 Outside Directors' Stock Option Plan of the Company
is incorporated by reference from Exhibit 10.4 to the
Company's Registration Statement, No. 33-51874.
10.13 First Amendment to 1992 Outside Directors' Stock Option
Plan is incorporated by reference from Exhibit 10.29 to
the Company's Form 10-K for the year ended December 31,
1994.
10.14 Second Amendment to the Company's 1992 Outside Directors'
Stock Option Plan, is incorporated by reference from the
Company's Proxy Statement, dated November 4, 1994.
10.15 Third Amendment to the Company's 1992 Outside Directors'
Stock Option Plan is incorporated by reference from the
Company's Proxy Statement, dated November 8, 1996.
83
<PAGE>
10.16 Fourth Amendment to the Company's 1992 Outside Directors'
Stock Option Plan is incorporated by reference from the
Company's Proxy Statement, dated April 20, 1998.
10.17 1993 Non-qualified Stock Option Plan is incorporated by
reference from the Company's Proxy Statement, dated
October 12, 1993.
10.18 401(K) Profit Sharing Plan and Trust of the Company is
incorporated by reference from Exhibit 10.5 to the
Company's Registration Statement, No. 33-51874.
10.19 Common Stock Purchase Warrant Certificate, dated July 19,
1996, granted to RBB Bank Aktiengesellschaft is
incorporated by reference from Exhibit 10.1 to the
Company's Form 10-Q for the quarter ended June 30, 1996.
10.20 Common Stock Purchase Warrant Certificate, dated July 19,
1996, granted to RBB Bank Aktiengesellschaft is
incorporated by reference from Exhibit 10.2 to the
Company's Form 10-Q for the quarter ended June 30, 1996.
10.21 Common Stock Purchase Warrant Certificate No. 1-9-96,
dated September 16, 1996, between the Company and J. P.
Carey Enterprises, Inc. is incorporated by reference
from Exhibit 4.8 to the Company's Registration Statement,
No. 333-14513.
10.22 Common Stock Purchase Warrant Certificate No. 2-9-96,
dated September 16, 1996, between the Company and J. P.
Carey Enterprises, Inc. is incorporated by reference from
Exhibit 4.9 to the Company's Registration Statement, No.
333-14513.
10.23 Common Stock Purchase Warrant Certificate No. 3-9-96,
dated September 16, 1996, between the Company and J W
Charles Financial Services, Inc. is incorporated by
reference from Exhibit 4.10 to the Company's Registration
Statement, No. 333-14513.
10.24 Common Stock Purchase Warrant Certificate No. 4-9-96,
dated September 16, 1996, between the Company and Search
Group Capital, Inc. is incorporated by reference from
Exhibit 4.11 to the Company's Registration Statement, No.
333-14513.
10.25 Common Stock Purchase Warrant Certificate No. 5-9-96,
dated September 16, 1996, between the Company and Search
Group Capital, Inc. is incorporated by reference from
Exhibit 4.12 to the Company's Registration Statement, No.
333-14513.
10.26 Common Stock Purchase Warrant Certificate No. 6-9-96,
dated September 16, 1996, between the Company and Search
Group Capital, Inc. is incorporated by reference from
Exhibit 4.13 to the Company's Registration Statement, No.
333-14513.
10.27 Common Stock Purchase Warrant Certificate No. 7-9-96,
dated September 16, 1996, between the Company and Marvin
S. Rosen is incorporated by reference from Exhibit 4.14
to the Company's Registration Statement, No. 333-14513.
10.28 Common Stock Purchase Warrant Certificate No. 8-9-96,
dated September 16, 1996, between the Company and D. H.
Blair Investment Banking Corporation is incorporated by
reference from Exhibit 4.15 to the Company's Registration
Statement, No. 333-14513.
84
<PAGE>
10.29 Common Stock Purchase Warrant Certificate No. 9-9-96,
dated September 16, 1996, between the Company and Steve
Gorlin is incorporated by reference from Exhibit 4.16 to
the Company's Registration Statement, No. 333-14513.
10.30 Common Stock Purchase Warrant ($2.10) dated June 9, 1997,
between the Company and RBB Bank Aktiengesellschaft is
incorporated by reference from Exhibit 4.4 to the
Company's Form 8-K, dated June 11, 1997.
10.31 Common Stock Purchase Warrant ($2.50) dated June 9, 1997,
between the Company and RBB Bank Aktiengesellschaft is
incorporated by reference from Exhibit 4.5 to the
Company's Form 8-K, dated June 11, 1997.
10.32 Common Stock Purchase Warrant ($1.50) dated June 9, 1997,
between the Company and J W Charles Securities, Inc. is
incorporated by reference from Exhibit 4.6 to the
Company's Form 8-K, dated June 11, 1997.
10.33 Common Stock Purchase Warrant ($2.00) dated June 9, 1997,
between the Company and J W Charles Securities, Inc. is
incorporated by reference from Exhibit 4.7 to the
Company's Form 8-K, dated June 11, 1997.
10.34 Stock Purchase Agreement, dated June 30, 1997, between
the Company and Dr. Louis F. Centofanti is incorporated
by reference from Exhibit 4.4 to the Company's Form 8-K,
dated July 7, 1997.
10.35 Amended Stock Purchase Agreement, dated October 7, 1997,
between the Company and Dr. Louis F. Centofanti is
incorporated by reference from Exhibit 10.6 to the
Company's Form 10-Q for the quarter ended September 30,
1997.
10.36 Employment Agreement, dated October 1, 1997, between the
Company and Dr. Louis F. Centofanti is incorporated by
reference from Exhibit 10.9 to the Company's Form 10-Q
for the quarter ended September 30, 1997.
10.37 Employment Agreement Dated April 7, 1998, between the
Company and Bernhardt Warren is incorporated by reference
from Exhibit 10.1 to the Company's Form 10-Q for the
quarter ended March 31, 1998.
10.38 Common Stock Purchase Warrant ($1.875) dated June 30,
1998, between the Company and RBB Bank Aktiengesellschaft
as incorporated by reference from Exhibit 4.4 to the
Company's Form 8-K, dated June 30, 1998.
10.39 Common Stock Purchase Warrant ($2.50) dated June 30,
1998, between the Company and RBB Bank Aktiengesellschaft
as incorporated by reference from Exhibit 4.5 to the
Company's Form 8-K, dated June 30, 1998.
10.40 Consulting Agreement dated effective June 30, 1998,
between the Company and Liviakis Financial
Communications, Inc. as incorporated by reference from
Exhibit 4.6 to the Company's Form 8-K, dated June 30,
1998.
10.41 Common Stock Purchase Warrant effective June 30, 1998,
between the Company and Liviakis Financial
Communications, Inc. as incorporated by reference from
Exhibit 4.7 to the Company's Form 8-K, dated June 30,
1998.
10.42 Common Stock Purchase Warrant effective June 30, 1998,
between the Company and Robert B. Prag as incorporated by
reference from Exhibit 4.8 to the Company's Form 8-K,
dated June 30, 1998.
85
<PAGE>
10.43 Exchange Agreement dated as of April 30, 1998, to be
considered effective as of February 28, 1998, between the
Company and RBB Bank Aktiengesellschaft as incorporated
by reference from Exhibit 10.6 to the Company' Form 10-Q
for the quarter ended June 30, 1998.
10.44 Exchange Agreement dated as of April 30, 1998, to be
considered effective as of February 28, 1998, between the
Company and The Infinity Fund, L.P. as incorporated by
reference from Exhibit 10.7 to the Company's Form 10-Q
for the quarter ended June 30, 1998.
10.45 Common Stock Purchase Warrant effective June 30, 1998,
between the Company and JW Genesis Financial Corporation
as incorporated by reference from Exhibit 10.8 to the
Company's Form 10-Q for the quarter ended June 30, 1998.
10.46 Common Stock Purchase Warrant effective June 30, 1998,
between the Company and Fontenoy Investments as
incorporated by reference from Exhibit 10.9 to the
Company's Form 10-Q for the quarter ended June 30, 1998.
10.47 Consulting Agreement, dated April 8, 1998, and effective
January 1, 1998, between the Company and Alfred C.
Warrington, IV as incorporated by reference from Exhibit
10.11 to the Company's Form 10-Q for the quarter ended
June 30, 1998.
10.48 Letter from RBB Bank to the Company, dated July 14, 1998,
as incorporated by reference from Exhibit 10.12 to the
Company's Form 10-Q for the quarter ended June 30, 1998.
10.49 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,
as incorporated by reference from Exhibit 10.1 to the
Company's Form 10-Q for the quarter ended September 30,
1998.
10.50 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,
as incorporated by reference from Exhibit 10.2 to the
Company's Form 10-Q for the quarter ended September 30,
1998.
10.51 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,
as incorporated by reference from Exhibit 10.3 to the
Company's Form 10-Q for the quarter ended September 30,
1998.
10.52 General agreement between East Tennessee Materials and
Energy Corporation (M&EC) and Perma-Fix Environmental
Services, Inc. dated May 27, 1998, as incorporated by
reference from Exhibit 10.4 to the Company's Form 10-Q
for the quarter ended September 30, 1998.
10.53 Appendix B to general agreement between East Tennessee
Materials and Energy Corporation (M&EC) and Perma-Fix
Environmental Services, Inc. dated November 6, 1998, as
incorporated by reference from Exhibit 10.5 to the
Company's Form 10-Q for the quarter ended September 30,
1998.
86
<PAGE>
10.54 Agreement and Plan of Merger dated March 4, 1999, among
Perma-Fix Environmental Services, Inc., Florida Perma-
Chem, Inc., Georgia Perma-Chem, Inc., Chemical
Conservation Corporation, Chemical Conservation of
Georgia, Inc. the Thomas P. Sullivan Living Trust and the
Ann L. Sullivan Living Trust. (Exhibits to this contract
as listed in the index are omitted, but will be provided
to the Commission upon request.) 88
10.55 Agreement and Plan of Merger dated March 4, 1999, among
Perma-Fix Environmental Services, Inc., Perma-Met, Inc.
Chem-Met Services, Inc., the Thomas P. Sullivan Living
Trust, the Ann L. Sullivan Living Trust, Thomas P.
Sullivan and Ann L. Sullivan. (Exhibits to this contract
as listed in the index are omitted, but will be provided
to the Commission upon request.) 159
10.56 Exchange Agreement dated March 14, 1999, among Liviakis
Financial Communications, Inc., Robert B. Prag and Perma-
Fix Environmental Services, Inc. 223
21.1 List of Subsidiaries 232
23.1 Consent of BDO Seidman, LLP 233
27.1 Financial Data Schedule 1998 234
27.2 Financial Data Schedule 1997 235
AGREEMENT AND PLAN OF MERGER
among
PERMA-FIX ENVIRONMENTAL SERVICES, INC.,
FLORIDA PERMA-CHEM, INC.,
GEORGIA PERMA-CHEM, INC.,
CHEMICAL CONSERVATION CORPORATION,
CHEMICAL CONSERVATION OF GEORGIA, INC.,
THE THOMAS P. SULLIVAN LIVING TRUST,
THE ANN L. SULLIVAN LIVING TRUST,
THOMAS P. SULLIVAN, an individual
and
ANN L. SULLIVAN, an individual
March 15, 1999
<PAGE>
<PAGE>
TABLE OF CONTENTS
_________________
Page
____
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . .3
1.1 "Affiliate" . . . . . . . . . . . . . . . . . . . . . .3
1.2 "Chem-Con Common Stock" . . . . . . . . . . . . . . . .3
1.3 "Chem-Con Intellectual Property Right" . . . . . . . .3
1.4 "Chem-Met " . . . . . . . . . . . . . . . . . . . . . .3
1.5 "Chem-Met Agreement " . . . . . . . . . . . . . . . . .3
1.6 "Chem-Met Merger" . . . . . . . . . . . . . . . . . . .3
1.7 "Closing" . . . . . . . . . . . . . . . . . . . . . . .3
1.8 "Closing Date". . . . . . . . . . . . . . . . . . . . .3
1.9 "Code". . . . . . . . . . . . . . . . . . . . . . . . .3
1.10 "Effective Time". . . . . . . . . . . . . . . . . . . .3
1.11 "Environmental Laws". . . . . . . . . . . . . . . . . .3
1.12 "Employment Agreement". . . . . . . . . . . . . . . . .4
1.13 "ERISA" . . . . . . . . . . . . . . . . . . . . . . . .4
1.14 "GAAP". . . . . . . . . . . . . . . . . . . . . . . . .4
1.15 "Governmental Authority". . . . . . . . . . . . . . . .4
1.16 "Laws". . . . . . . . . . . . . . . . . . . . . . . . .4
1.17 "Liens" . . . . . . . . . . . . . . . . . . . . . . . .4
1.18 "Mergers" . . . . . . . . . . . . . . . . . . . . . . .4
1.19 "Mineral Rights". . . . . . . . . . . . . . . . . . . .4
1.20 "Permitted Encumbrances". . . . . . . . . . . . . . . .4
1.21 "Perma-Fix Common Stock". . . . . . . . . . . . . . . .4
1.22 "Perma-Met" . . . . . . . . . . . . . . . . . . . . . .5
1.23 "Quanta". . . . . . . . . . . . . . . . . . . . . . . .5
1.24 "Real Property" . . . . . . . . . . . . . . . . . . . .5
1.25 "Returns" . . . . . . . . . . . . . . . . . . . . . . .5
1.26 "Securities Act". . . . . . . . . . . . . . . . . . . .5
1.27 "SEC" . . . . . . . . . . . . . . . . . . . . . . . . .5
1.28 "Shares". . . . . . . . . . . . . . . . . . . . . . . .5
1.29 "Subsidiaries". . . . . . . . . . . . . . . . . . . . .5
1.30 "Surviving Corporations". . . . . . . . . . . . . . . .5
1.31 "Taxes" . . . . . . . . . . . . . . . . . . . . . . . .5
ARTICLE 2 THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . .5
2.1 The Mergers. . . . . . . . . . . . . . . . . . . . . .5
<PAGE>
2.1.1 Merger of Chemical Florida with and into
Florida Perma-Chem.. . . . . . . . . . . . . . .5
2.1.2 Merger of Chemical Georgia with and into
Georgia Perma-Chem.. . . . . . . . . . . . . . .6
2.2 Effective Time of the Mergers . . . . . . . . . . . . .6
2.3 Closing . . . . . . . . . . . . . . . . . . . . . . . .6
2.4 Effects of the Mergers. . . . . . . . . . . . . . . . .6
2.4.1 Chemical Florida . . . . . . . . . . . . . . . .6
2.4.2 Chemical Georgia . . . . . . . . . . . . . . . .7
2.5 ALS Trust/TPS Trust Nominee on Perma-Fix's Board of
Directors . . . . . . . . . . . . . . . . . . . . . . .7
2.5.1 ALS Trust/TPS Trust Nominee to Perma-Fix Board
of Directors . . . . . . . . . . . . . . . . . .7
2.5.2 Information Regarding Sullivan Nominees. . . . .8
ARTICLE 3 CONVERSION OF SECURITIES. . . . . . . . . . . . . . . . . .8
3.1 Conversion of Capital Stock . . . . . . . . . . . . . .8
3.1.1 Capital Stock of Perma-Fix . . . . . . . . . . .9
3.1.2 Capital Stock of Florida Perma Chem. . . . . . .9
3.1.3 Capital Stock of Georgia Perma-Chem. . . . . . .9
3.1.4 Chem-Con Capital Stock . . . . . . . . . . . . .9
3.1.5 Chem-Con Treasury Stock. . . . . . . . . . . . .9
3.2 Dissenters Rights . . . . . . . . . . . . . . . . . . .9
3.3 Exchange of Certificates. . . . . . . . . . . . . . . 10
3.3.1 Exchange. . . . . . . . . . . . . . . . . . . .10
3.3.2 Exchange Procedures . . . . . . . . . . . . . .10
3.3.3 No Further Ownership Rights in Chem-Con Common
Stock . . . . . . . . . . . . . . . . . . . . .10
3.3.4 No Fractional Shares. . . . . . . . . . . . . .10
3.3.5 No Liability. . . . . . . . . . . . . . . . . .11
3.3.6 Lost Certificates . . . . . . . . . . . . . . .11
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE ALS TRUST,
THE TPS TRUST, ALS, TPS AND CHEM-CON. . . . . . . . . . . 11
4.1 Organization of the Sullivan Trusts . . . . . . . . . 11
4.2 Organization of Chem-Con. . . . . . . . . . . . . . . 11
4.3 Capital Stock of Chem-Con . . . . . . . . . . . . . . 12
4.4 Ownership Interests in Securities . . . . . . . . . . 12
-ii-
<PAGE>
4.5 Financials. . . . . . . . . . . . . . . . . . . . . . 12
4.5.1 Financial Statements . . . . . . . . . . . . . 13
4.5.2 Liabilities. . . . . . . . . . . . . . . . . . 13
4.5.3 Net Worth. . . . . . . . . . . . . . . . . . . 13
4.5.4 Transactions Since September 30, 1998. . . . . 13
4.6 Tax and Other Returns, Reports and Pooling of
Interest. . . . . . . . . . . . . . . . . . . . . . . 14
4.6.1 Tax Returns. . . . . . . . . . . . . . . . . . 14
4.6.2 Payment of Taxes. . . . . . . . . . . . . . . .14
4.6.3 Waiver of Statute of Limitations. . . . . . . .14
4.6.4 Tax Deficiencies. . . . . . . . . . . . . . . .15
4.6.5 Pooling of Interests. . . . . . . . . . . . . .15
4.7 Property. . . . . . . . . . . . . . . . . . . . . . . 15
4.7.1 Assets. . . . . . . . . . . . . . . . . . . . .15
4.7.2 Real Property . . . . . . . . . . . . . . . . .15
4.7.3 Leases. . . . . . . . . . . . . . . . . . . . .15
4.7.4 Notice. . . . . . . . . . . . . . . . . . . . .16
4.7.5 Personal Property . . . . . . . . . . . . . . .16
4.7.6 Notice from Insurance Carrier . . . . . . . . .16
4.8 Intellectual Property . . . . . . . . . . . . . . . . 16
4.8.1 Ownership . . . . . . . . . . . . . . . . . . .16
4.8.2 No Breach of License. . . . . . . . . . . . . .17
4.8.3 Year 2000 Issues. . . . . . . . . . . . . . . .17
4.9 Agreements, Contracts and Commitments . . . . . . . . 18
4.9.1 Contracts . . . . . . . . . . . . . . . . . . .18
4.9.2 Written List. . . . . . . . . . . . . . . . . .20
4.10 No Breach of Statute or Contract; Governmental
Authorizations . . . . . . . . . . . . . . . . . . . .21
4.10.1 No Violation. . . . . . . . . . . . . . . . . .21
4.10.2 Permits and Licenses. . . . . . . . . . . . . .22
4.10.3 Reports . . . . . . . . . . . . . . . . . . . .22
4.10.4 Violation of Law and Contamination of
Real Property . . . . . . . . . . . . . . . . .22
4.10.5 Permits under Environmental Laws. . . . . . . .22
4.10.6 Other Permits . . . . . . . . . . . . . . . . .23
4.11 No Litigation or Adverse Effects. . . . . . . . . . . 23
4.12 Authorization, Execution and Delivery of Agreement. . 24
4.13 Ability to Conduct the Business . . . . . . . . . . . 24
4.14 Disclosure. . . . . . . . . . . . . . . . . . . . . . 24
4.15 Broker's or Finder's Fee. . . . . . . . . . . . . . . 25
4.16 Insurance . . . . . . . . . . . . . . . . . . . . . . 25
4.17 Completeness of Documents -- Chem-Con and CCC . . . . 25
4.18 Completeness of Documents -- Sullivan Trusts. . . . . 25
4.19 Disposition of Assets . . . . . . . . . . . . . . . . 25
-iii-
<PAGE>
4.20 Obligations to Employees. . . . . . . . . . . . . . . 26
4.21 Condition of Plant, Machinery and Equipment . . . . . 27
4.22 Books of Account. . . . . . . . . . . . . . . . . . . 28
4.23 Stock Redemptions . . . . . . . . . . . . . . . . . . 28
4.24 Minute Books. . . . . . . . . . . . . . . . . . . . . 28
4.25 Indebtedness of Shareholders, etc . . . . . . . . . . 28
4.26 Business Prospects. . . . . . . . . . . . . . . . . . 28
4.27 Bank Accounts; Powers of Attorney . . . . . . . . . . 28
4.28 Sensitive Payments. . . . . . . . . . . . . . . . . . 28
ARTICLE 5 ADDITIONAL REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE SULLIVANS AND THE SULLIVAN TRUSTS. . . . 29
5.1 Affiliate Status. . . . . . . . . . . . . . . . . . . 29
5.2 Rule 145. . . . . . . . . . . . . . . . . . . . . . . 29
5.3 Legend. . . . . . . . . . . . . . . . . . . . . . . . 29
5.4 Restrictions on Certain Actions . . . . . . . . . . . 30
5.4.1 Prohibition Against Acquisition . . . . . . . .30
5.4.2 Prohibition Against Solicitation. . . . . . . .30
5.4.3 Prohibition Against Control . . . . . . . . . .31
5.5 Attendance. . . . . . . . . . . . . . . . . . . . . . 31
5.6 Specific Enforcement. . . . . . . . . . . . . . . . . 31
ARTICLE 6 NO SOLICITATION OF TRANSACTIONS . . . . . . . . . . . . . 31
6.1 No Solicitation of Transactions . . . . . . . . . . . 31
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF PERMA-FIX . . . . . . . 32
7.1 Organization, etc . . . . . . . . . . . . . . . . . . 32
7.2 Authorization, Execution and Delivery of Agreement. . 33
7.3 Capital Stock of Perma-Fix. . . . . . . . . . . . . . 33
7.4 SEC Filings . . . . . . . . . . . . . . . . . . . . . 33
7.4.1. . . . . . . . . . . . . . . . . . . . . . . . .33
7.4.2 Material Adverse Change . . . . . . . . . . . .34
7.5 Status of Perma-Fix Common Stock . . . . . . . . . . .34
7.6 No Breach of Statute or Contract, Governmental
Authorizations . . . . . . . . . . . . . . . . . . . .34
7.7 No Litigation or Adverse Events. . . . . . . . . . . .35
-iv-
<PAGE>
7.8 Broker's or Finder's Fees . . . . . . . . . . . . . . 35
ARTICLE 8 COVENANTS OF CONDUCT AND TRANSACTIONS
PRIOR TO AND AFTER THE CLOSING. . . . . . . . . . . . . . 35
8.1 Investigations; Operation of Business of Chem-Con . . 35
8.1.1 Access to Premises and Books. . . . . . . . . .35
8.1.2 Business Organization of Chem-Con . . . . . . .36
8.1.3 Ordinary Course of Business . . . . . . . . . .36
8.1.4 Sale of Assets. . . . . . . . . . . . . . . . .38
8.2 No Selling of Shares or Granting of Options . . . . . 39
8.3 Consents. . . . . . . . . . . . . . . . . . . . . . . 39
8.4 Governmental Reports. . . . . . . . . . . . . . . . . 39
8.5 Conduct of Business . . . . . . . . . . . . . . . . . 39
8.6 Governmental Approvals. . . . . . . . . . . . . . . . 39
8.7 Encumber. . . . . . . . . . . . . . . . . . . . . . . 40
8.8 Title Policies for Real Property Owned by
Chemical Florida. . . . . . . . . . . . . . . . . . . 40
8.9 Title Policies for Real Properties owned by
Chemical Georgia. . . . . . . . . . . . . . . . . . . 40
8.10 Real Property Located in Orlando, Florida . . . . . . 40
8.11 Survey. . . . . . . . . . . . . . . . . . . . . . . . 41
8.12 Public Announcements. . . . . . . . . . . . . . . . . 41
8.13 Notification. . . . . . . . . . . . . . . . . . . . . 41
8.14 Filings . . . . . . . . . . . . . . . . . . . . . . . 42
8.15 Supplemental Disclosure . . . . . . . . . . . . . . . 42
8.16 SEC Filings . . . . . . . . . . . . . . . . . . . . . 42
8.17 Listing of Perma-Fix Common Stock . . . . . . . . . . 42
8.18 Perma-Fix Registration Statement, etc.. . . . . . . . 42
8.19 Information for Proxy Statements. . . . . . . . . . . 43
8.20 Registration Statement; Proxy Statement/
Prospectus. . . . . . . . . . . . . . . . . . . . . . 43
8.21 Disclosure in Proxy Statement.. . . . . . . . . . . . 44
8.22 Audited Financial Statements. . . . . . . . . . . . . 44
8.23 Public Disclosure . . . . . . . . . . . . . . . . . . 45
8.24 Pooling Accounting. . . . . . . . . . . . . . . . . . 45
8.25 Letter of Public Accountants. . . . . . . . . . . . . 45
8.26 Assumption of Liabilities . . . . . . . . . . . . . . 46
8.27 Liability to Broker . . . . . . . . . . . . . . . . . 46
8.28 Access to Premises and Books. . . . . . . . . . . . . 47
-v-
<PAGE>
ARTICLE 9 CONDITIONS OF TRANSACTIONS CONTEMPLATED BY
AGREEMENT; ABANDONMENT OF AGREEMENT . . . . . . . . . . . 47
9.1 Closing Conditions of Perma-Fix, Florida Perma-Chem and
Georgia Perma-Chem. . . . . . . . . . . . . . . . . . 47
9.1.1 Resolutions of Board of Directors and
Shareholders of Chem-Con . . . . . . . . . . . 47
9.1.2 Delivery of Trust Documents. . . . . . . . . . 48
9.1.3 Approval by Lender. . . . . . . . . . . . . . .48
9.1.4 Representations and Warranties of
the Sullivans and the Sullivan Trusts
to be True and Correct and Compliance With
Covenants. . . . . . . . . . . . . . . . . . . 48
9.1.5 Representations and Warranties of Chem-Con
to be True and Compliance With Covenants . . . 48
9.1.6 Third Party Consents. . . . . . . . . . . . . .49
9.1.7 No Material Adverse Change. . . . . . . . . . .49
9.1.8 Statutory Requirements; Litigation. . . . . . .49
9.1.9 Opinion of Counsel of Chem-Con, the
Sullivans and the Sullivan Trusts . . . . . . .50
9.1.10 Effective Registration Statement. . . . . . . .50
9.1.11 Due Diligence . . . . . . . . . . . . . . . . .50
9.1.12 Environmental Audit . . . . . . . . . . . . . .50
9.1.13 Stock Certificates. . . . . . . . . . . . . . .50
9.1.14 Permits . . . . . . . . . . . . . . . . . . . .51
9.1.15 No Liens on Assets. . . . . . . . . . . . . . .51
9.1.16 Listing of Perma-Fix Common Stock . . . . . . .51
9.1.17 Minute Books and Stock Ledgers. . . . . . . . .51
9.1.18 Financial Statements. . . . . . . . . . . . . .51
9.1.19 Orlando Real Estate . . . . . . . . . . . . . .51
9.1.20 Title Policies and Surveys. . . . . . . . . . .52
9.1.21 Good Standing Certificates. . . . . . . . . . .52
9.1.22 Resignation of Directors. . . . . . . . . . . .52
9.1.23 Chem-Met Agreement. . . . . . . . . . . . . . .52
9.1.24 Valdosta Remediation. . . . . . . . . . . . . .52
9.1.25 Pooling Letters.. . . . . . . . . . . . . . . .52
9.1.26 Shareholder Approval. . . . . . . . . . . . . .52
9.1.27 Shareholder Approval. . . . . . . . . . . . . .52
9.1.28 Accountants Letters . . . . . . . . . . . . . .53
9.1.29 Employment Agreement. . . . . . . . . . . . . .53
9.1.30 Officer and Director Waiver . . . . . . . . . .53
9.1.31 Fairness Opinion. . . . . . . . . . . . . . . .53
9.1.32 Closing Price of Perma-Fix Common Stock . . . .53
-vi-
<PAGE>
9.2 Conditions to Obligations of Chem-Con and The
ALS Trust . . . . . . . . . . . . . . . . . . . . . . 53
9.2.1 Resolutions of Perma-Fix Board of
Directors and Shareholders . . . . . . . . . . . 53
9.2.2 Resolutions of Florida Perma-Chem and
Georgia Perma-Chem Board of Directors
and Shareholders. . . . . . . . . . . . . . . 54
9.2.3 Representations and Warranties of Perma-
Fix to be True . . . . . . . . . . . . . . . . . 54
9.2.4 Employment Agreement . . . . . . . . . . . . . . 54
9.2.5 Effective Registration Statement . . . . . . . . 54
9.2.6 No Material Adverse Change . . . . . . . . . . . 54
9.2.7 Litigation . . . . . . . . . . . . . . . . . . . 55
9.2.8 Opinion of Counsel of Perma-Fix. . . . . . . . . 55
9.2.9 Closing Price of Perma-Fix Closing Stock . . . . 55
9.3 Termination of Agreement and Abandonment of
Mergers . . . . . . . . . . . . . . . . . . . . . . . . 55
9.3.1 Conditions of the Sullivans, the
Sullivan Trusts or Chem-Con Not Met. . . . . . . 55
9.3.2 Conditions of Perma-Fix Not Met. . . . . . . . . 55
9.3.3 Termination by Perma-Fix or the Sullivans
of the Chem-Met Agreement. . . . . . . . . . . . 56
9.3.4 Mutual Consent . . . . . . . . . . . . . . . . . 56
9.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 10 TERMINATION OF OBLIGATIONS AND WAIVER OF CONDITIONS. . . . 56
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . 56
10.2 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 11 INDEMNIFICATION AND SURVIVAL OF REPRESENTATIONS
AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . 57
11.1 Indemnification by the Sullivans and the Sullivan
Trusts . . . . . . . . . . . . . . . . . . . . . . . . .57
11.2 Notice of Claim. . . . . . . . . . . . . . . . . . . . .57
11.3 Survival of Representations and Remedies . . . . . . . .57
11.4 Indemnification Period . . . . . . . . . . . . . . . . .58
11.5 Settlement of Indemnification Claims . . . . . . . . . .58
ARTICLE 12 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . .58
12.1 Entire Agreement and Amendment . . . . . . . . . . . . .58
-vii-
<PAGE>
12.2 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . .58
12.3 Governing Law . . . . . . . . . . . . . . . . . . . . 58
12.4 Benefit of Parties; Assignment. . . . . . . . . . . . 59
12.5 Pronouns. . . . . . . . . . . . . . . . . . . . . . . 59
12.6 Headings. . . . . . . . . . . . . . . . . . . . . . . 59
12.7 Notices . . . . . . . . . . . . . . . . . . . . . . . 59
12.8 Time. . . . . . . . . . . . . . . . . . . . . . . . . 60
12.9 Severability. . . . . . . . . . . . . . . . . . . . . 60
12.10 Counterparts . . . . . . . . . . . . . . . . . . . . 60
Schedule "A" - List of all jurisdictions in which Chem-Con is
authorized to do business
Schedule "B" - List of all of Chem-Con's ownership interests
in other business enterprises
Schedule "C" - Liabilities
Schedule "D" - List of all transactions of Chem-Con since
September 30, 1998
Schedule "E" - Tax Returns; Payment of Taxes; Waiver of
Statute of Limitations; Tax Deficiencies
Schedule "F" - List of all Permitted Encumbrances and Liens
on Chem-Con assets; Real Property owned by
Chem-Con; title insurance policies; leases;
Chem-Con personal property; notices of
violations
Schedule "G" - List of all contracts
Schedule "H" - List of contracts, leases, and agreements
re Chem-Con business (copies)
Schedule "I" - Permits and licenses and reports since
December 31, 1990
Schedule "J" - Litigation
Schedule "K" - List of all trade names, trademarks, service
marks, patents, copyrights and applications
Schedule "L" - Insurance
Schedule "M" - Disposition of Assets
Schedule "N" - Determination letters on benefit plans
Schedule "O" - Condition of plant, machinery and equipment
Schedule "P" - Indebtedness of Shareholders
Schedule "Q" - Bank accounts/borrowing resolutions of Chem-
Con; Powers of Attorney
Schedule "R" - Description of Quanta Tract
Schedule "S" - Year 2000 Information
Exhibit "A" - Employment Agreement with Thomas P. Sullivan
Exhibit "B" - Permitted Encumbrances
Exhibit "C" - Florida Articles of Merger
Exhibit "D" - Georgia Certificate of Merger
Exhibit "E" - Opinion of Counsel of Chem-Con
Exhibit "F" - Opinion of Counsel of Perma-Fix
-viii-
<PAGE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), dated
as of the 15th day of March, 1999, among PERMA-FIX ENVIRONMENTAL
SERVICES, INC., a Delaware corporation ("Perma-Fix"); FLORIDA
PERMA-CHEM, INC. a Florida corporation and a wholly-owned
subsidiary of Perma-Fix ("Florida Perma-Chem"); GEORGIA PERMA-CHEM,
INC., a Georgia corporation and a wholly-owned subsidiary of Perma-
Fix ("Georgia Perma-Chem"); CHEMICAL CONSERVATION CORPORATION; a
Florida corporation ("Chemical Florida"); CHEMICAL CONSERVATION OF
GEORGIA, INC., a Georgia corporation ("Chemical Georgia"); The
THOMAS P. SULLIVAN LIVING TRUST, dated September 6, 1978 ("TPS
Trust"); The ANN L. SULLIVAN LIVING TRUST, dated September 6, 1978
("ALS Trust"); THOMAS P. SULLIVAN, an individual ("TPS"); and ANN
L. SULLIVAN, an individual ("ALS"). Collectively, the TPS Trust
and the ALS Trust are referred to herein as the "Sullivan Trusts,";
TPS and ALS are collectively referred to as the "Sullivans";
Chemical Florida and Chemical Georgia are referred to herein as
"Chem-Con," and Florida Perma-Chem and Georgia Perma-Chem are
referred to herein as "Perma-Chem."
W I T N E S S E T H:
WHEREAS, the ALS Trust is the sole and exclusive owner
of all of the issued and outstanding capital stock of Chemical
Florida and Chemical Georgia (collectively the "Chem-Con Common
Stock");
WHEREAS, ALS is the sole trustee and primary
beneficiary of the ALS Trust;
WHEREAS, TPS is the sole trustee and primary
beneficiary of the TPS Trust;
WHEREAS, the Sullivans are husband and wife;
WHEREAS, Florida Perma-Chem and Georgia Perma-Chem are,
directly or indirectly, wholly owned subsidiaries of Perma-Fix;
WHEREAS, the Board of Directors of Perma-Fix, Florida
Perma-Chem and Chemical Florida deem it advisable and in the best
interest of each corporation and its respective stockholders that
Chemical Florida merge with and into Florida Perma-Chem, with
Florida Perma-Chem being the survivor, in order to advance the
long-term business interest of each corporation;
WHEREAS, the Board of Directors of Perma-Fix, Georgia
Perma-Chem and Chemical Georgia deem it advisable and in the best
interests of each corporation and its respective stockholders that
Chemical Georgia merge with and into Georgia Perma-Chem, with
Georgia Perma-Chem being the survivor, in order to advance the
long-term business interest of each corporation;
WHEREAS, Chem-Con Corporation, a Florida corporation
("CCC") is a wholly owned subsidiary of Chemical Florida;
WHEREAS, the parties hereto desire that Chemical
Florida shall be merged with and into Florida Perma-Chem, with
Florida Perma-Chem being the survivor, (said transaction being
hereinafter referred to as the " Florida Merger") pursuant to a
plan of merger (the "Florida Plan of Merger") in which the
stockholder of Chemical Florida will become a stockholder of Perma-
Fix, and the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection
with such transactions contemplated hereby;
WHEREAS, the parties hereto desire that Chemical
Georgia shall be merged with and into Georgia Perma-Chem, with
Georgia Perma-Chem being the survivor, (said transaction being
hereinafter referred to as the "Georgia Merger") pursuant to a plan
of merger (the "Georgia Plan of Merger") in which the stockholder
of Chemical Georgia will become a stockholder of Perma-Fix, and the
parties desire to provide for certain undertakings, conditions,
representations, warranties and covenants in connection with such
transactions;
WHEREAS, the Florida Merger and the Georgia Merger are
collectively referred to herein as the "Mergers";
WHEREAS, for Federal income tax purposes, it is
intended that the Mergers shall qualify as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "Code");
WHEREAS, for accounting purposes, it is intended that
the Mergers shall be accounted for as a pooling of interests;
WHEREAS, the Board of Directors of Perma-Fix, Florida
Perma-Chem and Chemical Florida have approved and adopted the
Florida Merger, this Agreement and the Florida Plan of Merger; and
WHEREAS, the Board of Directors of Perma-Fix, Georgia
Perma-Chem and Chemical Georgia have approved and adopted the
Georgia Merger, this Agreement and the Georgia Plan of Merger.
NOW, THEREFORE, in consideration of the premises and
the mutual covenants, agreements, representations and warranties
herein contained, the parties hereto agree as follows:
-2-
<PAGE>
ARTICLE
1
DEFINITIONS
For purposes of this Agreement, the following terms
shall have the respective meanings set forth below:
1.1 "Affiliate" has the meaning set forth in Rule 405 promulgated
under the Securities Act, whether or not such is an Affiliate
now or becomes an Affiliate after the date hereof.
1.2 "Chem-Con Common Stock" has the meaning as specified in
Section 4.3 hereof.
1.3 "Chem-Con Intellectual Property Right" has the meaning as
defined in Section 4.8.1 of this Agreement.
1.4 "Chem-Met " shall mean Chem-Met Services, Inc. a Michigan
corporation.
1.5 "Chem-Met Agreement " shall mean that certain Agreement and
Plan of Merger among Perma-Fix, Perma-Met (as defined below),
Chem-Met, the Sullivan Trusts and the Sullivans, dated as of
the date of this Agreement, whereby Chem-Met is to merge with
and into Perma-Met, a wholly owned subsidiary of Perma-Fix,
with Perma-Met being the survivor.
1.6 "Chem-Met Merger" shall mean the merger of Chem-Met with and
into Perma-Met (as defined below), with Perma-Met being the
survivor, pursuant to the Chem-Met Agreement.
1.7 "Closing" has the meaning as specified in Section 2.3 hereof.
1.8 "Closing Date" has the meaning as specified in Section 2.3
hereof.
1.9 "Code" means the Internal Revenue Code of 1986, as amended.
1.10 "Effective Time" shall have the meaning set forth in Section
2.2 hereof.
1.11 "Environmental Laws" mean all federal, state, county, local
and foreign environmental, health, and safety laws, codes,
ordinances and all rules and regulations promulgated there-
under, including, without limitation, laws relating to
management, emissions, discharges, releases or threatened
-3-
<PAGE>
releases of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes into the
environment (including, without limitation, air, surface
water, groundwater, land surface or subsurface strata) or
otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemicals, petroleum
products or industrial, solid, toxic or hazardous substances
or wastes. Environmental Laws include, without limitation,
(i) the Federal Water Pollution Control Act ("FWPCA"), 33
U.S.C. Section 1251, et seq.; (ii) the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
Section 9601, et seq.; (iii) the Resource Conservation and Recovery
Act ("RCRA"), 42 U.S.C. Section 6901, et seq.; (iv) the Clean Air
Act ("Clean Air Act"), 42 U.S.C. Section 7401, et seq; (v) the Toxic
Substances Control Act ("TSCA"), 15 U.S.C. Section 201, et seq.;
(vi) any and all other analogous state and local statutes;
and, (vii) all rules and regulations promulgated under any of
the foregoing.
1.12 "Employment Agreement" shall have the meaning set forth in
Section 9.2.4 hereof, a copy of which is attached hereto as
Exhibit "A".
1.13 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated
thereunder.
1.14 "GAAP" means United States generally accepted accounting prin-
ciples.
1.15 "Governmental Authority" means any agency, instrumentality,
department, commission, court, tribunal or board of any
government, whether foreign or domestic and whether national,
federal, state, provincial, or local.
1.16 "Laws" mean any and all federal, state and local laws, rules,
regulations, codes, orders, ordinances, judgments, injunctions
and decrees.
1.17 "Liens" mean all security interests, liens, mortgages, claims,
charges, pledges, restrictions, equitable interests,
easements, property rights or encumbrances of any nature.
1.18 "Mergers" has the meaning as defined in the eleventh WHEREAS
clause of this Agreement.
1.19 "Mineral Rights" mean the mineral and oil and gas rights,
interest and leases, pipelines and pipeline rights of way
situated on and under the Real Property.
1.20 "Permitted Encumbrances" means (i) liens listed on Exhibit "B"
attached hereto; (ii) liens for taxes not yet delinquent or
being contested in good faith by appropriate proceedings; and,
(iii) such technical imperfections of title and easements, if
any, which do not in the sole discretion of Perma-Fix, when
considered together, detract materially from the value of, or
interfere with, the present or presently proposed use of, any
Real Property.
1.21 "Perma-Fix Common Stock" means the Common Stock, par value
$.001 per share, of Perma-Fix.
-4-
<PAGE>
1.22 "Perma-Met" shall mean Perma-Met, Inc., a Michigan corporation
and a wholly owned subsidiary of Perma-Fix.
1.23 "Quanta" means Quanta Corporation, a Michigan corporation in
which all of its issued and outstanding capital stock is owned
by the ALS Trust.
1.24 "Real Property" means all real property, land, buildings,
improvements and structures owned, leased or used by Chem-Con.
1.25 "Returns" mean all returns, declaration, reports, estimates,
information returns and statements required to be filed with
or supplied to any taxing authority in connection with any
Taxes.
1.26 "Securities Act" means the Securities Act of 1933, as amended.
1.27 "SEC" means the U.S. Securities and Exchange Commission.
1.28 "Shares" means all of the issued and outstanding shares of
capital stock of Chemical Florida and Chemical Georgia of
whatsoever character and description.
1.29 "Subsidiaries" means all corporations fifty percent (50%) or
more of the common stock or other form of equity of which
shall be owned, directly or indirectly through one or more
intermediaries, by another corporation.
1.30 "Surviving Corporations" has the meaning as defined in Section
2.4.2 of this Agreement.
1.31 "Taxes" mean all taxes, charges, fees, levies or other assess-
ments, including, without limitation, income, gross receipts,
excise, real and personal property, sales, transfer, license,
payroll and franchise taxes, imposed by any Governmental Auth-
ority and shall include any interest, penalties or additions
to tax attributable to any of the foregoing.
ARTICLE 2
THE MERGER
2.1 The Mergers.
2.1.1 Merger of Chemical Florida with and into Florida Perma-
Chem. Subject to the terms of this Agreement, Chemical
Florida shall merge with and into Florida Perma-Chem,
with Florida Perma-Chem being the surviving
-5-
<PAGE>
corporation, in accordance with the applicable
provisions of the Florida Business Corporation Act
("FBCA") and the terms of this Agreement. Chemical
Florida and Florida Perma-Chem agree to the Florida
Merger.
2.1.2 Merger of Chemical Georgia with and into Georgia Perma-
Chem. Subject to the terms of this Agreement, Chemical
Georgia shall merge with and into Georgia Perma-Chem,
with Georgia Perma-Chem being the surviving
corporation, in accordance with the applicable
provisions of the Georgia Business Corporation Code
("GBCC") and the terms of this Agreement. Chemical
Georgia and Georgia Perma-Chem agree to the Georgia
Merger.
2.2 Effective Time of the Mergers. Subject to the provisions of
this Agreement, at the Closing (as defined below) (i) the
Articles of Merger regarding the Florida Merger, a copy of
which is attached hereto as Exhibit "C" (the "Florida Articles
of Merger"), shall be duly executed and acknowledged by
Chemical Florida and Florida Perma-Chem and delivered to and
filed with the Secretary of State of Florida, as provided in the
FBCA, on the Closing Date, and (ii) the Certificate of Merger
regarding the Georgia Merger, a copy of which is attached
hereto as Exhibit "D" ("Georgia Certficiate of Merger"), shall
be duly executed and acknowledged by Chemical Georgia and
Georgia Perma-Chem, and delivered to and filed with the
Secretary of State of Georgia, as provided in the GBCC, on the
Closing Date. The Mergers shall become effective upon the
filing of the Florida Articles of Merger and the Georgia
Articles of Merger (collectively, the "Articles of Merger") as
herein described, or at such time thereafter as shall be
provided in the Articles of Merger (the "Effective Time").
