-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, He4FTkvr57GmFgOQwPOPdd3NHozvlZZxRJLbTazLSt+QTCq2qleJXMYOWYc8bG4e 6zsJ+yam8/0OzUBXOwx74w== 0000948600-99-000022.txt : 19990331 0000948600-99-000022.hdr.sgml : 19990331 ACCESSION NUMBER: 0000948600-99-000022 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PERMA FIX ENVIRONMENTAL SERVICES INC CENTRAL INDEX KEY: 0000891532 STANDARD INDUSTRIAL CLASSIFICATION: HAZARDOUS WASTE MANAGEMENT [4955] IRS NUMBER: 581954497 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-11596 FILM NUMBER: 99577385 BUSINESS ADDRESS: STREET 1: 1940 NORTHWEST 67TH PLACE STREET 2: SUITE A CITY: GAINESVILLE STATE: FL ZIP: 32653 BUSINESS PHONE: 3523951351 MAIL ADDRESS: STREET 1: 1940 NW 67TH PL STREET 2: SUITE A CITY: GAINESVILLE STATE: FL ZIP: 32653 10-K 1 FORM 10-K - 12/31/1998 ================================================================= SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ____________________ Form 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998 __________________________ or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File No. 1-11596 _______ PERMA-FIX ENVIRONMENTAL SERVICES, INC. (Exact name of registrant as specified in its charter) Delaware 58-1954497 (State or other jurisdiction (IRS Employer Identification of incorporation or organization) Number) 1940 N.W. 67th Place Gainesville, FL 32653 (Address of principal (Zip Code) executive offices) (352)373-4200 (Registrant's telephone number) Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ___________________ _____________________ Common Stock, $.001 Par Value Boston Stock Exchange Redeemable Warrants Boston Stock Exchange Securities registered pursuant to Section 12(g) of the Act: Class B Warrants Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ ______ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by nonaffiliates of the Registrant as of March 12, 1999, based on the closing sale price of such stock as reported by NASDAQ on such day, was $12,648,341. The Company's Common Stock is listed on the NASDAQ SmallCap Market and the Boston Stock Exchange. As of March 12, 1999, there were 12,411,080 shares of the registrant's Common Stock, $.001 par value, outstanding, excluding 943,000 shares held as treasury stock. =================================================================
PERMA-FIX ENVIRONMENTAL SERVICES, INC. INDEX _____ Page No. _________ PART I Item 1. Business. . . . . . . . . . . . . . . . . . . 1 Item 2. Properties. . . . . . . . . . . . . . . . . . 10 Item 3. Legal Proceedings . . . . . . . . . . . . . . 11 Item 4A. Executive Officers of the Company. . . . . . . 11 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . 14 Item 6. Selected Financial Data . . . . . . . . . . . 15 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . 17 Special Note Regarding Forward-Looking Statements. . . . . . . . . . . . . . . . . . 27 Item 8. Financial Statements and Supplementary Data. . . . . . . . . . . . . . . . . . . . . 28 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . . . . . . . . . . . 61 PART III Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . 62 Item 11. Executive Compensation . . . . . . . . . . . . 64 Item 12. Security Ownership of Certain Beneficial Owners and Management. . . . . . . . . . . . . 69 Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . 74 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. . . . . . . . . . . . 78
PART I ITEM 1. BUSINESS Company Overview and Principal Products and Services Perma-Fix Environmental Services, Inc. (the Company, which may be referred to as we, us, or our) is a Delaware corporation, engaged through its subsidiaries, in: * Waste Management Services, which includes: * treatment, storage, processing, and disposal of hazardous and non-hazardous waste and mixed waste which is both low-level radioactive and hazardous; * nuclear mixed and low-level radioactive waste treatment, processing and disposal, which includes research, development, on-and off-site waste remediation and processing; and * industrial waste and wastewater management services, including the collection, treatment, processing and disposal, and the design and construction of on-site waste- water treatment systems. * Consulting Engineering Services, which includes: * broad-scope environmental issues, including environmental management programs, regulatory permitting, compliance and auditing, landfill design, field testing and character- ization. We service research institutions, commercial companies and governmental agencies nationwide. The distribution channels for services are through direct sales to customers or via intermediaries. We were incorporated in December of 1990. Our executive offices are located at 1940 N.W. 67th Place, Gainesville, Florida 32653. Our home page on the Internet is at www.perma-fix.com. You can learn more about us by visiting that site. Operating Segments We have ten operating segments which represent each separate facility or location that we operate. Eight of these segments provide waste management services and two segments provide consulting engineering services as described below: *WASTE MANAGEMENT SERVICES, which includes, off-site waste storage, treatment, processing and disposal services through our four treatment, storage and disposal ("TSD") facilities and numerous related operations provided by our four other facilities, as discussed below. Perma-Fix of Florida, Inc. ("PFF"), located in Gainesville, Florida, is our most uniquely permitted and licensed TSD. PFF specializes in the processing and treatment of certain types of wastes containing both low-level mixed radioactive and hazardous wastes, which are known in the industry as mixed waste. PFF is one of only a few facilities nationally to operate under both a hazardous waste permit and a nuclear materials license, from which it has built its reputation based on its ability to treat difficult waste streams using unique processing technologies and its ability to provide related research and development services. Its primary services include the treatment and processing of waste Liquid Scintillation Vials (LSVs), the processing and handling of other mixed and radioactive wastes, site remediation, storage of customer wastes, research and development, as well as more typical services of hazardous and non-hazardous waste management. The LSVs are generated primarily by institutional research agencies and biotechnical companies. These wastes contain mixed (low-level) radioactive materials and hazardous waste (flammable) constituents. Management believes that PFF currently processes approximately 80% of the available LSV waste in the country. The business has expanded into receiving and handling other types of mixed wastes primarily from the nuclear utilities, the U.S. Department of Energy ("USDOE") and other government facilities as well as select mixed 1 waste field remediation projects. PFF manages the activities at the facility under a license from the State of Florida Office of Radiation Control and a Resource Conservation and Recovery Act ("RCRA") Part B permit. Perma-Fix Treatment Services, Inc. ("PFTS") is a permitted TSD facility located in Tulsa, Oklahoma. PFTS provides waste transportation and treatment and provides disposal via its on-site Class I Injection Well located at the facility. The injection well is permitted for the disposal of non-hazardous liquids and characteristic hazardous wastes that have been treated to remove the hazardous characteristic. PFTS operates a non-hazardous wastewater treatment system for oil and solids removal, a corrosive treatment system for neutralization and metals precipitation, and a container stabilization system. The injection well is controlled by a state-of-the-art computer system to assist in achieving compliance with all applicable state and federal regulations. Perma-Fix of Dayton, Inc. ("PFD"), is a permitted TSD facility located in Dayton, Ohio. PFD has four main disposal production areas. The four production areas are a RCRA permitted TSD, a centralized wastewater treatment area, used oil fuel recycling area, and non-hazardous solids solidification area. Waste accepted under the RCRA permit is typically drum waste for incineration or stabilization. Wastewaters accepted at the facility include hazardous and non-hazardous wastewaters, which are treated by ultra filtration and metals precipitation to meet the requirements of PFD's Clean Water Act pretreatment permit. Waste industrial oils and used motor oils are processed through high-speed centrifuges to produce a high quality fuel that is burned by industrial burners. PFD also designs and constructs on-site wastewater pretreatment systems. Perma-Fix of Ft. Lauderdale, Inc. ("PFL") is a permitted Treatment and Storage facility located in Ft. Lauderdale, Florida. PFL collects and treats hazardous wastewaters, oily wastewaters, used oil and other off-specification petroleum-based products, some of which may potentially be recycled into usable products. Key activities at PFL include process cleaning and material recovery, production and sales of on-specification fuel oil, custom tailored waste management programs and hazardous material disposal and recycling materials from generators such as the cruise line and marine industries. Perma-Fix of New Mexico, Inc. ("PFNM"), located in Albuquerque, New Mexico, provides on-site (at the generator's site) waste treatment services to convert certain types of characteristic hazardous wastes into non-hazardous waste by removing those characteristics which categorize such waste as "hazardous" and treats non-hazardous waste as an alternative to off-site waste treatment and disposal methods. PFI does not treat on-site waste that is specifically listed as hazardous waste by the U.S. Environmental Protection Agency ("EPA") under RCRA, but treats only non-hazardous waste and characteristic waste deemed hazardous under RCRA on the generator's site. Perma-Fix, Inc. ("PFI") provides on-site waste treatment services for certain low level radioactive and mixed wastes, for industrial firms, the USDOE and other governmental facilities under licenses granted to the generator. PFI, in partnership with PFF, continues to expand its processing capabilities in the nuclear waste field, utilizing its technologies and project experience, including the successful processing of legacy waste at the USDOE Fernald Ohio facility. In addition, PFI has recently opened an Oak Ridge, Tennessee office to facilitate future USDOE contracts. Industrial Waste Management, Inc. ("IWM"), located in St. Louis, Missouri is engaged in supplying and managing non-hazardous and hazardous waste to be used by cement plants as a substitute fuel or as a source of raw materials used in the production of cement. Reclamation Services, Inc. ("RSI") located in Tulsa, Oklahoma, is a reseller of by-product materials generated at cement plants for environmental and engineering applications. For 1998, the Company's waste management services business accounted for approximately 85.7% of the Company's total revenue, as compared to approximately 83.6% for 1997, which excludes discontinued operations. Contained within this segment is the nuclear and mixed waste product line, which accounted for 2 $4,693,000 or 15.36% of total revenue for 1998, as compared to $5,407,000 or 19.03% of total revenue for 1997, excluding discontinued operations. *CONSULTING ENGINEERING SERVICES, which provides environmental engineering and regulatory compliance consulting services through two subsidiaries, as discussed below. Schreiber, Yonley & Associates ("SYA") is located in St. Louis, Missouri. SYA specializes in environmental management programs, permitting, compliance and auditing, in addition to landfill design, field investigation, testing and monitoring. SYA clients are primarily industrial, including many within the cement manufacturing industry. Mintech, Inc. ("Mintech") is located in Tulsa, Oklahoma. Mintech specializes in environmental and geotechnical consulting, engineering, geology, hydrogeology and geophysics, including evaluating, selecting and implementing the appropriate environmental solutions to problems involving soil and water. Mintech also provides remediation services. In addition, Mintech personnel routinely provide training services involving various environmental regulations to private industry, governmental agencies and military installations. The engineering firms also provide the necessary support, compliance and training as required by our operating facilities. During 1998 environmental engineering and regulatory compliance consulting services accounted for approximately 14.3% of our total revenue, as compared to 16.4% in 1997, which excludes discontinued operations. Segment Information and Foreign and Domestic Operations and Export Sales During 1998, we were engaged in ten operating segments. Pursuant to FAS 131, we define an operating segment as: * A business activity from which we may earn revenue and incur expenses; * Whose operating results are regularly reviewed by our chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and * For which discrete financial information is available. We therefore define our segments as each separate facility or location that we operate. We clearly view each business as a separate segment and make decisions based on the activity and profitability of that particular location. These segments however, exclude the Corporate headquarters which does not generate revenue and Perma-Fix of Memphis, Inc. which is reported elsewhere as a discontinued operation. See Note 4 regarding discontinued operations. Pursuant to FAS 131 we have aggregated our operating segments into two reportable segments to ease in the presentation and understanding of our business. We used the following criteria to aggregate our segments: * The nature of our products and services; * The nature of the production processes; * The type or class of customer for our products and services; * The methods used to distribute our products or provide our services; and * The nature of the regulatory environment. Most of our activities were conducted in the Southeast, Southwest and Midwest portions of the United States. We had no foreign operations or export sales during 1998. 3 Importance of Patents and Trademarks, or Concessions Held We do not believe that we are dependent on any particular patent or trademark in order to operate our business or any significant segment thereof. We have received registration through the year 2000 for the service mark "Perma-Fix" by the U.S. Patent and Trademark office. We do not believe that on-site waste treatment processes for the stabilization of certain hazardous wastes as utilized by PFI are patentable except as described below. We do, however, believe that our level of expertise in utilizing such processes is substantial, and, therefore, we maintain such processes as a trade secret. We maintain a policy whereby key employees of PFI who are involved with the implementation of the treatment processes sign confidentiality agreements with respect to non-disclosure of such processes. A new process ("New Process") designed to remove certain types of organic hazardous constituents from soils or other solids and sludges ("Solids") has been developed by us. This New Process is designed to remove the organic hazardous constituents from the solids through a water based system. We have filed a patent application with the U.S. Patent and Trademark Office covering the New Process. As of the date of this report, we have not received a patent for the New Process, and there are no assurances that such a patent will be issued. Until development of this New Process, we were not aware of a relatively simple and inexpensive process that would remove the organic hazardous constituents from solids without elaborate and expensive equipment or expensive treating agents. Due to the organic hazardous constituents involved, the disposal options for such materials are limited, resulting in high disposal cost when there is a disposal option available. By reducing the organic hazardous waste constituents from the solids to a level where the solids may be returned to the ground, the generator's disposal options for such waste are substantially increased, allowing the generator to dispose of such waste at substantially less cost. As of the date of this report, we have only used the New Process, on a limited basis, for commercial use. As a result, there are no assurances that the New Process will perform as presently expected. It is anticipated that we will begin more extensive commercial use of the New Process in 1999. Patent applications have also been filed for processes to treat radon, selenium and other speciality materials. However, changes to current environmental laws and regulations could limit the use of the New Process or the disposal options available to the generator. See -- "Permits and Licenses." Permits and Licenses Waste management companies are subject to extensive, evolving and increasingly stringent federal, state and local environmental laws and regulations. Such federal, state and local environmental laws and regulations govern our activities regarding the treatment, storage, processing, disposal and transportation of hazardous, non- hazardous and radioactive wastes, and require us to obtain and maintain permits, licenses and/or approvals in order to conduct certain of our waste activities. Failure to obtain and maintain our permits or approvals would have a material adverse effect on us, our operations and financial condition. Moreover, as we expand our operations we may be required to obtain additional approvals, licenses or permits, and there can be no assurance that we will be able to do so. PFTS is a permitted solid and hazardous waste treatment, storage, and disposal facility. The RCRA part B Permit was issued by the Waste Management Section of the Oklahoma Department of Environmental Quality ("ODEQ"). Additionally PFTS maintains an active Injection Facility Operations Permit issued by the ODEQ Underground Injection Control Section for our two waste disposal injection wells, and a Pre-Treatment permit in order to discharge industrial wastewaters to the City of Tulsa's Publically Owned Treatment Works. PFTS is also registered with the ODEQ and the Department of Transportation as a hazardous waste transporter. PFF operates its hazardous and low-level radioactive waste activities under a RCRA Part B permit and a radioactive materials license issued by the state of Florida. PFL operates under a general permit and used oil processors license issued by the Florida Department of Environmental Protection ("FDEP"), a transporter license issued by the FDEP and a transfer 4 facility license issued by Broward County, Florida. Broward County also issued PFL a discharge pretreatment permit that allows discharge of treated water to the Broward County Publically Owned Treatment Works. PFD operates a hazardous and non-hazardous waste treatment and storage facility under various permits, including a RCRA Part B permit. PFD provides wastewater pretreatment under a discharge permit with Montgomery County Publically Owned Treatment Works and is a specification and off-specification used oil processor under the guidelines of the Ohio EPA. We believe that our TSD facilities presently have obtained all approvals, licenses and permits necessary to enable them to conduct their business as they are presently conducted. The failure of our TSD facilities to renew any of their present approvals, licenses and permits, or the termination of any such approvals, licenses or permits, could have a material adverse effect on us, our operations and financial condition. We believe that our on-site waste treatment services do not require federal environmental permits provided certain conditions are met, and we have received written verification from each state in which we are presently operating that no such permit is required provided certain conditions are met. There can be no assurance that states in which our waste facilities presently do business, other states in which our waste facilities may do business in the future, or the federal government will not change policies or regulations requiring us to obtain permits to carry on our on-site activities. Seasonality We experience a seasonal slowdown in operations and revenues during the winter months extending from late November through early March. The seasonality factor is a combination of the inability to generate consistent billable hours in the consulting engineering segment, along with poor weather conditions in the central plains and Midwestern geographical markets we serve for on-site and off- site services, resulting in a decrease in revenues and earnings during such period. Dependence Upon a Single or Few Customers The majority of our revenues for fiscal 1998 have been derived from hazardous and non-hazardous waste management services provided to a variety of industrial and commercial customers. Our customers are principally engaged in research, biotechnical development, transportation, chemicals, metal processing, electronic, automotive, petrochemical, refining and other similar industries, in addition to government agencies that include the U.S. Department of Energy ("USDOE"), U.S. Department of Defense ("USDOD"), and other federal, state and local agencies. We are not dependent upon a single customer, or a few customers, the loss of any one or more would have a material adverse effect on us, and during 1998 we did not make sales to any single customer that in the aggregate amount represented more than ten percent (10%) of our consolidated revenues. Competitive Conditions Competition is intense in most of our businesses, we compete with numerous companies both large and small, that are able to provide one or more of the environmental services offered by us and many of which may have greater financial, human and other resources than we have. However, we believe that the range of waste management and environmental consulting, treatment, processing and remediation services we provide affords us a competitive advantage with respect to certain of our more specialized competitors. We believe that the treatment processes we utilize offer a cost savings alternative to more traditional remediation and disposal methods offered by our competitors. The intense competition for performing the services performed by us within the waste industry has resulted in reduced gross margin levels for certain of those services. The exception is in the low- level radioactive and hazardous mixed waste area, which has only a few competitors. In addition, at present we believe there is only one other facility in the United States that provides low-level radioactive and hazardous waste processing of scintillation vials, which requires both a radioactive materials license and a hazardous 5 waste permit. Competition in the waste management industry is likely to increase as the industry continues to mature, as more companies enter the market and expand the range of services which they offer and as we move into new geographic markets. We believe that there are no formidable barriers to entry into certain of the on-site treatment businesses. However, the permitting requirements, and the cost to obtain such permits, are barriers to the entry of hazardous waste TSD facilities and radioactive activities as presently operated by our subsidiaries. Certain of the non- hazardous waste operations, however, do not require such permits and, as a result, entry into these non-hazardous waste businesses would be easier. If the permit requirements for both hazardous waste storage, treatment and disposal activities and/or the licensing requirements for the handling of low level radioactive matters are eliminated or if such licenses or permits were made easier to obtain, such would allow more companies to enter into these markets and provide greater competition. In the on-site waste treatment service area, we believe that the major competition to our services is the continued utilization of traditional off-site disposal methods such as landfilling. As the viability of our on-site treatment process is demonstrated in the market, we believe that the potential to reduce costs and the ability to limit potential liability will persuade waste generators to utilize our services. In the future, we believe that we will face direct competition as processes such as those applied by us are utilized by our competitors. We believe that we are a significant participant in the delivery of off-site waste treatment services in the Southeast, Midwest and Southwest portions of the United States. We compete with TSD facilities operated by national, regional and independent environmental services firms located within a several hundred mile radius of our facilities. Our subsidiary, PFF, with permitted radiological activities solicits business on a nationwide basis, including the U.S. Territories and Antarctica. Our competitors for remediation services include national and regional environmental services firms that may have larger environmental remediation staffs and greater resources. We recognize our lack of financial resources necessary to compete for larger remediation contracts and therefore, presently concentrate on remediation services projects within our existing customer base or projects in our service area which are too small for companies without a presence in the market to perform competitively. Environmental engineering and consulting services provided by us through Mintech and SYA involve competition with larger engineering and consulting firms. We believe that we are able to compete with these firms based on our established reputation in these market areas and our expertise in several specific elements of environmental engineering and consulting such as environmental applications in the cement industry. Capital Spending, Certain Environmental Expenditures and Potential Environmental Liabilities During 1998, we spent approximately $2,554,000 in capital expenditures, which was principally for the expansion and improvements to our continuing operations. This 1998 capital spending total includes $564,000 of which was financed. For 1999, we have budgeted approximately $2,500,000 for capital expenditures to improve our operations, reduce the cost of waste processing and handling, expand the range of wastes that can be accepted for treatment and processing and to maintain permit compliance requirements, and approximately $437,000 to comply with federal, state and local regulations in connection with remediation activities at two locations. See Note 4 and Note 9 to Notes to Consolidated Financial Statements. However, there is no assurance that we will have the funds available for such budgeted expenditures. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources of the Company". We do not anticipate the ongoing environmental expenditures to be significant, with the exception of remedial activities at the two locations discussed below. In June 1994, we acquired from Quadrex Corporation and/or a subsidiary of Quadrex Corporation (collectively, "Quadrex") three TSD companies, including the Dayton, Ohio, PFD facility. The former owners of PFD had merged Environmental Processing Services, Inc. ("EPS") with PFD, which was subsequently sold to Quadrex. Through our acquisition of PFD in 1994 from Quadrex, we were indemnified by Quadrex for costs associated with remediating certain property leased by EPS from an affiliate of EPS on which 6 EPS operated a RCRA storage and processing facility ("Leased Property"). Such remediation involves soil and/or groundwater restoration. The Leased Property used by EPS to operate its facility is separate and apart from the property on which PFD's facility is located. During 1995, in conjunction with the bankruptcy filing by Quadrex, we were required to advance $250,000 into a trust fund to support remedial activities at the Leased Property used by EPS, which was subsequently increased to $365,000. As discussed in Note 9 to the Consolidated Financial Statements, we have accrued approximately $460,000 for the estimated costs of remediating the Leased Property used by EPS, which will extend for a period of three (3) to five (5) years. Due to the acquisition of PFM, we assumed and recorded certain liabilities to remediate gasoline contaminated groundwater and investigate, under the hazardous and solid waste amendments, potential areas of soil contamination on PFM's property. Prior to our ownership of PFM, the owners installed monitoring and treatment equipment to restore the groundwater to acceptable standards in accordance with federal, state and local authorities. We have accrued approximately $910,000 for the estimated cost of remediating the groundwater contamination. See "BUSINESS -- Certain Environmental Expenditures". The PFM facility is situated in the vicinity of the Memphis Military Defense Depot (the "Defense Facility"), which Defense Facility is listed as a Superfund Site and is adjacent to the Allen Well Field utilized by Memphis Light, Gas & Water, a public water supply utilized in Memphis, Tennessee. Chlorinated compounds have previously been detected in the groundwater beneath the Defense Facility, as well as in very limited amounts in certain production wells in the adjacent Allen Well Field. Very low concentrations of certain chlorinated compounds have also been detected in the groundwater beneath the PFM facility and the possible presence of these compounds are currently being investigated. Based upon a study performed by our environmental engineering group, we do not believe the PFM facility is the source of the chlorinated compounds in a limited number of production wells in the Allen Well Field and, as a result, do not believe that the presence of the low concentrations of chlorinated compounds at the PFM facility will have a material adverse effect upon the Company. We were also notified in January 1998 by the EPA that it is believed that PFM is a potentially responsible party ("PRP") regarding the remediation of a drum reconditioning facility located in Memphis. See "Legal Proceedings" for further discussion of this environmental liability. The nature of our business exposes us to significant risk of liability for damages. Such potential liability could involve, for example, claims for clean-up costs, personal injury or damage to the environment in cases where we are held responsible for the release of hazardous materials; claims of employees, customers or third parties for personal injury or property damage occurring in the course of our operations; and claims alleging negligence or professional errors or omissions in the planning or performance of our services or in the providing of our products. In addition, we could be deemed a responsible party for the costs of required clean-up of any property which may be contaminated by hazardous substances generated or transported by us to a site we selected, including properties owned or leased by us. We could also be subject to fines and civil penalties in connection with violations of regulatory requirements. Research and Development Innovation by our operations is very important to the success of our business. Our goal is to discover, develop and bring to market innovative ways to process waste that address unmet environmental needs. We are planning for future growth of our research operations. We conduct research internally, and also through collaborations with universities. We feel that our investments in research have been rewarded by the discovery of the Perma-Fix Process and the New Process. Our competitors also devote resources to research and development and many such competitors have greater resources at their disposal than we do. Number of Employees In our service-driven business, our employees are vital to our success. We believe we have good relationships with our employees. As of December 31, 1998, we employed approximately 226 persons, of which approximately 52 were assigned to our engineering and consulting industry segment and approximately 168 to the waste management industry segment. 