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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
____________________________________
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _______________
Commission File No. 1-11596
_______________
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 58-1954497
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
1940 N.W. 67th Place, Gainesville, FL 32653
(Address of principal executive offices) (Zip Code)
(352)373-4200
(Registrant's telephone number)
N/A
__________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
______ ______
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of the close of the latest practical date.
Class Outstanding at May 10, 2000
_____ ___________________________
Common Stock, $.001 Par Value 21,709,172
(excluding 988,000 shares
held as treasury stock)
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PERMA-FIX ENVIRONMENTAL SERVICES, INC.
INDEX
Page No.
_______
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 2000
and December 31, 1999 . . . . . . . . . . . . . . . . 2
Consolidated Statements of Operations -
Three Months Ended March 31, 2000 and 1999. . . . . . 4
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 2000 and 1999 . . . . . . . . . . . . 5
Consolidated Statements of Stockholder's Equity -
Three Months Ended March 31, 2000 . . . . . . . . . . 6
Notes to Consolidated Financial Statements. . . . . . . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . .14
Item 3. Quantitative and Qualitative Disclosure
about Market Risk. . . . . . . . . . . . . . . . . .22
PART II OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . .23
Item 5. Other Events . . . . . . . . . . . . . . . . . . . . . .23
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . .24
<PAGE>
<PAGE>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
PART I, ITEM 1
The consolidated financial statements included herein have been
prepared by the Company (which may be referred to as we, us or
our), without an audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and
note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules
and regulations, although the Company believes the disclosures
which are made are adequate to make the information presented not
misleading. Further, the consolidated financial statements
reflect, in the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present
fairly the financial position and results of operations as of and
for the periods indicated.
It is suggested that these consolidated financial statements be
read in conjunction with the consolidated financial statements
and the notes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999.
The results of operations for the three months ended March 31,
2000, are not necessarily indicative of results to be expected
for the fiscal year ending December 31, 2000.
1
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
March 31,
2000 December 31,
(Amounts in Thousands, Except for Share Amounts) (Unaudited) 1999
_________________________________________________________________________________
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 679 $ 771
Restricted cash equivalents and investments 22 73
Accounts receivable, net of allowance for doubtful
accounts of $945 and $952, respectively 13,057 13,027
Inventories 223 229
Prepaid expenses 1,611 486
Other receivables 161 62
Assets of discontinued operations 320 377
_______ ________
Total current assets 16,073 15,025
Property and equipment:
Buildings and land 12,557 12,555
Equipment 13,827 13,682
Vehicles 2,309 2,274
Leasehold improvements 16 16
Office furniture and equipment 1,278 1,223
Construction in progress 1,698 1,210
___________ __________
31,685 30,960
Less accumulated depreciation (8,336) (7,690)
___________ __________
Net property and equipment 23,349 23,270
Intangibles and other assets:
Permits, net of accumulated amortization of $1,634
and $1,504, respectively 8,416 8,544
Goodwill, net of accumulated amortization of $1,087
and $1,009, respectively 7,076 7,154
Other assets 637 651
___________ _________
Total assets $ 55,551 $ 54,644
=========== =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS, CONTINUED
March 31,
2000 December 31,
(Amounts in Thousands, Except for Share Amounts) (Unaudited) 1999
_________________________________________________________________________________
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,697 $ 7,587
Accrued expenses 7,028 5,885
Revolving loan and term note facility 938 938
Current portion of long-term debt 1,488 1,427
Current liabilities of discontinued operations 413 588
___________ __________
Total current liabilities 16,564 16,425
Environmental accruals 3,800 3,847
Accrued closure costs 967 962
Long-term debt, less current portion 13,349 12,937
Long term liabilities of discontinued operations 654 654
___________ _________
Total long-term liabilities 18,770 18,400
___________ _________
Total Liabilities 35,334 34,825
Commitments and contingencies (see Note 6) - -
Stockholders' equity:
Preferred Stock, $.001 par value; 2,000,000 shares
authorized, 4,187 and 4,537 shares issued and
outstanding, respectively - -
Common Stock, $.001 par value; 50,000,000 shares
authorized, 22,697,172 and 21,501,776 shares
issued, including 988,000 shares held as
treasury stock 23 21
Additional paid-in capital 43,254 42,367
Accumulated deficit (21,198) (20,707)
_________ _________
22,079 21,681
Less Common Stock in treasury at cost; 988,000
shares issued and outstanding (1,862) (1,862)
_________ _________
Total stockholders' equity 20,217 19,819
_________ _________
Total liabilities and stockholders' equity $ 55,551 $ 54,644
========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
(Amounts in Thousands, ________________________
Except for Share Amounts) 2000 1999
_____________________________________________________________________________
<S> <C> <C>
Net revenues $ 13,589 $ 7,812
Cost of goods sold 9,542 5,290
________ ________
Gross profit 4,047 2,522
Selling, general and administrative expenses 3,253 1,838
Depreciation and amortization 862 519
________ ________
Income (loss) from operations (68) 165
Other income (expense):
Interest income 11 7
Interest expense (410) (27)
Other 30 (14)
_________ _________
Net income (loss) (437) 131
Preferred Stock dividends (54) (117)
_________ _________
Net income (loss) applicable to
Common Stock $ (491) $ 14
======== ========
__________________________________________________________________
Basic net income (loss) per common share: $ (.02) $ -
======== =========
Diluted net income (loss) per common share $ (.02) $ -
======== =========
Weighted average number of shares and
potential common shares used in computing
net income (loss) per share:
Basic 20,849 12,372
======== =======
Diluted 20,849 25,247
======== =======
The accompanying notes are an integral part
of these consolidated financial statements.
4
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
(Amounts in Thousands, _________________________
Except for Share Amounts) 2000 1999
________________________________________________________________________________
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) from continuing operations $ (437) $ 131
Adjustments to reconcile net income (loss) to
cash provided by continuing operations:
Depreciation and amortization 862 519
Provision for bad debt and other reserves 11 4
Gain on sale of plant, property and equipment (10) (2)
Changes in assets and liabilities:
Accounts receivable (41) (101)
Prepaid expenses, inventories and other assets (216) (82)
Accounts payable and accrued expenses (715) (156)
_______ _______
Net cash provided by (used in) continuing operations (546) 313
_______ _______
Net cash used in discontinued operations (157) (276)
_______ _______
Cash flows from investing activities:
Purchases of property and equipment (570) (374)
Proceeds from sale of plant, property and equipment 65 5
Change in restricted cash, net 46 (5)
Net cash used by discontinued operations - (40)
______ ______
Net cash used in investing activities (459) (414)
______ ______
Cash flows from financing activities:
Net Borrowings (Repayments) of revolving loan &
term note facility 600 (263)
Principal repayments on long-term debt (345) (70)
Proceeds from issuance of stock 776 43
Net cash used by discontinued operations (3) (15)
_______ _______
Net cash provided by (used in) financing activitie 1028 (305)
_______ _______
Decrease in cash and cash equivalents (134) (682)
Cash and cash equivalents at beginning of period,
including discontinued operations of $45, and
$0, respectively 816 776
________ _______
Cash and cash equivalents at end of period,
including discontinued operations of $3,
and $10, respectively $ 682 $ 94
========= ========
__________________________________________________________________________________
Supplemental disclosure:
Interest paid $ 417 $ 215
Non-cash investing and financing activities:
Issuance of Common Stock for services 49 12
Issuance of stock for payment of dividends 112 115
Long-term debt incurred for purchase of
property and equipment 216 89
The accompanying notes are an integral part
of these consolidated financial statements.
5
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited, for the three months ended March 31, 2000)
Common
Additional Stock
(Amounts in Thousands Preferred Stock Common Stock Paid-In Accumulated Held in
___________________________________________________________________________________________________________________
Except for Share Amounts) Shares Amount Shares Amount Capital Deficit Treasury
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 4,537 $ - 21,501,776 $ 21 $ 42,367 $(20,707) $ (1,862)
Net loss - - - - - (437) -
Preferred Stock dividend - - - - - (54) -
Issuance of Common Stock for
Preferred Stock dividend - - 97,841 - 112 - -
Conversion of Preferred Stock
to Common (350) - 322,351 1 - - -
Issuance of stock under
Employee Stock Purchase Plan - - 48,204 - 49 - -
Exercise of warrants - - 727,000 1 726 - -
______ ______ __________ _____ _______ _______ _______
Balance at March 31, 2000 4,187 $ - 22,697,172 $ 23 $ 43,254 $(21,198) $ (1,862)
====== ====== ========== ===== ======= ======= =======
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
6
<PAGE>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
Reference is made herein to the notes to consolidated
financial statements included in our Annual Report on Form 10-K
for the year ended December 31, 1999.
1. Summary of Significant Accounting Policies
__________________________________________
Our accounting policies are as set forth in the notes to
consolidated financial statements referred to above.
2. Earnings Per Share
__________________
Basic EPS is based on the weighted average number of shares
of Common Stock outstanding during the period. Diluted EPS
includes the dilutive effect of potential common shares. Diluted
loss per share for the three months ended March 31, 2000, does
not include potential common shares as their effect would be
anti-dilutive.
<TABLE>
<CAPTION>
The following is a reconciliation of basic net income (loss)
per share to diluted net income (loss) per share for the three
months ended March 31, 2000 and 1999:
Three Months Ended
March 31,
(Amounts in Thousands _____________________
Except for Share Amounts) 2000 1999
________________________________________________________________________
<S> <C> <C>
Net income (loss) applicable to
Common Stock - basic $ (491) $ 14
Effect of dilutive securities -
Preferred Stock dividends - 117
_______ ________
Net income (loss) applicable to
Common Stock - diluted $ (491) $ 131
======== ========
Basic net income (loss) per share $ (.02) $ -
======= =======
Diluted net income (loss) per share $ (.02) $ -
======== ========
Weighted average shares outstanding-basic 20,849 12,372
Potential shares exercisable under stock
option plans - 171
Potential shares upon exercise of
warrants - 63
Potential shares upon conversion of
Preferred Stock - 12,641
_______ _________
Weighted average shares outstanding-diluted 20,849 25,247
======= =========
</TABLE>
The above reconciliation for the three months ended March 31, 2000,
excludes 1,302,949 options, 4,839,963 warrants and 2,880,147 potential
shares upon conversion of Preferred Stock since their effect would be anti-
dilutive.
7
<PAGE>
3. Discontinued Operations
_______________________
On January 27, 1997, an explosion and resulting tank fire
occurred at the Perma-Fix of Memphis, Inc. ("PFM") facility, a
hazardous waste storage,processing and blending facility, which
resulted in damage to certain hazardous waste storage tanks
located on the facility and caused certain limitedcontamination
at the facility. As a result of the significant disruption and
the cost to rebuild and operate this segment, the Company made a
strategic decision, in February 1998, to discontinue its 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.
The accrued environmental and closure costs related to PFM
total $1,008,000 as of March 31, 2000, a decrease of $166,000
from the December 31, 1999, accrual balance. This reduction was
principally a result of the specific costs related to general
closure and remedial activities, including groundwater
remediation, and agency and investigative activities, ($101,000),
and the general operating losses, including indirect labor,
materials and supplies, incurred in conjunction with the above
actions ($65,000). The general operating losses do not reflect
management fees charged by the corporation. The remaining
environmental and closure liability represents the best estimate
of the cost to complete the groundwater remediation at the site
of approximately $633,000, the costs to complete the facility
closure activities over the next five (5) year period (including
agency and investigative activities, and future operating losses
during such closure period) totaling approximately $338,000, and
the potential PRP liability of $37,000.
4. Proposed Acquisition
____________________
The Company has entered into a stock purchase agreement dated
May 16, 2000, to purchase Diversified Scientific Systems, Inc.
("DSSI") from Waste Management, Inc.("Seller"), subject to certain
conditions being met. Under the terms of the agreement, upon completion
of the purchase of DSSI, the Company is to pay the Seller $8.5 million,
subject to the purchase price being increased or decreased under
certain conditions, with $5 million payable in cash at closing
and the balance evidenced by a promissory note (the "Note"). The
Note is to be for a term of five years, will bear an annual rate
of interest of 7%, with accrued interest payable annually and the
principal amount payable in one lump sum at the end of the
five-year term. DSSI's facility, located in Kingston, Tennessee,
is permitted to transport, store and treat hazardous waste and
mixed waste (waste containing both low level radioactive and
hazardous waste) and to dispose of or recycle mixed waste in
DSSI's incinerator located at DSSI's facility.
In order to assist the Company in raising the funds to fund the
cash portion of the purchase price and to assist the Company in
providing additional liquidity, the Company has retained Ryan,
Beck & Co. and Larkspur Capital Corporation (collectively, the
"Agents") as financial advisors to the Company, and has granted
the Agents or their permitted designees a five-year warrant to
purchase up to 150,000 shares of the Company's Common Stock
("Retainer Warrants"). If the Company is successful in
finalizing the private placement as discussed in the
"Management's Discussion and Analysis of Financial Condition and
Results of Operation Liquidity" prior to termination of the
agreement with the Agents or within twelve months following
termination of the agreement with the Agents and the placement
involves a party contacted by the Agents prior to the termination,
the Company has agreed to pay the Agents certain cash fees and
certain additional warrants.
8
<PAGE>
5. Long-term Debt
______________
<TABLE>
<CAPTION>
Long-term debt consists of the following at March 31, 2000,
and December 31, 1999 (in thousands):
March 31,
2000 December 31,
(Unaudited) 1999
___________ ____________
<S> <C> <C>
Revolving loan facility dated January 15, 1998, as amended
May 27, 1999, borrowings based upon by eligible accounts
receivable, subject to monthly borrowing base calculation,
variable interest paid monthly at prime rate plus 1 3/4
(10.50% at March 31, 2000). $ 6,726 $ 5,891
Term loan agreement dated January 15, 1998, as amended
May 27, 1999, payable in monthly principal installments
of $78, balance due in June 2002, variable interest
paid monthly at prime rate plus 1 3/4 (10.50% at
March 31, 2000). 2,969 3,203
Three promissory notes dated May 27, 1999, payable in
equal monthly installments of principal and interest of $90
over 60 months, due June 2004, interest at 5.5% for first
three years and 7% for remaining two years. 4,070 4,283
Various capital lease and promissory note obligations, payable
2000 to 2005, interest at rates ranging from 7.5% to 13.0%. 2,010 1,925
__________ ___________
15,775 15,302
Less current portion of revolving loan and term note facility 938 938
Less current portion of long-term debt 1,488 1,427
__________ ___________
$ 13,349 $ 12,937
========== ===========
</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 as lender. The
Agreement initially provided for a term loan in the amount of
$2,500,000, which required 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 provided 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 was 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 original 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
9
<PAGE>
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 original Agreement dated January 15, 1998.
In connection with the acquisition of Chemical Conservation
Corporation (CCC), Chemical Conservation of Georgia, Inc. (CCG)
and Chem-Met Services, Inc. (CM) on May 27, 1999, Congress, the
Company, and the Company's subsidiaries, including CCC, CCG and
CM entered into an Amendment and Joinder to Loan and Security
Agreement (the "Loan Amendment") dated May 27, 1999, pursuant to
which the Loan and Security Agreement ("Original Loan Agreement")
among Congress, the Company and the Company's subsidiaries were
amended to provide, among other things, (i) the credit line being
increased from $7,000,000 to $11,000,000, with the revolving line
of credit portion being determined as the maximum credit of
$11,000,000, less the term loan balance, with the exact amount
that can be borrowed under the revolving line of credit not to
exceed eighty percent (80%) of the Net Amount of Eligible
Accounts (as defined in the Original Loan Agreement) less certain
reserves; (ii) the term loan portion of the Original Loan
Agreement being increased from its current balance of
approximately $1,600,000 to $3,750,000 and it shall be subject to
a four-year amortization schedule payable over three years at an
interest rate of 1.75% over prime; (iii) the term of the Original
Loan Agreement, as amended, was extended for three years from the
date of the acquisition, subject to earlier termination pursuant
to the terms of the Original Loan Agreement, as amended; (iv)
CCC, CCG and CM being added as co-borrowers under the Original
Loan Agreement, as amended; (v) the interest rate on the
revolving line of credit will continue at 1.75% over prime, with
a rate adjustment to 1.5% if net income applicable to Common
Stock of the Company is equal to or greater than $1,500,000 for
fiscal year ended December 31, 2000; (vi) the monthly service
fee shall increase from $1,700 to $2,000; (vii) government
receivables will be limited to 20% of eligible accounts
receivable; and (viii) certain obligations of CM shall be paid at
closing of the acquisition of CCC, CCG and CM. The Loan
Amendment became effective on June 1, 1999, when the Stock
Purchase Agreements were consummated. Payments under the term
loan commenced on June 1, 1999, with monthly principal payments
of approximately $78,000 and a final balloon payment in the
amount of $938,000 on June 1, 2002. The Company incurred
approximately $40,000 in additional financing fees relating
to the closing of this amendment, which is being amortized over
the remaining term of the agreement. The interest rate on the
revolving loan and term loan was 10.50% at March 31, 2000.
Under the terms of the Original Loan Agreement, as amended, the
Company has agreed to maintain an Adjusted Net Worth (as defined
in the Original Loan Agreement) of not less than $3,000,000
throughout the term of the Original Loan Agreement, which was
amended, pursuant to the above noted acquisition. The adjusted
net worth covenant requirement ranges from a low of $1,200,000
at June 1, 1999, to a high of $3,000,000 from July 1, 2000,
through the remaining term of the Loan Agreement. The covenant
requirement at March 31,2000, was $2,000,000, which the Company
was in compliance with. The Company has agreed that it will not
pay any dividends on any shares of capital stock of the Company,
except that dividends may be paid on the Company's shares of
Preferred Stock outstanding as of the date of the Loan Amendment
(collectively, "Excepted Preferred Stock") under the terms of the
applicable Excepted Preferred Stock and if and when declared by
the Board of Directors of the Company pursuant to Delaware
General Corporation Law. As security for the payment and
performance of the Original Loan Agreement, as amended, the
Company and its subsidiaries (including CCC, CCG and CM) have
granted a first security interest in all accounts receivable,
inventory, general intangibles, equipment and certain of their
other assets, as well as the mortgage on two facilities owned by
subsidiaries of the Company, except for certain real property
owned by CM, for which a first security interest is held by the
TPS Trust and the ALS Trust as security for CM's non-recourse
guaranty of the payment of the Promissory Notes. All other terms
and conditions of the original loan remain unchanged.
As of March 31, 2000, borrowings under the revolving loan
agreement were approximately $6,726,000, an increase of $835,000
over the December 31, 1999, balance of $5,891,000. The balance
under the term loan at March 31, 2000, was $2,969,000, a decrease
of $234,000 from the December 31, 1999, balance of $3,203,000.
10
<PAGE>
As of March 31, 2000, the Company's borrowing availability under
the Congress credit facility, based on its then outstanding
eligible accounts receivable, was approximately $1,627,000.
Pursuant to the terms of the Stock Purchase Agreements in
connection with the acquisition of CCC, CCG and CM, a portion of
the consideration was paid in the form of the Promissory Notes,
in the aggregate amount of $4,700,000 payable to the former
owners of CCC, CCG and CM. The Promissory Notes are paid in
equal monthly installments of principal and interest of approxi-
mately $90,000 over five years with the first installment due on
July 1, 1999, and having an interest rate of 5.5% for the first
three years and 7% for the remaining two years. The aggregate
outstanding balance of the Promissory Notes total $4,070,000 at
March 31, 2000, of which $881,000 is in the current portion.
