June 27, 2000
Mr. Joe Anderson, CEO
East Tennessee Materials and Energy Corporation
109 Jefferson Avenue
Oak Ridge, TN 37830
Hillis Enterprises
Performance Development Corporation
109 Jefferson Avenue
Oak Ridge, TN 37830
Dear Joe:
This letter of intent will summarize and outline the general
terms and conditions under which Perma-Fix Environmental
Services, Inc. ("PESI") proposes to acquire eighty-percent (80%)
of the common and preferred stock of East Tennessee Materials
and Energy Corporation ("M&EC").
Benefits to M&EC of the PESI Proposal
1. PESI has the management resources in place to respond and
move forward quickly to ensure an efficient transaction
resulting in minimal disruption to the management,
employees, customers and suppliers of M&EC.
2. PESI's Board of Directors supports the corporate strategy
to expand the company's nuclear waste business, through
the expansion of mixed waste activities. This strategy
has been publicly communicated to and positively
supported by PESI's shareholders.
3. PESI's acquisition history has shown that PESI acquires
businesses that can be grown by integrating the business'
operations and facilities. On May 16, 2000, PESI
announced the signing of a definitive agreement to
acquire DSSI and made clear PESI's intention to fully
integrate DSSI's operations and facility.
Terms and Conditions
1. The transaction will be structured as a stock purchase
for a consideration of $11,952,125 representing 80% of the
total outstanding common stock of M&EC at the time of closing
and would have the following sources and uses:
Sources: Uses:
Cash $270,000 401(k) Liability $692,920
Cash or Assumption 3,915,868 IRS Obligation 3,222,948
PESI Common Stock(1) 810,000 Payments to Common Holders(3) 1,080,000
Participating Preferred Refinancing of all Outstanding
Security(2) $6,956,257 Obligations(4) $6,956,257
_________ _________
Total Sources $11,952,125 Total Uses $11,952,125
<PAGE>
(1) Represents a maximum of 540,000 shares of PESI common
stock.
(2) The participating preferred security would be redeemable
out of the cash flow of M&EC in such amounts and at such times
as are acceptable to the lenders of PESI and M&EC, subject to
the cash requirements of M&EC for expansion, capital
expenditures and debt repayment.
(3) As a condition precedent to closing, all preferred stock
of M&EC is expected to be converted to common stock.
(4) To be used to satisfy all third party obligations, payments
to preferred shareholders and any other payments to common
shareholders. As a condition precedent to closing, M&EC will
warrant and agree that 100% of the existing and contingent
liabilities, debts, guarantees or other obligations owed by
M&EC have been satisfied through the issuance of $6,956,257
of the Participating Preferred Stock. And furthermore, that
there will be no other obligations outstanding after the
closing other than for the 401(k), the IRS Obligations or
any obligation specifically assumed by PESI in lieu of the
$3,915.868 Cash payment.
5. Upon the signing of this letter of intent, PESI agrees,
subject to approval by its lenders, to lend M&EC $50,000
in the form of a short-term secured promissory note to
fund overdue obligations of M&EC (the "Note"). In
addition, PESI will assist M&EC in resolving M&EC's significant
creditor issues, but failure of M&EC to resolve its creditor
issues for any reason shall not result in any liability
to PESI. The principal and interest of the Note shall be
used as a portion of the cash consideration upon Closing.
6. In consideration for signing this letter of intent, and
for the Note, neither M&EC, its officers, directors, attorneys,
accountants and other representatives will undertake or continue
acquisition discussions with other parties nor otherwise disclose
this proposal or the terms of this proposal to anyone other than
a duly authorized representative of PESI for a period of sixty (60)
days. In addition, M&EC agrees to use its best efforts to cause the
transactions contemplated hereby to occur.
7. The transactions contemplated hereby shall be subject to completion
of financial, technical, environmental and legal audits and due
diligence by PESI confirming as to the assets and liabilities,
obligations, revenues, expenses, client relations, customer base
and business operations, the result of such audits and due diligence
are satisfactory to PESI. From the date this letter is signed
until such date agreed to in the Definitive Agreement (as such
agreement is defined in Paragraph 9 hereof), if any, M&EC will
give PESI and its counsel, accountants and other representatives
reasonable access during normal business hours to all properties,
books, contracts, documents and records with respect to its affairs
as the parties may mutually agree. If the transactions are not
consummated, PESI shall hold in confidence all the
information obtained from M&EC, other than information in
the public domain, information subsequently coming in the
public domain by means other than disclosure by PESI,
information disclosed by third parties or information
that, prior to the date above, PESI possessed or as
otherwise required to be disclosed by law.
8. Each party shall be responsible for and shall pay
its own costs and expenses in connection with the
<PAGE>
completion of the transactions contemplated hereby. M&EC will
provide PESI, its employees and agents, including attorneys
and accountants, full access to all of the accounts, books,
tax returns and other business records of the business after
the signing of this letter of intent. To the extent M&EC
is provided any information about PESI as part of these
transactions, no such information shall be used by M&EC other
than for the evaluation of the transactions, and such
information shall be held in strict confidence.
9. The transactions contemplated hereby shall be subject to the
negotiation and execution of a mutually acceptable Definitive
Purchase and Sale Agreement (the "Definitive Agreement"). The
Definitive Agreement shall contain mutually acceptable
representations, warranties, covenants and indemnification
provisions, closing conditions and other provisions customarily
found in a stock purchase agreement. The Definitive Agreement
will be executed no later than sixty (60) days after the date of
your acceptance of this letter of intent. The closing of
transactions contemplated hereby will occur no later than ninety
(90) days after the date of your acceptance of this letter of
intent, subject to extensions to obtain regulatory and other
approvals, if any, as may be required.
10. This letter is the result of our continuing discussions
over the past two years and is intended to reflect the
terms of acquisition discussed in our meetings of the
past week regarding the interest of PESI in purchasing
the Stock of M&EC and supersedes all prior discussions
or correspondence concerning these transactions, but it
does not contain all matters upon which agreement between
the parties must be reached in order for the transactions
to be consummated.
11. The parties agree not to make any public announcement about
these proposed transactions without the prior written consent
of the other party, unless legally required on advice of counsel
of a party, in which case such party shall give the other party
notice of such requirement and as much time as feasible to
review and comment on the disclosure.
12. This letter is an expression of intent; provided however, the
provisions of Paragraphs 6, 8 and 11 above shall be binding upon
the parties as of the date this letter of intent is signed by
M&EC. A Definitive Agreement shall be subject to necessary corporate
approvals.
If the above proposal meets with your approval, please sign
and date this letter in the spaces provided below and return a
signed copy to me at the address listed above.
<PAGE>
I look forward to working with you to close the proposed transactions.
Sincerely
/s/ Larry McNamara
Larry McNamara
President, PESI Nuclear Division
Accepted and agreed to by the undersigned this 28 day of June, 2000.
____
EAST TENNESSEE MATERIALS AND ENERGY CORPORATION
By: /s/ Joe W. Anderson
_____________________________
Joe W. Anderson, P.E.
Chief Executive Officer
HILLIS ENTERPRISES [Legal Name]
By: /s/ Bill J. Hillis President
________________________________
Name:
Title:
PERFORMANCE DEVELOPMENT CORPORATION
By: /s/ Joe W. Anderson
________________________________
Joe W. Anderson, P.E.
Chief Executive Officer