7 Governmental Regulation Environmental companies and their customers are subject to extensive and evolving environmental laws and regulations by a number of national, state and local environmental, safety and health agencies, the principal of which being the EPA. These laws and regulations largely contribute to the demand for our services. Although our customers remain responsible by law for their environmental problems, we must also comply with the requirements of those laws applicable to our services. Because the field of environmental protection is both relatively new and rapidly developing, we cannot predict the extent to which our operations may be affected by future enforcement policies as applied to existing laws or by the enactment of new environmental laws and regulations. Moreover, any predictions regarding possible liability are further complicated by the fact that under current environmental laws we could be jointly and severally liable for certain activities of third parties over whom we have little or no control. Although we believe that we are currently in substantial compliance with applicable laws and regulations, we could be subject to fines, penalties or other liabilities or could be adversely affected by existing or subsequently enacted laws or regulations. The principal environmental laws affecting us and our customers are briefly discussed below. The Resource Conservation and Recovery Act of 1976, as amended ("RCRA"). RCRA and its associated regulations establish a strict and comprehensive regulatory program applicable to hazardous waste. The EPA has promulgated regulations under RCRA for new and existing treatment, storage and disposal facilities including incinerators, storage and treatment tanks, storage containers, storage and treatment surface impoundments, waste piles and landfills. Every facility that treats, stores or disposes of hazardous waste must obtain a RCRA permit or must obtain interim status from the EPA, or a state agency which has been authorized by the EPA to administer its program, and must comply with certain operating, financial responsibility and closure requirements. RCRA provides for the granting of interim status to facilities that allows a facility to continue to operate by complying with certain minimum standards pending issuance or denial of a final RCRA permit. Boiler and Industrial Furnace Regulations under RCRA ("BIF Regulations"). BIF Regulations require boilers and industrial furnaces, such as cement kilns, to obtain permits or to qualify for interim status under RCRA before they may use hazardous waste as fuel. If a boiler or industrial furnace does not qualify for interim status under RCRA, it may not burn hazardous waste as fuel or use such as raw materials without first having obtained a final RCRA permit. In addition, the BIF Regulations require 99.99% destruction of the hazardous organic compounds used as fuels in a boiler or industrial furnace and impose stringent restrictions on particulate, carbon monoxide, hydrocarbons, toxic metals and hydrogen chloride emissions. The Safe Drinking Water Act, as amended (the "SDW Act"), regulates, among other items, the underground injection of liquid wastes in order to protect usable groundwater from contamination. The SDW Act established the Underground Injection Control Program ("UIC Program") that provides for the classification of injection wells into five classes. Class I wells are those which inject industrial, municipal, nuclear and hazardous wastes below all underground sources of drinking water in an area. Class I wells are divided into non-hazardous and hazardous categories with more stringent regulations imposed on Class I wells which inject hazardous wastes. PFTS' permit to operate its underground injection disposal wells is limited to non-hazardous wastewaters. The Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA", also referred to as the "Superfund Act"). CERCLA governs the clean-up of sites at which hazardous substances are located or at which hazardous substances have been released or are threatened to be released into the environment. CERCLA authorizes the EPA to compel responsible parties to clean up sites and provides for punitive damages for noncompliance. CERCLA imposes joint and several liability for the costs of clean-up and damages to natural resources. Health and Safety Regulations. The operation of the Company's environmental activities is subject to the requirements of the Occupational Safety and Health Act ("OSHA") and comparable state laws. Regulations promulgated under OSHA by the Department of Labor require employers of persons in the transportation and 8 environmental industries, including independent contractors, to implement hazard communications, work practices and personnel protection programs in order to protect employees from equipment safety hazards and exposure to hazardous chemicals. Atomic Energy Act. The Atomic Energy Act of 1954 governs the safe handling and use of Source, Special Nuclear and Byproduct materials in the U.S. and its territories. This act authorized the Atomic Energy Commission (now the Nuclear Regulatory Commission) to enter into "Agreements with States to carry out those regulatory functions in those respective states except for Nuclear Power Plants and federal facilities like the VA hospitals and the USDOE operations." On July 1, 1964, the state of Florida signed this Agreement. Thus, the state of Florida (with the USNRC oversight), Office of Radiation Control, regulates the radiological program of the PFF facility. Other Laws. Our activities are subject to other federal environmental protection and similar laws, including, without limitation, the Clean Water Act, the Clean Air Act, the Hazardous Materials Transportation Act and the Toxic Substances Control Act. Many states have also adopted laws for the protection of the environment which may affect us, including laws governing the generation, handling, transportation and disposition of hazardous substances and laws governing the investigation and clean-up of, and liability for, contaminated sites. Some of these state provisions are broader and more stringent than existing federal law and regulations. Our failure to conform our services to the requirements of any of these other applicable federal or state laws could subject us to substantial liabilities which could have a material adverse affect on us, our operations and financial condition. In addition to various federal, state and local environmental regulations, our hazardous waste transportation activities are regulated by the U.S. Department of Transportation, the Interstate Commerce Commission and transportation regulatory bodies in the states in which we operate. We cannot predict the extent to which we may be affected by any law or rule that may be enacted or enforced in the future, or any new or different interpretations of existing laws or rules. Insurance We believe we maintain insurance coverage adequate for our needs and which is similar to, or greater than, the coverage maintained by other companies of our size in the industry. There can be no assurances, however, that liabilities which may be incurred by us will be covered by our insurance or that the dollar amount of such liabilities which are covered will not exceed our policy limits. Under our insurance contracts, we usually accept self-insured retentions which we believe appropriate for our specific business risks. We are required by EPA regulations to carry environmental impairment liability insurance providing coverage for damages on a claims-made basis in amounts of at least $1 million per occurrence and $2 million per year in the aggregate. To meet the requirements of customers, we have exceeded these coverage amounts. Year 2000 Issues The Year 2000 problem arises because many computer systems were designed to identify a year using only two digits, instead of four digits, in order to conserve memory and other resources. For instance, "1997" would be held in the memory of a computer as "97." When the year changes from 1999 to 2000, a two digit system would read the year as changing from "99" to "00." For a variety of reasons, many computer systems are not designed to make such a date change or are not designed to "understand" or react appropriately to such a date change. Therefore, as the date changes to the year 2000, many computer systems could completely stop working or could perform in an improper and unpredictable manner. We have conducted a review of our computer systems to identify the systems which we anticipated could be effected by the Year 2000 issue and we believe that all such systems were already, or have been converted to be, Year 2000 compliant. Such conversion costs, where required, have not been material and have been expensed as incurred. Pursuant to our Year 2000 planning, we have requested information regarding the computer systems of our key suppliers, customers, creditors, and financial service organizations and have 9 been informed that they are substantially Year 2000 compliant. There can be no assurance, however, that such key organizations are actually Year 2000 compliant and that the Year 2000 issue will not adversely affect the Company's financial position or results of operations. We believe that our expenditures in addressing our Year 2000 issues will not have a material adverse effect on our financial position or results of operations. Oak Ridge System Contract Award The Company and East Tennessee Materials and Energy Corp. ("M&EC") entered into a teaming agreement ("M&EC Contract") pursuant to which the Company and M&EC may obtain from customers of the U. S. Department of Energy ("DOE") regarding treatment and disposal of certain types of radioactive, hazardous or mixed waste (waste containing both hazardous and low level radioactive waste) at DOE facilities. The Company anticipates that, as a member of the team with M&EC in connection with the contracts and finalization of the scope of work documents with M&EC relating to the work to be performed by each of the Company and M&EC under the contracts, it will (i) provide certain of the Company's environmental remediation technologies, (ii) install equipment necessary to apply the Company's technology, and (iii) supervise certain aspects of the remediation process operations. As of the date of this Report, however, the Company has engaged in only minimal design work in connection with the M&EC Contract. The revenues which will be received by the Company, if any, as a result of the M&EC Contract are subject to a variety of factors and the Company cannot currently estimate what such amount of revenue may be. See "Special Note Regarding Forward Looking Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations--Oak Ridge System Contract Award." Proposed Acquisition During March, 1999, Chemical Conservation Corporation, Chemical Conservation of Georgia, Inc., Chem-Met Services, Inc. (collectively "Chem-Con") and the Company entered into a definitive agreement whereby the Company agreed to acquire Chem-Con in exchange for $7.4 million of Perma-Fix Common Stock. In addition, we agreed to enter into an employment agreement with the president of Chem-Con, who is also one of the principal stockholders of Chem- Con, pursuant to which we would pay such person a total of $1.3 million over a four (4) year period. Chem-Con's revenues are principally generated from collection, treatment, and recycling of industrial and hazardous waste, including waste oils, water and miscellaneous solid waste. Chemical Conservation Corporation operates a permitted treatment and storage facility and transfer station that also serves as the base for a private trucking fleet; Chemical Conservation of Georgia, Inc. treats hazardous waste and recycles solvents; and, Chem-Met Services, Inc. treats and stabilizes inorganic wastes and maintains a government services division that is focused principally on the Defense Revitalization and Marketing Services (DRMS) market. The transaction is expected to be closed during the summer of 1999. However, the acquisition is subject to the ability of the parties to, among other things, qualify the acquisition of Chem-Con as a pooling of interests transaction, which means that the merged companies will be treated as if they had always been combined for accounting and financial reporting purposes, the effectiveness of a registration statement covering the shares of Perma-Fix Common Stock to be issued in connection with the acquisition and the approval of the acquisition by the Company's stockholders entitled to vote thereon. See "Management Discussion and Analysis of Financial Condition and Results of Operations" and See Note 5 to Notes to Consolidated Financial Statements. ITEM 2. PROPERTIES Our principal executive offices are in Gainesville, Florida. Our waste management operations are located in Gainesville and Ft. Lauderdale, Florida; Dayton, Ohio; Tulsa, Oklahoma; Albuquerque, New Mexico and Memphis, Tennessee. Our consulting engineering services are located in Tulsa, Oklahoma and St. Louis, Missouri. We also maintain sales offices in Laverne, California and Kansas City, Missouri. 10 We own five facilities and have an option to purchase another facility at a nominal amount at the end of the lease term, all of which are in the United States. In addition, we lease four properties for office space, one of which also contains a warehouse and one additional property that is utilized strictly as warehouse space, all of which are located in the United States as described above. We believe that the above facilities currently provide adequate capacity for our operations and that additional facilities are readily available in the regions in which we operate. ITEM 3. LEGAL PROCEEDINGS In May 1995, PFM, a subsidiary of the Company, became aware that the U.S. District Attorney for the Western District of Tennessee and the Department of Justice were investigating certain prior activities of W. & R. Drum, Inc. ("W.R. Drum") its successor, First Southern Container Company, and any other facility owned or operated, in whole or in part, by Johnnie Williams. PFM used W. R. Drum to dispose of certain of its used drums. In May 1995, PFM received a Grand Jury Subpoena which demanded the production of any documents in the possession of PFM pertaining to W. R. Drum, First Southern Container Company, or any other facility owned or operated, and holder in part, by Johnnie Williams. PFM complied with the Grand Jury Subpoena. Thereafter, in September of 1995, PFM received another Grand Jury Subpoena for documents from the Grand Jury investigating W. R. Drum, First Southern Container Company and/or Johnnie Williams. PFM complied with the Grand Jury Subpoena. In December 1995, representatives of the Department of Justice advised PFM that it was also currently a subject of the investigation involving W. R. Drum, First Southern Container Company, and/or Johnnie Williams. Since 1995, the Company has received no new information about this matter. During January 1998, PFM was notified by the EPA that the EPA had conducted remediation operations at a site owned and operated by W.R. Drum, Inc. in Memphis, Tennessee (the "Drum Site"). By correspondence dated January 15, 1998 ("PRP Letter"), the EPA informed PFM that it believed that PFM was a PRP regarding the remediation of the Drum Site, primarily as a result of acts by PFM prior to the time PFM was acquired by the Company. The PRP Letter estimated the remediation costs incurred by the EPA for the Drum Site to be approximately $1,400,000 as of November 30, 1997, and the EPA has orally informed the Registrant that such remediation has been substantially complete as of such date. During the second quarter of 1998, PFM and certain other PRP's began negotiating with the EPA regarding a potential settlement of the EPA's claims regarding the Drum Site and such negotiations have been completed. During the third quarter of 1998, the government agreed to PFM's offer to pay $225,000 ($150,000 payable at closing and the balance payable over a twelve month period) to settle any potential liability regarding the Drum Site. During January 1999, the Company executed a "Partial Consent Decree" pursuant to this settlement, which settlement is subject to approval of the court. There are no assurances that the settlement will be approved by the court. In addition to the above matters and in the normal course of conducting our business, we are involved in various other litigation. We are not a party to any litigation or governmental proceeding which our management believes could result in any judgments or fines against us that would have a material adverse affect on our financial position, liquidity or results of operations. ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY The following table sets forth, as of the date hereof, information concerning the Executive Officers of the Company: 11
NAME AGE POSITION ____ ___ _________ Dr. Louis F. Centofanti 55 Chairman of the Board, President and Chief Executive Officer Mr. Richard T. Kelecy 43 Chief Financial Officer, Vice President and Secretary Mr. Roger Randall 55 Vice President, Industrial Services Mr. Bernhardt Warren 50 Vice President, Nuclear Services Mr. Timothy Kimball 53 Vice President, Technical Services
DR. LOUIS F. CENTOFANTI Dr. Centofanti has served as Chairman of the Board since he joined the Company in February, 1991. Dr. Centofanti also served as President and Chief Executive Officer of the Company from February, 1991 until September, 1995 and again in March, 1996 was elected to serve as President and Chief Executive Officer of the Company and continues as Chairman of the Board. From 1985 until joining the Company, Dr. Centofanti served as Senior Vice President of USPCI, Inc., a large hazardous waste management company, where he was responsible for managing the treatment, reclamation and technical groups within USPCI. In 1981, he founded PPM, Inc., a hazardous waste management company specializing in the treatment of PCB contaminated oils which was subsequently sold to USPCI. From 1978 to 1981, Dr. Centofanti served as Regional Administrator of the U.S. Department of Energy for the southeastern region of the United States. Dr. Centofanti has a Ph.D. and a M.S. in Chemistry from the University of Michigan, and a B.S. in Chemistry from Youngstown State University. MR. RICHARD T. KELECY Mr. Kelecy was elected Chief Financial Officer in September 1995. He previously served as Chief Accounting Officer and Treasurer of the Company since July 1994. From 1992 until June 1994, Mr. Kelecy was Corporate Controller and Treasurer for Quadrex Corporation. From 1990 to 1992 Mr. Kelecy was Chief Financial Officer for Superior Rent-a-Car, and from 1983 to 1990 held various positions at Anchor Glass Container Corporation including Assistant Treasurer. Mr. Kelecy holds a B.A. in Accounting and Business Administration from Westminster College. MR. ROGER RANDALL Mr. Randall has served as Vice-President/General Manager of PFD since its acquisition by the Company in June, 1994 and was elected to the position of Vice President Industrial Services of the Company in December 1997. From June, 1992 to June, 1994, Mr. Randall served as General Manager of the Dayton facility under the ownership of Quadrex Corporation. From 1982 to June, 1992, Mr. Randall served a variety of management roles at the Dayton facility, ranging from Operations Manager to Chairman of the Board and Chief Executive Officer under the ownership of Clark Processing, Inc. Previous to his involvement with the waste management industry, Mr. Randall spent 17 years in public education serving a variety of administrative roles. He has a B.S. from Wittenberg University and an M.A. from Wright State University. MR. BERNHARDT WARREN Mr Warren has served as Vice President/General Manager of PFF since 1996 and was elected to the position of Vice President Nuclear Services of the Company in December 1997. From 1992 to 1996, Mr. Warren provided contractual consulting services for PFF and other companies through Applied Environmental Consulting, Inc., of which Mr. Warren is Owner and President. From 1982 to 1992, Mr. Warren served a variety of management roles at the Florida facility under the ownership of Quadrex Corporation. He was involved in radioactive materials and radioactive waste management from 1973 to 1982, when he was Manager of Radioactive Materials Licensing Program for the State of Florida. He has a B.S. degree in biology from Florida Southern College, a Master of Public Administration from Florida State University and graduated from the United States Nuclear Regulatory Commission sponsored Oak Ridge Associated University program. Mr. Warren has authored more than a dozen technical papers and has achieved Master Level as a Certified Hazardous Materials Manager. 12 MR. TIMOTHY KIMBALL Mr. Kimball has served as Vice President of PFI and PFNM since January, 1991 and was elected to the position of Vice President Technical Services of the Company in December 1997. He previously served as the Hazardous Waste Coordinator and Technical Representative for Rinchem Company, Inc. from 1985 to 1991. He also served a variety of management roles ranging from Planning Director, Partner and President, as well as Technical and Research Assistant for the University of New Mexico. He has a B.A. in Political Science and Public Administration from the University of Louisville, and an M.A. in Anthropology from the University of New Mexico. 13 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our Common Stock, with a par value of $.001 per share, is traded on the NASDAQ SmallCap Market ("NASDAQ") and the Boston Stock Exchange ("BSE") under the symbol "PESI" on NASDAQ and "PES" on the BSE. Effective December 1996, our Common Stock also began trading on the Berlin Stock Exchange under the symbol "PES.BE." The following table sets forth the high and low bid prices quoted for the Common Stock during the periods shown. The source of such quotations and information is the NASDAQ Stock market statistical summary reports: 1998 1997 __________________ _________________ Low High Low High _____ _____ ____ _____ Common Stock: 1st Quarter 1 25/32 2 1/2 1 1/8 1 3/8 2nd Quarter 1 7/16 2 1/32 2 3/16 2 5/16 3rd Quarter 1 3/8 2 25/32 1 15/16 2 4th Quarter 1 1/32 2 7/32 2 1/16 2 1/4
Such over-the-counter market quotations reflect inter-dealer prices, without retail mark-ups or commissions and may not represent actual transactions. As of December 31, 1998, there were approximately 191 shareholders of record of our Common Stock, including brokerage firms and/or clearing houses holding shares of our Common Stock for their clientele (with each brokerage house and/or clearing house being considered as one holder). However, the total number of beneficial shareholders as of January 20, 1999, was approximately 1,645. Since our inception, we have not paid any cash dividends on our Common Stock and have no dividend policy. Our loan agreement prohibits paying any cash dividends on our Common Stock without prior approval. In addition to the securities sold by us during 1998, as reported in the Company's Forms 10-Q for the quarters ended June 30, 1998 and September 30, 1998, which were not registered under the Securities Act of 1933, as amended ("Securities Act"), we sold or issued during 1998 the following securities which were also not registered under the Act:
1. During 1998, we issued RBB Bank Aktiengesellschaft, located in Graz, Austria, 116,555 shares of the Company's Common Stock in payment of accrued and unpaid dividends in the Company's Series 3 Class C Convertible Preferred Stock ("Series 3 Preferred"), in accordance with the terms of the Series 3 Preferred. The following shares of Common Stock were issued to RBB Bank during 1998 in payment of the accrued and unpaid dividends in the Series 3 Preferred: Number of Amount Shares of Date of of Dividend Common Stock Issuance ___________ ____________ _________ $ 121,000 54,528 1/22/98 119,000 62,027 7/24/98
The issuance of the above described shares of Common Stock in payment of accrued and unpaid dividends in the Series 3 Preferred, were issued pursuant to an exemption from registration under Section 4(2) and/or Rule 506 of Regulation D of the Securities Act. These have been registered for resale in our Form S-3 Registration Statement No. 333-14513.
2. During 1998, we issued RBB Bank Aktiengesellschaft, located in Graz, Austria, 17,420 shares of the Company's Common Stock in payment of accrued and unpaid dividends 14 in the Company's Series 8 Class H Convertible Preferred Stock ("Series 8 Preferred"), in accordance with the terms of the Series 8 Preferred. The shares of Common Stock issued to RBB Bank during 1998 in payment of the accrued and unpaid dividends in the Series 8 Preferred are shown in the following table: Number of Amount Shares of Date of of Dividend Common Stock Issuance ___________ ____________ _________ $ 33,000 17,420 7/24/98
The issuance of the above described shares of Common Stock in payment of accrued and unpaid dividends in the Series 8 Preferred, were issued pursuant to an exemption from registration under Section 4(2) and/or Rule 506 of Regulation D of the Securities Act.
3. During 1998, we issued The Infinity Fund L.P., located in Atlanta, Georgia, 2,439 shares of the Company's Common Stock in payment of accrued and unpaid dividends in the Company's Series 9 Class I Convertible Preferred Stock ("Series 9 Preferred"), in accordance with the terms of the Series 9 Preferred. The shares of Common Stock issued to The Infinity Fund L.P. during 1998 in payment of the accrued and unpaid dividends in the Series 9 Preferred are shown in the following table: Number of Amount Shares of Date of of Dividend Common Stock Issuance ___________ ____________ _________ $ 5,000 2,439 7/24/98
The issuance of the above described shares of Common Stock in payment of accrued and unpaid dividends in the Series 9 Preferred, were issued pursuant to an exemption from registration under Section 4(2) and/or Rule 506 of Regulation D of the Securities Act. ITEM 6. SELECTED FINANCIAL DATA
The financial data included in this table has been derived from our consolidated financial statements. Financial statements for the year ended December 31, 1998, 1997, 1996, 1995, and 1994 have been audited by BDO Seidman, LLP. Statement of Operations Data: (Amounts in Thousands, Except for Share Amounts) December 31, ____________________________________________________ 1998 1997 1996 1995 1994(2) _______ _______ _______ _______ _______ Revenues(4) $ 30,551 $ 28,413 $ 27,041 $ 31,477 $ 23,522 Net income (loss) from continuing operations 462 192 27 (3,494) (1,201) Net loss from discon- tinued operations - (4,101) (287) (5,558)(3) (315) Preferred Stock dividends (1,160) (1,260)(5) (2,145)(5) - - Net loss applicable to Common Stock from continuing operations (698) (1,068)(5) (2,118)(5) (3,494) (1,201) Net loss per common share from contin- uing operations(1) (.06) (.10)(5) (.24)(5) (.44) (.20) Weighted average number of common shares outstanding(1) 12,028 10,650 8,761 7,872 5,988 15 Balance Sheet Data: December 31, ______________________________________________________ 1998 1997 1996 1995 1994(2) _______ _______ _______ _______ _______ Working capital (deficit) $ 372 $ 754 $ (773) $(9,372) $ (705) Total assets 28,748 28,570 29,036 28,873 35,067 Long-term debt 3,042 4,981 6,360 8,478 6,041 Total liabilities 12,795 16,376 16,451 20,935 18,105 Stockholders' equity 15,953 12,194 12,585 7,938 16,962 (1) Net loss per share for the fiscal year ended December 31, 1994 has been restated, in accordance with Accounting Principles Board Opinion No. 15, "Earnings Per Share," to reflect the issuance of contingent shares to Quadrex during 1995. As of December 31, 1997, the Company applied SFAS 128, the new standard of computing and presenting earnings per share. The adoption of SFAS 128 did not have a material effect on the Company's EPS presentation since the effects of potential common shares are antidilutive. (2) Includes financial data of Perma-Fix of Florida, Inc., Perma-Fix of Dayton, Inc. and Perma-Fix of Ft. Lauderdale, Inc., as acquired from Quadrex Corporation and accounted for using the purchase method of accounting, from June 30, 1994. (3) Includes write-down of impaired intangible permit related to an acquisition completed in December of 1993 and certain nonrecurring charges. (4) Excludes revenues of Perma-Fix of Memphis, Inc., shown elsewhere as a discontinued operation. (5) In March 1997, the Securities and Exchange Commission, ("Commission") announced its position on the accounting for Preferred Stock which is or may be convertible in Common Stock at a discount from the market rate on the date of issuance of such Preferred Stock. The Commission's position pursuant to Emerging Issues Task Force ("EITF") D-60 regarding beneficial conversion features is that a Preferred Stock dividend should be recorded for the difference between the conversion price and quoted market price of Common Stock as determined on the date of issuance of such Preferred Stock. To comply with this position, we restated our 1996 consolidated financial statements to reflect a dividend of approximately $2 million related to the fiscal 1996 sales of Convertible Preferred Stock. As a result, the amount noted in this table as our net loss applicable to Common Stock for 1996 reflects the restated amount from the previously reported net loss applicable to Common Stock of $405,000 and the amount noted in this table as our net loss per share of Common Stock for 1996 reflects the restated amount from the previously reported net loss per share of Common Stock of ($.05). Pursuant to the Commission's position regarding EITF D-60 and EITF D-42, we restated our 1997 consolidated financial statements to reflect a dividend of approximately $908,000 ($195,000 attributable to warrants) related to the fiscal 1997 sales and subsequent exchanges of Convertible Preferred Stock, of which approximately $111,000 was attributable to the quarter ended June 30, 1997, and approximately $797,000 was attributable to the quarter ended September 30, 1997. The impact of the restatement on the second and third quarters of 1997 and the year ended December 31, 1997, is shown as follows (amounts in thousands, except for share amounts): 16 As Originally Reported As Amended ___________________________ ___________________________ Quarter Ended Year Ended Quarter Ended Year Ended ________________ __________ ________________ _________ 6/30/97 9/30/97 12/31/97 6/30/97 9/30/97 12/31/97 _______ _______ ________ _______ _______ _________ Preferred Stock Dividends $ 82 $ 99 $ 352 $ 193 $ 896 $1,260 Net Loss Applicable to Common Stock (525) 58 (4,261) (636) (739) (5,169) Net Loss Per Share (.05) .01 (.40) (.06) (.07) (.49)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements contained within this "Management's Discussion and Analysis of Financial Condition and Results of Operations" may be deemed "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (collectively, the "Private Securities Litigation Reform Act of 1995"). See "Special Note regarding Forward-Looking Statements" contained in this report. Management's discussion and analysis is based, among other things, upon our audited consolidated financial statements and includes the accounts of the Company and our wholly-owned subsidiaries, after elimination of all significant inter-company balances and transactions. Results of Operations The following discussion and analysis should be read in conjunction with our consolidated financial statements and the notes thereto included in Item 8 of this report. The reporting of financial results and pertinent discussions are tailored to two reportable segments: Waste Management Services and Consulting Engineering Services.
Below are the results of operations for our years ended December 31, 1998, 1997 and 1996 (amounts in thousands, except for share amounts): (Consolidated) 1998 % 1997 % 1996 % ______________ _______ _____ _______ _____ _______ _____ Net Revenue $30,551 100.0 $28,413 100.0 $27,041 100.0 Cost of goods sold 21,064 68.9 19,827 69.8 18,912 69.9 _______ _____ _______ _____ _______ _____ Gross Profit 9,487 31.1 8,586 30.2 8,129 30.1 Selling, general and administra- tive 6,847 22.4 5,682 20.0 5,942 22.0 Depreciation and amortization 2,109 6.9 1,980 7.0 2,083 7.7 Other income (expense): Interest income 35 .1 41 .1 43 .2 Interest expense (294) (1.0) (431) (1.5) (643) (2.4) Other 190 .6 (342) (1.2) 523 1.9 ________ ______ ________ ______ ________ ______ Net income from continuing operations 462 1.5 192 .6 27 - Loss from discon- tinued opera- tions(2) - - (4,101) (14.4) (287) (1.1) Preferred Stock dividends (1,160) (3.8) (1,260)(1) (4.4) (2,145)(1) (7.9) ________ ______ ________ ______ _________ ______ Net loss applic- able to Common Stock $ (698) (2.3) $(5,169)(1) (18.2) $(2,405)(1) (8.9) ======== ====== ======= ====== ======== ====== Net loss per Common share $ (.06) - $ (.49) - $ (.27) - ======== ====== ======== ====== ======== ====== 17 (1) In March 1997, the Securities and Exchange Commission ("Commission") announced its position on the accounting for Preferred Stock which is convertible into Common Stock at a discount from the market rate on the date of issuance of such Preferred Stock. The Commission's position pursuant to EITF D- 60 regarding beneficial conversion features is that a Preferred Stock dividend should be recorded for the difference between the conversion price and quoted market price of Common Stock as determined on the date of issuance of such Preferred Stock. To comply with this position, we restated our 1996 consolidated financial statements to reflect a dividend of approximately $2 million related to the fiscal 1996 sales of Convertible Preferred Stock. As a result, the amount noted in this table as our net loss applicable to Common Stock for 1996 reflects the restated amount from the previously reported net loss applicable to Common Stock of $405,000 and the amount noted in this table as our net loss per share of Common Stock for 1996 reflects the restated amount from the previously reported net loss per share of Common Stock of ($.05). Pursuant to the Commission's position regarding EITF D-60 and EITF D-42, we restated our 1997 consolidated financial statements to reflect a dividend of approximately $908,000 ($195,000 attributable to warrants) related to the fiscal 1997 sales and subsequent exchanges of Convertible Preferred Stock, of which approximately $111,000 was attributable to the quarter ended June 30, 1997, and approximately $797,000 was attributable to the quarter ended September 30, 1997. The impact of the restatement on the second and third quarters of 1997 and the year ended December 31, 1997, is shown as follows (amounts in thousands, except for share amounts): As Originally Reported As Amended ___________________________ ___________________________ Quarter Ended Year Ended Quarter Ended Year Ended ________________ __________ ________________ _________ 6/30/97 9/30/97 12/31/97 6/30/97 9/30/97 12/31/97 _______ _______ ________ _______ _______ ________ Preferred Stock Dividends $ 82 $ 99 $ 352 $ 193 $ 896 $ 1,260 Net Loss Applicable to Common Stock (525) 58 (4,261) (636) (739) (5,169) Net Loss Per Share (.05) .01 (.40) (.06) (.07) (.49) (2) On January 27, 1997, an explosion and resulting tank fire occurred at the PFM facility located in Memphis, Tennessee, which resulted in damage to certain hazardous waste storage tanks located on the facility, and caused certain limited contamination at the facility. Due to the nature of the loss, the significant disruption and limited operating activities at the facility, we made a strategic decision in February 1998, to discontinue our fuel blending operations at PFM, which comprised virtually all of the revenue producing operations of PFM. See "Business" and Note 4 to Notes to Consolidated Financial Statements and to "Discontinued Operations" in this section for further discussion on PFM. Hereafter, PFM will be referred to as a discontinued operation, and excluded from the discussions on the operating results of the continuing operations.