2.3 Closing. The closing of the Mergers (the "Closing") will take
place at 10:00 a.m., Eastern Standard Time, pursuant to the
terms of this Agreement on a date to be specified by Perma-Fix
and Chem-Con, which shall be no later than five business days
after approval of the Mergers and the Chem-Met Merger by the
shareholders of Perma-Fix entitled to vote thereon (the
"Closing Date"), at the offices of Chemical Conservation
Corporation, 10100 Rocket Boulevard, Orlando, Florida, 32824,
unless another date, place or time is agreed to in writing by
Perma-Fix and Chem-Con.
2.4 Effects of the Mergers. At the Effective Time:
2.4.1 Chemical Florida. Chemical Florida shall be merged with
and into Florida Perma-Chem (Chemical Florida and
Florida Perma-Chem are sometimes referred to below as
the "Florida Constituent Corporations" and Florida
Perma-Chem is sometimes referred to herein as the
"Florida Surviving Corporation"), with Florida Perma-
Chem being the survivor and Chemical Florida ceasing to
exist, (ii) the Articles of Incorporation of Florida
Perma-Chem immediately prior to the Effective Time
shall be the Articles of Incorporation of the Florida
-6-
<PAGE>
Surviving Corporation, except that at the Effective
Time Florida Perma-Chem shall change its corporate name
to [Chemical Conservation of Florida, Inc.,] (iii) the
Bylaws of Florida Perma-Chem as in effect immediately
prior to the Effective Time shall be the Bylaws of the
Florida Surviving Corporation, and (iv) the purpose of
the Florida Surviving Corporation shall be as set forth
in Article II of the Articles of Incorporation of
Florida Perma-Chem immediately prior to the Effective
Time.
2.4.2 Chemical Georgia. Chemical Georgia shall be merged
with and into Georgia Perma-Chem (Chemical Georgia and
Georgia Perma-Chem are sometimes referred to below as
the "Georgia Constituent Corporations" and Georgia
Perma-Chem is sometimes referred to herein as the
"Georgia Surviving Corporation"), with Georgia Perma-
Chem being the survivor and Chemical Georgia ceasing to
exist, (ii) the Articles of Incorporation of Georgia
Perma-Chem immediately prior to the Effective Time
shall be the Articles of Incorporation of the Georgia
Surviving Corporation, except that at the Effective
Time Georgia Perma-Chem shall change its name to
Chemical Conservation of Georgia, Inc.,(iii) the Bylaws
of Georgia Perma-Chem as in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving
Corporation, and (iv) the purpose of the Georgia
Surviving Corporation shall be as set forth in Article
II of the Articles of Incorporation of Georgia Perma-
Chem immediately prior to the Effective Time.
"Surviving Corporation" shall refer to the Florida
Surviving Corporation and the Georgia Surviving
Corporation.
2.5 ALS Trust/TPS Trust Nominee on Perma-Fix's Board of Directors.
2.5.1 ALS Trust/TPS Trust Nominee to Perma-Fix Board of
Directors. Subject to, and except as otherwise
provided by, the terms of this Section 2.5.1, after the
Closing Date, and provided that at all times through
the date of Perma-Fix's annual meeting of shareholders
at which the Sullivan Trusts are entitled to have their
one (1) nominee ("Sullivan Nominee") elected to Perma-
Fix's Board of Directors under this Section 2.5.1, the
Sullivan Trusts owns of record, in the aggregate, not
less than 1,500,000 shares of the Perma-Fix Common
Stock that the Sullivan Trusts acquired under this
Agreement and the Chem-Met Agreement, the Sullivan
Trusts may select one (1) nominee for nomination to
Perma-Fix's Board of Directors and Perma-Fix agrees to
recommend to the shareholders of Perma-Fix at Perma-
Fix's annual meeting of shareholders the one nominee
selected by the Sullivan Trusts if such Sullivan
Nominee is satisfactory to the Board of Directors of
Perma-Fix, along with all other nominees nominated by
the Board of Directors of Perma-Fix, for election to
the Board of Directors of Perma-Fix. Notwithstanding
the above, if at any time and for any reason after the
Closing Date the Sullivan Trusts' ownership of record
-7-
<PAGE>
of Perma-Fix Common Stock acquired under this Agreement
and the Chem-Met Agreement is, in the aggregate, less
than1,500,000 shares of Perma-Fix Common Stock, then
the Sullivan Trusts shall not be entitled to have a
Sullivan Nominee elected or recommended by Perma-Fix
for election to the Board of Directors of Perma-Fix.
Nothing contained in this Section 2.5.1 shall obligate
or cause the Board of Directors of Perma-Fix to violate
any of their fiduciary duties. Notwithstanding the
foregoing, from and after the breach or default by any
of the Sullivans and/or the Sullivan Trusts of any of
their obligations, agreements or covenants contained in
this Agreement or the Chem-Met Agreement or the
Employment Agreement, the Sullivan Trusts shall have no
further rights under this Section 2.5.1 and no further
right to designate a Sullivan Nominee and Perma-Fix
shall have no obligation to recommend or otherwise take
affirmative action regarding any nominee of the
Sullivan Trusts for a position on the Perma-Fix Board
of Directors.
2.5.2 Information Regarding Sullivan Nominees. During the
period that the Sullivan Trusts are entitled to have
one nominee elected to the Board of Directors of Perma-
Fix, the Sullivan Trusts shall provide to the President
of Perma-Fix the name of such nominee or nominees and
a written description of such nominee or nominees
within 120 days prior to the date of the annual meeting
of shareholders at which the Sullivan Nominee is to be
elected to Perma-Fix's Board of Directors. The written
description of such nominee or nominees must contain
all such information regarding such nominee or nominees
as is required to be disclosed in a Perma-Fix Proxy
Statement relating to the election of directors under
Schedule 14A as promulgated under Section 14(a) of the
Exchange Act (including, but not limited to, informa-
tion required by Item 401 of Regulation S-K). Within
thirty (30) days after receipt by the President of
Perma-Fix of such written information regarding the
Sullivan Trusts proposed nominee, Perma-Fix shall
advise the Sullivan Trusts if such nominee is not
acceptable to the Board of Directors of Perma-Fix. If
any such nominee selected by the Sullivan Trusts is not
acceptable, the Sullivan Trusts shall, within ten (10)
days from being advised by Perma-Fix that its nominee
is not acceptable to the Board of Directors of Perma-
Fix, supply the name and the required written descrip-
tion concerning the Sullivan Trusts' new nominee, if
any, with such new nominee to be satisfactory to the
Board of Directors of Perma-Fix.
ARTICLE 3
CONVERSION OF SECURITIES
3.1 Conversion of Capital Stock. As of the Effective Time:
-8-
<PAGE>
3.1.1 Capital Stock of Perma-Fix. Each share of capital
stock of Perma-Fix issued and outstanding immediately
prior to the Effective Time shall remain issued and
outstanding and be unchanged by the Mergers;
3.1.2 Capital Stock of Florida Perma Chem. Each share of
capital stock of Florida Perma-Chem issued and
outstanding immediately prior to the Effective Time
shall remain issued and be unchanged by the Florida
Merger.
3.1.3 Capital Stock of Georgia Perma-Chem. Each share of
capital stock of Georgia Perma-Chem issued and
outstanding immediately prior to the Effective Time
shall remain issued and be unchanged by the Georgia
Merger.
3.1.4 Chem-Con Capital Stock. Each share of capital stock of
Chemical Florida and each share of capital stock of
Chemical Georgia issued and outstanding immediately
prior to the Effective Time shall, by virtue of the
Mergers, and without any action on the part of the
holder thereof, be automatically canceled, be null and
void and, subject to the terms of this Article 3, all
shares of Chem-Con Common Stock issued and outstanding
immediately prior to the Effective Time shall by virtue
of the Mergers, and without any action on the part of
the holder thereof, be exchanged for that number of
fully paid and nonassessable shares of Perma-Fix Common
Stock determined by dividing $6,500,000 by the average
of the closing sale prices per share of the Perma-Fix
Common Stock as reported on the National Association of
Securities Dealers Automated Quotation System
("NASDAQ") for five consecutive trading days ending
with the trading day immediately prior to the Effective
Time. During the five consecutive trading days ending
with the trading day immediately prior to the Effective
Time, the Company shall not, and shall cause its
officers and directors to not, buy or sell any Perma-
Fix Common Stock over the NASDAQ or the Boston Stock
Exchange.
3.1.5 Chem-Con Treasury Stock. All shares of Chem-Con Common
Stock that are owned by Chem-Con as treasury stock, if
any, shall be canceled and retired and shall cease to
exist and no Perma-Fix Common Stock or other
consideration shall be delivered in exchange therefor.
3.2 Dissenters Rights. The holders of all issued and outstanding
shares of Chem-Con Common Stock are parties to this Agreement
and they each agree, represent and warrant that none of them
shall exercise or attempt to exercise any dissenters rights,
right of appraisal or similar rights provided for under the
FBCA or the GBCC.
-9-
<PAGE>
3.3 Exchange of Certificates. The procedures for exchanging
outstanding shares of Chem-Con Common Stock for Perma-Fix
Common Stock pursuant to the Mergers are as follows:
3.3.1 Exchange. As of the Effective Time, Perma-Fix shall
deliver to the ALS Trust certificates representing the
shares of Perma-Fix Common Stock ( the "Exchange
Certificates") issuable pursuant to Section 3.1.4 in
exchange for outstanding shares of Chem-Con Common
Stock.
3.3.2 Exchange Procedures. At the Effective Time, the ALS
Trust, being the sole beneficial and record owner of
all of the issued and outstanding shares of capital
stock of Chem-Con, shall surrender to Perma-Fix all
certificates representing all of the issued and
outstanding shares of capital stock of Chem-Con (the
"Certificates"), duly and validly endorsed, in blank,
with signatures guaranteed by a national bank or
investment banking firm, for cancellation, and, subject
to the terms and conditions of this Agreement, the ALS
Trust, being the sole and exclusive holder of any and
all such Certificates shall be entitled to receive in
exchange for all of the shares of Chem-Con Common Stock
a certificate representing that number of whole shares
of Perma-Fix Common Stock which such holder has the
right to receive pursuant to the provisions of Section
3.1.4 hereof, and the Certificates so surrendered shall
immediately be canceled. Until surrendered as
contemplated by this Section 3.3.2, the Certificates
representing shares of Chem-Con Common Stock shall be
deemed at any time after the Effective Time to
represent only the right to receive upon such surrender
the certificate representing shares of Perma-Fix Common
Stock as contemplated by this Section 3.1.4.
3.3.3 No Further Ownership Rights in Chem-Con Common Stock.
All shares of Perma-Fix Common Stock issued upon the
surrender for exchange of Certificates in accordance
with the terms hereof shall be deemed to have been
issued in full satisfaction of all rights pertaining to
such shares of Chem-Con Common Stock. From and after
the Effective Time there shall be no further
registration of transfers on the stock transfer books
of the Surviving Corporations of the shares of Chem-Con
Common Stock which were outstanding immediately prior
to the Effective Time.
3.3.4 No Fractional Shares. No certificate or scrip
representing fractional shares of Perma-Fix Common
Stock shall be issued upon the surrender for exchange
of Certificates, and such fractional share interests
will not entitle the owner thereof to vote or to any
other rights of a stockholder of Perma-Fix.
-10-
<PAGE>
3.3.5 No Liability. Neither Perma-Fix nor Chem-Con shall be
liable to any holder of shares of Chem-Con Common Stock
or Perma-Fix Common Stock, as the case may be, for such
shares (or dividends or distributions with respect
thereto) delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
3.3.6 Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if
required by either of the Surviving Corporations, the
posting by such person of a bond in such reasonable
amount as such Surviving Corporation may direct as
indemnity against any claim that may be made against it
with respect to such Certificate, Perma-Fix will issue
in exchange for such lost, stolen or destroyed
Certificate the shares of Perma-Fix Common Stock and
unpaid dividends and distributions on shares of Perma-
Fix Common Stock deliverable in respect thereof
pursuant to this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE ALS TRUST,
THE TPS TRUST, ALS, TPS AND CHEM-CON
The ALS Trust, the TPS Trust, ALS, TPS, Chemical
Florida and Chemical Georgia, jointly and severally, represent and
warrant to Perma-Fix, Florida Perma-Chem and Georgia Perma-Chem
that, as of the date of this Agreement and as of the Closing, the
following:
4.1 Organization of the Sullivan Trusts. The Sullivan Trusts are
valid trusts. ALS is the primary beneficiary under the ALS
Trust, and ALS is the sole trustee under the ALS Trust. TPS
is the primary beneficiary of the TPS Trust, and TPS is the
sole trustee under the TPS Trust. ALS, as sole trustee under
the ALS Trust, and TPS as sole trustee under the TPS Trust,
have full power, authority and capacity to enter into this
Agreement and to perform any and all obligations and covenants
of the ALS Trust and the TPS Trust under this Agreement.
4.2 Organization of Chem-Con. Each of Chemical Florida, Chemical
Georgia and CCC is a corporation duly organized, validly
existing and in good standing under the laws of the respective
jurisdiction of its incorporation, and each has the corporate
power to own its properties and to carry on its business as is
now being conducted. Each of Chemical Florida, Chemical
Georgia and CCC is duly qualified and in good standing as a
foreign corporation in each jurisdiction in which the nature
of the business conducted by it or the character of the
-11-
<PAGE>
property owned, leased or used by it makes such qualification
necessary. A list of all such jurisdictions, separately shown
and indicated, is set forth on Schedule "A" attached hereto.
4.3 Capital Stock of Chem-Con. The authorized capital stock of
Chemical Florida consists solely of seven thousand five
hundred (7,500) shares of common stock, par value $1.00
("Chemical Florida Common Stock"), of which two hundred (200)
shares are issued and outstanding and all of such issued and
outstanding shares of Chemical Florida Common Stock are owned
of record and beneficially by the ALS Trust. The authorized
capital stock of Chemical Georgia consists solely of one
hundred thousand (100,000) shares of common stock, par value
$1.00 ("Chemical Georgia Common Stock"), of which seventy-five
thousand (75,000) shares are issued and outstanding and all of
such issued and outstanding shares of Chemical Georgia Common
Stock are owned of record and beneficially by the ALS Trust.
The authorized capital stock of CCC consists solely of seven
thousand five hundred (7,500) shares of common stock, par
value $1.00 ("CCC Common Stock"), of which one hundred (100)
shares are issued and outstanding and all of such issued and
outstanding shares of CCC Common Stock are owned of record and
beneficially by Chemical Florida. Collectively, the Chemical
Florida Common Stock, and the Chemical Georgia Common Stock
are referred to herein as the "Chem-Con Common Stock." No
shares of Chem-Con Common Stock or shares of CCC Common Stock
are held in treasury or reserved for issuance at a later date.
All of the issued and outstanding shares of Chem-Con Common
Stock and of CCC Common Stock are (i) validly authorized and
issued, (ii) fully paid and nonassessable and (iii) free and
clear of any and all Liens. Subsequent to September 30, 1998,
Chem-Con has not declared or paid any dividend, or declared or
made any distribution on, or authorized the creation or
issuance of, or issued, or authorized or effected any split-up
or any other recapitalization of, any of its capital stock, or
directly or indirectly redeemed, purchased or otherwise
acquired any of their respective outstanding capital stock or
agreed to take any such action. There are no outstanding
contractual obligations of Chem-Con or CCC to repurchase,
redeem or otherwise acquire any of their respective out-
standing shares of capital stock. There are no outstanding
agreements, options, warrants or rights to subscribe for or
purchase from or otherwise receive from Chem-Con, CCC, or the
ALS Trust or any other party any of Chem-Con's or CCC's
capital stock or other securities of any kind or description
of Chem-Con or CCC.
4.4 Ownership Interests in Securities. Set forth on Schedule "B"
attached hereto is a list of all equity or ownership interests
in, and all bonds and debentures of, other business enter-
prises which Chem-Con owns and such Schedule indicates any
such interests which are held subject to any legal, contrac-
tual or other limitations or restrictions on the right to
resell the same.
-12-
<PAGE>
4.5 Financials.
4.5.1 Financial Statements. Chemical Florida and Chemical
Georgia have previously furnished Perma-Fix a true and
correct copy of the audited financial statements for
Chemical Florida, Chemical Georgia, Chem-Met and their
Subsidiaries, on a combined basis, for the fiscal year
ended September 30, 1998, ("Audited Financial
Statements"), consisting of, among other things, (i) a
balance sheet as of September 30, 1998, and (ii)
statement of income and related earnings for the fiscal
year ended September 30, 1998. The Audited Financial
Statements are true, correct and complete in all
material respects and correctly present the financial
conditions and results of operations of Chemical
Florida, Chemical Georgia, Chem-Met and their
Subsidiaries on a combined basis as of the date
thereof. For the purposes of this Agreement, the
Audited Financial Statements shall be deemed to include
any notes to such financial statements. The Audited
Financial Statements have been prepared in conformity
with GAAP, consistently applied throughout the periods
indicated and on a basis consistent with prior periods.
4.5.2 Liabilities. Except as set forth in Schedule "C"
attached hereto, Chemical Florida, Chemical Georgia and
their Subsidiaries do not have any liabilities or obli-
gations either accrued, absolute, contingent, known or
unknown, matured or unmatured, or otherwise, which have
not been:
4.5.2.1 reflected in the Audited Financial Statements;
or
4.5.2.2 incurred consistent with past practices of
Chem-Con in the ordinary and normal course of
Chem-Con's business since September 30, 1998.
4.5.3 Net Worth. Except as set forth in Schedule "C"
attached hereto, there are no claims against or liabil-
ities or obligations of, or any legal basis for any
claims against or liabilities or obligations of, Chem-
Con or its Subsidiaries which might result in a
material reduction in the net worth of Chem-Con and its
Subsidiaries from that shown in the Audited Financial
Statements or any material charge against net earnings
of Chem-Con and its Subsidiaries.
4.5.4 Transactions Since September 30, 1998. Except as set
forth on Schedule "D", between September 30, 1998, and
the date of this Agreement, Chem-Con and its
Subsidiaries have not engaged in any material
transaction not in the ordinary and normal course of
business and, except as set forth on such Schedule "D",
there has not been, occurred or arisen since September 30,
1998:
-13-
<PAGE>
4.5.4.1 any material adverse change in the financial
condition or in the operations of the business
of Chem-Con or its Subsidiaries from that
shown on the Audited Financial Statements; or
4.5.4.2 any damage or destruction in the nature of a
casualty loss, or interference with its
business from such loss or from any labor
dispute or court or governmental action, order
or decree, whether covered by insurance or
not, materially and adversely affecting the
properties or business of Chem-Con or its
Subsidiaries; or
4.5.4.3 any increase, except increases given in
accordance with prior practice, in the com-
pensation payable or to become payable by
Chem-Con or its Subsidiaries to any of Chem-
Con's or its Subsidiaries' employees or any
increase in the benefits, regardless of
amount, in any bonus, insurance, pension or
other plan, program, payment or arrangement
with respect to employee benefits made to, for
or with any officers or employees; or
4.5.4.4 any extraordinary loss (as defined in Opinions
No. 9 and No. 30 of the Accounting Principles
Board of American Institute of Certified
Public Accountants) suffered by Chem-Con or
its Subsidiaries which is material to Chem-Con
or its Subsidiaries, or any waiver by Chem-Con
or its Subsidiaries of any rights which are
material to Chem-Con or its Subsidiaries.
4.6 Tax and Other Returns, Reports and Pooling of Interest.
4.6.1 Tax Returns. All federal, state, local, foreign,
personal property, and real property tax returns
required to be filed by the ALS Trust and Chem-Con and
its Subsidiaries have been timely filed with the
appropriate governmental agencies in all jurisdictions
in which such returns and reports are required to be
filed.
4.6.2 Payment of Taxes. All federal, state, local and
foreign taxes (including interest and penalties), due
from the ALS Trust, Chem-Con and its Subsidiaries (i)
have been fully paid, or (ii) are being contested in
good faith by appropriate proceedings and are disclosed
on Schedule "E" attached hereto.
4.6.3 Waiver of Statute of Limitations. No waivers of
statutes of limitation in respect of any Returns or tax
reports have been given or requested, except as shown
on such Schedule "E".
-14-
<PAGE>
4.6.4 Tax Deficiencies. There are no potential tax defic-
iencies which may arise from issues which have been
raised or which have not yet been raised but which
might reasonably be expected to be raised by the
Internal Revenue Service ("IRS") or any other taxing
authority that have not been disclosed on Schedule "E"
and may reasonably be expected to have a material
adverse effect on Chem-Con or its Subsidiaries.
4.6.5 Pooling of Interests. To the best of their knowledge,
after consulting with its independent auditors, neither
Chem-Con, the Sullivans, the Sullivan Trusts nor any of
its Affiliates has taken or agreed to take any action
which would (i) prevent Perma-Fix from accounting for
the business combination to be effected by the Mergers
as a pooling of interests or (ii) prevent the Mergers
from, collectively, constituting a transaction
qualifying as a reorganization under 368(a) of the
Code.
4.7 Property.
4.7.1 Assets. Except as disclosed in Schedule F attached
hereto: Chem-Con and its Subsidiaries own and have good
and marketable title in and to all of the assets used
by them in the operation or conduct of their business,
or required by Chem-Con and its Subsidiaries for the
normal and ordinary conduct of their business, free and
clear of any and all Liens, except for Permitted Encum-
brances.
4.7.2 Real Property. Schedule "F" attached hereto lists all
Real Properties owned by Chem-Con and its Subsidiaries.
Chem-Con and its Subsidiaries have good and marketable
title in fee simple to all of the respective Real
Property owned by them, free and clear of any and all
Liens, except for Permitted Encumbrances, and have
access thereto such as is reasonable to permit the
present or presently proposed use of any such
properties. Schedule "F" indicates which of the pro-
perties listed is covered by a title insurance policy
and a description of each such title insurance policy
is set forth on Schedule "F". The Real Property owned
by Chem-Con and its Subsidiaries contains no encroach-
ments on abutting property, public or private, and no
material encroachments by others on either of their
properties. Chem-Con and its Subsidiaries, whichever
is applicable, owns all of the Mineral Rights under the
Real Property owned by them.
4.7.3 Leases. Schedule "F" sets forth a true and complete
list of each lease of real or personal property exe-
cuted by or binding upon Chem-Con or its Subsidiaries,
as lessee, sublessee, tenant or assignee setting forth
in each case a brief description of the property
covered by the lease, the rental and the terms
thereunder. Each lease is in full force and effect,
without any default or breach thereof by any party
thereto. No consent of any landlord, lessor or any
other party is required under any such lease to keep
such lease in full force and effect without being term-
inable or in default after the execution and delivery
of this Agreement and consummation of the transactions
contemplated by this Agreement. True and complete
copies of all leases required to be listed on Schedule
"F", including all amendments, addenda, waivers and all
other binding documents, have heretofore been delivered
to Perma-Fix.
-15-
<PAGE>
4.7.4 Notice. Except as set forth on Schedule "F", none of
Chem-Con or any of its Subsidiaries, any of the
Sullivan Trust nor any of the Sullivans has received
actual or constructive notice of any violation of any
zoning, use, occupancy, building, or environmental
statute, ordinance, regulation, order, or other law or
requirement affecting or relating to any activities
performed at any time on any Real Property. None of
the Sullivan Trusts, the Sullivans, Chem-Con nor any of
the Subsidiaries of Chem-Con has any knowledge of any
past, present, or future events, conditions,
circumstances, activities, incidents, actions, or plans
that may in any way interfere with or limit the
continued use of said Real Property for all present or
presently proposed use of said Real Property.
4.7.5 Personal Property. Chem-Con and its Subsidiaries own
the full right and interest and have good and market-
able title in and to all material personal and intang-
ible property used by Chem-Con and its Subsidiaries in
the conduct of Chem-Con's and its Subsidiaries'
business and none of such personal and intangible
property is subject (i) to any contracts of sale, or
(ii) to any Liens, except for Permitted Encumbrances.
4.7.6 Notice from Insurance Carrier. None of the Sullivans,
the Sullivan Trusts, Chem-Con nor its Subsidiaries has
received any notice of, or writing referring to, any
requirements or recommendations by any insurance
company which has issued a policy covering any part of
the Real Property requiring or recommending any repairs
or work or other action being taken on any part of the
Real Property, except as otherwise disclosed in
Schedule "F". All utilities required for the operation
of the Real Property in the manner currently operated
by Chem-Con or its Subsidiaries are installed and
operating, and all installation and connection charges
have been paid in full or provided for.
4.8 Intellectual Property.
4.8.1 Ownership. Schedule "K" attached hereto is a true and
complete list of all patents, trademarks, trade names,
service marks, copyrights, web domain addresses, mask
-16-
<PAGE>
works, any applications for and registrations of such
patents, trademarks, trade names, service marks,
copyrights, mask works, web domain addresses, and all
processes, formulae, methods, schematics, technology,
know-how, computer software programs or applications
and tangible or intangible proprietary information or
material that Chem-Con or its Subsidiaries is licensed
or otherwise possesses legally enforceable rights to
use and are necessary to conduct the business of Chem-
Con or its Subsidiaries as currently conducted, or
planned to be conducted , the absence of which would be
reasonably likely to have a material adverse effect
upon Chem-Con or its Subsidiaries (the "Chem-Con
Intellectual Property Rights"). None of the Chem-Con
Intellectual Property Rights is subject to any
outstanding order, judgment, decree, stipulation, or
agreement restricting the use of such Chem-Con
Intellectual Property Rights, and to the best of their
knowledge none infringes on, or is being infringed by,
other intellectual property rights of any other person
or entity. Chem-Con and its Subsidiaries have
promulgated and used commercially reasonable efforts to
enforce and maintain any reasonably necessary trade
secret or confidentiality measures regarding the Chem-
Con Intellectual Property Rights. Neither Chem-Con nor
its Subsidiaries has given and are not bound by an
agreement or indemnification regarding Chem-Con
Intellectual Property Rights in connection with any
property or service produced, used or sold by Chem-Con
or its Subsidiaries.
4.8.2 No Breach of License. None of the ALS Trust, Chem-Con
nor its Subsidiaries is, or will as a result of the
execution and delivery of this Agreement or the
performance of their respective obligations under this
Agreement or otherwise be, in breach of any license,
sublicense or other agreement relating to the Chem-Con
Intellectual Property Rights, or any material licenses,
sublicenses and other agreements as to which Chem-Con
or its Subsidiaries is a party and pursuant to which
Chem-Con or its Subsidiaries is authorized to use any
third party patents, trademarks or copyrights ("Chem-
Con Third Party Intellectual Property Rights"),
including software which is used in the manufacture of,
incorporated in, or forms a part of any product sold or
services rendered by or expected to be sold or services
rendered by Chem-Con or its Subsidiaries, the breach of
which would be reasonably likely to have a material
adverse effect upon Chem-Con or its Subsidiaries,
except as disclosed in Schedule "K" hereof.
4.8.3 Year 2000 Issues. Schedule S hereof identifies each
"Year 2000" audit, report or investigation that has
been performed by or on behalf of Chem-Con and its
Subsidiaries with respect to their business and
operations, and Chem-Con has provided to Perma-Fix true
and correct copies of all such audits, reports or
investigations. Except as set forth in such audits,
reports and investigations, neither the Sullivans, the
Sullivan Trusts nor Chem-Con or its Subsidiaries are
-17-
<PAGE>
aware of any failure to be Year 2000 Compliant of (i)
any software products sold or licensed by Chem-Con or
its Subsidiaries to third parties or (ii) any computer
software products used by or licensed to Chem-Con or
its Subsidiaries from third parties for internal use by
Chem-Con or its Subsidiaries. For purposes of this
Agreement, "Year 2000 Compliant" means, with respect to
each software product referred to in the prior
sentence, that such system (i) will accurately receive,
record, store, provide, recognize and process all date
and time data from, during, into and between the
twentieth and twenty-first centuries; (ii) will
accurately perform all date-dependent calculations and
operations (including, without limitation, mathematical
operations, sorting, comparing and reporting) from,
during, into and between the twentieth and twenty-first
centuries; and (iii) will not malfunction, cease to
function or provide invalid or incorrect results as a
result of (x) the change of century, (y) date data,
including date data which represents or references
different centuries or more than one century or (z) the
occurrence of any particular date; in each case without
human intervention, other than original data entry;
provided, in each case, that all applications, hardware
and other systems used in conjunction with such system
which are not owned or licensed by Chem-Con or its
Subsidiaries correctly exchange date data with or
provide data to such system. Neither Chem-Con nor its
Subsidiaries has provided any guarantee or warranty
for any product sold or licensed, or services provided,
by Chem-Con or its Subsidiaries to the effect that such
product or service (i) complies with or accounts for
the fact of the arrival of the year 2000 or (ii) will
not be adversely affected with respect to
functionality, operability, performance or volume
capacity (including without limitation the processing
and reporting of data) by virtue of the arrival of the
year 2000. Chem-Con and its Subsidiaries have
performed audits regarding their primary suppliers,
customers, creditors and financial service
organizations with which they have substantial
interaction ("Outside Persons") and have determined
that all of these Outside Persons are substantially
Year 2000 Compliant to the extent that there will be no
material adverse effects to Chem-Con or its
Subsidiaries resulting from a failure of such Outside
Persons to be Year 2000 Compliant. In addition,
Schedule "S" shall set forth in detail the status of
Chem-Con and its Subsidiaries' efforts to address the
Year 2000 issues involving Chem-Con and its
Subsidiaries and outside persons.
4.9 Agreements, Contracts and Commitments.
4.9.1 Contracts. Except as set forth on Schedule "G",
neither Chem-Con nor its Subsidiaries is a party to or
bound by:
4.9.1.1 any collective bargaining agreements or any
agreements that contain any severance pay
liabilities or obligations;
-18-
<PAGE>
4.9.1.2 any bonus, deferred compensation, pension,
profit-sharing or retirement plans, programs
or other similar employee benefit arrange-
ments;
4.9.1.3 any employment agreement, contract or commit-
ment with an employee;
4.9.1.4 any agreement of guaranty or indemnification
running from Chem-Con or its Subsidiaries to
any person or entity, including, but not
limited to, any Affiliate, other than
guarantees or indemnifications issued in the
ordinary course of Chem-Con's business
relating solely to the indemnification of
certain of its customers due to Chem-Con's
disposal of waste generated by such customers
at permitted disposal facilities not
affiliated with Chem-Con;
4.9.1.5 any agreement, contract or commitment which
would reasonably be expected to have a
material adverse impact on the business of
Chem-Con or its Subsidiaries;
4.9.1.6 any agreement, indenture or other instrument
which contains restrictions with respect to
payment of dividends or any other distribution
in respect of Chem-Con or its Subsidiaries or
any other outstanding securities of Chem-Con
or its Subsidiaries;
4.9.1.7 any agreement, contract or commitment con-
taining any covenant limiting the freedom of
Chem-Con or its Subsidiaries to engage in any
line of business or compete with any person;
4.9.1.8 any agreement, contract or commitment relating
to capital expenditures in excess of ten
thousand dollars ($10,000.00) and involving
future payments;
4.9.1.9 any agreement, contract or commitment relating
to the acquisition of assets or capital stock
of any business enterprise;
4.9.1.10 any contract with the Department of Defense or
any other department or agency of the United States
Government, or to any subcontract under any such
contract, which is subject to renegotiation under
the Renegotiation Act of 1951, as amended; or
4.9.1.11 any agreement, contract or commitment not
made in the ordinary course of business which
involves Ten Thousand Dollars ($10,000) or more or
-19-
<PAGE>
has a remaining term of one (1) year or more from
December 31, 1998, or is not cancelable on thirty
(30) days or less notice without penalty. Neither
Chem-Con nor its Subsidiaries has breached, and
there is not any claim, or, to the best of Chem-
Con's or the ALS Trust's knowledge, any claim that
Chem-Con or its Subsidiaries have breached any of
the terms or conditions of any agreement, contract
or commitment set forth in this Agreement or in any
of the Schedules attached hereto or of any other
agreement, contract or commitment, if any such
breach or breaches in the aggregate could result in
the imposition of damages or the loss of benefits
in an amount or of a kind material to Chem-Con or
its Subsidiaries.
4.9.2 Written List. Attached hereto as Schedule "H" is a
written list of all contracts, leases, agreements and
instruments which are in any single case of material
importance to the conduct of the business of Chem-Con
or its Subsidiaries, together with true and correct
copies of each document requested by Perma-Fix and a
written description of each oral arrangement so listed.
Without limiting the generality of the foregoing, the
aforesaid list includes all the contracts, agreements
and instruments of the following types to which Chem-
Con or its Subsidiaries is a party, or by which it is
bound (without regard to whether such contracts, agree-
ments and instruments are material):
4.9.2.1 leases of, and contracts for, the purchase or
sale of Real Property;
4.9.2.2 labor union contracts together with a list of
all labor unions representing or, to their
best knowledge, attempting to represent
employees of Chem-Con or its Subsidiaries;
4.9.2.3 pension, retirement, profit-sharing, bonus,
stock purchase, stock option, hospitalization
or insurance plans (and certificates or other
documents issued thereunder) or vacation pay,
severance pay and other similar benefit
arrangements for officers, directors,
employees or agents;
4.9.2.4 employment contracts or agreements, contracts
with other persons engaged in sales or service
activities, and advertising contracts, and
brokering contracts, which are not terminable
by Chem-Con or its Subsidiaries without lia-
bility upon termination notice of thirty (30)
days or less;
4.9.2.5 written or oral agreements, understandings and
arrangements with officers, directors,
employees, shareholders, agents, or Affiliates
-20-
<PAGE>
of Chem-Con or its Subsidiaries, the Sullivans
or the Sullivan Trusts relating to present or
future compensation of, or other benefits
available to, such persons;
4.9.2.6 contracts, and other arrangements of any kind,
whether oral or written, with any director,
officer, employee, trustee, stockholder or
Affiliate of Chem-Con or its Subsidiaries, the
Sullivans or the Sullivan Trusts or to which
any director, officer, employee or Affiliate
of Chem-Con or any of its Subsidiaries is a
party;
4.9.2.7 contracts, purchase orders and other arrange-
ments of any nature involving an expenditure
of Five Thousand Dollars ($5,000.00) or more
not made in the ordinary course of business or
which involve an unperformed commitment, under
contracts not otherwise disclosed hereunder,
in excess of Twenty-Five Thousand Dollars
($25,000.00); and
4.9.2.8 indentures, loan agreements, notes, mortgages,
conditional sales contracts, and other
agreements for financing.
4.10 No Breach of Statute or Contract; Governmental Authorizations.
4.10.1 No Violation. Neither the execution and delivery of
this Agreement by Chem-Con, the Sullivans or the
Sullivan Trusts nor the performance or compliance by
the Chem-Con or its Subsidiaries, the Sullivans or the
Sullivan Trusts with any of the terms and provisions of
this Agreement will violate any Laws of any govern-
mental agency or authority, domestic or foreign, or
will at the Closing conflict with or result in a breach
of any of the terms, conditions or provisions of any
judgment, order, injunction, decree or ruling of any
court or governmental agency or authority, domestic or
foreign, to which any of Chem-Con or its Subsidiaries,
the Sullivans or the Sullivan Trusts may be subject to,
or bound by, or of any agreement or instrument to which
Chem-Con or its Subsidiaries, the Sullivans or the
Sullivan Trusts is a party or by which any of them is
bound, or constitute a default thereunder, or result in
the creation of any Liens upon the Chem-Con Common
Stock or any of the property or assets of Chem-Con or
its Subsidiaries, or cause any acceleration of maturity
of any obligation or loan, or give to others any
interest or rights, including rights of termination or
cancellation, in or with respect to any of the proper-
ties, assets, agreements, contracts, or business of
Chem-Con or its Subsidiaries, the Sullivans or the
Sullivan Trusts or cause any acceleration or
termination or cancellation, in or with respect to any
-21-
<PAGE>
of the properties, assets, agreements, contracts or
business of Chem-Con or its Subsidiaries, the Sullivans
or the Sullivan Trusts.
4.10.2 Permits and Licenses. Schedule "I" attached hereto is
a true and complete list of all permits, licenses and
franchises presently held by, or used in connection
with, the normal and ordinary business of Chem-Con or
its Subsidiaries and all applications for any of the
foregoing filed by Chem-Con or its Subsidiaries, the
Sullivans or the Sullivan Trusts relating to the
business of Chem-Con or its Subsidiaries with any
Governmental Authority. All permits, licenses and
franchises used by Chem-Con or its Subsidiaries to
conduct Chem-Con's or its Subsidiaries' business are in
the name of Chem-Con or its Subsidiaries and none are
in the name of any other party.
4.10.3 Reports. Schedule "I" is a true and complete list of
all reports made by, or with respect to Chem-Con or its
Subsidiaries, the Sullivans or the Sullivan Trusts
since September 30, 1998, except as otherwise furnished
pursuant to this Agreement, to or from the Federal
Trade Commission ("FTC"), Environmental Protection
Agency ("EPA"), Equal Employment Opportunity Commission
("EEOC"), reports under the Occupational Safety and
Health Act ("OSHA"), the Department of Labor, Florida
Department of Environmental Protection, Georgia
Department of Natural Resources, all other state or
federal government agencies or departments, and tax
returns to, tax rulings from, and tax audit reports
from the IRS, relating in any manner to the business of
Chem-Con or its Subsidiaries.
4.10.4 Violation of Law and Contamination of Real Property.
Except as disclosed in Schedule "I", none of Chem-Con
or its Subsidiaries, the Sullivans nor the Sullivan
Trusts is in violation of any Laws, (including, but not
limited to, Environmental Laws) which violation might
have a material adverse effect on Chem-Con or its
Subsidiaries or the business of Chem-Con or its
Subsidiaries or the financial condition or operations
of Chem-Con or its Subsidiaries, and none of the Real
Property owned or leased by Chem-Con and/or its
Subsidiaries is contaminated or requires remediation of
any kind as a result of being contaminated.
4.10.5 Permits under Environmental Laws. Chem-Con and its
Subsidiaries have obtained, presently holds and has
adhered to all permits, licenses, and other authori-
zations required under federal, state, and local laws
(including, but not limited to, any and all
Environmental Laws), (i) which are necessary for, or
material to, the conduct of Chem-Con's business or its
Subsidiaries' business as such businesses are currently
being operated, including, but not limited to, any and
all permits and licenses required under the
Environmental Laws for Chem-Con and its Subsidiaries to
conduct Chem-Con's business or its Subsidiaries'
-22-
<PAGE>
business as currently conducted, and (ii) such other
permits, licenses and other authorizations relating to
pollution or protection of the environment, including,
without limitation, laws relating to emissions, dis-
charges, releases or threatened releases of pollutants,
contaminants (chemicals or industrial or toxic wastes
into the environment including, without limitation,
ambient air, surface waste, groundwater, soil or land),
or otherwise relating to the manufacture, processing,
recycling, reclamation, distribution, use, treatment,
storage, disposal, transport, or handling of pollut-
ants, contaminants, chemicals, petroleum products, or
industrial or solid or toxic wastes or radioactive
materials, except as disclosed in Schedule I attached
hereto. Chem-Con and its Subsidiaries are in com-
pliance with all terms and conditions of all such
required permits, licenses and other authorizations,
and with all other limitations, restrictions,
conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables contained in
such Environmental Laws, except as disclosed in
Schedule I attached hereto. None of Chem-Con or its
Subsidiaries, the Sullivans nor the Sullivan Trusts,
after due inquiry, has any knowledge of any past,
present, or future events, actions, or plans that may
interfere with or prevent full compliance or continued
full compliance as described above, or that may give
rise to any common law or legal liability or otherwise
form the basis of any claim, action, demand, suit,
proceeding, hearing, study, or investigation related to
the manufacture, processing, recycling, reclamation,
distribution, use, treatment, storage, disposal,
transport or threatened release of, any pollutant,
contaminant, chemical or industrial or solid or toxic
waste or radioactive materials.
4.10.6 Other Permits. Except as set forth in Schedule "I",
neither the execution and delivery of this Agreement
nor the consummation thereof will violate any of the
terms of any of the permits, licenses, approvals and
authorities held by Chem-Con or its Subsidiaries or
cause the termination or cancellation of any of the
permits, licenses, approvals and authorities held by
Chem-Con or its Subsidiaries. None of Chem-Con or its
Subsidiaries, the Sullivans nor the Sullivan Trusts has
received official notice that Chem-Con or its
Subsidiaries is in violation of any law, regulation,
ordinance or rule applicable to them or their oper-
ations.
4.11 No Litigation or Adverse Effects. Except as set forth in
Schedule "J", there is no suit, action or legal, administra-
tive, arbitration, or other proceeding, or governmental
investigation, or any change in the zoning, use, occupancy or
building ordinances affecting the real property or any lease-
hold interests of Chem-Con or its Subsidiaries pending or, to
the best of their knowledge threatened, which could adversely
affect the financial condition, results of operations or
business, assets or properties of Chem-Con or its
Subsidiaries, or the conduct of business of Chem-Con or its
Subsidiaries. Further, there is no suit, action or legal,
administrative, arbitration, governmental investigation or
-23-
<PAGE>
other proceeding against Chem-Con or its Subsidiaries, or to
the best of their knowledge threatened, involving any claims
based upon negligence, product warranties, product liability
or any other type of claim (including, but not limited to,
those arising under any Environmental Laws) exceeding poten-
tial liability (including costs of defense and attorneys'
fees), whether or not covered by insurance, in an amount in
excess of Ten Thousand Dollars ($10,000.00) with respect to
the individual suit, action, proceeding or investigation, or
potential liability (including costs of defense and attorneys'
fees) of Twenty-Five Thousand Dollars ($25,000.00) in the
aggregate of all such suits, actions, proceedings or
investigations, except (a) workers' compensation, automobile
accident and other routine claims wholly covered by existing
insurance (including costs of defense and attorneys' fees) and
(b) as set forth in Schedule "J" hereto.
4.12 Authorization, Execution and Delivery of Agreement. Each of
Chem-Con, the Sullivans and the Sullivan Trusts has the power,
authority and capacity to enter into this Agreement and to
carry out the transactions contemplated hereby. The
execution, delivery and the performance of this Agreement by
Chem-Con, the Sullivans and the Sullivan Trusts have been duly
and validly authorized and approved by all requisite corporate
action on the part of Chem-Con and all requisite action of the
trustees under the Sullivan Trusts, and this Agreement
constitutes the valid and binding agreement and obligation of
Chem-Con, the Sullivans and the Sullivan Trusts enforceable in
accordance with its terms, subject to bankruptcy, insolvency
and other laws of similar import.
4.13 Ability to Conduct the Business. None of Chem-Con, its
Subsidiaries, the Sullivans nor the Sullivan Trusts is subject
to, or bound by, any judgment, order, writ, injunction or
decree of any court or of any governmental body or agency or
of any arbitrator which could prevent the execution, delivery
or performance of this Agreement or the use by Chem-Con or its
Subsidiaries of assets owned, leased or used by Chem-Con or
its Subsidiaries, or the conduct of Chem-Con or its
Subsidiaries's business, as presently conducted by Chem-Con or
its Subsidiaries, in accordance with present practices, after
the Closing. None of Chem-Con or its Subsidiaries, the
Sullivans nor the Sullivan Trusts is a party to, bound by, or
a beneficiary of, any agreement which could prevent the use of
assets material to Chem-Con or its Subsidiaries or the conduct
of business as currently conducted by Chem-Con or its
Subsidiaries in each case after the Closing.