Payments of such Promissory Notes are guaranteed by CM under a
non-recourse guaranty, which non-recourse guaranty is secured
by certain real estate owned by CM.
As further discussed in Note 3, the long-term debt, other than
revolving and term loan debt, associated with the discontinued
PFM operation is excluded from the above and is recorded in the
Liabilities of Discontinued Operations total. The PFM debt
obligations total $1,000, all of which is current.
6. 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 the normal course of conducting our business, we are
involved in various litigation. There has been no material
change in legal proceedings from those disclosed previously in
the Company's Form 10-K for year ended December 31, 1999. We are
not a party to any litigation or governmental proceeding which
our management believes could result in any judgements or
fines against us that would have a material adverse affect on the
Company's 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 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. We have recorded accrued
liabilities for estimated closure costs and identified
environmental remediation costs.
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
11
<PAGE>
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.
7. Business Segment Information
____________________________
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 have eleven operating segments which are defined as each
separate facility or location that we operate. We clearly view
each facility 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 3
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, radioactive waste, and wastewater through our seven TSD
facilities; Perma-Fix Treatment Services, Inc., Perma-Fix of
Dayton, Inc., Perma-Fix of Ft. Lauderdale, Inc., Perma-Fix of
Florida, Inc., Chemical Conservation Corporation, Chemical
Conservation of Georgia, Inc., and Chem-Met Services, 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 and mixed wastes into non-hazardous
waste and various waste management services to certain
governmental agencies through Chem-Met Government Services.
The Consulting Engineering Services segment provides
environmental engineering and regulatory compliance services
through Schreiber, Yonley & Associates, Inc. which includes
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. During
1999, the business and operations of Mintech, Inc., our second
engineering company, located in Tulsa, Oklahoma, was merged into
and consolidated with the SY&A operations.
The table below shows certain financial information by business
segment for the quarter ended March 31, 2000 and quarter ended
March 31, 1999 and excludes the results of operations of the
discontinued operations.
12
<PAGE>
<TABLE>
<CAPTION>
Segment Reporting 03/31/00
Waste Segments Consolidated
Services Engineering Total Corp(2) Memphis(3) Total
________ ___________ ________ ________ __________ ___________
<S> <C> <C> <C> <C> <C> <C>
Revenue from external customers $ 12,622 $ 967 $ 13,589 $ - $ - $ 13,589
Intercompany revenues 1,127 51 1,178 - - 1,178
Interest income 7 - 7 4 - 11
Interest expense 326 13 339 71 - 410
Depreciation and amortization 825 20 845 17 - 862
Segment profit (loss) (36) 124 88 (579) - (491)
Segment assets(1) 50,638 2,633 53,271 1,960 320 55,551
Expenditures for segment assets 741 12 753 33 - 786
Segment Reporting 03/31/99
Waste Segments Consolidated
Services Engineering Total Corp(2) Memphis(3) Total
________ ___________ ________ _______ __________ ____________
Revenue from external customers $ 6,601 $ 1,211 $ 7,812 $ - $ - $ 7,812
Intercompany revenues 93 93 186 - - 186
Interest income 5 - 5 2 - 7
Interest expense 41 20 61 (34) - 27
Depreciation and amortization 494 20 514 5 - 519
Segment profit (loss) 270 77 347 (333) - 14
Segment assets(1) 24,725 2,432 27,157 1,310 456 28,923
Expenditures for segment assets 445 13 458 5 - 463
<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 2).
</FN>
</TABLE>
13
<PAGE>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART I, ITEM 2
Forward-looking Statements
Certain statements contained with this report may be deemed
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended (collectively, the
"Private Securities Litigation Reform Act of 1995"). All
statements in this report other than a statement 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
continue and improve operations and remain profitable on an
annualized basis, (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 facilities in Memphis, Tennessee; Valdosta,
Georgia and Detroit Michigan, (viii) ability to remediate certain
contaminated sites for projected amounts, (ix) completion of the
acquisition of DSSI, (x) ability to obtain new sources of
financing, and (xi) 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) inability of the "New Process" (as
defined) to perform as anticipated or to develop such for
commercial, (viii) ability to receive or retain certain required
permits, (ix) discovery of additional contamination or expanded
Contamination at a certain Dayton, Ohio, property formerly leased
by the Company or the Company's facilities at Memphis, Tennessee;
Valdosta, Georgia and Detroit Michigan, which would result in a
material increase in remediation expenditures, (x) determination
that PFM is the source of chlorinated compounds at the Allen Well
Field, (xi) changes in federal, state and local laws and
regulations, especially environmental regulations, or
in interpretation of such, (xii) potential increases in
equipment, maintenance, operating or labor costs, (xiii)
management retention and development, (xiv) the requirement to
use internally generated funds for purposes not presently
anticipated, (xv) inability to become profitable, (xvi) the
inability to secure additional liquidity in the form of
additional equity or debt, (xvii) the commercial viability of our
on-site treatment process, (xviii) 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, (xix) the inability of the Company to maintain the
listing of its Common Stock on the NASDAQ, (xx) the determination
that CM or CCC was responsible for a material amount of
remediation at certain Superfund sites, and (xxi) inability to
finalize the acquisition of DSSI. The Company undertakes no
obligations to update publicly any forward-looking statement,
whether as a result of new information, future events or
otherwise.
14
<PAGE>
Results of Operations
<TABLE>
<CAPTION>
The table below should be used when reviewing management's
discussion and analysis for the three months ended March 31, 2000
and 1999:
Consolidated (amounts in thousands)
___________________________________
2000 % 1999 %
________ ______ ________ ______
<S> <C> <C> <C> <C>
Net Revenues $13,589 100.0 $ 7,812 100.0
Cost of Goods Sold 9,542 70.2 5,290 67.7
_______ _____ _______ _____
Gross Profit 4,047 29.8 2,522 32.3
Selling, General & Administrative 3,253 23.9 1,838 23.6
Depreciation/Amortization 862 6.3 519 6.6
_______ _____ _______ _____
(Income) Loss from operations $ (68) (.4) $ 165 2.1
======== ===== ======= =====
Interest Expense $ (410) (3.0) $ (27) (.3)
Preferred Stock Dividend (54) (.4) (117) (1.5)
</TABLE>
Summary - Quarter Ended March 31, 2000 and 1999
_______________________________________________
We provide services through two reportable operating segments.
The Waste Management Services segment is engaged in on-and
off-site treatment, storage, disposal and processing of a wide
variety of by-products and industrial, hazardous and mixed
wastes. This segment competes for materials and services with
numerous regional and national competitors to provide
comprehensive and cost-effective Waste Management Services to a
wide variety of customers in the Midwest, Southeast and Southwest
regions of the country. We operate and maintain facilities and
businesses in the waste by-product brokerage, on-site treatment
and stabilization, and off-site blending, treatment and disposal
industries. Our Consulting Engineering segment provides a wide
variety of environmental related consulting and engineering
services to industry and government. The Consulting Engineering
segment provides oversight management of environmental
restoration projects, air and soil sampling, compliance
reporting, surface and subsurface water treatment design
for removal of pollutants, and various compliance and training
activities.
Consolidated net revenues increased to $13,589,000 from
$7,812,000 for the quarter ended March 31, 2000, as compared to
the same quarter in 1999. This increase of $5,777,000 or 74.0%
is principally attributable to the additional revenues resulting
from the acquisition of Chemical Conservation Corporation (CCC),
Chemical Conservation of Georgia, Inc. (CCG) and Chem-Met
Services, Inc. (CM), effective June 1, 1999, which in the
aggregate contributed approximately $6,746,000 to this increase.
Partially offsetting this increase, were decreases within the
Waste Management Services segment totaling approximately
$410,000, principally from the Perma-Fix of Dayton wastewater
facility, and decreases within the Consulting Engineering segment
totaling approximately $559,000, principally from the Mintech,
Inc. engineering company whose operations were reduced and
merged with Schreiber, Yonley & Associates, Inc. during the
second half of 1999. These reduced revenues are also a result of
the seasonal decrease in market demand, which typically occurs
during the first quarter of each year and appeared more dramatic
in 2000.
Cost of goods sold for the Company increased $4,252,000 or
80.4% for the quarter ended March 31, 2000, as compared to the
quarter ended March 31, 1999. This consolidated increase in cost
of goods sold reflect principally the increased operating,
disposal and transportation costs, corresponding to the increased
revenues from the acquisition of CCC, CCG and CM, as discussed
above, which totaled $4,703,000. Increased operating costs were
also recognized across most of the Waste Management Services
facilities, as we increase certain fixed costs and began
preparation for the processing of new wastewater streams at
several facilities and the expanded mixed waste processing
capabilities at the Gainesville, Florida, mixed waste facility.
The resulting gross profit for the quarter ended March 31, 2000,
increased $1,525,000 to $4,047,000, which as a percentage of
revenue is 29.8%, reflecting a decrease over the corresponding
quarter in 1999 percentage of revenue of 32.3%. This decrease in
15
<PAGE>
gross profit as a percentage of revenue was principally
recognized throughout the Waste Management Services segment which
experienced a decrease from 33.1% in 1999 to 29.4% in 2000
reflecting the expansion and startup activities discussed above.
Offsetting this however was an increase in the Consulting
Engineering segment from 28.8% in 1999 to 35.1% in 2000,
reflecting the benefits from the restructuring and consolidation
of our engineering businesses, as discussed above.
Selling, general and administrative expenses increased
$1,415,000 or 77.0% for the quarter ended March 31, 2000, as
compared to the quarter ended March 31, 1999. As a percentage of
revenue, selling, general and administrative expense increased to
23.9% for the quarter ended March 31, 2000, compared to 23.6% for
the same period in 1999. The increase reflects the expenses
directly related to CCC, CCG and CM as acquired effective June 1,
1999, which totals $1,300,000 and the increased expenses
associated with our additional sales and marketing efforts as we
continue to refocus the business segments into new environmental
markets, such as nuclear and mixed waste, and the additional
administrative overhead associated with our research and
development efforts. We have expensed in the current period all
research and development costs associated with the development of
various technologies and the increase administrative costs
associated with the expansion of the Perma-Fix of Florida, Inc.
("PFF") mixed waste facility.
Depreciation and amortization expense for the quarter ended
March 31, 2000, reflects an increase of $343,000 as compared to
the quarter ended March 31, 1999. This increase is attributable
to a depreciation expense increase of $246,000 which is a result
of the depreciation in 2000 from the CCC, CCG and CM facilities
acquired effective June 1, 1999, totaling $194,000 and the
additional depreciation related to the expanded facilities and an
amortization expense increase of $97,000 for the quarter ended
March 31, 2000, as compared to the quarter ended March 31, 1999.
This increase in amortization expense is a result of the goodwill
and permit amortization from the CCC, CCG and CM facilities
acquired in 1999.
Interest expense increased $383,000 from the quarter ended
March 31, 2000, as compared to the corresponding period of 1999,
excluding discontinued operations. This increase principally
reflects the acquisition of CCC, CCG and CM effective June 1,
1999. The existing debt assumed in conjunction with the
acquisition, along with the three promissory notes, which
comprised $4,700,000 of the purchase price, resulted in
approximately $74,000 of additional interest expense. The
remaining increase in interest expense is a result of the
increased borrowing levels on the Congress Financial Corporation
revolving and term loan incurred in conjunction with the above
noted acquisition, which totaled approximately $297,000.
Preferred Stock dividends decreased $63,000 during the quarter
ended March 31, 2000 as compared to the corresponding period of
1999. This decrease is due to the conversion of $4,563,000
(4,563 preferred shares) of the Preferred Stock into Common Stock
on April 20, 1999, the redemption of $750,000 (750 preferred
shares) of the Preferred Stock on July 15, 1999, and the
conversion of $350,000 (350 preferred shares) of the Preferred
Stock into Common Stock throughout the first quarter of 2000.
Discontinued Operations
On January 27, 1997, an explosion and resulting tank fire
occurred at the Perma-Fix of Memphis, Inc. ("PFM") facility, a
hazardous waste storage, processing and blending facility, which
resulted in damage to certain hazardous waste storage tanks
located on the facility and caused certain limited contamination
at the facility. As a result of the significant disruption and
the cost to rebuild and operate this segment, the Company made a
strategic decision, in February 1998, to discontinue its 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.
16
<PAGE>
Proposed Acquisition
As provided in Note 4 to Notes to Consolidated Financial Statements,
the Company has entered into a stock purchase agreement dated May 16,
2000, to purchase Diversified Scientific Systems, Inc. ("DSSI") from
Waste Management, Inc. ("Seller"), subject to certain conditions
being met. Under the terms of the agreement, upon completion of
the purchase of DSSI, the Company is to pay the Seller $8.5 million,
subject to the purchase price being increased or decreased under
certain conditions, with $5 million payable in cash at closing
and the balance evidenced by a promissory note to the Seller (the
"Note"). The Note is to be for a term of five years, will bear an
annual rate of interest of 7%, with the accrued interest payable
annually and the principal amount payable in one lump sum payment
at the end of the five-year term. The agreement also provides that
if the acquisition is not completed within 90 days from May 16, 2000,
or such longer period as is necessary to obtain approvals of
applicable governmental authorities relating to the permits and
licenses of DSSI necessary to consummate the transactions, the
agreement may be terminated by either party, except under certain
limited circumstances. See "Liquidity and Capital Resources of
the Company" for a discussion as to the Company's proposal to
fund the cash portion of the purchase price.
Liquidity and Capital Resources of the Company
At March 31, 2000, the Company had cash and cash equivalents
of $682,000, including $3,000 from discontinued operations. This
cash and cash equivalents total reflects a decrease of $134,000
from December 31, 1999, as a result of net cash used in
continuing operations of $546,000 (principally the reduction of
accounts payable), cash used by discontinued operation of
$157,000, cash used in investing activities of $459,000
(principally purchases of equipment, net totaling $570,000),
offset by cash provided by financing activities of $1,028,000
(net borrowings of the revolving loan and term note facility,
proceeds from the issuance of stock, partially offset by
principal repayments of long-term debt). Accounts receivable,
net of allowances for continuing operations, totaled $13,057,000,
an increase of $30,000 over the December 31, 1999, balance of
$13,027,000. The receivable balance remained flat during this
first quarter of 2000, due in large part to the reduced revenue
levels of this typical slow quarter, offset by Government
Services contracting activities, which increased for the quarter
and represents slower paying receivables.
The Company, as parent and guarantor, and all direct and
indirect subsidiaries of the Company are co-borrowers and
cross-guarantors under a Loan and Security Agreement
("Agreement") with Congress as lender. The Agreement initially
provided for a term loan in the amount of $2,500,000, which
required 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 provided
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 was 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 original 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 original Agreement dated
January 15, 1998.
In connection with the acquisition of CCC, CCG and CM on
May 27, 1999, Congress, the Company, and the Company's
subsidiaries, including CCC, CCG and CM entered into an Amendment
and Joinder to Loan and Security Agreement (the "Loan Amendment")
dated May 27, 1999, pursuant to which the Loan and Security
Agreement ("Original Loan Agreement") among Congress, the Company
and the Company's subsidiaries was amended to provide, among
other things, (i) the credit line being increased from $7,000,000
to $11,000,000, with the revolving line of credit portion being
17
<PAGE>
determined as the maximum credit of $11,000,000, less the term
loan balance, with the exact amount that can be borrowed under
the revolving line of credit not to exceed eighty percent (80%)
of the Net Amount of Eligible Accounts (as defined in the
Original Loan Agreement) less certain reserves; (ii) the term
loan portion of the Original Loan Agreement being increased from
its current balance of approximately $1,600,000 to $3,750,000 and
it shall be subject to a four-year amortization schedule payable
over three years at an interest rate of 1.75% over prime; (iii)
the term of the Original Loan Agreement, as amended, was extended
for three years from the date of the acquisition, subject to
earlier termination pursuant to the terms of the Original Loan
Agreement, as amended; (iv) CCC, CCG and CM being added as
co-borrowers under the Original Loan Agreement, as amended; (v)
the interest rate on the revolving line of credit will continue
at 1.75% over prime, with a rate adjustment to 1.5% if net income
applicable to Common Stock of the Company is equal to or greater
than $1,500,000 for fiscal year ended December 31, 2000; (vi) the
monthly service fee shall increase from $1,700 to $2,000; (vii)
government receivables will be limited to 20% of eligible
accounts receivable; and (viii) certain obligations of CM shall
be paid at closing of the acquisition of CCC, CCG and CM. The
Loan Amendment became effective on June 1, 1999, when the Stock
Purchase Agreements were consummated. Payments under the term
loan commenced on June 1, 1999, with monthly principal payments
of approximately $78,000 and a final balloon payment in the
amount of $938,000 on June 1, 2002. The Company incurred
approximately $40,000 in additional financing fees relating to
the closing of this amendment, which is being amortized over the
remaining term of the agreement.
Under the terms of the Original Loan Agreement, as amended, the
Company has agreed to maintain an Adjusted Net Worth (as defined
in the Original Loan Agreement) of not less than $3,000,000
throughout the term of the Original Loan Agreement, which was
amended, pursuant to the above noted acquisition. The adjusted
net worth covenant requirement ranges from a low of $1,200,000 at
June 1, 1999, to a high of $3,000,000 from July 1, 2000, through
the remaining term of the Loan Agreement. The covenant
requirement at March 31, 2000, was $2,000,000, which the Company
was in compliance with. The Company has agreed that it will not
pay any dividends on any shares of capital stock of the Company,
except that dividends may be paid on the Company's shares of
Preferred Stock outstanding as of the date of the Loan Amendment
(collectively, "Excepted Preferred Stock") under the terms of the
applicable Excepted Preferred Stock, if and when declared by the
Board of Directors of the Company pursuant to Delaware General
Corporation Law. If dividends on the Excepted Preferred Stock
are paid, the loan agreement provides that the Company must pay
the dividends in shares of Common Stock and not in cash, unless
prior consent is obtained. As security for the payment and
performance of the Original Loan Agreement, as amended, the
Company and its subsidiaries (including CCC, CCG and CM) have
granted a first security interest in all accounts receivable,
inventory, general intangibles, equipment and certain of their
other assets, as well as the mortgage on two facilities owned by
subsidiaries of the Company, except for certain real property
owned by CM, for which a first security interest is held by the
TPS Trust and the ALS Trust as security for CM's non-recourse
guaranty of the payment of the Promissory Notes. All other terms
and conditions of the original loan remain unchanged.
As of March 31, 2000, borrowings under the revolving loan
agreement were approximately $6,726,000, an increase of $835,000
over the December 31, 1999, balance of $5,891,000. The balance
under the term loan at March 31, 2000, was $2,969,000, a decrease
of $234,000 from the December 31, 1999, balance of $3,203,000.
As of March 31, 2000, the Company's borrowing availability under
the Congress credit facility, based on its then outstanding
eligible accounts receivable, was approximately $1,627,000.
Pursuant to the terms of the Stock Purchase Agreements in
connection with the acquisition of CCC, CCG and CM, a portion of
the consideration was paid in the form of the Promissory Notes,
in the aggregate amount of $4,700,000 payable to the former
owners of CCC, CCG and CM. The Promissory Notes are paid in
equal monthly installments of principal and interest of
approximately $90,000 over five years with the first installment
due on July 1, 1999, and having an interest rate of 5.5% for the
18
<PAGE>
first three years and 7% for the remaining two years. The
aggregate outstanding balance of the Promissory Notes total
$4,070,000 at March 31, 2000, of which $881,000 is in the current
portion. Payments of such Promissory Notes are guaranteed by CM
under a non-recourse guaranty, which non-recourse guaranty is
secured by certain real estate owned by CM.