Summary -- Years Ended December 31, 1998 and 1997 Consolidated net revenues increased $2,138,000, or 7.5% for continuing operations for the year ended December 31, 1998, compared to the year ended December 31, 1997. This increase is attributable to the growth in the wastewater treatment market at PFTS, which totaled approximately $1,283,000 and the growth in the oily wastewater and field services markets at PFFL, which totaled approximately $1,168,000. Partially offsetting these increases was a decrease in the consulting engineering segment of approximately $287,000 and a decrease in on-site treatment of approximately $357,000. Cost of goods sold increased $1,237,000, or 6.2% for the year ended December 31, 1998, compared to the year ended December 31, 1997. This increase in cost of goods sold reflects principally the increased operating, disposal, and transportation costs corresponding to the increased revenues as discussed above. Gross profit for the year ended December 31, 1998, increased to $9,487,000, which as a percentage of revenue is 31.1%, reflecting a slight improvement over 1997. 18 Selling, general and administrative expenses increased $1,165,000 or 20.5% for the year ended December 31, 1998, as compared to 1997. As a percentage of revenue, selling, general and administrative expenses also increased to 22.4% for the year ended December 31, 1998, compared to 20.0% for the same period of 1997. This increase reflects an increase in costs of approximately $53,000 in the consulting engineering segment, approximately $983,000 increase in costs in the waste management segment, and an increase of approximately $129,000 in corporate overhead. These increases reflect our efforts to continue to research and develop new markets, products and technologies that will allow us to become more profitable. Depreciation and amortization expense for the year ended December 31, 1998, reflects an increase of approximately $129,000 or 6.5% as compared to the year ended December 31, 1997. This increase is attributable to the capitalization and subsequent depreciation of completed capital asset projects in 1998. Amortization expense increased approximately $45,000 for the year ended December 31, 1998, as a result of new capitalized permitting costs and their subsequent current year amortization and the additional amortization of goodwill resulting from the 1998 acquisition of Action Environmental. Interest expense decreased approximately $137,000 from the year ended December 31, 1998, as compared to the corresponding period of 1997. This decrease reflects reduced borrowing levels on the Congress Financial revolver and term note. The Preferred Stock dividends include the dividends recognized upon the issuance of new series' of Preferred Stock due to the beneficial conversion feature and dividends paid on a semi-annual basis on outstanding Preferred Stock, which on a combined basis decreased approximately $100,000, for the year ended December 31, 1998, as compared to the year ended December 31, 1997. Pursuant to EITF D-60, we restated our 1997 consolidated financial statements to record a dividend of approximately $908,000 related to the fiscal 1997 sales of certain series of Convertible Preferred Stock. Pursuant to EITF D-60 and D-42, we have recorded a dividend of approximately $750,000 related to the fiscal 1998 sales of certain series of Convertible Preferred Stock. However, Preferred Stock dividends paid during 1998 were approximately $410,000 as compared to approximately $352,000 during 1997. This increase of approximately $58,000 is due to the issuance of the new Series 10 Preferred Stock issued in July 1998. See Note 6 to Notes to Consolidated Financial Statements regarding the issuance of Preferred Stock. See Note 3 to Notes to Consolidated Financial Statements regarding the restatements due to the beneficial conversion features of our various issuances of Preferred Stock. Summary -- Years Ended December 31, 1997 and 1996 Consolidated net revenues increased $1,372,000, or 5.1% for continuing operations for the year ended December 31, 1997, compared to the year ended December 31, 1996. This increase is attributable to the waste management industry segment, which experienced an increase in revenues of approximately $2,259,000 during 1997, as compared to 1996. Our four (4) TSD's all experienced increased revenues during 1997, which in the aggregate totaled approximately $3,042,000 and were principally attributable to growth in the wastewater and mixed waste markets. The most significant TSD increase occurred at the PFF facility, which recognized a $2,184,000 increase resulting from new mixed waste contracts. Partially offsetting these increases within the waste management industry segment were two (2) sale transactions completed during 1996, whereby we sold our PermaCool Technology which had generated $689,000 in revenue during 1996 and sold our plastic recycling subsidiary (Re-Tech Systems, Inc.) which had generated $129,000 in revenue during 1996. This increase in the waste management industry segment was partially offset by a reduction in revenues of $887,000 in the consulting engineering industry segment. This consulting engineering reduction is partially a result of two one-time projects for 1996, which totaled $396,000 and were not duplicated in 1997, and a significant reduction in the Bartlesville, Oklahoma, three year project that reduced 1997 consulting engineering revenue by approximately $554,000 as compared to 1996. Cost of goods sold increased $915,000 or 4.8% to a total of $5,682,000 for the year ended December 31, 1997, compared to the year ended December 31, 1996. This consolidated increase in cost of goods sold reflects principally the increased operating, disposal, and transportation costs, corresponding to the increased 19 revenues as discussed above. The resulting gross profit for the year ended December 31, 1997, increased to $8,586,000, which as a percentage of revenue is 30.2%, reflecting a slight improvement over 1996. Selling, general and administrative expenses decreased $260,000 or 4.4% for the year ended December 31, 1997, as compared to 1996. As a percentage of revenue, selling, general and administrative expense also decreased to 20.0% for the year ended December 31, 1997, compared to 22.0% for the same period in 1996. This decrease of $260,000 reflects a reduction in costs of $168,000 in the consulting engineering industry segment and a $153,000 reduction in costs in the waste management industry segment, which was partially offset by an increase of approximately $61,000 in corporate overhead, for certain outside services. The consolidated reduction in selling, general and administrative expenses reflects our continued efforts toward reduced cost structure throughout the organization. Depreciation and amortization expense for the year ended December 31, 1997, reflects a decrease of $103,000 or .7% of revenue as compared to the year ended December 31, 1996. This decrease is attributable to a depreciation expense reduction of 47,000 due to the sale of certain assets as a result of our previous restructuring programs and various other assets becoming fully depreciated. Amortization expense reflects a total decrease of $67,000 for the year ended December 31, 1997, as compared to the year ended December 31, 1996, which is a direct result of the "Covenant Not to Compete" having become fully amortized during the first quarter of 1997. Interest expense decreased $212,000 from year ended December 31, 1997, as compared to the corresponding period of 1996. The decrease in interest expense reflects the reduced borrowing levels on the Heller Financial, Inc. revolving and term note and the Ally Capital Equipment Lease Agreements. The Preferred Stock dividends decreased $885,000 for the year ended December 31, 1997 as compared to the year ended December 31, 1996. Pursuant to EITF D-60, we previously restated our 1996 consolidated financial statements to record a dividend of approximately $2,000,000 related to the fiscal 1996 sales of certain series of Convertible Preferred Stock and have restated our 1997 consolidated financial statements to record a dividend of approximately $908,000 ($195,000 attributable to warrants) related to the fiscal 1997 sales of certain series of Convertible Preferred Stock. However, dividends paid during 1997 were approximately $352,000 as compared to approximately $145,000 during 1996. This increase of approximately $207,000 is due to the full year of the Series 8 and Series 9 Preferred Stock dividends during 1997. See Note 6 to Notes to Consolidated Financial Statements regarding the issuance of Preferred Stock. See Note 3 to Notes to Consolidated Financial Statements regarding the restatements due to the beneficial conversion features of our various issuances of Preferred Stock. Liquidity and Capital Resources of the Company At December 31, 1998, we had cash and cash equivalents of $776,000, including discontinued operations. This cash and cash equivalents total reflects a increase of $450,000 from December 31, 1997, as a result of net cash provided by continuing operations of $3,428,000, offset by cash used by discontinued operation of $1,594,000, cash used in investing activities of $1,749,000 (principally purchases of equipment, net totaling $1,990,000, partially offset by the proceeds from the sale of property and equipment of $53,000) and cash provided by financing activities of $365,000. Accounts receivable, net of allowances for continuing operations, totaled $5,950,000, an increase of $668,000 over the December 31, 1997, balance of $5,282,000, which reflects the impact of increased revenues during the fourth quarter of 1998, over the same period of 1997. On January 15, 1998, we, as parent and guarantor, and all of our direct and indirect subsidiaries, as co-borrowers and cross- guarantors, entered into a Loan and Security Agreement ("Agreement") with Congress Financial Corporation (Florida) as lender ("Congress"). The Agreement provides for a term loan in the amount of $2,500,000, which requires principal repayments based on a four-year level principal amortization over a term of 36 months, with monthly principal payments of $52,000. Payments commenced on February 1, 1998, with a final balloon payment in the amount of approximately $573,000 due on January 14, 2001. The Agreement also 20 provides for a revolving loan facility in the amount of $4,500,000. At any point in time the aggregate available borrowings under the facility are subject to the maximum credit availability as determined through a monthly borrowing base calculation, as updated for certain information on a weekly basis, equal to 80% of our eligible accounts receivable accounts as defined in the Agreement. The termination date on the revolving loan facility is also the third anniversary of the closing date. We incurred approximately $230,000 in financing fees relative to the solicitation and closing of this loan agreement (principally commitment, legal and closing fees) which are being amortized over the term of the Agreement. Pursuant to the Agreement, the term loan and revolving loan both bear interest at a floating rate equal to the prime rate plus 1 3/4%. The loans also contain certain closing, management and unused line fees payable throughout the term. The loans are subject to a 3.0% prepayment fee in the first year, 1.5% in the second and 1.0% in the third year of the Agreement. As security for the payment and performance of the Agreement, we granted a first security interest in all of our and our subsidiaries' accounts receivable, inventory, general intangibles, equipment and other assets, as well as the mortgage on two (2) facilities owned by our subsidiaries. The Agreement contains affirmative covenants including, but not limited to, certain financial statement disclosures and certifications, management reports, maintenance of insurance and collateral. The Agreement also contains an Adjusted Net Worth financial covenant, as defined in the Agreement, of $3,000,000. Under the Agreement, we are limited to granting liens on our equipment, including capitalized leases, (other than liens on the equipment to which Congress has a security interest) in an amount not to exceed $2,500,000 in the aggregate at any time outstanding. The proceeds of the Agreement were utilized to repay in full on January 15, 1998, the outstanding balance of the Heller Financial, Inc. ("Heller") Loan and Security Agreement which was comprised of a revolving loan and term loan, and to repay and buyout all assets under the Ally Capital Corporation ("Ally") Equipment Financing Agreements. The balance of the revolving and term loans on January 15, 1998, as repaid pursuant to the Congress agreement, was $2,289,000. The outstanding balance, which was principal on the Ally Equipment Financing Agreement was $624,000, repaid pursuant to the Congress Agreement. In conjunction with the above debt repayments, we also repaid a small mortgage, paid certain fees, taxes and expenses, resulting in an initial Congress term loan of $2,500,000 and revolving loan balance of $1,705,000 as of the date of closing. We recorded the December 31, 1997, Heller and Ally debt balances as though the Congress transaction had been closed as of December 31, 1997. As a result of this transaction, and the repayment of the Heller and Ally debt, the combined monthly debt payments were reduced from approximately $104,000 per month to $52,000 per month. As of December 31, 1998, the borrowings under the Congress revolving loan facility totaled $97,000 with borrowing availability of approximately $4,009,000. The balance under the Congress term loan at December 31, 1998, was $1,927,000. During June 1998, we entered into a master security agreement and secured promissory note in the amount of approximately $317,000 for the purchase and financing of certain capital equipment at the Perma-Fix of Florida, Inc. facility. The term of the promissory note is for sixty (60) months, at a rate of 11.58% per annum and monthly installments of approximately $7,000. We subsequently entered into a second secured promissory note in the amount of approximately $207,000 for the purchase and financing of certain capital equipment. The term of the promissory note is for sixty (60) months, at a rate of 10.54% per annum and monthly installments of approximately $4,000. At December 31, 1998, we had $3,014,000 in aggregate principal amount of outstanding debt, related to continuing operations, as compared to $4,865,000 at December 31, 1997. This decrease in outstanding debt of $1,851,000 during 1998 reflects the reduced borrowing levels on the revolving loan resulting from the proceeds from issuance of Preferred Stock, positive cash flow of the operations, and the scheduled principal repayments on other long- term debt of $320,000, partially offset by the new debt and capital 21 lease obligations secured during the year of $564,000. As of December 31, 1998, we had $28,000 in aggregate principal amounts of outstanding debt related to PFM discontinued operations, of which $24,000 is classified as current. As of December 31, 1998, total consolidated accounts payable for continuing operations was $2,422,000, an increase of $159,000 from the December 31, 1997, balance of $2,263,000, which resulted from the increased business activity at year end. This December 1998 balance does however also reflects a reduction of $205,000 in the balance of payables in excess of sixty (60) days, to a total of $403,000. Our net purchases of new capital equipment for continuing operations for the twelve month period ended December 31, 1998, totaled approximately $2,554,000. These expenditures were for expansion and improvements to the operations principally within the waste management industry segment. These capital expenditures were principally funded by the cash provided by continuing operations, the proceeds from the issuance of Preferred Stock, as discussed below, and $564,000 through various other lease financing sources. We have budgeted capital expenditures of approximately $2,500,000 for 1999, which includes completion of certain current projects, as well as other identified capital and permit compliance purchases. We anticipate funding these capital expenditures by a combination of lease financing with lenders other than the equipment financing arrangement discussed above, and/or internally generated funds. On or about June 30, 1998, the Company issued 3,000 shares of newly created Series 10 Class J Convertible Preferred Stock ("Series 10 Preferred"), as further discussed in Note 6 to Consolidated Financial Statements and Item 2 "Changes in Securities and Use of Proceeds." The Company received net proceeds of $2,653,000 (after deduction of the payment of $210,000 for broker's commission and certain other closing costs, but prior to the Company's legal fees and other costs in connection with the sale of the Series 10 Preferred and the registration of the Common Stock issuable upon conversion of such Preferred Stock) for the sale of the Series 10 Preferred. Each share of Series 10 Preferred sold for $1,000 per share and has a liquidation value of $1,000 per share. The Company utilized the proceeds received on the sale of Series 10 Preferred for working capital and/or to reduce the outstanding balance of its revolving credit facility, subject to the Company reborrowing under such credit facility. With the issuance of the Series 10 Preferred, the Company has outstanding 9,850 shares of Preferred Stock, with each share having a liquidation preference of $1,000 ("Liquidation Value"). Annual dividends on the Preferred Stock ranges from 4% to 6% of the Liquidation Value, depending upon the Series. Dividends on the Preferred Stock are cumulative, and are payable, if and when declared by the Company's Board of Directors, on a semi-annual basis. Dividends on the outstanding Preferred Stock may be paid at the option of the Company, if declared by the Board of Directors, in cash or in the shares of the Company's Common Stock as described under Note 6 of the Consolidated Financial Statements and Item 2 of Part II hereof. As of December 31, 1998, there are certain events, which may have a material impact on the Company's liquidity on a short-term basis. The Company's Board of Directors has authorized the repurchase of up to 500,000 shares of the Company's Common Stock from time to time in the open market or privately negotiated transactions, in accordance with SEC Rule 10b-18, as promulgated under the Exchange Act, of which we repurchased 23,000 shares during 1998 and if the remaining authorized shares were purchased as of the date of the report such would result in the expenditure of approximately $600,000 in cash. The Company anticipates funding these activities from cash provided by continuing operations and borrowings under the Company's revolving credit facility. The working capital position at December 31, 1998, was $372,000, as compared to $754,000 at December 31, 1997, which reflects a decrease in this position of $382,000 during 1998. This change in current working capital principally reflects our continued repayment of long term debt, including the revolving loan, from the current cash flow from operations, resulting in our overall reduced borrowing levels, which includes a revolving loan balance of only $97,000 at December 31, 1998 as compared to $2,652,000 at December 31, 1997. Additionally, we continue to invest current cash proceeds into the long term capital improvements of our operating 22 facilities, with the 1998 purchases of property and equipment totaling $1,990,000, which exceeds the 1997 total by $486,000. During 1998, accrued dividends for the period July 1, 1997, through December 31, 1997, in the amount of approximately $183,000 were paid in January 1998, in the form of 85,216 shares of Common Stock. Dividends for the period January 1, 1998, through June 30, 1998, of approximately $176,000 were paid in the form of 90,609 shares of Common Stock. The accrued dividends for the period July 1, 1998, through December 31, 1998, in the amount of approximately $235,000 were paid in January 1999, in the form of $121,000 in cash and 85,802 shares of Common Stock. It is the present intention of the Company to pay any dividends declared by the Company's Board of Directors on its outstanding shares of Preferred Stock in Common Stock of the Company. During January 1998, PFM was notified by the EPA that it believed that PFM was a PRP regarding the remediation of a site owned and operated by W.R. Drum, Inc. ("WR Drum") in Memphis, Tennessee (the "Drum Site"), as further discussed in Item 3 "Legal Proceedings." During the third quarter of 1998, the government agreed to PFM's offer to pay $225,000 ($150,000 payable at closing and the balance payable over a twelve month period) to settle any potential liability regarding this Drum Site. During January 1999, the Company executed a "Partial Consent Decree" pursuant to this settlement, which settlement is subject to approval of the court. It is anticipated that the settlement will be approved and the initial payment of $150,000 will be made during the second quarter of 1999. However, there are no assurances that the settlement will be approved by the court. In summary, we have continued to take steps to improve our operations and liquidity as discussed above, including the equity raised in 1998. If we are unable to continue to improve our operations and to become profitable in the foreseeable future, such would have a material adverse effect on our liquidity position. Discontinued Operations On January 27, 1997, an explosion and resulting tank fire occurred at the PFM facility, a hazardous waste storage, processing and blending facility, which resulted in damage to certain hazardous waste storage tanks located on the facility and caused certain limited contamination at the facility. Such occurrence was caused by welding activity performed by employees of an independent contractor at or near the facility's hazardous waste tank farm contrary to instructions by PFM. The facility was non-operational from the date of this event until May 1997, at which time it began limited operations. During the remainder of 1997, PFM continued to accept waste for processing and disposal, but arranged for other facilities owned by us or our subsidiaries or others not affiliated with us to process such waste. The utilization of other facilities to process such waste resulted in higher costs to PFM than if PFM were able to store and process such waste at its Memphis, Tennessee, TSD facility, along with the additional handling and transportation costs associated with these activities. As a result of the significant disruption and the cost to rebuild and operate this segment, we made a strategic decision, in February 1998, to discontinue the fuel blending operations at PFM. The fuel blending operations represented the principal line of business for PFM prior to this event, which included a separate class of customers, and its discontinuance has required PFM to attempt to develop new markets and customers, through the utilization of the facility as a storage facility under its RCRA permit and as a transfer facility. Accordingly, during the fourth quarter of 1997, the Company recorded a loss on disposal of discontinued operations of $3,053,000, which included $1,272,000 for impairment of certain assets and $1,781,000 for the establishment of certain closure liabilities. The net loss from the discontinued PFM operations for the years ended December 31, 1997 and 1996 ($1,048,000, and $287,000, respectively) are shown separately in the Consolidated Statements of Operations. The results of the discontinued PFM operations do not reflect management fees charged by us, but do include interest expense of $254,000 and $169,000 during 1997 and 1996, respectively, specifically identified to PFM as a result of PFM's actual incurred debt under our revolving and term loan credit facility. The operating expenses incurred during 1998, totaling $653,000, relate to the closure and remedial activities performed, 23 and have been recorded to the accrued environmental reserve. During March of 1998, we received a settlement in the amount of $1,475,000 from its insurance carrier for the business interruption claim. This settlement was recognized as a gain in 1997 and thereby reducing the net loss recorded for the discontinued PFM operations in 1997. Earlier in 1997, PFM received approximately $522,000 (less its deductible of $25,000) in connection with its claim for loss of contents as a result of the fire and explosion which was utilized to replace certain assets and reimburse us for certain fire related expense. The accrued environmental and closure costs related to PFM totals $2,501,000 as of December 31, 1998, a decrease of $1,359,000 from the December 31, 1997, accrual balance. This reduction was principally a result of the specific costs related to the decomissioning and closure of the fuel blending tank farm and related processing equipment ($428,000), general closure and remedial activities, including groundwater remediation and agency and investigative activities, ($278,000), and the general operating losses, including indirect labor, materials and supplies, incurred in conjunction with the above actions ($653,000). The remaining liability represents the best estimate of the cost to complete the groundwater remediation at the site of approximately $980,000 (See Note 9 to the Notes to Consolidated Financial Statements), the costs to complete the facility closure activities (including agency and investigative activities) totaling approximately $946,000, future operating losses to be incurred by PFM as it completes such closure and remedial activities over the next five (5) to ten (10) year period ($350,000) and the potential PRP liability of $225,000 as further discussed in Note 12 to the Notes to Consolidated Financial Statements Revenues of the discontinued PFM operations were $1,878,000 in 1997 and $3,996,000 in 1996. These revenues are not included in revenues as reported in the Consolidated Statements of Operation. See Note 4 to Notes to Consolidated Financial Statements for further discussion on PFM. Environmental Contingencies We are engaged in the waste management services segment of the pollution control industry. As a participant in the on-site treatment, storage and disposal market and the off-site treatment and services market, we are subject to rigorous federal, state and local regulations. These regulations mandate strict compliance and therefore are a cost and concern to us. Because of their integral role in providing quality environmental services, we make every reasonable attempt to maintain complete compliance with these regulations; however, even with a diligent commitment, we, along with many of our competitors, may be required to pay fines for violations or investigate and potentially remediate our waste management facilities. We routinely use third party disposal companies, who ultimately destroy or secure landfill residual materials generated at our facilities or at a client's site. We, compared to certain of our competitors, dispose of significantly less hazardous or industrial by-products from our operations due to rendering material non- hazardous, discharging treated wastewaters to publicly-owned treatment works and/or processing wastes into saleable products. In the past, numerous third party disposal sites have improperly managed wastes and consequently require remedial action; consequently, any party utilizing these sites may be liable for some or all of the remedial costs. Despite our aggressive compliance and auditing procedures for disposal of wastes, we could, in the future, be notified that we are a PRP at a remedial action site, which could have a material adverse effect. In addition to budgeted capital expenditures of $2,500,000 for 1999 at the TSD facilities, which are necessary to maintain permit compliance and improve operations, as discussed above under "Business -- Capital Spending, Certain Environmental Expenditures" and "Liquidity and Capital Resources of the Company" of this Management's Discussion and Analysis, we have also budgeted for 1999 an additional $437,000 in environmental expenditures to comply with federal, state and local regulations in connection with remediation of certain contaminates at two locations. As previously discussed under "Business -- Capital Spending, Certain Environmental Expenditures and Potential Environmental Liabilities," the two locations where these expenditures will be made are the Leased Property in Dayton, Ohio (EPS), a former RCRA storage facility as operated by the former owners of PFD, and PFM's facility in Memphis, Tennessee. We have estimated the expenditures 24 for 1999 to be approximately $222,000 at the EPS site and $215,000 at the PFM location. Additional funds will be required for the next five to ten years to properly investigate and remediate these sites. We expect to fund these expenses to remediate these two sites from funds generated internally, however, no assurances can be made that we will be able to do so. Oak Ridge System Contract Award The Company and M&EC entered into the M&EC Contract pursuant to which the Company and M&EC agreed to act as a team in the performance of certain contracts that either the Company or M&EC may obtain from customers of the DOE regarding treatment and disposal of certain types of radioactive, hazardous or mixed waste (waste containing both hazardous and low level radioactive waste) at DOE facilities. In connection with proposals relating to the treatment and disposal of mixed waste at DOE's Oak Ridge, Tennessee system ("Oak Ridge"), M&EC and the Company made a joint proposal to DOE, with M&EC to act as the team leader. In August 1998 M&EC, as the team leader, was awarded three contracts ("Oak Ridge Contracts") by Bechtel Jacobs Company, LLC, the government-appointed manager of the environmental program for Oak Ridge, to perform certain treatment and disposal services relating to Oak Ridge. The Oak Ridge Contracts were issued by DOE based on proposals by M&EC and the Company. The Oak Ridge Contracts are similar in nature to a blanket purchase order whereby the DOE specifies the approved waste treatment process and team to be used for certain disposal, but the DOE does not specify a schedule as to dates for disposal or quantities of disposal material to be processed. The initial term of the contract will represent a demonstration period for the team's successful treatment of the waste and the resulting ability of such processed waste to meet acceptance criteria for its ultimate disposal location. As with most such blanket processing agreements, the Oak Ridge Contracts contain no minimum or maximum processing guarantees, and may be terminated by either party pursuant to standard DOE procurement regulation terms. Each specific waste stream processed under the Oak Ridge Contracts will require a separate work order from DOE and will be priced separately with an intent of recognizing an acceptable profit margin. The Company anticipates that, as a member of the team with M&EC in connection with the Oak Ridge Contracts and finalization of the scope of work documents with M&EC relating to the work to be performed by each of the Company and M&EC under the Oak Ridge Contracts, it will (i) provide certain of the Company's environmental remediation technologies, (ii) install equipment necessary to apply the Company's technology, and (iii) supervise certain aspects of the remediation process operations. In addition, the teaming agreement provides that M&EC will purchase all of the equipment necessary to perform the Oak Ridge Contracts. The Company anticipates that work, if any, under the Oak Ridge Contracts will begin during the later part of 1999. There are no assurances that the Company and M&EC will complete the scope of work documents. The Company also anticipates that a substantial portion of any work performed under the Oak Ridge Contracts will be performed at M&EC's facility at Oak Ridge currently under development as of the date of this Report. The DOE estimates that the Oak Ridge Contracts have the potential to generate up to $100 million in gross revenues over an estimated time span of more than five years. As of the date of this Report, however, the Company cannot estimate (i) the amount of work or revenues, if any, which will be received by M&EC under the Oak Ridge Contracts, (ii) the percentage or amount of work received by M&EC under the Oak Ridge Contracts which will be performed by the Company, or (iii) the ultimate profitability, or lack of profitability, of the Oak Ridge Contracts for the Company. See "Special Note Regarding Forward Looking Statements" and "Business-- Oak Ridge System Contract Award." Proposed Acquisition During March 1999, the Company, Chemical Conservation Corporation (Florida), Chemical Conservation of Georgia, Inc. and Chem-Met Services, Inc. (Collectively "Chem-Con") entered into a definitive agreement whereby PESI agreed to acquire all of the outstanding shares of Common Stock of Chem-Con in exchange for $7.4 million in the Company's Common Stock, with the number of shares of the Company's Common Stock to be issued determined by dividing $7.4 million by the average closing price per share of the Company's 25 Common Stock as quoted on the NASDAQ for the five (5) trading days immediately preceding the date of closing. The Company would, at the closing of the acquisition, enter into a four year employment agreement with an executive of Chem-Con in the approximate amount of $1.3 million. We expect that the merger will be accounted for as a pooling of interests, which means that we will treat our companies as if they had always been combined for accounting and financial reporting purposes. The transaction is expected to be closed during the second quarter of 1999, subject to the ability of the parties to, among other things, qualify the Acquisition as a pooling of interests transaction, which means that the merged companies will be treated as if they had always been combined for accounting and financial reporting purposes and to obtain approval of the Acquisition by the Company's stockholders entitled to vote thereon. No assurances can be made that the Acquisition will occur, or if such Acquisition occurs, that such Acquisition would be on the same terms as described above. Chem-Con reported audited combined net revenues of approximately $21.8 million and audited combined net income of approximately $480,000 for fiscal year ended September 30, 1998. Upon closure of the proposed acquisition, the Company will be required to pay approximately $900,000 for the settlement of certain environmental contingencies and $360,000 in connection with the settlement of another claim against Chem-Con. In addition, the facilities of Chem-Con located in Michigan and Georgia are contaminated in certain aspects and, as a result of such contamination and based upon the Company's due diligence, the Company believes such remediation costs, which will be incurred over a ten year period, will not in the aggregate exceed $3.8 million. The Company will also be required to replace Chem-Con's financing facility which totaled approximately $2 million at December 31, 1998, through the utilization of the Company's current loan and security agreement or a new credit facility as obtained by the Company. It is anticipated that this acquisition will result in economies of scale on both the selling and processing activities, as well as certain overhead related expenses, and will provide access to new products, new customers, and the ability to offer new services. The geographic locations, combined with expanded service capabilities, of the merged companies will provide significant market presence through the Midwest and Southeastern United States. Recent Accounting Pronouncements In June, 1998 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). FAS 133 requires companies to recognize all derivative contracts as either assets or liabilities in the balance sheet and to measure them at fair value. FAS 133 is effective for periods beginning after June 15, 1999. Historically, we have not entered into derivative contracts. Accordingly, FAS 133 is not expected to affect our financial statements. 