4.14 Disclosure. No representation or warranty by Chem-Con, the
Sullivans and the Sullivan Trust contained in this Agreement
and no statement contained in any certificate, list,
disclosure schedule, exhibit or other instrument furnished, or
to be furnished, to Perma-Fix, Florida Perma-Chem and/or
Georgia Perma-Chem pursuant hereto, contains or will contain
any untrue statement of a material fact or omits, or will
omit, to state a material fact necessary to make the state-
ments contained therein not misleading.
-24-
<PAGE>
4.15 Broker's or Finder's Fee. No agent, broker, person or firm
acting on behalf of the Chem-Con, the Sullivans and/or the
Sullivan Trust or under the authority of Chem-Con, the
Sullivans and/or the Sullivan Trusts is or will be entitled to
any commission or broker's or finder's fee from any of the
parties hereto in connection with this Agreement or any of the
transactions contemplated herein, except the Sullivans have
retained WHCA Partners as an agent or firm acting on behalf of
the Sullivans and the Sullivan Trusts in connection with this
Agreement and the transactions contemplated by this Agreement.
The Sullivans and the Sullivan Trusts shall pay to WHCA
Partners any and all fees and other renumeration due to WHCA
Partners in connection with this Agreement and the
transactions contemplated by this Agreement. Chem-Con shall
pay any expenses due to WHCA Partners for work performed by
WHCA Partners on behalf of Chem-Con prior to November 5, 1998;
provided however, Chem-Con shall not pay any commissions or
fees due to WHCA Partners in connection with this Agreement or
the transactions contemplated by this Agreement.
4.16 Insurance. Chem-Con and its Subsidiaries have in full force
and effect policies of insurance of the types, including
insurance policies under which Chem-Con, its Subsidiaries and
Chem-Con's or its Subsidiaries' officers, directors and Affil-
iates or any of them, in such capacity, is named insured, and
in the amounts and with insurance carriers as set forth in
Schedule "L" attached hereto, and will continue all of such
insurance in full force and effect up to and until the
Closing. The amounts and types of such insurance policies and
the insurance carriers issuing such policies fully meet Chem-
Con's and its Subsidiaries' contractual, legal or regulatory
commitments and are fully adequate to insure against risks to
which Chem-Con or its Subsidiaries is normally exposed in the
operation of its businesses and as required by Governmental
Authority and the Environmental Laws.
4.17 Completeness of Documents -- Chem-Con and CCC. The copies of
the Articles of Incorporation and Bylaws of Chem-Con and CCC,
and of all leases, instruments, agreements or other documents
(including all Schedules and documents delivered pursuant to
this Agreement) which have been or will be delivered to Perma-
Fix pursuant to the terms of this Agreement or in connection
with the transactions contemplated hereby, are, or if not now
delivered, will when delivered, be true, complete and correct.
4.18 Completeness of Documents -- Sullivan Trusts. The copies of
the organizational documents of the Sullivan Trusts, which
have been or will be delivered to Perma-Fix pursuant to the
terms of this Agreement or in connection with the transactions
contemplated hereby, are, or if not now delivered, will when
delivered, be true, complete and correct.
4.19 Disposition of Assets. Since September 30, 1998, neither
Chem-Con nor its Subsidiaries have made any sale or other
disposition of any of their properties or assets or sur-
rendered any of their rights with respect thereto, or made any
additions to their properties or assets, or entered into any
agreements, or entered into any other transaction, except in
-25-
<PAGE>
each instance in the ordinary course of business or as set
forth in Schedule "M" attached hereto, and no such sale, dis-
position, surrender, addition, agreement or transaction set
forth in such Schedule "M" has any material adverse effect
upon the results of operations or financial condition of Chem-
Con or its Subsidiaries or Chem-Con's or its Subsidiaries'
ability to conduct Chem-Con's and its Subsidiaries' business
as currently conducted.
4.20 Obligations to Employees. All obligations of Chem-Con and/or
any Affiliates, whether arising by operation of law, contract,
agreement, or otherwise, for payments to trusts or other funds
or to any governmental agency or to any employees, directors,
officers, agents, or any other individual (or any of their
respective heirs, legatees, beneficiaries, or legal
representatives) with respect to profit-sharing, pension or
retirement benefits, or any other employee benefit of any kind
whatsoever relating to Chem-Con, its Subsidiaries or any of
their employees, have been paid. All legally enforceable
obligations of Chem-Con or its Subsidiaries, whether arising
by operation of law, contract, agreement, or otherwise, for
bonuses or other forms of compensation or benefits which are,
or may become, payable to its employees, directors, officers,
agents, or any other individual (or their respective heirs,
legatees, beneficiaries or legal representative) relating to
Chem-Con or its Subsidiaries or any of the employees of Chem-
Con or its Subsidiaries with respect to periods ending on or
before the Closing have been paid, or adequate accruals for
payment thereof are reflected on the Audited Financial
Statements. Neither Chem-Con nor any of its Affiliates has
any accumulated funding deficiencies, as such term is defined
in the Employee Retirement Income Security Act of 1974
("ERISA") and in the Code with respect to any employee benefit
plan as defined in ERISA maintained or established for
employees of Chem-Con or its Subsidiaries. Neither Chem-Con
nor its Subsidiaries has incurred any liability to the Pension
Benefit Guaranty Corporation ("PBGC") other than for the
payment of insurance premiums all of which have been paid when
due, the IRS or the Department of Labor ("DOL") with respect
to any such employee benefit plan that affects, or might
affect Chem-Con, and does not have any withdrawal liability
with respect to any multiemployer pension plan ("Multiemployer
Plan") which is subject to the Multiemployer Pension Plan
Amendments Act of 1980. The consummation of this Agreement
will not result in either a complete or partial withdrawal
from any of the Multiemployer Plans. All of the employee
benefit plans of which Chem-Con or any Affiliate of Chem-Con
is the plan sponsor relating to Chem-Con and its Subsidiaries
or any of their employees have been amended as, when and to
the extent necessary to comply with and qualify under the
applicable provisions of the Code; and all such employee
benefit plans have been administered in accordance with the
applicable provisions of the Code and ERISA. Except as
indicated on Schedule "N", any employee benefit plans relating
to Chem-Con or its Subsidiaries or any of their employees
which are pension benefit plans have received, or have applied
for and expect to receive, determination letters from the IRS
to the effect that such plans are qualified and exempt from
federal income taxes under Sections 401(a) and 501(a), respectively,
of the Code, and, no amendments have been made to any such
employee benefit plans other than those covered by such
-26-
<PAGE>
determination letters or applications for such determination
letters with respect to such amendments which have been timely
filed with the IRS. No determination letter received with
respect to any employee benefit plan relating to Chem-Con or
its Subsidiaries or any of their employees has been revoked
nor has revocation been threatened. Each of the employee
benefit plans have been administered at all times and in all
respects in accordance with their respective terms. There are
no pending investigations by any Governmental Authority
involving any employee benefit plans relating to Chem-Con or
its Subsidiaries or any of their employees, no deficiency or
termination proceedings involving such employee benefit plans,
and no threatened or pending claims (except for claims for
benefits payable in the normal operation of the employee
benefit plans), suits or proceedings against any such
employee benefit plan or asserting any rights or claims to
benefits under any such employee benefit plan nor are there
any facts which could give rise to any liability in the event
of any such investigation, claim, suit or proceeding. Neither
the employee benefit plans nor any trusts created thereunder
relating to Chem-Con or its Subsidiaries or to any of their
employees, nor any trustee, administrator or other fiduciary
thereof, has engaged in a "prohibited transaction" (as such
term is defined in Section 4975 of the Code or Section 406 of
the ERISA); and has not experienced any reportable event within the
meaning of ERISA or other event or condition which presents a
material risk of termination of any such employee benefit plan
by the PBGC, has had any tax imposed upon it by the IRS for
any alleged violation under Section 4975 of the Code, or has engaged
in any transaction which might subject Chem-Con or its
Subsidiaries or any such employee benefit plan to any
liability for such tax. The terms of any such employee
benefit plans comply with ERISA and the Code in all respects,
and, any and all reporting and disclosure requirements of
ERISA or the Code and the DOL with respect to any such
employee benefit plan have been timely met. The information
supplied to the actuary by Chem-Con or its Subsidiaries, the
Sullivans or the Sullivan Trusts for use in preparing those
reports was complete and accurate and none of Chem-Con, the
Sullivans nor the Sullivan Trusts has reason to believe that
the conclusions expressed in such reports are incorrect. In
the event of termination of any employee benefit plan of Chem-
Con or any of its Affiliates relating to Chem-Con or its
Subsidiaries or to any of their employees, there will be no
liability of Chem-Con or its Subsidiaries or the plan with
respect to the providing of benefits accrued thereunder
subject to future variations in levels of compensation
assuming continued investment returns at rates actuarially
predicted. Further, if termination (whether complete or
partial) of any plan has occurred, then, all liabilities with
respect thereto have been satisfied in full and no present
liability exists with respect to any such prior termination.
Schedule "N" also includes a list of any and all pension or
benefit obligations of Chem-Con and/or its Affiliates which
have not been fully funded.
4.21 Condition of Plant, Machinery and Equipment. Except as set
forth on Schedule "O", all of the items of the property, plant
and equipment owned, operated or leased by Chem-Con or its
Subsidiaries are, in all material respects, in good condition
-27-
<PAGE>
and repair, reasonable wear and tear excepted, and Chem-Con
and its Subsidiaries agree to maintain such items in good
operating condition until the Closing. Casualty losses to
such property, plant and equipment are covered by insurance
with normal industry deductibles being applicable.
4.22 Books of Account. Chem-Con has maintained its books of
account in accordance with GAAP, applied on a consistent basis
with prior periods.
4.23 Stock Redemptions. There are no shares of Chem-Con Common
Stock which are subject to redemption or purchase in lieu of
redemption, which prior to September 30, 1998, were not paid
for in full. From September 30, 1998, through the date of
this Agreement, Chem-Con has not purchased or redeemed or
entered into any agreement to purchase or redeem any Chem-Con
Common Stock.
4.24 Minute Books. Chem-Con and its Subsidiaries have maintained
their corporate minute books and all such books are current.
4.25 Indebtedness of Shareholders, etc. Except as set forth on
Schedule "P", none of the shareholders, Affiliates, officers,
directors or employees of Chem-Con is (i) indebted to Chem-Con
or its Subsidiaries, and neither Chem-Con nor its Subsidiaries
is indebted to their Affiliates, shareholders or any of their
officers, directors or employees, (ii) a party to or has any
interest in a material contract, agreement or lease with Chem-
Con or its Subsidiaries or in which Chem-Con or its
Subsidiaries is a party to or bound by, or (iii) a customer or
supplier of Chem-Con or its Subsidiaries, which during any one
of the preceding three (3) years supplied to or purchased from
Chem-Con or its Subsidiaries a amount of property or services
exceeding Ten Thousand Dollars ($10,000.00) in any one (1)
year.
4.26 Business Prospects. Since September 30, 1998, there has not
occurred any event or other occurrence which might have a
material adverse effect on the business or business prospects
of Chem-Con or its Subsidiaries.
4.27 Bank Accounts; Powers of Attorney. Schedule "Q" attached
hereto sets forth each bank account and borrowing resolution
authorizing officers or agents of Chem-Con or its Subsidiaries
to borrow money and lists the persons authorized to transact
business on behalf of Chem-Con or its Subsidiaries with
respect to each such account or borrowing resolution.
Schedule "Q" also lists all powers of attorney granted by
Chem-Con or its Subsidiaries to any other person.
4.28 Sensitive Payments. Neither Chem-Con nor its Subsidiaries has
made or received, and to their best knowledge, after
reasonable due inquiry, none of their officers, directors,
employees, agents, shareholders or other representative of
Chem-Con or its Subsidiaries or any person acting on behalf of
Chem-Con or its Subsidiaries, has made or received, directly
or indirectly, any bribes, kickbacks, illegal political
contributions with corporate funds, improper payments from
-28-
<PAGE>
corporate funds that are falsely recorded on the books and
records of Chem-Con, payments to governmental officials in
their individual capacities or illegal payments from corporate
funds to obtain or retain business.
ARTICLE 5
ADDITIONAL REPRESENTATIONS, WARRANTIES
AND COVENANTS OF THE SULLIVANS AND THE SULLIVAN TRUSTS
The Sullivans and the Sullivan Trusts, jointly and
severally, provide to Perma-Fix the following additional repre-
sentations, warranties and covenants:
5.1 Affiliate Status. Upon the execution of this Agreement, Chem-
Con, the Sullivans and the Sullivan Trusts will provide Perma-
Fix with a list of those persons who are, in Chem-Con's
reasonable judgment, "Affiliates" of Chem-Con within the
meaning of Rule 145 as promulgated under the Securities Act
("Rule 145") (each such person who is an "affiliate of Chem-
Con within the meaning of Rule 145 is referred to as a "Chem-
Con Affiliate"). Chem-Con, the Sullivans and the Sullivan
Trusts shall provide Perma-Fix with such information and
documents as Perma-Fix shall reasonably request for purposes
of reviewing such list and shall notify Perma-Fix in writing
regarding any change in the identity of the Chem-Con
Affiliates prior to the Closing Date.
5.2 Rule 145. The Sullivans and the Sullivan Trusts will not
offer, sell, pledge, hypothecate, transfer or otherwise
dispose of, or reduce their interest in or risk relating to,
any of the shares of Perma-Fix Common Stock issued to the ALS
Trust under this Agreement as a result of the Mergers unless
at such time either: (i) such transaction is permitted
pursuant to the provisions of Rule 145 under the Securities
Act; (ii) the undersigned shall have furnished to Perma-Fix an
opinion of counsel, reasonably satisfactory to Perma-Fix, to
the effect that such transaction is otherwise exempt from the
registration requirements of the Securities Act; or (iii) a
registration statement under the Securities Act covering the
proposed offer, sale, pledge, hypothecation, transfer or other
disposition shall be effective under the Securities Act.
5.3 Legend. The Sullivans and the Sullivan Trusts understand and
agree that stop transfer instructions will be given to Perma-
Fix's transfer agent and that there will be placed on the
certificate or certificates representing the Perma-Fix Common
Stock issuable under this Agreement, any substitutions
therefor and any certificates for additional shares which
might be distributed with respect to such Perma-Fix Common
Stock, a legend stating in substance:
-29-
<PAGE>
"The shares represented by this certificate were
issued in a transaction to which Rule 145 of the
Securities Act of 1933 applies and may only be
transferred in accordance with the provisions of
such rule. In addition, the shares represented by
this certificate may only be transferred in
accordance with the terms of an Agreement and
Plan of Merger dated March 15, 1999, among Perma-
Fix Environmental Services, Inc. ("Perma-Fix"),
Florida Perma-Chem, Inc., Georgia Perma-Chem,
Inc., Chemical Conservation Corporation, Chemical
Conservation of Georgia, Inc., The Thomas P.
Sullivan Living Trust, dated September 6, 1978,
The Ann L. Sullivan Living Trust, dated
September 6, 1978, Thomas P. Sullivan and Ann L.
Sullivan, a copy of which agreement may be
inspected by the holder of this certificate at
the principal offices of Perma-Fix, or furnished
by Perma-Fix to the holder of this certificate
upon written request, without charge."
5.4 Restrictions on Certain Actions. For a period of two (2)
years from the date of Closing, neither any of the Sullivan
Trusts nor any of the Sullivans shall, without the prior
consent of the Board of Directors of Perma-Fix (specifically
expressed in a resolution adopted by a majority of the Board
of Directors of Perma-Fix who are not employees,
representatives or agents of the Sullivan Trusts and/or the
Sullivans or any of their Affiliates):
5.4.1 Prohibition Against Acquisition. Except for the shares
of Perma-Fix Common Stock which the Sullivan Trusts
acquire under this Agreement and the Chem-Met
Agreement, or through stock splits, stock dividends or
stock options granted by Perma-Fix to TPS, acquire,
offer or propose to acquire, or permit any Affiliate of
the Sullivan Trusts or any of the Sullivans to acquire,
directly or indirectly, or in conjunction with or
through any other person, firm, corporation, entity,
partnership, company or association, by purchase or
otherwise, beneficial ownership of any shares of Perma-
Fix Common Stock or any other voting securities of
Perma-Fix or any rights or option to acquire voting
securities of Perma-Fix or any securities convertible
into any voting securities of Perma-Fix (collectively,
"Perma-Fix Voting Securities") except as otherwise
agreed to in writing by the President of Perma-Fix or
approved by the Board of Directors (or a duly
authorized committee of the Board of Directors) of
Perma-Fix. Notwithstanding anything in this Section
5.4.1 to the contrary, Michael F. Sullivan and Patrick
Sullivan, sons of TPS and ALS, may acquire shares of
Perma-Fix Common Stock;
5.4.2 Prohibition Against Solicitation. Directly or
indirectly, or through or in conjunction with any other
person, firm, corporation, entity, partnership, company
or association, solicit, or encourage any solicitation
-30-
<PAGE>
of, or permit any Affiliate of the Sullivans or any of
the Sullivan Trusts to solicit, or encourage any
solicitation of, (i) proxies with respect to Perma-Fix
Voting Securities under any circumstances, or (ii)
tender or exchange offers for Perma-Fix Voting
Securities under any circumstances or (iii) any
election contest relating to the election of directors
of Perma-Fix; or
5.4.3 Prohibition Against Control. Take any action alone or
in concert with any other person, firm, corporation,
partnership, company or association to acquire or
affect the control of Perma-Fix or to influence the
management, board of directors or policies of Perma-
Fix, or, directly or indirectly, or encourage the
formation of, any group within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as
amended, seeking to obtain or take control of Perma-Fix
or to influence the management, board of directors
policies of Perma-Fix, except it is recognized that the
Sullivan Trusts have the right to select one (1)
nominee to the Board of Directors of Perma-Fix under
certain limited conditions; or
5.5 Attendance. During the period that any of the Sullivans or
Sullivan Trusts is the beneficial owner of any shares of
Perma-Fix Common Stock acquired under this Agreement and the
Chem-Met Agreement, the Sullivan Trusts shall cause all such
shares of Perma-Fix Common Stock which they beneficially own
to be duly represented, in person or by proxy, at each meeting
of stockholders of Perma-Fix.
5.6 Specific Enforcement. The parties hereto recognize and agree
that, in the event any of the Sullivans or any of the Sullivan
Trusts breach or threaten to breach any of the provisions of
this Article 5, immediate irreparable injury would be caused
to Perma-Fix, for which there is no adequate remedy at law.
It is accordingly agreed that in the event of a failure by any
of the Sullivans or Sullivan Trusts to perform their obliga-
tions under this Article 5, Perma-Fix shall be entitled to
specific performance through injunctive relief to prevent
breaches of any provision of this Article 5 and to specif-
ically enforce any provision of Article 5 and the terms and
provisions thereof in any action instituted in any court of
the United States or any state thereof having subject matter
jurisdiction, in addition to any other remedy to which Perma-
Fix may be entitled, at law or in equity.
ARTICLE 6
NO SOLICITATION OF TRANSACTIONS
6.1 No Solicitation of Transactions. Chem-Con, the Sullivans and
the Sullivan Trusts shall not, and will not allow any of their
employees, agents, representatives or Affiliates (including,
but not limited to any of Chem-Con's and/or Chem-Met's
officers, directors, employees, agents, representatives or
Affiliates), to (i) negotiate, sell, offer to sell or solicit
-31-
<PAGE>
offers to purchase any of the assets of Chem-Con and/or Chem-
Met (other than sales of products in the ordinary course of
their businesses); (ii) negotiate, sell, offer to sell or
solicit offers to purchase or exchange, any capital stock of
Chem-Con, Chem-Met or any Subsidiary of Chem-Con or Chem-Met
to, from or with any other party (other than pursuant to the
terms of this Agreement and the Chem-Met Agreement) or enter
into any merger, consolidation, liquidation or similar trans-
action involving, directly or indirectly, Chem-Con , Chem-Met
or any Subsidiary of Chem-Con or Chem-Met (other than pursuant
to the terms of this Agreement and the Chem-Met Agreement) and
none of the Sullivan, the Sullivan Trusts, Chem-Con, Chem-Met
nor any of their Affiliates will negotiate with or provide
financial, technical or other information to any person (other
than pursuant to the terms of this Agreement and the Chem-Met
Agreement) in connection with any such proposed purchase or
transaction; or, (iii) negotiate, sell, offer to sell or
solicit any offers to purchase any outstanding shares of Chem-
Con's and Chem-Met's capital stock or any other securities of
Chem-Con and Chem-Met (other than pursuant to the terms of
this Agreement and the Chem-Met Agreement).
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF PERMA-FIX
Perma-Fix, Florida Perma-Chem and Georgia Perma-Chem,
jointly and severally, represent and warrant to the ALS Trust as
follows:
7.1 Organization, etc. Perma-Fix is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware. Florida Perma-Chem is a corporation duly
organized, validly existing and in good standing under the
laws of the State of Florida. Georgia Perma-Chem is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia. Perma-Fix
has the corporate power to own its property and to carry on
its business as now being conducted; Perma-Fix has the
corporate power and authority to execute and deliver this
Agreement and, after the Registration Statement has been
declared effective by the SEC and obtaining approvals from its
shareholders, its lender, the Boston Stock Exchange ("BSE")
and the National Association of Securities Dealers, Inc.
("NASDAQ"), to issue the Perma-Fix Common Stock to be
delivered pursuant to Section 3.1.4 hereof and consummate the
transactions contemplated hereby and the Chem-Met Agreement,
and to perform the transactions contemplated by this
Agreement. Each of Florida Perma-Chem and Georgia Perma-Chem
has the corporate power and authority to execute and deliver
this Agreement and, subject to the Registration Statement
being declared effective by the SEC and Perma-Fix obtaining
approvals from its shareholders and its lender, to consummate
the transactions contemplated hereby.
-32-
<PAGE>
7.2 Authorization, Execution and Delivery of Agreement. The exe-
cution, delivery and performance of this Agreement by Perma-
Fix, Florida Perma-Chem and Georgia Perma-Chem have been duly
and validly authorized and approved by the Board of Directors
of Perma-Fix. This Agreement constitutes the valid and
binding agreement of Perma-Fix, enforceable in accordance with
its terms, subject to bankruptcy, insolvency and other laws of
similar import, and Perma-Fix, Florida Perma-Chem and Georgia
Perma-Chem have taken, or will use reasonable efforts to take
prior to the Closing, all other action required by law on the
part of Perma-Fix, Florida Perma-Chem and Georgia Perma-Chem
and Perma-Fix's, Florida Perma-Chem's and Georgia Perma-Chem's
Certificate or Articles of Incorporation and bylaws or
otherwise to effect the transactions contemplated by this
Agreement.
7.3 Capital Stock of Perma-Fix. As of the date of this Agreement,
the authorized capital stock of Perma-Fix consists of (i)
2,000,000 shares of Preferred Stock, $.001 par value, 9,850 of
which are outstanding as of the date hereof; and (ii)
50,000,000 shares of Perma-Fix Common Stock, of
which 12,419,080 shares are issued and outstanding as of the
date hereof and 13,577,163 shares are reserved for issuance
under Perma-Fix's Stock Option Plans (such Plans being here-
inafter referred to as the "Perma-Fix Plans") and warrants or
rights to subscribe for or purchase from Perma-Fix any Perma-
Fix Common Stock.
7.4 SEC Filings.
7.4.1 Perma-Fix has previously furnished Chem-Con and the ALS
Trust true and complete copies of the following docu-
ments which have been filed by Perma-Fix with the SEC
pursuant to Sections 13(a), 14(a), (b) or (c) or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act")
(such documents are hereinafter collectively called the
"Perma-Fix SEC Filings"):
7.4.1.1 its Annual Report on Form 10-K for the year
ended December 31, 1997 (the "Form 10-K"), as
amended by Amendment No. 1 on Form 10-K/A
filed with the SEC on January 14, 1999;
7.4.1.2 quarterly reports on Form 10-Q for the
quarters ended March 31, 1998 and June 30,
1998; and
7.4.1.3 quarterly report on Form 10-Q for the quarter
ended September 30, 1998 as amended by
Amendment No. 1 on Form 10-Q/A filed with the
SEC on January 14, 1999.
7.4.1.4 Proxy Statement, dated April 20, 1998, in
connection with its 1998 Annual Meeting of
Stockholders; and
-33-
<PAGE>
7.4.1.5 Form 8-K, Date of Report (date of earliest
event reported): June 30, 1998.
The audited and unaudited financial statements con-
tained in the Perma-Fix SEC Filings, as amended,
present fairly the consolidated financial condition and
results of operations and changes in shareholders'
equity and changes in financial position of Perma-Fix
as of the dates and for the periods indicated, except
as may otherwise be stated in such financial state-
ments. For purposes of this Agreement, all financial
statements of Perma-Fix shall be deemed to include any
notes to such financial statements. The financial
statements described in this Section 7.4 are
hereinafter referred to as the "Perma-Fix Financial
Statements."
7.4.2 Material Adverse Change. Since September 30, 1998,
there has not been, occurred or arisen, which has not
been publicly disclosed to the shareholders of Perma-
Fix or contained in the Perma-Fix SEC Filings, as
amended:
7.4.2.1 any material adverse change in the consoli-
dated financial condition or in the operations
of the business of Perma-Fix and its
subsidiaries, taken as a whole, from that
shown on the Perma-Fix Financial Statements;
or
7.4.2.2 any event, condition or state of facts (other
than the general state of the national economy
and proposed federal legislation or
regulation) of any character which, to the
knowledge of Perma-Fix, materially and
adversely affects the results of operations or
business or financial condition or properties
of Perma-Fix and its subsidiaries, taken as a
whole, except as otherwise disclosed in this
Section 7.4.
7.5 Status of Perma-Fix Common Stock. The shares of Perma-Fix
Common Stock to be delivered pursuant to Section 3.1.4 hereof,
when so issued pursuant to this Agreement, will be duly and
validly authorized and issued, fully paid and nonassessable.
7.6 No Breach of Statute or Contract, Governmental Authorizations.
Subject to the Registration Statement being declared effective
by the SEC, obtaining approval by the shareholders of Perma-
Fix, the National Association of Securities Dealers ("NASD"),
the BSE and Perma-Fix's lender, neither the execution and
delivery of this Agreement by Perma-Fix, Florida Perma-Chem
and Georgia Perma-Chem nor compliance with the terms and pro-
visions of this Agreement by Perma-Fix, Florida Perma-Chem and
Georgia Perma-Chem will violate (i) any law, statute, rule or
regulation of any governmental authority, domestic or foreign,
or will at the Closing Date conflict with or result in a
breach of any of the terms, conditions or provisions of any
judgment, order, injunction, decree or ruling of any court or
-34-
<PAGE>
governmental agency or authority to which Perma-Fix, Florida
Perma-Chem and Georgia Perma-Chem are subject, which in the
aggregate would have a material adverse effect on Perma-Fix
and its subsidiaries, taken as a whole, or (ii) any agreement
or instrument to which it is a party or by which it is bound
or constitute a default thereunder which would have a material
adverse effect on Perma-Fix, Florida Perma-Chem and Georgia
Perma-Chem and their subsidiaries, taken as a whole, or (iii)
result in the creation of any Lien upon any property or assets
of Perma-Fix or cause any acceleration of maturity of any
obligation or loan which would have a material adverse effect
on Perma-Fix and its subsidiaries, taken as a whole, or (iv)
give to others any interest or rights, including rights of
termination or cancellation, in or with respect to any of the
material properties, assets, agreements, contracts or business
of Perma-Fix which would have a material adverse effect on
Perma-Fix and its subsidiaries, taken as a whole.
7.7 No Litigation or Adverse Events. Except as set forth in the
SEC Filings, copies of which have been or will be delivered to
Chem-Con, there is no suit, action, or legal, administrative,
arbitration or other proceeding or governmental investigation
pending, or to the best of the knowledge of Perma-Fix
threatened, which could materially and adversely affect the
financial condition and results of operations of Perma-Fix and
its subsidiaries, taken as a whole.
7.8 Broker's or Finder's Fees. No agent, broker, person or firm
acting on behalf of Perma-Fix, or under its authority, is or
will be entitled to any commission or broker's or finder's fee
from any of the parties hereto in connection with any of the
transactions contemplated herein.
ARTICLE 8
COVENANTS OF CONDUCT AND TRANSACTIONS
PRIOR TO AND AFTER THE CLOSING
8.1 Investigations; Operation of Business of Chem-Con. Chem-Con,
the Sullivans and the Sullivan Trusts agree, jointly and
severally, between the date of this Agreement and the Closing:
8.1.1 Access to Premises and Books. That Perma-Fix, Florida
Perma-Chem and Georgia Perma-Chem and their repre-
sentatives shall have full access to all their premises
and books and records relating to Chem-Con, and shall
cause Chem-Con to provide to Perma-Fix and its repre-
sentatives full access to their premises and books and
records, and to cause Chem-Con's officers to furnish
Perma-Fix, Florida Perma-Chem and Georgia Perma-Chem
with such financial and operating data and other
information with respect to the business and properties
-35-
<PAGE>
of Chem-Con, as Perma-Fix, Florida Perma-Chem and
Georgia Perma-Chem shall from time to time request;
provided, however, that any such investigation shall
not affect any of the representations, warranties or
covenants of Chem-Con, the Sullivans and/or the
Sullivan Trusts hereunder; and, provided further, that
any such investigation shall be conducted in such
manner as not to interfere unreasonably with the
operation of the business of Chem-Con. In the event of
termination of this Agreement, Perma-Fix will return to
Chem-Con any and all financial statements, agreements,
documents, memoranda or other repositories of informa-
tion relating to Chem-Con that Perma-Fix, Florida
Perma-Chem and/or Georgia Perma-Chem has obtained in
connection with its review, and Perma-Fix agrees that
any written information relating to Chem-Con and Chem-
Con's financial condition, business, operations and
prospects are strictly confidential and shall not be
voluntarily disclosed to any third party or used by
Perma-Fix for its benefit or the benefit of any other
person, except for such information or documents (i)
available generally to the public, (ii) in the posses-
sion of Perma-Fix prior to its receipt under this
Agreement, (iii) obtained by Perma-Fix from a third
party who has an independent right to such information
or documents, or (iv) as otherwise required by law to
be disclosed; provided, however, that any
confidentiality requirements contained in this Section
shall terminate and be null and void twelve (12) months
from the date of this Agreement.
8.1.2 Business Organization of Chem-Con. To cause Chem-Con
and its Subsidiaries, to the extent required for
continued operation of Chem-Con's and its Subsidiaries'
business without impairment, to use Chem-Con's best
efforts to preserve substantially intact the business
organization of Chem-Con and its Subsidiaries to keep
available the services of the present officers and
employees of Chem-Con and its Subsidiaries, and to
preserve the present relationships of Chem-Con and its
Subsidiaries with persons having significant business
relations therewith such as suppliers, customers,
brokers, agents or otherwise.
8.1.3 Ordinary Course of Business. To cause Chem-Con to con-
duct Chem-Con's and its Subsidiaries' businesses only
in the ordinary course and, by way of amplification and
not limitation, Chem-Con and its Subsidiaries will not
without the prior written consent of Perma-Fix (except
as otherwise specifically provided in this Agreement):
8.1.3.1 issue any capital stock or make any changes to
its authorized, issued or outstanding capital
stock, grant any stock options or rights to
acquire shares of any of its capital stock or
any security convertible into any class of its
capital stock or agree to do any of the
foregoing; or
-36-
<PAGE>
8.1.3.2 declare, set aside, or pay any dividend or
distribution with respect to any of its
capital stock or any other securities
convertible into any class of capital stock;
or
8.1.3.3 directly or indirectly redeem, purchase or
otherwise acquire any of its capital stock or
enter into any agreement to purchase or redeem
any of the Chem-Con Common Stock; or
8.1.3.4 effect a split or reclassification of any of
its capital stock convertible into any class
of capital stock, purchase, redeem, retire or
otherwise acquire any shares of any class of
its capital stock or any security convertible
into any class of its capital stock or agree
to do any of the foregoing; or
8.1.3.5 change its charter or bylaws; or
8.1.3.6 except consistent with past practices, grant
any increase in the compensation payable or to
become payable by it to its officers or
employees or any increase, regardless of
amount, in any bonus, insurance, pension or
other benefit plan, program, payment or
arrangement made to, for, or with any officers
or employees; or
8.1.3.7 engage in any transaction not in the ordinary
course of business; or
8.1.3.8 borrow or agree to borrow any funds or assume,
endorse, guarantee or agree to guarantee or
otherwise as an accommodation become liable or
responsible for obligations of any other
individual, firm or corporation; or
8.1.3.9 waive any rights of substantial value; or
8.1.3.10 enter into an agreement, contract or com-
mitment which, if entered into prior to
the date of this Agreement, would be
required to be listed in a Schedule
pursuant to the terms of this Agreement
and is in excess of Twenty-Five Thousand
Dollars ($25,000.00); or
8.1.3.11 acquire any Real Property; or
8.1.3.12 enter into any agreement with Affiliates
or trustees of the Sullivan Trusts or
Affiliates, officers or directors of
Chem-Con; or
-37-
<PAGE>
8.1.3.13 adopt, enter into, or amend materially
any employment contract or any bonus,
stock option, profit-sharing, pension,
retirement, incentive, or similar
employee benefit program; or
8.1.3.14 pay or incur any obligation or liability,
absolute or contingent, other than lia-
bilities incurred in the ordinary and
usual course of its business; or
8.1.3.15 mortgage, pledge, or subject to lien or
other encumbrance any of its properties
or assets; or
8.1.3.16 except for transactions in the ordinary
and usual course of its business, sell or
transfer any of its properties or assets
or cancel, release or assign any indebt-
edness owed to it or any claims held by
it; or
8.1.3.17 make any investment of a capital nature
in excess of Twenty-Five Thousand Dollars
($25,000.00) for any one item or group of
similar items, contributions to capital,
property transfers, or otherwise, or by
the purchase of any property or assets of
any other individual, firm, or corpor-
ation; or
8.1.3.18 enter into any other agreement not in the
ordinary and usual course of business; or
8.1.3.19 merge or consolidate with any other cor-
poration, acquire any of its assets or
capital stock, solicit any offers for any
of its assets or capital stock, or,
except in the ordinary course of busi-
ness, acquire any assets of any other
person, corporation, or other business
organization, or enter into any discus-
sions with any person concerning, or
agree to do, any of the foregoing; or
8.1.3.20 enter into any transaction or take any
action which would, if effected prior to
the Closing, constitute a breach of any
of the representations, warranties or
covenants contained in this Agreement.
8.1.4 Sale of Assets. Without the prior written consent of
Perma-Fix, neither Chem-Con nor any of its Subsidiaries
will undertake or enter into any sale, disposition,
surrender, acquisition, agreement or transaction
relating to any of its assets except in the ordinary
course of business or as contemplated by this
Agreement.
-38-
<PAGE>
8.2 No Selling of Shares or Granting of Options. Prior to the
Closing, neither the ALS Trust, Chem-Con nor CCC shall sell,
transfer, assign or otherwise dispose of any of the Shares or
the shares of capital stock of CCC or grant any options,
warrants, or other rights to purchase or otherwise acquire any
Shares or other shares of the capital stock of Chem-Con or
CCC, or issue any securities convertible into any shares of
the capital stock of Chem-Con or CCC.
8.3 Consents. Chem-Con, the Sullivans, the Sullivan Trusts and
Perma-Fix shall each use its best efforts to obtain the
consent or approval of each person or Governmental Authority
whose consent or approval shall be required in order to permit
Chem-Con, the Sullivans, the Sullivan Trusts or Perma-Fix, as
the case may be, to consummate the transactions contemplated
by this Agreement.
8.4 Governmental Reports. Between the date of this Agreement and
the Closing, the Sullivans, the Sullivan Trusts and Chem-Con
shall furnish, make available to Perma-Fix any and all
reports, not heretofore delivered to Perma-Fix under this
Agreement or which are filed subsequent to the date of this
Agreement, to any state, federal or local government, agency
or department, including, but not limited to, the SEC, the
IRS, the EPA, the FTC and the PBGC.
8.5 Conduct of Business. Prior to the Closing, Chem-Con shall
conduct its business in the ordinary and usual course as
heretofore conducted and to use its best efforts (i) to
preserve its business and business organization intact; (ii)
to keep available to Chem-Con the services of the present
officers and employees of Chem-Con; (iii) to preserve the
goodwill of customers and others having business relations
with Chem-Con; (iv) to maintain its properties in customary
repair, working order and condition (reasonable wear and tear
excepted); (v) to comply with all Laws applicable to it and
the conduct of its businesses; (vi) to keep in force at not
less than their present limits all existing policies of
insurance; (vii) to make no material changes in the customary
terms and conditions upon which it does business; (viii) to
duly and timely file all reports, returns, and other documents
required to be filed with federal, state, local and other
Governmental Authorities; and, (ix) unless it is contesting
the same in good faith and has established reasonable reserves
therefor, to pay, when required to be paid, all Taxes
indicated by Returns so filed or otherwise lawfully levied or
assessed upon it or any of its properties and to withhold or
collect and pay to the proper Governmental Authorities or hold
in separate bank accounts for such payment all taxes and other
assessments which it believes in good faith to be required by
Law to be so withheld or collected.
8.6 Governmental Approvals. Prior to Closing, each of Chem-Con,
the Sullivans and the Sullivan Trusts shall use its best
efforts in good faith to take or cause to be taken as promptly
as practicable all such steps as shall be necessary to obtain
all required Governmental Approvals as promptly as practicable
to consummate the transactions contemplated by this Agreement.
-39-
<PAGE>
8.7 Encumber. None of Chem-Con, the ALS Trust nor the Sullivan
Trusts shall sell, pledge, encumber or otherwise hypothecate
or transfer or grant an option, warrant or right to sell or
dispose of any shares of capital stock of Chem-Con prior to
the Closing other than pursuant to this Agreement.
8.8 Title Policies for Real Property Owned by Chemical Florida.
On or before five (5) days prior to the Closing Date, Chemical
Florida shall deliver to Perma-Fix a fully paid policy or
policies of title insurance, dated as of a date within five
(5) days of the Closing Date, issued to Chemical Florida and
Florida Perma-Chem by a title company of nationally recognized
standing, reasonably satisfactory to Perma-Fix, on a standard
ALTA's owner title insurance policy form, insuring that
Chemical Florida has good and marketable fee simple title in
and to each parcel of Real Property owned by Chemical Florida
listed on Schedule F hereto, free and clear of all Liens and
containing no exceptions, except (a) standard printed
exceptions (other than exceptions for mechanics', artisans' or
materialmen's liens and for matters that would be revealed by
a survey) and (b) Permitted Encumbrances. The amount of such
title insurance for each parcel of Real Property owned by
Chemical Florida shall be as set forth on Schedule F hereto.
The cost and expense for such title insurance shall be shared
equally by the Sullivans and Perma-Fix.
8.9 Title Policies for Real Properties owned by Chemical Georgia.
On or before five (5) days prior to the Closing Date, Chemical
Georgia shall deliver to Perma-Fix a fully paid policy or
policies of title insurance, dated as of a date within five
(5) days of the Closing Date, issued to Chemical Georgia and
Georgia Perma-Chem by a company of nationally recognized
standing, reasonably satisfactory to Perma-Fix, or a standard
ALTA's owner title insurance policy form, insuring to Chemical
Georgia and Georgia Perma-Chem that Chemical Georgia has good
and marketable fee simple title in and to each parcel of Real
Property owned by Chemical Georgia listed on Schedule F
hereto, free and clear of all Liens and containing no
exceptions, except (a) standard printed exceptions (other than
exemptions for mechanics, artisans' or materialmen's liens and
for matters that would be revealed by a survey) and (b)
Permitted Encumbrances. The amount of such title insurance
for each parcel of Real Property owned by Chemical Georgia
shall be as set forth on Schedule F hereto. The cost and
expenses for such title insurance shall be shared equally by
the Sullivans and Perma-Fix.
8.10 Real Property Located in Orlando, Florida. The Real Property
located in Orlando, Florida, as described in Schedule F
attached hereto, and all improvements located thereon (the
"Orlando Real Property"), which Orlando Real Property is being
leased by Chemical Florida, from the ALS Trust. ALS Trust
represents and warrants that it has good and marketable fee
simple title in and to the Orlando Real Property and all of
the Mineral Rights thereunder, free and clear of any and all
Liens except for (a) Permitted Encumbrances and (b) two
mortgages owed to and held by (i) Sun Trust Bank with the
-40-
<PAGE>
principal amount of such indebtedness as of December 31, 1998,
being approximately $110,000.00 ("Sun Trust Debt") and (ii)
Commercial Carrier with the principal amount of such
indebtedness as of the date hereof being approximately
$138,000.00 ("Carrier Debt"). The Sun Trust Debt and Carrier
Debt are collectively referred to herein as the "Two
Mortgages." Within ten (10) days prior to the Closing, the
ALS Trust shall, through a capital contribution, transfer and
convey good and marketable fee simple title to all of the
Orlando Real Property, all improvements located thereon and
all of the Mineral Rights thereunder, by a general warranty
deed in form and contents satisfactory to Perma-Fix, to
Chemical Florida, free and clear of any and all Liens except
for Permitted Encumbrances and the Two Mortgages. ALS Trust
represents and warrants that the Two Mortgages are current and
without default and no event has occurred under the Two
Mortgages which would, with the passage of time, result in a
default. On or before five (5) days prior to the Closing
Date, the ALS Trust shall deliver to Perma-Fix a fully paid
policy of title insurance, dated as of the date within five
(5) days of the Closing Date, issued to Chemical Florida and
Florida Perma-Chem by a title company of nationally recognized
standing, reasonably satisfactory to Perma-Fix, on a standard
ALTA's owner title insurance policy form, insuring to Chemical
Florida and Florida Perma-Chem that Chemical Florida has good
and marketable fee simple title in and to the Orlando Real
Property, free and clear of all Liens and containing no
exceptions other than (a) standard printed exceptions (other
than exceptions for mechanics, artisans or materialmen's liens
and for matters that would be revealed by a survey), (b)
Permitted Encumbrances and (c) the Two Mortgages. The amount
of such title insurance shall be $385,000.00. The cost and
expense for such title insurance shall be shared equally by
the ALS Trust and Perma-Fix.
8.11 Survey. Simultaneously with the delivery of the title
policies to Perma-Fix pursuant to Sections 8.8, 8.9 and 8.10
hereof, Chem-Con shall deliver to Perma-Fix and the title
company issuing the title insurance under Sections 8.8, 8.9
and 8.10 hereof, a written survey prepared by a duly licensed
surveyor reasonably satisfactory to Perma-Fix covering each of
the Real Properties owned by Chem-Con and the Orlando Real
Property, which survey shall be satisfactory to Perma-Fix and
to the title company issuing the ALTA's owner's title
insurance policies. The cost and expense for such survey
shall be shared equally by the Sullivans and Perma-Fix.
8.12 Public Announcements. Perma-Fix, the Sullivans and the
Sullivan Trusts agree that they will consult with each other
before issuing any press releases or otherwise making any
public statements with respect to this Agreement or the
transactions contemplated hereby and any press release or any
public statement shall be subject to mutual agreement of the
parties, except as may be required by the disclosure
obligations of either party or their Affiliates under
applicable securities law.
8.13 Notification. Chem-Con, the Sullivans and the Sullivan Trusts
shall give Perma-Fix prompt written notice of (i) the
-41-
<PAGE>
existence of any fact or the occurrence of any event which
constitutes, or with the giving of notice or the passage of
time or both would constitute a breach of any representation
or warranty of Chem-Con, the Sullivans or the Sullivan Trusts
made herein or pursuant hereto and (ii) the taking of any
action by Chem-Con, the Sullivans or the Sullivan Trusts that
would breach or violate, or constitute a default under, any
agreement or covenant of Chem-Con, the Sullivans or the
Sullivan Trusts made herein or pursuant hereto. Upon the
giving of such notice, Perma-Fix may terminate this Agreement
in accordance with the terms hereof.