As of March 31, 2000, total consolidated accounts payable for
continuing operations was $6,697,000, a decrease of $890,000 from
the December 31, 1999, balance of $7,587,000. This decrease in
accounts payable is partially reflective of the increased borrowing
level under the revolving loan agreement, which funds were utilized
to reduce certain payables.
Our net purchases of new capital equipment for continuing
operations for the three-month period ended March 31, 2000,
totaled approximately $786,000. 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 and $216,000 through various other lease financing
sources. We have budgeted capital expenditures of approximately
$4,000,000 for 2000, 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.
The working capital deficit position at March 31, 2000, was
$491,000, as compared to a deficit position of $1,400,000 at
December 31, 1999, which reflects an improvement in this position
of $909,000 during the first quarter of 2000. The working
capital deficit position is principally a result of the impact of
the CCC, CCG and CM acquisition, effective June 1, 1999. The
consideration was paid in the form of cash, debt and equity, with
the cash portion being $1,000,000, funded out of current working
capital and the debt portion being $4,700,000 in the form of
three promissory notes, paid over five years. The Congress term
loan was also increased by $2,083,000 pursuant to this
acquisition, which resulted in an increase in the current
portion of the term loan debt. We also assumed certain other
liabilities pursuant to this acquisition, including the accrued
environmental liability related to the CM facility in Detroit,
Michigan, and the CCG Facility in Valdosta, Georgia, both of
which are long term remedial projects, with increased spending in
this first year. These two remedial projects contributed
$1,007,000 to this working capital deficit. Additionally, we
continue to invest current cash proceeds into the long term
capital improvements of our operating facilities as discussed
above. However, we were able to improve on this working capital
position during the first quarter, principally from cash flow
from operations, borrowings on the revolving loan and proceeds
from the issuance of stock.
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"). 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, and paid the initial
settlement payment amount of $150,000 in October 1999 and an
installment of $37,000 in March 2000. The remaining amount of
$38,000 is to be paid on September 15, 2000.
The accrued dividends on the outstanding Preferred Stock for
the period July 1, 1999, through December 31, 1999, in the amount
of approximately $109,000 were paid in February 2000, in the form
of 95,582 shares of Common Stock of the Company. The dividends
for the period January 1, 2000, through March 31, 2000, total
$54,000, of which $3,000 was paid in conjunction with the first
quarter 2000 conversions and $51,000 will be paid in July 2000,
in the form of Common Stock, or if approved by the lender, at the
Company's option, in the form of cash.
19
<PAGE>
In order to fund the cash portion of the purchase price
relating to the proposed acquisition of DSSI, as discussed above,
and to provide the Company additional liquidity to fund other
capital expenditures and the continuing growth of the Company,
the Company has retained Ryan, Beck & Co. and Larkspur Capital
Corporation (collectively, the "Agents") as its financial
advisors in the private placement of new debt and possible
equity. There are no assurances that the Company will be
successful in arranging lenders to participate in the private
placement, or if participants are available, that the private
placement can be completed on terms satisfactory to the Company.
In connection with the retention of the Agents as financial
advisors to the Company, the Company has granted the Agents or
their permitted designees a five-year warrant to purchase up to
150,000 shares of the Company's Common Stock ("Retainer
Warrants"). If the Company is successful in finalizing the
private placement prior to termination of the agreement with the
Agents or within twelve months following termination of the
agreement with the Agents and the placement involves a party
contacted by the Agents prior to the termination, the Company
has agreed to pay the Agents certain cash fees and additional
warrants.
In summary, we have continued to take steps to improve our
operations and liquidity as discussed above. However, with the
acquisition in 1999, we incurred and assumed certain debt
obligations and long-term liabilities, which had a short term
impact on liquidity. If we are unable to continue to improve our
operations and to continue profitability in the foreseeable
future, such would have a material adverse effect on our
liquidity position.
Environmental Contingencies
The Company is engaged in the Waste Management Services segment
of the pollution control industry. As a participant in the
on-site treatment, storage and disposal market and the off-site
treatment and services market, the Company is subject to rigorous
federal, state and local regulations. These regulations mandate
strict compliance and therefore are a cost and concern to the
Company. The Company makes every reasonable attempt to maintain
complete compliance with these regulations; however, even with a
diligent commitment, the Company, as with many of its
competitors, may be required to pay fines for violations or
investigate and potentially remediate its waste management
facilities.
The Company routinely uses third party disposal companies, who
ultimately destroy or secure landfill residual materials
generated at its facilities or at a client's site. The Company,
compared to its competitors, disposes of significantly less
hazardous or industrial by-products from its operations
due to rendering material non-hazardous, discharging treated
wastewaters to publicly-owned treatment works and/or processing
wastes into saleable products. In the past, numerous third party
disposal sites have improperly managed wastes and consequently
require remedial action; consequently, any party utilizing these
sites may be liable for some or all of the remedial costs.
Despite the Company's aggressive compliance and auditing
procedures for disposal of wastes, the Company could, in the
future, be notified that it is a PRP at a remedial action site,
which could have a material adverse effect on the Company.
20
<PAGE>
In addition to budgeted capital expenditures of $4,000,000 for
2000 at the TSD facilities, which are necessary to maintain
permit compliance and improve operations, as discussed above in
this Management's Discussion and Analysis, we have also budgeted
for 2000 an additional $1,656,000 in environmental expenditures
to comply with federal, state and local regulations in connection
with remediation of certain contaminates at four locations. The
four locations where these expenditures will be made are a parcel
of property leased by a predecessor to PFD in Dayton, Ohio (EPS),
a former RCRA storage facility as operated by the former owners
of PFD, PFM's facility in Memphis, Tennessee, CCG's facility in
Valdosta Georgia and CM's facility in Detroit, Michigan. We have
estimated the expenditures for 2000 to be approximately $254,000
at the EPS site, $265,000 at the PFM location, $499,000 at the
CCG site and $638,000 at the CM site, of which $83,000, $63,000,
$23,000 and $127,000 were spent during the first quarter of 2000,
respectively. 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 four
sites from funds generated internally, however, no assurances can
be made that we will be able to do so.
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, "1999" would be held in the memory of a computer as
"99."
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, after 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
requested information regarding the computer systems of our key
suppliers, customers, creditors, and financial service
organizations and were informed that they are substantially Year
2000 compliant. As of the date of this Report, the Company has
experienced no Year 2000 disruptions to its operations since the
year 2000 began. 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.
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 as amended by FAS 137 is
effective for periods beginning after June 15, 2000.
Historically, we have not entered into derivative contracts.
Accordingly, FAS 133 is not expected to affect our financial
statements.
21
<PAGE>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
PART I, ITEM 3
The Company is exposed to certain market risks arising from
adverse changes in interest rates, primarily due to the potential
effect of such changes on the Company's variable rate loan
arrangements with Congress, as described under Note 5 to Notes to
Consolidated Financial Statements. The Company does not use
interest rate derivative instruments to manage exposure to
interest rate changes.
22
<PAGE>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
PART II - Other Information
Item 1. Legal Proceedings
_________________
There are no additional material legal proceedings pending
against the Company and/or its subsidiaries not previously
reported by the Company in Item 3 of its Form 10-K for the year
ended December 31, 1999, which Item 3 is incorporated herein by
reference.
Item 5. Other Information
_________________
The Company has entered into a stock purchase agreement dated
May 16, 2000, to purchase Diversified Scientific Systems, Inc.
("DSSI") from Waste Management, Inc. ("Seller"), subject to certain
conditions being met. Under the terms of the agreement, upon completion
of the purchase of DSSI, the Company is to pay the Seller $8.5 million,
subject to the purchase price being increased or decreased under
certain conditions, with $5 million payable in cash at closing
and the balance evidenced by a promissory note (the "Note"). The
Note is to be for a term of five years, will bear an annual rate
of interest of 7%, with accrued interest payable annually and the
principal amount payable in one lump sum at the end of the
five-year term. DSSI's facility, located in Kingston, Tennessee,
is permitted to transport, store and treat hazardous waste and
mixed waste (waste containing both low level radioactive and
hazardous waste) and to dispose of or recycle mixed waste in
DSSI's incinerator located at DSSI's facility. The agreement
provides that if the acquisition by the Company of DSSI is not
completed within 90 days from May 16, 2000, or such longer period
as is necessary to obtain approvals of applicable governmental
authorities relating to the permits and licenses of DSSI
necessary to consummate the transaction, either party may
terminate the agreement, except under limited circumstances. See
Note 4 to Notes to Consolidated Financial Statements and the
"Management's Discussion and Analysis of Financial Condition and
Results of Operations--Proposed Acquisition" and "-Liquidity and
Capital Resources of the Company."
In connection with the retention of Ryan, Beck & Co. and
Larkspur Capital Corporation (collectively, the "Agents") as
financial advisors to the Company, the Company has granted the
Agents or their permitted designees a five-year warrant to
purchase up to 150,000 shares of the Company's Common Stock
("Retainer Warrants"). If the Company is successful in
finalizing the private placement as discussed in the
"Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity" prior to termination of the
agreement with the Agents or within twelve months following
termination of the agreement with the Agents and the placement
involves a party contacted by the Agents prior to the termination,
the Company has agreed to pay the Agents certain cash fees and
certain additional warrants.
23
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
________________________________
(a) Exhibits
________
2.1 Stock Purchase Agreement, dated May 16, 2000,
between the Company and Waste Management, Inc.
regarding the purchase of DSSI. Schedules and
exhibits attached thereto are omitted, but such
will be provided to the Commission upon request.
10.1 Form of Warrant Agreement between the Company,
Ryan, Beck & Co., Inc. and Larkspur Capital
Corporation.
27 Financial Data Schedule
(b) Reports on Form 8-K
___________________
No report on Form 8-K was filed by the Company during
the first quarter of 2000.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, hereunto duly authorized.
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
Date: May 17, 2000 By: /s/ Louis F. Centofanti
___________________________________
Dr. Louis F. Centofanti
Chairman of the Board
Chief Executive Officer
By: /s/ Richard T. Kelecy
___________________________________
Richard T. Kelecy
Chief Financial Officer
25
<PAGE>
<PAGE>
EXHIBIT INDEX
_____________
Exhibit Sequential
No. Description Page No.
_______ ___________ __________
2.1 Stock Purchase Agreement, dated May 16,
2000, between the Company and Waste
Management, Inc. regarding the purchase
of DSSI. Schedules and exhibits attached
thereto are omitted, but such will be
provided to the Commission upon request. 27
10.1 Warrant Agreement, between the Company,
Ryan, Beck & Co., Inc. and Larkspur Capital
Corporation. 60
27 Financial Data Schedule. 69
STOCK PURCHASE AGREEMENT
BETWEEN
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
AND
WASTE MANAGEMENT HOLDINGS, INC.
May 16, 2000
<PAGE>
DIVERSIFIED SCIENTIFIC SERVICES, INC.
STOCK PURCHASE AGREEMENT
THIS AGREEMENT entered into this 16th day of May, 2000, by
and between Perma-Fix Environmental Services, Inc., a Delaware
corporation, with its principal place of business located at 1940
NW 67th Place, Suite A, Gainesville, FL 32653, (the "Buyer") and
Waste Management of Holdings, Inc., a Delaware corporation, with
a principal place of business located at 3900 S. Wadsworth
Boulevard, Suite 800, Lakewood, Colorado 80235 (the "Seller").
The Buyer and the Seller are referred to collectively herein as
the "Parties."
WHEREAS, the Seller is the sole and exclusive owner of all
of the issued and outstanding capital stock of Diversified
Scientific Services, Inc. a Tennessee corporation, ("DSSI"); and
WHEREAS, the Seller desires to sell, convey, transfer,
assign and deliver to Buyer, and Buyer desires to purchase from
Seller, all of the issued and outstanding capital stock of DSSI
for cash and Buyer's Stock (as defined below); and
WHEREAS, the Board of Directors of Buyer and Seller,
respectively, have approved and adopted this Agreement.
Now, therefore, in consideration of the premises and mutual
promises herein made, and in consideration of the
representations, warranties and covenants herein contained, the
Parties agree as follows:
1. Definitions.
(a) "Adverse Consequences" means all actions, suits
proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, penalties, fines, costs, liabilities,
obligations,, taxes, liens, losses, expenses, and fees, including
court costs and reasonable attorneys' fees and expenses.
(b) "Affiliates" has the meaning set forth in Rule 405
promulgated under the Securities act (as defined below), whether
or not such is an affiliate now or becomes an Affiliate after the
date hereof.
(c) "Buyer" has the meaning set forth in the preface
above.
(d) "Buyer's Note" has the meaning set forth in
Article 2(b) below.
(e) "Cash" means any cash and cash equivalents
(including marketable securities and short term investments)
calculated in accordance with GAAP applied on a basis consistent
with the preparation of the Financial Statements.
(f) "Closing" has the meaning set forth in Article
2(d) below.
2
<PAGE>
(g) "Closing Date" has the meaning set forth in
Article 2(d) below.
(h) Intentionally left blank.
(i) "Environmental Laws" mean all federal, state, and
local environmental, radioactive, health and safety Laws, codes,
ordinances and all rules and regulations promulgated thereunder,
including without limitation, Laws relating to emissions,
discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic, radioactive 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, or
industrial, solid, toxic, hazardous or radioactive substances or
wastes.
(j) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations
promulgated thereunder.
(k) "Financial Statement" has the meaning set forth in
Article 6(f) below.
(l) "GAAP" means United States generally accepted
accounting principles as in effect from time to time.
(m) "Hart-Scott-Rodino Act" means the Hart-Scott
Rodino Antitrust Improvements Act of 1976, as amended.
(n) "Knowledge" means the knowledge of the following
officers of DSSI, the Seller, or any of their Affiliates, Joel
Eacker, Breke Harnagel, Gail Strobel, Pat Hopper and Andrew
Roseman.
(o) "Laws" mean any and all Laws, rules, regulations,
codes, ordinances, judgments, injunctions, decrees and policies.
(p) "Liens" mean all security interests, liens,
mortgages, claims, charges, pledges, restrictions, equitable
interests, easements, property rights or encumbrances of any
nature.
(q) "Ordinary Course of Business" means the ordinary
course of business of a party consistent with such party's custom
and practice including with respect to quantity and frequency.
(r) "Party" has the meaning set forth in the preface
above.
(s) "Proprietary Right" means any trade name,
trademark, service mark, patent or copyright and any application
for any of the foregoing owned or used by DSSI
3
<PAGE>
(t) "Purchase Price" has the meaning set forth in
Article 2(b) below.
(u) "Real Property" means all real property, land,
buildings, improvements and structures owned or leased by DSSI
and all mineral rights thereunder owned by DSSI.
(v) "Returns" mean all returns, declaration, reports,
estimates, information returns and statements required to be
filed with or supplied to any taxing authorities in connection
with any Taxes.
(w) "Securities Act" means the Securities Act of 1933,
as amended.
(x) "Securities Exchange Act" means the Securities
Exchange Act of 1934, as amended.
(y) "Seller" has the meaning set forth in the preface
above.
(z) "Shares" mean all of the issued and outstanding
shares of capital stock of DSSI of whatsoever character and
description.
(aa) "Subsidiaries" means all corporations or other
entities 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.
(bb) "Taxes" mean all taxes, charges, fees, levies or
other assessments, including, without limitation, income, gross
receipts, excise real and personal property, sales, transfer,
license, payroll and franchise taxes, imposed by any governmental
authority and shall include any interest, penalties or additions
to tax attributable to any of the foregoing.
(cc) "Tennessee EPA" means the Tennessee Department of
Environment and Conversation.
2. Purchase and Sale of DSSI Shares.
(a) Basic Transaction. On and subject to the terms
and conditions of this Agreement, at the Closing, the Buyer
agrees to purchase from the Seller, and the Seller agrees to
sell, transfer and convey to the Buyer, all of the issued and
outstanding Shares, free and clear of any and all Liens, for the
consideration specified below in this Article 2.
(b) Purchase Price. The Buyer agrees to pay to
the Seller at the Closing $8,500,000 (the "Purchase Price") by
delivery of
(1) its promissory note (the "Buyer's Note") in
the form of Exhibit A attached hereto in the aggregate principal
amount of $3,500,000 (plus or minus the adjustments to be made to
the Purchase Price pursuant to this agreement) and bearing
interest at a rate of 7% per annum on any unpaid principal
4
<PAGE>
balance and having a term of five years from the Closing Date,
with interest payable annually and principal due in lump sum at
the end of the five year term; and
(2) $5,000,000 in cash payable by wire transfer
to Seller at Closing.
(c) Adjustments to Purchase Price.
(1) At the Closing, the Purchase Price shall be
adjusted as follows: The Seller and the Buyer shall jointly
prepare an unaudited balance sheet of DSSI as of the end of the
month immediately preceding the Closing Date ("Balance Sheet of
DSSI"), which Balance Sheet of DSSI shall be prepared in
accordance with GAAP applied on a consistent basis with the
December Balance Sheet. If the Net Assets (as defined below) of
DSSI calculated pursuant to the Balance Sheet of DSSI is greater
than the Net Assets of DSSI calculated pursuant to the December
Balance Sheet (as defined I subsection 5(f) hereof), then the
Purchase Price shall be increased by the exact amount of such
difference. If the Net Assets of DSSI calculated pursuant to the
Balance Sheet of DSSI is less than the Net Assets of DSSI
calculated pursuant to the December Balance Sheet, then the
Purchase Price shall be reduced by the exact amount of such
difference. For the purposes of this Agreement, "Net Assets"
means the amount by which the total assets (less goodwill,
general intangibles, receivables due from Seller and/or any other
Affiliates of DSSI and any investments in Subsidiaries) of DSSI
exceeds the total liabilities (less payables or other amounts due
to Seller or any other Affiliates of DSSI, any investments in
Subsidiaries and accrued income taxes) of DSSI as determined
under GAAP and consistently applied; and
(2) Within 30 days after the Closing, Seller and
Buyer shall jointly prepare an unaudited balance sheet of DSSI as
of the end of the day immediately preceding the Closing ("Closing
Balance Sheet"), which balance sheet shall be prepared in
accordance with GAAP applied on a consistent basis with the
Balance Sheet of DSSI. If the Net Assets (as defined in
subsection 2(b) above) of DSSI calculated pursuant to the Balance
Sheet of DSSI is greater than the Net Assets of DSSI used for
calculating the Purchase Price under subsection 2(c)(1) above,
then the Buyer shall pay such difference to the Seller within 45
days from the date of the Closing. If the Net Assets of DSSI
calculated pursuant to the Closing Balance Sheet is less than the
Net Assets of DSSI used for calculating the Purchase Price under
subsection 2(c)(1) above, then the Seller shall pay such
difference to the Buyer within 45 days from the date of the
Closing.
(3) Any adjustment to the Purchase Price made
pursuant to this section 2(c) shall be made by adjustment to the
principal amount due under the Buyer's Note.