26 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain statements contained with this report may be deemed "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (collectively, the "Private Securities Litigation Reform Act of 1995"). All statements in this report other than an statements of historical fact are forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which could cause actual results and performance of the Company to differ materially from such statements. The words "believe," "expect," "anticipate," "intend," "will," and similar expressions identify forward-looking statements. Forward-looking statements contained herein relate to, among other things, (i) ability or inability to improve operations and become profitable on an annualized basis and continue its operations, (ii) the Company's ability to develop or adopt new and existing technologies in the conduct of its operations, (iii) anticipated financial performance, (iv) ability to comply with the Company's general working capital requirements, (v) ability to retain or receive certain permits or patents, (vi) ability to be able to continue to borrow under the Company's revolving line of credit, (vii) ability to generate sufficient cash flow from operations to fund all costs of operations and remediation of certain formerly leased property in Dayton, Ohio, and the Company's facility in Memphis, Tennessee, (viii) ability to remediate certain contaminated sites for projected amounts, (ix) the government's acceptance of the Company's offer regarding settlement of claims involving the Drum Site (as defined), (x) ability of the Company to remediate certain properties of Chem-Con (as defined) for projected amounts, (xi) ability to obtain a satisfactory line of credit for Chem-Con, (xii) ability to obtain approval of the acquisition of Chem-Con by the stockholders of the Company, (xiii) "Year 2000" computer issues, (xiv) the Oak Ridge Contracts (as defined), (xv) anticipated revenues resulting from the Oak Ridge Contracts and completion of the scope of work with M&EC (as defined), (xvi) acquisition of Chem-Con, and all other statements which are not statements of historical fact. While the Company believes the expectations reflected in such forward-looking statements are reasonable, it can give no assurance such expectations will prove to have been correct. There are a variety of factors which could cause future outcomes to differ materially from those described in this report, including, but not limited to, (i) general economic conditions, (ii) material reduction in revenues, (iii) inability to collect in a timely manner a material amount of receivables, (iv) increased competitive pressures, (v) the ability to maintain and obtain required permits and approvals to conduct operations, (vi) the ability to develop new and existing technologies in the conduct of operations, (vii) overcapacity in the environmental industry, (viii) inability of the "New Process" (as defined) to perform as anticipated or to develop such for commercial use, (ix) "Year 2000" compliance of the computer system of the Company, its key suppliers, customers, creditors, and financial service organizations, (x) ability to receive or retain certain required permits, (xi) discovery of additional contamination or expanded contamination at a certain Dayton, Ohio, property formerly leased by the Company or the Company's facility at Memphis, Tennessee, which would result in a material increase in remediation expenditures, (xii) determination that PFM is the source of chlorinated compounds at the Allen Well Field, (xiii) changes in federal, state and local laws and regulations, especially environmental regulations, or in interpretation of such, (xiv) potential increases in equipment, maintenance, operating or labor costs, (xv) management retention and development, (xvi) the requirement to use internally generated funds for purposes not presently anticipated, (xvii) inability to become profitable, or if unable to become profitable, the inability to secure additional liquidity in the form of additional equity or debt, (xviii) the commercial viability of our on-site treatment process, (xix) discovery of additional contamination or expanded contamination at property owned or used by Chem-Con, (xx) inability of the Company and M&EC to finalize the scope of work documents relating to the Oak Ridge Contracts, (xxi) the actual volume of waste to be received under the Oak Ridge Contracts, (xxii) a determination that the amount of work to be performed by the Company under the Oak Ridge Contracts is less than anticipated, (xxiii) the inability of the Company to perform the work assigned to it under Oak Ridge Contracts in a profitable manner, (xxiv) the inability of the Company to obtain under certain circumstances shareholder approval of the transaction in which the Series 10 Preferred and certain warrants were issued, and (xxv) the inability of the Company to maintain the listing of its Common Stock on the NASDAQ. The Company undertakes no obligations to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise. 27 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements Consolidated Financial Statements: Page No. _________________________________ ________ Report of Independent Certified Public Accountants BDO Seidman, LLP 29 Consolidated Balance Sheets as of December 31, 1998 and 1997 30 Consolidated Statements of Operations for the years ended December 31, 1998, 1997 and 1996 32 Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996 33 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1998, 1997 and 1996 34 Notes to Consolidated Financial Statements 35 Financial Statement Schedules: _____________________________ II Valuation and Qualifying Accounts for the years ended December 31, 1998, 1997 and 1996 80 Schedules Omitted _________________ In accordance with the rules of Regulation S-X, other schedules are not submitted because (a) they are not applicable to or required by the Company, or (b) the information required to be set forth therein is included in the consolidated financial statements or notes thereto. 28 Report of Independent Certified Public Accountants Board of Directors Perma-Fix Environmental Services, Inc. We have audited the accompanying consolidated balance sheets of Perma-Fix Environmental Services, Inc. and subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1998. We have also audited the schedule listed in the accompanying index. These consolidated financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and schedule are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and schedule. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedule. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Perma-Fix Environmental Services, Inc. and subsidiaries at December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. Also, in our opinion, the schedule presents fairly, in all material respects, the information set forth therein. /s/ BDO Seidman, LLP BDO Seidman, LLP Orlando, Florida March 5, 1999 29
PERMA-FIX ENVIRONMENTAL SERVICES, INC. CONSOLIDATED BALANCE SHEETS As of December 31 (Amounts in Thousands, Except for Share Amounts) 1998 1997 ___________________________________________________________________ ASSETS Current assets: Cash and cash equivalents $ 776 $ 314 Restricted cash equivalents and investments 111 321 Accounts receivable, net of allowance for doubtful accounts of $313 and $374, respectively 5,950 5,282 Insurance claim receivable - 1,475 Inventories 145 119 Prepaid expenses 471 567 Other receivables 11 70 Assets of discontinued operations 489 587 _________ ________ Total current assets 7,953 8,735 Property and equipment: Buildings and land 5,804 5,533 Equipment 8,606 7,689 Vehicles 941 1,202 Leasehold improvements 16 16 Office furniture and equipment 782 1,056 Construction in progress 1,592 1,052 _________ ________ 17,741 16,548 Less accumulated depreciation (5,836) (5,564) _________ ________ Net property and equipment 11,905 10,984 Intangibles and other assets: Permits, net of accumulated amortization of $1,088 and $831, respectively 3,661 3,725 Goodwill, net of accumulated amortization of $751 and $580, respectively 4,698 4,701 Other assets 531 425 ________ ________ Total assets $ 28,748 $ 28,570 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 30
PERMA-FIX ENVIRONMENTAL SERVICES, INC. CONSOLIDATED BALANCE SHEETS, CONTINUED As of December 31 (Amounts in Thousands, Except for Share Amounts) 1998 1997 ___________________________________________________________________ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,422 $ 2,263 Accrued expenses 3,369 3,380 Revolving loan and term note facility 625 614 Current portion of long-term debt 302 254 Current liabilities of discontinued operations 863 1,470 _________ _______ Total current liabilities 7,581 7,981 Environmental accruals 520 525 Accrued closure costs 715 831 Long-term debt, less current portion 2,087 3,997 Long term liabilities of discontinued operations 1,892 3,042 _________ _______ Total long-term liabilities 5,214 8,395 Commitments and contingencies (see Notes 4, 7, 9 and 12) - - Stockholders' equity: Preferred Stock, $.001 par value; 2,000,000 shares authorized, 9,850 and 6,850 shares issued and outstanding, respectively - - Common Stock, $.001 par value; 50,000,000 shares authorized, 13,215,093 and 12,540,487 shares issued, including 943,000 and 920,000 shares held as treasury stock, respectively 13 12 Redeemable warrants 140 140 Additional paid-in capital 39,769 35,271 Accumulated deficit (22,157) (21,459) ________ _______ 17,765 13,964 Less Common Stock in treasury at cost; 943,000 and 920,000 shares issued and outstanding, respectively (1,812) (1,770) ________ _______ Total stockholders' equity 15,953 12,194 ________ _______ Total liabilities and stockholders' equity $ 28,748 $ 28,570 ======== ========
31 The accompanying notes are an integral part of these consolidated financial statements.
PERMA-FIX ENVIRONMENTAL SERVICES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31 (Amounts in Thousands, Except for Share Amounts) 1998 1997 1996 ___________________________________________________________________ Net revenues $ 30,551 $ 28,413 $ 27,041 Cost of goods sold 21,064 19,827 18,912 ________ ________ ________ Gross profit 9,487 8,586 8,129 Selling, general and administrative expenses 6,847 5,682 5,942 Depreciation and amortization 2,109 1,980 2,083 _______ ______ ________ Income from operations 531 924 104 Other income (expense): Interest income 35 41 43 Interest expense (294) (431) (643) Other 190 (342) 523 ________ ________ _______ Net income from continuing operations 462 192 27 Discontinued Operations: Loss from operations - (1,048) (287) Loss on disposal - (3,053) - _______ ________ _______ Loss from discon- tinued operations - (4,101) (287) _______ Net income (loss) 462 (3,909) (260) _______ ________ _______ Preferred Stock dividends (1,160) (1,260)* (2,145)* _______ ________ _______ Net loss applicable to Common Stock $ (698) $ (5,169)* $ (2,405)* ======== ======== ======== ____________________________________________________ Basic loss per common share: Continuing operations $ (.06) $ (.10) $ (.24) Discontinued operations - (.39) (.03) _________ _________ ________ Net loss per common share $ (.06) $ (.49)* $ (.27)* ======== ======== ======== Weighted average number of common shares outstanding 12,028 10,650 8,761 ======== ======== ======== *Amounts have been restated from that previously reported to reflect a stock dividend on Preferred Stock which is convertible at a discount from market value at the date of issuance (see Note 3).
The accompanying notes are an integral part of these consolidated financial statements. 32
PERMA-FIX ENVIRONMENTAL SERVICES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31 (Amounts in Thousands) 1998 1997 1996 ___________________________________________________________________ Cash flows from operating activities: Net income from contin- uing operations $ 462 $ 192 $ 27 Adjustments to reconcile net loss to cash pro- vided by (used in) operations: Depreciation and amorti- zation 2,109 1,980 2,083 Loss on impairment of assets - 371 - Provision for bad debt and other reserves 61 133 17 (Gain) loss on sale of plant, property and equipment (24) 21 (4) Changes in assets and liabilities, net of effects from business acquisitions: Accounts receivable (715) (770) (38) Prepaid expenses, inven- tories and other assets 1,341 303 (513) Accounts payable and accrued expenses 194 (809) (1,798) _______ ________ _______ Net cash provided by (used in) continuing operations 3,428 1,421 (226) _______ ________ _______ Net cash used in discontinued operations (1,594) (1,398) (1,065) _______ ________ _______ Cash flows from investing activities: Purchases of property and equipment, net (1,990) (1,504) (1,957) Proceeds from sale of plant, property and equipment 53 54 1,214 Change in restricted cash, net 192 (30) (58) Net cash used by discon- tinued operations (4) (41) (162) _______ ________ _______ Net cash used in investing activities (1,749) (1,521) (963) ________ ________ _______ Cash flows from financing activities: Repayments on revolving loan and term note facility (2,140) (743) (997) Principal repayments on long-term debt (320) (938) (1,502) Proceeds from issuance of stock 2,941 3,480 6,367 Purchase of treasury stock (42) - (1,770) Net cash used by discon- tinued operations (74) (20) - ________ ________ ________ Net cash provided by financing activities 365 1,779 2,098 ________ ________ ________ (Decrease) increase in cash and cash equivalents 450 281 (156) Cash and cash equivalents at beginning of period, including discontinued oper- ations of $12, $8, and $28, respectively 326 45 201 ________ ________ _______ Cash and cash equivalents at end of period, including discontinued operations of $0, $12, and $8, respectively $ 776 $ 326 $ 45 ======== ======= ======= ___________________________________________________________________ Supplemental disclosure: Interest paid $ 555 $ 710 $ 844 Non-cash investing and financing activities: Issuance of Common Stock for services 241 76 462 Long-term debt incurred for purchase of property and equipment, including discontinued operations of $31 in 1997 564 294 424 Issuance of stock for pay- ment of dividends 358 314 - Issuance of Common Stock for acquisition 207 - -
The accompanying notes are an integral part of these consolidated financial statements. 33
PERMA-FIX ENVIRONMENTAL SERVICES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the years ended December 31 Preferred Stock Common Stock (Amounts in Thousands, ___________________ __________________ Except for Share Amounts) Shares Amount Shares Amount _________________________________________________________________________ Balance at December 31, 1995 - - 7,872,384 8 Net loss - - - - Preferred Stock dividend - - - - Issuance of stock for cash and services - - 573,916 - Issuance of Preferred Stock for cash 6,930 - - - Conversion of Preferred Stock to common (1,430) - 1,953,647 2 Expiration of redeemable warrants - - - - Redemption of common shares to treasury stock - - - - ______ _______ __________ ______ Balance at December 31, 1996 5,500 $ - 10,399,947 $ 10 ====== ======= ========== ======= Net loss - - - - Preferred Stock dividend - - - - Issuance of Common Stock for preferred stock dividend - - 178,781 - Issuance of stock for cash and services - - 128,271 - Exercise of warrants - - 794,514 1 Conversion of Series 3 Preferred Stock to Common Stock (1,500) - 1,027,974 1 Option Exercise - - 11,000 - Issuance of Preferred Stock for cash 2,850 - - - _______ ______ __________ _______ Balance at December 31, 1997 6,850 $ - 12,540,487 $ 12 ======== ====== ========== ======= Net income - - - - Preferred Stock dividends - - - - Issuance of Common Stock for Preferred Stock dividend - - 175,825 - Issuance of Preferred Stock 3,000 - - - Issuance of Common Stock for acquisition - - 108,207 - Issuance of stock for cash and services - - 174,474 - Exercise of warrants - - 215,100 1 Option Exercise - - 1,000 - Redemption of common shares to treasury stock - - - - _______ ______ __________ _______ Balance at December 31, 1998 9,850 $ - 13,215,093 $ 13 ======== ====== ========== ======= Common Additional Stock Redeemable Paid-In Accumulated Held in Warrants Capital Deficit Treasury ______________________________________________________ 269 21,546 (13,885) - - - (260) - - 2,000 (2,145) - - 693 - - - 6,129 - - - (2) - - (129) 129 - - - - - (1,770) __________ ___________ __________ __________ $ 140 $ 30,495 $(16,290) $ (1,770) ========== =========== =========== =========== - - (3,909) - - 908 (1,260) - - 314 - - - 96 - - - 932 - - - (1) - - - 11 - - - 2,516 - - ________ __________ ___________ __________ $ 140 $ 35,271 $ (21,459) $ (1,770) ======== ========== =========== ========== - - 462 - - 750 (1,160) - - 358 - - - 2,653 - - - 207 - - - 274 - - - 255 - - - 1 - - - - - (42) _______ _________ __________ __________ $ 140 $ 39,769 $ (22,157) $ (1,812) ======= ========= ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 34 PERMA-FIX ENVIRONMENTAL SERVICES, INC. Notes to Consolidated Financial Statements December 31, 1997, 1996 and 1995 ________________________________________________________ NOTE 1 DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Perma-Fix Environmental Services, Inc. (the Company, which may be referred to as we, us, or our) is a Delaware corporation, engaged through its subsidiaries, in: * Waste Management Services, which includes: * treatment, storage, processing, and disposal of hazardous and non-hazardous waste and mixed waste which is both low-level radioactive and hazardous; * nuclear mixed and low-level radioactive waste treatment, processing and disposal, which includes research, development, on-and off-site waste remediation and processing; and * industrial waste and wastewater management services, including the collection, treatment, processing and disposal, and the design and construction of on-site wastewater treatment systems. * Consulting Engineering Services, which includes: * broad-scope environmental issues, including environmental management programs, regulatory permitting, compliance and auditing, landfill design, field testing and characterization. We have grown through both acquisitions and internal development. Our present objective is to focus on the operations, maximize the profitability and to continue the research and development of innovative technologies for the treatment of nuclear, mixed waste and industrial waste. We are subject to certain risks: (1) We are involved in the treatment, handling, storage and transportation of hazardous and non-hazardous, mixed and industrial wastes and wastewater. Such activities contain risks against which we believe we are adequately insured, and (2) in general, the industries in which we operate are characterized by intense competition among a number of larger, more established companies with significantly greater resources. Our consolidated financial statements for the years 1996 through 1998 include the accounts of Perma-Fix Environmental Services, Inc. ("PESI") and our wholly-owned subsidiaries, Perma-Fix, Inc. ("PFI") and subsidiaries, Industrial Waste Management, Inc. ("IWM") and subsidiaries, Perma-Fix Treatment Services, Inc. ("PFTS"), Perma- Fix of Florida, Inc. ("PFF"), Perma-Fix of Dayton, Inc. ("PFD"), Perma-Fix of Ft. Lauderdale, Inc. ("PFL"), and Perma-Fix Processing, Inc. ("Re-Tech"). The Perma-Fix Processing, Inc. (Re- Tech) plastic processing subsidiary was, however, sold effective March 15, 1996. Due to a fire and resulting explosion during 1997, the fuel blending operations of Perma-Fix of Memphis, Inc. ("PFM") were discontinued. See Note 4. ________________________________________________________ NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation Our consolidated financial statements include our accounts and our wholly-owned subsidiaries after elimination of all significant intercompany accounts and transactions. Reclassifications Certain prior year amounts have been reclassified to conform with the 1998 presentation. 35 Operating Segments In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and Related Information," ("FAS 131"). FAS 131 establishes standards for the way that public companies report information about operating segments in annual financial statements. It also requires the disclosure of certain information regarding services provided, geographic areas of operation and major customers. See Note 14 for a further description of these segments and certain business information. Use of Estimates In preparing financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as, the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash Equivalents We consider all highly liquid investments with initial maturities of three months or less to be cash equivalents. Cash equivalents at December 31, 1998, included overnight repurchase agreements in the approximate amount of $249,000. Restricted Cash Equivalents and Investments Restricted cash equivalents and investments for continuing operation, which are classified as current assets, decreased $210,000 from the year ended December 31, 1998, as compared to the same period of 1997, to a balance of $111,000. During 1998, we replaced a restricted trust fund for the financial guarantee of the PFTS TSD facility, with an insurance policy which resulted in the release of $212,000 of restricted funds. In addition to these current assets, a trust fund of $383,000 is classified as a long term asset as of December 31, 1998, as compared to $365,000 as of December 31, 1997. These restricted instruments reflect secured collateral relative to the various financial assurance instruments guaranteeing the standard RCRA closure bonding requirements for the PFTS, PFD and PFL TSD facilities, while the long-term portion reflects cash held for long-term commitments related to the RCRA closure action at a facility affiliated with PFD as further discussed in Note 9. The letters of credit secured by the restricted cash renew annually, and the Company plans to replace the letters of credit with other alternative financial assurance instruments. PFM has restricted cash equivalents of $218,000 as of December 31, 1998. This restricted cash amount is reported in current assets (assets of discontinued operations), and includes a trust fund for $73,000 and certificates of deposit for $145,000. These restricted instruments reflect secured collateral relative to the various financial assurance instruments guaranteeing the standard RCRA closure requirements for the PFM facility. The letters of credit secured by this restricted cash also renew annually. Inventories Inventories consist of fly ash, cement kiln dust and treatment chemicals. Inventories are valued at the lower of cost or market with cost determined by the first-in, first-out method. Property and Equipment Property and equipment expenditures are capitalized and depreciated using the straight-line method over the estimated useful lives of the assets for financial statement purposes, while accelerated depreciation methods are principally used for tax purposes. Generally, annual depreciation rates range from ten to forty years for buildings (including improvements) and three to seven years for office furniture and equipment, vehicles, and decontamination and processing equipment. Maintenance and repairs are charged directly to expense as incurred. The cost and accumulated depreciation of assets sold or retired are removed from the respective accounts, and any gain or loss from sale or retirement is recognized in the 36 accompanying consolidated statements of operations. Renewals and improvements which extend the useful lives of the assets are capitalized. Intangible Assets Intangible assets relating to acquired businesses consist primarily of the cost of purchased businesses in excess of the estimated fair value of net assets acquired ("goodwill") and the recognized permit value of the business. Goodwill is generally amortized over 40 years and permits are amortized over 20 years. Amortization expense approximated $429,000, $388,000 and $455,000 for the years ended 1998, 1997, and 1996, respectively. We continually reevaluate the propriety of the carrying amount of permits and goodwill as well as the amortization period to determine whether current events and circumstances warrant adjustments to the carrying value and estimates of useful lives. We use an estimate of the related undiscontinued operating income over the remaining lives of goodwill and permit costs in measuring whether they are recoverable. At this time, we believe that no impairment of goodwill or permits has occurred and that no reduction of the estimated useful lives of the remaining assets is warranted. This evaluation policy is in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Accrued Closure Costs Accrued closure costs represent our estimated environmental liability to clean up our facilities in the event of closure. Income Taxes We account for income taxes under Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes", which requires use of the liability method. SFAS No. 109 provides that deferred tax assets and liabilities are recorded based on the differences between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Deferred tax assets or liabilities at the end of each period are determined using the currently enacted tax rates to apply to taxable income in the periods in which the deferred tax assets or liabilities are expected to be settled or realized. Net Revenues Revenues for services and reimbursable costs are recognized at the time services are rendered or, in the case of fixed price contracts, under the percentage-of-completion method of accounting. No customer accounted for more than ten percent (10%) of consolidated net revenues. Self-Insurance We have a self-insurance program for certain health benefits. The cost of such benefits is recognized as expense in the period in which the claim occurred, including estimates of claims incurred but not reported. The claims expense for 1998 was approximately $807,000, as compared to $663,000 for 1997. This increase principally reflects the occurrence of several larger claims during 1998. Net Loss Per Share Net loss per share has been presented using the weighted average number of common shares outstanding. Potential common shares have not been included in the net loss per share calculations since their effects would be antidilutive. Potential common shares include 1,687,132 stock options, 13,230,796 warrants and 10,116,667 shares underlying the convertible Preferred Stock at the minimum conversion price. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS 128"). SFAS 128 establishes new standards for computing and presenting earnings per share ("EPS"). Specifically, SFAS 128 replaces the presentation of primary EPS with a presentation of basic EPS, requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. SFAS 128 37 is effective for financial statements issued for periods ending after December 15, 1997. The adoption of SFAS 128 did not have a material effect on our EPS presentation for 1998, 1997 and 1996, since the effects of potential common shares are antidilutive. Fair Value of Financial Instruments The book values of cash, trade accounts receivable, trade accounts payable, and financial instruments included in current assets and other assets approximate their fair values principally because of the short-term maturities of these instruments. The fair value of our long-term debt is estimated based on the current rates offered to us for debt of similar terms and maturities. Under this method, our fair value of long-term debt was not significantly different from the stated value at December 31, 1998 and 1997. Recent Accounting Pronouncements In June, 1998 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). FAS 133 requires companies to recognize all derivative contracts as either assets or liabilities in the balance sheet and to measure them at fair value. FAS 133 is effective for periods beginning after June 15, 1999. Historically, we have not entered into derivative contracts. Accordingly, FAS 133 is not expected to affect our financial statements. ________________________________________________________ NOTE 3 RESTATEMENT OF 1996 AND 1997 STOCKHOLDER'S EQUITY
In March 1997, the Securities and Exchange Commission Staff (the "Staff") announced its position on the accounting for Preferred Stock which is or may be convertible into Common Stock at a discount from the market price at the date of issuance. The Staff's position pursuant to EITF D-60 is that a Preferred Stock dividend should be recorded for the difference between the conversion price and the quoted market price of Common Stock as determined at the date of issuance. To comply with this position, we previously restated our 1996 consolidated financial statements to reflect a dividend of approximately $2,000,000 related to the fiscal 1996 sales of Convertible Preferred Stock discussed in Note 6 (Series 1 Class A, Series 2 Class B, Series 3 Class C Preferred Stock). We also restated the reported net loss per share of Common Stock for the year ended December 31, 1996, to ($.27), from the previously reported amount of ($.05). Pursuant to EITF D-60 and EITF D-42, we restated our 1997 consolidated financial statements to reflect a dividend of approximately $713,000 related to the fiscal 1997 sales and subsequent exchanges of Convertible Preferred Stock and a dividend of approximately $195,000 related to the fiscal 1997 issuance of warrants in connection with the issuance of the Preferred Stock as discussed in Note 6 (Series 4 Class D, Series 5 Class E, Series 6 Class F, and Series 7 Class G Preferred Stock). The restatement reflects dividends totaling approximately $908,000 resulting from Preferred Stock sales, of which approximately $111,000 was attributable to the quarter ended June 30, 1997, and approximately $797,000 was attributable to the quarter ended September 30, 1997. The impact of the restatement on the second and third quarters of 1997 and the year ended December 31, 1997, is shown as follows (amounts in thousands, except for share amounts): As Originally Reported As Amended ___________________________ ___________________________ Quarter Ended Year Ended Quarter Ended Year Ended ________________ __________ ________________ _________ 6/30/97 9/30/97 12/31/97 6/30/97 9/30/97 12/31/97 _______ _______ ________ _______ _______ ________ Preferred Stock Dividends $ 82 $ 99 $ 352 $ 193 $ 896 $ 1,260 Net Loss Applicable to Common Stock (525) 58 (4,261) (636) (739) (5,169) Net Loss Per Share (.05) .01 (.40) (.06) (.07) (.49)
38 ________________________________________________________ NOTE 4 DISCONTINUED OPERATIONS On January 27, 1997, an explosion and resulting tank fire occurred at the PFM facility, a hazardous waste storage, processing and blending facility, located in Memphis, Tennessee, which resulted in damage to certain hazardous waste storage tanks located on the facility and caused certain limited contamination at the facility. Such occurrence was caused by welding activity performed by employees of an independent contractor at or near the facility's hazardous waste tank farm contrary to instructions by PFM. The facility was non-operational from the date of this event until May 1997, at which time it began limited operations. Until the time of the incident, PFM operated as a permitted "fuel blending" facility and serviced a separate class of customers who generated specific waste streams, each identified by its waste code and specific characteristics. As our only such "fuel blending" facility, PFM was permitted and capable of mixing certain hazardous liquid, semi- solid and solid waste in a vat which suspended the solids in order to pump the mixture into a tank. The tanks also contained mixing units which kept the solids suspended until the mixture could be off-loaded into tanker trucks. As a result of the damage to the tanks and processing equipment and the related cost to rebuild this operating unit, we decided to discontinue this line of business, which resulted in PFM's inability to service and retain the existing customer base. The existing customer base represented principally manufacturing and service companies whose operations generated certain semi-solid and solid permitted hazardous wastes, which as a result of permit and processing limitations could not be served by our other facilities. PFM continues to pursue other markets or activities which may be performed at this facility given the permit limitations, capital requirements and development of a new line of business and related customer base. Upon evaluation of the above business decision, and given the loss of both the existing line of business and its related customer base, we reported the Memphis segment as a discontinued operation, pursuant to Paragraph 13 of APB 30. The fuel blending activities were discontinued on the date of the incident, January 27,1997. All assets involved in the fuel blending activities that were not damaged beyond repair in the fire have subsequently been damaged as a result of the decontamination process. Accordingly, during the fourth quarter of 1997, we recorded a loss on disposal of discontinued operations of $3,053,000, which included $1,272,000 for impairment of certain assets and $1,781,000 for the establishment of certain closure liabilities. The net loss from the discontinued PFM operations for the years ended December 31, 1997 and 1996 ($1,048,000, and $287,000, respectively) are shown separately in the Consolidated Statements of Operations. The results of the discontinued PFM operations do not reflect management fees charged by the Corporation, but does include interest expense of $254,000 and $169,000 during 1997 and 1996, respectively, specifically identified to such operations as a result of such operations incurring debt under the Company's revolving and term loan credit facility. The operating expenses incurred during 1998, totaling $653,000, relate to the closure and remedial activities performed, and have been recorded to the accrued environmental reserve. During March of 1998, the Company received a settlement in the amount of $1,475,000 from its insurance carrier for the business interruption claim which is recorded as an insurance claim receivable at December 31, 1997. This settlement was recognized as a gain in 1997 and thereby reduced the net loss recorded for the discontinued PFM operations in 1997. Earlier in 1997, PFM received approximately $522,000 (less its deductible of $25,000) in connection with its claim for loss of contents as a result of the fire and explosion which was utilized to replace certain assets and reimburse the Company for certain fire related expense. Revenues of the discontinued PFM operations were $1,878,000 in 1997 and $3,996,000 in 1996. These revenues are not included in revenues as reported in the Consolidated Statements of Operation.