8.14 Filings. The parties hereto shall, as promptly as practicable
after the date hereof, submit applications, all documents,
reports and notifications, and satisfy all requests for
additional information, if any, pursuant to 40 Code of Federal
Regulations ("CFR") Part 270 and all other requirements under
any and all applicable Environmental Laws, with regard to the
transfer of, or changes in the ownership or operational
control of Chem-Con or any of its Subsidiaries or the permits,
licenses or approvals held or used by Chem-Con or any of its
Subsidiaries relating to the businesses of Chem-Con or any of
its Subsidiaries. Each of the parties hereto agree to
reasonably cooperate with each other to obtain all authoriza-
tions required under any and all applicable laws, to
consummate the transactions contemplated hereby.
8.15 Supplemental Disclosure. Chem-Con, the Sullivans and the
Sullivan Trusts agree that, with respect to their
representations and warranties made in this Agreement, they
will have a continuing obligation to supplement or amend the
Schedules hereto with respect to any matter hereafter arising
or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or
described in the Schedules hereto. Upon the supplementing or
amending of any Schedules by Chem-Con, the Sullivans or the
Sullivan Trusts or the discovery of any matters by Perma-Fix
in the course of its investigations, Perma-Fix may, at its
option, terminate this Agreement without any liability or
obligation on the part of Perma-Fix, Florida Perma-Chem and
Georgia Perma-Chem.
8.16 SEC Filings. Perma-Fix shall provide the Sullivans with all
reports and other filings it makes with the SEC under the
Securities Act or under the Exchange Act from the date of this
Agreement to the Closing.
8.17 Listing of Perma-Fix Common Stock. Perma-Fix shall use
reasonable efforts to obtain, prior to the Closing, approval
for listing on the BSE and NASDAQ Small Cap Market, upon
official notice of issuance, of the shares of Perma-Fix Common
Stock to be delivered pursuant to the provisions of Section
3.3 hereof.
8.18 Perma-Fix Registration Statement, etc. Prior to the Effective
Date of the Mergers, Perma-Fix shall have prepared and filed
with the SEC a registration statement on Form S-4 (the
"Registration Statement") under the Securities Act for the
-42-
<PAGE>
purpose of registering the shares of Perma-Fix Common Stock to
be issued pursuant to the terms of this Agreement and the
Chem-Met Agreement. Perma-Fix will use all reasonable efforts
to cause the Registration Statement to become effective as
soon as practicable and to thereafter maintain the
effectiveness of the Registration Statement up to the time of
the shareholders meetings of Chem-Con, Chem-Met and Perma-Fix
called for the purpose of approving this Agreement, the Chem-
Met Agreement and the Mergers are held and up to and at the
time of the delivery of the shares of Perma-Fix Common Stock
to be delivered to Chem-Con and Chem-Met shareholders under
the terms and provisions of this Agreement and the Chem-Met
Agreement as may be required by law and the regulations of the
SEC. Chem-Con, Chem-Met, the Sullivans, the Sullivan Trusts
and Perma-Fix will each take such steps as may be necessary on
their respective parts to comply with any state securities or
Blue Sky Laws applicable to the action to be taken by them in
connection with the delivery by Perma-Fix to Chem-Con and
Chem-Met stockholders of the Perma-Fix Common Stock.
8.19 Information for Proxy Statements. The parties hereto will
each furnish to the other such data and information relating
to it as the other may reasonably request for the purpose of
including such data and information in the Registration
Statement and the Proxy Statement (as defined below) provided
for by this Agreement and the Agreement of Merger.
8.20 Registration Statement; Proxy Statement/Prospectus. Chem-Con,
the Sullivans and the Sullivan Trusts, jointly and severally,
covenant and agree that the information to be supplied by
Chem-Con, the Sullivans and/or the Sullivan Trusts pursuant to
this Agreement and the Chem-Met Agreement for inclusion in the
Registration Statement pursuant to which shares of Perma-Fix
Common Stock issued in the Mergers will be registered under
the Securities Act shall not at the time the Registration
Statement is declared effective by the SEC ("Effective Date")
contain any untrue statement of a material fact or omit to
state any material fact required to be stated in the
Registration Statement or necessary in order to make the
statements in the Registration Statement, in light of the
circumstances under which they were made, not misleading. The
information supplied by Chem-Con, the Sullivans and/or the
Sullivan Trusts for inclusion in the proxy
statement/prospectus (the "Proxy Statement") to be sent to the
stockholders of Perma-Fix in connection with the meeting of
Perma-Fix's stockholders (the "Perma-Fix Stockholders'
Meeting") to consider this Agreement, the Mergers and the
issuance of shares of Perma-Fix Common Stock pursuant to the
Mergers shall not, on the date the Proxy Statement is first
mailed to stockholders of Perma-Fix, at the time of the Perma-
Fix Stockholders' Meeting and at the Effective Time, contain
any statement which, at such time and in light of the
circumstances under which it shall be made, is false or
misleading with respect to any material fact, or omit to state
any material fact necessary in order to make the statements
made in the Proxy Statement not false or misleading; or omit
to state any material fact necessary to correct any statement
in any earlier communication with respect to the solicitation
of proxies for the Perma-Fix Stockholders' Meeting which has
become false or misleading. If at any time prior to the
-43-
<PAGE>
Effective Time any event relating to Chem-Con or any of its
Affiliates, officers, directors, employees or shareholders
which should be discovered by Chem-Con, the Sullivans and/or
the Sullivan Trusts which should be set forth in an amendment
to the Registration Statement or a supplement to the Proxy
Statement, Chem-Con, the Sullivans and/or the Sullivan Trusts
shall promptly inform Perma-Fix.
8.21 Disclosure in Proxy Statement. Perma-Fix agrees that none of
the information which has been or will be supplied in writing
by Perma-Fix for inclusion in the Proxy Statement relating to
the Mergers will, at the time such Proxy Statement is mailed
or at the time of the meeting to which such Proxy Statement
relates, be false or misleading with respect to any material
fact, or will omit to state any material fact relating to
Perma-Fix necessary to order to make the statements therein
not false or misleading or necessary to correct any statement
in any earlier communication with respect to the solicitation
of any proxy for the meeting in connection with such Proxy
Statement.
8.22 Audited Financial Statements. For inclusion in the
Registration Statement and Proxy Statement, Chem-Met, the
Sullivans and the Sullivan Trusts shall have Bovitz & Co.,
P.C., prepare, audit and deliver to Perma-Fix true, correct
and complete copies of the 1998, 1997 and 1996 audited
financial statements of Chem-Con and Chem-Met, on a combined
basis, consisting of (i) balance sheet as of fiscal years
ended September 30, 1998, September 30, 1997 and September 30,
1996; (ii) statement of income and related earnings for the
fiscal years ended September 30, 1998, September 30, 1997 and
September 30, 1996; (iii) statement of stockholders' equity
and statement of cash flow for the years ended September 30,
1998, September 30, 1997 and September 30, 1996, and (iv)
notes thereto, with auditors' report thereon being
unqualified, all of which shall have been examined by Bovtiz
& Co., P.C., independent certified public accountants, and be
in accordance with Regulation S-X (17 C.F.R. Part 210) and
GAAP, consistently applied. The audited financial statements
referred to in this Section 8.22 shall include Chem-Con and
Chem-Met, on a combined basis. Perma-Fix agrees to pay for
that portion of such audited financial statements for Chem-Con
and Chem-Met, on a combined basis, relating to years ended
September 30, 1996, 1997 and 1998 unless the audit finds that
the income of Chem-Con and Chem-Met, on a combined basis, is
twenty percent (20%) less than represented prior to accounting
entries as follows: (i) reversal of officer notes receivable
of $1,125,919 offset by a note payable from the officer in the
amount of $60,980; (ii) increased allowance for doubtful
accounts of Two Hundred Thousand Dollars ($200,000); (iii)
accrued expenses of Six Hundred Thousand Dollars ($600,000);
(iv) reserve for remediation of Chem-Con's Valdosta, Georgia
facility of One Million Eight Hundred Thousand Dollars
($1,800,000); and (v) accrued closure costs of Six Hundred
Thirty-Five Thousand Eight Hundred Two Dollars ($635,802), in
which case the audit shall be paid for in its entirety by
Chem-Con.
-44-
<PAGE>
8.23 Public Disclosure. Perma-Fix and the Sullivans shall consult
with each other before issuing any press release or otherwise
making any public statement with respect to the Mergers or
this Agreement and shall not issue any such press release or
make any such public statement prior to such consultation,
except as may be required by law or any listing agreement with
a national securities exchange or the NASDAQ.
8.24 Pooling Accounting. From and after the date hereof and until
the Effective Time, neither Chem-Con nor Perma-Fix shall
knowingly take any action, or knowingly fail to take any
action, that is reasonably likely to jeopardize the treatment
of the Mergers and the Chem-Met Merger as provided in the
Chem-Met Agreement as a pooling of interests for accounting
purposes.
8.25 Letter of Public Accountants. Chem-Con, the Sullivans and
the Sullivan Trusts shall cause to be delivered to Perma-Fix
letters, the first ("First Accountant Letter") of which shall
be dated not less than two days prior to the date on which the
Registration Statement becomes effective, and the second (the
"Second Accountant Letter") of which shall be dated not less
than five days prior to the Closing Date from Bovitz & Co.,
P.C., which shall be addressed to Perma-Fix and be in form
reasonably satisfactory to Perma-Fix and customary in scope
and substance for letters delivered by independent public
accountants in connection with registration statements similar
to the Registration Statement and shall contain, without
limitation, the following statements: (i) the combined Audited
Financial Statements of Chem-Con and Chem-Met examined by them
and included in the Proxy Statement and Registration Statement
comply as to form in all material respects with the applicable
accounting requirement of the Securities Act and of the
published Rules and Regulations thereunder and (ii) on the
basis of a reading of the latest available unaudited
consolidated financial statements, inquiries of officers of
Chem-Con and Chem-Met responsible for financial and accounting
matters and a reading of the minutes, nothing has come to
their attention which caused them to believe that (a) as of
the date of the latest available unaudited interim financial
statements prepared by Chem-Con and Chem-Met there was any
change in the capital stock or long-term debt of Chem-Con,
Chem-Met and their subsidiaries consolidated or any decreases
in consolidated net current assets or in consolidated net
assets, as compared with the amounts shown in the
September 30, 1998, consolidated Balance Sheet, or (b) for the
period from September 30, 1998, to the date of the latest
available unaudited interim consolidated financial statements
prepared by Chem-Con, there were any decreases, as compared
with the corresponding period in the preceding year, in
consolidated net revenues or in total or per share amounts of
consolidated income (loss) before extraordinary items or of
consolidated net income, except in all instances for changes
or decreases which the Proxy Statement discloses have occurred
or may occur, and (c) that on the basis of inquiries of
officers of Chem-Con and Chem-Met responsible for financial
and accounting matters and a reading of the minutes, nothing
-45-
<PAGE>
has come to their attention which caused them to believe that
(1) at a specified date within five (5) days of the Effective
Date of the Registration Statement and not more than five (5)
days prior to the Effective Time of the Mergers there was any
change in the capital stock or long-term debt of Chem-Con and
Chem-Met and their subsidiaries consolidated or any decreases
in consolidated net current assets or in consolidated net
assets, as compared with amounts shown on the September 30,
1998, consolidated Balance Sheet or (2) for the period from
the date of the latest available unaudited consolidated
interim financial statements prepared by Chem-Con and Chem-Met
to a specified date within five (5) days of the effective date
of the Registration Statement and not more than five (5) days
prior to the Effective Time of the Merger there were any
decreases as compared with the corresponding period in the
preceding year, in consolidated net revenues or in the total
or per-share amounts of consolidated income before
extraordinary items or of consolidated net income, except in
all instances for changes or decreases which the Proxy
Statement and Registration Statement discloses have occurred
or may occur, and (d) that they have compared the financial
information which related to Chem-Con and Chem-Met appearing
in the Proxy Statement and Registration Statement with amounts
in the consolidated financial statements or accounting records
of Chem-Con and Chem-Met and have found them to be in
agreement.
8.26 Assumption of Liabilities. Each of the Sullivans and the
Sullivan Trusts, jointly and severally, assume, and agree to
pay, when due, and to perform or discharge, as the case may
be, any and all (i) federal and/or state tax obligations and
liabilities of Chem-Con and Quanta (and any other corporation
with respect to periods for which such corporation was
included and consolidated federal income tax returns with
Chem-Con or Quanta) for any period ending on or prior to the
Closing Date, without regard to whether such liabilities have
been or would be properly provided for in the financial
records of any person under generally accepted accounting
principals, and including, without limitation, any such
obligations or liabilities arising from (A) the transactions
contemplated by this Agreement, (B) the determination of any
tax on a consolidated basis with any other corporation, or (C)
any tax sharing or tax allocation agreement, and (ii)
obligations and liabilities (absolute or contingent known or
unknown)of Quanta that have been incurred by Quanta in any
manner whatsoever prior to the Closing Date or arising in any
way in connection with the business or operations of Quanta
prior to the Closing Date.
8.27 Liability to Broker. The Sullivans have retained WHCA
Partners as an agent or firm acting on behalf of the Sullivans
and the Sullivan Trusts in connection with this Agreement and
the transactions contemplated by this Agreement. Except as
otherwise expressly provided in Section 4.15 hereof, the
Sullivans and the Sullivan Trusts shall, jointly and
severally, pay any and all fees or renumeration due and
payable to WHCA Partners as a result of this Agreement and/or
consummation of the transactions contemplated by this
Agreement.
-46-
<PAGE>
8.28 Access to Premises and Books. Perma-Fix agrees that the
Sullivans, the Sullivan Trusts and their representatives shall
have full access to all their premises and books and records
relating to Perma-Fix, and Perma-Fix shall provide to the
Sullivans, the Sullivan Trusts and their representatives full
access to their premises and books and records, and to cause
Perma-Fix's officers to furnish the Sullivans, the Sullivan
Trusts with such financial and operating data and other
information with respect to the business and properties of
Perma-Fix, as the Sullivans or Sullivan Trusts shall from time
to time request; provided, however, that any such investi-
gation shall not affect any of the representations, warranties
or covenants of Perma-Fix hereunder; and, provided further,
that any such investigation shall be conducted in such manner
as not to interfere unreasonably with the operation of the
business of Perma-Fix. In the event of termination of this
Agreement, the Sullivans and the Sullivan Trusts will return
to Perma-Fix any and all financial statements, agreements,
documents, memoranda or other repositories of information re-
lating to Perma-Fix and its Subsidiaries that Chem-Con, the
Sullivans or the Sullivan Trusts have obtained in connection
with their review, and Chem-Con, the Sullivans and the
Sullivan Trusts agree that any written information relating to
Perma-Fix and its Subsidiaries and Perma-Fix's and its
Subsidiaries' financial condition, business, operations and
prospects are strictly confidential and shall not be volun-
tarily disclosed to any third party or used by any of Chem-
Con, the Sullivans or the Sullivan Trusts for its benefit or
the benefit of any other person, except for such information
or documents (i) available generally to the public, (ii) in
the possession of Chem-Con prior to its receipt under this
Agreement, (iii) obtained by any of Chem-Con, the Sullivans or
the Sullivan Trusts from a third party who has an independent
right to such information or documents, or (iv) as otherwise
required by law to be disclosed; provided, however, that any
confidentiality requirements contained in this Section shall
terminate and be null and void twelve (12) months from the
date of this Agreement.
ARTICLE 9
CONDITIONS OF TRANSACTIONS CONTEMPLATED BY AGREEMENT;
ABANDONMENT OF AGREEMENT
9.1 Closing Conditions of Perma-Fix, Florida Perma-Chem and
Georgia Perma-Chem. The obligations of Perma-Fix, Florida
Perma-Chem and Georgia Perma-Chem to consummate this Agreement
or to effect the transactions contemplated by this Agreement
shall be subject to the following conditions:
9.1.1 Resolutions of Board of Directors and Shareholders of
Chem-Con. Chem-Con shall have furnished to Perma-Fix,
in form and substance satisfactory to Perma-Fix:
-47-
<PAGE>
9.1.1.1 certified copies of resolutions of the
shareholder and Board of Directors of Chem-
Con, duly adopted by the Board of Directors
and shareholder of Chem-Con, authorizing, the
execution, delivery and performance of this
Agreement by Chem-Con and its shareholder;
9.1.1.2 Incumbency certificate for the officers
of Chem-Con.
9.1.2 Delivery of Trust Documents. The trust documents
creating the Sullivan Trust shall have been delivered
to Perma-Fix evidencing, in form and content
satisfactory to Perma-Fix that each of the Sullivan
Trusts has the full, valid and legal capacity and
authority to execute, deliver and perform all of its
agreements, obligations, terms and conditions of this
Agreement.
9.1.3 Approval by Lender. Perma-Fix's lender shall have
approved the transactions contemplated by this
Agreement and the Chem-Met Agreement, and Perma-Fix
shall have obtained for Florida Perma-Chem and Georgia
Perma-Chem a working capital line of credit from and
after consummation of the Mergers on terms satisfactory
to Perma-Fix.
9.1.4 Representations and Warranties of the Sullivans and the
Sullivan Trusts to be True and Correct and Compliance
With Covenants. Except to the extent waived in writing
by Perma-Fix hereunder, (i) the representations and
warranties of the Sullivans and the Sullivan Trusts
herein contained shall be true and correct in all
material respects on the Closing Date with the same
effect as though made at such time; and (ii) the
Sullivans and the Sullivan Trusts shall have performed
all of their obligations and complied with all
covenants, obligations, and agreements required by this
Agreement to be performed or complied with by the
Sullivans and the Sullivan Trusts on or prior to the
Closing Date. The Sullivans and Sullivan Trusts shall
also have delivered to Perma-Fix a certificate, dated
the Closing Date and signed by each of the Sullivans
and all trustees of the Sullivan Trusts, to both of the
aforementioned effects. The Certificate is to be in
form and substance satisfactory to Perma-Fix.
9.1.5 Representations and Warranties of Chem-Con to be True
and Compliance With Covenants. Except to the extent
waived in writing by Perma-Fix hereunder, (i) the
representations and warranties of Chem-Con herein con-
tained shall be true in all material respects on the
Closing Date with the same effect as though made at
such time; and (ii) Chem-Con shall have performed all
obligations and complied with all covenants, obliga-
tions, and agreements required by this Agreement to be
performed or complied with by Chem-Con on or prior to
the Closing Date. Chem-Con shall also have delivered
-48-
<PAGE>
to Perma-Fix a certificate of Chemical Florida (in form
and substance satisfactory to Perma-Fix), dated the
Closing Date and signed by the chief executive officer
of Chemical Florida, to both of the aforementioned
effects. Chem-Con shall also have delivered to Perma-
Fix a certificate of Chemical Georgia (in form and sub-
stance satisfactory to Perma-Fix), dated the Closing
Date and signed by the chief executive officer of
Chemical Georgia, to both of the aforementioned
effects.
9.1.6 Third Party Consents. Chem-Con, the Sullivans and the
Sullivan Trusts shall have obtained consents to the
transactions contemplated by this Agreement from the
parties to all contracts, permits, agreements, debt
instruments and other documents referred to in the
Schedules delivered by Chem-Con, the Sullivans or the
Sullivan Trusts to Perma-Fix in accordance with this
Agreement or otherwise, which require such consents and
consents from, or notification to, all Governmental
Authorities which require such consents or noti-
fications.
9.1.7 No Material Adverse Change. There shall not have
occurred (i) any material adverse change since
September 30, 1998, in the business, properties,
assets, results of operations or financial condition of
Chem-Con, or (ii) any loss or damage to any of the
properties or assets (whether or not covered by
insurance) of Chem-Con which will materially affect or
impair the ability of Chem-Con to conduct, after con-
summation of the transactions contemplated hereby, the
business of Chem-Con as now being conducted by Chem-
Con.
9.1.8 Statutory Requirements; Litigation. In a manner
satisfactory to Perma-Fix, (i) all statutory
requirements for the valid consummation by Chem-Con,
the Sullivan Trusts and the Sullivans of the
transactions contemplated by this Agreement shall have
been fulfilled; all authorizations, consents and
approvals of all Governmental Authorities required to
be obtained in order to permit consummation by the
Chem-Con, the Sullivan Trusts and the Sullivans of the
transactions contemplated by this Agreement and to
permit the business presently conducted by Chem-Con to
continue unimpaired immediately following the Closing
shall have been obtained; and, (ii) all applications
for permits shall have been approved by the appropriate
Governmental Authorities and all authorizations and
approvals relating to all permits and licenses held by
Chem-Con shall have been obtained from the appropriate
Governmental Authorities under any and all of the
Environmental Laws as a result of the change in
ownership of Chem-Con, pursuant to the terms of this
Agreement, with such permits, approvals and authori-
zations to be in form and substance satisfactory to
Perma-Fix, so that Chem-Con is permitted to continue
unimpaired immediately following the Closing Date the
same business operations that Chem-Con carried on as of
the date of this Agreement and the Closing Date.
Between the date of this Agreement and the Closing, no
-49-
<PAGE>
Governmental Authority, whether federal, state or
local, shall have instituted (or threatened to
institute either orally or in a writing directed to any
of Chem-Con, the Sullivans and/or the Sullivan Trusts
or any of their subsidiaries) an investigation which is
pending on the Closing relating to this Agreement and
the transactions contemplated hereby, and between the
date of this Agreement and the Closing no action or
proceeding shall have been instituted or, to the
knowledge of Perma-Fix, shall have been threatened
before a court or other governmental body or by any
public authority to restrain or prohibit the trans-
actions contemplated by this Agreement or to obtain
damages in respect thereof.
9.1.9 Opinion of Counsel of Chem-Con, the Sullivans and the
Sullivan Trusts. Perma-Fix shall have received from
O'Rourke & Myers, counsel to Chem-Con, the Sullivans
and the Sullivan Trusts, or such other counsel
acceptable to Perma-Fix and its counsel, an opinion or
opinions, dated the Closing Date, substantially in the
form of Exhibit "E" hereto, with the form and contents
thereof reasonably satisfactory to Perma-Fix and its
counsel.
9.1.10 Effective Registration Statement. The Registration
Statement shall have become effective under the
Securities Act and shall not be subject to a stop order
or a proceeding seeking a stop order.
9.1.11 Due Diligence. Perma-Fix shall have completed its
financial due diligence of Chem-Con, with the results
thereof satisfactory to Perma-Fix.
9.1.12 Environmental Audit. Perma-Fix shall have conducted
and completed an environmental audit of Chem-Con, and
shall have determined to the satisfaction of Perma-Fix
that, (i) Chem-Con has been and is currently in
compliance in all material respects with all applicable
Environmental Laws, except as otherwise disclosed
herein; (ii) none of the assets (including, but not
limited to, the soils and groundwater on or under any
of the Real Properties) owned, leased, operated or used
by Chem-Con are contaminated with any hazardous
substance (as defined in Section 101(14) of CERCLA or
any analogous state or local Laws) or petroleum (as
defined in Subtitle I of RCRA or any analogous state or
local Laws) in a manner that might have a material
adverse effect on Chem-Con, except as otherwise
disclosed herein; and (iii) Chem-Con is not or would
not be subject to any liability in any material amount
under any provision, or as a result of any past or
present violation, of any applicable Environmental
Laws.
9.1.13 Stock Certificates. On or prior to the Closing, the
ALS Trust shall execute, endorse in blank and deliver
to Perma-Fix, with signatures guaranteed by a bank or
investment banking firm and in form acceptable to
-50-
<PAGE>
Perma-Fix, all of the stock certificates representing
the Shares, duly and validly endorsed for transfer,
free and clear of any and all Liens.
9.1.14 Permits. All permits (including, but not limited to,
all permits issued or issuable by Governmental
Authorities under all Environmental Laws) which Perma-
Fix deems necessary to conduct Chem-Con's business
after the Effective Time as currently conducted by
Chem-Con (i) have been duly and validly transferred, or
approved for transfer effective upon the Closing, to
Florida Perma-Chem and Georgia Perma-Chem, whichever is
appropriate, by all Governmental Authorities or (ii)
have been duly and validly issued to Florida Perma-Chem
and Georgia Perma-Chem, whichever is appropriate, by
all appropriate Governmental Authorities, all in form
and content satisfactory to Perma-Fix.
9.1.15 No Liens on Assets. All assets of Chem-Con (real and
personal) shall be free and clear of any and all Liens,
except for Permitted Encumbrances.
9.1.16 Listing of Perma-Fix Common Stock. The BSE and the
NASDAQ Small Cap Market shall have approved for
listing, upon official notice of issuance, the shares
of Perma-Fix Common Stock to be delivered pursuant to
the provisions of Article 3 hereof.
9.1.17 Minute Books and Stock Ledgers. The ALS Trust shall
have delivered to Perma-Fix the minute books and stock
ledgers for Chem-Con.
9.1.18 Financial Statements. Perma-Fix shall have received
from Bovitz & Co., P.C. audited financial statements
("Chem-Con Audited Financial Statements") of Chem-Con
for all years required to be included in the
Registration Statement and Proxy Statement and Form 8-K
to be filed by Perma-Fix as a result of consummation of
this Agreement and the Chem-Met Agreement and as
required by Regulation S-X (17 CFR Part 210), with such
audited financial statements to be prepared in accord-
ance with Regulation S-X (17 CFR Part 210) and GAAP,
consistently applied throughout the periods, and with
the Bovitz & Co., P.C. report in connection therewith
to be unqualified.
9.1.19 Orlando Real Estate. Good and marketable fee simple
title in and to the Orlando Real Estate and all
improvements thereon shall have been transferred and
conveyed to Chemical Florida by a capital contribution,
free and clear of any and all Liens, except for the
Permitted Encumbrances and the Two Mortgages.
-51-
<PAGE>
9.1.20 Title Policies and Surveys. Prior to the Closing Date,
Perma-Fix shall have received the title insurance
policies and surveys pursuant to Sections 8.8, 8.9,
8.10and 8.11 hereof.
9.1.21 Good Standing Certificates. Good standing and tax
certificates (or analogous documents), dated as close
as practicable to the Closing, from the appropriate
authorities in each jurisdiction of incorporation of
Chem-Con and in each jurisdiction in which Chem-Con is
qualified to do business, showing Chem-Con to be in
good standing and to have paid all taxes due in the
applicable jurisdiction.
9.1.22 Resignation of Directors. All of the directors of
Chem-Con shall have resigned as members of the Board of
Directors of Chem-Con, effective as of the Closing
Date, except for any existing director of Chem-Con who
Perma-Fix advises the ALS Trust in writing prior to
Closing is to remain a director of Chem-Con, whichever
is applicable, prior to Closing.
9.1.23 Chem-Met Agreement. The Chem-Met Agreement shall have
closed contemporaneously with the Closing of this
Agreement.
9.1.24 Valdosta Remediation. Prior to Closing, Perma-Fix
shall have determined that the cost to remediate the
contamination at the Valdosta, Georgia facility where
Chemical Georgia is located shall not, in the
aggregate, exceed $1,800,000.
9.1.25 Pooling Letters. Perma-Fix shall have received a
letter from BDO Seidman, LLP and a letter from Bovitz
& Co., P.C. addressed to Perma-Fix, regarding its
concurrence with management's conclusions that the
acquisition of Chem-Con pursuant to the terms of this
Agreement and the acquisition of Chem-Met pursuant to
the terms of the Chem-Met Agreement qualify for
pooling-of-interests accounting under Accounting
Principles Board Opinion No. 16, as contemplated to be
effected as of the date of the letter, it being agreed
that Perma-Fix and Chem-Con shall each provide
reasonable cooperation to BDO Seidman, LLP and Bovitz
& Co., P.C., to enable them to issue such a letter.
9.1.26 Shareholder Approval. Perma-Fix shareholders shall
have approved the Mergers contemplated by this
Agreement and the Chem-Met Agreement as required under
Delaware law and/or under the requirements of NASDAQ or
the BSE.
9.1.27 Shareholder Approval. The shareholders of Chem-Con
shall have approved the Merger transactions
contemplated by this Agreement pursuant to the laws of
the states of incorporation of Chem-Con and no
-52-
<PAGE>
shareholders of Chem-Con shall have exercised or
attempted to exercise dissenters rights or other
similar rights in connection with the transactions
contemplated hereby.
9.1.28 Accountants Letters. Perma-Fix shall have received the
First Accountant Letter and the Second Accountant
Letter and such shall be satisfactory to Perma-Fix.
9.1.29 Employment Agreement. Perma-Fix and TPS shall have
entered into the Employment Agreement.
9.1.30 Officer and Director Waiver. Each officer and director
of Chem-Con and CCC shall have executed and delivered
to Perma-Fix an agreement, in form and substance
satisfactory to Perma-Fix pursuant to which each such
officer and director shall waive any and all rights to
indemnification which any such officer and director may
have from Chem-Con and/or CCC pursuant to Chem-Con's or
CCC's Certificate of Incorporation, Bylaws, any
indemnification agreements, or otherwise.
9.1.31 Fairness Opinion. Prior to the filing of the
Registration Statement with the SEC and within five (5)
days prior to the Closing, Perma-Fix shall have
received a fairness opinion from an investment banker
selected by Perma-Fix that the consideration to be
issued by Perma-Fix under this Agreement and the Chem-
Met Agreement is fair to Perma-Fix and its shareholders
from a financial standpoint, with the form and contents
of such opinion to be satisfactory to Perma-Fix.
9.1.32 Closing Price of Perma-Fix Common Stock. The average
closing sale prices per share of the Perma-Fix Common
Stock as reported on the NASDAQ for the five
consecutive trading days ending with the trading day
immediately prior to the Effective Date shall be not
less than $1.25.
9.2 Conditions to Obligations of Chem-Con and The ALS Trust. The
obligation of Chem-Con and the ALS Trust to consummate this
Agreement or to effect the transactions contemplated by this
Agreement shall be subject to the following conditions:
9.2.1 Resolutions of Perma-Fix Board of Directors and
Shareholders. Perma-Fix shall have furnished Chem-Con
with:
9.2.1.1 certified copies of resolutions duly adopted
by the Board of Directors and the shareholders
of Perma-Fix approving and authorizing
execution, delivery and performance of the
transactions contemplated by this Agreement;
-53-
<PAGE>
9.2.1.2 Incumbency Certificates for the officers of
Perma-Fix.
9.2.2 Resolutions of Florida Perma-Chem and Georgia Perma-
Chem Board of Directors and Shareholders. Perma-Fix
shall have furnished Chem-Con with:
9.2.2.1 certified copies of resolutions duly adopted by
Florida Perma-Chem and Georgia Perma-Chem approving
and authorizing execution, delivery and performance
of the transactions contemplated by this Agreement; and
9.2.2.2 Incumbency Certificate for the officers of
Florida Perma-Chem and Georgia Perma-Chem.
9.2.3 Representations and Warranties of Perma-Fix to be True.
Except to the extent waived hereunder, (i) the repre-
sentations and warranties of Perma-Fix, Florida Perma-
Chem and Georgia Perma-Chem herein contained shall be
true in all material respects at the Closing with the
same effect as though made at such time, except for
such which do not have a material adverse effect on
Perma-Fix and its subsidiaries, taken as a whole; and
(ii) Perma-Fix, Florida Perma-Chem and Georgia Perma-
Chem shall have performed all material obligations and
complied with all material covenants required by this
Agreement to be performed or complied with by it prior
to the Closing. Perma-Fix shall also have delivered to
the ALS Trust a certificate of Perma-Fix, dated the
Closing and signed by its President or a Vice President
to both of the aforementioned effects.
9.2.4 Employment Agreement. Perma-Fix shall have entered
into the Employment Agreement ("Employment Agreement")
with Thomas P. Sullivan.
9.2.5 Effective Registration Statement. The Registration
Statement shall have become effective under the
Securities Act and shall not be subject to a stop order
or a proceeding seeking a stop order.
9.2.6 No Material Adverse Change. Except as otherwise dis-
closed in this Agreement or as publicly disclosed to
the shareholders of Perma-Fix or contained in the
Perma-Fix SEC Filings, there shall not have occurred
(i) any material adverse change since December 31,
1998, in the consolidated financial condition of Perma-
Fix (it being understood that anything disclosed in any
of the financial data furnished by Perma-Fix to the
Sullivans or the Sullivan Trusts pursuant to this
Agreement, or in an annual, interim or other report
filed by Perma-Fix with the SEC or press releases
issued by Perma-Fix (copies of which shall have been
furnished to the ALS Trust) since December 31, 1998,
and prior to the date of this Agreement (copies of
which shall have been furnished to Chem-Con, the
-54-
<PAGE>
Sullivans or the Sullivan Trusts), shall not constitute
such a material adverse change or (ii) any loss or
damage to any of the material properties or assets of
Perma-Fix which would have a material adverse effect on
Perma-Fix and its subsidiaries considered as a whole.
9.2.7 Litigation. Between the date of this Agreement and the
Closing, no Governmental Authority, whether federal,
state or local, shall have instituted (or threatened to
institute, either orally or in writing, directed to the
ALS Trust, Perma-Fix, Chem-Con, or any of their
subsidiaries) an investigation which is pending on the
Closing Date relating to the transactions contemplated
by this Agreement and between the date of this
Agreement and the Closing Date, no action or proceeding
shall have been instituted or, to the knowledge of the
Sullivans, the Sullivan Trusts, Perma-Fix or Chem-Con,
shall have been threatened before a court or other
governmental body or by any public authority to
restrain or prohibit the transactions contemplated by
this Agreement or to obtain damages in respect thereof.
9.2.8 Opinion of Counsel of Perma-Fix. The ALS Trust shall
have received from Conner & Winters, a Professional
Corporation, counsel to Perma-Fix, or such other
counsel reasonably acceptable to the ALS Trust and its
counsel, an opinion, dated the Closing Date,
substantially in the form of Exhibit "F" hereto, with
the form and content thereof reasonably satisfactory to
Chem-Con and its counsel.
9.2.9 Closing Price of Perma-Fix Closing Stock. The average
closing sale prices per share of Perma-Fix Common Stock
as reported on the NASDAQ for the five consecutive
trading days ending with the trading day immediately
prior to the Effective Date shall not be less than
$1.25.
9.3 Termination of Agreement and Abandonment of Mergers. Except
as otherwise provided in Sections 8.1.1 and 8.29 hereof, this
Agreement and the transactions contemplated hereby may be
terminated at any time before the Closing, whether before or
after approval of this Agreement by the shareholders of Perma-
Fix or Chem-Con, as follows and in no other manner:
9.3.1 Conditions of the Sullivans, the Sullivan Trusts or
Chem-Con Not Met. By Perma-Fix if, by June 30, 1999,
the conditions set forth in Section 9.1 of this Article
9 shall not have been met (or waived as provided in
Article 10 of this Agreement).
9.3.2 Conditions of Perma-Fix Not Met. By the Sullivans if,
by June 30, 1999, the conditions set forth in Section
9.2 of this Article 9 shall not have been met (or
waived as provided in Article 10 of this Agreement).
-55-
<PAGE>
9.3.3 Termination by Perma-Fix or the Sullivans of the Chem-
Met Agreement. By Perma-Fix or by the Sullivans, if
the Chem-Met Agreement is terminated pursuant to the
terms thereof.
9.3.4 Mutual Consent. By the mutual written consent of both
Perma-Fix and Chem-Con.
9.4 Expenses. Each party shall bear its own out-of-pocket
expenses incurred in connection with the transactions
contemplated by this Agreement, including, without limitation,
all legal, accounting, consulting, brokers, advisory, travel,
communications and other similar fees and expenses; provided,
however, that any and all such expenses incurred by Chem-Con
in connection with this Agreement and consummation of the
transactions contemplated by this Agreement shall be
considered as incurred by the ALS Trust and shall be paid by
the ALS Trust.
ARTICLE 10
TERMINATION OF OBLIGATIONS AND WAIVER OF CONDITIONS
10.1 Termination. In the event that this Agreement shall be
terminated pursuant to Section 9.3 hereof, all further
obligations of the parties hereto under this Agreement shall
terminate without further liability of any party to another
and each party hereto will pay its own costs and expenses
incident to its negotiation and preparation of this Agreement
and to its performance and compliance with all agreements and
conditions contained herein on its part to be performed or
complied with, including the fees, expenses and disbursements
of its counsel.
10.2 Waiver. If any of the conditions specified in Section 9.1 of
Article 9 hereof has not been satisfied, Perma-Fix may
nevertheless at the election of Perma-Fix proceed with the
transactions contemplated hereby; and, if any of the condi-
tions specified in Section 9.2 of Article 9 hereof has not
been satisfied, the ALS Trust may nevertheless at the ALS
Trust' election proceed with the transactions contemplated
hereby. Any such election to proceed shall be evidenced by a
certificate executed on behalf of the electing party. Any
such waiver shall not be considered as a waiver of any of the
other terms and provisions of this Agreement by the electing
party.
-56-
<PAGE>
ARTICLE 11
INDEMNIFICATION AND SURVIVAL OF
REPRESENTATIONS AND WARRANTIES
11.1 Indemnification by the Sullivans and the Sullivan Trusts. The
Sullivans and the Sullivan Trusts shall, jointly and
severally, defend, indemnify and hold harmless each of Perma-
Fix, Chem-Con, Florida Perma-Chem, Georgia Perma-Chem and each
of their officers, directors, employees, agents,
representatives and Affiliates from and against any and all
claims, judgments, demands, damages, penalties, fines, losses,
orders (judicial or administrative), decrees, liabilities,
obligations, costs, claims and expenses (including, without
limitation, reasonable attorneys' fees and accountant fees)
which any of Perma-Fix, Chem-Con, Florida Perma-Chem, Georgia
Perma-Chem and each of their officers, directors employees,
agents, representatives and Affiliates incurs or suffers or
may incur or suffer at any time as a result of or in
connection with or arising out of (i) any representation or
warranty made by any of Chem-Con, the Sullivans and/or the
Sullivan Trusts in this Agreement or any certificate or other
document delivered to Perma-Fix, Florida Perma-Chem or Georgia
Perma-Chem pursuant to this Agreement that is false or
misleading; (ii) any breach of or failure to perform any
agreements, covenants, promises or obligations of Chem-Con,
the Sullivans and/or Sullivan Trusts contained in this Agree-
ment; (iii) any liabilities, obligations or claims arising in
any way from 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
Closing Date; (iv) any and all liabilities, obligations or
claims incurred by Quanta prior to the Closing Date or arising
in any way in connection with the business or operations of
Quanta prior to the Closing Date, or (v) any liabilities,
obligations or claims brought under CERCLA or RCRA or any
analogous state statute for the release or threatened release
of any hazardous substances (as defined in CERCLA) or
hazardous waste (as defined in RCRA) in which Sullivan or
Chem-Con knew was pending or threatened against Chem-Con as of
the date hereof or at the Closing Date but failed for any
reason to disclose such in this Agreement or was, directly or
indirectly, caused by or resulted from the knowing or willful
violation by Sullivan or Chem-Con on or prior to the Closing
Date of CERCLA, RCRA or any analogous state statute.
11.2 Notice of Claim. Perma-Fix shall give the Sullivans and the
Sullivan Trusts a written notice (the "Notice of Claim")
within ninety (90) days of the discovery of any matter in
respect of which the right to indemnification contained in
Section 11 can be claimed. Notwithstanding the foregoing,
failure to give such notice will not terminate any obligation
of the Sullivans and the Sullivan Trusts hereunder.
11.3 Survival of Representations and Remedies. All representations
and warranties contained in this Agreement shall survive the
Closing, regardless of the investigation made by either party
-57-
<PAGE>
hereto. This Agreement and all covenants and agreements
contained in this Agreement shall survive the Closing.
11.4 Indemnification Period. Any claim for indemnification under
this Section 11 must be made and settled in full within one
year from the Closing Date ("Indemnification Period"). Upon
expiration of the Indemnification Period, this Section 11 is
terminated and any claims for indemnification pursuant to this
Section 11 are terminated.
11.5 Settlement of Indemnification Claims. Settlement of any
claims for indemnification pursuant to this Section 11 shall
be made through the delivery by the Sullivans and/or the
Sullivan Trusts of that number of shares of Perma-Fix Common
Stock determined by dividing the total amount of
indemnification due and owing from the Sullivans and/or the
Sullivan Trusts to Perma-Fix by the average of the closing
sale prices per share of Perma-Fix Common Stock as reported on
the NASDAQ for five consecutive trading days ending with the
trading day immediately prior to the Effective Time.
ARTICLE 12
MISCELLANEOUS
12.1 Entire Agreement and Amendment. This Agreement, including the
Exhibits and Schedules hereto, sets forth the entire agreement
and understanding between the parties and merges and
supersedes all prior discussions, agreements and under-
standings of every kind and nature among them as to the
subject matter hereof, and no party shall be bound by any
condition, definition, warranty or representation other than
as expressly provided for in this Agreement or as may be on a
date on or subsequent to the date hereof duly set forth in
writing signed by each party which is to be bound thereby.
Unless otherwise expressly defined, terms defined in the
Agreement shall have the same meanings when used in any
Exhibit or Schedule and terms defined in any Exhibit or
Schedule shall have the same meanings when used in the
Agreement or in any other Exhibit or Schedule. This Agreement
(including the Exhibits and Schedules hereto) shall not be
changed, modified or amended except by a writing signed by
each party to be charged and this Agreement may not be dis-
charged except by performance in accordance with its terms or
by a writing signed by each party to be charged.
12.2 Taxes. Any Taxes in the nature of a sales or transfer tax
(including any realty transfer tax or realty gains transfer
tax), and any stock transfer tax, payable on the consummation
of any other transaction contemplated hereby shall be paid by
the Sullivans and the Sullivan Trusts.
12.3 Governing Law. This agreement shall be construed in accord-
ance with and governed by the Laws of Delaware, without regard
to the principles of conflicts of laws thereof.
-58-
<PAGE>
12.4 Benefit of Parties; Assignment. This Agreement shall be
binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
The Agreement may not be assigned by any of the parties hereto
except with the prior written consent of the other parties
hereto. Nothing herein contained shall confer or is intended
to confer on any third party or entity which is not a party to
this Agreement any rights under this Agreement.
12.5 Pronouns. Whenever the context requires, the use in this
Agreement of a pronoun of any gender shall be deemed to refer
also to any other gender, and the use of the singular shall be
deemed to refer also to the plural.
12.6 Headings. The headings in the sections, paragraphs, Schedules
and Exhibits of this Agreement are inserted for convenience of
reference only and shall not constitute a part hereof. The
words "herein", "hereof", "hereto" and "hereunder", and other
words of similar import refer to this Agreement as a whole and
not to any particular provision of this Agreement.
12.7 Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if sent by
registered mail or certified mail, postage prepaid, addressed:
If to Perma-Fix: Perma-Fix Environmental Services, Inc.
1940 Northwest 67th Place
Gainesville, Florida 32653
Attention: President
With a copy to: Irwin H. Steinhorn, Esquire
Conner & Winters
One Leadership Square
211 North Robinson, Suite 1700
Oklahoma City, Oklahoma 73102
If to Chem-Con,
the Sullivans and
the Sullivan Trusts: Mr. Thomas P. Sullivan
1021 Harvard Road
Grosse Pointe Park, Michigan 48230
With a copy to: Peter E. O'Rourke, Esq.
O'Rourke & Myers
241 Lewiston
Grosse Pointe Farms, Michigan 48236
-59-
<PAGE>
or to such other address as shall be furnished in writing by
either party. Any such notice or communication shall be
deemed to have been given as of three (3) days after posting,
one (1) day after next day delivery service or upon personal
delivery.
12.8 Time. Time is of the essence of this Agreement.
12.9 Severability. Each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid
under applicable law; but, if any provision of this Agreement
is held to be invalid under applicable law, such provision
will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
12.10 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one
and the same agreement and shall become effective when
one or more counterparts have been signed by each of
the parties hereto and delivered to each of the other
parties hereto.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
-60-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto execute this
Agreement on the 15th day of March, 1999.
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
By: /s/ Louis F. Centofanti
_____________________________________
Dr. Louis F. Centofanti
President
FLORIDA PERMA-CHEM, INC.