(d) The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place
at the offices of Burns, Figa & Will, P.C. 6400 South Fiddlers
Green Circle, Suite 1030, Englewood, Colorado, 80111, commencing
at 10:00 a.m. Mountain Time on the second business day following
satisfaction or waiver of all conditions to the obligations of
the Parties to consummate the transactions contemplated hereby or
such other date as the Buyer and Seller may mutually determine
(the "Closing Date"). If the Closing has not occurred on or
before the later of 90 days from the date of this Agreement or
5
<PAGE>
such longer period as is necessary to obtain the approvals of the
applicable government authorities relating to the permits and
licenses of DSSI as necessary to consummate the transaction
contemplated hereunder, then either of the Parties may terminate
this agreement by giving of written notice of such termination;
except that a Party may not terminate this Agreement if the
Closing has not occurred by the later of 90 days from the date of
this Agreement or such longer period as is necessary to obtain
the approvals of the applicable government authorities relating
to the permits and licenses of DSSI as necessary to consummate
the transaction contemplated hereunder due to such Party's breach
of its representations, warranties and covenants contained
herein.
(e) Deliveries at the Closing. At the Closing,
(1) the Seller will deliver to the Buyer the
various certificates, instruments and documents referred to in
Articles 7 & 9 below required to be delivered by Seller;
(2) the Buyer will deliver to the Seller the
various certificates, instruments and documents referred to in
Articles 7 & 9below required to be delivered by Buyer;
(3) the Seller will deliver to the Buyer stock
certificates representing all of the issued and outstanding
Shares, duly and validly endorsed in the name of Buyer, free and
clear of any and all Liens; and
(4) the Buyer will deliver to the Seller the
consideration specified in Article 2(b) above.
3. Representations and Warranties of the Seller.
The Seller represents and warrants to the Buyer that the
statements contained in this Article 3 are correct and complete
in all material respects as of the date of this Agreement and
will be correct and complete as of the Closing Date.
(a) Organization of Seller. The Seller is a duly
organized, validly existing corporation, and is in good standing
under the Laws of the state of Delaware.
(b) Authorization of Transactions. The Seller has
full power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the
Seller, enforceable against the Seller in accordance with its
terms and conditions. Except as set forth in Schedule 3(b)
hereof, or the terms of this Agreement, Seller need not give any
notice to, make any filing with, or obtain any authorization,
consent or approval of any government or governmental agency in
order to consummate the transactions contemplated by this
Agreement.
(c) Non-contravention. To the best knowledge of
Seller, neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will
violate any constitution, statute, regulation, rule, permit,
agreement, injunction, judgment, order, decree, ruling, charge,
6
<PAGE>
or other restriction of any government, governmental agency, or
court to which Seller is subject, or any provision of its
articles of incorporation or bylaws.
(d) Brokers' Fees. The Seller has no liability or
obligation to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this
Agreement for which Buyer could become liable or obligated.
(e) Investment. The Seller
(1) understands that the Buyer's Note has not
been, and will not be registered under the Securities Act, or
under any applicable state securities Laws, and is being offered
and sold in reliance upon federal and state exemptions fro
transactions not involving any public offering ;
(2) is acquiring the Buyer's Note solely for its
own account for investment purposes, and not with a view to
distribution thereof;
(3) is a sophisticated investor with knowledge
and experience in business and financial matters;
(4) is an accredited investor (as such term is
defined in Rule 501 of Regulation D promulgated under the
Securities act), as the Seller is a corporation with total assets
in excess of $5,000,000;
(5) has received true and correct copies of the
following documents which have been filed with the Securities and
Exchange Commission ("Commission");
(i) the Annual Report on Form 10-K for the
year ended December 31, 1999;
(ii) Form 10-Q for the quarter ended March 31,
1999;
(iii) Form 10-Q for the quarter ended June 30,
1999;
(iv) Form 10-Q from the quarter ended
September 30, 1999, as amended by form 10-Q/A dated January 18,
2000;
(v) Forms 8-K, dated April 21, 1999, June 16,
1999 (as amended by form 8-K/A, dated August 16, 1999, and
February 15, 2000; and
(vi) Proxy Statement for 1999 annual
shareholders' meeting.
(6) is able to bear the economic risk and lack of
liquidity inherent in holding the Buyer's Note; and
7
<PAGE>
(7) Agrees that the Buyer's Note will bear a
legend stating in substance:
This Note has been acquired for investment
and has not been registered under the
Securities Act of 1933, as amended
("Securities Act"), in reliance on an
exception contained in the Securities Act.
This Note may only be transferred pursuant to
an effective registration statement under the
Securities Act and any applicable state
securities laws unless there is furnished to
the Buyer an opinion of counsel or other
evidence satisfactory to Buyer to the effect
that such registration is not required. This
Note is subject to the terms and conditions
of that certain Stock Purchase Agreement,
dated May 16, 2000, between the Maker and the
Payee of this Note.
(f) DSSI Shares. Seller owns of record and
beneficially all of the Shares free and clear of any and all
Liens or restrictions on transfer, taxes, options, warrants,
purchase rights, contracts, commitments, equities, claims, or
demands. The Seller is not, directly or indirectly, a party to
any option, warrant purchase right, or other contract or
commitment that could require the Seller to sell, transfer, or
otherwise dispose of any capital stock of DSSI. The Seller is
not a party to any voting trust, proxy or other agreement or
understanding with respect to the voting of any capital stock of
DSSI.
4. Representations and Warranties of the Buyer.
The Buyer represents and warrants to the Seller that the
statements contained in this Article 4 are correct and complete
in all material respects as of the date of this Agreement and
will be correct and complete as of the Closing Date.
(a) Organization of Buyer. The Buyer is a duly
organized, validly existing corporation, and is in good standing
under the Laws of the state of its incorporation.
(b) Authorization of Transactions. The Buyer has full
power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of the Buyer,
enforceable against the Buyer in accordance with its terms and
conditions, subject to bankruptcy, insolvency and other law of
similar import. Except as set forth in Schedule 4(b) hereof or
the terms of this Agreement or as may be required under DSSI
permit, license or under any environmental laws relating to DSSI
or the acquisition of DSSI, Buyer need not give any notice to,
make any filing with, or obtain any authorization, consent or
approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
(c) Non-contravention. To the best knowledge of
Buyer, neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will
violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of
8
<PAGE>
any government, governmental agency, or court to which Buyer is
subject, or any provision of its articles of incorporation or
bylaws, provided however, this provision shall not apply to any
limitations, restrictions, or conditions contained in any of the
DSSI permits or licenses, or on any of the Environmental Laws
relating to DSSI or the acquisition of DSSI.
(d) Brokers' Fees. The Buyer has no liability or
obligation to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this
Agreement for which Seller could become liable or obligated.
(e) Investment. The Buyer is not acquiring the Shares
with a view to or for sale in connection with any distribution
thereof within the meaning of the Securities Act.
(f) Financial Statements. Buyer has previously
delivered to the Seller the following financial statements
(collectively the "Buyer Financial Statements"):
(1) audited balance sheet and statement of income
for the fiscal years ended December 31, 1997, December 31, 1998
and December 31, 1999 for Buyer; and
(2) unaudited balance sheets and statements of
income for the three (3) month period ended March 31, 2000 for
the Buyer.
The above referenced financial statements of the Buyer have
been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby and present fairly
the financial condition of Buyer as of such dates and the results
of operations of Buyer for such periods.
5. Representations and Warranties Concerning DSSI.
The Seller represents and warrants to the Buyer that to its
Knowledge the statements contained in this Article 5 are correct
and complete in all material respects as of the date of this
Agreement and will be correct and complete as of the Closing
Date,
(a) Organization, Qualification and Corporate Power.
DSSI is a corporation duly organized, validly existing and in
good standing under the Laws of the state of its incorporation.
DSSI is duly authorized to conduct business and is in good
standing under the Laws of each jurisdiction where such
qualification is required, except where the lack of such
qualification would not have a material adverse effect on the
financial condition or operation of DSSI. DSSI has full
corporate power and authority to carry on the business in which
it is engaged and to own and use the properties owned and used by
it. Schedule 5 (a) lists the officers and directors of DSSI.
(b) Capitalization. The authorized capital stock of
DSSI consists of 2,000,000 shares of common stock, no par value
(DSSI Common Stock) of which 1,800,000 shares are issued and
outstanding. All of the issued and outstanding shares of capital
stock of DSSI have been duly authorized, are validly issued,
fully paid and non-assessable free and clear of any and all
liens, and are all owned of record and beneficially by the
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Seller. There are no outstanding or authorized options warrants,
purchase rights, subscription rights, conversion rights, exchange
rights or other contracts or commitments that could require DSSI
to issue, sell or otherwise cause to become outstanding any of
its capital stock. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation or similar
rights with respect to DSSI.
(c) Non-contravention. Except as set forth in
Schedule 5(c), neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby, will
(1) violate any constitution, statute,
regulation, rule, license, permit, agreement, injunction,
judgment, order, decree, ruling charge or other restriction of
any government, governmental agency or court to which DSSI is
subject or any provision of its articles of incorporation or
bylaws; or
(2) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement, permit,
contract, lease, license, instrument, or other arrangement to
which DSSI is a party or by which it is bound or to which any of
its assets is subject, except where the violation, conflict,
breach, default, acceleration, termination, modification,
cancellation, or failure to give notice would not have a material
adverse effect on the financial condition of DSSI or on the
ability of the parties to consummate the transactions
contemplated by this Agreement. DSSI is required to obtain
approval or provide notice to the governmental agencies that
issued the permits and/or licenses set forth in Schedule 5(o).
(d) Brokers' Fees. DSSI has no liability or
obligation to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this
Agreement.
(e) Title to Tangible Assets. Except as disclosed in
Schedule 5(e), DSSI has good and marketable title to, or a valid
leasehold interest in, the material tangible assets used in the
conduct of its business free and clear of any and all Liens.
(f) Financial Statements. Seller shall prior to
Closing furnish Buyer with the following financial statements:
(1) audited balance sheet and statement of income
of DSSI for the fiscal year ended December 31, 1999 ("December
Balance Sheet") and the audited balance sheet and statement of
income of DSSI for the fiscal years ended December 31, 1997 and
December 31, 1998;
(2) unaudited balance sheet and statement of
income of DSSI for the three months ended March 31, 2000; and
(3) audited statement of cash flow for the fiscal
years ended December 31, 1997, December 31, 1998 and December 31,
1999.
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The above-referenced financial statements of DSSI are true,
correct and complete in all material respects and correctly
present the financial conditions and results of operations of
DSSI as of the date thereof. The audited financial statements of
DSSI for the fiscal year ended December 31, 1999 are hereinafter
referred to as the "December Financial Statements." The
financial statements for the three months ended March 31, 2000
are herein after referred to as "March Financial Statements". The
December Financial Statements and the March Financial Statements
are together referred to as the "Financial Statements". For the
purposes of this Agreement, the Unaudited Financial Statements
shall be deemed to include any notes to such financial
statements. The Unaudited Financial Statements have been
prepared in conformity with GAAP, consistently applied throughout
the periods indicated and on a basis consistent with prior
periods.
(g) Liabilities. Except as set forth in the Schedule
5(g) attached hereto, DSSI does not have any liabilities or
obligations either accrued, absolute, contingent, matured or
unmatured or otherwise which have not been:
(1) reflected on the December Financial
Statements; or
(2) incurred consistent with past practices of
DSSI in the ordinary and normal course of DSSI's
business since the date of the December Financial
Statements.
(h) Events Subsequent to December
Financial Statements. Since the December Financial Statements,
there has not been any material adverse change in the financial
condition of DSSI. Without limiting the generality of the
foregoing, since that date DSSI has not engaged in any practice,
taken any action or entered into any transaction outside the
ordinary course of business the primary purpose or effect of
which has been to generate or preserve cash.
(i) Legal Compliance. Except as disclosed in Schedule
5(i), in all material respects DSSI has complied with all
applicable permits, laws, statutes, ordinances rules and
regulations of all federal, state and local government or
governmental agency with jurisdiction over DSSI operations or
real property. DSSI has and is operating the incinerator located
on the Gallaher Road property in Roane County, Tennessee in
accordance with the incinerator permits. Neither DSSI nor Seller
is aware of any threatened claim or litigation, which could
materially and adversely affect the financial condition, results
of operations or business, assets or properties of DSSI or the
conduct of business of DSSI
(j) Real Property.
(1) Schedule 5(j)(1) lists all Real Property
owned by DSSI. With respect to each such parcel of owned Real
Property:
(i) DSSI has good and marketable title to
the parcel of Real Property and all mineral rights thereunder,
free and clear of any and all Liens except for installments of
special assessments not yet delinquent and or, recorded
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easements, covenants and other restrictions which do not
materially affect the value of the Real Property or materially
interfere with the present use of such Real Property;
(ii) there are no leases, subleases,
concessions or other agreements granting to any party or parties
the right to use or occupy any portion of the real property; and
(iii) there are no outstanding options or
rights of first refusal to purchase the parcel of Real Property
or any mineral rights contained therunder, or any portion thereof
or interest therein.
(2) Schedule 5(j)(2) lists all of the Real
Property leased or subleased to DSSI. The Seller has made
available to the Buyer for inspection correct and complete copies
of the leases and subleases listed in Schedule 5(j)(2). Each of
the leases and subleases listed is legal, valid, binding,
enforceable and in full force and effect, except where the
illegality, invalidity, nonbinding nature, unenforceability or
ineffectiveness would not have a material adverse effect on
DSSI.
Seller will at its sole cost and expense provide Buyer with
a title guarantee or policy and an ALTA survey to all Real
Property described in 5(j)(1) above meeting the requirements of
Section 5(j)(1) and the requirements of 7(i) hereof.
(3) Except as set forth on Schedule 5(j)(3), none
of the Real Property owned or Real Property leased by DSSI is
contaminated or requires remediation of any kind under any
Environmental Law as a result of being contaminated.
(k) Patents and Trademarks.
(1) Schedule 5(k) attached hereto is a true and
complete list of all patents and applications, trade names,
trademark registrations and applications, common law trademarks,
copyrights and copyright registrations and applications, which
DSSI owns, uses or has the right to use that are necessary to the
conduct of DSSI's business. Schedule 5(k) also correctly sets
forth all patents and applications, trade names, trademark
registrations and applications, common law trademarks, copyrights
and copyright registrations and applications, which relate to the
business of DSSI and which are directly or indirectly owned or
controlled by any director, officer, shareholder, employee or
Affiliate of DSSI and used by DSSI. There are no claims or
demands from any other person, firm or corporation pertaining to
any of such patents and applications, trade names, trademark
registrations and applications, common law trademarks, copyrights
or copyright registrations and applications and no proceedings
have been instituted or are pending or to the knowledge of
Seller, threatened, which challenge the rights of DSSI, in
respect thereof, except as shown on Schedule "5(k)." None of
such patents and applications, trade names, trademark
registrations and applications, common law trademarks, copyrights
or copyright registrations and applications, as the case may be,
is subject to any outstanding order, judgment, decree,
stipulation, or agreement restricting the use of such patents,
trade names, trademarks or copyrights, and to Seller's knowledge
none infringes on, or is being infringed by, other patents, trade
names, trademarks or copyrights. DSSI has not given and is not
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bound by an agreement indemnification for patent, trade name,
trademark or copyright infringement as to any property produced,
used or sold by DSSI.
(2) DSSI is not, or will as a result of the
execution and delivery of this Agreement or the performance by
Seller of its obligations under this Agreement or otherwise, be
in breach of any license, sublicense or other agreement relating
to the DSSI's Intellectual Property Rights, or any material
licenses, sublicenses and other agreements as to which DSSI is a
party and pursuant to which DSSI is authorized to use any third
party patents, trademarks or copyrights ("DSSI Third Party
Intellectual Property rights"), including software which is sued
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 DSSI, except as disclosed in Schedule "5(j)"
hereof.
(l) Contracts.
(1) Schedule 5(l) lists all written contracts and
other written agreements to which DSSI is a party the performance
of which will involve consideration in excess of $25,000.00. The
Seller has made copies of each contract or other agreement listed
in schedule 5(l) available to Buyer for inspection.
(2) except as set forth in Schedule 5(l), DSSI is
not a party to or bound by:
(i) any collective bargaining agreements or
any agreements that contain any severance pay liabilities or
obligations;
(ii) any bonus, deferred compensation,
pension, profit-sharing or retirement plans, programs or other
similar arrangements;
(iii) any employment agreement, contract
or commitment with an employee;
(iv) any agreement of guaranty or
indemnification running from DSSI to any person or entity,
including, but not limited to, any of its Affiliates;
(v) any agreement, contract or commitment
which would reasonably be expected to have a material adverse
impact on the business of DSSI;
(vi) any agreement, indenture or other
instrument which contains restrictions with respect to payment of
dividends or any other distribution in respect of DSSI or any
other outstanding securities of DSSI;
(vii) any agreement, contract or
commitment containing any covenant limiting the freedom of DSSI
to engage in any line of business or compete with any person;
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(viii) any agreement, contract or
commitment relating to capital expenditures in excess of twenty
five thousand dollars ($25,000.00) and involving future payments;
(ix) any agreement, contract or commitment
relating to the acquisition of assets or capital stock of any
business enterprise;
(x) 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;
(xi) any agreement, contract or commitment
not made in the ordinary course of business which involves Twenty
Five Thousand Dollars ($25,000.00) or more or has a remaining
term of one (1) year or more from December 31, 1999, or is not
cancelable on thirty (30) days or less notice without penalty.
DSSI has not breached, and there is not any claim, or, to the
best of Seller's or DSSI's knowledge, any claim that DSSI 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, of any such breach or breaches in the aggregate
could result in the imposition of damages or the loss of benefits
in an amount or a kind material to DSSI.
(xii) contractors, and other arrangements
of any kind, whether oral or written, with any directors,
officer, employee, trustee stockholder or Affiliate of DSSI;
(xiii) contracts, purchase orders and
other arrangements of any nature involving an expenditure of
Twenty Five Thousand Dollars ($25,000.00) 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); or
(xv) indentures, loan agreements, notes,
mortgages, conditional sales contracts, and other agreements for
financing.
(m) Litigation. Schedule 5(m) sets forth each
instance in which DSSI
(1) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge; or
(2) is a party to any action, suit, proceeding,
hearing or investigation of, in, or before any court or quasi-
judicial or administrative agency of any federal, state or local
jurisdiction, except where the injunction, judgment, order,
decree, ruling, action, suit, proceeding, hearing or
investigation would not have a material adverse effect on the
financial condition of DSSI.
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(n) Employee Benefits.
(1) Attached hereto as Schedule 5(n) is a list of
all Plans (as defined in Section 3(3) of ERISA) and other
retirement, profit-sharing, deferred compensation, bonus, stock
option, stock purchase and Plans and arrangements (individually,
a "Plan", and collectively, the "Plans") in which DSSI employees
participate. Seller has furnished Buyer current copies of all
such Plans. None of the Plans is sponsored or maintained by
DSSI.
(2) None of the Plans is a
"multiemployer Plan," as defined in Section 414(f) of the
Internal Revenue Code (the "Code") or Section 3(37) of ERISA.
DSSI has not completely or partially withdrawn from any
multiemployer Plan so as to incur any partial or full withdrawal
liability under Section 4201 of ERISA (without regard to
subsequent reduction or waiver of such liability under section
4207 or 4208 of ERISA). Consummation of this Agreement will not
result in either a complete or partial withdrawal from any
multi-
employer Plan.