Net assets and liabilities of the discontinued PFM operations at the end of each year, in thousands of dollars, consisted of the following: 39 1998 1997 _______ _______ Assets of discontinued operations: Cash and cash equivalents $ - $ 12 Restricted cash equivalents and investments 218 214 Accounts receivable, net of allowance for doubtful accounts $101 and $105, respectively 260 333 Prepaid expenses and other assets 11 28 _______ ______ $ 489 $ 587 ======= ======= Current liabilities of discontinued operations: Accounts payable $ 100 $ 277 Accrued expenses 126 259 Accrued environmental costs 613 835 Current portion of long-term debt 24 99 _______ _______ $ 863 $ 1,470 ======= ======= Long-term liabilities of discontinued operations: Long-term debt, less current portion $ 4 $ 17 Accrued environmental and closure costs 1,888 3,025 _______ _______ $ 1,892 $ 3,042 ======= =======
The accrued environmental and closure costs related to PFM totals $2,501,000 as of December 31, 1998, a decrease of $1,359,000 from the December 31, 1997, accrual balance. This reduction was principally a result of the specific costs related to the decomissioning and closure of the fuel blending tank farm and related processing equipment ($428,000), general closure and remedial activities, including groundwater remediation,and agency and investigative activities, ($278,000), and the general operating losses, including indirect labor, materials and supplies, incurred in conjunction with the above actions ($653,000). The remaining liability represents the best estimate of the cost to complete the groundwater remediation at the site of approximately $980,000 (see Note 9), the costs to complete the facility closure activities (including agency and investigative activities) totaling approximately $946,000, future operating losses to be incurred by PFM as it completes such closure and remedial activities over the next five (5) to ten (10) year period ($350,000) and the potential PRP liability of $225,000 as further discussed in Note 12. ________________________________________________________ NOTE 5 ACQUISITION AND PROPOSED ACQUISITION Effective April 1, 1998, the Company entered into an asset purchase agreement to acquire substantially all of the assets and certain liabilities of Action Environmental Corp. ("Action") of Miami, Florida. Action has provided oil filter collection and processing services to approximately 700 customers in south Florida. The assets of Action were acquired through a combination of stock issuance and the assumption of certain liabilities. The acquisition was accounted for using the purchase method effective April 1, 1998. The acquisition of Action resulted in an issuance of 108,207 shares of the Company's Common Stock reflecting a total purchase price of $207,000. During March 1999, the Company, Chemical Conservation Corporation (Florida), Chemical Conservation of Georgia, Inc. and Chem-Met Services, Inc. (Collectively "Chem-Con") entered into a definitive agreement whereby PESI agreed to acquire all of the outstanding shares of Common Stock of Chem-Con in exchange for $7.4 million in the Company's Common Stock, with the number of shares of the Company's Common Stock to be issued determined by dividing $7.4 million by the average closing price per share of the Company's Common Stock as quoted on the NASDAQ for the five (5) trading days immediately preceding the date of closing. The Company would, at the closing of the acquisition, enter into a four year employment agreement with an executive of Chem-Con in the approximate amount of $1.3 million. The audited combined net revenues of Chem-Con for 40 the fiscal year ended September 30, 1998, were, in the aggregate, approximately $21.8 million. We expect that the merger will be accounted for as a pooling of interests, which means that we will treat our companies as if they had always been combined for accounting and financial reporting purposes. The transaction is expected to be closed during the second quarter of 1999, subject to the ability of the parties to, among other things, qualify the Acquisition as a pooling of interests transaction, which means that the merged companies will be treated as if they had always been combined for accounting and financial reporting purposes and to obtain approval of the Acquisition by the Company's stockholders entitled to vote thereon. ________________________________________________________ NOTE 6 PREFERRED STOCK ISSUANCE AND CONVERSION We issued, during February 1996, to RBB Bank Aktiengesellschaft, located in Graz, Austria ("RBB Bank"), 1,100 shares of newly created Series 1 Class A Preferred Stock ("Series 1 Preferred") at a price of $1,000 per share, for an aggregate sales price of $1,100,000, and paid placement and closing fees of $180,000. During February 1996, we also issued 330 shares of newly created Series 2 Class B Convertible Preferred Stock ("Series 2 Preferred") to RBB Bank at a price of $1,000 per share, for an aggregate sales price of $330,000, and paid placement and closing fees of $35,000. The Series 1 Preferred and Series 2 Preferred accrued dividends on a cumulative basis at a rate per share of five percent (5%) per annum, payable at the option of the Company in cash or Company Common Stock. All dividends on the Series 1 Preferred and Series 2 Preferred were paid in Common Stock. The Series 1 Preferred and Series 2 Preferred were convertible, at any time, commencing forty- five (45) days after issuance into shares of the Company's Common Stock at a conversion price equal to the aggregate value of the shares of the Preferred Stock being converted, together with all accrued but unpaid dividends thereon, divided by the "Average Stock Price" per share (the "Conversion Price"). The Average Stock Price means the lesser of (i) seventy percent (70%) of the average daily closing bid prices of the Common Stock for the period of five (5) consecutive trading days immediately preceding the date of subscription by the holder or (ii) seventy percent (70%) of the average daily closing bid prices of the Common Stock for a period of five (5) consecutive trading days immediately preceding the date of conversion of the Preferred Stock. During the second quarter of 1996, a total of 722 shares of the Series 1 Preferred were converted into approximately 1,034,000 shares of the Company's Common Stock and the associated accrued dividends were paid in the form of approximately 16,000 shares of the Company's Common Stock. Pursuant to a subscription and purchase agreement for the issuance of Series 3 Class C Convertible Preferred Stock, as discussed below, the remaining 378 shares of the Series 1 Preferred and the 330 shares of the Series 2 Preferred were converted during July 1996 into 920,000 shares of the Company's Common Stock. By terms of the subscription agreement, the 920,000 shares of Common Stock were purchased by us at a purchase price of $1,770,000 and are included in Treasury Stock as of December 31, 1996. As a result of such conversions, the Series 1 Preferred and the Series 2 Preferred are no longer outstanding. On July 17, 1996, we issued to RBB Bank 5,500 shares of newly- created Series 3 Class C Convertible Preferred Stock ("Series 3 Preferred") at a price of $1,000 per share, for an aggregate sales price of $5,500,000, and paid placement and closing fees as a result of such transaction of approximately $586,000. As part of the sale of the Series 3 Preferred, we also issued to RBB Bank two (2) Common Stock purchase warrants entitling RBB Bank to purchase, after December 31, 1996, until July 18, 2001, an aggregate of up to 2,000,000 shares of Common Stock, with 1,000,000 shares exercisable at an exercise price equal to $2.00 per share and 1,000,000 shares exercisable at an exercise price equal to $3.50 per share. The sale to RBB Bank of the Series 3 Preferred was made in a private placement under Sections 4(2) and/or 3(b) and/or Rule 506 of Regulation D under the Securities Act of 1933, as amended. The Series 3 Preferred accrues dividends on a cumulative basis at a rate of six percent (6%) per annum, and is payable semi-annually when and as declared by the Board of Directors. Dividends shall be paid, at our option, in the form of cash or Common Stock. The holder of the Series 3 Preferred may convert into Common Stock of the Company up to (i) 1,833 shares of the Series 3 Preferred on and after October 1, 1996, (ii) 1,833 shares of the Series 3 Preferred 41 on and after November 1, 1996, and (iii) the balance of the Series 3 Preferred on and after December 1, 1996. The conversion price shall be the product of (i) the average closing bid quotation for the five (5) trading days immediately preceding the conversion date multiplied by (ii) seventy-five percent (75%). The conversion price shall be a minimum of $.75 per share or a maximum of $1.50 per share, with the minimum conversion price to be reduced by $.25 per share each time, if any, after July 1, 1996, the Company sustains a net loss, on a consolidated basis, in each of two (2) consecutive quarters. At no time shall a quarter that has already been considered in such determination be considered in any subsequent determination. The Common Stock issuable on the conversion of the Series 3 Preferred is subject to certain registration rights pursuant to the subscription agreement. The subscription agreement also provides that the Company utilize $1,770,000 of the net proceeds to purchase from RBB Bank 920,000 shares of the Company's Common Stock owned by RBB Bank. As discussed above, RBB Bank had previously acquired from the Company 1,100 shares of Series 1 Preferred and 330 shares of Series 2 Preferred and, as of the date of the subscription agreement, was the owner of record and beneficially owned all of the issued and outstanding shares of Series 1 Preferred and Series 2 Preferred, which totaled 378 shares of Series 1 Preferred and 330 shares of Series 2 Preferred. Pursuant to the terms of the subscription agreement relating to the Series 3 Preferred, RBB Bank converted all of the remaining outstanding shares of Series 1 Preferred and Series 2 Preferred into Common Stock of the Company (920,000 shares) pursuant to the terms, provisions, restrictions and conditions of the Series 1 Preferred and Series 2 Preferred, which were in turn purchased by the Company pursuant to the terms of such subscription agreement. During 1997, the holder of the Series 3 Preferred converted 1,500 shares of the Series 3 Preferred into 1,027,974 shares of Common Stock of the Company. As of the date of this report, no further shares have been converted. During 1997, accrued dividends for the period July 17, 1996, through June 30, 1997, and dividends on converted shares, in the combined total of approximately $314,000 were paid in the form of 178,781 shares of Common Stock of the Company. The accrued dividends for the period July 1, 1997, through December 31, 1997, in the amount of approximately $121,000 were paid in January 1998, in the form of 54,528 shares of Common Stock of the Company. The accrued dividends for the period January 1, 1998, through June 30, 1998, in the amount of approximately $119,000 were paid in July 1998, in the form of 62,027 shares of Common Stock of the Company. The accrued dividends for the period July 1, 1998, through December 31, 1998, in the amount of approximately $121,000 were paid in January 1999, in the form of cash. As further discussed in Note 3, the Securities and Exchange Commission Staff (the "Staff") announced its position on accounting for Preferred Stock which is convertible into Common Stock at a discount from the market rate at the date of issuance, in March of 1997. The Staffs position is that a Preferred Stock dividend should be recorded for the difference between the conversion price and the quoted market price of Common Stock as determined at the date of issuance. To comply with this position, we recognized a dividend in 1996 of approximately $2,000,000 as related to the above discussed Series 1 Class A, Series 2 Class B, and Series 3 Class C Preferred Stock. On or about June 11, 1997, we issued to RBB Bank 2,500 shares of newly-created Series 4 Class D Convertible Preferred Stock, par value $.001 per share ("Series 4 Preferred"), at a price of $1,000 per share, for an aggregate sales price of $2,500,000. The sale to RBB Bank was made in a private placement under Sections 4(2) and/or 3(b) and/or Rule 506 of Regulation D under the Securities Acts of 1933, as amended, pursuant to the terms of a Subscription and Purchase Agreement, dated June 9, 1997, between us and RBB Bank ("Subscription Agreement"). The Series 4 Preferred has a liquidation preference over the Company's Common Stock, par value $.001 per share ("Common Stock"), equal to $1,000 consideration per outstanding share of Series 4 Preferred (the "Liquidation Value"), plus an amount equal to all unpaid dividends accrued thereon. The Series 4 Preferred accrues dividends on a cumulative basis at a rate of four percent (4%) per annum of the Liquidation Value ("Dividend Rate"), and is payable semi-annually when and as declared by the Board of Directors. No dividends or other distributions may be paid or declared or set aside for payment on the Company's Common Stock until all accrued and unpaid dividends on all outstanding shares of Series 4 Preferred have been paid or set aside for payment. Dividends shall be paid, at our option, in the form of cash or Common Stock. If we pay dividends in Common Stock, such is payable in the number of shares of Common Stock equal to the product of (a) the quotient of (i) four percent (4%) of $1,000 divided by (ii) the average of the closing bid quotation 42 of the Common Stock as reported on the NASDAQ for the five trading days immediately prior to the applicable dividend declaration date, times (b) a fraction, the numerator of which is the number of days elapsed during the period for which the dividend is to be paid and the denominator of which is 365. The holder of the Series 4 Preferred may convert into Common Stock up to 1,250 shares of the Series 4 Preferred on and after October 5, 1997, and the remaining 1,250 shares of the Series 4 Preferred on and after November 5, 1997. The conversion price per share is the lesser of (a) the product of the average closing bid quotation for the five (5) trading days immediately preceding the conversion date multiplied by eighty percent (80%) or (b) $1.6875. The minimum conversion price was $.75, which minimum was eliminated as of September 6, 1998. The Company will have the option to redeem the shares of Series 4 Preferred (a) between June 11, 1998, and June 11, 2001, at a redemption price of $1,300 per share if at any time the average closing bid price of the Common Stock for ten consecutive trading days is in excess of $4.00, and (b) after June 11, 2001, at a redemption price of $1,000 per share. The holder of the Series 4 Preferred will have the option to convert the Series 4 Preferred prior to redemption by the Company. As part of the sale of the Series 4 Preferred, we also issued to RBB Bank two Common Stock purchase warrants (collectively, the "Warrants ") entitling RBB Bank to purchase, after December 31, 1997, and until June 9, 2000, an aggregate of up to 375,000 shares of Common Stock, subject to certain anti-dilution provisions, with 187,500 shares exercisable at a price equal to $2.10 per share and 187,500 shares exercisable at a price equal to $2.50 per share. A certain number of shares of Common Stock issuable on the conversion of the Series 4 Preferred and on the exercise of the Warrants is subject to certain registration rights pursuant to the Subscription Agreement. We paid fees (excluding legal and accounting) of $200,000 to an investment banker in connection with the placement of Series 4 Preferred to RBB Bank and issued to the investment banking firm that handled the placement two (2) Common Stock purchase warrants entitling the investment banking firm to purchase an aggregate of up to 300,000 shares of Common Stock, subject to certain anti- dilution provisions, with one warrant for a five year term to purchase up to 200,000 shares at an exercise price of $2.00 per share and the second warrant for a three year term to purchase up to 100,000 shares of Common Stock at an exercise price of $1.50 per share, subject to certain anti-dilution provisions. Under the terms of each warrant, the investment banking firm is entitled to certain registration rights with respect to the shares of Common Stock issuable on the exercise of each warrant. We negotiated an Exchange Agreement with RBB Bank ("RBB Exchange Agreement") which provided that the 2,500 shares of Series 4 Preferred and the RBB Series 4 Warrants were tendered to us in exchange for (i) 2,500 shares of a newly created Series 6 Class F Preferred Stock, par value $.001 per share ("Series 6 Preferred"), (ii) two warrants each to purchase 187,500 shares of Common Stock exercisable at $1.8125 per share, and (iii) one warrant to purchase 281,250 shares of Common Stock exercisable at $2.125 per share (collectively, the "RBB Series 6 Warrants"). The RBB Series 6 Warrants will be for a term of three (3) years and may be exercised at any time after December 31, 1997, and until June 9, 2000. The conversion price of the Series 6 Preferred shall be $1.8125 per share, unless the closing bid quotation of the Common Stock is lower than $2.50 in twenty (20) out of any thirty (30) consecutive trading days after March 1, 1998, in which case, the conversion price per share shall be the lesser of (A) the product of the average closing bid quotation for the five (5) trading days immediately preceding the conversion date multiplied by eighty percent (80%) or (B) $1.8125 with the minimum conversion price being $.75, which minimum will be eliminated from and after September 6, 1998. The remaining terms of the Series 6 Preferred will be substantially the same as the terms of the Series 4 Preferred. As of the date of this report no shares of the Series 6 Preferred have been converted. 43 Effective February 28, 1998, the Company entered into an Exchange Agreement with RBB Bank (the "Second RBB Exchange Agreement"), which provided that the 2,500 shares of Series 6 Preferred were tendered to the Company in exchange for 2,500 of a newly-created Series 8 Class H Preferred Stock, par value $.001 per share ("Series 8 Preferred"). The exchange was made in an exchange offer exempt from registration pursuant to Section 3(a)(9) of the Securities Act, and/or Section 4(2) of the Securities Act and/or Regulation D as promulgated under the Securities Act. The Series 8 Preferred was issued to RBB Bank during July 1998. The rights under the Series 8 Preferred are the same as the rights under the Series 6 Preferred, except for the conversion price. The Series 8 Preferred is convertible at $1.8125 per share, except that, in the event the average closing bid price reported in the over-the-counter market, or the closing sale price if listed on a national securities exchange for the five (5) trading days prior to a particular date of conversion, shall be less than $2.50, the conversion price for only that particular conversion shall be the average of the closing bid quotations of the Common Stock as reported on the over-the-counter market, or the closing sale price if listed on a national securities exchange, for the five (5) trading days immediately proceeding the date of such particular conversion notice provided by the holder to the Company multiplied by 80%. Notwithstanding the foregoing, the conversion price shall not be less than a minimum of $.75 per share, which minimum shall be eliminated from and after September 6, 1998. The terms of the Series 8 Preferred has a liquidation preference over the Company's Common Stock equal to $1,000 consideration per outstanding share of Series 8 Preferred (the "Series 8 Liquidation Value"), plus an amount equal to all accrued and unpaid dividends. The Series 8 Preferred accrues dividends on a cumulative basis at a rate of four percent (4%) per annum of the Series 8 Liquidation Value ("Series 8 Dividend Rate"), and is payable semi-annually when and as declared by the Board of Directors. No dividends or other distributions may be paid or declared or set aside for payment on the Company's Common Stock until all accrued and unpaid dividends on all outstanding shares of Series 8 Preferred have been paid or set aside for payment. Dividends may be paid, at the option of the Company, in the form of cash or Common Stock of the Company. If the Company pays dividends in Common Stock, such is payable in the number of shares of Common Stock equal to the product of (a) the quotient of (i) the Series 8 Dividend Rate divided by (ii) the average of the closing bid quotation of the Common Stock as reported on the NASDAQ for the five trading days immediately prior to the date the dividend is declared, times (b) a fraction, the numerator of which is the number of days elapsed during the period for which the dividend is to be paid and the denominator of which is 365. Except for the exchange of the Series 6 Preferred for the Series 8 Preferred, the Second RBB Exchange Agreement does not terminate the First RBB Exchange Agreement. In addition, the RBB Series 6 Warrants were not affected by the Second RBB Exchange Agreement. The Company paid to RBB Bank the dividends on the Series 6 Preferred which accrued from the date of its issuance through February 28, 1998, the effective date of the Second RBB Exchange Agreement by issuing to RBB Bank 7,652 shares of Common Stock in payment of such accrued dividends. By letter dated July 14, 1998, RBB Bank agreed to waive certain penalties regarding the Series 4 Preferred and Series 6 Preferred. The accrued dividends for the period July 1, 1997, through December 31, 1997, for the Series 4 and Series 6 Preferred, total approximately $55,000, which were paid in January 1998, in the form of 27,377 shares of Common Stock of the Company. The accrued dividends for the Series 6 and 8 Preferred for the period January 1, 1998, through June 30, 1998, in the amount of approximately $49,000, were paid in July 1998, in the form of 25, 072 shares of Common Stock of the Company. The accrued dividends for the Series 8 Preferred for the period July 1, 1998, through December 31, 1998, in the amount of approximately $50,000, were paid in February 1999, the form of 38,046 shares of Common Stock of the Company. As further discussed in Note 3, the Securities and Exchange Commission Staff (the "Staff") announced its position on accounting for Preferred Stock which is convertible into Common Stock at a discount from the market rate at the date of issuance, in March of 1997. The Staffs position pursuant to EITF D-60 relating to beneficial conversion features is that a preferred stock dividend 44 should be recorded for the difference between the conversion price and the quoted market price of common stock as determined at the date of issuance. To comply with this position, we recognized a dividend in 1997 of approximately $798,000 as related to the issuance of the Series 4 Class D, and Series 6 Class F Preferred Stock and the related warrants. On or about July 14, 1997, we issued to the Infinity Fund, L.P. ("Infinity"), 350 shares of newly-created Series 5 Class E Convertible Preferred Stock, par value $.001 per share ("Series 5 Preferred"), at a price of $1,000 per share, for an aggregate sales price of $350,000. The sale to Infinity was made in a private placement under Rule 506 of Regulation D under the Securities Acts of 1933, as amended, pursuant to the terms of a Subscription and Purchase Agreement, dated July 7, 1997, between us and Infinity ("Infinity Subscription Agreement"). We utilized the proceeds received on the sale of Series 5 Preferred for the payment of debt and general working capital. The Series 5 Preferred has a liquidation preference over the Company's Common Stock, par value $.001 per share ("Common Stock"), equal to $1,000 consideration per outstanding share of Series 5 Preferred (the "Liquidation Value"), plus an amount equal to all unpaid dividends accrued thereon. The Series 5 Preferred accrues dividends on a cumulative basis at a rate of four percent (4%) per annum of the Liquidation Value ("Dividend Rate"). Dividends are payable semi-annually when and as declared by the Board of Directors. No dividends or other distributions may be paid or declared or set aside for payment on the Company's Common Stock until all accrued and unpaid dividends on all outstanding shares of Series 5 Preferred have been paid or set aside for payment. Dividends may be paid, at our option, in the form of cash or Common Stock. If we pay dividends in Common Stock, such is payable in the number of shares of Common Stock equal to the product of (a) the quotient of (i) the Dividend Rate divided by (ii) the average of the closing bid quotation of the Common Stock as reported on the NASDAQ for the five trading days immediately prior to the date the dividend is declared, multiplied by (b) a fraction, the numerator of which is the number of days elapsed during the period for which the dividend is to be paid and the denominator of which is 365. The holder of the Series 5 Preferred may convert into Common Stock up to 175 shares of the Series 5 Preferred on and after November 3, 1997, and the remaining 175 shares of the Series 5 Preferred on and after December 3, 1997. The conversion price per share is the lesser of (a) the product of the average closing bid quotation for the five trading days immediately preceding the conversion date multiplied by 80% or (b) $1.6875. The minimum conversion price is $.75, which minimum will be eliminated from and after September 6, 1998. The Company will have the option to redeem the shares of Series 5 Preferred (a) between July 14, 1998, and July 13, 2001, at a redemption price of $1,300 per share if at any time the average closing bid price of the Common Stock for ten consecutive trading days is in excess of $4.00, and (b) after July 13, 2001, at a redemption price of $1,000 per share. The holder of the Series 5 Preferred will have the option to convert the Series 5 Preferred prior to redemption by the Company. A certain number of shares of Common Stock issuable upon conversion of the Series 5 Preferred is subject to certain registration rights pursuant to the Infinity Subscription Agreement. We negotiated an Exchange Agreement with Infinity ("Infinity Fund Exchange Agreement") which provided that the 350 shares of Series 5 Preferred will be tendered to us in exchange for (i) 350 shares of a newly created Series 7 Class G Preferred Stock, par value $.001 per share ("Series 7 Preferred"), and (ii) one Warrant to purchase up to 35,000 shares of Common Stock exercisable at $1.8125 per share ("Series 7 Warrant"). The Series 7 Warrant will be for a term of three (3) years and may be exercised at any time after December 31, 1997, and until July 7, 2000. The conversion price of the Series 7 Preferred shall be $1.8125 per share, unless the closing bid quotation of the Common Stock is lower than $2.50 per share in twenty (20) out of any thirty (30) consecutive trading days after March 1, 1998, in which case, the conversion price per share shall be the lesser of (i) the product of the average closing bid quotation for the five (5) trading days immediately preceding the conversion date multiplied by eighty percent (80%) or (ii) $1.8125, with the minimum conversion price being $.75, which minimum was eliminated as of September 6, 1998. 45 The remaining terms of the Series 7 Preferred will be substantially the same as the terms of the Series 5 Preferred. As of the date of this report no shares of the Series 7 Preferred have been converted. Effective February 28, 1998, the Company entered into an Exchange Agreement with Infinity (the "Second Infinity Exchange Agreement"), which provided that the 350 shares of Series 7 Preferred were tendered to the Company in exchange for 350 shares of a newly- created Series 9 Class I Preferred Stock, par value $.001 per share ("Series 9 Preferred"). The exchange was made as an exchange offer pursuant to Section 3(a)(9) of the Securities Act, and/or Section 4(2) of the Securities Act and/or Registration D as promulgated under the Securities Act. The rights of the Series 9 Preferred are the same as the rights under the Series 7 Preferred, except for the conversion price. The conversion price for the Series 9 Preferred is $1.8125 per share, except that, in the event the average closing bid price of the Common Stock as reported in the over the counter market, or the closing sale price if listed on a national securities exchange, for the five (5) trading days prior to a particular date of conversion, shall be less than $2.265, the conversion price for only such particular conversion shall be the average of the closing bid quotations of the Common Stock as reported on the over the counter market, or the closing sale price if listed on a national securities exchange for the five (5) trading days immediately proceeding the date of such particular conversion notice provided by the holder to the Company multiplied by 80%. Notwithstanding the foregoing, the conversion price shall not be less than a minimum of $.75 per share, which minimum shall be eliminated from and after September 8, 1998. The Series 9 Preferred has a liquidation preference over the Company's Common Stock, par value $.001 per share ("Common Stock"), equal to $1,000 consideration per outstanding share of Series 9 Preferred (the "Series 9 Liquidation Value"), plus an amount equal to all unpaid dividends accrued thereon. The Series 9 Preferred accrues dividends on a cumulative basis at a rate of four percent (4%) per annum of the Series 9 Liquidation Value ("Series 9 Dividend Rate"). Dividends are payable semi-annually when and as declared by the Board of Directors. No dividends or other distributions may be paid or declared or set aside for payment on the Company's Common Stock until all accrued and unpaid dividends on all outstanding shares of Series 9 Preferred have been paid or set aside for payment. Dividends may be paid, at the option of the Company, in the form of cash or Common Stock of the Company. If the Company pays dividends in Common Stock, such are payable in the number of shares of Common Stock equal to the product of (a) the quotient of (i) the Series 9 Dividend Rate divided by (ii) the average of the closing bid quotation of the Common Stock as reported on the NASDAQ for the five trading days immediately prior to the date the dividend is declared, multiplied by (b) a fraction, the numerator of which is the number of days elapsed during the period for which the dividend is to be paid and the denominator of which is 365. Except for the exchange of the Series 7 Preferred for the Series 9 Preferred, the Second Infinity Exchange Agreement does not terminate the First Infinity Exchange Agreement. In addition, the Infinity Series 7 Warrants were not affected by the Second Infinity Exchange Agreement. The Company has paid Infinity the dividends on the Series 7 Preferred which accrued from the date of its issuance through February 28, 1998, the effective date of the Second Infinity Exchange Agreement, by issuing to Infinity 1,071 shares of Common Stock in payment of such accrued dividends. The accrued dividends for the period July 1, 1997, through December 31, 1997, for the Series 5 and Series 7 Preferred, total approximately $7,000, which were paid in January 1998, in the form of 3,311 shares of Common Stock of the Company. The accrued dividends for the Series 7 and 9 Preferred for the period January 1, 1998, through June 30, 1998, in the amount of approximately $7,000, were paid in July 1998, in the form of 3,510 shares of Common Stock of the Company. The accrued dividends for the Series 9 Preferred for the period July 1, 1998, through December 31, 1998, in the amount of approximately $7,000, were paid in February 1999, in the form of 5,326 shares of Common Stock of the Company. As further discussed in Note 3, the Securities and Exchange Commission Staff (the "Staff") announced its position on accounting for Preferred Stock which is convertible into Common Stock at a discount from the market rate at the date of issuance, in March of 1997. The Staff's position pursuant to EITF D-60 relating to 46 beneficial conversion features is that a preferred stock dividend should be recorded for the difference between the conversion price and the quoted market price of common stock as determined at the date of issuance. To comply with this position, we recognized a dividend in 1997 of approximately $110,000 as related to the issuance of the Series 5 Class E, and Series 7 Class G Preferred Stock and the related warrants. On or about June 30, 1998, the Company issued to RBB Bank Aktiengesellschaft, located in Graz, Austria ("RBB Bank"), 3,000 shares of newly-created Series 10 Class J Convertible Preferred Stock, par value $.001 per share ("Series 10 Preferred"), at a price of $1,000 per share, for an aggregate sales price of $3,000,000. The sale to RBB Bank was made in a private placement under Section 4(2) of the Securities Act of 1933, as amended (the "Act") and/or Rule 506 of Regulation D under the Act, pursuant to the terms of a Subscription and Purchase Agreement, dated June 30, 1998 between the Company and RBB Bank ("Subscription Agreement"). The net proceeds of $2,653,000 from this private placement, after the deduction for certain fees and expenses, was received by the Company on July 14, 1998. The Series 10 Preferred has a liquidation preference over the Company's Common Stock, par value $.001 per share ("Common Stock"), equal to $1,000 consideration per outstanding share of Series 10 Preferred (the "Liquidation Value"), plus an amount equal to all unpaid and accrued dividends thereon. The Series 10 Preferred accrues dividends on a cumulative basis at a rate of four percent (4%) per annum of the Liquidation Value ("Dividend Rate"), and is payable semi-annually within ten (10) business days after each subsequent June 30 and December 31 (each a "Dividend Declaration Date"), and shall be payable in cash or shares of the Company's Common Stock at the Company's option. The first Dividend Declaration Date was December 31, 1998. No dividends or other distributions may be paid or declared or set aside for payment on the Company's Common Stock until all accrued and unpaid dividends on all outstanding shares of Series 10 Preferred have been paid or set aside for payment. Dividends may be paid, at the option of the Company, in the form of cash or Common Stock of the Company. If the Company pays dividends in Common Stock, such is payable in the number of shares of Common Stock equal to the product of (a) the quotient of (i) the Dividend Rate divided by (ii) the average of the closing bid quotation of the Common Stock as reported on the NASDAQ for the five trading days immediate prior to the date the dividend is declared, times (b) a fraction, the numerator of which is the number of days elapsed during the period for which the dividend is to be paid and the denominator of which is 365. The holder of the Series 10 Preferred may convert into Common Stock any or all of the Series 10 Preferred on and after 180 days after June 30, 1998 (December 28, 1998). The conversion price per outstanding share of Preferred Stock ("Conversion Price") is $1.875; except that if the average of the closing bid price per share of Common Stock quoted on the NASDAQ (or the closing bid price of the Common Stock as quoted on the national securities exchange if the Common Stock is not listed for trading on the NASDAQ but is listed for trading on a national securities exchange) for the five (5) trading days immediately prior to the particular date on which the holder notified the Company of a conversion ("Conversion Date") is less than $2.34, then the Conversion Price for that particular conversion shall be eighty percent (80 %) of the average of the closing bid price of the Common Stock on the NASDAQ (or if the Common Stock is not listed for trading on the NASDAQ but is listed for trading on a national securities exchange then eighty percent (80%) of the average of the closing bid price of the Common Stock on the national securities exchange) for the five (5) trading days immediately prior to the particular Conversion Date. As of June 30, 1998, the closing price of Common Stock on the NASDAQ was $1.875 per share. As of the date of this report, no shares of the Series 10 Preferred have been converted. As part of the sale of the Series 10 Preferred, the Company also issued to RBB Bank (a) a warrant entitling the holder to purchase up to an aggregate of 150,000 shares of Common Stock at an exercise price of $2.50 per share of Common Stock expiring three (3) years after June 30, 1998 and (b) a warrant entitling the holder to purchase up to an aggregate of 200,000 shares of Common Stock at an exercise price of $1.875 per share of Common Stock and expiring three (3) years after June 30, 1998. Collectively, these warrants are referred to herein as the "RBB Warrants." The Common Stock issuable upon the conversion of the Series 10 Preferred and upon the exercise of the RBB Warrants is subject to certain registration rights pursuant to the Subscription Agreement. 