By: /s/ Louis F. Centofanti
_____________________________________
Dr. Louis F. Centofanti
President
GEORGIA PERMA-CHEM, INC.
By: /s/ Louis F. Centofanti
_____________________________________
Dr. Louis F. Centofanti
President
CHEMICAL CONSERVATION CORPORATION
By: /s/ Thomas P. Sullivan
_____________________________________
Thomas P. Sullivan
President
CHEMICAL CONSERVATION CORPORATION OF
GEORGIA, INC.
By: /s/ Thomas P. Sullivan
_____________________________________
Thomas P. Sullivan
President
-61-
<PAGE>
THE THOMAS P. SULLIVAN LIVING TRUST,
Dated September 6, 1978
By: /s/ Thomas P. Sullivan
_____________________________________
Thomas P. Sullivan, Sole Trustee,
under the Thomas P. Sullivan Living
Trust, Dated September 6, 1978, and
any amendments thereto.
THE ANN L. SULLIVAN LIVING TRUST,
Dated September 6, 1978
By: /s/ Ann L. Sullivan
_____________________________________
Ann L. Sullivan, Sole Trustee under
the Ann L. Sullivan Living Trust,
Dated September 6, 1978, and any
amendments thereto.
THOMAS P. SULLIVAN
By: /s/ Thomas P. Sullivan
_____________________________________
Thomas P. Sullivan, individually
ANN L. SULLIVAN
By: /s/ Ann L. Sullivan
_____________________________________
Ann L. Sullivan, individually
-62-
<PAGE>
AGREEMENT AND PLAN OF MERGER
among
PERMA-FIX ENVIRONMENTAL SERVICES, INC.,
PERMA-MET, INC.,
CHEM-MET SERVICES, INC.,
THE THOMAS P. SULLIVAN LIVING TRUST,
THE ANN L. SULLIVAN LIVING TRUST,
THOMAS P. SULLIVAN, an individual
and
ANN L. SULLIVAN, an individual
MARCH 15, 1999
<PAGE>
<PAGE>
TABLE OF CONTENTS
_________________
Page
____
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . .2
1.1 "Affiliate" . . . . . . . . . . . . . . . . . . . . . .2
1.2 "Chem-Con " . . . . . . . . . . . . . . . . . . . . . .2
1.3 "Chem-Con Agreement " . . . . . . . . . . . . . . . . .2
1.4 "Chem-Con Merger" . . . . . . . . . . . . . . . . . . .2
1.5 "Chem-Fix Settlement Agreement" . . . . . . . . . . . .2
1.6 "Chem-Met Common Stock. . . . . . . . . . . . . . . . .3
1.7 "Chem-Met Intellectual Property Right". . . . . . . . .3
1.8 "Closing" . . . . . . . . . . . . . . . . . . . . . . .3
1.9 "Closing Date". . . . . . . . . . . . . . . . . . . . .3
1.10 "Code". . . . . . . . . . . . . . . . . . . . . . . . .3
1.11 "Effective Time". . . . . . . . . . . . . . . . . . . .3
1.12 "Environmental Laws". . . . . . . . . . . . . . . . . .3
1.13 "Employment Agreement". . . . . . . . . . . . . . . . .3
1.14 "ERISA" . . . . . . . . . . . . . . . . . . . . . . . .3
1.15 "Florida Perma-Chem". . . . . . . . . . . . . . . . . .3
1.16 "Facility". . . . . . . . . . . . . . . . . . . . . . .3
1.17 "Four County Landfill". . . . . . . . . . . . . . . . .4
1.18 "GAAP". . . . . . . . . . . . . . . . . . . . . . . . .4
1.19 "Georgia Perma-Chem". . . . . . . . . . . . . . . . . .4
1.20 "Governmental Authority". . . . . . . . . . . . . . . .4
1.21 "Laws". . . . . . . . . . . . . . . . . . . . . . . . .4
1.22 "Liens" . . . . . . . . . . . . . . . . . . . . . . . .4
1.23 "Merger". . . . . . . . . . . . . . . . . . . . . . . .4
1.24 "Mineral Rights". . . . . . . . . . . . . . . . . . . .4
1.25 "Permitted Encumbrances". . . . . . . . . . . . . . . .4
1.26 "Perma-Chem". . . . . . . . . . . . . . . . . . . . . .4
1.27 "Perma-Fix Common Stock". . . . . . . . . . . . . . . .4
1.28 "Quanta". . . . . . . . . . . . . . . . . . . . . . . .4
1.29 "Real Property" . . . . . . . . . . . . . . . . . . . .4
1.30 "Returns" . . . . . . . . . . . . . . . . . . . . . . .5
1.31 "Securities Act". . . . . . . . . . . . . . . . . . . .5
1.32 "Shares". . . . . . . . . . . . . . . . . . . . . . . .5
1.33 "SEC" . . . . . . . . . . . . . . . . . . . . . . . . .5
1.34 "Subsidiaries". . . . . . . . . . . . . . . . . . . . .5
1.35 "Surviving Corporations". . . . . . . . . . . . . . . .5
1.36 "Taxes" . . . . . . . . . . . . . . . . . . . . . . . .5
i
<PAGE>
1.37 "10 Acre Tract" . . . . . . . . . . . . . . . . . . . .5
ARTICLE 2 THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . .5
2.1 The Merger. . . . . . . . . . . . . . . . . . . . . .5
The Merger of Chem-Met with and into Perma-Met. . . . .5
2.2 Effective Time of the Merger. . . . . . . . . . . . . .5
2.3 Closing . . . . . . . . . . . . . . . . . . . . . . . .6
2.4 Effects of the Merger . . . . . . . . . . . . . . . . .6
ARTICLE 3 CONVERSION OF SECURITIES. . . . . . . . . . . . . . . . . .6
3.1 Conversion of Capital Stock . . . . . . . . . . . . . .6
3.1.1 Capital Stock of Perma-Fix . . . . . . . . . . .6
3.1.2 Capital Stock of Perma-Met . . . . . . . . . . .6
3.1.3 Chem-Met Capital Stock . . . . . . . . . . . . .6
3.1.4 Chem-Met Treasury Stock. . . . . . . . . . . . .7
3.2 Dissenters Rights . . . . . . . . . . . . . . . . . . .7
3.3 Exchange of Certificates. . . . . . . . . . . . . . . .7
3.3.1 Exchange . . . . . . . . . . . . . . . . . . . .7
3.3.2 Exchange Procedures. . . . . . . . . . . . . . .7
3.3.3 No Further Ownership Rights in Chem-Met Common
Stock. . . . . . . . . . . . . . . . . . . . . .8
3.3.4 No Fractional Shares . . . . . . . . . . . . . .8
3.3.5 No Liability . . . . . . . . . . . . . . . . . .8
3.3.6 Lost Certificates. . . . . . . . . . . . . . . .8
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE ALS TRUST,
THE TPS TRUST, ALS, TPS AND CHEM-MET. . . . . . . . . . . .8
4.1 Organization of the Sullivan Trusts . . . . . . . . . .9
4.2 Organization of Chem-Met. . . . . . . . . . . . . . . .9
4.3 Capital Stock of Chem-Met . . . . . . . . . . . . . . .9
4.4 Ownership Interests in Securities . . . . . . . . . . .9
4.5 Financials. . . . . . . . . . . . . . . . . . . . . . 10
4.5.1 Financial Statements . . . . . . . . . . . . . 10
4.5.2 Liabilities. . . . . . . . . . . . . . . . . . 10
4.5.3 Net Worth. . . . . . . . . . . . . . . . . . . 10
4.5.4 Transactions Since September 30, 1998. . . . . 10
4.6 Tax and Other Returns, Reports and Pooling of
Interest. . . . . . . . . . . . . . . . . . . . . . . 11
4.6.1 Tax Returns. . . . . . . . . . . . . . . . . . 11
ii
<PAGE>
4.6.2 Payment of Taxes . . . . . . . . . . . . . . . 11
4.6.3 Waiver of Statute of Limitations . . . . . . . 11
4.6.4 Tax Deficiencies . . . . . . . . . . . . . . . 11
4.6.5 Pooling of Interests . . . . . . . . . . . . . 11
4.7 Property. . . . . . . . . . . . . . . . . . . . . . . 12
4.7.1 Assets . . . . . . . . . . . . . . . . . . . . 12
4.7.2 Real Property. . . . . . . . . . . . . . . . . 12
4.7.3 Leases . . . . . . . . . . . . . . . . . . . . 12
4.7.4 Notice . . . . . . . . . . . . . . . . . . . . 12
4.7.5 Personal Property. . . . . . . . . . . . . . . 13
4.7.6 Notice from Insurance Carrier. . . . . . . . . 13
4.8 Intellectual Property . . . . . . . . . . . . . . . . 13
4.8.1 Ownership. . . . . . . . . . . . . . . . . . . 13
4.8.2 No Breach of License . . . . . . . . . . . . . 14
4.8.3 Year 2000 Issues . . . . . . . . . . . . . . . 14
4.9 Agreements, Contracts and Commitments . . . . . . . . 15
4.9.1 Contracts. . . . . . . . . . . . . . . . . . . 15
4.9.2 Written List . . . . . . . . . . . . . . . . . 16
4.10 No Breach of Statute or Contract;
Governmental Authorizations. . . . . . . . . . . . . . . . . . 17
4.10.1 No Violation . . . . . . . . . . . . . . . . . 17
4.10.2 Permits and Licenses . . . . . . . . . . . . . 18
4.10.3 Reports. . . . . . . . . . . . . . . . . . . . 18
4.10.4 Violation of Law . . . . . . . . . . . . . . . 18
4.10.5 Permits under Environmental Laws . . . . . . . 18
4.10.6 Other Permits. . . . . . . . . . . . . . . . . 19
4.11 No Litigation or Adverse Effects. . . . . . . . . . . 19
4.12 Authorization, Execution and Delivery of Agreement. . 20
4.13 Ability to Conduct the Business . . . . . . . . . . . 20
4.14 Disclosure. . . . . . . . . . . . . . . . . . . . . . 20
4.15 Broker's or Finder's Fee. . . . . . . . . . . . . . . 20
4.16 Insurance . . . . . . . . . . . . . . . . . . . . . . 21
4.17 Completeness of Documents -- Chem-Met . . . . . . . . 21
4.18 Completeness of Documents -- Sullivan Trusts. . . . . 21
4.19 Disposition of Assets . . . . . . . . . . . . . . . . 21
4.20 Obligations to Employees. . . . . . . . . . . . . . . 21
4.21 Condition of Plant, Machinery and Equipment . . . . . 23
4.22 Books of Account. . . . . . . . . . . . . . . . . . . 23
4.23 Stock Redemptions . . . . . . . . . . . . . . . . . . 23
4.24 Minute Books. . . . . . . . . . . . . . . . . . . . . 23
4.25 Indebtedness of Shareholders, etc . . . . . . . . . . 23
4.26 Business Prospects. . . . . . . . . . . . . . . . . . 24
4.27 Bank Accounts; Powers of Attorney . . . . . . . . . . 24
4.28 Sensitive Payments. . . . . . . . . . . . . . . . . . 24
iii
<PAGE>
ARTICLE 5 ADDITIONAL REPRESENTATIONS, WARRANTIES
AND COVENANTS OF THE SULLIVANS AND THE SULLIVAN TRUSTS. . 24
5.1 Affiliate Status. . . . . . . . . . . . . . . . . . . 24
5.2 Rule 145. . . . . . . . . . . . . . . . . . . . . . . 25
5.3 Legend. . . . . . . . . . . . . . . . . . . . . . . . 25
5.4 Restrictions on Certain Actions . . . . . . . . . . . 25
5.4.1 Prohibition Against Acquisition . . . . . . . .25
5.4.2 Prohibition Against Solicitation. . . . . . . .26
5.4.3 Prohibition Against Control . . . . . . . . . .26
5.5 Attendance. . . . . . . . . . . . . . . . . . . . . . 26
5.6 Specific Enforcement. . . . . . . . . . . . . . . . . 26
ARTICLE 6 NO SOLICITATION OF TRANSACTIONS . . . . . . . . . . . . . 27
6.1 No Solicitation of Transactions . . . . . . . . . . . 27
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF PERMA-FIX . . . . . . . 27
7.1 Organization, etc . . . . . . . . . . . . . . . . . . 27
7.2 Authorization, Execution and Delivery of Agreement. . 28
7.3 Capital Stock of Perma-Fix. . . . . . . . . . . . . . 28
7.4 SEC Filings . . . . . . . . . . . . . . . . . . . . . 28
7.4.1 . . . . . . . . . . . . . . . . . . . . . . . . 28
7.4.2 . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4.3 Material Adverse Change. . . . . . . . . . . . 29
7.5 Status of Perma-Fix Common Stock. . . . . . . . . . . 29
7.6 No Breach of Statute or Contract, Governmental
Authorizations. . . . . . . . . . . . . . . . . . . . 29
7.7 No Litigation or Adverse Events . . . . . . . . . . . 30
7.8 Broker's or Finder's Fees . . . . . . . . . . . . . . 30
ARTICLE 8 COVENANTS OF CONDUCT AND TRANSACTIONS
PRIOR TO AND AFTER THE CLOSING. . . . . . . . . . . . . . 30
8.1 Investigations; Operation of Business of Chem-Met . . 30
8.1.1 Access to Premises and Books . . . . . . . . . 30
8.1.2 Business Organization of Chem-Met. . . . . . . 31
8.1.3 Ordinary Course of Business . . . . . . . . . .31
iv
<PAGE>
8.1.4 Sale of Assets. . . . . . . . . . . . . . . . .33
8.2 No Selling of Shares or Granting of Options . . . . . 33
8.3 Disclosure in Proxy Statement . . . . . . . . . . . . 34
8.4 Consents. . . . . . . . . . . . . . . . . . . . . . . 34
8.5 Governmental Reports. . . . . . . . . . . . . . . . . 34
8.6 Conduct of Business . . . . . . . . . . . . . . . . . 34
8.7 Governmental Approvals. . . . . . . . . . . . . . . . 35
8.8 Encumber. . . . . . . . . . . . . . . . . . . . . . . 35
8.9 Title Policies for Real Property Owned by Chem-Met. . 35
8.10 Survey. . . . . . . . . . . . . . . . . . . . . . . . 35
8.11 Public Announcements. . . . . . . . . . . . . . . . . 35
8.12 Notification. . . . . . . . . . . . . . . . . . . . . 36
8.13 Filings . . . . . . . . . . . . . . . . . . . . . . . 36
8.14 Supplemental Disclosure . . . . . . . . . . . . . . . 36
8.15 SEC Filings . . . . . . . . . . . . . . . . . . . . . 36
8.16 Listing of Perma-Fix Common Stock . . . . . . . . . . 36
8.17 Perma-Fix Registration Statement, etc.. . . . . . . . 36
8.18 Information for Proxy Statements. . . . . . . . . . . 37
8.19 Registration Statement; Proxy Statement/Prospectus. . 37
8.20 Audited Financial Statements. . . . . . . . . . . . . 38
8.21 Public Disclosure . . . . . . . . . . . . . . . . . . 38
8.22 Pooling Accounting. . . . . . . . . . . . . . . . . . 38
8.23 Letter of Public Accountants. . . . . . . . . . . . . 38
8.24 Liability to Broker . . . . . . . . . . . . . . . . . 40
8.25 Assumption of Tax Liability and Quanta Liability. . . 40
8.26 Access to Premises and Books. . . . . . . . . . . . . 40
8.27 Quanta Merger and Exchange. . . . . . . . . . . . . . 41
8.28 T.A.S. Leasing, Inc . . . . . . . . . . . . . . . . . 41
ARTICLE 9 CONDITIONS OF TRANSACTIONS CONTEMPLATED BY AGREEMENT;
ABANDONMENT OF AGREEMENT. . . . . . . . . . . . . . . . . 42
9.1 Closing Conditions of Perma-Fix and Perma-Chem. . . . 42
9.1.1 Resolutions of Board of Directors and
Shareholders of Chem-Met . . . . . . . . . . . 42
9.1.2 Delivery of Trust Documents. . . . . . . . . .42
9.1.3 Approval by Lender. . . . . . . . . . . . . . . . . 42
9.1.4 Representations and Warranties of
the Sullivans and the Sullivan Trusts
to be True and Correct and Compliance With
Covenants . . . . . . . . . . . . . . . . . . . 42
v
<PAGE>
9.1.5 Representations and Warranties of Chem-Met
to be True and Compliance With Covenants . . . . 43
9.1.6 Third Party Consents. . . . . . . . . . . . . . .43
9.1.7 No Material Adverse Change. . . . . . . . . . . .43
9.1.8 Statutory Requirements; Litigation. . . . . . . .43
9.1.9 Opinion of Counsel of Chem-Met, the
Sullivans and the Sullivan Trusts. . . . . . . . 44
9.1.10 Effective Registration Statement. . . . . . . . .44
9.1.11 Due Diligence . . . . . . . . . . . . . . . . . .44
9.1.12 Environmental Audit . . . . . . . . . . . . . . .44
9.1.13 Stock Certificates. . . . . . . . . . . . . . . .45
9.1.14 Permits . . . . . . . . . . . . . . . . . . . . .45
9.1.15 No Liens on Assets. . . . . . . . . . . . . . . .45
9.1.16 Listing of Perma-Fix Common Stock . . . . . . . .45
9.1.17 Minute Books and Stock Ledgers. . . . . . . . . .45
9.1.18 Financial Statements. . . . . . . . . . . . . . .45
9.1.19 Title Policies and Surveys. . . . . . . . . . . .45
9.1.20 Good Standing Certificates. . . . . . . . . . . .46
9.1.21 Resignation of Directors. . . . . . . . . . . . .46
9.1.22 Chem-Con Agreement. . . . . . . . . . . . . . . .46
9.1.23 Facility Remediation. . . . . . . . . . . . . . .46
9.1.24 Settlement of Four County Landfill PRP
Claims . . . . . . . . . . . . . . . . . . . . . 46
9.1.25 Settlement of Chem-Fix Claims.. . . . . . . . . .46
9.1.26 Pooling Letters.. . . . . . . . . . . . . . . . .46
9.1.27 Shareholder Approval. . . . . . . . . . . . . . .47
9.1.28 Shareholder Approval. . . . . . . . . . . . . . .47
9.1.29 Accountants Letters . . . . . . . . . . . . . . .47
9.1.30 Employment Agreement. . . . . . . . . . . . . . .47
9.1.31 Officer and Director Waiver . . . . . . . . . . .47
9.1.32 Quanta Transactions . . . . . . . . . . . . . . .47
9.1.33 Fairness Opinion. . . . . . . . . . . . . . . . .47
9.1.34 Closing Price of Perma-Fix Common Stock . . . . .47
9.1.35 TAS Lease . . . . . . . . . . . . . . . . . . . .48
9.2 Conditions to Obligations of Chem-Met and The
TPS Trust. . . . . . . . . . . . . . . . . . . . . . . .48
9.2.1 Resolutions of Perma-Fix Board of
Directors and Shareholders. . . . . . . . . . . .48
9.2.2 Resolutions of Perma-Met Board of
Directors and Shareholders. . . . . . . . . . . . 48
9.2.3 Representations and Warranties of Perma-Fix
to be True. . . . . . . . . . . . . . . . . . . . 48
9.2.4 Employment Agreement. . . . . . . . . . . . . . . 48
9.2.5 Effective Registration Statement. . . . . . . . . 48
9.2.6 No Material Adverse Change. . . . . . . . . . . . 49
9.2.7 Litigation. . . . . . . . . . . . . . . . . . . . 49
vi
<PAGE>
9.2.8 Opinion of Counsel of Perma-Fix . . . . . . . . . 49
9.2.9 Escrow Agreement. . . . . . . . . . . . . . . . . 49
9.2.10 Closing Price of Perma-Fix Closing Stock. . . . . 49
9.3 Termination of Agreement and Abandonment of Merger. . . .49
9.3.1 Conditions . . . . . . . . . . . . . . . . . . . .50
9.3.2 Conditions of Perma-Fix Not Met. . . . . . . . . .50
9.3.3 Termination by Perma-Fix or the
Sullivans under Section 9.3 of the
Chem-Con Agreement . . . . . . . . . . . . . . . .50
9.3.4 Mutual Consent . . . . . . . . . . . . . . . . . .50
9.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . .50
ARTICLE 10 TERMINATION OF OBLIGATIONS AND WAIVER OF CONDITIONS 50
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . .50
10.2 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . .50
ARTICLE 11 INDEMNIFICATION AND SURVIVAL OF
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . .51
11.1 Indemnification by the Sullivans and the
Sullivan Trusts . . . . . . . . . . . . . . . . . . . . .51
11.2 Notice of Claim . . . . . . . . . . . . . . . . . . . . .51
11.3 Survival of Representations and Remedies. . . . . . . . .52
11.4 Indemnification Period. . . . . . . . . . . . . . . . . .52
11.5 Settlement of Indemnification Claims. . . . . . . . . . .52
ARTICLE 12 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . .52
12.1 Entire Agreement and Amendment. . . . . . . . . . . . . .52
12.2 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .53
12.3 Governing Law . . . . . . . . . . . . . . . . . . . . . .53
12.4 Benefit of Parties; Assignment. . . . . . . . . . . . . .53
12.5 Pronouns. . . . . . . . . . . . . . . . . . . . . . . . .53
12.6 Headings. . . . . . . . . . . . . . . . . . . . . . . . .53
12.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . .53
12.8 Time. . . . . . . . . . . . . . . . . . . . . . . . . . .54
12.9 Severability. . . . . . . . . . . . . . . . . . . . . . .54
12.10 Counterparts. . . . . . . . . . . . . . . . . . . . . .54
Schedule "A" - List of all jurisdictions in which Chem-Met is
authorized to do business
Schedule "B" - List of all of Chem-Met's ownership interests
in other business enterprises
Schedule "C" - Liabilities
vii
<PAGE>
Schedule "D" - List of all transactions of Chem-Met since
September 30, 1998
Schedule "E" - Tax Returns; Payment of Taxes; Waiver of
Statute of Limitations; Tax Deficiencies
Schedule "F" - List of all Permitted Encumbrances and Liens
on Chem-Met assets; Real Property owned by
Chem-Met; title insurance policies; leases;
Chem-Met personal property; notices of
violations
Schedule "G" - List of all contracts
Schedule "H" - List of contracts, leases, and agreements re
Chem-Met business (copies)
Schedule "I" - Permits and licenses and reports since
December 31, 1990
Schedule "J" - Litigation
Schedule "K" - List of all trade names, trademarks, service
marks, patents, copyrights and applications
Schedule "L" - Insurance
Schedule "M" - Disposition of Assets
Schedule "N" - Determination letters on benefit plans
Schedule "O" - Condition of plant, machinery and equipment
Schedule "P" - Indebtedness of Shareholders
Schedule "Q" - Bank accounts/borrowing resolutions of Chem-
Met; Powers of Attorney
Schedule "R" - Description of Quanta Tract
Schedule "S" - Year 2000 Information
Exhibit "A" - Employment Agreement with Thomas P. Sullivan
Exhibit "B" - Facility
Exhibit "C" - Permitted Encumbrances
Exhibit "D" - Description of 10 Acre Tract
Exhibit "E" - Certificate of Merger
Exhibit "F" - Opinion of Counsel of Chem-Met
Exhibit "G" - Opinion of Counsel of Perma-Fix
viii
<PAGE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
____________________________
THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), dated
as of the 15th day of March, 1999, among PERMA-FIX ENVIRONMENTAL
SERVICES, INC., a Delaware corporation ("Perma-Fix"); PERMA-MET,
INC. a Michigan corporation and a wholly-owned subsidiary of Perma-
Fix ("Perma-Met"); CHEM-MET SERVICES, INC., a Michigan corporation
("Chem-Met"); The THOMAS P. SULLIVAN LIVING TRUST, dated September 6,
1978 ("TPS Trust"); The ANN L. SULLIVAN LIVING TRUST, dated
September 6, 1978 ("ALS Trust"); THOMAS P. SULLIVAN, an individual
("TPS"); and ANN L. SULLIVAN, an individual ("ALS"). Collectively,
the TPS Trust and the ALS Trust are referred to herein as the
"Sullivan Trusts," and TPS and ALS are collectively referred to as
the "Sullivans."
W I T N E S S E T H:
WHEREAS, the TPS Trust is the sole and exclusive owner
of all of the issued and outstanding capital stock of Chem-Met (the
"Chem-Met Common Stock");
WHEREAS, TPS is the sole trustee and primary
beneficiary of the TPS Trust;
WHEREAS, ALS is the sole trustee and primary
beneficiary of the ALS Trust;
WHEREAS, the Sullivans are husband and wife;
WHEREAS, Perma-Met is directly or indirectly, a wholly
owned subsidiary of Perma-Fix;
WHEREAS, the Board of Directors of Perma-Fix, Perma-Met
and Chem-Met deem it advisable and in the best interest of each
corporation and its respective stockholders that Chem-Met merge
with and into Perma-Met, with Perma-Met being the survivor, in
order to advance the long-term business interest of each
corporation;
WHEREAS, the parties hereto desire that Chem-Met shall
be merged with and into Perma-Met, with Perma-Met being the
survivor (said transaction being hereinafter referred to as the
"Merger") pursuant to a plan of merger (the "Plan of Merger") in
which the stockholder of Chem-Met will become a stockholder of
Perma-Fix, and the parties desire to provide for certain
undertakings, conditions, representations, warranties and covenants
in connection with such transactions contemplated hereby;
WHEREAS, for Federal income tax purposes, it is
intended that the Merger shall qualify as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "Code");
<PAGE>
WHEREAS, for accounting purposes, it is intended that
the Merger shall be accounted for as a pooling of interests;
WHEREAS, the Board of Directors of Perma-Fix, Perma-Met
and Chem-Met have approved and adopted the Merger and this
Agreement; and
NOW, THEREFORE, in consideration of the premises and
the mutual covenants, agreements, representations and warranties
herein contained, the parties hereto agree as follows:
ARTICLE
1
DEFINITIONS
For purposes of this Agreement, the following terms
shall have the respective meanings set forth below:
1.1 "Affiliate" has the meaning set forth in Rule 405 promulgated
under the Securities Act, whether or not such is an Affiliate
now or becomes an Affiliate after the date hereof.
1.2 "Chem-Con " shall collectively mean Chemical Conservation
Corporation, a Florida corporation ("Chemical Florida") and
Chemical Conservation of Georgia, Inc., a Georgia corporation
("Chemical Georgia").
1.3 "Chem-Con Agreement " shall mean that certain Agreement and
Plan of Merger among Perma-Fix, Perma-Con (as defined below),
Chem-Con, the Sullivan Trusts and the Sullivans, dated as of
the date of this Agreement, whereby Chemical Florida is to
merge with and into Florida Perma-Chem, a wholly owned
subsidiary of Perma-Fix, with Florida Perma-Chem being the
survivor Chemical Georgia is to merge with and into Georgia
Perma-Chem, a wholly owned subsidiary of Perma-Fix, with
Georgia Perma-Chem being the survivor.
1.4 "Chem-Con Merger" shall collectively mean the merger of
Chemical Florida with and into Florida Perma-Chem, with
Florida Perma-Chem being the survivor, and the merger of
Chemical Georgia with and into Georgia Perma-Chem, with
Georgia Perma-Chem being the survivor, all pursuant to the
Chem-Con Agreement.
1.5 "Chem-Fix Settlement Agreement" shall mean that certain
settlement agreement regarding the settlement of the American
Arbitration Association proceeding, No. 54 1990077 92, between
Chem-Fix Technologies, Inc. and Chem-Met.
2
<PAGE>
1.6 "Chem-Met Common Stock" means the Chem-Met common stock, par
value $10.00 per share.
1.7 "Chem-Met Intellectual Property Right" has the meaning as
defined in Section 4.8.1 of this Agreement.
1.8 "Closing" has the meaning as specified in Section 2.3 hereof.
1.9 "Closing Date" has the meaning as specified in Section 2.3
hereof.
1.10 "Code" means the Internal Revenue Code of 1986, as amended.
1.11 "Effective Time" shall have the meaning set forth in Section
2.2 hereof.
1.12 "Environmental Laws" mean all federal, state, county, local
and foreign environmental, health, and safety laws, codes,
ordinances and all rules and regulations promulgated there-
under, including, without limitation, laws relating to
management, emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes into the
environment (including, without limitation, air, surface
water, groundwater, land surface or subsurface strata) or
otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemicals, petroleum
products or industrial, solid, toxic or hazardous substances
or wastes. Environmental Laws include, without limitation,
(i) the Federal Water Pollution Control Act ("FWPCA"), 33
U.S.C. Section 1251, et seq.; (ii) the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
Section 9601, et seq.; (iii) the Resource Conservation and Recovery
Act ("RCRA"), 42 U.S.C. Section 6901, et seq.; (iv) the Clean Air
Act ("Clean Air Act"), 42 U.S.C. Section 7401, et seq; (v) the Toxic
Substances Control Act ("TSCA"), 15 U.S.C. Section 201, et seq.;
(vi) any and all other analogous state and local statutes;
and, (vii) all rules and regulations promulgated under any of
the foregoing.
1.13 "Employment Agreement" shall have the meaning set forth in
Section 9.2.4 hereof, a copy of which is attached hereto as
Exhibit "A".
1.14 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated
thereunder.
1.15 "Florida Perma-Chem" shall mean Florida Perma-Chem, Inc., a
Florida corporation and a wholly owned subsidiary of Perma-
Fix.
1.16 "Facility" means the Real Property (as defined below) operated
and owned by Chem-Met, located at 18550 Allen Road, Wyandotte,
Michigan, and described in Exhibit "B" attached hereto.
3
<PAGE>
1.17 "Four County Landfill" shall mean that certain landfill
facility located in DeLong, Indiana, known as the "Four County
Landfill Site".
1.18 "GAAP" means United States generally accepted accounting prin-
ciples.
1.19 "Georgia Perma-Chem" shall mean Georgia Perma-Chem, Inc., a
Georgia corporation and a wholly owned subsidiary of Perma-
Fix.
1.20 "Governmental Authority" means any agency, instrumentality,
department, commission, court, tribunal or board of any
government, whether foreign or domestic and whether national,
federal, state, provincial, or local.
1.21 "Laws" mean any and all federal, state and local laws, rules,
regulations, codes, orders, ordinances, judgments, injunctions
and decrees.
1.22 "Liens" mean all security interests, liens, mortgages, claims,
charges, pledges, restrictions, equitable interests,
easements, property rights or encumbrances of any nature.
1.23 "Merger" has the meaning as defined in the seventh WHEREAS
clause of this Agreement.
1.24 "Mineral Rights" mean the mineral and oil and gas rights,
interest and leases, pipelines and pipeline rights of way
situated on and under the Real Property.
1.25 "Permitted Encumbrances" means (i) liens listed on Exhibit "C"
attached hereto; (ii) liens for taxes not yet delinquent or
being contested in good faith by appropriate proceedings; and,
(iii) such technical imperfections of title and easements, if
any, which do not in the sole discretion of Perma-Fix, when
considered together, detract materially from the value of, or
interfere with, the present or presently proposed use of, any
Real Property.
1.26 "Perma-Chem" shall collectively mean Florida Perma-Chem, a
Florida corporation and a wholly owned subsidiary of Perma-Fix
and Georgia Perma-Chem, a Georgia corporation and a wholly
owned subsidiary of Perma-Fix.
1.27 "Perma-Fix Common Stock" means the Common Stock, par value
$.001 per share, of Perma-Fix.
1.28 "Quanta" means Quanta Corporation, a Michigan corporation in
which all of its issued and outstanding capital stock is owned
by the ALS Trust.
1.29 "Real Property" means all real property, land, buildings,
improvements and structures owned, leased or used by Chem-Met.
4
<PAGE>
1.30 "Returns" mean all returns, declaration, reports, estimates,
information returns and statements required to be filed with
or supplied to any taxing authority in connection with any
Taxes.
1.31 "Securities Act" means the Securities Act of 1933, as amended.
1.32 "Shares" means all of the issued and outstanding shares of
capital stock of Chem-Met of whatsoever character and
description.
1.33 "SEC" means the U.S. Securities and Exchange Commission.
1.34 "Subsidiaries" means all corporations fifty percent (50%) or
more of the common stock or other form of equity of which
shall be owned, directly or indirectly through one or more
intermediaries, by another corporation.
1.35 "Surviving Corporations" has the meaning as defined in Section
2.4.2 of this Agreement.
1.36 "Taxes" mean all taxes, charges, fees, levies or other assess-
ments, including, without limitation, income, gross receipts,
excise, real and personal property, sales, transfer, license,
payroll and franchise taxes, imposed by any Governmental Auth-
ority and shall include any interest, penalties or additions
to tax attributable to any of the foregoing.
1.37 "10 Acre Tract" means that Real Property described in Exhibit
"D" attached hereto.
ARTICLE 2
THE MERGER
2.1 The Merger. The Merger of Chem-Met with and into Perma-Met.
Subject to the terms of this Agreement, Chem-Met shall merge
with and into Perma-Met, with Perma-Met being the surviving
corporation, in accordance with the applicable provisions of
the Michigan Business Corporation Act ("MBCA") and the terms
of this Agreement. Chem-Met and Perma-Met agree to the
Merger.
2.2 Effective Time of the Merger. Subject to the provisions of
this Agreement, at the Closing (as defined below) (i) the
Certificate of Merger regarding the Merger, a copy of which is
attached hereto as Exhibit "E" (the "Certificate of Merger"),
shall be duly executed and acknowledged by Chem-Met and Perma-
Met and delivered to and filed with the Secretary of State of
Michigan, as provided in the MBCA, on the Closing Date. The
Merger shall become effective upon the filing of the Articles
of Merger as herein described, or at such time thereafter as
shall be provided in the Articles of Merger (the "Effective
Time").
5
<PAGE>
2.3 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m., Eastern Standard Time, pursuant to the
terms of this Agreement on a date to be specified by Perma-Fix
and Chem-Met, which shall be no later than five business days
after approval of the Merger and the Chem-Con Merger by the
shareholders of Perma-Fix entitled to vote thereon (the
"Closing Date"), at the offices of Chemical Conversation
Corporation, 10100 Rocket Blvd., Orlando, Florida 32824,
unless another date, place or time is agreed to in writing by
Perma-Fix and Chem-Met.
2.4 Effects of the Merger. At the Effective Time, Chem-Met shall
be merged with and into Perma-Met (Chem-Met and Perma-Met are
sometimes referred to below as the "Constituent Corporations"
and Perma-Met is sometimes referred to herein as the
"Surviving Corporation"), with Perma-Met being the survivor
and Chem-Met ceasing to exist, (ii) the Articles of
Incorporation of Perma-Met immediately prior to the Effective
Time shall be the Articles of Incorporation of the Surviving
Corporation, except that at the Effective Time Perma-Met shall
change its corporate name to Chem-Met Services, Inc. (iii) the
Bylaws of Perma-Met as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving
Corporation, and (iv) the purpose of the Surviving Corporation
shall be as set forth in Article II of the Articles of
Incorporation of Perma-Met immediately prior to the Effective
Time.
ARTICLE 3
CONVERSION OF SECURITIES
3.1 Conversion of Capital Stock. As of the Effective Time:
3.1.1 Capital Stock of Perma-Fix. Each share of capital
stock of Perma-Fix issued and outstanding immediately
prior to the Effective Time shall remain issued and
outstanding and be unchanged by the Merger;
3.1.2 Capital Stock of Perma-Met. Each share of capital
stock of Perma-Met issued and outstanding immediately
prior to the Effective Time shall remain issued and
outstanding and be unchanged by the Merger;
3.1.3 Chem-Met Capital Stock. Each share of Chem-Met capital
stock issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger, and
without any action on the part of the holder thereof,
be automatically canceled, be null and void and,
subject to the terms of this Article 3, all shares of
Chem-Met Common Stock issued and outstanding
immediately prior to the Effective Time shall, by
virtue of the Merger, and without any action on the
part of the holder thereof, be exchanged for that
number of fully paid and nonassessable shares of Perma-
Fix Common Stock determined by dividing $900,000 by the
6
<PAGE>
average of the closing sale prices per share of the
Perma-Fix Common Stock as reported on the National
Association of Securities Dealers Automated Quotation
System ("NASDAQ") for five consecutive trading days
ending with the trading day immediately prior to the
Effective Time. During the five consecutive trading
days ending with the trading day immediately prior to
the Effective Time, the Company shall not, and shall
cause its officers and directors to not, buy or sell
any Perma-Fix Common Stock over the NASDAQ or the
Boston Stock Exchange.
3.1.4 Chem-Met Treasury Stock. All shares of Chem-Met Common
Stock that are owned by Chem-Met as treasury stock, if
any, shall be canceled and retired and shall cease to
exist and no Perma-Fix Common Stock or other
consideration shall be delivered in exchange therefor.
3.2 Dissenters Rights. The holders of all issued and outstanding
shares of Chem-Met Common Stock are parties to this Agreement
and they each agree, represent and warrant that none of them
shall exercise or attempt to exercise any dissenters rights,
right of appraisal or similar rights provided for under the
MBCA.
3.3 Exchange of Certificates. The procedures for exchanging
outstanding shares of Chem-Met Common Stock for Perma-Fix
Common Stock pursuant to the Merger are as follows:
3.3.1 Exchange. As of the Effective Time, Perma-Fix shall
deliver to the TPS Trust certificates representing the
shares of Perma-Fix Common Stock ( the "Exchange
Certificates") issuable pursuant to Section 3.1.2 in
exchange for outstanding shares of Chem-Met Common
Stock.
3.3.2 Exchange Procedures. At the Effective Time, the TPS
Trust, being the sole beneficial and record owner of
all of the issued and outstanding shares of capital
stock of Chem-Met, shall surrender to Perma-Fix all
certificates representing all of the issued and
outstanding shares of capital stock of Chem-Met (the
"Certificates"), duly and validly endorsed, in blank,
with signatures guaranteed by a national bank or
investment banking firm, for cancellation, and, subject
to the terms and conditions of this Agreement, the TPS
Trust, being the sole and exclusive holder of any and
all such Certificates shall be entitled to receive in
exchange for all of the shares of Chem-Met Common Stock
a certificate representing that number of whole shares
of Perma-Fix Common Stock which such holder has the
right to receive pursuant to the provisions of Section
3.1.3 hereof, and the Certificates shall immediately be
canceled at the Effective Time. Until surrendered as
contemplated by this Section 3.3.2, the Certificates
representing shares of Chem-Met Common Stock shall be
deemed at any time after the Effective Time to
represent only the right to receive upon such surrender
the certificate representing shares of Perma-Fix Common
Stock as contemplated by Section 3.1.3 hereof.
7
<PAGE>
3.3.3 No Further Ownership Rights in Chem-Met Common Stock.
All shares of Perma-Fix Common Stock issued upon the
surrender for exchange of Certificates in accordance
with the terms hereof shall be deemed to have been
issued in full satisfaction of all rights pertaining to
such shares of Chem-Met Common Stock. From and after
the Effective Time there shall be no further
registration of transfers on the stock transfer books
of the Surviving Corporations of the shares of Chem-Met
Common Stock which were outstanding immediately prior
to the Effective Time.
3.3.4 No Fractional Shares. No certificate or scrip
representing fractional shares of Perma-Fix Common
Stock shall be issued upon the surrender for exchange
of Certificates, and such fractional share interests
will not entitle the owner thereof to vote or to any
other rights of a stockholder of Perma-Fix.
3.3.5 No Liability. Neither Perma-Fix nor Chem-Met shall be
liable to any holder of shares of Chem-Met Common Stock
or Perma-Fix Common Stock, as the case may be, for such
shares (or dividends or distributions with respect
thereto) delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
3.3.6 Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by
such person of a bond in such reasonable amount as such
Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to
such Certificate, Perma-Fix will issue in exchange for
such lost, stolen or destroyed Certificate the shares
of Perma-Fix Common Stock and unpaid dividends and
distributions on shares of Perma-Fix Common Stock
deliverable in respect thereof pursuant to this
Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE ALS TRUST,
THE TPS TRUST, ALS, TPS AND CHEM-MET
The ALS Trust, the TPS Trust, ALS, TPS, and Chem-Met,
jointly and severally, represent and warrant to Perma-Fix and
Perma-Met that, as of the date of this Agreement and as of the
Closing, the following:
4.1 Organization of the Sullivan Trusts. The Sullivan Trusts are
valid trusts. ALS is the primary beneficiary under the ALS
8
<PAGE>
Trust, and ALS is the sole trustee under the ALS Trust. TPS
is the primary beneficiary of the TPS Trust, and TPS is the
sole trustee under the TPS Trust. ALS, as sole trustee under
the ALS Trust, and TPS, as sole trustee under the TPS Trust,
have full power, authority and capacity to enter into this
Agreement and to perform any and all obligations and covenants
of the ALS Trust and the TPS Trust under this Agreement.
4.2 Organization of Chem-Met. Chem-Met is a corporation duly
organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, and has the
corporate power to own its properties and to carry on its bus-
iness as is now being conducted. Chem-Met is duly qualified
and in good standing as a foreign corporation in each juris-
diction in which the nature of the business conducted by it or
the character of the property owned, leased or used by it
makes such qualification necessary. A list of all such
jurisdictions, separately shown and indicated, is set forth on
Schedule "A" attached hereto.
4.3 Capital Stock of Chem-Met. The authorized capital stock of
Chem-Met consists solely of five thousand (5,000) shares of
Chem-Met Common Stock, of which one hundred (100) shares are
issued and outstanding and all of such issued and outstanding
shares of Chem-Met Common Stock are owned of record and
beneficially by the TPS Trust. No shares of Chem-Met Common
Stock are held in treasury or reserved for issuance at a later
date. All of the issued and outstanding shares of Chem-Met
Common Stock are (i) validly authorized and issued, (ii) fully
paid and nonassessable and (iii) free and clear of any and all
Liens. Subsequent to September 30, 1998, Chem-Met has not
declared or paid any dividend, or declared or made any
distribution on, or authorized the creation or issuance of, or
issued, or authorized or effected any split-up or any other
recapitalization of, any of its capital stock, or directly or
indirectly redeemed, purchased or otherwise acquired any of
their respective outstanding capital stock or agreed to take
any such action. There are no outstanding contractual
obligations of Chem-Met to repurchase, redeem or otherwise
acquire any of its respective outstanding shares of capital
stock. There are no outstanding agreements, options, warrants
or rights to subscribe for or purchase from or otherwise
receive from Chem-Met or the TPS Trust or any other party any
of Chem-Met's capital stock or other securities of any kind or
description of Chem-Met.
4.4 Ownership Interests in Securities. Set forth on Schedule "B"
attached hereto is a list of all equity or ownership interests
in, and all bonds and debentures of, other business enter-
prises which Chem-Met owns and such Schedule indicates any
such interests which are held subject to any legal, contrac-
tual or other limitations or restrictions on the right to
resell the same.
9
<PAGE>
4.5 Financials.
4.5.1 Financial Statements. Chem-Met has previously furn-
ished Perma-Fix with a true and correct copy of the
audited financial statements of Chemical Florida,
Chemical Georgia, Chem-Met and their Subsidiaries on a
combined basis for the fiscal year ended September 30,
1998 ("Audited Financial Statements"), consisting of,
among other things (i) a balance sheet as of
September 30, 1998, and (ii) statement of income and
related earnings for the fiscal year ended
September 30, 1998. The above-referenced Audited
Financial Statements are true, correct and complete in
all material respects and correctly present the finan-
cial conditions and results of operations of Chemical
Florida, Chemical Georgia, Chem-Met and their
Subsidiaries on a combined basis as of the date
thereof. For the purposes of this Agreement, the
Audited Financial Statements shall be deemed to include
any notes to such financial statements. The Audited
Financial Statements have been prepared in conformity
with GAAP, consistently applied throughout the periods
indicated and on a basis consistent with prior periods.