(3) Except as set forth in
Schedule 5(n) the provisions and operation of each of the Plans
do not violate in any respect any provision of ERISA, the Code
or any other statute, rule, regulation, agreement or instrument
which governs the Plans. Seller and its Affiliates have or will
comply in all respects with all applicable ERISA reporting and
disclosure requirements with the Department of Labor ("DOL"),
Internal Revenue Service ("IRS"), participants and
beneficiaries, whether due before or after Closing Date. Seller
and its Affiliates have paid all premiums required by the
Pension Benefit Guaranty Corporation ("PBGC"). The information
supplied to the actuary by the Seller, DSSI or their Affiliates
for use in preparing those reports was complete and accurate and
neither Seller, DSSI nor any of their Affiliates has any reason
to believe that the conclusions expressed in such reports are
incorrect.
(4) Seller has paid to all the Plans all
contributions (including employer and employee) and premiums due
on or before the Closing Date. There are no unpaid premiums or
contributions, which are due or not provided for by Seller or its
Affiliates as of the Closing Date. Neither the Seller, DSSI, nor
any of their Affiliates has any accumulated funding deficiencies,
as such term is defined in ERISA and in the Code, with respect to
any Plan maintained or established for employees of DSSI.
Neither Seller, DSSI nor any of their Affiliates has incurred any
material liability to the PBGC (other than for payment of
insurance premiums, all of which have been paid, when due), the
IRS or the DOL with respect to any Plans that affect, or might
affect, DSSI.
(5) Except as set forth in Schedule 5(n) there
are no pending investigations by any governmental entity
involving any Plans relating to DSSI or any of the employees of
DSSI, no deficiency or termination proceedings involving such
Plans, and no threatened or pending claims (except for claims for
benefits payable in the normal operation of the Plans), suits or
proceedings against any Plan or asserting any rights or claims to
benefits under any such Plan (except for claims for benefits in
the ordinary course) nor are there any facts which would give
rise to any material liability in the event of any such
investigation, claim, suit or proceeding. Neither the Plans nor
any trusts created thereunder relating to DSSI or to any of the
DSSI employees, nor any trustee or 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 ERISA) which would could give rise to any material liability
to DSSI; 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 Plan by the PBGC, has
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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 DSSI or any such employee benefit to any
material liability for such tax. All employees of DSSI
participating in the Plan can be terminated from participation in
all such Plans by DSSI without DSSI incurring any liability or
obligations in any manner under the Plans to its employees or
otherwise.
(6) With respect to any of the Plans that the
Seller, DSSI, or any of their Affiliates is or intends to be a
qualified Plan under Section 401(a) of the Internal Revenue Code,
the Seller, DSSI or any of their Affiliates has received a
determination letter from the IRS to the effect that the Plan is
qualified under section 401 of the Code and the related trust is
exempt form federal income tax under Section 501 of the Code.
Nothing has occurred to cause the Loss of such qualification or
exemption.
(7) As of the Closing Date, certain employees of
DSSI that are employed by DSSI as of the Closing Date are
entitled to accrued vacation and sick time, the exact amounts of
which are set forth in Schedule 5(m) attached hereto and included
in the financial statements, subject to the provisions of Section
7 (f) hereof.
(o) Permits and Licenses.
(1) Schedule 5(o) attached hereto is a list of
all permits and licenses presently held by, or used in connection
with the normal and ordinary business of, DSSI and all
applications for any and all of the foregoing filed by DSSI under
any and all Environmental Laws. All permits held by or used by
DSSI to conduct its business or operations are in the name of
DSSI and none are in the name of any other party.
(2) DSSI is in material compliance with all the
terms and conditions of all permits and licenses listed in
Schedule 5(o) and with all other limitations, restrictions,
conditions, standards requirements or obligations contained in
such permits or licenses. Except as disclosed in schedule 5(o),
neither DSSI, Seller nor any of their Affiliates has received any
notice from any governmental entity that DSSI is in violation of
any permit, license or authorization held by DSSI or under which
it is conducting its business as currently being conducted or has
received notice of any violations of any Environmental Laws
(p) Closure and Post Closure. In connection with DSSI
meeting its closure and post closure financial assurance
requirements, Seller or DSSI has had issued through Frontier
Insurance company, Bond # 119932 in the sum of $12,732,834
("Closure and Post Closure Bond"). At the Closing, Buyer shall be
responsible to provide a replacement bond in similar sum at or
prior to Closing. Neither Seller nor DSSI makes any warranty
express or implied as to the sufficiency of such Closure and Post
Closure Bond to meet the financial assurance requirements
required by any Environmental Laws.
(q) Taxes. All federal, state and local taxes
(including interest and penalties), due from DSSI (i) have been
fully paid, or (ii) have been adequately accrued for in the DSSI
December Financial Statements.
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(r) Assets. Except as disclosed on Schedule 5(q)
attached hereto, DSSI owns and has good and marketable title in
and to all of the material assets used by it in the operation or
conduct of its business, or required by DSSI from the normal and
ordinary conduct of its business free and clear of any and all
Liens.
(s) No Breach of Status or Contract. Neither the
execution and delivery of this agreement by the Seller, nor the
performance or compliance by the Seller or DSSI with any of the
terms and conditions of this Agreement, will violate any Laws or
any rules or regulations promulgated thereunder or will at
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 entity or
authority, to which Seller or DSSI is subject to or bound by, or
of any agreement or instrument to which Seller or DSSI 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
Shares or any of the property or assets of DSSI, or cause any
acceleration of maturity of any loan or obligation, or give to
others any interest or rights, including rights of termination or
cancellation, in or with respect to any of the properties,
assets, agreements, contracts, or business of DSSI, or cause any
acceleration or termination or cancellation, in or with respect
to any of the properties, assets, agreements, contracts, business
or operations of DSSI.
(t) Violation of Law and Contamination of Real
Property. Except as disclosed in the Schedule 5(t) to this
Agreement, there are no violations of any Laws, (including but
not limited to, Environmental Laws) which violation might have a
material adverse effect on DSSI or the business of DSSI or the
financial condition or operations of DSSI and the Real Property
owned by DSSI is not contaminated and does not require
remediation of any kind as a result of being contaminated.
(u) Disclaimer of Other Representations and
Warranties. Except as expressly set forth in Articles 3 and 5,
the Seller makes no representation or warranty, express or
implied, at law or in equity, in respect to DSSI, or any of its
assets, liabilities, or operations, including, without
limitation, with respect to merchantability or fitness for a
particular purpose, and any other representations or warranties
are expressly disclaimed. Buyer hereby acknowledges that, except
to the extent specifically set forth in Articles 3 and 5, the
Buyer is purchasing the assets of DSSI on an "as-is, where-is"
basis.
6. Remedies for Breach of this Agreement.
(a) All of the representations, warranties and
covenants of the Seller contained in Section 5 above shall
survive the Closing Date hereunder (unless the Buyer knew any
misrepresentation or breach of warranty at the Closing Date) and
continue in full force and effect for a period of three years
thereafter. All of the representations, warranties and covenants
contained in Sections 3, 4 and 7 herein shall survive the Closing
Date (unless the damaged party knew of any misrepresentation or
breach of warranty at the time of Closing) and continue in full
force and effect forever thereafter (subject to any applicable
statute of limitations).
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(b) In the event Seller breaches any of its
warranties, representations or covenants contained herein, and,
if there is an applicable survival period pursuant to Section
6(a) above and that Buyer makes a written claim for
indemnification against the Seller pursuant to Section 10(g)
below within such survival period, then the Seller agrees to
indemnify the Buyer and DSSI from and against any and all Adverse
Consequences the Buyer and/or DSSI shall suffer or may suffer
through and after the date of the claim for indemnification (but
excluding any and all Adverse Consequences the Buyer or DSSI
shall or may suffer after the end of the applicable survival
period as to a breach of the representations and warranties
contained in section 5 hereof) caused proximately by the breach.
Seller shall not have any obligation to indemnify the Buyer from
and against any Adverse Consequences caused by the breach of any
representation or warranty of the Seller contained in Article 5
above;
(1) until Buyer and/or DSSI has suffered Adverse
Consequences by reason of all such breaches in excess of
$250,000.00 at which point the Seller will be obligated to
indemnify the Buyer and/or DSSI from and against any and all such
Adverse Consequences from the first dollar of all such Adverse
Consequences by the Buyer and /or DSSI. No event or breach shall
be considered in determining such $250,000.00 unless and until
the Adverse Consequences from any singular event or breach
equals or exceeds $10,000.
(2) to the extent Adverse Consequences the Buyer
has suffered by reason of all such breaches exceeds $3,500,000
after which point Seller will have no obligation to indemnify
Buyer from and against further such Adverse Consequences.
(3) for any claim relating to (i) the ultimate
disposal of waste generated by DSSI that is stored on the Real
Property owned by DSSI located in Kingston, Tennessee ("Tennessee
Real Property") on the Closing Date for which there is no current
disposal alternatives under the Environmental Laws ("Legacy
Waste"), including any closure and post closure obligations of
DSSI relating to the Legacy Waste located on the Tennessee Real
Property on the Closing Date, and (ii) any on-site contamination
of the Tennessee Real Property as of the Closing Date; provided,
however, nothing contained in this clause (3) shall limit or
restrict Seller's indemnification under this Article 6 or
Seller's liability and/or obligations under this Article 6: (a)
as a result of or in connection with any Adverse Consequences
relating to or in connection with DSSI under, or claims made
against DSSI that DSSI is a responsible party or a potentially
responsible party under, any Environmental Laws or otherwise as a
result of DSSI having arranged by contract, agreement or
otherwise for disposal or treatment, or arranged for the
transportation for disposal or treatment, of any waste or
substance (hazardous, radioactive, petroleum or otherwise) at any
facility or site for which a release (as defined in the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended) or threatened release has occurred or
may occur other than the Tennessee Real Property, or (b) any
violation or breach of any Environmental Laws by DSSI or permits
held by DSSI on or prior to the Closing Date, except for any
violation or breach of any Environmental Laws due to the Legacy
Waste being stored on the Tennessee Real Property on the Closing
Date or any on-site contamination of the Tennessee Real Property
as of the Closing Date.
(c) Buyer and Seller acknowledge and agree that the
foregoing indemnification provisions in this Article 6 shall be
the exclusive remedy of the Buyer and Seller with respect to DSSI
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and the transaction contemplated by this Agreement, except for
any remedy available to Seller at law or in equity, to collect on
the Buyers Note; provided, however, in addition to any other
rights and remedies Buyer and DSSI may have, at law or in equity,
in the event Buyer or DSSI has a claim for indemnification
against Seller under this Article 6 and Buyer has obtained an
award or judgment against the Seller from an arbitrator or
arbitrators or a court of competent jurisdiction in connection
with or relating to such claim for indemnification, Buyer may
offset the amount of such award or judgment against the Buyer's
Note.
7. Pre-Closing Covenants.
The parties agree as follows with respect to the period
between execution of this Agreement and the Closing Date.
(a) Each of the parties will use its reasonable best
efforts to take all action and to do all things necessary, proper
or advisable in order to consummate and make effective the
transactions contemplated by this Agreement including
satisfaction of the Closing conditions set forth elsewhere in
this Agreement.
(b) Each of the Parties will, and the Seller will
cause DSSI to, give any notices to, make any filings with and use
its reasonable best efforts to obtain any authorizations,
consents, and approvals of government's and government agencies
in connection with the transfer of ownership of permits and
approvals held by DSSI all as set forth in Schedule 7(b).
(c) The Seller will not cause or permit DSSI to engage
in any practice, take any action, or enter into any transaction
outside the Ordinary Course of Business. , nor will it accept for
treatment any additional material which will generate secondary
waste from which there is no outlet for disposal.
(d) The Seller will permit and Seller will cause DSSI
to permit, representatives of the Buyer to have full access at
all reasonable times, in a manner so as not to interfere with the
normal business operations of DSSI, to all premises, properties,
personnel, books, records, contracts and documentation of or
pertaining to DSSI. The Buyer will treat and hold as such any
Confidential Information it receives from the seller or DSSI in
the course of reviews contemplated by this Article 7(d), will not
use the Confidential Information except in connection with this
Agreement, and if this Agreement is terminated for any reason
whatsoever, will return to Seller and DSSI all tangible
embodiments and all copies of the Confidential Information which
are in its possession.
(e) From the date of this Agreement until Closing,
Seller shall not and shall cause DSSI to not perform any of the
following acts relating to DSSI:
(f) issue any DSSI capital stock or make any changes
to DSSI authorized, issued or outstanding capital stock, grant
any stock options or rights to acquire shares of any of DSSI
capital stock or any security convertible into any class of DSSI
capital stock or agree to do any of the foregoing; or
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(ii) declare, set aside, or pay any dividend or
distribution with respect to any DSSI capital stock or any other
securities convertible into any class of capital stock; or
(iii) directly or indirectly redeem, purchase
or otherwise acquire any DSSI capital stock or enter into any
agreement to purchase or redeem any DSSI capital stock; or
(iv) effect a split or reclassification of any
DSSI capital stock or security convertible into any class of DSSI
capital stock, purchase, redeem, retire or otherwise acquire any
shares of any class of DSSI capital stock or any security
convertible into any class of DSSI capital stock or agree to do
any of the foregoing; or
(v) change its charter or bylaws; or
(vi) except consistent with past practices, grant
any increase in the compensation payable or to become payable by
it to DSSI 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
(vii) engage in any transaction not in the
Ordinary Course of Business; or
(viii) 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, corporation; or
(ix) acquire any real property; or
(x) enter into any agreement with Affiliates,
officers or directors of Seller or DSSI; or
(xi) 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
(xii) pay or incur any material obligation or
liability, absolute or contingent, other than liabilities
incurred in the ordinary and usual course of its business; or
(xiii) mortgage, pledge, or subject to Lien or
other encumbrance any of DSSI properties or assets; or
(xiv) except for transactions in the Ordinary
Course of DSSI Business, sell or transfer any of DSSI properties
or assets or cancel, release or assign any indebtedness owed to
DSSI or any claims held by DSSI; or
(xv) make any investment of a capital nature in
excess of Fifty Thousand Dollars ($50,000.00) 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 corporation; or
20
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(xvi) enter into any other agreement not in
the Ordinary Course of Business; or
(xvii) merge or consolidate with any other
corporation, acquire any of DSSI's assets or capital stock,
solicit any offers for or negotiate with any third party to sell
any of its assets or capital stock, or, except in the Ordinary
Course of Business, acquire any assets of any other person,
corporation, or other business organization, or enter into any
discussions with any person concerning, or agree to do, any of
the foregoing; or
(xviii) 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.
(g) Employees. Seller shall cause DSSI to terminate
those employees of DSSI prior to the Closing which Buyer shall
request Seller or DSSI to terminate. Seller shall be liable and
responsible for, and shall pay, all obligations and liabilities
to those employees of DSSI which were terminated (voluntarily or
involuntarily) on or prior to the Closing (including, but not
limited, accrued vacation, sick time, medical claims and
termination pay). Seller shall be liable and responsible for
providing to all of the employees of DSSI terminated (voluntarily
or involuntarily) on or the prior to the Closing coverage under
the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"). Seller shall be liable for all group medical claims
relating to employees of DSSI resulting from medical treatment
conducted prior to the Closing.
(h) Directors and Officers. On or prior to the
Closing, Seller shall cause all of the directors of DSSI to
resign as a director of DSSI and shall cause those officers of
DSSI to resign as requested by the Buyer, and at the Closing
shall deliver to Buyer executed resignations of such directors
and officers.
(i) Governmental Reports. Between the date of this
Agreement and the Closing, Seller shall furnish, make available
to, and shall cause DSSI to furnish and make available to, Buyer
any and all reports, not heretofore delivered to Buyer 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 Commission, the
IRS, the United States Environmental Protection Agency, the
United States Federal Trade Commission, the PBGC and the
Tennessee EPA.
(j) Title Policies and Survey. Seller shall deliver
to Buyer, at Seller's sole cost and expense, a fully paid policy
or policies of title insurance, dated as of the Closing Date,
issued to DSSI by a title company of nationally-recognized
standing, reasonably satisfactory to Buyer, on a standard ALTA's
owner title insurance policy form, insuring that DSSI has good
and marketable fee simple title in and to all of the Real
Property and mineral rights in at least the amount of the fair
market value to all of DSSI's Real Property, free and clear of
any and all Liens except for installments of special assessments
not yet delinquent and recorded easements, covenants and other
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restrictions which do not materially affect the value of the Real
Property or materially interfere with the present use of such
Real Property. In addition, Seller shall deliver to Buyer, at
Seller's cost and expense, a survey of each tract of DSSI's Real
Property prepared by a duly-licensed surveyor, certified in a
manner reasonably acceptable to Buyer with the "Minimum Standard
Detail Requiremetns for ALTA/ACSM Land Title Survey," jointly
established and adopted by ALTA and ACSM in 1992 and includes
items 1, 2, 3, 4, 6, 7(a), 7(b)(i), 8, 9, 10, 11 and 13 of Table
A thereto and pursuant to the accuracy standards (as adopted by
ATLA and ACSM and in effect on the date of the certification of
an Urban Survey.
(k) Insurance. The Seller shall maintain, or cause
DSSI to maintain, all of the insurance relating to DSSI in such
amounts and insuring such risks as in effect as of the date of
this Agreement.
(l) Litigation. The Seller shall give the Buyer
prompt notice of the institution of any litigation with respect
to DSSI or any other litigation which would have a material
adverse effect on DSSI.
(m) Violations. Seller shall furnish to Buyer any
required authorization necessary in order for Buyer to make
investigations of any violation of Law or any permits or licenses
that would have a material adverse effect on DSSI's business or
operations. Further, if Seller or DSSI shall receive any notice
of such violations prior to Closing, it shall furnish a true and
correct copy of the same to Buyer promptly upon receipt thereof.
If any such violation would, in the good-faith and reasonable
opinion of Buyer, have a material adverse effect on the business
or operations of DSSI, Seller shall use reasonable efforts,
promptly after written request by Buyer, to perform such work as
shall be reasonably required to cure such violations prior to the
Closing. If Seller fails or refuses for any reason to cure such
violations, Buyer may terminate this Agreement and, upon such
termination, neither party hereto shall have any liability to the
other parties
8. Post-Closing Covenants.
The parties agree as follows with respect to the period
following the Closing Date.
(a) In the case at any time after the Closing Date any
further action is necessary to carry out the purposes of this
Agreement, each of the Parties will take such further action
(including execution and delivery of such further instruments and
documents) as any other Party reasonably may request, all at the
sole cost and expense of the requesting Party.
(b) In the event and for so long as any party actively
is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in
connection with
(1) any transaction contemplated under this
Agreement or
(2) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident,
action, failure to act or transaction on or prior to the Closing
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Date involving DSSI, the other Party shall cooperate with it and
its counsel in the defense or contest, make available its
personnel, and provide such testimony and access to its books and
records as shall be necessary in connection with the defense or
contest, all at the sole cost and expense of the Party contesting
or defending.
(c) The Seller will not, and shall cause its
employees, agents, representatives and Affiliates to not, take
any action that is designed or intended to have the effect of
discouraging any lessor, licensor, customer, supplier, or other
business associate of DSSI from maintaining the same business
relationships with DSSI after the Closing Date as it maintained
with DSSI prior to the Closing Date.