47 The Company utilized the proceeds received on the sale of Series 10 Preferred for working capital and to reduce the outstanding balance of its credit facilities, subject to the Company reborrowing under such credit facilities. In connection with the placement of Series 10 Preferred to RBB Bank, the Company paid fees (excluding legal and accounting) of $210,000 and issued to (a) Liviakis Financial Communications, Inc. ("Liviakis") for assistance with the placement of the Series 10 Preferred, warrants entitling the holder to purchase up to an aggregate of 1,875,000 shares of Common Stock, subject to certain anti-dilution provisions, at an exercise price of $1.875 per share of Common Stock which warrants may be exercised after January 15, 1999, and which expire after four (4) years; (b) Robert B. Prag, an executive officer of Liviakis for assistance with the placement of the Series 10 Preferred, warrants entitling the holder to purchase up to an aggregate of 625,000 shares of Common Stock, subject to certain anti-dilution provisions, at an exercise price of $1.875 per share of Common Stock, which warrants may be exercised after January 15, 1999, and which expire after four (4) years; (c) JW Genesis Financial Corporation for assistance with the placement of the Series 10 Preferred, warrants entitling the holder to purchase up to an aggregate of 150,000 shares of Common Stock, subject to certain anti-dilution provisions, at an exercise price of $1.875 per share of Common Stock, which warrants expire after three (3) years; and (d) Fontenoy Investments for assistance with the placement of the Series 10 Preferred, warrants entitling the holder to purchase up to an aggregate of 350,000 shares of Common Stock, subject to certain anti-dilution provisions, at an exercise price of $1.875 per share of Common Stock, which warrants expire after three (3) years. Under the terms of each warrant, the holder is entitled to certain registration rights with respect to the shares of Common Stock issuable on the exercise of each warrant. In March, 1999, the Company entered into an Exchange Agreement dated March 14, 1999, with Liviakis and Prag whereby the warrants described in the preceding paragraph for the purchase of 2,500,000 shares of Common Stock (1,875,000 and 625,000 respectively) were canceled and exchanged for 200,000 shares of Common Stock. The accrued dividends for the Series 10 Preferred for the period July 14, 1998, through December 31, 1998, in the amount of approximately $56,000, were paid in February 1999, in the form of 42,430 shares of Common Stock of the Company. As further discussed in Note 3, in March of 1997, the Securities and Exchange Commission Staff (the "Staff") announced its position on the accounting for Preferred Stock which is or may be convertible into Common Stock at a discount from the market rate at the date of issuance. The Staff's position pursuant to EITF D-60 relating to beneficial conversion features is that a Preferred Stock dividend should be recorded for the difference between the conversion price and the quoted market price of Common Stock as determined at the date of issuance. To comply with this position, the Company recognized a dividend in the total amount of $750,000, with approximately $383,000 recorded in the third quarter of 1998 and $367,000 recorded in the fourth quarter of 1998.
In summary, we recorded the following dividends related to Preferred Stock issuances: 1998 1997 1996 __________ __________ _________ Paid Dividends $ 410,000 $ 352,000 $ 145,000 Beneficial Conversion Feature 750,000(3) 908,000(2) 2,000,000(1) __________ __________ __________ Total Dividends Reported $1,160,000 $1,260,000 $2,145,000 ========== ========== ========== (1) Amounts for 1996 reflect beneficial conversion feature on Series 3 Class C Preferred Stock. (2) Amounts for 1997 reflect beneficial conversion feature on Series 4 Class C, Series 6 Class F, Series 5 Class E and Series 7 Class G Preferred Stock and related warrants. (3) Amounts for 1998 reflect beneficial conversion feature on Series 10 Class J Preferred Stock. See Note 3 related to the beneficial conversion feature.
48 On October 14, 1998, the Board of Directors authorized the repurchase of up to 500,000 shares of the Company's Common Stock from time to time in open market or privately negotiated transactions, in accordance with SEC Rule 10b-18. The repurchases will be at prevailing market prices. The Company will utilize its current working capital and available borrowings to acquire such shares. On November 18, 1998, we purchased 7,000 shares of our stock at the market price of $1.856 per share for an aggregate of approximately $13,000. On November 19, 1998, we purchased 16,000 shares of our stock at the market price of $1.8425 per share for an aggregate of approximately $29,000. ________________________________________________________ NOTE 7 LONG-TERM DEBT
Long-term debt at December 31 includes the following (in thousands): 1998 1997 _______ _______ Revolving loan facility dated January 15, 1998, collateralized by eligible accounts receivables, subject to monthly borrowing base calculation, variable interest paid monthly at prime rate plus 1 3/4. $ 97 $ 1,664 Term loan agreement dated January 15, 1998, payable in monthly principal install- ments of $52, balance due in January 2001, variable interest paid monthly at prime rate plus 1 3/4. 1,927 2,500 Mortgage note agreement payable in quarterly installments of $15, plus accrued interest at 10%. Balance due October 1998 secured by real property. - 61 Various capital lease and promissory note obligations, payable 1999 to 2003, interest at rates ranging from 8.0% to 15.9%. 990 640 _______ _______ 3,014 4,865 Less current portion of revolving loan and term note facility 625 614 Less current portion of long-term debt 302 254 _______ _______ $ 2,087 $ 3,997 ======= =======
On January 15, 1998, the Company, as parent and guarantor, and all direct and indirect subsidiaries of the Company, as co-borrowers and cross-guarantors, entered into a Loan and Security Agreement ("Agreement") with Congress Financial Corporation (Florida) as lender ("Congress"). The Agreement provides for a term loan in the amount of $2,500,000, which requires principal repayments based on a four- year level principal amortization over a term of 36 months, with monthly principal payments of $52,000. Payments commenced on February 1, 1998, with a final balloon payment in the amount of approximately $573,000 due on January 14, 2001. The Agreement also provides for a revolving loan facility in the amount of $4,500,000. At any point in time the aggregate available borrowings under the facility are subject to the maximum credit availability as determined through a monthly borrowing base calculation, as updated for certain information on a weekly basis, equal to 80% of eligible accounts receivable accounts of the Company as defined in the Agreement. The termination date on the revolving loan facility is also the third anniversary of the closing date. The Company incurred approximately $230,000 in financing fees relative to the solicitation and closing of this loan agreement (principally commitment, legal and closing fees) which are being amortized over the term of the Agreement. 49 Pursuant to the Agreement, the term loan and revolving loan both bear interest at a floating rate equal to the prime rate plus 1 3/4%. The loans also contain certain closing, management and unused line fees payable throughout the term. The loans are subject to a 3.0% prepayment fee in the first year, 1.5% in the second and 1.0% in the third year of the Agreement. As security for the payment and performance of the Agreement, we granted a first security interest in all accounts receivable, inventory, general intangibles, equipment and other assets of the Company and our subsidiaries, as well as the mortgage on two (2) of our facilities. The Agreement contains affirmative covenants including, but not limited to, certain financial statement disclosures and certifications, management reports, maintenance of insurance and collateral. The Agreement also contains an adjusted net worth financial covenant, as defined in the Agreement, of $3,000,000. The proceeds of the Agreement were utilized to repay in full on January 15, 1998, the outstanding balance of the Heller Financial, Inc. ("Heller") which was comprised of a revolving loan and security agreement, loan and term loan, and to repay and buyout all assets under the Ally Capital Corporation ("Ally") equipment financing agreements. As of December 31, 1997, the borrowings under the Heller revolving loan facility totaled $2,652,000. The balance of the revolving loan on January 15, 1998, as repaid pursuant to the Congress agreement was $2,289,000. The balance under the Heller term loan at December 31, 1997, was $867,000. The Company subsequently made a term loan payment of $41,000 on January 2, 1998, resulting in a balance of $826,000, as repaid pursuant to the Congress Agreement. As of December 31, 1997, the outstanding balance on the Ally Equipment Financing Agreement was $624,000 which represented the principal balance repaid pursuant to the Congress Agreement. In conjunction with the above debt repayments, we also repaid a small mortgage, paid certain fees, taxes and expenses, resulting in an initial Congress term loan of $2,500,000 and revolving loan balance of $1,705,000 as of the date of closing. As of December 31, 1998, the borrowings under the Congress revolving loan facility totaled $97,000 with borrowing availability of approximately $4,009,000. The balance under the Congress term loan at December 31, 1998, was $1,927,000. During June 1998, we entered into a master security agreement and secured promissory note in the amount of approximately $317,000 for the purchase and financing of certain capital equipment at the Perma- Fix of Florida, Inc. facility. The term of the promissory note is for sixty (60) months, at a rate of 11.58% per annum and monthly installments of approximately $7,000. We subsequently entered into a second secured promissory note in the amount of approximately $207,000 for the purchase and financing of certain capital equipment. The term of the promissory note is for sixty (60) months, at a rate of 10.54% per annum and monthly installments of approximately $4,000. We recorded the December 31, 1997, Heller and Ally debt balances as though the Congress transaction had been closed as of December 31, 1997. As further discussed in Note 4, the long-term debt associated with the discontinued Memphis operation is excluded from the above and is recorded in the "Long-Term Liabilities of Discontinued Operations" total. The Memphis debt obligations total $28,000, of which $24,000 is current. The aggregate amount of the maturities of long-term debt maturing in future years as of December 31, 1998, is $951,000 in 1999; $910,000 in 2000; $953,000 in 2001; $145,000 in 2002; and $83,000 in 2003. ________________________________________________________ NOTE 8 ACCRUED EXPENSES
Accrued expenses at December 31 include the following (in thousands): 50 1998 1997 _______ _______ Salaries and employee benefits $ 783 $ 927 Accrued sales, property and other tax 387 484 Waste disposal and other operating related expenses 1,608 1,240 Accrued environmental 278 305 Other 313 424 _______ _______ Total accrued expenses $ 3,369 $ 3,380 ======= =======
The above amounts exclude Perma-Fix of Memphis, Inc. accrued expenses for the years ended December 31, 1998, and 1997 of $739 and $1,094, respectively, which are reported as current liabilities of discontinued operations. See Note 4 for further discussion of this discontinued operation. ________________________________________________________ NOTE 9 ACCRUED CLOSURE COSTS AND ENVIRONMENTAL LIABILITIES We accrue for the estimated closure costs as determined pursuant to RCRA guidelines for all fixed-based regulated facilities, which represents the potential future liability to close and remediate such a facility, should such a cessation of operations ever occur. During 1998, the accrued long-term closure cost for its continuing operations decreased by $116,000 to a total of $715,000 as compared to the 1997 total of $831,000. This decrease is principally a result of the reduced calculated closure liability which occurred at one TSD facility due to changes in operational activities. The closure costs are based upon RCRA guidelines and will increase in the future, as indexed to an inflationary factor, and may also increase or decrease as we change our current operations at these regulated facilities. Additionally, unlike solid waste facilities, we, consistent with EPA regulations, do not have post-closure liabilities that extend substantially beyond the effective life of the facility. At December 31, 1998, we have accrued long-term environmental and acquisition related liabilities totaling $520,000, which reflects a decrease of $5,000 from the December 31, 1997, balance of $525,000. This amount principally represents management's best estimate of the long term costs to remove contaminated soil and to undergo groundwater remediation activities at one former RCRA facility that is under a closure action from 1989 that our wholly-owned subsidiary, PFD, leases. In June 1994, we acquired from Quadrex Corporation and/or a subsidiary of Quadrex Corporation (collectively, "Quadrex") three TSD companies, including the PFD facility. The former owners of PFD had merged EPS with PFD, which was subsequently sold to Quadrex. Through our acquisition of PFD in 1994 from Quadrex, we were indemnified by Quadrex for costs associated with remediating the Leased Property, which entails remediation of soil and/or groundwater restoration. The Leased Property used by EPS to operate its facility is separate and apart from the property on which PFD's facility is located. In conjunction with the subsequent bankruptcy filing by Quadrex, and our recording of purchase accounting for the acquisition of PFD, we recognized an environmental liability of approximately $1,200,000 for the remediation of this leased facility. This facility has pursued remedial activities for the last five years with additional studies forthcoming, and potential groundwater restoration which could extend three (3) to five (5) years. We have estimated the potential liability related to the remaining remedial activity of the above property to be approximately $460,000, representing the remaining acquisition reserve balance, of which we anticipate spending approximately $222,000 during 1999. No insurance or third party recovery was taken into account in determining our cost estimates or reserve, nor do our cost estimates or reserves reflect any discount for present value purposes. Pursuant to our acquisition, effective December 31, 1993, of Perma- Fix of Memphis, Inc. (F/N/A American Resource Recovery, Inc.), we assumed certain liabilities relative to the removal of contaminated soil and to undergo groundwater remediation at the facility. Prior to our ownership of PFM, the owners installed monitoring and treatment equipment to restore the groundwater to acceptable standards in accordance with federal, state and local authorities. Based upon technical information available to it, we estimated, and recorded through purchase accounting, the remaining cost of such remedial action. To-date, we have spent approximately $260,000 and have a reserve balance of approximately $980,000 as of December 31, 51 1998. Neither our cost estimates nor reserves reflect any discount for present value purpose and such remediation is expected to extend for a period of five to ten years. We have recorded approximately $170,000 as a portion of the current liability under "Current Liabilities of Discontinued Operations" and the remainder under "Long-term Liabilities of Discontinued Operations." See Note 4 for additional discussion of discontinued operations. ________________________________________________________ NOTE 10 INCOME TAXES The components of the provision for income taxes are as follows (in thousands):
At December 31, 1998, we had temporary differences and net operating loss carry forwards which gave rise to deferred tax assets and liabilities at December 31, as follows (in thousands): 1998 1997 1996 _______ _______ _______ Net operating losses $ 3,684 $ 3,393 $ 3,376 Environmental reserves 990 1,498 980 Impairment of assets 560 560 - Other 210 213 172 Valuation allowance (5,015) (5,139) (4,034) _______ _______ _______ Deferred tax assets 429 525 494 _______ _______ _______ Depreciation and amortization 429 525 466 Other - - 28 _______ _______ _______ Deferred tax liability 429 525 494 _______ _______ _______ Net deferred tax asset (liability) $ - $ - $ - ======= ======= =======
A reconciliation between the expected tax benefit using the federal statutory rate of 34% and the provision for income taxes as reported in the accompanying consolidated statements of operations is as follows (in thousands): 1998 1997 1996 _______ _______ _______ Tax benefit at statutory rate $ 157 $(1,329) $ (88) Goodwill amortization 76 77 43 Other (109) 147 (140) Increase (decrease) in valuation allowance (124) 1,105 185 _______ _______ _______ Provision for income taxes $ - $ - $ - ======= ======= =======
Our valuation allowance decreased by approximately $124,000 for the year ended December 31, 1998, and increased $1,105,000 and $185,000 for the years ended December 31, 1997 and 1996, which represents the effect of changes in the temporary differences and net operating losses (NOLs), as amended. We have recorded a valuation allowance to state our deferred tax assets at estimated net realizable value due to the uncertainty related to realization of these assets through future taxable income. We have estimated net operating loss carry forwards for federal income tax purposes of approximately $10,835,000 at December 31, 1998. These net operating losses can be carried forward and applied against future taxable income, if any, and expire in the years 2006 through 2012. However, as a result of various stock offerings and certain acquisitions, the use of these NOLs will be limited under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended. Additionally, NOLs may be further limited under the provisions of Treasury Regulation 1.1502-21 regarding Separate Return Limitation Years. 52 ________________________________________________________ NOTE 11 CAPITAL STOCK, EMPLOYEE STOCK PLAN AND INCENTIVE COMPENSATION In February 1996, we issued 1,100 shares of newly created Series 1 Preferred at a price of $1,000 per share, for net proceeds of $924,000. We also issued 330 shares of newly created Series 2 Preferred at a price of $1,000 per share, for net proceeds of $297,000. During 1996, of the Series 1 and Series 2 Preferred were fully converted into 1,953,467 shares of the Company's Common Stock. During July 1996, we issued 5,500 shares of newly created Series 3 Preferred at a price of $1,000 per share for an aggregate sales price of $5,500,000. During June 1997, we issued 2,500 shares of newly created Series 4 Preferred at a price of $1,000 per share for an aggregate sales price of $2,500,000. During July 1997, we issued 350 shares of newly created Series 5 Preferred at a price of $1,000 per share for an aggregate sales price of $350,000. During 1997, 1,500 shares of the Series 3 Preferred were converted into 1,027,974 shares of the Company's Common Stock. See Note 6 for further discussion. In March 1996, we entered into a Stock Purchase Agreement with Dr. Centofanti, the President, Chief Executive Officer, Chairman of the Board of the Company, whereby we sold, and Dr. Centofanti purchased, 133,333 shares of the Company's Common Stock for 75% of the closing bid price of such Common Stock as quoted on the NASDAQ on the date that Dr. Centofanti notified us of his desire to purchase such stock, as authorized by the Board of Directors of the Company. During February 1996, Dr. Centofanti tendered to the Company $100,000 for such 133,333 shares by delivering to us $86,000 and forgiving $14,000 that was owing to Dr. Centofanti by us for expenses incurred by Dr. Centofanti on our behalf. On the date that Dr. Centofanti notified us of his desire to purchase such shares, the closing bid price as quoted on the NASDAQ for the Company's Common Stock was $1.00 per share. In June 1996, we entered into a second Stock Purchase Agreement with Dr. Centofanti, whereby we sold, and Dr. Centofanti purchased, 76,190 shares of the Company's Common Stock for 75% of the closing bid price of such Common Stock as quoted on the NASDAQ on the date that Dr. Centofanti notified us of his desire to purchase such stock (closing bid of $1.75 on June 11, 1996), as previously authorized by our Board of Directors. Dr. Centofanti tendered to us $100,000 for such 76,190 shares of Common Stock. During 1997, Dr. Centofanti also purchased 12,190 shares of Common Stock for $20,000, representing 75% of the closing bid price. During 1996, we issued 347,912 shares of Common Stock to our outside consultants and directors for past and future services, valued at approximately $462,000, during 1997, we issued 116,081 shares of Common Stock to our outside consultants and directors, valued at approximately $148,000 and during 1998, we issued 60,769 shares of Common Stock to our outside consultants and directors, valued at approximately $73,650. At the Company's Annual Meeting of Stockholders ("Annual Meeting") as held on December 12, 1996, the stockholders approved the adoption of the Perma-Fix Environmental Services, Inc. 1996 Employee Stock Purchase Plan. This plan provides eligible employees of the Company and its subsidiaries, who wish to become stockholders, an opportunity to purchase Common Stock of the Company through payroll deductions. The maximum number of shares of Common Stock of the Company that may be issued under the plan will be 500,000 shares. The plan provides that shares will be purchased two (2) times per year and that the exercise price per share shall be eighty-five percent (85%) of the market value of each such share of Common Stock on the offering date on which such offer commences or on the exercise date on which the offer period expires, whichever is lowest. The first purchase period commenced July 1, 1997, and ended December 31, 1997. Proceeds totaled $16,000 for this purchase period which resulted in the purchase of 8,276 shares of Common Stock in January 1998, pursuant to the 1996 Employee Stock Purchase Plan. The second purchase period commenced January 1, 1998, and ended June 30, 1998. Proceeds totaled $16,849 for this purchase period which resulted in the purchase of 10,732 shares of Common Stock in July 1998. The third purchase period commenced July 1, 1998, and ended December 31, 1998. Proceeds totaled $22,334 for this purchase period which resulted in the purchase of 17,517 shares of Common Stock in January 1999. 53 During October 1997, Dr. Centofanti entered into a three (3) year Employment Agreement with us which provided for, among other things, an annual salary of $110,000, subject to annual inflationary increases and the issuance of Non-Qualified Stock Options ("Non- Qualified Stock Options"). The Non-Qualified Stock Options provide Dr. Centofanti with the right to purchase an aggregate of 300,000 shares of Common Stock as follows: (i) after one year 100,000 shares of Common Stock at a price of $2.25 per share, (ii) after two years 100,000 shares of Common stock at a price of $2.50 per share, and (iii) after three years 100,000 shares of Common Stock at a price of $3.00 per share. The Non-Qualified Stock Options expire ten years after the date of the Employment Agreement. Stock Options On December 16, 1991, we adopted a Performance Equity Plan (the "Plan"), under which 500,000 shares of the Company's Common Stock are reserved for issuance, pursuant to which officers, directors and key employees are eligible to receive incentive or Non-Qualified stock options. Incentive awards consist of stock options, restricted stock awards, deferred stock awards, stock appreciation rights and other stock-based awards. Incentive stock options granted under the Plan are exercisable for a period of up to ten years from the date of grant at an exercise price which is not less than the market price of the Common Stock on the date of grant, except that the term of an incentive stock option granted under the Plan to a stockholder owning more than 10% of the then-outstanding shares of Common Stock may not exceed five years and the exercise price may not be less than 110% of the market price of the Common Stock on the date of grant. To date, all grants of options under the Performance Equity Plan have been made at an exercise price not less than the market price of the Common Stock at the date of grant. Effective September 13, 1993, we adopted a Non-Qualified Stock Option Plan pursuant to which officers and key employees can receive long- term performance-based equity interests in the Company. The maximum number of shares of Common Stock as to which stock options may be granted in any year shall not exceed twelve percent (12%) of the number of common shares outstanding on December 31 of the preceding year, less the number of shares covered by the outstanding stock options issued under the Company's 1991 Performance Equity Plan as of December 31 of such preceding year. The option grants under the plan are exercisable for a period of up to ten years from the date of grant at an exercise price which is not less than the market price of the Common Stock at date of grant. Effective December 12, 1993, we adopted the 1992 Outside Directors Stock Option Plan, pursuant to which options to purchase an aggregate of 100,000 shares of Common Stock had been authorized. This Plan provides for the grant of options on an annual basis to each outside director of the Company to purchase up to 5,000 shares of Common Stock. The options have an exercise price equal to the closing trading price, or, if not available, the fair market value of the Common Stock on the date of grant. The Plan also provides for the grant of additional options to purchase up to 10,000 shares of Common Stock on the foregoing terms to each outside director upon election to the Board. During our annual meeting held on December 12, 1994, the stockholders approved the Second Amendment to our 1992 Outside Directors Stock Option Plan which, among other things, (i) increased from 100,000 to 250,000 the number of shares reserved for issuance under the Plan, and (ii) provides for automatic issuance to each director of the Company, who is not an employee of the Company, a certain number of shares of Common Stock in lieu of sixty-five percent (65%) of the cash payment of the fee payable to each director for his services as director. The Third Amendment to the Outside Directors Plan, as approved at the December 1996 Annual Meeting, provided that each eligible director shall receive, at such eligible director's option, either sixty-five percent (65%) or one hundred percent (100%) of the fee payable to such director for services rendered to the Company as a member of the Board in Common Stock. In either case, the number of shares of Common Stock of the Company issuable to the eligible director shall be determined by valuing the Common Stock of the Company at seventy-five percent (75%) of its fair market value as defined by the Outside Directors Plan. The Fourth Amendment to the Outside Directors Plan, was approved at the May 1998 Annual Meeting and increased the number of authorized shares from 250,000 to 500,000 reserved for issuance under the Plan. 54 We applied APB Opinion 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for options issued to employees. Accordingly, no compensation cost has been recognized for options granted to employees at exercise prices which equal or exceed the market price of the Company's Common Stock at the date of grant. Options granted at exercise prices below market prices are recognized as compensation cost measured as the difference between market price and exercise price at the date of grant. Statement of Financial Accounting Standards No. 123 ("FAS 123") "Accounting for Stock-Based Compensation," requires us to provide pro forma information regarding net income and earnings per share as if compensation cost for our employee stock options had been determined in accordance with the fair market value based method prescribed in FAS 123. We estimate the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1998, 1997 and 1996, respectively: no dividend yield for all years; an expected life of ten years for all years; expected volatility of 45.0%, 42.0% and 46.8%; and risk-free interest rates of 4.58%, 6.91% and 6.63%.