4.5.2 Liabilities. Except as set forth in Schedule "C"
attached hereto, Chem-Met does not have any liabilities
or obligations either accrued, absolute, contingent,
known or unknown, matured or unmatured, or otherwise,
which have not been:
4.5.2.1 reflected in the Audited Financial Statements;
or
4.5.2.2 incurred consistent with past practices of
Chem-Met in the ordinary and normal course of
Chem-Met's business since September 30, 1998.
4.5.3 Net Worth. Except as set forth in Schedule "C"
attached hereto, there are no claims against or liabil-
ities or obligations of, or any legal basis for any
claims against or liabilities or obligations of, Chem-
Met which might result in a material reduction in the
net worth of Chem-Met from that shown in the Audited
Financial Statements or any material charge against net
earnings of Chem-Met.
4.5.4 Transactions Since September 30, 1998. Except as set
forth on Schedule "D", between September 30, 1998, and
the date of this Agreement, Chem-Met has not engaged in
any material transaction not in the ordinary and normal
course of business and, except as set forth on such
Schedule "D", there has not been, occurred or arisen
since September 30, 1998:
4.5.4.1 any material adverse change in the financial
condition or in the operations of the business
of Chem-Met from that shown on the Audited
Financial Statements; or
4.5.4.2 any damage or destruction in the nature of a
casualty loss, or interference with its
business from such loss or from any labor
dispute or court or governmental action, order
10
<PAGE>
or decree, whether covered by insurance or
not, materially and adversely affecting the
properties or business of Chem-Met; or
4.5.4.3 any increase, except increases given in
accordance with prior practice, in the com-
pensation payable or to become payable by
Chem-Met to any of Chem-Met's employees or any
increase in the benefits, regardless of
amount, in any bonus, insurance, pension or
other plan, program, payment or arrangement
with respect to employee benefits made to, for
or with any officers or employees; or
4.5.4.4 any extraordinary loss (as defined in Opinions
No. 9 and No. 30 of the Accounting Principles
Board of American Institute of Certified
Public Accountants) suffered by Chem-Met which
is material to Chem-Met, or any waiver by
Chem-Met of any rights which are material to
Chem-Met.
4.6 Tax and Other Returns, Reports and Pooling of Interest.
4.6.1 Tax Returns. All federal, state, local, foreign,
personal property, real property and foreign tax
returns required to be filed by the TPS Trust and Chem-
Met have been timely filed with the appropriate govern-
mental agencies in all jurisdictions in which such
returns and reports are required to be filed.
4.6.2 Payment of Taxes. All federal, state, local and
foreign taxes (including interest and penalties), due
from the TPS Trust and Chem-Met (i) have been fully
paid, or (ii) are being contested in good faith by
appropriate proceedings and are disclosed on Schedule
"E" attached hereto.
4.6.3 Waiver of Statute of Limitations. No waivers of
statutes of limitation in respect of any Returns or tax
reports have been given or requested, except as shown
on such Schedule "E".
4.6.4 Tax Deficiencies. There are no potential tax defic-
iencies which may arise from issues which have been
raised or which have not yet been raised but which
might reasonably be expected to be raised by the
Internal Revenue Service ("IRS") or any other taxing
authority that have not been disclosed on Schedule "E"
and may reasonably be expected to have a material
adverse effect on Chem-Met
4.6.5 Pooling of Interests. To the best of their knowledge,
after consulting with its independent auditors, none of
Chem-Met, the Sullivans, the Sullivan Trusts nor any of
their Affiliates has taken or agreed to take any action
which would (i) prevent Perma-Fix from accounting for
the business combination to be effected by the Merger
11
<PAGE>
as a pooling of interests or (ii) prevent the Merger
from constituting a transaction qualifying as a
reorganization under 368(a) of the Code.
4.7 Property.
4.7.1 Assets. Except as disclosed in Schedule F attached
hereto: Chem-Met owns and has good and marketable title
in and to all of the assets used by it in the operation
or conduct of its business, or required by Chem-Met for
the normal and ordinary conduct of their business, free
and clear of any and all Liens, except for Permitted
Encumbrances.
4.7.2 Real Property. Schedule "F" attached hereto lists all
Real Properties owned by Chem-Met. Chem-Met has good
and marketable title in fee simple to all of the Real
Property owned by it, free and clear of any and all
Liens, except for Permitted Encumbrances, and have
access thereto such as is reasonable to permit the
present or presently proposed use of any such
properties. Schedule "F" indicates which of the pro-
perties listed is covered by a title insurance policy
and a description of each such title insurance policy
is set forth on Schedule "F". The Real Property owned
by Chem-Met contains no encroachments on abutting pro-
perty, public or private, and no material encroachments
by others on either of their properties. Chem-Met owns
all of the Mineral Rights under the Real Property owned
by them.
4.7.3 Leases. Schedule "F" sets forth a true and complete
list of each lease of real or personal property exe-
cuted by or binding upon Chem-Met, as lessee, sub-
lessee, tenant or assignee setting forth in each case
a brief description of the property covered by the
lease, the rental and the terms thereunder. Each lease
is in full force and effect, without any default or
breach thereof by any party thereto. No consent of any
landlord, lessor or any other party is required under
any such lease to keep such lease in full force and
effect without being terminable or in default after the
execution and delivery of this Agreement and consum-
mation of the transactions contemplated by this Agree-
ment. True and complete copies of all leases required
to be listed on Schedule "F", including all amendments,
addenda, waivers and all other binding documents, have
heretofore been delivered to Perma-Fix.
4.7.4 Notice. Except as set forth on Schedule "F", none of
Chem-Met, any of the Sullivan Trusts nor any of the
Sullivans has received actual or constructive notice
of any violation of any zoning, use, occupancy, build-
ing, or environmental statute, ordinance, regulation,
order, or other law or requirement affecting or
relating to any activities performed at any time on any
Real Property. None of the Sullivan Trusts, the
Sullivans nor Chem-Met has any knowledge of any past,
12
<PAGE>
present, or future events, conditions, circumstances,
activities, incidents, actions, or plans that may in
any way interfere with or limit the continued use of
said Real Property for all present or presently
proposed use of said Real Property.
4.7.5 Personal Property. Chem-Met owns the full right and
interest and has good and marketable title in and to
all material personal and intangible property used by
Chem-Met in the conduct of Chem-Met's business and none
of such personal and intangible property is subject (i)
to any contracts of sale, or (ii) to any Liens, except
for Permitted Encumbrances.
4.7.6 Notice from Insurance Carrier. None of the Sullivans,
the Sullivan Trusts, nor Chem-Met has received any
notice of, or writing referring to, any requirements or
recommendations by any insurance company which has
issued a policy covering any part of the Real Property
requiring or recommending any repairs or work or other
action being taken on any part of the Real Property,
except as otherwise disclosed in Schedule "F". All
utilities required for the operation of the Real
Property in the manner currently operated by Chem-Met
are installed and operating, and all installation and
connection charges have been paid in full or provided
for.
4.8 Intellectual Property.
4.8.1 Ownership. Schedule "K" attached hereto is a true and
complete list of all patents, trademarks, trade names,
service marks, copyrights, web domain addresses, mask
works, any applications for and registrations of such
patents, trademarks, trade names, service marks,
copyrights, mask works, web domain addresses, and all
processes, formulae, methods, schematics, technology,
know-how, computer software programs or applications
and tangible or intangible proprietary information or
material that Chem-Met is licensed or otherwise
possesses legally enforceable rights to use and are
necessary to conduct the business of Chem-Met as
currently conducted, or planned to be conducted , the
absence of which would be reasonably likely to have a
material adverse effect upon Chem-Met (the "Chem-Met
Intellectual Property Rights"). None of the Chem-Met
Intellectual Property Rights is subject to any
outstanding order, judgment, decree, stipulation, or
agreement restricting the use of such Chem-Met
Intellectual Property Rights, and to the best of their
knowledge none infringes on, or is being infringed by,
other intellectual property rights of any other person
or entity. Chem-Met has promulgated and used
commercially reasonable efforts to enforce and maintain
any reasonably necessary trade secret or
confidentiality measures regarding the Chem-Met
Intellectual Property Rights. Chem-Met has not given
and is not bound by an agreement or indemnification
regarding Chem-Met Intellectual Property Rights in
connection with any property or service produced, used
or sold by Chem-Met.
13
<PAGE>
4.8.2 No Breach of License. Neither the TPS Trust nor Chem-
Met is, or will as a result of the execution and
delivery of this Agreement or the performance of their
respective obligations under this Agreement or
otherwise be, in breach of any license, sublicense or
other agreement relating to the Chem-Met Intellectual
Property Rights, or any material licenses, sublicenses
and other agreements as to which Chem-Met is a party
and pursuant to which Chem-Met is authorized to use any
third party patents, trademarks or copyrights ("Chem-
Met Third Party Intellectual Property Rights"),
including software which is used in the manufacture of,
incorporated in, or forms a part of any product sold or
services rendered by or expected to be sold or services
rendered by Chem-Met, the breach of which would be
reasonably likely to have a material adverse effect
upon Chem-Met, except as disclosed in Schedule "K"
hereof.
4.8.3 Year 2000 Issues. Schedule "S" hereof identifies each
"Year 2000" audit, report or investigation that has
been performed by or on behalf of Chem-Met with respect
to their business and operations, and Chem-Met has
provided to Perma-Fix true and correct copies of all
such audits, reports or investigations. Except as set
forth in such audits, reports and investigations,
neither the Sullivans, the Sullivan Trusts nor Chem-Met
are aware of any failure to be Year 2000 Compliant of
(i) any software products sold or licensed by Chem-Met
to third parties or (ii) any computer software products
used by or licensed to Chem-Met from third parties for
internal use by Chem-Met. For purposes of this
Agreement, "Year 2000 Compliant" means, with respect to
each software product referred to in the prior
sentence, that such system (i) will accurately receive,
record, store, provide, recognize and process all date
and time data from, during, into and between the
twentieth and twenty-first centuries; (ii) will
accurately perform all date-dependent calculations and
operations (including, without limitation, mathematical
operations, sorting, comparing and reporting) from,
during, into and between the twentieth and twenty-first
centuries; and (iii) will not malfunction, cease to
function or provide invalid or incorrect results as a
result of (x) the change of century, (y) date data,
including date data which represents or references
different centuries or more than one century or (z) the
occurrence of any particular date; in each case without
human intervention, other than original data entry;
provided, in each case, that all applications, hardware
and other systems used in conjunction with such system
which are not owned or licensed by Chem-Met correctly
exchange date data with or provide data to such system.
Chem-Met has not provided any guarantee or warranty for
any product sold or licensed, or services provided, by
Chem-Met to the effect that such product or service (i)
complies with or accounts for the fact of the arrival
of the year 2000 or (ii) will not be adversely affected
with respect to functionality, operability, performance
or volume capacity (including without limitation the
processing and reporting of data) by virtue of the
arrival of the year 2000. Chem-Met has performed
audits regarding its primary suppliers, customers,
14
<PAGE>
creditors and financial service organizations with
which they have substantial interaction ("Outside
Persons") and has determined that all of these Outside
Persons are substantially Year 2000 Compliant to the
extent that there will be no material adverse effects
to Chem-Met resulting from a failure of such Outside
Persons to be Year 2000 Compliant. In addition,
Schedule "S" shall set forth in detail the status of
Chem-Met's efforts to address the Year 2000 issues
relating to Chem-Met and such Outside Persons.
4.9 Agreements, Contracts and Commitments.
4.9.1 Contracts. Except as set forth on Schedule "G", Chem-
Met is not a party to or bound by:
4.9.1.1 any collective bargaining agreements or any
agreements that contain any severance pay
liabilities or obligations;
4.9.1.2 any bonus, deferred compensation, pension,
profit-sharing or retirement plans, programs
or other similar employee benefit arrange-
ments;
4.9.1.3 any employment agreement, contract or commit-
ment with an employee;
4.9.1.4 any agreement of guaranty or indemnification
running from Chem-Met to any person or entity,
including, but not limited to, any Affiliate,
other than guarantees or indemnifications in
the ordinary course of Chem-Met's business
relating solely to indemnification of certain
of its customers due to Chem-Met's disposal of
waste generated by such customers at permitted
disposal facilities not affiliated with Chem-
Met;
4.9.1.5 any agreement, contract or commitment which
would reasonably be expected to have a
material adverse impact on the business of
Chem-Met;
4.9.1.6 any agreement, indenture or other instrument
which contains restrictions with respect to
payment of dividends or any other distribution
in respect of Chem-Met or any other
outstanding securities of Chem-Met;
4.9.1.7 any agreement, contract or commitment con-
taining any covenant limiting the freedom of
Chem-Met to engage in any line of business or
compete with any person;
15
<PAGE>
4.9.1.8 any agreement, contract or commitment relating
to capital expenditures in excess of ten
thousand dollars ($10,000.00) and involving
future payments;
4.9.1.9 any agreement, contract or commitment relating
to the acquisition of assets or capital stock
of any business enterprise;
4.9.1.10 any contract with the Department of Defense
or any other department or agency of the United
States Government, or to any subcontract under any
such contract, which is subject to renegotiation
under the Renegotiation Act of 1951, as amended; or
4.9.1.11 any agreement, contract or commitment not
made in the ordinary course of business which
involves Ten Thousand Dollars ($10,000) or more or
has a remaining term of one (1) year or more from
December 31, 1998, or is not cancelable on thirty
(30) days or less notice without penalty. Chem-Met
has not breached, and there is not any claim, or,
to the best of Chem-Met's or the Sullivans or the
Sullivan Trusts' knowledge, any claim that Chem-Met
has breached any of the terms or conditions of any
agreement, contract or commitment set forth in this
Agreement or in any of the Schedules attached
hereto or of any other agreement, contract or
commitment, if any such breach or breaches in the
aggregate could result in the imposition of damages
or the loss of benefits in an amount or of a kind
material to Chem-Met.
4.9.2 Written List. Attached hereto as Schedule "H" is a
written list of all contracts, leases, agreements and
instruments which are in any single case of material
importance to the conduct of the business of Chem-Met,
together with true and correct copies of each document
requested by Perma-Fix and a written description of
each oral arrangement so listed. Without limiting the
generality of the foregoing, the aforesaid list
includes all the contracts, agreements and instruments
of the following types to which Chem-Met is a party, or
by which it is bound (without regard to whether such
contracts, agreements and instruments are material):
4.9.2.1 leases of, and contracts for, the purchase or
sale of Real Property;
4.9.2.2 labor union contracts together with a list of
all labor unions representing or, to their
best knowledge, attempting to represent
employees of Chem-Met;
4.9.2.3 pension, retirement, profit-sharing, bonus,
stock purchase, stock option, hospitalization
or insurance plans (and certificates or other
documents issued thereunder) or vacation pay,
16
<PAGE>
severance pay and other similar benefit
arrangements for officers, directors,
employees or agents;
4.9.2.4 employment contracts or agreements, contracts
with other persons engaged in sales or service
activities, advertising contracts and
brokering contracts which are not terminable
by Chem-Met without liability upon termination
notice of thirty (30) days or less;
4.9.2.5 written or oral agreements, understandings and
arrangements with officers, directors,
employees, shareholders, agents, or Affiliates
of Chem-Met, the Sullivans or the Sullivan
Trusts relating to present or future compensa-
tion of, or other benefits available to, such
persons;
4.9.2.6 contracts, and other arrangements of any kind,
whether oral or written, with any director,
officer, employee, trustee, stockholder or
Affiliate of Chem-Met, the Sullivans or the
Sullivan Trusts or to which any director,
officer, employee or Affiliate of Chem-Met is
a party;
4.9.2.7 contracts, purchase orders and other arrange-
ments of any nature involving an expenditure
of Five Thousand Dollars ($5,000.00) or more
not made in the ordinary course of business or
which involve an unperformed commitment, under
contracts not otherwise disclosed hereunder,
in excess of Twenty-Five Thousand Dollars
($25,000.00); and
4.9.2.8 indentures, loan agreements, notes, mortgages,
conditional sales contracts, and other
agreements for financing.
4.10 No Breach of Statute or Contract; Governmental Authorizations.
4.10.1 No Violation. Neither the execution and delivery of
this Agreement by Chem-Met, the Sullivans or the
Sullivan Trusts nor the performance or compliance by
the Chem-Met, the Sullivans or the Sullivan Trusts with
any of the terms and provisions of this Agreement will
violate any Laws of any governmental agency or auth-
ority, domestic or foreign, or will at the Closing con-
flict with or result in a breach of any of the terms,
conditions or provisions of any judgment, order,
injunction, decree or ruling of any court or
governmental agency or authority, domestic or foreign,
to which any of Chem-Met, the Sullivans or the Sullivan
Trusts may be subject to, or bound by, or of any
agreement or instrument to which Chem-Met, the
Sullivans or the Sullivan Trusts is a party or by which
any of them is bound, or constitute a default there-
under, or result in the creation of any Liens upon the
17
<PAGE>
Chem-Met Common Stock or any of the property or assets
of Chem-Met, or cause any acceleration of maturity of
any obligation or loan, or give to others any interest
or rights, including rights of termination or cancella-
tion, in or with respect to any of the properties,
assets, agreements, contracts, or business of Chem-Met,
the Sullivans or the Sullivan Trusts or cause any
acceleration or termination or cancellation, in or with
respect to any of the properties, assets, agreements,
contracts or business of Chem-Met, the Sullivans or the
Sullivan Trusts.
4.10.2 Permits and Licenses. Schedule "I" attached hereto is
a true and complete list of all permits, licenses and
franchises presently held by, or used in connection
with, the normal and ordinary business of Chem-Met and
all applications for any of the foregoing filed by
Chem-Met, the Sullivans or the Sullivan Trusts
relating to the business of Chem-Met with any
Governmental Authority. All permits, licenses and
franchises used by Chem-Met to conduct Chem-Met's
business are in the name of Chem-Met none are in the
name of any other party.
4.10.3 Reports. Schedule "I" is a true and complete list of
all reports made by, or with respect to Chem-Met, the
Sullivans or the Sullivan Trusts since September 30,
1998, except as otherwise furnished pursuant to this
Agreement, to or from the Federal Trade Commission
("FTC"), Environmental Protection Agency ("EPA"), Equal
Employment Opportunity Commission ("EEOC"), reports
under the Occupational Safety and Health Act ("OSHA"),
the Department of Labor, Michigan Department of
Environmental Quality and all other state or federal
government agencies or departments, and tax returns to,
tax rulings from, and tax audit reports from the IRS,
relating in any manner to the business of Chem-Met.
4.10.4 Violation of Law. Except as disclosed in Schedule "I",
none of Chem-Met, the Sullivans nor the Sullivan Trusts
is in violation of any Laws, (including, but not
limited to, Environmental Laws), which violation might
have a material adverse effect on Chem-Met or the
business of Chem-Met or the financial condition or
operations of Chem-Met, and none of the Real Property
owned or leased by Chem-Met is contaminated or requires
remediation of any kind as a result of being
contaminated.
4.10.5 Permits under Environmental Laws. Chem-Met has
obtained, presently holds and has adhered to all
permits, licenses, and other authorizations required
under federal, state, and local laws (including, but
not limited to, any and all Environmental Laws), (i)
which are necessary for, or material to, the conduct of
Chem-Met's business as such business is currently being
operated, including, but not limited to, any and all
permits and licenses required under the Environmental
Laws for Chem-Met to conduct Chem-Met's business as
currently conducted, and (ii) such other permits,
licenses and other authorizations relating to pollution
18
<PAGE>
or protection of the environment, including, without
limitation, laws relating to emissions, discharges,
releases or threatened releases of pollutants, contam-
inants (chemicals or industrial or toxic wastes into
the environment including, without limitation, ambient
air, surface waste, groundwater, soil or land), or
otherwise relating to the manufacture, processing,
recycling, reclamation, distribution, use, treatment,
storage, disposal, transport, or handling of pollut-
ants, contaminants, chemicals, petroleum products, or
industrial or solid or toxic wastes or radioactive
materials, except as disclosed in Schedule I attached
hereto. Chem-Met is in compliance with all terms and
conditions of all such required permits, licenses and
other authorizations, and with all other limitations,
restrictions, conditions, standards, prohibitions, re-
quirements, obligations, schedules, and timetables
contained in such Environmental Laws, except as
disclosed in Schedule I attached hereto. None of Chem-
Met, the Sullivans nor the Sullivan Trusts after due
inquiry, has any knowledge of any past, present, or
future events, actions, or plans that may interfere
with or prevent full compliance or continued full com-
pliance as described above, or that may give rise to
any common law or legal liability or otherwise form the
basis of any claim, action, demand, suit, proceeding,
hearing, study, or investigation related to the
manufacture, processing, recycling, reclamation,
distribution, use, treatment, storage, disposal,
transport or threatened release of, any pollutant,
contaminant, chemical or industrial or solid or toxic
waste or radioactive materials.
4.10.6 Other Permits. Except as set forth in Schedule "I",
neither the execution and delivery of this Agreement
nor the consummation thereof will violate any of the
terms of any of the permits, licenses, approvals and
authorities held by Chem-Met or cause the termination
or cancellation of any of the permits, licenses,
approvals and authorities held by Chem-Met. None of
Chem-Met, the Sullivans nor the Sullivan Trusts has
received official notice that Chem-Met is in violation
of any law, regulation, ordinance or rule applicable to
them or their operations.
4.11 No Litigation or Adverse Effects. Except as set forth in
Schedule "J", there is no suit, action or legal, administra-
tive, arbitration, or other proceeding, or governmental
investigation, or any change in the zoning, use, occupancy or
building ordinances affecting the real property or any lease-
hold interests of Chem-Met pending or, to the best of their
knowledge threatened, which could adversely affect the
financial condition, results of operations or business, assets
or properties of Chem-Met, or the conduct of business of Chem-
Met. Further, there is no suit, action or legal,
administrative, arbitration, governmental investigation or
other proceeding against Chem-Met, or to the best of their
knowledge threatened, involving any claims based upon negli-
gence, product warranties, product liability or any other type
of claim (including, but not limited to, those arising under
any Environmental Laws) exceeding potential liability
(including costs of defense and attorneys' fees), whether or
not covered by insurance, in an amount in excess of Ten
Thousand Dollars ($10,000.00) with respect to the individual
suit, action, proceeding or investigation, or potential
19
<PAGE>
liability (including costs of defense and attorneys' fees) of
Twenty-Five Thousand Dollars ($25,000.00) in the aggregate of
all such suits, actions, proceedings or investigations, except
(a) workers' compensation, automobile accident and other
routine claims wholly covered by existing insurance (including
costs of defense and attorneys' fees) and (b) as set forth in
Schedule "J" hereto.
4.12 Authorization, Execution and Delivery of Agreement. Each of
Chem-Met, the Sullivans and the Sullivan Trusts has the power,
authority and capacity to enter into this Agreement and to
carry out the transactions contemplated hereby. The
execution, delivery and the performance of this Agreement by
Chem-Met, the Sullivans and the Sullivan Trusts have been duly
and validly authorized and approved by all requisite corporate
action on the part of Chem-Met and all requisite action of the
trustees under the Sullivan Trusts, and this Agreement
constitutes the valid and binding agreement and obligation of
Chem-Met, the Sullivans and the Sullivan Trusts enforceable in
accordance with its terms, subject to bankruptcy, insolvency
and other laws of similar import.
4.13 Ability to Conduct the Business. None of Chem-Met, the
Sullivans nor the Sullivan Trusts is subject to, or bound by,
any judgment, order, writ, injunction or decree of any court
or of any governmental body or agency or of any arbitrator
which could prevent the execution, delivery or performance of
this Agreement or the use by Chem-Met of assets owned, leased
or used by Chem-Met, or the conduct of Chem-Met's business, as
presently conducted by Chem-Met, in accordance with present
practices, after the Closing. None of Chem-Met, the Sullivans
nor the Sullivan Trusts is a party to, bound by, or a bene-
ficiary of, any agreement which could prevent the use of
assets material to Chem-Met or the conduct of business as
currently conducted by Chem-Met in each case after the
Closing.
4.14 Disclosure. No representation or warranty by Chem-Met, the
Sullivans or the Sullivan Trusts contained in this Agreement
and no statement contained in any certificate, list,
disclosure schedule, exhibit or other instrument furnished, or
to be furnished, to Perma-Fix or Perma-Chem pursuant hereto,
contains or will contain any untrue statement of a material
fact or omits, or will omit, to state a material fact
necessary to make the statements contained therein not
misleading.
4.15 Broker's or Finder's Fee. No agent, broker, person or firm
acting on behalf of the Chem-Met, the Sullivans and/or the
Sullivan Trust or under the authority of Chem-Met, the
Sullivans and/or the Sullivan Trusts is or will be entitled to
any commission or broker's or finder's fee from any of the
parties hereto in connection with this Agreement or any of the
transactions contemplated herein, except the Sullivans have
retained WHCA Partners as an agent or firm acting on behalf of
the Sullivans and the Sullivan Trusts in connection with this
Agreement and the transactions contemplated herein. The
Sullivans and the Sullivan Trusts shall pay to WHCA Partners
any and all fees due to WHCA Partners in connection with this
Agreement and the transactions contemplated by this Agreement.
Chem-Met shall pay any expenses to WHCA Partners for work
performed by WHCA Partners on behalf of Chem-Met prior to
20
<PAGE>
November 5, 1998; provided however, Chem-Met shall not pay any
commissions or fees due to WHCA Partners in connection with
this Agreement or the transactions contemplated by this
Agreement.
4.16 Insurance. Chem-Met has in full force and effect policies of
insurance of the types, including insurance policies under
which Chem-Met officers, directors and Affiliates or any of
them, in such capacity, is named insured, and in the amounts
and with insurance carriers as set forth in Schedule "L"
attached hereto, and will continue all of such insurance in
full force and effect up to and until the Closing. The
amounts and types of such insurance policies and the insurance
carriers issuing such policies fully meet Chem-Met's con-
tractual, legal or regulatory commitments and are fully
adequate to insure against risks to which Chem-Met is normally
exposed in the operation of its businesses and as required by
Governmental Authority and the Environmental Laws.
4.17 Completeness of Documents -- Chem-Met. The copies of the
Articles of Incorporation and Bylaws of Chem-Met, and of all
leases, instruments, agreements or other documents (including
all Schedules and documents delivered pursuant to this Agree-
ment) which have been or will be delivered to Perma-Fix
pursuant to the terms of this Agreement or in connection with
the transactions contemplated hereby, are, or if not now
delivered, will when delivered, be true, complete and correct.
4.18 Completeness of Documents -- Sullivan Trusts. The copies of
the organizational documents of the Sullivan Trusts, which
have been or will be delivered to Perma-Fix pursuant to the
terms of this Agreement or in connection with the transactions
contemplated hereby, are, or if not now delivered, will when
delivered, be true, complete and correct.
4.19 Disposition of Assets. Since September 30, 1998, Chem-Met has
not made any sale or other disposition of any of their pro-
perties or assets or surrendered any of their rights with
respect thereto, or made any additions to their properties or
assets, or entered into any agreements, or entered into any
other transaction, except in each instance in the ordinary
course of business or as set forth in Schedule "M" attached
hereto, and no such sale, disposition, surrender, addition,
agreement or transaction set forth in such Schedule "M" has
any material adverse effect upon the results of operations or
financial condition of Chem-Met or Chem-Met's ability to
conduct Chem-Met's business as currently conducted.
4.20 Obligations to Employees. All obligations of Chem-Met and/or
any of its Affiliates, whether arising by operation of law,
contract, agreement, or otherwise, for payments to trusts or
other funds or to any governmental agency or to any employees,
directors, officers, agents, or any other individual (or any
of their respective heirs, legatees, beneficiaries, or legal
representatives) with respect to profit-sharing, pension or
retirement benefits, or any other employee benefit of any kind
whatsoever relating to Chem-Met or any of its employees, have
been paid. All legally enforceable obligations of Chem-Met,
whether arising by operation of law, contract, agreement, or
otherwise, for bonuses or other forms of compensation or
21
<PAGE>
benefits which are, or may become, payable to its employees,
directors, officers, agents, or any other individual (or their
respective heirs, legatees, beneficiaries or legal
representative) relating to Chem-Met or any of the employees
of Chem-Met with respect to periods ending on or before the
Closing have been paid, or adequate accruals for payment
thereof are reflected on the Audited Financial Statements.
Neither Chem-Met nor any of its Affiliates has any accumulated
funding deficiencies, as such term is defined in the Employee
Retirement Income Security Act of 1974 ("ERISA") and in the
Code with respect to any employee benefit plan as defined in
ERISA maintained or established for employees of Chem-Met.
Chem-Met has not incurred any liability to the Pension Benefit
Guaranty Corporation ("PBGC") other than for the payment of
insurance premiums all of which have been paid when due, the
IRS or the Department of Labor ("DOL") with respect to any
such employee benefit plan that affects, or might affect Chem-
Met, and does not have any withdrawal liability with respect
to any multiemployer pension plan ("Multiemployer Plan") which
is subject to the Multiemployer Pension Plan Amendments Act of
1980. The consummation of this Agreement will not result in
either a complete or partial withdrawal from any of the
Multiemployer Plans. All of the employee benefit plans of
which Chem-Met or any Affiliate of Chem-Met is the plan
sponsor relating to Chem-Met or any of their employees have
been amended as, when and to the extent necessary to comply
with and qualify under the applicable provisions of the Code;
and all such employee benefit plans have been administered in
accordance with the applicable provisions of the Code and
ERISA. Except as indicated on Schedule "N", any employee
benefit plans relating to Chem-Met or any of their employees
which are pension benefit plans have received, or have applied
for and expect to receive, determination letters from the IRS
to the effect that such plans are qualified and exempt from
federal income taxes under Sections 401(a) and 501(a), respectively,
of the Code, and, no amendments have been made to any such
employee benefit plans other than those covered by such
determination letters or applications for such determination
letters with respect to such amendments which have been timely
filed with the IRS. No determination letter received with
respect to any employee benefit plan relating to Chem-Met or
any of its employees has been revoked nor has revocation been
threatened. Each of the employee benefit plans have been
administered at all times and in all respects in accordance
with their respective terms. There are no pending investiga-
tions by any Governmental Authority involving any employee
benefit plans relating to Chem-Met or any of its employees, no
deficiency or termination proceedings involving such employee
benefit plans, and no threatened or pending claims (except for
claims for benefits payable in the normal operation of the
employee benefit plans), suits or proceedings against any
such employee benefit plan or asserting any rights or claims
to benefits under any such employee benefit plan nor are there
any facts which could give rise to any liability in the event
of any such investigation, claim, suit or proceeding. Neither
the employee benefit plans nor any trusts created thereunder
relating to Chem-Met or to any of their employees, nor any
trustee, administrator or other fiduciary thereof, has engaged
in a "prohibited transaction" (as such term is defined in Section
4975 of the Code or Section 406 of the ERISA); and has not experi-
enced any reportable event within the meaning of ERISA or
other event or condition which presents a material risk of
termination of any such employee benefit plan by the PBGC, has
22
<PAGE>
had any tax imposed upon it by the IRS for any alleged viola-
tion under Section 4975 of the Code, or has engaged in any trans-
action which might subject Chem-Met or any such employee
benefit plan to any liability for such tax. The terms of any
such employee benefit plans comply with ERISA and the Code in
all respects, and, any and all reporting and disclosure
requirements of ERISA or the Code and the DOL with respect to
any such employee benefit plan have been timely met. The
information supplied to the actuary by Chem-Met, the Sullivans
or the Sullivan Trusts for use in preparing those reports was
complete and accurate and none of Chem-Met, the Sullivans nor
the Sullivan Trusts has reason to believe that the conclusions
expressed in such reports are incorrect. In the event of
termination of any employee benefit plan of Chem-Met or any of
its Affiliates relating to Chem-Met or to any of their
employees, there will be no liability of Chem-Met or the plan
with respect to the providing of benefits accrued thereunder
subject to future variations in levels of compensation
assuming continued investment returns at rates actuarially
predicted. Further, if termination (whether complete or
partial) of any plan has occurred, then, all liabilities with
respect thereto have been satisfied in full and no present
liability exists with respect to any such prior termination.
Schedule "N" also includes a list of any and all pension or
benefit obligations of Chem-Met and/or its Affiliates which
have not been fully funded.
4.21 Condition of Plant, Machinery and Equipment. Except as set
forth on Schedule "O", all of the items of the property, plant
and equipment owned, operated or leased by Chem-Met is, in all
material respects, in good condition and repair, reasonable
wear and tear excepted, and Chem-Met agrees to maintain such
items in good operating condition until the Closing. Casualty
losses to such property, plant and equipment are covered by
insurance with normal industry deductibles being applicable.
4.22 Books of Account. Chem-Met has maintained its books of
account in accordance with GAAP, applied on a consistent basis
with prior periods.
4.23 Stock Redemptions. There are no shares of Chem-Met Common
Stock which are subject to redemption or purchase in lieu of
redemption, which prior to September 30, 1998, were not paid
for in full. From September 30, 1998, through the date of
this Agreement, Chem-Met has not purchased or redeemed or
entered into any agreement to purchase or redeem any Chem-Met
Common Stock.
4.24 Minute Books. Chem-Met have maintained their corporate minute
books and all such books are current.
4.25 Indebtedness of Shareholders, etc. Except as set forth on
Schedule "P", none of the shareholders, Affiliates, officers,
directors or employees of Chem-Met is (i) indebted to Chem-
Met, and Chem-Met is not indebted to their Affiliates, share-
holders or any of their officers, directors or employees, (ii)
a party to or has any interest in a material contract, agree-
ment or lease with Chem-Met or in which Chem-Met is a party to
or bound by, or (iii) a customer or supplier of Chem-Met,
which during any one of the preceding three (3) years supplied
23
<PAGE>
to or purchased from Chem-Met a amount of property or services
exceeding Ten Thousand Dollars ($10,000.00) in any one (1)
year.
4.26 Business Prospects. Since September 30, 1998, there has not
occurred any event or other occurrence which might have a
material adverse effect on the business or business prospects
of Chem-Met.
4.27 Bank Accounts; Powers of Attorney. Schedule "Q" attached
hereto sets forth each bank account and borrowing resolution
authorizing officers or agents of Chem-Met to borrow money and
lists the persons authorized to transact business on behalf of
Chem-Met with respect to each such account or borrowing reso-
lution. Schedule "Q" also lists all powers of attorney
granted by Chem-Met to any other person.
4.28 Sensitive Payments. Chem-Met has not made or received, and to
their best knowledge, after reasonable due inquiry, none of
their officers, directors, employees, agents, shareholders or
other representative of Chem-Met or any person acting on
behalf of Chem-Met, has made or received, directly or
indirectly, any bribes, kickbacks, illegal political contri-
butions with corporate funds, improper payments from corporate
funds that are falsely recorded on the books and records of
Chem-Met, payments to governmental officials in their
individual capacities or illegal payments from corporate funds
to obtain or retain business.
ARTICLE 5
ADDITIONAL REPRESENTATIONS, WARRANTIES
AND COVENANTS OF THE SULLIVANS AND THE SULLIVAN TRUSTS
The Sullivans and the Sullivan Trusts, jointly and
severally, provide to Perma-Fix the following additional repre-
sentations, warranties and covenants:
5.1 Affiliate Status. Upon the execution of this Agreement, Chem-
Met, the Sullivans and the Sullivan Trusts will provide Perma-
Fix with a list of those persons who are, in Chem-Met's
reasonable judgment, "Affiliates" of Chem-Met within the
meaning of Rule 145 as promulgated under the Securities Act
("Rule 145") (each such person who is an "affiliate of Chem-
Met within the meaning of Rule 145 is referred to as a "Chem-
Met Affiliate"). Chem-Met, the Sullivans and the Sullivan
Trusts shall provide Perma-Fix with such information and
documents as Perma-Fix shall reasonably request for purposes
of reviewing such list and shall notify Perma-Fix in writing
regarding any change in the identity of the Chem-Met
Affiliates prior to the Closing Date.
5.2 Rule 145. The Sullivans and the Sullivan Trusts will not
offer, sell, pledge, hypothecate, transfer or otherwise
dispose of, or reduce their interest in or risk relating to,
any of the shares of Perma-Fix Common Stock issued to the
24
<PAGE>
Sullivan Trusts under this Agreement as a result of the Merger
unless at such time either: (i) such transaction is permitted
pursuant to the provisions of Rule 145 under the Securities
Act; (ii) the undersigned shall have furnished to Perma-Fix an
opinion of counsel, reasonably satisfactory to Perma-Fix, to
the effect that such transaction is otherwise exempt from the
registration requirements of the Securities Act; or (iii) a
registration statement under the Securities Act covering the
proposed offer, sale, pledge, hypothecation, transfer or other
disposition shall be effective under the Securities Act.
5.3 Legend. The Sullivans and the Sullivan Trusts understand and
agree that stop transfer instructions will be given to Perma-
Fix's transfer agent and that there will be placed on the
certificate or certificates representing the Perma-Fix Common
Stock issuable under this Agreement, any substitutions
therefor and any certificates for additional shares which
might be distributed with respect to such Perma-Fix Common
Stock, a legend stating in substance:
"The shares represented by this certificate were
issued in a transaction to which Rule 145 of the
Securities Act of 1933 applies and may only be
transferred in accordance with the provisions of
such rule. In addition, the shares represented by
this certificate may only be transferred in
accordance with the terms of an Agreement and
Plan of Merger dated March 15, 1999, among Perma-
Fix Environmental Services, Inc. ("Perma-Fix"),
Perma-Met, Inc., Chem-Met Services, Inc., The
Thomas P. Sullivan Living Trust, dated
September 6, 1978, The Ann L. Sullivan Living
Trust, dated September 6, 1978, Thomas P.
Sullivan and Ann L. Sullivan, a copy of which
agreement may be inspected by the holder of this
certificate at the principal offices of Perma-
Fix, or furnished by Perma-Fix to the holder of
this certificate upon written request, without
charge."
5.4 Restrictions on Certain Actions. For a period of two (2)
years from the date of Closing, neither any of the Sullivan
Trusts nor any of the Sullivans shall, without the prior
consent of the Board of Directors of Perma-Fix (specifically
expressed in a resolution adopted by a majority of the Board
of Directors of Perma-Fix who are not employees,
representatives or agents of the Sullivan Trusts and/or the
Sullivans or any of their Affiliates):
5.4.1 Prohibition Against Acquisition. Except for the shares
of Perma-Fix Common Stock which the Sullivan Trusts
acquire under this Agreement and the Chem-Con
Agreement, or through stock splits, stock dividends or
stock options granted by Perma-Fix to TPS, acquire,
offer or propose to acquire, or permit any Affiliate of
the Sullivan Trusts or any of the Sullivans to acquire,
directly or indirectly, or in conjunction with or
through any other person, firm, corporation, entity,
partnership, company or association, by purchase or
otherwise, beneficial ownership of any shares of Perma-
Fix Common Stock or any other voting securities of
Perma-Fix or any rights or option to acquire voting
securities of Perma-Fix or any securities convertible
into any voting securities of Perma-Fix (collectively,
25
<PAGE>
"Perma-Fix Voting Securities"), except as otherwise
agreed to in writing by the President of Perma-Fix or
approved by the Board of Directors (or a committee of
the Board of Directors) of Perma-Fix. Notwithstanding
anything in Section 5.4.1 to the contrary, Michael F.
Sullivan and Patrick Sullivan, sons of TPS and ALS, may
acquire shares of Perma-Fix Common Stock.
5.4.2 Prohibition Against Solicitation. Directly or
indirectly, or through or in conjunction with any other
person, firm, corporation, entity, partnership, company
or association, solicit, or encourage any solicitation
of, or permit any Affiliate of the Sullivans or any of
the Sullivan Trusts to solicit, or encourage any
solicitation of, (i) proxies with respect to Perma-Fix
Voting Securities under any circumstances, tender or
exchange offers with respect to Perma-Fix Voting
Securities under any circumstances, or (ii) any
election contest relating to the election of directors
of Perma-Fix; or
5.4.3 Prohibition Against Control. Take any action alone or
in concert with any other person, firm, corporation,
partnership, company or association to acquire or
affect the control of Perma-Fix or to influence the
management, board of directors or policies of Perma-
Fix, or, directly or indirectly, or encourage the
formation of, any group within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as
amended, seeking to obtain or take control of Perma-Fix
or to influence the management, board of directors or
policies of Perma-Fix except it is recognized that the
Sullivan Trusts have the right to select one (1)
nominee to the Board of Directors of Perma-Fix under
certain limited conditions.
5.5 Attendance. During the period that any of the Sullivans or
Sullivan Trusts is the beneficial owner of any shares of
Perma-Fix Common Stock acquired under this Agreement and the
Chem-Con Agreement, the Sullivan Trusts shall cause all such
shares of Perma-Fix Common Stock which they beneficially own
to be duly represented, in person or by proxy, at each meeting
of stockholders of Perma-Fix.
5.6 Specific Enforcement. The parties hereto recognize and agree
that, in the event any of the Sullivans or any of the Sullivan
Trusts breach or threaten to breach any of the provisions of
this Article 5, immediate irreparable injury would be caused
to Perma-Fix, for which there is no adequate remedy at law.
It is accordingly agreed that in the event of a failure by any
of the Sullivans or Sullivan Trusts to perform their obliga-
tions under this Article 5, Perma-Fix shall be entitled to
specific performance through injunctive relief to prevent
breaches of any provision of this Article 5 and to specif-
ically enforce any provision of Article 5 and the terms and
provisions thereof in any action instituted in any court of
the United States or any state thereof having subject matter
jurisdiction, in addition to any other remedy to which Perma-
Fix may be entitled, at law or in equity.
26
<PAGE>
ARTICLE 6
NO SOLICITATION OF TRANSACTIONS
6.1 No Solicitation of Transactions. Chem-Met, the Sullivans and
the Sullivan Trusts shall not, and will not allow any of their
employees, agents, representatives or Affiliates (including,
but not limited to any of Chem-Con's and/or Chem-Met's
officers, directors, employees, agents, representatives or
Affiliates), to (i) negotiate, sell, offer to sell or solicit
offers to purchase any of the assets of Chem-Con and/or Chem-
Met (other than sales of products in the ordinary course of
their businesses); (ii) negotiate, sell, offer to sell or
solicit offers to purchase or exchange, any capital stock of
Chem-Con, Chem-Met or any Subsidiary of Chem-Con or Chem-Met
to, from or with any other party (other than pursuant to the
terms of this Agreement and the Chem-Con Agreement) or enter
into any merger, consolidation, liquidation or similar trans-
action involving, directly or indirectly, Chem-Con, Chem-Met
or any Subsidiary of Chem-Con or Chem-Met (other than pursuant
to the terms of this Agreement and the Chem-Con Agreement) and
none of the Sullivans nor the Sullivan Trusts, Chem-Con, Chem-
Met nor any of their Affiliates will negotiate with or provide
financial, technical or other information to any person (other
than pursuant to this Agreement and the Chem-Con Agreement) in
connection with any such proposed purchase or transaction; or,
(iii) negotiate, sell, offer to sell or solicit any offers to
purchase any outstanding shares of Chem-Con's and Chem-Met's
capital stock or any other securities of Chem-Con and Chem-Met
(other than pursuant to the terms of this Agreement and the
Chem-Con Agreement).
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF PERMA-FIX
Perma-Fix and Perma-Met, jointly and severally,
represent and warrant to the TPS Trust as follows:
7.1 Organization, etc. Perma-Fix is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware. Perma-Met is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Michigan. Perma-Fix has the corporate power to own
its property and to carry on its business as now being con-
ducted; Perma-Fix has the corporate power and authority to
execute and deliver this Agreement and, after the Registration
Statement has been declared effective by the SEC and obtaining
approvals from its shareholders, its lender, the Boston Stock
Exchange ("BSE") and the National Association of Securities
Dealers, Inc. ("NASDAQ"), to issue the Perma-Fix Common Stock
to be delivered pursuant to Section 3.1.3 hereof and consum-
mate the transactions contemplated hereby and the Chem-Con
27
<PAGE>
Agreement, and to perform the transactions contemplated by
this Agreement. Perma-Met has the corporate power and
authority to execute and deliver this Agreement and, subject
to the Registration Statement being declared effective by the
SEC and Perma-Fix obtaining approval from its shareholders and
its lender, to consummate the transactions contemplated
hereby.