(d) Covenant Not to Compete. Seller shall not, and
shall cause its employees, agents, representatives and Affiliates
to not, for a period of twenty-four (24) months after the Closing
Date, in the Untied States, directly or indirectly, by or for
itself, or as an agent, representative or employee of another, or
through others as their agent, representative or employee or by
and through any joint venture, partnership, corporation, limited
liability company or other business entity in which Seller or its
Affiliates has a direct or indirect interest, own, manage,
operate, control, or be engaged in any business that competes,
directly or indirectly, with DSSI.
(e) Agreement Not to Solicit Employees and Customers.
Seller shall not, and shall cause its employees, agents,
representatives and Affiliates to not, for a period of twenty-
four (24) months after the Closing Date, directly or indirectly,
by or for themselves, or as an agent, representative or employee
of another, or through others as their agent, representative or
employee, or by and through any joint venture, partnership,
corporation, limited liability company or other business entity
in which he has a direct or indirect interest:
(1) to use or disclose for the benefit of any
person or entity, other than Buyer or any of its subsidiaries,
any customer lists, or identify any of the customers of DSSI; or,
(2) to solicit, induce or in any manner attempt
to solicit or induce any customer or supplier of DSSI to cease
being a supplier or customer of DSSI; or
(3) to solicit or induce, or in any manner
attempt to solicit or induce, any person employed by, or as an
agent of DSSI, to terminate his or her employment or agency with
DSSI.
(f) Injunctive Relief. Seller acknowledges that the
provisions of this Section 8 are reasonable and necessary for the
protection of the Buyer and that regarding the covenants and
provisions in Section 8(c), 8(d) and 8(e) hereof ("Protective
Clauses"), Buyer will be irrevocably damaged if such Protective
Clauses are not specifically enforced. Seller agrees that the
remedy at law for any breach or threatened breach of the
Protective Clauses will be inadequate, and that the Buyer may, in
addition to such other remedies as may be available to it in law
or in equity, shall be entitled to injunctive relief without bond
or other security. If it becomes necessary for the Buyer to
bring legal action against the Seller as a result of its breach
of any of the Protective Clauses, the Buyer and Seller agree that
the prevailing party shall be entitled to recover its costs and
expenses in connection with such legal action (including, but not
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<PAGE>
limited to, reasonable attorney's fees) from and against the
other party.
9. Conditions to Obligation to Close.
(a) Conditions to Obligations of the Buyer. The
obligation of the Buyer to consummate the transactions to be
performed by it in connection with the Closing is subject to the
satisfaction of the following conditions:
(1) the representations and warranties of the
Seller set forth in this Agreement shall be true and correct in
all material respects at and as of the Closing Date;
(2) The Seller and DSSI shall have performed and
complied with all of their covenants, obligations and agreements
contained herein in all material respects through the Closing;
(3) There shall not be any injunction, judgment,
order, decree, ruling or charge in effect preventing, or any
action or lawsuit pending which could prevent the consummation of
any of the transactions contemplated by this Agreement;
(4) The Seller shall have furnished to the Buyer,
in form and substance satisfactory to the Buyer, certified copies
of resolutions of the Board of Directors of the Seller, duly
adopted by the Board of Directors of Seller, authorizing the
execution, delivery and performance of this Agreement by Seller,
and an incumbency certificate for the officers of the Seller;
(5) The Seller shall have delivered to the Buyer
a certificate, duly executed by an executive officer of the
Seller, in form and substance satisfactory to Buyer, dated as of
the Closing Date, to the effect that each of the conditions
specified in (1), (2) and (3) above of this Article 9(a) has been
satisfied in all respects;
(6) All applicable waiting periods, if any, under
the Hart-Scott Rodino Act shall have expired or otherwise been
terminated and the Parties and DSSI shall have received all other
authorizations, consents, and approvals of Governments and
Governmental Authorities required hereunder;
(7) All actions to be taken by the Seller
pursuant to the terms of this Agreement and in connection with
the consummation of the transactions contemplated hereby, and all
certificates, consents, opinions, instruments and other documents
require to effect the transactions contemplated hereby, have been
taken and will be reasonably satisfactory inform and substance to
the Buyer;
(8) Seller shall, at its sole cost and expense,
have prepared, and deliver to Buyer, true, correct and complete
copies of the 1997, 1998 and 1999 audited financial statements
of DSSI, consisting of:
24
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1) balance sheet;
2) statement of income and related
earnings;
3) statement of stockholders' equity and
statement of changes
in financial position;
4) statement of cash flows; and
5) notes thereto, with auditors' report
thereon being unqualified, all of which shall have been examined
by Arthur Anderson, DSSI's independent certified public accountants,
and be in accordance with Regulation S-X (17 C.F.R. Part 210) and GAAP,
consistently applied. Seller covenants and agrees that there
shall be no material change in the 1999 audited financial
statements of DSSI from the Financial Statements;
(9) all statutory requirements for the valid
consummation by Seller of the transactions contemplated by this
Agreement shall have been fulfilled; all authorizations, consents
and approvals of the Governmental Authorities required to be
obtained in order to permit consummation by Seller of the
transactions contemplated by this Agreement and to permit the
business presently conducted by DSSI to continue unimpaired
immediately following the Closing shall have been obtained;
(10) all applications for, or modifications to,
permits and licenses shall have been approved by the appropriate
Governmental Authorities and all authorizations and approvals
relating to all permits and licenses held by DSSI shall have been
obtained from the appropriate Governmental Authorities under any
and all of the Environmental Laws (including, but not limited to,
the appropriate Environmental Laws of the State of Tennessee) as
a result of the change in ownership of DSSI, pursuant to the
terms of this Agreement, with such permits, approvals and
authorizations to be in form and substance satisfactory to the
Buyer, so that DSSI is permitted to continue unimpaired
immediately following the Closing Date the same business
operations that DSSI 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
or all or in a writing directed to Seller or DSSI or any of their
subsidiaries) an investigation which is pending on the Closing
relating to this Agreement and the transactions contemplated
hereby, no action or proceeding shall have been instituted or, to
the knowledge of Buyer, 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;
(11) Buyer shall have conducted and completed an
environmental audit of DSSI, and shall have determined to the
satisfaction of Buyer that
(i) DSSI has been and is currently in
compliance in all material respects with all applicable
Environmental Laws;
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(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 DSSI are
contaminated with any radioactive waste, 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 DSSI, and
(iii) DSSI is not or would be subject to
any liability in any material amount under any provision, or as a
result of any past or present violations, of any applicable
Environmental Laws;
(12) DSSI shall have obtained consents to all
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 Seller to
Buyer 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
notifications;
(13) There shall not have occurred
(i) any material adverse change since
December 31, 1999, in the business, properties, assets, results
of operations or financial condition of DSSI, or
(ii) any Loss or damage to any of the
properties or assets (whether or not covered by insurance) of
DSSI which will materially affect or impair the ability of DSSI
to conduct, after consummation of the transactions contemplated
hereby, the business of DSSI as now being conducted by DSSI;
(14) Buyer shall have received from Burns, Figa &
Will, P.C., counsel to Seller, an opinion or opinions addressed
to Buyer and dated the Closing Date, with the form and contents
thereof reasonably satisfactory to Buyer and its counsel;
(15) Buyer shall have completed its financial due
diligence of DSSI, with the results thereof satisfactory to
Buyer;
(16) Seller shall have delivered to Buyer the
minute books and stock ledgers for DSSI, which minute books shall
be current, in all material respects;
(17) Buyer shall have received from Seller 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 DSSI and in
each jurisdiction in which DSSI is qualified to do business,
showing DSSI to be in good standing and to have paid all taxes
due in the applicable jurisdiction;
(18) Seller and its Affiliates shall have
delivered to Buyer, in form and substance satisfactory to Buyer,
a release releasing DSSI from any and all known or unknown,
absolute or contingent, debts, liabilities and obligations that
DSSI may have to Seller and any and all Affiliates of Seller, and
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Buyer shall have received, in form and substance satisfactory to
Buyer, appropriate tax opinions from Seller that such release or
releases shall have not tax effect or tax consequence on DSSI;
(19) Buyer shall have
obtained, on terms satisfactory to Buyer, a bond in the principal
sum of not less than $12,732,834 covering DSSI's closure and post
closure financial assurance requirements under the Environmental
Laws; and
(20) Seller shall, immediately
prior to the Closing, terminate or cause DSSI to terminate DSSI
employees from participation under any and all Plans, without
such termination resulting in any liability or obligation on the
part of DSSI or the Buyer under any such Plans or to any of the
DSSI employees, the Seller, any Affiliate of the Seller, any
governmental agency or otherwise.
The Buyer may waive any condition specified in this Article
9(a) if it executes a writing so stating at or prior to the
Closing.
(b) Conditions to the Obligations of the Seller. The
obligation of the Seller to consummate the transactions to be
performed by it in connection with the Closing is subject to the
following conditions:
(1) the representations and warranties set forth
in Article 4 above shall be true and correct in all material
respects at and as of the Closing Date;
(2) the Buyer shall have performed and complied
with all of its covenants hereunder in all material respects
through the Closing;
(3) there shall not be any injunction, judgment,
order, decree, ruling or charge in effect preventing consummation
of any of the transactions contemplated by this Agreement;
(4) the Buyer shall have delivered to the Seller
a certificate to the effect that each of the conditions specified
above in Article 10(b)(1)-(3) is satisfied in all respects;
(5) all applicable waiting periods, if any, under
the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated and the Parties and DSSI shall have received all other
authorizations, consents, and approvals of agencies referred to
hereunder;
(6) the Seller shall have received from Conner &
Winters, A Professional Corporation, counsel to the Buyer, an
opinion in form and substance reasonably satisfactory to Seller and its
counsel, addressed to the Seller and dated as of the Closing Date;
The Seller may waive any condition specified in this
Article 9(b) if it executes a writing so stating at or prior to
the Closing.
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10. Miscellaneous.
(a) Press Releases and Public Announcements. No Party
shall issue any press release or make any public announcement
relating to the subject matter of this Agreement without the
prior written approval of the Buyer and the Seller; provided,
however, that any Party may make any public disclosure it
believes in good faith is required by applicable Law or any
listing or trading agreement concerning its publicly-traded
securities (in which case the disclosing Party will use its
reasonable best efforts to advise the other Parties prior to
making the disclosure). The above restrictions shall not apply to
any (1) information available to either party from public records
or from other sources in accordance with the Law, (2) information
which is in the public domain or subsequent to the date of this
agreement enters the public domain otherwise than through
disclosure by Buyer or Seller, or (3) information which is
capable of being independently developed by or on behalf of the
party wishing to disclose without reference to the confidential
information.
(b) No Third-Party Beneficiaries. This Agreement
shall not confer any rights or remedies upon any Person other
than the Parties and their respective successors and permitted
assigns.
(c) Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement
among the Parties and merges and supersedes any prior
discussions, understandings, agreements, or representations by or
among the Parties, written or oral, to the extent they have
related in any way to the subject matter hereof. 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 this
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 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 each Party hereto, and this Agreement
not be discharged except by performance in accordance with its
terms or by a writing signed by each party to be charged.
(d) Succession and Assignment. This Agreement shall
be binding upon and inure to the benefit of the Parties named
herein and their respective successors and permitted assigns. No
Party may assign either this Agreement or any of its rights,
interests, or obligations hereunder without the prior written
approval of the Buyer and the Seller.
(e) Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an
original but all of which together will constitute one and the
same instrument.
(f) Notices. All notices, requests, demands, claims,
and other communications hereunder will be in writing. Any
notice, request, demand, claim, or other communication hereunder
28
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shall be deemed duly given if (and then two business days after)
it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to the Seller: Copy to:
Waste Management, Inc. Burns, Figa & Will, P.C.
3900 S., Wadsworth Blvd. 6400 S. Fiddlers Green Circle
Suite 800 Suite 1030
Lakewood, CO 80235 Englewood, CO 80111
Attn: Joel Eacker Attn: William A. Jeffry
If to the Buyer: Copy to:
Perma-Fix Environmental Conner & Winters, A Professional
Services, Inc. Corporation
1940 Northwest 67th Place One Leadership Square
Gainesville, FL 32653 211 North Robinson, Suite 1700
Attn: Dr. Louis F. Centofanti, Oklahoma City, OK 73102
President Attn: Irwin H. Steinhorn
Any Party may send any notice, request, demand, claim,
or other communication hereunder to the intended recipient at the
address set forth above using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex,
ordinary mail, or electronic mail), and 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 actual delivery. Any Party may change the address to
which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
(g) Governing Law. This Agreement shall be construed
in accordance with and governed by
(1) the applicable Laws of Tennessee only with
respect to the transfer of those permits issued by the State of
Tennessee and the applicable Laws of the Untied States only with
respect to the transfer of those permits issued by the EPA; and
(2) in accordance with the Laws of Delaware in
all other respects, without regarding to the principles of
conflicts of Laws thereof.
(h) Amendments and Waivers. No amendment of any
provision of this Agreement shall be valid unless the same shall
be in writing and signed by the Buyer and Seller. No waiver by
any Party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder,
or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
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(i) Severability. Any term or provision of this
Agreement that is invalid or unenforceable in any situation in
any jurisdiction shall not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(j) Expenses. The Buyer and Seller will each bear its
own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions
contemplated hereby. Any Taxes in the nature of Income Tax or
any gain resulting from the sale of Shares hereunder and any
transfer or sales tax and any stock transfer tax payable on the
consummation of any other transaction contemplated by this
Agreement shall be paid by Seller.
(k) Construction. The Parties have participated
jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly
by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any
federal, state, local or foreign statute or Law shall be deemed
also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word
"including" shall mean including without limitation.
(l) Incorporation of Exhibits, Annexes, and Schedules.
The Exhibits and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
(m) Headings. The heading 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.
(n) Time. Time is of the essence of this Agreement.
(o) Dispute Resolution. Any controversy or claim
arising out of or relating to this Agreement, or the breach thereof
(other than controversies or claims regarding enforcement of the
Protective Clauses, all of which shall be settled by a court of
competent jurisdiction) shall be settled in binding arbitration
to be held, and the award made, in Nashville, Tennessee, in accordance
with the then-existing rules of the American Arbitration Association,
and judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof. If any party's
claim exceeds $1,000,000, exclusive of interest and attorneys'
fees, the dispute shall be heard and determined by three
arbitrators. In any arbitration involving one arbitrator, the
arbitrator shall be: (i) any person selected by the parties if
they are able to so agree within ten (10) days after any party
requests the other party to so agree; or, if not, (ii) the
selection shall be made pursuant to the rules of the American
Arbitration Association. In any arbitration involving three
arbitrators, the Seller and Buyer shall each, within fifteen days
of the commencement of arbitration, select one person to act as
arbitrator and the two selected shall select a third arbitrator
within ten (10) days of their appointment. If the arbitrator
selected by the parties are unable or fail to agree upon the
third arbitrator, the third arbitrator shall be selected by the
American Arbitration Association. Within thirty (30) days of the
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hearing, the arbitrator(s) shall render a decision concerning all
contested issues considered during the arbitration and the
arbitrator(s) shall notify the parties in writing of their
decision, setting forth the dollar amount, if any, awarded. In
the event that there shall be more than one dispute to be
arbitrated, the parties agree that all pending disputes shall be
consolidated to the extent feasible. The nonprevailing party in
the arbitration shall pay to the prevailing party the prevailing
party's reasonable attorney's fees and expenses. The amount of
the dollar award, if any, plus all reasonable attorney's fees of
the prevailing party, shall be paid by the non-prevailing party.
IN WITNESS WHEREOF, the Parties have caused this Agreement
to be executed by their duly authorized representatives as of the
date first above written.
"SELLER" "BUYER"
WASTE MANAGEMENT HOLDINGS, INC. PERMA-FIX ENVIRONMENTAL
INC. SERVICES, INC.
By: /s/ Bruce E. Snyder By: /s/ Louis Centofanti
_______________________ ________________________
Bruce E. Snyder Dr. Louis F. Centofanti
Title: Vice President, Chief Title: President
Financial Officer and
Controller
_______________________
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EXHIBIT AND SCHEDULES
_____________________
Exhibit A - Form of Promissory Note
Schedule 3(b) - Consents and authorizations of governmental
agencies
Schedule 4(b) - Permits and licenses required under
environmental laws
Schedule 5(a) - List of the officers and directors of
DSSI
Schedule5(c) - Non-contravention
Schedule 5(e) - Title to tangible assets
Schedule 5(g) - Liabilities
Schedule 5(i) - Compliance with laws
Schedule (j)(1) - Real Property owned by DSSI
Schedule (j)(2) - Real Property leased or subleased to
DSSI
Schedule (j)(3) - Real Property owned or leased by DSSI
Schedule 5(k) - Patents, Applications, Trade Names,
Trademark Registrations
Schedule 5(l) - Written Contracts and Agreements in
excess of $25,000
Schedule 5(m) - Litigation
Schedule 5(n) - Employee benefit plans
Schedule 5(o) - Permits and Licenses
Schedule 5(q) - Assets
Schedule 5(t) - Compliance with environmental laws
Schedule 7(b) - Consents and approvals of governmental
agencies in connection with the transfer
of ownership of permits and approvals
held by DSSI
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
OF THIS WARRANT AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT (i) UNDER COVER OF A REGISTRATION STATEMENT
UNDER SUCH ACT WHICH IS EFFECTIVE AND CURRENT WITH RESPECT TO THIS
WARRANT OR SUCH SHARES OF COMMON STOCK, AS THE CASE MAY BE, OR (ii)
PURSUANT TO THE WRITTEN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO
PERMA-FIX ENVIRONMENTAL SERVICES, INC. TO THE EFFECT THAT
REGISTRATION UNDER SUCH ACT IS NOT REQUIRED WITH RESPECT TO SUCH
SALE OR TRANSFER.
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
RYAN, BECK & CO., INC.
AND
LARKSPUR CAPITAL CORPORATION
WARRANT AGREEMENT
Dated as of January 25, 2000
WARRANT AGREEMENT, dated as of January 25, 2000 by and among
PERMA-FIX ENVIRONMENTAL SERVICES, INC., a Delaware corporation (the
"Company"), RYAN BECK & CO, INC., and LARKSPUR CAPITAL CORPORATION
(hereinafter referred to individually called a "Holder" or "Agent"
and collectively, the "Holders" or the "Agents").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Agents, or
subject to the terms hereof, those permitted designees, warrants
("Warrants") to purchase up to an aggregate 150,000 shares of
common stock of the Company, par value $.001 per share ("Common
Stock");
WHEREAS, the Agents have agreed pursuant to an agreement (the
"Agreement") dated as of the date hereof by and among the Agents
and the Company to provide certain services to the Company;
WHEREAS, the Company proposes to issue to the Agents (and/or
designees) the Warrants as a partial retainer for the Agents'
services;
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WHEREAS, the Agents are "accredited investors," as such term
is defined in Rule 501 of Regulation D promulgated under the
Securities Act of 1933, as amended (the "Act");
WHEREAS, if either of the Agents designates any other party as
a designee for the purpose of receiving any portion of the
Warrants pursuant to the terms hereof, then, prior to receiving any
of the Warrants as designee of the Agents, such designee must
execute and deliver to the Company a written certification
("Certification"), the form and content of which must be
satisfactory to the Company, in which such designee represents to
the Company that such designee is an "accredited investor" under
Rule 501 of Regulation D promulgated under the Act and how such
designee is an accredited investor, and that such designee is
acquiring such designated Warrants for the designees' own account,
for investment purposes only and not with a view toward
distribution or resale and agrees to be subject to and bound by all
of the other conditions and provisions of this Agreement
(including, but not limited to, the representations, warranties and
covenants contained in Sections 3 and 7 hereof) and shall execute
and deliver to the Company an agreement in form and substance
substantially the same as this Agreement except for the name and
number of Warrants to be issued to the designee;
WHEREAS, the Common Stock is listed for trading on the Boston
Stock Exchange and the National Association of Securities Dealers
Automated Quotation SmallCap market ("NASDAQ"), and the Company is
subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
and has been subject to such filing requirements for the past
ninety (90) days; and
WHEREAS, in reliance upon the representations made by the
Agents in this Agreement, the transactions contemplated by this
Agreement are such that the offer and purchase of securities
hereunder will be exempt from registration under applicable federal
securities laws because this is a private placement and intended to
be a nonpublic offering pursuant to Sections 4(2) and/or 3(b) of
the Securities Act and/or Regulation D promulgated under the Act.