Under the accounting provisions of FASB Statement 123, our net loss and loss per share would have been reduced to the pro forma amounts indicated below: 1998 1997 1996 ____________ ______________ _____________ Net loss applicable to Common Stock from continuing operations As reported $ (698,000) $ (1,068,000) $ (2,118,000) Pro forma (962,000) (1,666,000) (2,471,000) Net loss per share applicable to Common Stock from con- tinuing operations As reported $ (.06) $ (.10) $ (.24) Pro forma (.08) (.16) (.28) _______________________________________________________________ Net loss applicable to Common Stock As reported $ (688,000) $ (5,169,000) $ (2,405,000) Pro forma (962,000) (5,767,000) $ (2,758,000) Net loss per share As reported $ (.06) $ (.49) $ (.27) Pro forma (.08) (.54) (.31)
A summary of the status of options under the plans as of December 31, 1998, 1997 and 1996 and changes during the years ending on those dates are presented below: 1998 1997 ___________________ ____________________ Weighted Weighted Average Average Exercise Exercise Shares Price Shares Price _________ _________ _________ ________ Performance Equity Plan: _______________________ Balance at beginning of year 288,138 $2.54 316,226 $2.43 Granted 70,000 1.25 - - Exercised (1,000) 1.00 - - Forfeited (15,306) 3.66 (28,088) 1.34 ________ ________ Balance at end of year 341,832 2.23 288,138 2.54 ======== ======== 55 Options exercisable at year end 223,832 2.80 217,238 2.98 Options granted during the year at exercise prices which equal market price of stock at date of grant: Weighted average exercise price 70,000 1.25 - - Weighted average fair value 70,000 .78 - - Non-qualified Stock Option Plan: ___________________ Balance at beginning of year 650,710 $1.41 475,395 $1.68 Granted 255,000 1.25 290,000 1.375 Exercised - - (11,000) 1.00 Forfeited (20,410) 1.375 (103,685) 2.54 ________ ________ Balance at end of year 885,300 1.37 650,710 1.41 ======== ======== Options exercisable at year end 216,240 1.54 90,426 1.72 Options granted during the year at exercise prices which equal market price of stock at date of grant: Weighted average exercise price 255,000 1.25 290,000 1.375 Weighted average fair value 255,000 .78 290,000 .90 Outside Directors Stock Option Plan: _______________________ Balance at beginning of year 160,000 $2.69 145,000 $2.76 Granted - - 15,000 2.13 Exercised - - - - Forfeited - - - - ________ ________ Balance at end of year 160,000 2.69 160,000 2.69 ======== ======== Options exercisable at year end 160,000 2.69 160,000 2.69 Options granted during the year at exercise prices which equal market price of stock at date of grant: Weighted average exercise price - - 15,000 2.13 Weighted average fair value - - 15,000 1.34 1996 ____________________ Weighted Average Exercise Shares Price _________ __________ 263,282 $ 3.22 110,000 1.00 - - (57,056) 3.32 _________ 316,226 2.43 ========= 183,609 3.14 110,000 1.00 110,000 .68 263,995 $ 3.17 345,000 1.00 - - (133,600) 2.88 _________ 475,395 1.68 ========= 34,158 3.77 345,000 1.00 345,000 .68 110,000 $ 3.08 35,000 1.75 - - - - ________ 145,000 2.76 ======== 110,000 3.08 35,000 1.75 35,000 1.25
The following table summarizes information about options under the plan outstanding at December 31, 1998: Options Outstanding ________________________________________ Weighted Average Weighted Description and Number Remaining Average Range of Outstanding at Contractual Exercise Exercise Price Dec. 31, 1998 Life Price ________________________ ______________ ___________ ________ Performance Equity Plan: _______________________ 1991/1992 Awards ($3.02) 185,332 3.1 years $3.02 1993 Awards ($5.25) 6,500 4.8 years 5.25 1996 Awards ($1.00) 80,000 7.4 years 1.00 1998 Awards ($1.25) 70,000 9.8 years 1.25 _________ 341,832 5.5 years 2.23 ========= Non-Qualified Stock Option Plan: ___________________ 1994 Awards ($4.75) 300 5.2 years $4.75 1995 Awards ($2.88) 85,000 6.0 years 2.88 1996 Awards ($1.00) 280,000 7.4 years 1.00 1997 Awards ($1.375) 265,000 8.3 years 1.38 1998 Awards ($1.25) 255,000 9.8 years 1.25 _________ 885,300 8.2 years 1.37 ========= Outside Directors Stock Option Plan: _______________________ 1993 Awards ($3.02) 45,000 3.5 years $3.02 1994 Awards ($3.00-$3.22) 45,000 5.5 years 3.07 1995 Awards ($3.25) 20,000 6.0 years 3.25 1996 Awards ($1.75) 35,000 7.9 years 1.75 1997 Awards ($2.125) 15,000 8.9 years 2.13 _________ 160,000 5.9 years 2.69 ========= Options Exercisable _______________________________ Weighted Number Average Exercisable at Exercise Dec. 31, 1998 Price _______________ ________ 185,332 $3.02 6,500 5.25 32,000 1.00 - __________ 223,832 2.80 ========== 240 $4.75 51,000 2.88 112,000 1.00 53,000 1.38 - __________ 216,240 1.54 ========== 45,000 $3.02 45,000 3.07 20,000 3.25 35,000 1.75 15,000 2.13 ________ 160,000 2.69
56 Warrants We have issued various warrants pursuant to acquisitions, private placements, debt and debt conversion and to facilitate certain financing arrangements. The warrants principally are for a term of three to five years and entitle the holder to purchase one share of Common Stock for each warrant at the stated exercise price. During 1998, pursuant to the issuance of the Series 10 Class J Convertible Preferred Stock, as further discussed in Note 6, we issued to Liviakis one (1) Common Stock purchase warrant entitling Liviakis to purchase, after January 15, 1999, until June 29, 2002, an aggregate of up to 1,875,000 shares of Common Stock exercisable at a price equal to $1.875 per share and we issued to Prag one (1) Common Stock purchase warrant entitling Prag to purchase, after January 15, 1999, until June 29, 2002, an aggregate of up to 625,000 shares of Common Stock exercisable at a price equal to $1.875 per share. In connection with the Preferred Stock issuances as discussed fully in Note 6, we issued additional warrants during 1998 for the purchase of 850,000 shares which are included in the Series 10 Class J warrants. During 1996, pursuant to the issuance of the Series 3 Class C Convertible Preferred Stock, as further discussed in Note 6, we issued to RBB Bank two (2) Common Stock purchase warrants entitling RBB Bank to purchase, after December 31, 1996, until July 18, 2001, an aggregate of up to 2,000,000 shares of Common Stock, with 1,000,000 shares exercisable at an exercise price equal to $2.00 per share and 1,000,000 at $3.50 per share. In connection with the Preferred Stock issuances as discussed fully in Note 6, we issued additional warrants during 1997 and 1996 for the purchase of 1,591,250 and 1,420,000 shares, respectively, of Common Stock which are included in other financing warrants. Certain of the warrant agreements contain antidilution provisions which have been triggered by the various stock and warrant transactions as entered into by us since the issuance of such warrants. The impact of these antidilution provisions was the reduction of certain warrant exercise prices and in some cases the increase in the total number of underlying shares for certain warrants issued prior to 1996. During 1998, a total of 215,100 warrants were exercised for proceeds in the amount of $255,000 and no warrants expired.
The following details the warrants currently outstanding as of December 31, 1998, after giving effect to antidilution provisions: Number of Underlying Exercise Expiration Warrant Series Shares Price Date ________________ __________ ____________ __________ Class B Warrants 4,273,445 $3.28 6/99 Class C Preferred Stock Warrants 2,950,300 $.73-$3.50 9/99-7/01 Class H Preferred Stock Warrants 1,504,450 $1.50-$3.00 6/00-7/02 Class I Preferred Stock Warrants 35,000 $1.8125 6/00 Class J Preferred Stock Warrants 3,350,000 $1.875-$2.50 6/01-6/02 Other Financing Warrants 1,117,901 $1.936-$3.625 6/99-9/00 __________ 13,230,796 ===========
In March, 1999, the Company entered into an Exchange Agreement with Liviakis and Prag whereby the warrants described in the preceding paragraph issued to Liviakis and Prag for the purchase of an aggregate of 2,500,000 shares of Common Stock (1,875,000 and 625,000 respectively) were exchanged for 200,000 shares of Common Stock. This will reduce the number of shares of Common Stock underlying Warrants outstanding relating to the Class J Preferred Stock from 3,350,000 to 850,000 shares. 57 Shares Reserved At December 31, 1998, we have reserved approximately 25 million shares of Common Stock for future issuance under all of the above arrangements and the convertible Series 3, Series 8, Series 9 and Series 10 Preferred Stock. (See Note 6.) ________________________________________________________ NOTE 12 COMMITMENTS AND CONTINGENCIES Hazardous Waste In connection with our waste management services, we handle both hazardous and non-hazardous waste which we transport to our own or other facilities for destruction or disposal. As a result of disposing of hazardous substances, in the event any cleanup is required, we could be a potentially responsible party for the costs of the cleanup notwithstanding any absence of fault on our part. Legal In May 1995, PFM, our subsidiary, became aware that the U.S. District Attorney for the Western District of Tennessee and the Department of Justice were investigating certain prior activities of W. & R. Drum, Inc. ("W.R. Drum") its successor, First Southern Container Company, and any other facility owned or operated, in whole or in part, by Johnnie Williams. PFM used W. R. Drum to dispose of certain of its used drums. In May 1995, PFM received a Grand Jury Subpoena which demanded the production of any documents in the possession of PFM pertaining to W. R. Drum, First Southern Container Company, or any other facility owned or operated, and holder in part, by Johnnie Williams. PFM complied with the Grand Jury Subpoena. Thereafter, in September of 1995, PFM received another Grand Jury Subpoena for documents from the Grand Jury investigating W. R. Drum, First Southern Container Company and/or Johnnie Williams. PFM complied with the Grand Jury Subpoena. In December 1995, representatives of the Department of Justice advised PFM that it was also currently a subject of the investigation involving W. R. Drum, First Southern Container Company, and/or Johnnie Williams. Since 1995, the Company has received no new information about this matter. During January 1998, PFM was notified by the EPA that the EPA had conducted remediation operations at a site owned and operated by W.R. Drum in Memphis, Tennessee (the "Drum Site"). By correspondence dated January 15, 1998 ("PRP Letter"), the EPA informed PFM that it believed that PFM was a PRP regarding the remediation of the Drum Site, primarily as a result of acts by PFM prior to the time PFM was acquired by the Company. The PRP Letter estimated the remediation costs incurred by the EPA for the Drum Site to be approximately $1,400,000 as of November 30, 1997, and the EPA has orally informed the Registrant that such remediation has been substantially complete as of such date. During the second quarter of 1998, PFM and certain other PRP's began negotiating with the EPA regarding a potential settlement of the EPA's claims regarding the Drum Site and such negotiations have been completed. During the third quarter of 1998, the government agreed to the PFM's offer to pay $225,000 ($150,000 payable at closing and the balance payable over a twelve month period) to settle any potential liability regarding the Drum Site. During January 1999, the Company executed a "Partial Consent Decree" pursuant to this settlement, which settlement is subject to approval of the court. There are no assurances that the settlement will be approved by the court. In addition to the above matters and in the normal course of conducting its business, we are involved in various other litigation. We are not a party to any litigation or governmental proceeding which our management believes could result in any judgments or fines against us that would have a material adverse affect on our financial position, liquidity or results of operations. Permits We are subject to various regulatory requirements, including the procurement of requisite licenses and permits at our facilities. These licenses and permits are subject to periodic renewal without which our operations would be adversely affected. We anticipate 58 that, once a license or permit is issued with respect to a facility, the license or permit will be renewed at the end of its term if the facility's operations are in compliance with the applicable regulatory requirements. Accrued Closure Costs and Environmental Liabilities We maintain closure cost funds to insure the proper decommissioning of our RCRA facilities upon cessation of operations. Additionally, in the course of owning and operating on-site treatment, storage and disposal facilities, we are subject to corrective action proceedings to restore soil and/or groundwater to its original state. These activities are governed by federal, state and local regulations and we maintain the appropriate accruals for restoration. As discussed in Note 9, we have recorded accrued liabilities for estimated closure costs and identified environmental remediation costs. Discontinued Operations As previously discussed, we made the strategic decision in February 1998 to discontinue our fuel blending operations at the PFM facility. We have, based upon the best estimates available, recognized accrued environmental and closure costs in the aggregate amount of $2,501,000 as of December 31, 1998. This liability includes principally, the RCRA closure liability, the groundwater remediation liability (see Note 9), the potential additional site investigation and remedial activity which may arise as PFM proceeds with its closure activities, our best estimate of the future operating losses as we discontinue our fuel blending operations and other contingent liabilities, including the above discussed PRP liability. See Note 4 for further discussion of PFM. Insurance Our business exposes us to various risks, including claims for causing damage to property or injuries to persons or claims alleging negligence or professional errors or omissions in the performance of its services, which claims could be substantial. We believe that our coverage is adequate to insure us against the various types of risks encountered. Operating Leases We lease certain facilities and equipment under operating leases. Future minimum rental payments as of December 31, 1998 required under these leases are $777,000 in 1999, $534,000 in 2000, $275,000 in 2001, $151,000 in 2002 and $115,000 in 2003. Net rent expense relating to our operating leases was $1,465,000, $1,533,000 and $1,657,000 for 1998, 1997 and 1996, respectively. ________________________________________________________ NOTE 13 PROFIT SHARING PLAN We adopted the Perma-Fix Environmental Services, Inc. 401(k) Plan (the "401(k) Plan") in 1992, which is intended to comply under Section 401 of the Internal Revenue Code and the provisions of the Employee Retirement Income Security Act of 1974. All full-time employees who have attained the age of 21 are eligible to participate in the 401(k) Plan. Participating employees may make annual pre-tax contributions to their accounts up to 15% of their compensation, up to a maximum amount as limited by law. We, at our discretion, may make matching contributions based on the employee's elective contributions. Company contributions vest over a period of six years. We elected not to provide any matching contributions for the years ended December 31, 1998, 1997, and 1996. However, beginning January 1, 1999 we have decided to match up to 25% of our employees contributions, not to exceed 3% of a participants compensation. 59 ________________________________________________________ NOTE 14 OPERATING SEGMENTS During 1998, we were engaged in ten operating segments. Pursuant to FAS 131, we define an operating segment as: * A business activity from which we may earn revenue and incur expenses; * Whose operating results are regularly reviewed by our chief operating division maker to make decisions about resources to be allocated to the segment and assess its performance; and * For which discrete financial information is available. We therefore define our segments as each separate facility or location that we operate. We clearly view each business as a separate segment and make decisions based on the activity and profitability of that particular location. These segments however, exclude the Corporate headquarters which does not generate revenue and Perma-Fix of Memphis, Inc. which is reported elsewhere as a discontinued operation. See Note 4 regarding discontinued operations. Pursuant to FAS 131 we have aggregated two or more operating segments into two reportable segments to ease in the presentation and understanding of our business. We used the following criteria to aggregate our segments: * The nature of our products and services; * The nature of the production processes; * The type or class of customer for our products and services; * The methods used to distribute our products or provide our services; and * The nature of the regulatory environment. Our reportable segments are defined as follows: The Waste Management Services segment, which provides on-and-off site treatment, storage, processing and disposal of hazardous and non-hazardous industrial and commercial, mixed waste, and wastewater through our four TSD facilities; Perma-Fix Treatment Services, Inc., Perma-Fix of Dayton, Inc., Perma-Fix of Ft. Lauderdale, Inc. and Perma-Fix of Florida, Inc. We provide through Perma-Fix Inc. and Perma-Fix of New Mexico, Inc. on-site waste treatment services to convert certain types of characteristic hazardous wastes into non-hazardous waste. We also provide through Reclamation Systems, Inc. and Industrial Waste Management, Inc. the supply and management of non-hazardous and hazardous waste to be used by cement plants as a substitute fuel or raw material source and the resell of by-product materials generated at cement plants for environmental applications. The Consulting Engineering Services segment provides environmental engineering and regulatory compliance services through Schreiber, Yonley & Associates, Inc. and Mintech, Inc. These engineering groups provide oversight management of environmental restoration projects, air and soil sampling and compliance and training activities, as well as, engineering support as needed by our other segment. 60
The table below shows certain financial information by business segment for 1998, 1997, and 1996 and excludes the results of operations of the discontinued operations: Segment Reporting 12/31/98 Waste Segment Services Engineering Total ________ ___________ _______ Revenue from external customers $26,181 $4,370 $30,551 Intercompany revenues 329 510 839 Interest income 31 - 31 Interest expense 369 54 423 Depreciation and amortization 2,015 77 2,092 Segment profit (loss) 265 (213) 52 Segment assets(1) 24,882 2,326 27,208 Expenditures for segment assets 2,492 20 2,512 Segment Reporting 12/31/97 Waste Segment Services Engineering Total ________ ___________ _______ Revenue from external customers $23,756 $4,657 $28,413 Intercompany revenues 932 522 1,454 Interest income 38 - 38 Interest expense 366 30 396 Depreciation and amortization 1,850 110 1,960 Segment profit (loss) 402 (421) (19) Segment assets(1) 23,576 2,593 26,169 Expenditures for segment assets 1,744 21 1,765 Segment Reporting 12/31/96 Waste Segment Services Engineering Total ________ ___________ _______ Revenue from external customers $21,497 $5,544 $27,041 Intercompany revenues 723 292 1,015 Interest income 41 - 41 Interest expense 532 55 587 Depreciation and amortization 1,876 156 2,032 Segment profit (loss) (11) 84 73 Segment assets(1) 23,546 2,565 26,111 Expenditures for segment assets 2,371 8 2,379 Consolidated Corp.(2) Memphis(3) Total ________ ___________ ____________ $ - $ - $30,551 - - 839 4 - 35 (129)(5) - 294 17 - 2,109 (750)(4) - (698) 1,051 489 28,748 42 - 2,554 Consolidated Corp.(2) Memphis(3) Total ________ ___________ _______ $ - $ - $28,413 - - 1,454 3 - 41 35 - 431 20 - 1,980 (1,049)(4) (141) (1,068) 171 2,230 28,570 8 45 1,812 Consolidated Corp.(2) Memphis(3) Total ________ ___________ ____________ $ - $ - $27,041 - - 1,015 2 - 43 56 - 643 51 - 2,083 (2,191)(4) (191) (2,118) 68 2,855 29,034 - 125 2,506 (1) Segment assets have been adjusted for intercompany accounts to reflect actual assets for each segment. (2) Amounts reflect the activity for corporate headquarters. (3) Amounts reflect the activity for Perma-Fix of Memphis, Inc., which is a discontinued operation, not included in the segment information (See Note 4). (4) Amounts reflect beneficial conversion feature of the Preferred Stock of the Company and Corporate overhead not allocated to discontinued operations (See Note 3). (5) Amount reflects interest expense adjustment to Perma-Fix of Memphis, Inc. allocated to discontinued operations.