7.2 Authorization, Execution and Delivery of Agreement. The exe-
cution, delivery and performance of this Agreement by Perma-
Fix and Perma-Met have been duly and validly authorized and
approved by the Board of Directors of Perma-Fix. This Agree-
ment constitutes the valid and binding agreement of Perma-Fix,
enforceable in accordance with its terms, subject to bank-
ruptcy, insolvency and other laws of similar import, and
Perma-Fix and Perma-Met have taken, or will use reasonable
efforts to take prior to the Closing, all other action
required by law on the part of Perma-Fix and Perma-Met and
Perma-Fix's and Perma-Met's Certificate or Articles of
Incorporation and bylaws or otherwise to effect the
transactions contemplated by this Agreement.
7.3 Capital Stock of Perma-Fix. As of the date of this Agreement,
the authorized capital stock of Perma-Fix consists of (i)
2,000,000 shares of Preferred Stock, $.001 par value, 9,850 of
which are outstanding as of the date hereof; and
(ii)50,000,000 shares of Perma-Fix Common Stock, of which
12,419,080 shares are issued and outstanding as of the date
hereof and 13,577,163 shares are reserved for issuance under
Perma-Fix's Stock Option Plans (such Plans being hereinafter
referred to as the "Perma-Fix Plans") and warrants or rights
to subscribe for or purchase from Perma-Fix any Perma-Fix
Common Stock.
7.4 SEC Filings.
7.4.1 Perma-Fix has previously furnished Chem-Met and the TPS
Trust true and complete copies of the following docu-
ments which have been filed by Perma-Fix with the SEC
pursuant to Sections 13(a), 14(a), (b) or (c) or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act")
(such documents are hereinafter collectively called the
"Perma-Fix SEC Filings"):
7.4.1.1 its Annual Report on Form 10-K for the year
ended December 31, 1997 (the "Form 10-K"), as
amended by Amendment No. 1 on Form 10-K/A
filed with the SEC on January 14, 1999;
7.4.1.2 quarterly reports on Form 10-Q for the
quarters ended March 31, 1998 and June 30,
1998; and
7.4.1.3 quarterly report on Form 10-Q for the quarter
ended September 30, 1998 ("Third Quarter 10-
Q"), as amended by Amendment No. 1 on Form 10-
Q/A filed January 14, 1999.
28
<PAGE>
7.4.1.4 Proxy Statement, dated April 20, 1998, in
connection with its 1998 Annual Meeting of
Stockholders; and
7.4.1.5 Form 8-K, Date of Report (date of earliest
event reported): June 30, 1998.
7.4.2 The audited and unaudited financial statements con-
tained in the Perma-Fix SEC Filings, as amended,
present fairly the consolidated financial condition and
results of operations and changes in shareholders'
equity and changes in financial position of Perma-Fix
as of the dates and for the periods indicated, except
as may otherwise be stated in such financial state-
ments. For purposes of this Agreement, all financial
statements of Perma-Fix shall be deemed to include any
notes to such financial statements. The financial
statements described in this Section 7.4 are
hereinafter referred to as the "Perma-Fix Financial
Statements."
7.4.3 Material Adverse Change. Since September 30, 1998,
there has not been, occurred or arisen, which has not
been publicly disclosed to the shareholders of Perma-
Fix or contained in the Perma-Fix SEC Filings, as
amended:
7.4.3.1 any material adverse change in the consoli-
dated financial condition or in the operations
of the business of Perma-Fix and its
subsidiaries, taken as a whole, from that
shown on the Perma-Fix Financial Statements;
or
7.4.3.2 any event, condition or state of facts (other
than the general state of the national economy
and proposed federal legislation or
regulation) of any character which, to the
knowledge of Perma-Fix, materially and
adversely affects the results of operations or
business or financial condition or properties
of Perma-Fix and its subsidiaries, taken as a
whole, except as otherwise disclosed in this
Section 7.4.
7.5 Status of Perma-Fix Common Stock. The shares of Perma-Fix
Common Stock to be delivered pursuant to Article 3 hereof,
when so issued pursuant to this Agreement, will be duly and
validly authorized and issued, fully paid and nonassessable.
7.6 No Breach of Statute or Contract, Governmental Authorizations.
Subject to the Registration Statement being declared effective
by the SEC, obtaining approval by the shareholders of Perma-
Fix, the National Association of Securities Dealers ("NASD"),
the BSE and Perma-Fix's lender, neither the execution and
delivery of this Agreement by Perma-Fix and Perma-Met nor
compliance with the terms and provisions of this Agreement by
Perma-Fix and Perma-Met will violate (i) any law, statute,
rule or regulation of any governmental authority, domestic or
foreign, or will at the Closing Date conflict with or result
in a breach of any of the terms, conditions or provisions of
29
<PAGE>
any judgment, order, injunction, decree or ruling of any court
or governmental agency or authority to which Perma-Fix or
Perma-Met are subject, which in the aggregate would have a
material adverse effect on Perma-Fix and its subsidiaries,
taken as a whole, or (ii) any agreement or instrument to which
it is a party or by which it is bound or constitute a default
thereunder which would have a material adverse effect on
Perma-Fix and Perma-Met and their Subsidiaries, taken as a
whole, or (iii) result in the creation of any Lien upon any
property or assets of Perma-Fix or cause any acceleration of
maturity of any obligation or loan which would have a material
adverse effect on Perma-Fix and its subsidiaries, taken as a
whole, or (iv) give to others any interest or rights,
including rights of termination or cancellation, in or with
respect to any of the material properties, assets, agreements,
contracts or business of Perma-Fix which would have a material
adverse effect on Perma-Fix and its subsidiaries, taken as a
whole.
7.7 No Litigation or Adverse Events. Except as set forth in the
SEC Filings, copies of which have been or will be delivered to
Chem-Met, there is no suit, action, or legal, administrative,
arbitration or other proceeding or governmental investigation
pending, or to the best of the knowledge of Perma-Fix
threatened, which could materially and adversely affect the
financial condition and results of operations of Perma-Fix and
its subsidiaries, taken as a whole.
7.8 Broker's or Finder's Fees. No agent, broker, person or firm
acting on behalf of Perma-Fix, or under its authority, is or
will be entitled to any commission or broker's or finder's fee
from any of the parties hereto in connection with any of the
transactions contemplated herein.
ARTICLE 8
COVENANTS OF CONDUCT AND TRANSACTIONS
PRIOR TO AND AFTER THE CLOSING
8.1 Investigations; Operation of Business of Chem-Met. Chem-Met,
the Sullivans and the Sullivan Trusts agree, jointly and
severally, between the date of this Agreement and the Closing:
8.1.1 Access to Premises and Books. That Perma-Fix and
Perma-Met, and their representatives shall have full
access to all their premises and books and records
relating to Chem-Met, and shall cause Chem-Met to
provide to Perma-Fix and its representatives full
access to their premises and books and records, and to
cause Chem-Met's officers to furnish Perma-Fix and
Perma-Met with such financial and operating data and
other information with respect to the business and pro-
perties of Chem-Met, as Perma-Fix and Perma-Met shall
from time to time request; provided, however, that any
such investigation shall not affect any of the
representations, warranties or covenants of Chem-Met,
30
<PAGE>
the Sullivans and/or the Sullivan Trusts hereunder;
and, provided further, that any such investigation
shall be conducted in such manner as not to interfere
unreasonably with the operation of the business of
Chem-Met. In the event of termination of this Agree-
ment, Perma-Fix will return to Chem-Met any and all
financial statements, agreements, documents, memoranda
or other repositories of information relating to Chem-
Met that Perma-Fix and Perma-Met have obtained in
connection with their review, and Perma-Fix agrees that
any written information relating to Chem-Met and Chem-
Met's financial condition, business, operations and
prospects are strictly confidential and shall not be
voluntarily disclosed to any third party or used by
Perma-Fix for its benefit or the benefit of any other
person, except for such information or documents (i)
available generally to the public, (ii) in the posses-
sion of Perma-Fix prior to its receipt under this
Agreement, (iii) obtained by Perma-Fix from a third
party who has an independent right to such information
or documents, or (iv) as otherwise required by law to
be disclosed; provided, however, that any
confidentiality requirements contained in this Section
shall terminate and be null and void twelve (12) months
from the date of this Agreement.
8.1.2 Business Organization of Chem-Met. To cause Chem-Met,
to the extent required for continued operation of Chem-
Met's business without impairment, to use Chem-Met's
best efforts to preserve substantially intact the busi-
ness organization of Chem-Met to keep available the
services of the present officers and employees of Chem-
Mets and to preserve the present relationships of Chem-
Met with persons having significant business relations
therewith such as suppliers, customers, brokers, agents
or otherwise.
8.1.3 Ordinary Course of Business. To cause Chem-Met to con-
duct Chem-Met's businesses only in the ordinary course
and, by way of amplification and not limitation, Chem-
Met will not without the prior written consent of
Perma-Fix (except as otherwise specifically provided in
this Agreement):
8.1.3.1 issue any capital stock or make any
changes to its authorized, issued or
outstanding capital stock, grant any
stock options or rights to acquire shares
of any of its capital stock or any
security convertible into any class of
its capital stock or agree to do any of
the foregoing; or
8.1.3.2 declare, set aside, or pay any dividend
or distribution with respect to any of
its capital stock or any other securities
convertible into any class of capital
stock; or
31
<PAGE>
8.1.3.3 directly or indirectly redeem, purchase
or otherwise acquire any of its capital
stock or enter into any agreement to
purchase or redeem any of the Chem-Met
Common Stock; or
8.1.3.4 effect a split or reclassification of any
of its capital stock convertible into any
class of capital stock, purchase, redeem,
retire or otherwise acquire any shares of
any class of its capital stock or any
security convertible into any class of
its capital stock or agree to do any of
the foregoing; or
8.1.3.5 change its charter or bylaws; or
8.1.3.6 except consistent with past practices,
grant any increase in the compensation
payable or to become payable by it to its
officers or employees or any increase,
regardless of amount, in any bonus,
insurance, pension or other benefit plan,
program, payment or arrangement made to,
for, or with any officers or employees;
or
8.1.3.7 engage in any transaction not in the
ordinary course of business; or
8.1.3.8 borrow or agree to borrow any funds or
assume, endorse, guarantee or agree to
guarantee or otherwise as an accommo-
dation become liable or responsible for
obligations of any other individual, firm
or corporation; or
8.1.3.9 waive any rights of substantial value; or
8.1.3.10 enter into an agreement, contract or com-
mitment which, if entered into prior to
the date of this Agreement, would be
required to be listed in a Schedule
pursuant to the terms of this Agreement
and is in excess of Twenty-Five Thousand
Dollars ($25,000.00); or
8.1.3.11 acquire any Real Property; or
8.1.3.12 enter into any agreement with Affiliates
or trustees of the Sullivan Trusts or
Affiliates, officers or directors of
Chem-Met; or
8.1.3.13 adopt, enter into, or amend materially
any employment contract or any bonus,
stock option, profit-sharing, pension,
retirement, incentive, or similar
employee benefit program; or
32
<PAGE>
8.1.3.14 pay or incur any obligation or liability,
absolute or contingent, other than lia-
bilities incurred in the ordinary and
usual course of its business; or
8.1.3.15 mortgage, pledge, or subject to lien or
other encumbrance any of its properties
or assets; or
8.1.3.16 except for transactions in the ordinary
and usual course of its business, sell or
transfer any of its properties or assets
or cancel, release or assign any indebt-
edness owed to it or any claims held by
it; or
8.1.3.17 make any investment of a capital nature
in excess of Twenty-Five Thousand Dollars
($25,000.00) for any one item or group of
similar items, contributions to capital,
property transfers, or otherwise, or by
the purchase of any property or assets of
any other individual, firm, or corpor-
ation; or
8.1.3.18 enter into any other agreement not in the
ordinary and usual course of business; or
8.1.3.19 merge or consolidate with any other cor-
poration, acquire any of its assets or
capital stock, solicit any offers for any
of its assets or capital stock, or,
except in the ordinary course of busi-
ness, acquire any assets of any other
person, corporation, or other business
organization, or enter into any discus-
sions with any person concerning, or
agree to do, any of the foregoing; or
8.1.3.20 enter into any transaction or take any
action which would, if effected prior to
the Closing, constitute a breach of any
of the representations, warranties or
covenants contained in this Agreement.
8.1.4 Sale of Assets. Without the prior written consent of
Perma-Fix, Chem-Met will not undertake or enter into
any sale, disposition, surrender, acquisition,
agreement or transaction relating to any of its assets
except in the ordinary course of business or as
contemplated by this Agreement.
8.2 No Selling of Shares or Granting of Options. Prior to the
Closing, neither the TPS Trust nor Chem-Met shall sell,
transfer, assign or otherwise dispose of any of the Shares or
grant any options, warrants, or other rights to purchase or
otherwise acquire any Shares or other shares of the capital
stock of Chem-Met or issue any securities convertible into any
shares of the capital stock of Chem-Met.
33
<PAGE>
8.3 Disclosure in Proxy Statement. Perma-Fix agrees that none of the
information which has been or will be supplied in writing by
Perma-Fix for inclusion in the Proxy Statement relating to the
Merger will, at the time such Proxy Statement is mailed or at
the time of the meeting to which such Proxy Statement relates,
be false or misleading with respect to any material fact, or
will omit to state any material fact relating to Perma-Fix
necessary to order to make the statements therein not false or
misleading or necessary to correct any statement in any
earlier communication with respect to the solicitation of any
proxy for the meeting in connection with such Proxy Statement.
8.4 Consents. Chem-Met, the Sullivans, the Sullivan Trusts and
Perma-Fix shall each use its best efforts to obtain the
consent or approval of each person or Governmental Authority
whose consent or approval shall be required in order to permit
Chem-Met, the Sullivans, the Sullivan Trusts or Perma-Fix, as
the case may be, to consummate the transactions contemplated
by this Agreement.
8.5 Governmental Reports. Between the date of this Agreement and
the Closing, the Sullivans, the Sullivan Trusts and Chem-Met
shall furnish, make available to Perma-Fix any and all
reports, not heretofore delivered to Perma-Fix under this
Agreement or which are filed subsequent to the date of this
Agreement, to any state, federal or local government, agency
or department, including, but not limited to, the SEC, the
IRS, the EPA, the FTC and the PBGC.
8.6 Conduct of Business. Prior to the Closing, Chem-Met shall
conduct its business in the ordinary and usual course as
heretofore conducted and to use its best efforts (i) to
preserve its business and business organization intact; (ii)
to keep available to Chem-Met the services of the present
officers and employees of Chem-Met; (iii) to preserve the
goodwill of customers and others having business relations
with Chem-Met; (iv) to maintain its properties in customary
repair, working order and condition (reasonable wear and tear
excepted); (v) to comply with all Laws applicable to it and
the conduct of its businesses; (vi) to keep in force at not
less than their present limits all existing policies of
insurance; (vii) to make no material changes in the customary
terms and conditions upon which it does business; (viii) to
duly and timely file all reports, returns, and other documents
required to be filed with federal, state, local and other
Governmental Authorities; and, (ix) unless it is contesting
the same in good faith and has established reasonable reserves
therefor, to pay, when required to be paid, all Taxes
indicated by Returns so filed or otherwise lawfully levied or
assessed upon it or any of its properties and to withhold or
collect and pay to the proper Governmental Authorities or hold
in separate bank accounts for such payment all taxes and other
assessments which it believes in good faith to be required by
Law to be so withheld or collected.
8.7 Governmental Approvals. Prior to Closing, each of Chem-Met,
the Sullivans and the Sullivan Trusts shall use its best
efforts in good faith to take or cause to be taken as promptly
as practicable all such steps as shall be necessary to obtain
34
<PAGE>
all required Governmental Approvals as promptly as practicable
to consummate the transactions contemplated by this Agreement.
8.8 Encumber. None of Chem-Met, the TPS Trust nor the Sullivan
Trusts shall sell, pledge, encumber or otherwise hypothecate
or transfer or grant an option, warrant or right to sell or
dispose of any shares of capital stock of Chem-Met prior to
the Closing other than pursuant to this Agreement.
8.9 Title Policies for Real Property Owned by Chem-Met. On or
before five (5) days prior to the Closing Date, Chem-Met shall
deliver to Perma-Fix a fully paid policy or policies of title
insurance, dated as of a date within five (5) days of the
Closing Date, issued to Chem-Met and Perma-Met by a title
company of nationally recognized standing, reasonably
satisfactory to Perma-Fix, on a standard ALTA's owner title
insurance policy form, insuring that Chem-Met has good and
marketable fee simple title in and to each parcel of Real
Property owned by Chem-Met listed on Schedule "F" hereto and
the 10 Acre Tract, free and clear of all Liens and containing
no exceptions, except (a) standard printed exceptions (other
than exceptions for mechanics', artisans' or materialmen's
liens and for matters that would be revealed by a survey) and
(b) Permitted Encumbrances. The amount of such title
insurance for each parcel of Real Property owned by Chem-Met
shall be as set forth on Schedule "F" hereto. The amount of
such title insurance as to the 10 Acre Tract shall be
$700,000.00. The cost and expense for such title insurance
shall be shared equally by the Sullivans and Perma-Fix.
8.10 Survey. Simultaneously with the delivery of the title
policies to Perma-Fix pursuant to Sections 8.8 hereof, Chem-
Met shall deliver to Perma-Fix and the title company issuing
the title insurance under Sections 8.8 hereof, a written
survey prepared by a duly licensed surveyor reasonably
satisfactory to Perma-Fix covering each of the Real Properties
owned by Chem-Met and the 10 Acre Tract, which survey shall be
satisfactory to Perma-Fix and to the title company issuing the
ALTA's owner's title insurance policies. The cost and expense
for such survey shall be shared equally by the Sullivans and
Perma-Fix.
8.11 Public Announcements. Perma-Fix, the Sullivans and the
Sullivan Trusts agree that they will consult with each other
before issuing any press releases or otherwise making any
public statements with respect to this Agreement or the
transactions contemplated hereby and any press release or any
public statement shall be subject to mutual agreement of the
parties, except as may be required by the disclosure
obligations of either party or their Affiliates under
applicable securities law.
8.12 Notification. Chem-Met, the Sullivans and the Sullivan Trusts
shall give Perma-Fix prompt written notice of (i) the
existence of any fact or the occurrence of any event which
constitutes, or with the giving of notice or the passage of
35
<PAGE>
time or both would constitute a breach of any representation
or warranty of Chem-Met, the Sullivans or the Sullivan Trusts
made herein or pursuant hereto and (ii) the taking of any
action by Chem-Met, the Sullivans or the Sullivan Trusts that
would breach or violate, or constitute a default under, any
agreement or covenant of Chem-Met, the Sullivans or the
Sullivan Trusts made herein or pursuant hereto. Upon the
giving of such notice, Perma-Fix may terminate this Agreement
in accordance with the terms hereof.
8.13 Filings. The parties hereto shall, as promptly as practicable
after the date hereof, submit applications, all documents,
reports and notifications, and satisfy all requests for
additional information, if any, pursuant to 40 Code of Federal
Regulations ("CFR") Part 270 and all other requirements under
any and all applicable Environmental Laws, with regard to the
transfer of, or changes in the ownership or operational
control of Chem-Met or the permits, licenses or approvals held
or used by Chem-Met relating to the businesses of Chem-Met.
Each of the parties hereto agree to reasonably cooperate with
each other to obtain all authorizations required under any and
all applicable laws, to consummate the transactions
contemplated hereby.
8.14 Supplemental Disclosure. Chem-Met, the Sullivans and the
Sullivan Trusts agree that, with respect to their
representations and warranties made in this Agreement, they
will have a continuing obligation to supplement or amend the
Schedules hereto with respect to any matter hereafter arising
or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or
described in the Schedules hereto. Upon the supplementing or
amending of any Schedules by Chem-Met, the Sullivans or the
Sullivan Trusts or the discovery of any matters by Perma-Fix
in the course of its investigations, Perma-Fix may, at its
option, terminate this Agreement without any liability or
obligation on the part of Perma-Fix or Perma-Met.
8.15 SEC Filings. Perma-Fix shall provide the Sullivans with all
reports and other filings it makes with the SEC under the
Securities Act or under the Exchange Act from the date of this
Agreement to the Closing.
8.16 Listing of Perma-Fix Common Stock. Perma-Fix shall use
reasonable efforts to obtain, prior to the Closing, approval
for listing on the BSE and NASDAQ Small Cap Market, upon
official notice of issuance, of the shares of Perma-Fix Common
Stock to be delivered pursuant to the provisions of Article 3
hereof.
8.17 Perma-Fix Registration Statement, etc. Prior to the Effective
Date of the Merger, Perma-Fix shall have prepared and filed
with the SEC a registration statement on Form S-4 (the
"Registration Statement") under the Securities Act for the
purpose of registering the shares of Perma-Fix Common Stock to
be issued pursuant to the terms of this Agreement and the
Chem-Con Agreement. Perma-Fix will use all reasonable efforts
to cause the Registration Statement to become effective as
soon as practicable and to thereafter maintain the
effectiveness of the Registration Statement up to the time of
36
<PAGE>
the shareholders meetings of Chem-Con, Chem-Met and Perma-Fix
called for the purpose of approving this Agreement, the
Merger, the Chem-Con Agreement and the mergers thereunder are
held and up to and at the time of the delivery of the shares
of Perma-Fix Common Stock to be delivered to Chem-Con and
Chem-Met shareholders under the terms and provisions of this
Agreement and the Chem-Con Agreement as may be required by law
and the regulations of the SEC. Chem-Con, Chem-Met, the
Sullivans, the Sullivan Trusts and Perma-Fix will each take
such steps as may be necessary on their respective parts to
comply with any state securities or Blue Sky Laws applicable
to the action to be taken by them in connection with the
delivery by Perma-Fix to Chem-Con and Chem-Met stockholders of
the Perma-Fix Common Stock.
8.18 Information for Proxy Statements. The parties hereto will
each furnish to the other such data and information relating
to it as the other may reasonably request for the purpose of
including such data and information in the Registration
Statement and the Proxy Statement (as defined below) provided
for by this Agreement and the Agreement of Merger.
8.19 Registration Statement; Proxy Statement/Prospectus. Chem-
Met, the Sullivans and the Sullivan Trusts, jointly and
severally, covenant and agree that the information to be
supplied by Chem-Met, the Sullivans and/or the Sullivan Trusts
pursuant to this Agreement and the Chem-Con Agreement for
inclusion in the Registration Statement pursuant to which
shares of Perma-Fix Common Stock issued in the Merger will be
registered under the Securities Act shall not at the time the
Registration Statement is declared effective by the SEC
("Effective Date") contain any untrue statement of a material
fact or omit to state any material fact required to be stated
in the Registration Statement or necessary in order to make
the statements in the Registration Statement, in light of the
circumstances under which they were made, not misleading. The
information supplied by Chem-Met, the Sullivans and/or the
Sullivan Trusts for inclusion in the proxy
statement/prospectus (the "Proxy Statement") to be sent to the
stockholders of Perma-Fix in connection with the meeting of
Perma-Fix's stockholders (the "Perma-Fix Stockholders'
Meeting") to consider this Agreement, the Merger and the
issuance of shares of Perma-Fix Common Stock pursuant to the
Merger shall not, on the date the Proxy Statement is first
mailed to stockholders of Perma-Fix, at the time of the Perma-
Fix Stockholders' Meeting and at the Effective Time, contain
any statement which, at such time and in light of the
circumstances under which it shall be made, is false or
misleading with respect to any material fact, or omit to state
any material fact necessary in order to make the statements
made in the Proxy Statement not false or misleading; or omit
to state any material fact necessary to correct any statement
in any earlier communication with respect to the solicitation
of proxies for the Perma-Fix Stockholders' Meeting which has
become false or misleading. If at any time prior to the
Effective Time any event relating to Chem-Met or any of its
Affiliates, officers, directors, employees or shareholders
which should be discovered by Chem-Met, the Sullivans and/or
the Sullivan Trusts which should be set forth in an amendment
to the Registration Statement or a supplement to the Proxy
Statement, Chem-Met, the Sullivans and/or the Sullivan Trusts
shall promptly inform Perma-Fix.
37
<PAGE>
8.20 Audited Financial Statements. For inclusion in the
Registration Statement and Proxy Statement, Chem-Con, Chem-
Met, the Sullivans and the Sullivan Trusts shall have Bovitz
& Co., P.C., prepare, audit and deliver to Perma-Fix true,
correct and complete copies of the 1998, 1997 and 1996 Audited
Financial Statements of Chem-Con and Chem-Met, on a combined
basis, consisting of (i) balance sheet as of fiscal years
ended September 30, 1998, September 30, 1997 and September 30,
1996; (ii) statement of income and related earnings for the
fiscal years ended September 30, 1998, September 30, 1997 and
September 30, 1996; (iii) statement of stockholders' equity
and statement of cash flow for the years ended September 30,
1998, September 30, 1997 and September 30, 1996, and (iv)
notes thereto, with auditors' report thereon being
unqualified, all of which shall have been examined by Bovitz
& Co., P.C., independent certified public accountants, and be
in accordance with Regulation S-X (17 C.F.R. Part 210) and
GAAP, consistently applied. The audited financial statements
referred to in this Section 8.22 shall include Chem-Con and
Chem-Met, on a combined basis. Perma-Fix agrees to pay for
that portion of such audited financial statements for Chem-Con
and Chem-Met, on a combined basis, relating to years ended
September 30, 1996, 1997 and 1998 unless the audit finds that
the income of Chem-Con and Chem-Met, on a combined basis, is
twenty percent (20%) less than represented prior to accounting
entries as follows: (i) reversal of officer notes receivable
of $1,125,919, offset by a note payable from the officer in
the amount of $60,980; (ii) increased allowance for doubtful
accounts of $200,000; (iii) accrued expenses of $600,000; (iv)
reserve for remediation of Chem-Con's Valdosta, Georgia
facility of $1,800,000; and (v) accrued closure costs of
$635,802, in which case the audit shall be paid for in its
entirety by Chem-Con.
8.21 Public Disclosure. Perma-Fix and the Sullivans shall consult
with each other before issuing any press release or otherwise
making any public statement with respect to the Merger or this
Agreement and shall not issue any such press release or make
any such public statement prior to such consultation, except
as may be required by law or any listing agreement with a
national securities exchange or the NASDAQ.
8.22 Pooling Accounting. From and after the date hereof and until
the Effective Time, neither Chem-Met nor Perma-Fix shall
knowingly take any action, or knowingly fail to take any
action, that is reasonably likely to jeopardize the treatment
of the Merger and the Chem-Con Merger as provided in the Chem-
Con Agreement as a pooling of interests for accounting
purposes.
8.23 Letter of Public Accountants. Chem-Met, the Sullivans and
the Sullivan Trusts shall cause to be delivered to Perma-Fix
letters, the first ("First Accountant Letter") of which shall
be dated not less than two days prior to the date on which the
Registration Statement becomes effective, and the second (the
"Second Accountant Letter") of which shall be dated not less
than five days prior to the Closing Date from Bovitz & Co.,
P.C., which shall be addressed to Perma-Fix and be in form
reasonably satisfactory to Perma-Fix and customary in scope
and substance for letters delivered by independent public
38
<PAGE>
accountants in connection with registration statements similar
to the Registration Statement and shall contain, without
limitation, the following statements: (i) the combined Audited
Financial Statements of Chem-Con and Chem-Met examined by them
and included in the Proxy Statement and Registration Statement
comply as to form in all material respects with the applicable
accounting requirement of the Securities Act and of the
published Rules and Regulations thereunder and (ii) on the
basis of a reading of the latest available unaudited financial
statements, inquiries of officers of Chem-Con and Chem-Met
responsible for financial and accounting matters and a reading
of the minutes, nothing has come to their attention which
caused them to believe that (a) as of the date of the latest
available unaudited consolidated interim financial statements
prepared by Chem-Con and Chem-Met there was any change in the
capital stock or long-term debt of Chem-Con, Chem-Met and
their subsidiaries consolidated or any decreases in
consolidated net current assets or in consolidated net assets,
as compared with the amounts shown in the September 30, 1998,
consolidated Balance Sheet, or (b) for the period from
September 30, 1998, to the date of the latest available
unaudited interim consolidated financial statements prepared
by Chem-Met, there were any decreases, as compared with the
corresponding period in the preceding year, in consolidated
net revenues or in total or per share amounts of consolidated
income (loss) before extraordinary items or of consolidated
net income, except in all instances for changes or decreases
which the Proxy Statement discloses have occurred or may
occur, and (c) that on the basis of inquiries of officers of
Chem-Con and Chem-Met responsible for financial and accounting
matters and a reading of the minutes, nothing has come to
their attention which caused them to believe that (1) at a
specified date within five (5) days of the Effective Date of
the Registration Statement and not more than five (5) days
prior to the Effective Time of the Merger there was any change
in the capital stock or long-term debt of Chem-Con and Chem-
Met and their subsidiaries consolidated or any decreases in
consolidated net current assets or in consolidated net assets,
as compared with amounts shown on the September 30, 1998,
consolidated Balance Sheet or (2) for the period from the date
of the latest available unaudited consolidated interim
financial statements prepared by Chem-Con and Chem-Met to a
specified date within five (5) days of the effective date of
the Registration Statement and not more than five (5) days
prior to the Effective Time of the Merger there were any
decreases as compared with the corresponding period in the
preceding year, in consolidated net revenues or in the total
or per-share amounts of consolidated income before
extraordinary items or of consolidated net income, except in
all instances for changes or decreases which the Proxy
Statement and Registration Statement discloses have occurred
or may occur, and (d) that they have compared the financial
information which related to Chem-Con and Chem-Met appearing
in the Proxy Statement and Registration Statement with amounts
in the consolidated financial statements or accounting records
of Chem-Con and Chem-Met and have found them to be in
agreement.
8.24 Liability to Broker. The Sullivans have retained WHCA
Partners as an agent or firm acting on behalf of the
Sullivans and/or the Sullivan Trusts in connection with this
Agreement. Except as otherwise expressly provided in Section
4.15 hereof, the Sullivans and the Sullivan Trusts shall,
jointly and severally, pay any and all fees or renumeration
39
<PAGE>
due and payable to WHCA Partners as a result of this
Agreement and/or consummation of the transactions
contemplated by this Agreement.
8.25 Assumption of Tax Liability and Quanta Liability. Each of
the Sullivans and the Sullivan Trusts, jointly and severally,
assume and agree to pay, when due, and to perform or
discharge, as the case may be, any and all (i) federal and/or
state tax obligations and liabilities of Chem-Con, Chem-Met
and Quanta (and any other corporation with respect to periods
for which such corporation was included and consolidated
federal income tax returns with Chem-Con, Chem-Met or Quanta)
for any period ending on or prior to the Closing Date,
without regard to whether such liabilities have been or would
be properly provided for in the financial records of any
person under generally accepted accounting principals, and
including, without limitation, any such obligations or
liabilities arising from (A) the transactions contemplated by
this Agreement, (B) the determination of any tax on a
consolidated basis with any other corporation, or (C) any tax
sharing or tax allocation agreement, and (ii) obligations and
liabilities (absolute or contingent, known or unknown)of
Quanta that have been incurred by Quanta in any manner
whatsoever prior to the Closing Date or arising in any way in
connection with the business or operations of Quanta prior to
the Closing Date.
8.26 Access to Premises and Books. That the Sullivans, the
Sullivan Trusts and their representatives shall have full
access to all their premises and books and records relating
to Perma-Fix, and Perma-Fix shall provide to the Sullivans,
the Sullivan Trusts and their representatives full access to
their premises and books and records, and to cause Perma-
Fix's officers to furnish the Sullivans, the Sullivan Trusts
with such financial and operating data and other information
with respect to the business and properties of Perma-Fix, as
the Sullivans or Sullivan Trusts shall from time to time re-
quest; provided, however, that any such investigation shall
not affect any of the representations, warranties or
covenants of Perma-Fix hereunder; and, provided further, that
any such investigation shall be conducted in such manner as
not to interfere unreasonably with the operation of the busi-
ness of Perma-Fix. In the event of termination of this
Agreement, the Sullivans and the Sullivan Trusts will return
to Perma-Fix any and all financial statements, agreements,
documents, memoranda or other repositories of information re-
lating to Perma-Fix and its Subsidiaries that Chem-Met, the
Sullivans or the Sullivan Trusts have obtained in connection
with its review, and Chem-Met, the Sullivans and the Sullivan
Trusts agree that any written information relating to Perma-
Fix and its Subsidiaries and Perma-Fix's and its
Subsidiaries' financial condition, business, operations and
prospects are strictly confidential and shall not be volun-
tarily disclosed to any third party or used by any of Chem-
Met, the Sullivans or the Sullivan Trusts for its benefit or
the benefit of any other person, except for such information
or documents (i) available generally to the public, (ii) in
the possession of Chem-Met prior to its receipt under this
Agreement, (iii) obtained by any of Chem-Met, the Sullivans
or the Sullivan Trusts from a third party who has an inde-
pendent right to such information or documents, or (iv) as
otherwise required by law to be disclosed; provided, however,
that any confidentiality requirements contained in this
40
<PAGE>
Section shall terminate and be null and void twelve (12)
months from the date of this Agreement.
8.27 Quanta Merger and Exchange. Prior to the Closing Date, (i)
Quanta shall have merged with and into Chem-Met, with Chem-
Met being the survivor ("Quanta Merger"), without any
consideration being paid to the stockholders of Quanta and
without any resulting tax consequences as a result thereof,
with such Quanta Merger being on terms and conditions
satisfactory to Perma-Fix, and (ii) after the Quanta Merger
but prior to the Closing, Chem-Met and Allen Sibley Limited
Liability Company, a Michigan limited liability company
("Allen Sibley") shall have completed the transaction in
which Allen Sibley shall have transferred and conveyed to
Chem-Met good and marketable fee simple title, free and clear
of any and all Liens except Permitted Encumbrances, in and to
the 10 Acre Tract and shall have assigned and transferred the
promissory note due by Quanta to Allen Sibley in the
principal sum of $365,000 ("Sibley Note") and the promissory
note due by Chem-Con to the TPS Trust in the principal sum of
$60,900 ("Chem-Con Note") in exchange for the two promissory
notes held by Chem-Met in the aggregate principle amount of
$1,125,919, with one note due from the TPS Trust and payable
to Quanta in the principal sum of $726,105 and the other note
due from the TPS Trust and payable to Chem-Met in the
principal sum of $399,814 (the "Exchange Transaction"). The
transfer of the 10 Acre Tract by Allen Sibley to Chem-Met
shall be by a general warranty deed, and such shall convey
good and marketable fee simple title, free and clear of any
and all Liens except for Permitted Encumbrances in and to the
10 Acre Tract to Chem-Met. At the time of the Quanta
Exchange, Allen Sibley shall have full ownership of and have
full and complete authority to transfer and assign, the
Sibley Note and the Chem-Con Note to Chem-Met, free and clear
of any and all Liens. The transaction contemplated by the
Exchange Transaction shall be on terms and in a manner that
is satisfactory to Perma-Fix. Notwithstanding anything in
this Section 8.27 to the contrary, the Quanta Merger and the
Exchange Transaction shall be consummated only if such do not
adversely effect Perma-Fix's ability to account for the
Merger and the Chem-Con Merger as a pooling of interest.
8.28 T.A.S. Leasing, Inc. Prior to the Closing Date, the ALS
Trust, who owns all of the outstanding capital stock of
T.A.S. Leasing, Inc. ("TAS Leasing"), shall transfer or
assign all of the outstanding capital stock of TAS Leasing
to Chem-Met, without any consideration being paid to the ALS
Trust as a result thereof and without any tax consequences to
Chem-Met as a result thereof, all in a manner satisfactory to
Perma-Fix. Upon such transfer, TAS Leasing shall be a wholly
owned subsidiary of Chem-Met.
41
<PAGE>
ARTICLE 9
CONDITIONS OF TRANSACTIONS CONTEMPLATED BY AGREEMENT;
ABANDONMENT OF AGREEMENT
9.1 Closing Conditions of Perma-Fix and Perma-Chem. The obliga-
tions of Perma-Fix and Perma-Chem to consummate this
Agreement or to effect the transactions contemplated by this
Agreement shall be subject to the following conditions:
9.1.1 Resolutions of Board of Directors and Shareholders of
Chem-Met. Chem-Met shall have furnished to Perma-Fix,
in form and substance satisfactory to Perma-Fix:
9.1.1.1 certified copies of resolutions of the
shareholder and Board of Directors of Chem-Met, duly
adopted by the Board of Directors and shareholder of
Chem-Met, authorizing, the execution, delivery and
performance of this Agreement by Chem-Met and its
shareholder;
9.1.1.2 Incumbency certificate for the officers of
Chem-Met.
9.1.2 Delivery of Trust Documents. The trust documents
creating the Sullivan Trust shall have been delivered
to Perma-Fix evidencing, in form and content
satisfactory to Perma-Fix that each of the Sullivan
Trusts has the full, valid and legal capacity and
authority to execute, deliver and perform all of its
agreements, obligations, terms and conditions of this
Agreement.
9.1.3 Approval by Lender. Perma-Fix's lender shall have
approved the transactions contemplated by this
Agreement and the Chem-Con Agreement, and Perma-Fix
shall have obtained for Perma-Met a working capital
line of credit from and after consummation of the
Merger on terms satisfactory to Perma-Fix. All of
Chem-Met's debts and obligations to Charter Bank shall
have been paid in full, and Charter Bank shall have
released all liens and security interest in and to the
assets of Chem-Met, all in form and substance
satisfactory to Perma-Fix.
9.1.4 Representations and Warranties of the Sullivans and
the Sullivan Trusts to be True and Correct and
Compliance With Covenants. Except to the extent
waived in writing by Perma-Fix hereunder, (i) the
representations and warranties of the Sullivans and
the Sullivan Trusts herein contained shall be true and
correct in all material respects on the Closing Date
with the same effect as though made at such time; and
(ii) the Sullivans and the Sullivan Trusts shall have
performed all of their obligations and complied with
all covenants, obligations, and agreements required by
this Agreement to be performed or complied with by the
Sullivans and the Sullivan Trusts on or prior to the
Closing Date. The Sullivans and Sullivan Trusts shall
also have delivered to Perma-Fix a certificate, dated
the Closing Date and signed by each of the Sullivans
and all trustees of the Sullivan Trusts, to both of
the aforementioned effects. The Certificate is to be
in form and substance satisfactory to Perma-Fix.
42
<PAGE>
9.1.5 Representations and Warranties of Chem-Met to be True
and Compliance With Covenants. Except to the extent
waived in writing by Perma-Fix hereunder, (i) the
representations and warranties of Chem-Met herein con-
tained shall be true in all material respects on the
Closing Date with the same effect as though made at
such time; and (ii) Chem-Met shall have performed all
obligations and complied with all covenants, obliga-
tions, and agreements required by this Agreement to be
performed or complied with by Chem-Met on or prior to
the Closing Date. Chem-Met shall also have delivered
to Perma-Fix a certificate of Chem-Met (in form and
substance satisfactory to Perma-Fix), dated the
Closing Date and signed by the chief executive officer
of Chem-Met, to both of the aforementioned effects.
Chem-Met shall also have delivered to Perma-Fix a
certificate of Chem-Met (in form and substance
satisfactory to Perma-Fix), dated the Closing Date and
signed by the chief executive officer of Chem-Met, to
both of the aforementioned effects.
9.1.6 Third Party Consents. Chem-Met, the Sullivans and the
Sullivan Trusts shall have obtained consents to the
transactions contemplated by this Agreement from the
parties to all contracts, permits, agreements, debt
instruments and other documents referred to in the
Schedules delivered by Chem-Met, the Sullivans or the
Sullivan Trusts to Perma-Fix in accordance with this
Agreement or otherwise, which require such consents
and consents from, or notification to, all Gov-
ernmental Authorities which require such consents or
notifications.
9.1.7 No Material Adverse Change. There shall not have
occurred (i) any material adverse change since
September 30, 1998, in the business, properties,
assets, results of operations or financial condition
of Chem-Met, or (ii) any loss or damage to any of the
properties or assets (whether or not covered by
insurance) of Chem-Met which will materially affect or
impair the ability of Chem-Met to conduct, after con-
summation of the transactions contemplated hereby, the
business of Chem-Met as now being conducted by Chem-
Met.
9.1.8 Statutory Requirements; Litigation. In a manner
satisfactory to Perma-Fix, (i) all statutory
requirements for the valid consummation by Chem-Met,
the Sullivan Trusts and the Sullivans of the
transactions contemplated by this Agreement shall have
been fulfilled; all authorizations, consents and
approvals of all Governmental Authorities required to
be obtained in order to permit consummation by Chem-
Met, the Sullivan Trusts and the Sullivans of the
transactions contemplated by this Agreement and to
permit the business presently conducted by Chem-Met to
continue unimpaired immediately following the Closing
shall have been obtained; and, (ii) all applications
for permits shall have been approved by the
appropriate Governmental Authorities and all
authorizations and approvals relating to all permits
and licenses held by Chem-Met shall have been obtained
from the appropriate Governmental Authorities under
43
<PAGE>
any and all of the Environmental Laws as a result of
the change in ownership of Chem-Met, pursuant to the
terms of this Agreement, with such permits, approvals
and authorizations to be in form and substance satis-
factory to Perma-Fix, so that Chem-Met is permitted to
continue unimpaired immediately following the Closing
Date the same business operations that Chem-Met
carried on as of the date of this Agreement and the
Closing Date. Between the date of this Agreement and
the Closing, no Governmental Authority, whether
federal, state or local, shall have instituted (or
threatened to institute either orally or in a writing
directed to any of Chem-Met, the Sullivans and/or the
Sullivan Trusts or any of their subsidiaries) an
investigation which is pending on the Closing relating
to this Agreement and the transactions contemplated
hereby, and between the date of this Agreement and the
Closing no action or proceeding shall have been
instituted or, to the knowledge of Perma-Fix, shall
have been threatened before a court or other govern-
mental body or by any public authority to restrain or
prohibit the transactions contemplated by this Agree-
ment or to obtain damages in respect thereof.
9.1.9 Opinion of Counsel of Chem-Met, the Sullivans and the
Sullivan Trusts. Perma-Fix shall have received from
O'Rourke & Myers, counsel to Chem-Met, the Sullivans
and the Sullivan Trusts, or such other counsel
acceptable to Perma-Fix and its counsel, an opinion or
opinions, dated the Closing Date, substantially in
the form of Exhibit "F" hereto, with the form and
contents thereof reasonably satisfactory to Perma-Fix
and its counsel.
9.1.10 Effective Registration Statement. The Registration
Statement shall have become effective under the
Securities Act and shall not be subject to a stop
order or a proceeding seeking a stop order.
9.1.11 Due Diligence. Perma-Fix shall have completed its
financial due diligence of Chem-Met, with the results
thereof satisfactory to Perma-Fix.
9.1.12 Environmental Audit. Perma-Fix shall have conducted
and completed an environmental audit of Chem-Met, and
shall have determined to the satisfaction of Perma-Fix
that, (i) Chem-Met has been and is currently in
compliance in all material respects with all
applicable Environmental Laws, except as otherwise
disclosed herein; (ii) none of the assets (including,
but not limited to, the soils and groundwater on or
under any of the Real Property) owned, leased,
operated or used by Chem-Met are contaminated with any
hazardous substance (as defined in Section 101(14) of
CERCLA or any analogous state or local Laws) or
petroleum (as defined in Subtitle I of RCRA or any
analogous state or local Laws) in a manner that might
have a material adverse effect on Chem-Met, except as
otherwise disclosed herein; and (iii) Chem-Met is not
or would not be subject to any liability in any
material amount under any provision, or as a result of
any past or present violation, of any applicable
Environmental Laws.