NOW, THEREFORE, in consideration of the premises, the payment
by the Agents to the Company of an aggregate of twelve dollars and
fifty cents ($12.50), the agreements herein set forth and other
good and valuable consideration, hereby acknowledged, the parties
hereto agree as follows:
1. Grant. The Agents are hereby granted Warrants providing
the right to purchase in equal amounts, at any time and from the
date hereof until 5:30 p.m., New York time, on January 25, 2005, up
to an aggregate of 150,000 shares of Common Stock (the "Warrant
Shares") at an initial exercise price (subject to adjustment as
provided in Section 11 hereof) of $1.44 per share of Common Stock
subject to the terms and conditions of this Agreement. Except as
set forth herein, the Warrant Shares issuable upon exercise of the
Warrants are in all respects identical to the shares of Common
Stock that have been issued to the public. Anything to the
contrary notwithstanding, the Company shall have the right to
cancel 50% of the Warrants issued and then outstanding, on a pro
rata basis among the registered holders of the Warrants thereof, in
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the event that no Transaction (as defined in the Agreement dated
January 25, 2000 between Ryan, Beck & Co., Larkspur Capital
Corporation and Perma-Fix Environmental Services, Inc. and its
related subsidiaries) shall have occurred within one year from the
date hereof. In the event any registered holder of the Warrants
holds an odd number of Warrants at the time of cancellation of 50%
of the Warrants issued and then outstanding by the Company, the
number of Warrants held by such registered holder of the Warrants
which are canceled shall be rounded up to the next highest whole
number.
2. Warrant Certificates. The warrant certificates (the
"Warrant Certificates") delivered and to be delivered pursuant to
this Agreement shall be in the form set forth in Exhibit A,
attached hereto and made a part hereof, with such appropriate
insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. Representations, Warranties and Covenants of Holder.
Each of the Holders of Warrants and/or Warrant Shares hereby
represents, warrants and covenants to the Company as follows:
3.1 Investment Intent. The Holders represent and
warrant that the Warrants are being, and any
underlying Warrant Shares will be, purchased or
acquired solely for the Holders' own account, for
investment purposes only and not with a view toward
the distribution or resale to others. The Holders
acknowledge and understand that neither the
Warrants nor Warrant Shares have been registered
under the Act by reason of a claimed exemption
under the provisions of the Act which depends, in
large part, upon the Holders' representations as to
investment intention, investor status, and related
and other matters set forth herein. The Holders
understand that, in the view of the Securities and
Exchange Commission (the "Commission"), among other
things, a purchase with an intent to distribute or
resell would represent a purchase and acquisition
with an intent inconsistent with its representation
to the Company, and the Commission might regard
such a transfer as a deferred sale for which the
registration exemption is not available.
3.2 Certain Risk. The Holders recognize that the
purchase of the Warrants or Warrant Shares involves
a high degree of risk in that (a) although the
Company has had an unaudited net income for the
nine month period ended September 30, 1999, the
Company did sustain losses through December 31,
1998, from its operations, and may require
substantial funds for its operations; (b) that the
Company has a substantial accumulated deficit; (c)
an investment in the Company is highly speculative
and only investors who can afford the loss of their
entire investment should consider investing in the
Company and the Warrants or Warrant Shares; (d) an
investor may not be able to liquidate his
investment; (e) transferability of the Warrants or
Warrant Shares is extremely limited; (f) in the
event of a disposition an investor could sustain
the loss of his entire investment; (g) the Warrants
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represent non-voting equity securities, and the
right to exercise such Warrants and purchase shares
of voting equity securities in a corporate entity
that has an accumulated deficit; (h) no return on
investment, whether through distributions,
appreciation, transferability or otherwise, and no
performance by, through or of the Company, has been
promised, assured, represented or warranted by the
Company, or by any director, officer, employee,
agent or representative thereof; and, (i) while the
Common Stock is presently quoted and traded on the
Boston Stock Exchange and the NASDAQ and while the
Holders are a beneficiary of certain registration
rights provided herein, the Warrants subscribed for
and that are purchased under this Agreement and the
Warrant Shares (a) are not registered under
applicable federal or state securities laws, and
thus may not be sold, conveyed, assigned or
transferred unless registered under such laws or
unless an exemption from registration is available
under such laws, as more fully described herein,
and (b) the Warrants subscribed for and that are to
be purchased under this Agreement are not quoted,
traded or listed for trading or quotation on the
NASDAQ, or any other organized market or quotation
system, and there is therefore no present public or
other market for the Warrants, nor can there be any
assurance that the Common Stock will continue to be
quoted, traded or listed for trading or quotation
on the Boston Stock Exchange or the NASDAQ or on
any other organized market or quotation system.
3.3 Prior Investment Experience. The Holders
acknowledge that they have prior investment
experience, including investment in non-listed and
non-registered securities, or they have employed
the services of an investment advisor, attorney or
accountant to read all of the documents furnished
or made available by the Company to them and to
evaluate the merits and risks of such an investment
on their behalf, and that they recognize the highly
speculative nature of this investment.
3.4 No Review by the Commission. The Holders hereby
acknowledge that this offering of the Warrants has
not been reviewed by the Commission because this
private placement is intended to be a nonpublic
offering pursuant to Sections 4(2) and/or 3(b) of
the Act and/or Regulation D promulgated under the
Act.
3.5 Not Registered. The Holders understand that the
Warrants and the Warrant Shares have not been
registered under the Act by reason of a claimed
exemption under the provisions of the Act which
depends, in part, upon the Holders' investment
intention. In this connection, the Holders
understand that it is the position of the
Commission that the statutory basis for such
exemption would not be present if their
representations merely meant that their intention
was to hold such securities for a short period,
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such as the capital gains period of tax statutes,
for a deferred sale, for a market rise (assuming
that a market develops), or for any other fixed
period.
3.6 No Public Market. The Holders understand that
there is no public market for the Warrants. The
Holders understand that although there is presently
a public market for the Common Stock, including the
Warrant Shares, Rule 144 (the "Rule") promulgated
under the Act requires, among other conditions, a
one-year holding period following full payment of
the consideration therefor prior to the resale (in
limited amounts) of securities acquired in a
nonpublic offering without having to satisfy the
registration requirements under the Act. The
Holders understand that the Company makes no
representation or warranty regarding its
fulfillment in the future of any reporting
requirements under the Exchange Act, or its
dissemination to the public of any current
financial or other information concerning the
Company, as is required by the Rule as one of the
conditions of its availability. The Holders
understand and hereby acknowledge that the Company
is under no obligation to register the Warrants or
the Warrant Shares under the Act, except as set
forth in Section 10 hereof.
3.7 Sophisticated Investor. The Holders (a) have
adequate means of providing for the Holders'
current financial needs and possible contingencies
and have no need for liquidity of the Holders'
investment in the Warrants; (b) are able to bear
the economic risks inherent in an investment in the
Warrants and understand that an important
consideration bearing on their ability to bear the
economic risk of the purchase of Warrants is
whether the Holders can afford a complete loss of
the Holders' investment in the Warrants and the
Holders represent and warrant that the Holders can
afford such a complete loss; and (c) have such
knowledge and experience in business, financial,
investment and banking matters (including, but not
limited to, investments in restricted, non-listed
and non-registered securities) that the Holders are
capable of evaluating the merits, risks and
advisability of an investment in the Warrants.
3.8 Tax Consequences. The Holders acknowledge that the
Company has made no representation regarding the
potential or actual tax consequences for the
Holders which will result from entering into the
Agreement. The Holders acknowledge that they bear
complete responsibility for obtaining adequate tax
advice regarding the Agreement.
3.9 Commission Filing. The Holders acknowledge that
they have been previously furnished with true and
complete copies of the following documents which
have been filed with the Commission pursuant to
Sections 13(a), 14(a), 14(c) or 15(d) of the
Exchange Act, and that such have been furnished to
the Holders a reasonable time prior to the date
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hereof: (i) Annual Report on Form 10-K for the
year ended December 31, 1998 (the "Form 10-K"), as
may be amended; (ii) the Company's Proxy Statement
delivered to shareholders on or about November 10,
1999; and (iii) the information contained in any
reports or documents required to be filed by the
Company under Sections 13(a), 14(a), 14(c) or 15(d)
of the Exchange Act since the distribution of the
Form 10-K.
3.10 Documents, Information and Access. The Holders'
decisions to purchase the Warrants are not based on
any promotional, marketing or sales materials, and
the Holders and their representatives have been
afforded, prior to purchase thereof, the
opportunity to ask questions of, and to receive
answers from, the Company and its management, and
has had access to all documents and information
which Holders deem material to an investment
decision with respect to the purchase of Warrants
hereunder.
3.11 No Commission. The Holders agree and acknowledge
that no commission or other remuneration is being
paid or given directly or indirectly for soliciting
the subscription described hereunder.
3.12 Reliance. The Holders understand and acknowledge
that the Company is relying upon all of the
representations, warranties, covenants,
understandings, acknowledgments and agreements
contained in this Agreement in determining whether
to accept this subscription and to sell and issue
the Warrants to the Holders.
3.13 Accuracy or Representations and Warranties. All of
the representations, warranties, understandings and
acknowledgments that Holders have made herein are
true and correct in all material respects as of the
date of execution hereof. The Holders will perform
and comply fully in all material respects with all
covenants and agreements set forth herein, and the
Holder covenants and agrees that until the
acceptance of this Agreement by the Company, the
Holders shall inform the Company immediately in
writing of any changes in any of the
representations or warranties provided or contained
herein.
4. Representations, Warranties and Covenants of the Company.
In order to induce Holder to enter into this Agreement, the Company
hereby represents, warrants and covenants to Holder as follows:
4.1 Organization, Authority, Qualification. The
Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the
State of Delaware. The Company has full corporate
power and authority to own and operate its
properties and assets and to conduct and carry on
its business as it is now being conducted and
operated.
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4.2 Authorization. The Company has full power and
authority to execute and deliver this Agreement and
to perform its obligations under and consummate the
transactions contemplated by this Agreement. Upon
the execution of this Agreement by the Company and
delivery of the Warrants, this Agreement shall have
been duly and validly executed and delivered by the
Company and shall constitute the legal, valid and
binding obligation of the Company, enforceable
against the Company in accordance with its terms.
4.3 No Commission. The Company agrees and acknowledges
that no commission or other remuneration is being
paid or given directly or indirectly for soliciting
the issuance of the Warrants.
4.4 Ownership of, and Title to, Securities. The
Warrant Shares, if issued, will be, duly
authorized, validly issued, fully paid and
nonassessable shares of the capital stock of the
Company, free of personal liability. Upon
consummation of the issuance of the Warrants (and
upon the exercise of the Warrants, in whole or in
part) pursuant to this Agreement, the Holder will
own and acquire title to the Warrants (and the
Warrant Shares, as the case may be) free and clear
of any and all proxies, voting trusts, pledges,
options, restrictions, or other legal or equitable
encumbrance of any nature whatsoever (other than
the restrictions on transfer due to federal and
state securities laws or as otherwise provided for
in this Agreement or in the Warrants).
5. Exercise of Warrant.
5.1 Method of Exercise. Subject to the terms hereof,
the Warrants initially are exercisable at an aggregate initial
exercise price per share of Common Stock set forth in Section 9
hereof payable by certified or cashier's check in New York Clearing
House funds, subject to adjustment as provided in Section 11
hereof. Upon surrender of a Warrant Certificate with the annexed
Form of Election to Purchase duly executed, together with payment
of the Exercise Price (as hereinafter defined) for the shares of
Common Stock purchased pursuant to the terms hereof, at the
Company's principal offices (presently located at 1940 NW 67th
Place, Gainesville, FL 32653) the Holders shall be entitled to
receive a certificate or certificates for the shares of Common
Stock so purchased. The purchase rights represented by each
Warrant Certificate are exercisable at the option of the Holders
thereof, in whole or in part (but not as to fractional shares of
the Common Stock underlying the Warrants). Warrants may be
exercised to purchase all or part of the shares of Common Stock
represented thereby. In the case of the purchase of less than all
the shares of Common Stock purchasable under any Warrant
Certificate, the Company shall cancel said Warrant Certificate upon
the surrender thereof and shall execute and deliver a new Warrant
Certificate of like tenor for the balance of the shares of Common
Stock purchasable thereunder.
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5.2 Exercise by Surrender of Warrants. In addition to
the method of payment set forth in Section 5.1 and in lieu of any
cash payment required thereunder, subject to the terms hereof, each
Holder of the Warrants shall have the right at any time and from
time to time to exercise the Warrants held by such Holder in full
or in part by surrendering a Warrant Certificate in the manner
specified in Section 5.1 in exchange for the number of Warrant
Shares equal to the product of (x) the number of Warrant Shares as
to which the Warrants are being exercised multiplied by (y) a
fraction, the numerator of which is the Market Price (as defined in
Section 5.3 below) of the Warrant Shares less the Exercise Price
and the denominator of which is such Market Price. Solely for the
purposes of this paragraph, Market Price shall be calculated as the
average of the Market Prices for each of the five trading days
preceding the Notice Date.
5.3 Definition of Market Price. As used herein, the
phrase "Market Price" at any date shall be deemed to be the average
closing bid quotation of the Company's Common Stock (i) as reported
on the NASDAQ for the last five (5) trading days, or (ii) if the
Common Stock is not traded on NASDAQ, the average closing price as
listed on a national securities exchange for the last five (5)
trading days, or (iii) if no longer traded on NASDAQ or listed on
a national securities exchange, as determined in good faith by
resolution of the Board of Directors of the Company, based on the
best information available to it.
6. Issuance of Certificates. Upon the exercise of the
Warrants or any portion thereof, the issuance of certificates for
the Warrant Shares underlying such Warrants so exercised, shall be
made forthwith (and in any event within five (5) business days
thereafter) without charge to the Holder exercising such Warrants,
including, without limitation, any tax which may be payable in
respect of the issuance thereof, and such certificates shall be
issued in the name of the Holder thereof.
The Warrants and the certificates representing the Warrant
Shares shall be executed on behalf of the Company by the manual or
facsimile signature of the then Chairman or Vice Chairman of the
Board of Directors or President or Vice President of the Company.
7. Restriction on Transfer of Warrants or Warrant Shares.
The Holder of a Warrant Certificate, by its acceptance thereof,
covenants and agrees that the Warrants are being acquired as an
investment and not with a view to the distribution thereof. The
Holder of a Warrant Certificate, by its acceptance thereof, agrees
that (i) no public distribution of Warrants or Warrant Shares will
be made in violation of the provisions of the Act and the Rules and
Regulations promulgated thereunder and (ii) during such period as
delivery of a prospectus with respect to Warrants or Warrant Shares
may be required by the Act, no public distribution of Warrants or
Warrant Shares will be made in a manner or on terms different from
those set forth in, or without delivery of, a prospectus then
meeting the requirements of Section 10 of the Act and in compliance
with all applicable state securities laws. The Holder of each
Warrant Certificate and each transferee thereof further agrees that
if any distribution of any of the Warrants or Warrant Shares is
proposed to be made by them otherwise than by delivery of a
prospectus meeting the requirements of Section 10 of the Act, such
action shall be taken only after receipt by the Company of an
opinion of its counsel, or an opinion of counsel reasonably
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satisfactory to the Company, to the effect that the proposed
distribution will not be in violation of the Act or of applicable
state law. Furthermore, it shall be a condition to the transfer of
the Warrants that any transferee thereof deliver to the Company his
or its written agreement to accept and be bound by all of the terms
and conditions contained in this Agreement. Any Warrant Shares
issued upon exercise of the Warrants shall bear a legend to the
following effect:
The securities represented by this
certificate have not been registered
under the Securities Act of 1933, as
amended (the "Act"), or qualified under
applicable state securities laws, and are
restricted securities within the meaning
of the Act. Such securities may not be
sold or transferred, except pursuant to a
registration statement under such Act and
qualification under applicable state
securities laws which are effective and
current with respect to such securities
or pursuant to an opinion of counsel
reasonably satisfactory to the issuer of
such securities that registration and
qualification are not required under
applicable federal or state securities
laws or an exemption is available
therefrom.
These securities are also subject to the
registration rights set forth in that
certain Warrant Agreement by and among
Perma-Fix Environmental Services, Inc.,
(the "Company") Ryan, Beck & Co., Inc.,
and Larkspur Capital Corporation, dated
as of January 25, 2000, a copy of which
is on file at the Company's Principal
Executive Office.
8. Warrant Holder Not Shareholder. A Warrant Certificate
shall not be deemed to confer upon the Holder any right to vote the
Warrant Shares or to consent to or receive notice as a shareholder
of the Company as such, because of the Warrant Certificate, in
respect of any matters whatsoever, or any other rights or
liabilities as a shareholder.
9. Exercise Price.
9.1 Initial and Adjusted Exercise Price. Except as
otherwise provided in Section 11 hereof, the initial exercise price
of each Warrant shall be $1.44 per share of Common Stock. The
adjusted exercise price shall be the price which shall result from
time to time from any and all adjustments of the initial exercise
price in accordance with the provisions of Section 11 hereof.
9.2 Exercise Price. The term "Exercise Price" herein
shall mean the initial exercise price or the adjusted exercise
price, depending upon the context.
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10. Registration Rights.
10.1 Piggyback Registration. Subject to the terms of
this Section 10, if, at any time commencing after the date hereof
and expiring seven (7) years from the effective date, the Company
proposes to register any of its equity securities under the Act
(other than a registration statement (i) on Form S-8 or any
successor form to such form or in connection with any employee or
director welfare, benefit or compensation plan, (ii) on Form S-4 or
any successor form to such form or in connection with an exchange
offer, (iii) in connection with a rights offering exclusively to
existing holders of Common Stock, (iv) in connection with an
offering solely to employees of the Company or its subsidiaries, or
(v) relating to a transaction pursuant to Rule 145 of the Act), it
will give written notice by registered mail, at least thirty (30)
days prior to the filing of each such registration statement, to
each Holder of its intention to do so. If any Holder notifies the
Company within twenty (20) business days after receipt of any such
notice of its desire to include any such securities in such
proposed registration statement, the Company shall afford any such
Holder of the opportunity to have any such Warrant Shares held by
such Holder or Warrant Shares underlying Warrants held by such
Holder, registered under such registration statement (sometimes
referred to herein as the "Piggyback Registration").
Notwithstanding the provisions of this Section 10.1, the
Company shall have the right at any time after it shall have given
written notice pursuant to this Section 10.1 (irrespective of
whether a written request for inclusion of any such securities
shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing
but prior to the effective date thereof.