44
<PAGE>
9.1.13 Stock Certificates. On or prior to the Closing, the
TPS Trust shall execute, endorse in blank and deliver
to Perma-Fix, with signatures guaranteed by a bank or
investment banking firm and in form acceptable to
Perma-Fix, all of the stock certificates representing
the Shares, duly and validly endorsed for transfer,
free and clear of any and all Liens.
9.1.14 Permits. All permits (including, but not limited to,
all permits issued or issuable under all Environmental
Laws) which Perma-Fix deems necessary to conduct
Chem-Met's business after the Effective Time as
currently conducted by Chem-Met shall have been (i)
duly and validly transferred, or approved for transfer
effective upon the Closing, to Perma-Met by all
appropriate Governmental Authorities issuing such
permits, or (ii) duly and validly issued to Perma-Met
by all appropriate Governmental Authorities, all in
form and content satisfactory to Perma-Fix.
9.1.15 No Liens on Assets. All assets of Chem-Met (real and
personal) shall be free and clear of any and all
Liens, except for Permitted Encumbrances.
9.1.16 Listing of Perma-Fix Common Stock. The BSE and the
NASDAQ shall have approved for listing, upon official
notice of issuance, the shares of Perma-Fix Common
Stock to be delivered pursuant to the provisions of
Article 3 hereof.
9.1.17 Minute Books and Stock Ledgers. The TPS Trust shall
have delivered to Perma-Fix the minute books and stock
ledgers for Chem-Met.
9.1.18 Financial Statements. Perma-Fix shall have received
from Bovitz & Co., P.C., Audited Financial Statements
("Chem-Met Audited Financial Statements") of Chem-Met
and Chem-Con for all years required to be included in
the Registration Statement and Proxy Statement and
Form 8-K to be filed by Perma-Fix as a result of
consummation of this Agreement and the Chem-Con
Agreement and as required by Regulation S-X (17 CFR
Part 210), with such audited financial statements to
be prepared in accordance with Regulation S-X (17 CFR
Part 210) and GAAP, consistently applied throughout
the periods, and with Bovtiz & Co., P.C., report in
connection therewith to be unqualified.
9.1.19 Title Policies and Surveys. Prior to the Closing
Date, Perma-Fix shall have received the title
insurance policies and surveys pursuant to Sections
8.8 and 8.9 hereof.
9.1.20 Good Standing Certificates. Good standing and tax
certificates (or analogous documents), dated as close
as practicable to the Closing, from the appropriate
authorities in each jurisdiction of incorporation of
Chem-Met and in each jurisdiction in which Chem-Met is
qualified to do business, showing Chem-Met to be in
good standing and to have paid all taxes due in the
applicable jurisdiction.
45
<PAGE>
9.1.21 Resignation of Directors. All of the directors of
Chem-Met shall have resigned as members of the Board
of Directors of Chem-Met, effective as of the Closing
Date, except for any existing director of Chem-Met who
Perma-Fix advises the TPS Trust in writing prior to
Closing is to remain a director of Chem-Met, whichever
is applicable, prior to Closing.
9.1.22 Chem-Con Agreement. The Chem-Con Agreement shall have
closed contemporaneously with the Closing of this
Agreement.
9.1.23 Facility Remediation. Perma-Fix shall determine, in
its sole discretion, that the total cost to remediate
any and all contamination on, under or at the Facility
(including, but not limited to, the areas designated
as Area 4 and Area 5 on Exhibit "B" describing the
Facility) shall not exceed, in the aggregate,
$2,000,000.
9.1.24 Settlement of Four County Landfill PRP Claims. Chem-
Met shall have entered into a valid and binding
definitive settlement agreements with the Indiana
Department of Natural Resources and the Four County
PRP Groups settling any and all claims and liabilities
of Chem-Met and its Affiliates, both potential and
actual, for an amount not to exceed $900,000 and
providing contribution protection to Chem-Met and its
Affiliates, arising out of Chem-Met's status as a PRP
regarding the Four County Landfill, with all such
settlement agreements being satisfactory to Perma-Fix
and having been approved and entered by the Indiana
Department of Natural Resources and the executed Four
County PRP Groups, all in a manner satisfactory to
Perma-Fix.
9.1.25 Settlement of Chem-Fix Claims. Chem-Met's liability
under the Chem-Fix Settlement Agreement shall not
exceed $360,000.
9.1.26 Pooling Letters. Perma-Fix shall have received a
letter from BDO Seidman, LLP and a letter from Bovitz
& Co., P.C., addressed to Perma-Fix, regarding its
concurrence with management's conclusions that the
acquisition of Chem-Met pursuant to the terms of this
Agreement and the acquisition of Chem-Con pursuant to
the terms of the Chem-Con Agreement qualify for
pooling-of-interests accounting under Accounting
Principles Board Opinion No. 16, as contemplated to be
effected as of the date of the letter, it being agreed
that Perma-Fix and Chem-Met shall each provide
reasonable cooperation to BDO Seidman, LLP and Bovitz
and Co., P.C., to enable them to issue such a letter.
46
<PAGE>
9.1.27 Shareholder Approval. Perma-Fix shareholders shall
have approved the Merger contemplated by this
Agreement and the mergers under the Chem-Con Agreement
as required under Delaware law and/or under the
requirements of NASDAQ or the BSE.
9.1.28 Shareholder Approval. The shareholders of Chem-Met
shall have approved the Merger transactions
contemplated by this Agreement pursuant to the laws of
the states of incorporation of Chem-Met and no
shareholders of Chem-Met shall have exercised or
attempted to exercise dissenters rights or other
similar rights in connection with the transactions
contemplated hereby.
9.1.29 Accountants Letters. Perma-Fix shall have received
the First Accountant Letter and the Second Accountant
Letter and such shall be satisfactory to Perma-Fix.
9.1.30 Employment Agreement. Perma-Fix and TPS shall have
entered into the Employment Agreement.
9.1.31 Officer and Director Waiver. Each officer and
director of Chem-Met shall have executed and delivered
to Perma-Fix an agreement, in form and substance
satisfactory to Perma-Fix pursuant to which each such
officer and director shall waive any and all rights to
indemnification which any such officer and director
may have from Chem-Met pursuant to Chem-Met's
Certificate of Incorporation, Bylaws, any
indemnification agreements, or otherwise.
9.1.32 Quanta Transactions. On or prior to Closing (i) the
Quanta Merger and the Exchange Transaction shall have
been completed pursuant to Section 8.27 hereof and in
a manner satisfactory to Perma-Fix.
9.1.33 Fairness Opinion. Prior to the filing of the
Registration Statement with the SEC and within five
(5) days of the Closing, Perma-Fix shall have received
a fairness opinion from an investment banker selected
by Perma-Fix that this Agreement and the Chem-Con
Agreement and consideration to be issued by Perma-Fix
under this Agreement and the Chem-Con Agreement are
fair to Perma-Fix and its shareholders from a
financial standpoint, with the form and content of
such opinions to be satisfactory to Perma-Fix.
9.1.34 Closing Price of Perma-Fix Common Stock. The average
closing sale prices per share of Perma-Fix Common
Stock as reported on the NASDAQ for the five
consecutive trading days ending with the trading day
immediately prior to the Effective Date shall be not
less than $1.25.
9.1.35 TAS Lease. Prior to the Closing, TAS Leasing shall
become a wholly owned subsidiary of Chem-Met pursuant
to the terms of Section 8.28 hereof.
47
<PAGE>
9.2 Conditions to Obligations of Chem-Met and The TPS Trust. The
obligation of Chem-Met and the TPS Trust to consummate this
Agreement or to effect the transactions contemplated by this
Agreement shall be subject to the following conditions:
9.2.1 Resolutions of Perma-Fix Board of Directors and
Shareholders. Perma-Fix shall have furnished Chem-Fix
with:
9.2.1.1 certified copies of resolutions duly adopted
by the Board of Directors and the shareholders
of Perma-Fix approving and authorizing
execution, delivery and performance of the
transactions contemplated by this Agreement;
9.2.1.2 Incumbency Certificates for the officers of
Perma-Fix.
9.2.2 Resolutions of Perma-Met Board of Directors and
Shareholders. Perma-Fix shall have furnished Chem-
Met with:
9.2.2.1 certified copies of resolutions duly adopted
by Perma-Met approving and authorizing execution,
delivery and performance of the transactions
contemplated by this Agreement; and
9.2.2.2 Incumbency Certificate for the officers of
Perma-Met.
9.2.3 Representations and Warranties of Perma-Fix to be
True. Except to the extent waived hereunder, (i) the
representations and warranties of Perma-Fix and Perma-
Met herein contained shall be true in all material
respects at the Closing with the same effect as though
made at such time, except for such which do not have
a material adverse effect on Perma-Fix and its
subsidiaries, taken as a whole; and (ii) Perma-Fix and
Perma-Met shall have performed all material
obligations and complied with all material covenants
required by this Agreement to be performed or complied
with by it prior to the Closing. Perma-Fix shall also
have delivered to the TPS Trust a certificate of
Perma-Fix, dated the Closing and signed by its
President or a Vice President to both of the
aforementioned effects.
9.2.4 Employment Agreement. Perma-Fix shall have entered
into the Employment Agreement ("Employment Agreement")
with Thomas P. Sullivan.
9.2.5 Effective Registration Statement. The Registration
Statement shall have become effective under the
Securities Act and shall not be subject to a stop
order or a proceeding seeking a stop order.
9.2.6 No Material Adverse Change. Except as otherwise dis-
closed in this Agreement or as publicly disclosed to
the shareholders of Perma-Fix or contained in the
48
<PAGE>
Perma-Fix SEC Filings, there shall not have occurred
(i) any material adverse change since December 31,
1998, in the consolidated financial condition of
Perma-Fix (it being understood that anything disclosed
in any of the financial data furnished by Perma-Fix to
the Sullivans or the Sullivan Trusts pursuant to this
Agreement, or in an annual, interim or other report
filed by Perma-Fix with the SEC or press releases
issued by Perma-Fix (copies of which shall have been
furnished to the TPS Trust) since December 31, 1998,
and prior to the date of this Agreement (copies of
which shall have been furnished to Chem-Met, the
Sullivans or the Sullivan Trusts), shall not
constitute such a material adverse change or (ii) any
loss or damage to any of the material properties or
assets of Perma-Fix which would have a material
adverse effect on Perma-Fix and its subsidiaries con-
sidered as a whole.
9.2.7 Litigation. Between the date of this Agreement and
the Closing, no Governmental Authority, whether
federal, state or local, shall have instituted (or
threatened to institute, either orally or in writing,
directed to the TPS Trust, Perma-Fix, Chem-Met, or any
of their subsidiaries) an investigation which is
pending on the Closing Date relating to the trans-
actions contemplated by this Agreement and between the
date of this Agreement and the Closing Date, no action
or proceeding shall have been instituted or, to the
knowledge of the Sullivans, the Sullivan Trusts,
Perma-Fix or Chem-Met, shall have been threatened
before a court or other governmental body or by any
public authority to restrain or prohibit the trans-
actions contemplated by this Agreement or to obtain
damages in respect thereof.
9.2.8 Opinion of Counsel of Perma-Fix. The TPS Trust shall
have received from Conner & Winters, a Professional
Corporation, counsel to Perma-Fix, or such other
counsel reasonably acceptable to the TPS Trust and its
counsel, an opinion, dated the Closing Date,
substantially in the form of Exhibit "G" hereto, with
the form and content thereof reasonably satisfactory
to Chem-Met and its counsel.
9.2.9 Escrow Agreement. Perma-Fix and the Escrow Agent
shall have executed the Escrow Agreement.
9.2.10 Closing Price of Perma-Fix Closing Stock. The average
closing sale prices per share of Perma-Fix Common
Stock as reported on the NASDAQ for the five
consecutive trading days ending with the trading day
immediately prior to the Effective Date shall not be
less than $1.25.
9.3 Termination of Agreement and Abandonment of Merger. Except
as otherwise provided in Sections 8.1 and 8.27 hereof, this
Agreement and the transactions contemplated hereby may be
terminated at any time before the Closing, whether before or
49
after approval of this Agreement by the shareholders of
Perma-Fix or Chem-Met, as follows and in no other manner:
9.3.1 Conditions of the Sullivans, the Sullivan Trusts or
Chem-Met Not Met. By Perma-Fix if, by June 30, 1999
the conditions set forth in Section 9.1 of this
Article 9 shall not have been met (or waived as
provided in Article 10 of this Agreement).
9.3.2 Conditions of Perma-Fix Not Met. By the Sullivans if,
by June 30, 1999, the conditions set forth in Section
9.2 of this Article 9 shall not have been met (or
waived as provided in Article 10 of this Agreement).
9.3.3 Termination by Perma-Fix or the Sullivans under
Section 9.3 of the Chem-Con Agreement. By Perma-Fix
or by the TPS Trust if the Chem-Con Agreement is
terminated pursuant to the terms thereof.
9.3.4 Mutual Consent. By the mutual written consent of both
Perma-Fix and Chem-Met
9.4 Expenses. Each party shall bear its own out-of-pocket
expenses incurred in connection with the transactions
contemplated by this Agreement, including, without
limitation, all legal, accounting, consulting, brokers,
advisory, travel, communications and other similar fees and
expenses; provided, however, that any and all such expenses
incurred by Chem-Met in connection with this Agreement and
consummation of the transactions contemplated by this
Agreement shall be considered as incurred by the TPS Trust
and shall be paid by the TPS Trust.
ARTICLE 10
TERMINATION OF OBLIGATIONS AND WAIVER OF CONDITIONS
10.1 Termination. In the event that this Agreement shall be
terminated pursuant to Section 9.3 hereof, all further
obligations of the parties hereto under this Agreement shall
terminate without further liability of any party to another
and each party hereto will pay its own costs and expenses
incident to its negotiation and preparation of this Agreement
and to its performance and compliance with all agreements and
conditions contained herein on its part to be performed or
complied with, including the fees, expenses and disbursements
of its counsel.
10.2 Waiver. If any of the conditions specified in Section 9.1 of
Article 9 hereof has not been satisfied, Perma-Fix may
nevertheless at the election of Perma-Fix proceed with the
transactions contemplated hereby; and, if any of the condi-
50
<PAGE>
tions specified in Section 9.2 of Article 9 hereof has not
been satisfied, the TPS Trust may nevertheless at the TPS
Trust' election proceed with the transactions contemplated
hereby. Any such election to proceed shall be evidenced by
a certificate executed on behalf of the electing party. Any
such waiver shall not be considered as a waiver of any of the
other terms and provisions of this Agreement by the electing
party.
ARTICLE 11
INDEMNIFICATION AND SURVIVAL OF
REPRESENTATIONS AND WARRANTIES
11.1 Indemnification by the Sullivans and the Sullivan Trusts.
The Sullivans and the Sullivan Trusts shall, jointly and
severally, defend, indemnify and hold harmless each of Perma-
Fix, Chem-Met, Perma-Met, and each of their officers,
directors, employees, agents, representatives and Affiliates
from and against any and all claims, judgments, demands,
damages, penalties, fines, losses, orders (judicial or
administrative), decrees, liabilities, obligations, costs,
claims and expenses (including, without limitation,
reasonable attorneys' fees and accountant fees) which any of
Perma-Fix, Chem-Met, Perma-Met, and each of their officers,
directors employees, agents, representatives and Affiliates
incurs or suffers or may incur or suffer at any time as a
result of or in connection with or arising out of (i) any
representation or warranty made by any of Chem-Met, the
Sullivans and/or the Sullivan Trusts in this Agreement or any
certificate or other document delivered to Perma-Fix or
Perma-Met pursuant to this Agreement that is false or
misleading; (ii) any breach of or failure to perform any
agreements, covenants, promises or obligations of Chem-Met,
the Sullivans and/or Sullivan Trusts contained in this Agree-
ment; (iii) any liabilities, obligations or claims arising in
any way from any and all federal or state income tax
liability which Chem-Con, Chem-Met and/or Quanta may incur or
be liable to pay for any reason whatsoever for any and all
periods prior to the Closing Date; (iv) any and all
liabilities, obligations or claims incurred by Quanta prior
to the Closing Date or arising in any way in connection with
the business or operations of Quanta prior to the Closing
Date; or (v) any liabilities, obligations or claims brought
under CERCLA or RCRA or any analogous state statute for the
release or threatened release of any hazardous substances (as
defined in CERCLA) or hazardous waste (as defined in RCRA) in
which Sullivan or Chem-Met knew was pending or threatened
against Chem-Met as of the date hereof or at the Closing Date
but failed for any reason to disclose such in this Agreement
or was, directly or indirectly, caused by or resulted from
the knowing or willful violation by Sullivan or Chem-Met on
or prior to the Closing Date of CERCLA, RCRA or any analogous
state statute.
11.2 Notice of Claim. Perma-Fix shall give the Sullivans and the
Sullivan Trusts a written notice (the "Notice of Claim")
within ninety (90) days of the discovery of any matter in
respect of which the right to indemnification contained in
Section 11 can be claimed. Notwithstanding the foregoing,
failure to give such notice will not terminate any obligation
of the Sullivans and the Sullivan Trusts hereunder.
51
<PAGE>
11.3 Survival of Representations and Remedies. All representa-
tions and warranties contained in this Agreement shall
survive the Closing, regardless of the investigation made by
either party hereto. This Agreement and all covenants and
agreements contained in this Agreement shall survive the
Closing.
11.4 Indemnification Period. Any claim for indemnification under
this Section 11 must be made and settled in full within one
year from the Closing Date ("Indemnification Period"). Upon
expiration of the Indemnification Period, this Section 11 is
terminated and any claims for indemnification pursuant to
this Section 11 are terminated.
11.5 Settlement of Indemnification Claims. Settlement of any
claims for indemnification pursuant to this Section 11 shall
be made through the delivery by the Sullivans and/or the
Sullivan Trusts of that number of shares of Perma-Fix Common
Stock determined by dividing the total amount of
indemnification due and owing from the Sullivans and/or the
Sullivan Trusts to Perma-Fix by the average of the closing
sale prices per share of Perma-Fix Common Stock as reported
on the NASDAQ for five consecutive trading days ending with
the trading day immediately prior to the Effective Time.
ARTICLE 12
MISCELLANEOUS
12.1 Entire Agreement and Amendment. This Agreement, including
the Exhibits and Schedules hereto, sets forth the entire
agreement and understanding between the parties and merges
and supersedes all prior discussions, agreements and under-
standings of every kind and nature among them as to the
subject matter hereof, and no party shall be bound by any
condition, definition, warranty or representation other than
as expressly provided for in this Agreement or as may be on
a date on or subsequent to the date hereof duly set forth in
writing signed by each party which is to be bound thereby.
Unless otherwise expressly defined, terms defined in the
Agreement shall have the same meanings when used in any
Exhibit or Schedule and terms defined in any Exhibit or
Schedule shall have the same meanings when used in the
Agreement or in any other Exhibit or Schedule. This Agree-
ment (including the Exhibits and Schedules hereto) shall not
be changed, modified or amended except by a writing signed by
each party to be charged and this Agreement may not be dis-
charged except by performance in accordance with its terms or
by a writing signed by each party to be charged.
12.2 Taxes. Any Taxes in the nature of a sales or transfer tax
(including any realty transfer tax or realty gains transfer
tax), and any stock transfer tax, payable on the consummation
of any other transaction contemplated hereby shall be paid by
the Sullivans and the Sullivan Trusts.
52
<PAGE>
12.3 Governing Law. This agreement shall be construed in accord-
ance with and governed by the Laws of Delaware, without
regard to the principles of conflicts of laws thereof.
12.4 Benefit of Parties; Assignment. This Agreement shall be
binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
The Agreement may not be assigned by any of the parties
hereto except with the prior written consent of the other
parties hereto. Nothing herein contained shall confer or is
intended to confer on any third party or entity which is not
a party to this Agreement any rights under this Agreement.
12.5 Pronouns. Whenever the context requires, the use in this
Agreement of a pronoun of any gender shall be deemed to refer
also to any other gender, and the use of the singular shall
be deemed to refer also to the plural.
12.6 Headings. The headings in the sections, paragraphs,
Schedules and Exhibits of this Agreement are inserted for
convenience of reference only and shall not constitute a part
hereof. The words "herein", "hereof", "hereto" and
"hereunder", and other words of similar import refer to this
Agreement as a whole and not to any particular provision of
this Agreement.
12.7 Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if sent by
registered mail or certified mail, postage prepaid,
addressed:
If to Perma-Fix: Perma-Fix Environmental Services, Inc.
1940 Northwest 67th Place
Gainesville, Florida 32653
Attention: President
With a copy to: Irwin H. Steinhorn, Esquire
Conner & Winters
One Leadership Square
211 North Robinson, Suite 1700
Oklahoma City, Oklahoma 73102
If to Chem-Met,
the Sullivans and
the Sullivan Trusts: Mr. Thomas P. Sullivan
1021 Harvard Road
Grosse Pointe Park, Michigan 48230
Attn: Mr. Thomas P. Sullivan, President
53
<PAGE>
With a copy to: Peter O'Rourke, Esq.
O'Rourke & Myers
241 Lewiston Road
Grosse Pointe Farms, Michigan 48236
or to such other address as shall be furnished in writing by
either party. Any such notice or communication shall be
deemed to have been given as of three (3) days after posting,
one (1) day after next day delivery service or upon personal
delivery.
12.8 Time. Time is of the essence of this Agreement.
12.9 Severability. Each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid
under applicable law; but, if any provision of this Agreement
is held to be invalid under applicable law, such provision
will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
12.10 Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered
one and the same agreement and shall become effective
when one or more counterparts have been signed by each
of the parties hereto and delivered to each of the
other parties hereto.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
54
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto execute this
Agreement on the 15th day of March, 1999.
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
By: /s/ Louis F. Centofanti
_________________________________________
Dr. Louis F. Centofanti
President
PERMA-MET, INC.
By: /s/ Louis F. Centofanti
_________________________________________
Dr. Louis F. Centofanti
President
CHEM-MET SERVICES, INC.
By: /s/ Thomas P. Sullivan
_________________________________________
Thomas P. Sullivan
President
55
<PAGE>
<PAGE>
THE THOMAS P. SULLIVAN LIVING TRUST,
Dated September 6, 1978
By: /s/ Thomas P. Sullivan
_______________________________________
Thomas P. Sullivan, Sole Trustee, under
the Thomas P. Sullivan Living Trust,
Dated September 6, 1978, and any
Amendments thereto.
THE ANN L. SULLIVAN LIVING TRUST, Dated
September 6, 1978
By: /s/ Ann L. Sullivan
__________________________________________
Ann L. Sullivan, Sole Trustee, under the
Ann L. Sullivan Living Trust, Dated
September 6, 1978, and any amendments
thereto.
THOMAS P. SULLIVAN
By: /s/ Thomas P. Sullivan
__________________________________________
Thomas P. Sullivan, individually
ANN L. SULLIVAN
By: /s/ Ann L. Sullivan
_________________________________________
Ann L. Sullivan, individually
<PAGE>
EXCHANGE AGREEMENT
among
PERMA-FIX ENVIRONMENTAL SERVICES, INC.,
LIVIAKIS FINANCIAL COMMUNICATIONS, INC.
and
ROBERT B. PRAG
Liviakis Financial Communications, Inc., a California
corporation ("Liviakis"), Robert B. Prag, an executive officer of
Liviakis ("Prag"), and Perma-Fix Environmental Services, Inc., a
Delaware corporation (the "Company"), previously entered into a
Consulting Agreement (the "Consulting Agreement"), effective as of
June 30, 1998, pursuant to which Liviakis and Prag received
warrants to purchase 2,500,000 shares of the Company's Common
Stock, par value $.001 per share ("Common Stock"), for $1.875 per
share ("Warrants") of which 1,875,000 were issued to Liviakis and
625,000 were issued to Prag in the name of Robert B. Prag. The
Warrants have a term of 4 years.
The Consulting Agreement has been terminated and Liviakis and
Prag (collectively, the "Subscribers") and the Company have agreed
to enter into this Agreement as of the 14th day of March, 1999,
pursuant to which the Warrants will be tendered and delivered to
the Company in exchange for 200,000 shares of Common Stock to be
issued by the Company as described herein.
1. Exchange of Securities.
1.1 Issuance of Common Stock. In full and complete
termination of the Warrants and the Subscribers' rights,
and the interest in and to the Warrants, and in full and
complete release of any and all obligations of the
Company under the Warrants, at the Closing the
Subscribers shall deliver the Warrants to the Company in
exchange for 200,000 shares of Common Stock, pursuant to
such terms, conditions and provisions as set forth in
this Agreement.
1.1.1 Delivery. The Company shall as soon as
practicable upon execution of this Agreement,
deliver or cause to be delivered, (a) to
Liviakis, a certificate or certificates
1
<PAGE>
representing the 150,000 shares of Common
Stock issued in the name of Liviakis; and (b)
to Prag, a certificate or certificates
representing the 50,000 shares of Common Stock
issued in the name of Prag. The Subscribers
agree that they shall upon delivery of the
200,000 shares of Common Stock, immediately
deliver to the Company the Warrants marked
"Canceled" and duly assigned to the Company.
1.1.2 Cancellation of Warrants. Upon execution of
this Agreement the Warrants shall be
immediately terminated and rendered null and
void in all respects regardless of the
completion of the delivery of the Warrants to
the Company as described in this Section 1.
1.1.3 Restrictive Legends. Subscribers agree that
all certificates representing the Common Stock
delivered hereunder ("Shares") shall bear the
restrictive legend substantially in the form
set forth in Section 3.7 below which shall
include, but not be limited to, a legend to
the effect that (a)the Shares represented by
such certificate have not been registered
under the Securities Act of 1933, as amended
("Securities Act"), and (b) unless there is an
effective registration statement relating to
the Shares, the Shares may not be offered,
sold, transferred, mortgaged, pledged or
hypothecated without an exemption from
registration and an opinion of counsel to the
Company with respect thereto, or an opinion
from counsel for the Subscribers, which
opinion is satisfactory to the Company, to the
effect that registration under the Securities
Act is not required in connection with such
sale or transfer and the reasons therefor.
The legend on all such certificates shall make
reference to the registration rights set forth
in Section 4 hereof.
1.2 Discharge. As of the execution of this Agreement, the
Warrants shall be fully terminated in all respects.
From and after the execution of this Agreement and
delivery of the 200,000 shares of Common Stock to
Liviakis and Prag as described in Section 1.1.1, (i) the
Subscribers release, acquit and forever discharge the
Company, and all of its respective subsidiaries, affil-
iates, agents, employees, officers, and directors, as
well as their respective heirs, successors, legal and
personal representatives, and assigns of any and all of
them, from and against any and all claims, liabilities,
losses, damages, cause or causes of action of any kind or
character whatsoever, whether liquidated, unliquidated or
disputed, asserted or assertable, known or unknown, in
contract or in tort, at law or in equity, which the
Subscribers might now or hereafter have arising out of or
in connection with or relating to the Warrants and/or the
Consulting Agreement and (ii) the Company releases,
acquits and forever discharges Prag and Liviakis, and all
of Liviakis' subsidiaries, affiliates, agents,
employees, officers, and directors, as well as the
Subscribers' respective heirs, successors, legal and
personal representatives, and assigns of any and all of
them, from and against any and all claims, liabilities,
losses, damages, cause or causes of action of any kind or
character whatsoever, whether liquidated, unliquidated or
disputed, asserted or assertable, known or unknown, in
2
<PAGE>
contract or in tort, at law or in equity, which the
Company might now or hereafter have arising out of or in
connection with or relating to the Warrants and/or the
Consulting Agreement.
1.3 Exchange. On the basis of the representations,
warranties, covenants and agreements, and subject to the
terms and conditions set forth herein, at the Closing,
the Company agrees to exchange and deliver to the
Subscribers, and the Subscribers agree to accept in such
exchange the delivery from the Company, of the Shares in
exchange for the transfer of the Warrants from the
Subscribers to the Company.
1.4 Reporting Company. The Company is a reporting company
under the Securities Exchange Act of 1934, as amended
("Exchange Act"), and has filed with the United States
Securities and Exchange Commission (the "SEC") all
reports required to be filed by the Company under Section
13 or 15(d) of the Exchange Act. The Subscriber has had
the opportunity to review, and has reviewed, all such
reports and information which the Subscriber deemed
material to an investment decision regarding the
acquisition of the Shares.
2. Closing.
2.1 Closing. The consummation of this Agreement (the
"Closing") will occur on the date that the Warrants are
delivered by the Subscribers to the Company (the "Closing
Date").
3. Representations, Warranties and Covenants of Subscribers. The
Subscribers hereby represent, warrant and covenant to the Company
as follows:
3.1 Liviakis and Prag each acknowledge that the Shares have
not been registered under the Securities Act and accordingly are
"restricted securities" within the meaning of Rule 144 of the
Securities Act. As such, the Shares may not be resold or
transferred unless the Shares have been registered under the
Securities Act or the Company has received an opinion of counsel
reasonably satisfactory to the Company that such resale or transfer
is exempt from the registration requirements of that Securities
Act. Consultant and Prag each further understand that the
exemption from registration afforded by Rule 144 under the
Securities Act depends upon the satisfaction of various conditions
and that, if applicable, Rule 144 affords the basis for sale only
in limited amounts.
3.2 Liviakis and Prag each acknowledge that they have been
afforded the opportunity to ask questions of and receive answers
from duly authorized officers or other representatives of the
Company concerning an investment in the Shares, and regarding any
additional information which Liviakis and Prag have requested.
3
<PAGE>
3.3 Liviakis and Prag have each had experience in
investments in restricted and publicly traded securities, and
Liviakis and Prag have each had experience in investments in
speculative securities and other investments which involve the risk
of loss of investment. Liviakis and Prag each acknowledge that an
investment in the Shares is speculative and involves the risk of
loss. Both Liviakis and Prag have the requisite knowledge to
assess the relative merits and risks of this investment without the
necessity of relying upon other advisors, and Liviakis and Prag can
afford the risk of loss of their entire investment in the Shares.
Liviakis is an "accredited investor," as that term is defined in
Rule 501 of Regulation D promulgated under the Securities Act, due
to the fact that Liviakis (a) was not created solely to permit the
acquisition of Shares and has total assets in excess of $5,000,000
and/or (b) is wholly owned by persons who qualify as accredited
investors. Prag is an "accredited investor," as that term is
defined in Rule 501 of Regulation D promulgated under the
Securities Act, due to the fact that Prag (a) has an individual net
worth, or joint net worth with his spouse in excess of $1,000,000
and/or (b) had an individual income in excess of $200,000 in each
of the two most recent years or joint income with his spouse in
excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income based in the current year.
Both Liviakis and Prag are purchasers described in Section 25102
(f) (2) of the California Corporate Securities Law of 1968, as
amended.
3.4 Each of Liviakis and Prag is acquiring the Shares for its
or his own account for long-term investment and not with a view
toward resale or distribution thereof except in accordance with
applicable securities laws.
3.5 Each of Liviakis and Prag acknowledges that issuance of
the Shares has not been made in connection with any advertisement.
3.6 Each of Liviakis and Prag acknowledges it or he has
received copies of (i) the Company's Form 10-K for the year ended
December 31, 1997, as amended by the Company's Form 10-K/A filed on
January 14, 1999, (ii) the Company's Form 10-Q for the quarter
ended March 31, 1998, (iii) the Company's Form 10-Q for the quarter
ended June 30, 1998, (iv) the Company's Form 10-Q for the quarter
ended September 30, 1998, as amended by the Company's Form 10-Q/A
filed on January 14, 1999, and proxy soliciting material for the
Company's 1998 annual meeting of shareholders.
3.7 Each of Liviakis and Prag acknowledges that the Shares
shall upon issuance thereof have stamped or imprinted thereon or
affixed thereto a legend to the following effect:
THE REGISTERED HOLDER HEREOF HAS ACQUIRED
THE SHARES REPRESENTED BY THIS
CERTIFICATE FOR INVESTMENT AND NOT FOR
RESALE IN CONNECTION WITH A DISTRIBUTION
THEREOF. ACCORDINGLY, SUCH SHARES HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND MAY NOT BE SOLD,
4
<PAGE>
TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO A CURRENTLY EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR
OTHERWISE IN A TRANSACTION EXEMPT FROM
THE PROVISIONS OF SECTION5 OF SAID ACT.
3.8 Each of Liviakis and Prag agrees that it or he shall not
sell, transfer, pledge, hypothecate, dispose, sell short or
otherwise take actions to reduce their economic interest in the
Shares, for a two month period from the date of this Agreement. At
the end of such two month period and after each of the next five 30
day periods passing after the end of the two month period, Liviakis
and Prag shall be permitted to sell, transfer, pledge, hypothecate,
dispose or otherwise reduce its or his economic interest in 1/6 of
the total Shares delivered to such party pursuant to this Agreement
in addition to any other Shares which have been previously released
from the lockup arrangement described in this Section 3.8 so that
150 days after the end of such two month period, all Shares shall
be free of restrictions under this Section 3.8.
4. Registration Rights.
4.1 Subject to the terms of this Section 4, the Subscribers
shall have the right to include all of the Shares as part of
Registration No. 333-43149 filed by the Company and to be amended
on or before April 30, 1999, and thereafter prosecuted diligently
to effectiveness. The Subscribers hereby elect to include the
Shares as part of the registration. Notwithstanding the foregoing
provisions, the Company may, prior to effectiveness, withdraw any
registration statement without incurring any liability to the
Subscribers if (i) the Company's Board of Directors determines in
good faith that the withdrawal of such registration statement is in
the best interests of the Company, (ii) the Company shall refile a
registration statement covering the Shares within four (4) months
of the withdrawal, and (iii) the Shares and other shares of Common
Stock of the Company covered by Registration No. 333-43149 shall be
treated in a like manner regarding inclusion in any registration
statement filed by the Company.
4.2 The Company shall use reasonable efforts to keep
effective and current the registration statement filed by the
Company under Section 4.1 hereof, which registration statement has
been declared effective by the Commission, with respect to the
Shares for an aggregate period ending upon the earlier of (i) two
(2) years after the Closing Date or(ii) the disposal or transfer of
all of the Shares by the Subscribers such that there is a change in
beneficial ownership of the Shares.
4.3 Unless terminated sooner, the registration rights set
forth in Section 4.1 above (but not Section 4.2) shall cease upon
the earliest of (a) the effective registration under the Securities
Act of all of the Shares, (b) the disposal or transfer of such
Shares by the Subscribers such that there is a change in beneficial
ownership of the Shares or (c) registration under the Securities
Act is no longer required for the immediate public distribution of
such Shares as a result of the provisions of Rule 144 promulgated
under the Securities Act.
5
<PAGE>
4.4 Subject to the immediately following sentence, the
Company shall in all events pay and be responsible for all fees,
expenses, costs and disbursements associated with the registering
of the Shares under this Section 4, including filing fees, fees,
costs and disbursements of the Company's counsel, accountants and
other consultants representing the Company therewith.
Notwithstanding anything set forth herein to the contrary,
Subscribers shall be responsible for and shall pay any and all
underwriting discounts and commissions in connection with the sale
of the Shares pursuant to this Section 4 and all fees of its legal
counsel and other advisors retained by the Subscribers in
connection with reviewing any registration statement.
4.5 (i) The Company will indemnify and hold harmless the
Subscribers and their directors and officers and any underwriter
(as defined in the Securities Act) for the Subscribers and each
person, if any, who controls the Subscribers or such underwriter
within the meaning of the Securities Act, from and against, and
will reimburse the Subscribers and each such underwriter and
controlling person with respect to, any and all loss, damage,
liability, cost and expense to which such Subscribers or any such
underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement
or alleged untrue statement of any material fact contained in such
registration statement referred to in Section 4.1 of this
Agreement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of, or are based upon, the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made not
misleading; provided, however, that the Company will not be liable
in any such case to the extent that any such loss, damage,
liability, cost or expense arises out of, or is based upon, any
untrue statement or alleged untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity
with information furnished by the Subscribers, such underwriter or
such controlling person in writing specifically for use in the
preparation thereof.
(ii) The Subscribers will jointly and severally indemnify and
hold harmless the Company, its directors and officers, any
controlling person and any underwriter from and against, and will
reimburse the Company, its directors and officers, any controlling
person and any underwriter with respect to, any and all loss,
damage, liability, cost or expenses to which the Company or any
controlling person and/or any underwriter may become subject under
the Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement,
or alleged untrue statement, of any material fact contained in such
registration statement referred to in Section 4.1 of this
Agreement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of, or are based upon, the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission
or alleged omission was so made in reliance upon, and in strict
conformity with, written information furnished by, or on behalf of,
the Subscribers specifically for use in the preparation thereof.
6
<PAGE>
5. Legal Representation. Liviakis and Prag each
represents that it or he has consulted with independent legal
counsel and/or tax, financial and business advisors, to the extent
deemed necessary.
6. Attorney's Fee. If any legal action or any
arbitration or other proceeding is brought for the enforcement or
interpretation of this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection with or related
to this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs in
connection with that action or proceeding, in addition to any other
relief to which it or they may be entitled.
7. Waiver. The waiver by any party of a breach of any
provision of this Agreement by another party shall not operate or
be construed as a waiver of any subsequent breach by such other
party.
8. Notices. All notices, requests, and other
communications hereunder shall be deemed to be duly given if sent
by U.S. mail, postage prepaid, addressed to the other parties at
the address as set forth herein below:
To the Company: Perma Fix Environmental
Services, Inc.
Dr. Louis F. Centofanti, CEO
Perma-Fix Environmental
Services, Inc.
1940 Northwest 67th Place
Gainesville, Florida 32606-1649
with copies
simultaneously
by like means to: Conner & Winters
One Leadership Square, Suite 1700
211 North Robinson
Oklahoma City, Oklahoma 73102
Attention: Irwin H. Steinhorn, Esquire
To Liviakis: Liviakis Financial
Communications, Inc.
John M. Liviakis, President
2420 "K" Street, Suite 220
Sacramento, California 95816
7
<PAGE>
To Prag: Robert B. Prag
2455 El Amigo Road
Del Mar, California 92014
with copies
simultaneously
by like means to: Kelly Lytton Mintz & Vann
1900 Avenue of the Stars
Suite 1450
Los Angeles, California 70067
Attention: Alan Jacobson, Esquire
It is understood that any party may change the address to
which notices for it shall be addressed by providing notice of such
change to the other parties in the manner set forth in this
paragraph.
9. Choice of Law, Jurisdiction and Venue. This Agreement
shall be governed by, construed and enforced in accordance with the
laws of the State of Delaware.
10. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the alleged breach thereof, shall be
settled by binding arbitration in Chicago, Illinois in accordance
with the applicable rules of the American Arbitration Association,
and judgment on the award rendered by the arbitrator(s) shall be
binding on the parties and may be entered in any court having
jurisdiction thereof.
11. Complete Agreement. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof.
This Agreement and its terms may not be changed orally but only by
an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or
discharge is sought. This Agreement supercedes in all respects
that certain Letter Agreement, dated March 8, 1999, between the
Company and Liviakis ("Letter Agreement") and renders such Letter
Agreement null and void in all respects and without any effect
whatsoever.
12. Counterparts. This Agreement may be executed in any
number of counterparts which, taken together, shall constitute one
and the same instrument.
The next page is the signature page.
8
<PAGE>
<PAGE>
AGREED TO:
"Company"
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
By: /s/ Louis F. Centofanti
_____________________________________
Dr. Louis F. Centofanti,
President and Chief Executive Officer
"Liviakis"
LIVIAKIS FINANCIAL COMMUNICATIONS, INC.
By: /s/ John M. Liviakis
_____________________________________
John M. Liviakis, President
By: /s/ Robert B. Prag
_____________________________________
Robert B. Prag, Sr. Vice-President
"Prag"
/s/ Robert B. Prag
________________________________________
Robert B. Prag, individually
9
LIST OF SUBSIDIARIES OF PERMA-FIX ENVIRONMENTAL SERVICES, INC.
(THE "COMPANY")
Perma-Fix of Florida, Inc. ("PFF"), a Florida corporation,. is a
100% owned subsidiary of the Company.
Perma-Fix of Fort Lauderdale, Inc. ("PFL"), a Florida corporation,
is a 100% owned subsidiary of the Company.
Perma-Fix of Dayton, Inc. ("PFD"), an Ohio corporation, is a 100%
owned subsidiary of the Company.
Perma-Fix Treatment Services, Inc. ("PFTS"), an Oklahoma
corporation, is a 100% owned subsidiary of the Company.
Perma-Fix of Memphis, Inc. ("PPM"), a Tennessee corporation, is a
100% owned subsidiary of the Company.
Perma-Fix, Inc. ("PFI"), an Oklahoma corporation, is a 100% owned
subsidiary of the Company.
Perma-Fix of New Mexico, Inc., a New Mexico corporation, is a 100%
owned subsidiary of PFI.
Reclamation Systems, Inc. ("RSI"), an Oklahoma corporation, is a
100% owned subsidiary of PFI.
Industrial Waste Management, Inc. ("IWM"), a Missouri corporation,
is a 100% owned subsidiary of the Company.
Schreiber, Yonley & Associates ("SYA"), a Missouri corporation, is
a 100% owned subsidiary of lWM.
Mintech, Inc., an Oklahoma corporation, is a 100% owned subsidiary
of PFI.
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Perma-Fix Environmental Services, Inc.
Gainesville, Florida
We hereby consent to the incorporation by reference of our report
dated March 5, 1999, relating to the consolidated financial
statements and schedule of Perma-Fix Environmental Services, Inc.
and subsidiaries appearing in the Company's Annual Report on
Form 10-K/A for the year ended December 31, 1998, into the Company's
previously filed Forms S-3 and S-8 Registration Statements, File Nos.
33-85118 (S-3), 333-14513 (S-3), 333-43149 (S-3), 33-80580 (S-8),
333-3664 (S-8), 333-17899 (S-8) and 333-25835 (S-8).
/s/ BDO Seidman, LLP
BDO Seidman, LLP
Orlando, Florida
March 26, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> $ 887,000
<SECURITIES> 0
<RECEIVABLES> 6,263,000
<ALLOWANCES> 313,000
<INVENTORY> 145,000
<CURRENT-ASSETS> 7,953,000
<PP&E> 17,741,000
<DEPRECIATION> 5,836,000
<TOTAL-ASSETS> 28,748,000
<CURRENT-LIABILITIES> 7,181,000
<BONDS> 2,087,000
0
0
<COMMON> 13,000
<OTHER-SE> 15,940,000
<TOTAL-LIABILITY-AND-EQUITY> 28,748,000
<SALES> 0
<TOTAL-REVENUES> 30,551,000
<CGS> 0
<TOTAL-COSTS> 21,064,000
<OTHER-EXPENSES> 2,109,000
<LOSS-PROVISION> 61,000
<INTEREST-EXPENSE> 294,000
<INCOME-PRETAX> (698,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (698,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (698,000)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> $ 635,000
<SECURITIES> 0
<RECEIVABLES> 5,656,000
<ALLOWANCES> 374,000
<INVENTORY> 119,000
<CURRENT-ASSETS> 8,735,000
<PP&E> 16,548,000
<DEPRECIATION> 5,564,000
<TOTAL-ASSETS> 28,570,000
<CURRENT-LIABILITIES> 7,981,000
<BONDS> 3,997,000
0
0
<COMMON> 12,000
<OTHER-SE> 12,182,000
<TOTAL-LIABILITY-AND-EQUITY> 28,570,000
<SALES> 0
<TOTAL-REVENUES> 28,413,000
<CGS> 0
<TOTAL-COSTS> 19,827,000
<OTHER-EXPENSES> 1,980,000
<LOSS-PROVISION> 133,000
<INTEREST-EXPENSE> 431,000
<INCOME-PRETAX> (5,169,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,068,000)
<DISCONTINUED> (4,101,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,169,000)
<EPS-PRIMARY> (.49)
<EPS-DILUTED> (.49)
</TABLE>