If a Piggyback Registration is an underwritten primary
registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their reasonable
opinion based upon market conditions the number of securities
requested to be included in such registration exceeds the number
that can be sold in such offering or would impair the pricing of
such offering, the Company will include in such registration (i)
first, the securities the Company proposes to sell, (ii) second, up
to the full number of applicable Common Stock requested to be
included in such registration by holders of Common Stock with prior
or superior piggyback registration rights, (iii) third, the number
of applicable Warrant Shares requested to be included in such
registration, pro rata among the Holders on the basis of the number
of shares requested by such holders to be included and which, in
the opinion of the managing underwriter, can be sold without
adversely affecting the price range or probability of success of
such offering, and (iv) fourth, other securities to be included in
such registration.
10.2 Demand Registration.
(a) Subject to the terms of this Section 10, at any time after
the date hereof and expiring five (5) years from the effective date, the
Holders representing a "Majority" (as hereinafter defined) of the Warrant
Shares (assuming the exercise of all the Warrants) shall have the right
(which right is in addition to the registration rights under Section 10.1
hereof), exercisable by written notice to the Company, to have the Company
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prepare and file with the Securities and Exchange Commission (the
"Commission"), on one occasion only, a registration statement and such
other documents, including a prospectus, as may be necessary in the opinion
of both counsel for the Company and counsel for Ryan Beck & Co., Inc., in
order to comply with the provisions of the Act, so as to permit a public
offering and the sale of their respective Warrant Shares for nine (9)
consecutive months by such Holders and any other Holder notifying the Company
within ten (10) days after receiving notice from the Company of such request.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 10.2 by any Holder to each Holder
within ten (10) days from the date of the receipt of any such registration
request.
(c) Notwithstanding anything to the contrary contained herein,
if the Company is obligated to file a registration statement covering the
Warrant Shares under Section 10.2(a) but shall not have filed a registration
statement for the Warrant Shares within the time period specified in Section
10.3 hereof pursuant to the written notice specified in Section 10.2(a) of a
Majority of the Holders, which time period shall be extended pursuant to
10.2(d) below, the Company shall have the option, but not the obligation,
upon the written notice of election of a Majority of the Holders to
repurchase (i) any and all Warrant Shares at the higher of the Market Price
per share of Common Stock on (y) the date of the notice sent pursuant to
Section 10.2(a) or (z) the expiration of the period specified in Section
10.3(a) and (ii) any and all Warrants at such Market Price less the Exercise
Price of such Warrant. Such repurchase shall be in immediately available
funds and shall close within two (2) days after the later of (i) the
expiration of the period specified in Section 10.3(a) or (ii) the delivery
of the written notice of election specified in this Section 10.2(d). The
Company shall have no obligation to exercise the option that may be granted
pursuant to the terms of this paragraph (c) of Section 10.2 hereof.
(d) Notwithstanding anything to the contrary, the Company may
delay the filing of a Registration Statement under this Section 10.2 and may
withhold efforts to cause such Registration Statement to become effective
if the Company determines in good faith that such registration might
interfere with or affect the negotiation or completion of any material
transaction or other material event that is being contemplated by the Company
(whether or not a final decision has been made to undertake such material
transaction at the time the right to delay is exercised). The Company may
exercise such right to delay the filing or effectiveness of a Registration
Statement two times and may delay the filing or effectiveness of such
registration statement for not more than 90 days beyond the relevant period
set forth in Section 10.3(a). Upon any delay by the Company pursuant to
this Section 10.2(d) which lasts more than 60 days, the Majority of the
Holders may rescind the notice given pursuant to Section 10.2(a), and the
Holders will be deemed not to have exercised the right to effect the filing of
a Registration Statement under Section 10.2(a) as a result of such notice.
(e) Notwithstanding anything herein to the contrary, the
obligations of the Company and rights of the Holders under Sections 10.1, 10.2
and 10.3 shall expire and terminate at such time as Ryan, Beck & Co., or its
successors, shall have received from counsel to the Company an unqualified
11
<PAGE>
written opinion of such counsel that the Holders have the right, pursuant
to the provision of Rule 144 under the Act, to sell within any three month
period from the date of the opinion all Warrant Shares then held and
purchasable
upon exercise of the Warrants by such Holders.
10.3 Covenants of the Company With Respect to Registration. In
connection with any registration under Section 10.1 or 10.2 hereof, the
Company
covenants and agrees as follows:
(a) The Company shall use its reasonable efforts to file a
registration statement within fifty (50) days of receipt of any demand
therefor, shall use its reasonable efforts to have any registration statements
declared effective at the earliest possible time, and shall furnish each
Holder desiring to sell Warrant Shares under such registration statement such
number of prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding
fees and expenses of Holder(s)' counsel and any underwriting or
selling commissions which shall be paid by the Holders),
fees and expenses in connection with all registration statements
filed pursuant to Section 10.1 and 10.2(a) hereof including,
without limitation, the Company's legal and accounting fees,
printing expenses, blue sky fees and expenses.
(c) The Company will take all necessary action
which may be required in qualifying or registering the Warrant
Securities included in a registration statement for offering and
sale under the securities or blue sky laws of such states as
reasonably are requested by the Holder(s), provided that the
Company shall not be obligated to execute or file any general
consent to service of process or to qualify as a foreign
corporation to do business under the laws of any such
jurisdiction.
(d) Nothing contained in this Agreement shall be
construed as requiring the Holders to exercise their Warrants
prior to the initial filing of any registration statement or the
effectiveness thereof.
(e) The Company shall deliver promptly to each
Holder participating in the offering requesting the
correspondence and memoranda described below copies of all
correspondence between the Commission and the Company, its
counsel or auditors and all memoranda relating to discussions
with the Commission or its staff with respect to the registration
statement.
(f) Notwithstanding anything herein to the
contrary, the obligations of the Company and rights of the
Holders under Sections 10.1, 10,.2 and 10.3 shall expire and
terminate at such time as Ryan, Beck & Co., Inc. or its
successors, shall have received from counsel to the Company an
unqualified written opinion of such counsel that the Holders have
the right, pursuant to the provisions of Rule 144 under the Act,
to sell within any three month period from the date of the
opinion all Warrant Shares then held and purchasable upon
exercise of the Warrants by such Holders.
12
<PAGE>
10.4 Indemnification.
(a) Subject to the terms of this Section 10, the
Company will indemnify and hold harmless each Holder, its
directors and officers, and each person, if any, who controls the
Holder within the meaning of Section 15 of the Act or Section
20(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), from and against, and will reimburse the Holder
and each such controlling person with respect to, any and all
loss, damage, liability, cost and expense to which such holder or
controlling person may become subject under the 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 a Registration Statement filed
with the Commission pursuant to Section 10, 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, an untrue statement or alleged
untrue statement or omission or alleged omission so made in
conformity with information furnished by a Holder or such
controlling person in writing specifically for use in the
preparation thereof.
(b) Subject to the terms of this Section 10, each
Holder will severally, and not jointly, 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 expense to which the Company or any
controlling person and/or any underwriter may become subject
under the 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 filed with the Commission pursuant
to Section 10, 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 Holder specifically for use in the preparation
thereof.
(c) Promptly after receipt by an indemnified
party pursuant to the provisions of Section 10.4(a) or 10.(b) of
notice of the commencement of any action involving the subject
matter of the foregoing indemnity provisions, such indemnified
party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of Section 10.4(a)
or 10.4(b), promptly notify the indemnifying party of the
commencement thereof; but the omission to so notify the
indemnifying party will not relieve the indemnifying party from
any liability which it may have to any indemnified party
otherwise than hereunder. In case such action is brought against
any indemnified party and the indemnified party notifies the
indemnifying party of the commencement thereof, the indemnifying
13
<PAGE>
party shall have the right to participate in, and, to the extent
that it may wish, assume the defense thereof; or, if there is a
conflict of interest which would prevent counsel for the
indemnifying party from also representing the indemnified party,
(or, in the event that the indemnified party and the indemnifying
party are both named as parties in the action and it is
reasonably determined, in good faith, by counsel for the
indemnified party and counsel for the indemnifying party that
there is such a conflict) the indemnified parties have the right
to select only one (1) separate counsel to participate in the
defense of such action on behalf of all such indemnified parties.
After notice from the indemnifying parties to such indemnified
party of the indemnifying parties' election so to assume the
defense thereof, the indemnifying parties will not be liable to
such indemnified parties pursuant to the provisions of said
Section 10.4(a) or 10.4(b) for any legal or other expense
subsequently incurred by such indemnified parties in connection
with the defense thereof, other than reasonable costs of
investigation, unless (a) the indemnified parties shall have
employed counsel in accordance with the provisions of the
preceding sentence; (b) the indemnifying parties shall not have
employed counsel satisfactory to the indemnified parties to
represent the indemnified parties within a reasonable time after
the notice of the commencement of the action or (c) the
indemnifying party has authorized the employment of counsel for
the indemnified party at the expense of the indemnifying parties.
10.5 Majority. For purposes of this Agreement, the term
"Majority" in reference to the Holders, shall mean in excess of
fifty percent (50%) of the then outstanding Warrants or Warrant
Shares that (y) are not held by the Company, an affiliate,
officer, creditor, employee or agent thereof or any of their
respective affiliates, members of their family, persons acting as
nominees or in conjunction therewith and (z) have not been resold
to the public pursuant to a registration statement filed with the
Commission under the Act.
11. Adjustments to Exercise Price and Number of Securities.
11.1 Subdivision and Combination. In case the Company
shall at any time subdivide or combine the outstanding shares of
Common Stock, the Exercise Price shall forthwith be
proportionately decreased in the case of subdivision or increased
in the case of combination.
11.2 Stock Dividends and Distributions. If the Company
at any time, or from time to time, while the Warrants are
outstanding shall declare or pay, without consideration, any
dividend on the Common Stock payable in Common Stock, then the
Exercise Price shall be proportionately decreased.
11.3 Adjustment in Number of Securities. Upon each
adjustment of the Exercise Price pursuant to the provisions of
this Section 11, the number of Warrant Shares issuable upon the
exercise at the adjusted exercise price of each Warrant shall be
adjusted to the nearest full amount by multiplying a number equal
to the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Shares issuable upon exercise
of the Warrants immediately prior to such adjustment and dividing
the product so obtained by the adjusted Exercise Price.
14
<PAGE>
11.4 Definition of Common Stock. For the purpose of
this Agreement, the term "Common Stock" shall mean (i) the Common
Stock or (ii) the class of stock designated as Common Stock in
the Articles of Incorporation of the Company as may be amended as
of the date hereof, or (ii) any other class of stock resulting
from successive changes or reclassifications of such Common
Stock consisting solely of changes in par value, or from par
value to no par value, or from no par value to par value.
11.5 Merger or Consolidation. In case of any
consolidation of the Company with, or merger of the Company with,
or merger of the Company into, another corporation (other than a
consolidation or merger in which the Company is the surviving
entity), the corporation formed by such consolidation or merger
shall execute and deliver to each Holder a supplemental warrant
agreement providing that the holder of each Warrant then
outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise
of such Warrant, the kind and amount of shares of stock and other
securities and property receivable upon such consolidation or
merger, by a holder of the number of shares of Common Stock of
the Company for which such warrant might have been exercised
immediately prior to such consolidation, merger, sale or
transfer. Such supplemental warrant agreement shall provide for
adjustments which shall be identical to the adjustments provided
in Section 11. The above provision of this subsection shall
similarly apply to successive consolidations or mergers.
11.6 No Adjustment of Exercise Price in Certain Cases.
No adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Warrants or
the shares of Common Stock issuable upon the exercise of the
Warrants;
(b) If the amount of said adjustment shall be
less than two cents (2 cents) per Warrant Share, provided, however,
that in such case any adjustment that would otherwise be
required then to be made shall be carried forward and shall be
made at the time of and together with the next subsequent
adjustment which, together with any adjustment so carried
forward, shall amount to at least two cents (2 cents) per Warrant
Share.
12. Exchange and Replacement of Warrant Certificates. Each
Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holder at the principal
executive office of the Company, for a new Warrant Certificate of
like tenor and date representing in the aggregate the right to
purchase the same number of Warrant Shares in such denominations
as shall be designated by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of any Warrant Certificate, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to
it, and reimbursement to the Company of all reasonable expense
incidental thereto, and upon surrender and cancellation of the
15
<PAGE>
Warrants, if mutilated, the Company will make and deliver a new
Warrant Certificate of like tenor, in lieu thereof.
13. Elimination of Fractional Interests. The Company shall
not be required to issue certificates representing fractions of
shares of Common Stock upon the exercise of the Warrants,
nor shall it be required to issue scrip or pay cash in lieu of
fractional interests, it being the intent of the parties that all
fractional interests shall be eliminated by rounding any fraction
up to the nearest whole number of shares of Common Stock or other
securities, properties or rights.
14. Reservation and Listing of Securities. The Company
shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of
issuance upon the exercise of the Warrants, such number of shares
of Common Stock or other securities, properties or rights as
shall be issuable upon the exercise thereof. The Company
covenants and agrees that, upon exercise of the Warrants and
payment of the Exercise Price therefor, all shares of Common
Stock and other securities issuable upon such exercise shall be
duly and validly issued, fully paid, non-assessable and not
subject to the preemptive rights of any stockholder. As long as
the Warrants shall be outstanding, the Company shall use its
reasonable efforts to cause all shares of Common Stock issuable
upon the exercise of the Warrants to be listed (subject to
official notice of issuance) on all securities exchanges on which
the Common Stock issued to the public in connection herewith may
then be listed and/or quoted.
15. Notices to Warrant Holders. Nothing contained in this
Agreement shall be construed as conferring upon the Holders the
right to vote or to consent or to receive notice as a stockholder
in respect of any meetings of stockholders for the election of
directors or any other matter, or as having any rights whatsoever
as a stockholder of the Company. If, however, at any time prior
to the expiration of the Warrants and their exercise, any of the
following events shall occur:
(a) the Company shall take a record of the holders of
its shares of Common Stock for the purpose of entitling them to
receive a dividend or distribution payable otherwise than in
cash, or a cash dividend or distribution payable otherwise than
out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the
books of the Company;
or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the
Company or securities convertible into or exchangeable for shares
of capital stock of the Company, or any option, right or warrant
to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation or merger)
or a sale of all or substantially all of its property, assets and
business as an entirety shall be proposed;
then, in any one or more of said events, the Company shall give
written notice of such event at least fifteen (15) days prior to
the date fixed as a record date or the date of closing the
16
<PAGE>
transfer books for the determination of the stockholders entitled
to such dividend, distribution, convertible or exchangeable
securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such
notice shall specify such record date or the date of closing the
transfer books, as the case may be. Failure to give such notice
or any defect therein shall not affect the validity of any action
taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any
proposed dissolution, liquidation, winding up or sale.
16. Notices.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been
duly made and sent when delivered, or mailed by registered or
certified mail, return receipt requested:
(a) If to a registered Holder of the Warrants, to the
address of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in
Section 5 hereof or to such other address as the Company may
designate by notice to the Holder; or
(c) If to Ryan, Beck & Co., Inc., to Ryan, Beck & Co.,
Inc. 200 Park Avenue, New York, NY 10166, Attention Randy F.
Rock; or
(d) If to Larkspur Capital Corporation, to Larkspur
Capital Corporation, 445 Park Avenue, New York, NY 10022,
Attention: Robert L. Goodwin.
17. Supplements and Amendments. The Company and Ryan, Beck
& Co. may from time to time supplement or amend this Agreement
without the approval of any Holder in order to cure any
ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any provisions
herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and Ryan, Beck &
Co. may deem necessary or desirable and which the Company and
Ryan, Beck & Co. deem shall not adversely affect the interests of
the Holders.
18. Successors. All the covenants and provisions of this
Agreement shall be binding upon and inure to the benefit of the
Company, each Holder and their respective successors and assigns
hereunder.
19. Termination. This Agreement shall terminate at the
close of business on January 25, 2005.
20. Governing Law; Submission to Jurisdiction. This
Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of
17
<PAGE>
Delaware and for all purposes shall be construed in accordance
with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
The Company, the Agents and each Holder hereby agrees that
any action, proceeding or claim against it arising out of, or
relating in any way to, this Agreement shall be brought and
enforced in the federal courts located in Wilmington, Delaware,
and irrevocably submits to such jurisdiction, which jurisdiction
shall be exclusive. The Company, the Agents and each Holder
hereby irrevocably waives any objection to such exclusive
jurisdiction or inconvenient forum. Any such process or summons
to be served upon any of the Company, the Agents and the
Holder(s) (at the option of the party bringing such action,
proceeding or claim) may be served by transmitting a copy
thereof, by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set
forth in Section 16 hereof. Such mailing shall be deemed
personal service and shall be legal and binding upon the party so
served in any action, proceeding or claim. The Company, the
Agents and the Holder(s) agree that the prevailing party(ies) in
any such action or proceeding shall be entitled to recover from
the other party(ies) all of its/their reasonable legal costs
and expenses relating to such action or proceeding and/or
incurred in connection with the preparation therefor.
21. Entire Agreement; Modification. This Agreement
contains the entire understanding between the parties hereto with
respect to the subject matter hereof and may not be modified or
amended except by a writing duly signed by the party against whom
enforcement of the modification or amendment is sought.
22. Severability. If any provision of this Agreement shall
be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision of this
Agreement.
23. Captions. The caption headings of the Sections of this
Agreement are for convenience of reference only and are not
intended, nor should they be construed as, a part of this
Agreement and shall be given no substantive effect.
24. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other
than the Company and the Agents and any other Holder any legal
or equitable right, remedy or claim under this Agreement; and
this Agreement shall be for the sole benefit of the Company and
the Agents and any other registered Holder.
25. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for
all purposes be deemed to be an original, and such counterparts
shall together constitute but one and the same instrument.
26. Assignment. This Agreement may not be assigned without
prior written consent of all parties hereto. The Warrants
granted hereunder may be assigned in part, or in whole if prior
to any such assignment the assignee executes and delivers to the
Company a Certification, the form and content of which must be
18
<PAGE>
satisfactory to the Company, in which such assignee represents to
the Company that such assignee is an "accredited investor" under
Rule 501 of Regulation D promulgated under the Act and how such
assignee is an accredited investor, and that such assignee is
acquiring such designated Warrants for the assignees' own
account, for investment purposes only and not with a view toward
distribution or resale and agrees to be subject to and bound by
all of the other conditions and provisions of this Agreement
(including, but not limited to, the representations, warranties
and covenants contained in Sections 3 and 7 hereof) and such
assignee shall execute and deliver to the Company an agreement in
form and substance substantially the same as this Agreement
except for the name and number of Warrants to be issued to the
assignee.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above
written.
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
By:
_______________________________________
Dr. Louis F. Centofanti
Chief Executive Officer
RYAN, BECK & CO., INC.
By:
______________________________________
Name:
Title:
LARKSPUR CAPITAL CORPORATION
By:
______________________________________
Name:
Title:
19
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-2000
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<RECEIVABLES> 13,057,000
<ALLOWANCES> 945,000
<INVENTORY> 223,000
<CURRENT-ASSETS> 16,073,000
<PP&E> 31,685,000
<DEPRECIATION> 8,336,000
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0
0
<COMMON> 23,000
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<TOTAL-LIABILITY-AND-EQUITY> 55,551,000
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