________________________________________________________ ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Since information relating to changes in accountants and engagement of new accountants by the Company during the Company's two most recent fiscal years or any subsequent interim period have been previously reported (as that term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended) and there were no disagreements or reportable events required to be reported under paragraph (b) of Item 304 of Regulation S-K, we have no information to be reported hereunder pursuant to Item 304 of Regulation S-K. 61 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth, as of the date hereof, information concerning the Directors and Executive Officers of the Company: NAME AGE POSITION ____ ___ ________ Dr. Louis F. Centofanti 55 Chairman of the Board, President and Chief Executive Officer Mark A. Zwecker 48 Director Steve Gorlin 61 Director Jon Colin 43 Director Mr. Richard T. Kelecy 43 Chief Financial Officer, Vice President and Secretary Mr. Roger Randall 55 Vice President, Industrial Services Mr. Bernhardt Warren 50 Vice President, Nuclear Services Mr. Timothy Kimball 53 Vice President, Technical Services
Each director is elected to serve until the next annual meeting of stockholders. DR. LOUIS F. CENTOFANTI The information set forth under the caption "Executive Officers of the Company" on page 11 is incorporated by reference. MR. MARK A. ZWECKER Mark Zwecker has served as a Director of the Company since its inception in January 1991. Mr. Zwecker is currently President of ACI Technology, LLC, a position he has held since 1997. Previously, Mr. Zwecker was Vice President of Finance and Administration for American Combustion, Inc., a position he held from 1986 until 1998. In 1983, Mr. Zwecker participated as a founder with Dr. Centofanti in the start up of PPM, Inc. He remained with PPM, Inc. until its acquisition in 1985 by USPCI. Mr. Zwecker has a B.S. in Industrial and Systems Engineering from the Georgia Institute of Technology and an M.B.A. from Harvard University. MR. STEVE GORLIN Steve Gorlin has served as a Director of the Company since its inception in January 1991. Over the past 25 years he has founded several biotechnology and pharmaceutical companies, including Hycor Biomedical, Inc., Theregenics Corporation, CytRx Corporation, and Medicis Corporation, which are public companies, and SeaLite Sciences, Inc., which is a private company. Mr. Gorlin founded and served as Chairman of the Board of EntreMed, Inc., a public company, from its inception in 1991 until December 1995. He is a member of the Board of Directors of Advanced Aerodynamic & Structures, Inc., a publicly traded manufacturing firm. Mr. Gorlin also established the Touch Foundation, a non-profit organization for the blind. MR. JON COLIN Jon Colin has served as a Director of the Company since December 1996. He is a financial consultant for a variety of technology-based companies. From 1990 to 1996, Mr. Colin served as President and Chief Executive Officer for Environmental Services of America, Inc., a publicly traded environmental services company. Mr. Colin has a B.S. degree in Accounting from the University of Maryland. MR. RICHARD T. KELECY The information set forth under the caption "Executive Officers of the Company" on page 11 is incorporated by reference. 62 MR. ROGER RANDALL The information set forth under the caption "Executive Officers of the Company" on page 11 is incorporated by reference. MR. BERNHARDT WARREN The information set forth under the caption "Executive Officers of the Company" on page 11 is incorporated by reference. MR. TIMOTHY KIMBALL The information set forth under the caption "Executive Officers of the Company" on page 11 is incorporated by reference. Certain Relationships There are no family relationships between any of our existing Directors, executive officers, or persons nominated or chosen to become a Director or executive officer. Dr. Centofanti is the only Director who is our employee. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the regulations promulgated thereunder require the Company's executive officers and directors and beneficial owners of more than ten percent (10%) of any equity security of the Company registered pursuant to Section 12 of the Exchange Act to file reports of ownership and changes of ownership of the Company's equity securities with the Securities and Exchange Commission, and to furnish the Company with copies of all such reports. Based solely on a review of the copies of such reports furnished to the Company and information provided to the Company, the Company believes that during 1998 none of the executive officers and directors of the Company failed to timely file reports under Section 16(a). RBB Bank Aktiengesellschaft ("RBB Bank"), which may have become a beneficial owner (as that term is defined under Rule 13d-3 as promulgated under the Exchange Act) of more than ten percent (10%) of the Company's Common Stock on February 9, 1996, as a result of its acquisition of 1,100 shares of Series 1 Preferred (as defined in "Certain Relationships and Related Transactions") that were convertible into a maximum of 1,282,798 shares of Common Stock of the Company commencing 45 days after issuance of the Series 1 Preferred, failed to file a Form 3 to report such transaction, if required. RBB Bank has advised us that it acquired such Preferred Stock on behalf of numerous clients and no one client is the beneficial owner of more than 250 shares of such Preferred Stock, and thus, RBB Bank believes it is not required to file reports under Section 16(a). If RBB Bank became a beneficial owner of more than ten percent (10%) of the Company's Common Stock on February 9, 1996, the date of RBB's initial Preferred Stock Agreement, and thereby required to file reports under Section 16(a) of the Exchange Act, then RBB Bank also failed to file (i) a Form 4 for three transactions which occurred in January 1998; (ii) a Form 4 for one transaction which occurred in June 1998; (iii) a Form 4 for three transactions which occurred in July 1998; and (iv) a Form 5 for 1998. 63 ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table The following table sets forth the aggregate cash compensation paid to our Chairman and Chief Executive Officer, the Vice President of Nuclear Services, Chief Financial Officer and Vice President of Industrial Services: Annual Compensation _____________________________ Other Annual Name and Principal Salary Bonus Compen- Position Year ($) ($) sation($) __________________________ ____ ________ ________ _________ Dr. Louis F. Centofanti(1) 1998 $112,250 $ - $ - Chairman of the Board, 1997 75,431 - 6,667(2) President and 1996 65,000 - 66,666(3) Chief Executive Officer Bernhardt C. Warren(4) 1998 87,341 223,800 56,950 Vice President of 1997 87,341 88,629 - Nuclear Services 1996 36,476 20,330 - Richard T. Kelecy(5) 1998 102,553 15,000 - Chief Financial Officer 1997 91,250 - - 1996 82,750 8,000 - Roger Randall(6) 1998 101,268 12,710 - Vice President of 1997 80,000 - - Industrial Services 1996 80,000 21,254 - Long-Term Compensation _______________________________ Restricted Underlying All Stock Options/ Other Award(s) SARs Compen- ($) (#) sation($) ________ ________ _________ $ - $ - $ - - 300,000 - - - - - 25,000 - - 30,000 - - - - - 30,000 - - 40,000 - - 60,000 - - 30,000 9,039(6) - 40,000 9,042 - 60,000 9,042 (1) Dr. Centofanti, the Company's Chairman of the Board, received compensation pursuant to an employment agreement, which provided for annual compensation to Dr. Centofanti of $75,000 beginning June 1992 and expiring in June 1995. Under the expired contract, Dr. Centofanti received an annual salary of $75,000, which was increased to $125,000 in October 1994 and continued until December 1995, when Dr. Centofanti's salary was voluntarily reduced to $65,000. Dr. Centofanti currently receives compensation pursuant to an employment agreement dated October 1, 1997, which provides, among other things, for an annual salary of $110,000, subject to annual inflation factor increases, and the issuance of Non- Qualified Stock Options ("Non-Qualified Stock Options"). Pursuant to the terms of the agreement Dr. Centofanti's annual salary was increased to $112,250 effective October 1, 1998. The Non-Qualified Stock Options provide Dr. Centofanti with the right to purchase an aggregate of 300,000 shares of Common Stock as follows: (i) after one year 100,000 shares of Common Stock at a price of $2.25 per share, (ii) after two years 100,000 shares of Common Stock at a price of $2.50 per share, and (iii) after three years 100,000 shares of Common Stock at a price of $3.00 per share. The Non- Qualified Stock Options expire ten years after the date of the Employment Agreement. Dr. Centofanti also served as President and Chief Executive Officer of the Company during 1994 and until September 1995, when Robert W. Foster was elected as President and Chief Executive Officer of the Company. At such time, Dr. Centofanti continued to serve as Chairman of the Board of the Company. Upon Mr. Foster's resignation, Dr. Centofanti resumed the positions of President and Chief Executive Officer effective March 15, 1996, and continued as Chairman of the Board. (2) The Company entered into one Stock Purchase Agreement ("1997 Centofanti Agreement") with Dr. Centofanti on or about June 30, 1997, pursuant to which the Company agreed to sell, and Dr. Centofanti agreed to buy, 24,381 shares of the Company's Common Stock for 75% of the closing bid price of such Common Stock as quoted on he NASDAQ on the date Dr. Centofanti notified the Company 64 of his desire to purchase such stock, as authorized by the Board of Directors. The closing bid price as quoted by the NASDAQ for the Common Stock on the date Dr. Centofanti notified the Company of his desire to purchase the shares was $2.1875, leading to a purchase price of $1.6406 and an aggregate purchase price of $40,000 for the 24,381 shares of Common Stock. The 1997 Centofanti Agreement was amended in October to reduce the number of shares purchased thereunder to 12,190 for an aggregate purchase price of $20,000, upon consideration of certain recent accounting pronouncements related to stock based compensation. The difference between the price paid by Dr. Centofanti for such stock and the fair market value thereof was approximately $6,667. See "Certain Relationships and Related Transactions." (3) The Company entered into two Stock Purchase Agreements with Dr. Centofanti during 1996 whereby the Company sold, and Dr. Centofanti purchased, 133,333 shares and 76,190 shares, in March 1996, and in June 1996, respectively, of the Company's Common Stock for 75% of the closing bid price of such Common Stock as quoted on the NASDAQ on the date that Dr. Centofanti notified the Company of his desire to purchase such stock, as authorized by the Board of Directors of the Company. The closing bid price as quoted on the NASDAQ for the Company's Common Stock on the dates that Dr. Centofanti notified the Company of his desire to purchase the shares was $1.00 per share for the March sale and $1.75 per share for the June sale. As a result, the difference between the price paid by Dr. Centofanti for such stock and the fair market value thereof was approximately $33,333 for each transaction. See "Certain Relationships and Related Transactions." (4) Mr. Warren was General Manager of Perma-Fix of Florida, Inc. from July 16, 1996, until December 8, 1997. During this time, Mr. Warren received compensation pursuant to an employment agreement, which provided for annual compensation to Mr. Warren of $87,000 beginning July 16, 1996, and expiring in July 1999. Mr. Warren also received additional compensation pursuant to the employment agreement paid on a variable rate in proportion to certain revenue goals. Effective December 8, 1997, Mr. Warren also became the Vice President of Nuclear Services for the Company. Mr. Warren currently receives compensation pursuant to an employment agreement dated April 7, 1998, which provides for annual compensation of $87,000 plus additional compensation in the form of Company Common Stock and cash payments for bonus. Upon execution of the agreement, Mr. Warren received a bonus of approximately $168,000 which was paid in the form of 94,697 shares of Common Stock, as determined by dividing the bonus amount by the average of the closing bid price of the Common Stock on the NASDAQ Small Cap for the five trading days prior to the date of execution of this agreement. Mr. Warren also received a bonus of approximately $57,000 in December, 1998, which was intended to pay for taxes on the stock bonus. Under the terms of his employment agreement, Mr. Warren is also to be paid a bonus of $168,000 which is to be paid in monthly installments over the two years of the agreement, with approximately $112,000 of such bonus paid in 1998. Stock Options were granted to Mr. Warren on April 8, 1997 and October 14, 1998, pursuant to the 1993 Non-Qualified Stock Option Plan. (5) Mr. Kelecy, the Chief Financial Officer, receives annual compensation of $102,000. Mr. Kelecy may also receive at the discretion of the Board additional compensation in the form of a bonus. Stock Options were granted to Mr. Kelecy on January 11, 1995, May 24, 1996, April 8, 1997 and October 14, 1998, pursuant to the 1993 Non-Qualified Stock Option Plan. (6) Mr. Randall was General Manager of Perma-Fix of Dayton, Inc. from its acquisition in 1994 until December 8, 1997. Mr. Randall receives annual compensation of $94,000. Effective December 1998, Mr. Randall receives a monthly car allowance compensation in the amount of $750, in lieu of a Company car, as previously provided. Mr. Randall may also received additional compensation paid on a variable rate in proportion to certain revenue goals. Effective December 8, 1997, Mr. Randall became the Vice President of Industrial Services for the Company. Stock Options were granted to Mr. Randall on January 11, 1995, May 24, 1996, April 8, 1997 and October 14, 1998, pursuant to the 1993 Non-Qualified Stock Option Plan.
65 Option/SAR Grants in Last Fiscal Year The following table sets forth certain information relating to individual grants of stock options made to each of the named executive officers in the above Summary Compensation Table during the last fiscal year and the potential realizable value of each grant of options, assuming that the market price of the underlying Common Stock appreciates in value during the ten-year option term at annualized rates of 5% and 10%. Individual Grants _____________________________________________________ Number of % of Shares of Total Options Common Stock Granted to Exercise Underlying Employees Price Expiration Name Options Granted in 1998 ($/sh)(1) Date _____________________ _______________ ____________ _________ __________ Bernhardt C. Warren(3) 25,000 7.7% $1.25 10/14/08 Richard T. Kelecy(4) 30,000 9.2 1.25 10/14/08 Roger Randall(5) 30,000 9.2 1.25 10/14/08 Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term(2) _____________________ 5%($) 10%($) _____ ______ $ 19,656 $ 40,809 23,588 59,771 23,588 59,771 (1) All options were granted at or above market price (the closing price of the Common Stock on the NASDAQ SmallCap Market on the date of grant. (2) The potential realizable value of each grant of options assumes that the market price of the Company's Common Stock appreciates in value from the date of grant to the end of the option term at the annualized rates shown above each column. The actual value that an executive may realize, if any, will depend on the amount by which the market price of the Company's Common Stock at the time of exercise exceeds the exercise price of the option. As of December 31, 1998, the closing price of a share of the Company's Common Stock as quoted on NASDAQ was $1.50. There is no assurance that any executive will receive the amounts estimated in this table. (3) The Company has adopted a 1993 Non-Qualified Stock Option Plan (the "1993 Plan"). Mr. Warren was granted options to purchase 25,000 shares of the Company's Common Stock pursuant to the 1993 Plan. The 1993 Plan provides that the options granted vest at the end of years one through five in 20% increments. (4) The Company has adopted a 1993 Non-Qualified Stock Option Plan (the "1993 Plan"). Mr. Kelecy was granted options to purchase 30,000 shares of the Company's Common Stock pursuant to the 1993 Plan. The 1993 Plan provides that the options granted vest at the end of years one through five in 20% increments. (5) The Company has adopted a 1993 Non-Qualified Stock Option Plan (the "1993 Plan"). Mr. Randall was granted options to purchase 30,000 shares of the Company's Common Stock pursuant to the 1993 Plan. The 1993 Plan provides that the options granted vest at the end of years one through five in 20% increments.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
The following table sets forth information concerning each exercise of stock options during the last completed fiscal year by each of the executive officers named in the Summary Compensation Table and the fiscal year-end value of unexercised options: 66 Number of Unexercised Shares Options at Fiscal Year-End Acquired on Value (#) Exercise Realized ___________________________ Name (#)(1) ($)(1) Exercisable Unexercisable _______________________ _____________ _________ ___________ _____________ Dr. Louis F. Centofanti - $ - 145,763 204,000 Bernhardt C. Warren - - 6,000 49,000 Richard Kelecy - - 56,000 104,000 Roger Randall - - 40,000 100,000 Value of Unexercised in-the-Money Options at Fiscal Year End ($)(2) __________________________ Exercisable Unexercisable ___________ _____________ $ - $ - 8,250 64,250 35,000 117,500 35,000 117,500 (1) No options were exercised during 1998. (2) Represents the difference between $1.50 (the closing bid price of the Company's Common Stock reported on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") on December 31, 1998), and the option exercise price. The actual value realized by a named executive officer on the exercise of these options depends on the market value of the Company's Common Stock on the date of exercise.
401(k) Plan We have adopted the Perma-Fix Environmental Services, Inc. 401(k) Plan which is intended to comply under Section 401 of the Internal Revenue Code of 1986, as amended (the "Code"), and the provisions of the Employee Retirement Security Act of 1974 (the "401(k) Plan"). All full-time employees who have attained the age of twenty-one (21) are eligible to participate in the 401(k) Plan. Participating employees may make annual pre-tax contributions to their accounts up to fifteen percent (15%) of their compensation, up to a maximum amount as limited by law. We, at our discretion, may make matching contributions based on full-time employees' elective contributions. Company contributions vest twenty percent (20%) after two (2) years, forty percent (40%) after three (3) years, sixty percent (60%) after four (4) years, eighty percent (80%) after five (5) years, and are one hundred percent (100%) vested thereafter. As of December 31, 1998, we have elected not to provide any matching contributions. However, effective January 1, 1999, we have agreed to match 25% of the employees contributions, not to exceed 3% of compensation. Distributions generally are payable in lump sums upon termination, retirement, death or disability. Employee Stock Purchase Plan We have adopted the Perma-Fix Environmental Services, Inc. 1996 Employee Stock Purchase Plan (the "1996 Plan") which is intended to comply under Section 423 of the Code. All full-time employees who have completed at least six (6) months of continuous service, other than those that are deemed, for the purpose of Section 423(b)(3) of the Code, to own stock possessing five percent (5%) or more the total combined voting power or value of all classes of stock of the Company, are eligible to participate in the 1996 Plan. Participating employees ("Participants") may authorize for payroll periods beginning on or after January 1, 1997, payroll deductions from compensation for the purpose of funding the Participant's stock purchase account ("Stock Purchase Account"). This deduction shall be not less than one percent (1%) nor more than five percent (5%) of the Participant's gross amount of compensation. The purchase price per share of the Common Stock to be sold to Participants pursuant to the 1996 Plan is the sum of (a) eighty- five percent (85%) of the fair market value of each share on the Offering Date on which such Offering commences or on the Exercise Date (as defined in the 1996 Plan) on which such Offering expires, whichever is the lower, and (b) any transfer, excise or similar tax imposed on the transaction pursuant to which shares of Common Stock are purchased. The "Offering Date" means the first day of each January and July during which the 1996 Plan is in effect, commencing with January 1, 1997. There is no holding period regarding Common Stock purchased under the 1996 Plan, however, in order for a participant to be entitled to the tax treatment described in Section 423 of the Code with respect to the Participant's sale of Common Stock purchased under the 1996 Plan, such Stock must not be sold for at least one (1) year after 67 acquisition under the 1996 Plan, except in the case of death. Any Participant may voluntarily withdraw from the 1996 Plan by filing a notice of withdrawal with the Board of Directors prior to the fifteenth (15th) day of the last month in a Purchase Period (as defined in the 1996 Plan). Upon such withdrawal, there shall be paid to the Participant the amount, if any, standing to the Participant's credit in the Participant's Stock Purchase Account. If a Participant ceases to be an eligible employee, the entire amount standing to the Participant's credit in the Participant's Stock Purchase Account on the effective date of such occurrence shall be paid to the Participant. The total deductions made by Participants pursuant to the offering period of January 1, 1998, through July 31, 1998, was $16,849 which was used to purchase 10,732 shares of the Company's Common Stock in August 1998. The total deductions made by Participants pursuant to the offering period of July 1, 1998, through December 31, 1998, was $22,334 which was used to purchase 17,517 shares of the Company's Common Stock in January 1999. Compensation of Directors In 1998, we paid our outside director's fees based on monthly payments of $1,000 for each month of service, resulting in the three outside directors earning annual director's fees in the total amount of $36,000. Subject to the election of each director, either sixty-five percent (65%) or one hundred percent (100%) of each director's fee is payable, in shares of our Common Stock based on seventy-five percent (75%) of the fair market value of the Common Stock determined on the business day immediately preceding the date that the fee is due. The balance of each director fee, if any, is payable in cash. The aggregate amount of accrued director's fees paid during 1998 to the three outside directors (Messrs. Colin, Gorlin and Zwecker) were as follows: $24,000 was paid by the issuance of 22,834 shares of Common Stock and approximately $12,000 was paid in cash, which included all balance forward amounts from 1997. Reimbursement of expenses for attending meetings of the Board are paid in cash at the time of the applicable Board meeting. The outside directors do not receive additional compensation for committee participation or special assignments except for reimbursement of expenses. We do not compensate the directors that also serve as our officers or employees of our subsidiaries for their service as directors. In September 1996, we issued a warrant ("Gorlin Warrant") to Steve Gorlin, a Director, for services rendered, other than those rendered as a Director. The Gorlin Warrant allows the holder to purchase 200,000 shares of Common Stock of the Company for $1.75 per share from January 1, 1997, until September 15, 1999. The Gorlin Warrant is subject to certain antidilution provisions. We believe that it is important for our directors to have a personal interest in our success and growth and for their interests to be aligned with those of our stockholders. Therefore, under the Company's 1992 Outside Directors Stock Option and Incentive Plan ("Outside Directors Plan"), each outside director is granted an option to purchase up to 15,000 shares of Common Stock on the date such director is initially elected to the Board of Directors and receives on an annual basis an option to purchase up to another 5,000 shares of Common Stock, with the exercise price being the fair market value of the Common Stock on the date that the option is granted. No option granted under the Outside Directors Plan is exercisable until after the expiration of six months from the date the option is granted and no option shall be exercisable after the expiration of ten (10) years from the date the option is granted. As of December 31, 1998, options to purchase 160,000 shares of Common Stock had been granted under the Outside Directors Plan. The Outside Directors Plan also provides that each eligible director shall receive, at such eligible director's option, either sixty-five percent (65%) or one hundred percent (100%) of the fee payable to such director for services rendered as a member of our Board in Common Stock. In either case, the number of shares of our Common Stock issuable to the eligible director shall be determined by valuing the Common Stock of the Company at seventy-five percent (75%) of its fair market value as defined by the Outside Directors Plan. As of the date of this proxy statement, we have issued 248,615 shares of the Company's Common Stock in payment of director fees, covering the period January 1, 1995 through December 31, 1998. The number of shares of Common Stock which may be issued in the aggregate under the Outside Directors Plan, either under options or stock awards, is 500,000 shares subject to adjustment. 68 Although Dr. Centofanti is not compensated for his services provided as a director, Dr. Centofanti is compensated for his services rendered as an officer of the Company. See "Employment Contracts, Termination of Employment and Change in Control Arrangements" and "EXECUTIVE COMPENSATION -- Summary Compensation Table." Employment Contracts, Termination of Employment and Change in Control Arrangements During October 1997, Dr. Centofanti entered into a three (3) year Employment Agreement which provided for, among other things, an annual salary of $110,000 and the issuance of Non-Qualified Stock Options ("Non-Qualified Stock Options"). The Non-Qualified Stock Options provide Dr. Centofanti with the right to purchase an aggregate of 300,000 shares of Common Stock as follows: (i) after one year 100,000 shares of Common Stock at a price of $2.25 per share, (ii) after two years 100,000 shares of Common Stock at a price of $2.50 per share, and (iii) after three years 100,000 shares of Common Stock at a price of $3.00 per share. The Non- Qualified Stock Options expire ten years after the date of the Employment Agreement. During April 1998, Mr. Warren entered into a two (2) year employment agreement which provided for, among other things, an annual salary of $87,000 and certain bonus payments. Upon execution of the agreement, Mr. Warren received a bonus of approximately $168,000 which was paid in the form of 94,697 shares of Common Stock, as determined by dividing the bonus amount by the average of the closing bid prices of the Common Stock on the NASDAQ Small Cap for the five trading days prior to the date of execution of this agreement. Mr. Warren is also to receive a bonus of approximately $168,000 which is to be paid in monthly installments over the two years of the agreement, with approximately $112,000 paid in 1998. The Company's 1991 Performance Equity Plan and the 1993 Non- Qualified Stock Option Plan (collectively, the "Plans") provide that in the event of a change in control (as defined in the Plans) of the Company, each outstanding option and award granted under the Plans shall immediately become exercisable in full notwithstanding the vesting or exercise provisions contained in the stock option agreement. As a result, all outstanding stock options and awards granted under the Plans to our executive officers shall immediately become exercisable upon such a change in control of the Company. Compensation Committee Interlocks and Insider Participation During 1998, the Compensation and Stock Option Committee for the Company's Board of Directors was composed of Mark Zwecker and Steve Gorlin. Mr. Zwecker was neither an officer nor an employee during the year 1998, however, Mr. Zwecker did serve as our Secretary from June 1995 until June 30, 1996. Mr. Gorlin was neither an officer nor an employee of the Company during 1998. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Security Ownership of Certain Beneficial Owners The following table sets forth information as to the shares of voting securities beneficially owned as of March 15, 1999, by each person known by us to be the beneficial owner of more than five percent (5%) of any class of our voting securities. Beneficial ownership by our stockholders has been determined in accordance with the rules promulgated under Section 13(d) of the Securities Exchange Act of 1934, as amended. A person is deemed to be a beneficial owner of any securities of which that person has the right to acquire beneficial ownership of such securities within 60 days from March 15, 1999. 69
Amount and Percent Name of Title Nature of of Beneficial Owner of Class Ownership Class(1) _______________________ _________ ____________ ________ Dr. Louis F. Centofanti(2) Common 976,745(2) 7.74% Steve Gorlin(3) Common 647,607(3) 5.12% RBB Bank Aktiengesellschaft(4) Common 15,367,911(4) 57.50% (1) In computing the number of shares and the percentage of outstanding Common Stock "beneficially owned" by a person, the calculations are based upon 12,411,080 shares of Common Stock issued and outstanding on March 15, 1999 (excluding 943,000 Treasury Shares), plus the number of shares of Common Stock which such person has the right to acquire beneficial ownership of within (60) days. (2) These shares include (i) 463,434 shares held of record by Dr. Centofanti; (ii) 61,048 shares receivable upon exercise of warrants to purchase Common Stock; (iii) options to purchase 45,763 shares granted pursuant to the 1991 Performance Equity Plan and the 1993 Non-qualified Stock Option Plan, which are immediately exercisable; (iv) 100,000 shares granted pursuant to Dr. Centofanti's Employment Agreement, which are immediately exercisable; and (v) 304,000 shares held by the wife of Dr. Centofanti and 2,500 shares held by the son of Dr. Centofanti's wife. This amount does not include options to purchase 4,000 shares granted pursuant to the above referenced plans or the options to purchase 200,000 shares granted pursuant to Dr. Centofanti's Employment Agreement with the Company, which are not exercisable within sixty (60) days. Dr. Centofanti has sole voting and investment power of these shares, except for the shares held by Dr. Centofanti's wife and his wife's son, for which Dr. Centofanti shares voting and investment power. The business address of Dr. Centofanti, for the purposes hereof, is c/o Perma-Fix Environmental Services, Inc., 1940 N.W. 67th Place, Gainesville, Florida 32653. (3) Mr. Gorlin has sole voting and investment power over these shares which include: (i) 412,607 shares held of record by Mr. Gorlin; (ii) 200,000 shares which Mr. Gorlin has the right to acquire, until September 15, 1999, under the terms of a Warrant granted by the Company to Mr. Gorlin in September 1996; (iii) Options to purchase 35,000 shares granted pursuant to the 1992 Outside Directors Stock Option and Incentive Plan which are immediately exercisable. The business address of Mr. Gorlin, for the purposes hereof, is c/o Perma-Fix Environmental Services, Inc., 1940 N.W. 67th Place, Gainesville, Florida 32653. See "Certain Relationships and Related Transactions." (4) These outstanding shares of Preferred Stock consist of the Series 3 Preferred, Series 8 Preferred and Series 10 Preferred (collectively, the "RBB Preferred") that RBB Bank acquired from the Company pursuant to the Subscription Agreements and the RBB Exchange Agreements. The RBB Preferred have no voting rights, except as required by law. The shares of Common Stock included as beneficially owned by RBB Bank in this table include: (i) 1,051,361 shares of Common Stock directly held by RBB Bank; (ii) 4,612,613 shares that RBB Bank is entitled to receive upon conversion of the 4,000 shares of Series 3 Preferred held by RBB Bank (assuming the average of the closing bid quotations for the Common Stock for the five trading days immediately preceding each conversion date equals $1.15625 per share, which was the closing bid of the Common Stock on March 15, 1999); (iii) 2,702,703 shares that RBB Bank is entitled to receive upon conversion of the 2,500 shares of Series 8 Preferred (assuming the Conversion Price Adjustment (as defined in "Certain Relationships and Related Party Transactions") is in effect and the average of the closing bid quotations for the Common Stock for the five trading days immediately preceding each conversion date equals $1.15625 per share, which was the closing bid of the Common Stock on March 15, 1999); (iv) 34,666 shares of Common Stock that RBB Bank may receive in payment of the accrued dividends on the Series 3 Preferred; (v) 159,505 shares that RBB 70 Bank may receive in payment of the accrued dividends on the Series 8 Preferred; (vi) 3,243,243 shares that RBB Bank is entitled to receive upon conversion of the 3,000 shares of Series 10 Preferred (assuming the Conversion Price Adjustment (as defined in "Certain Relationships and Related Party Transactions") is in effect and the average of the closing bid quotations for the Common Stock for the five trading days immediately preceding each conversion date equals $1.15625 per share, which was the closing bid of the Common Stock on March 15, 1999); and (vii) 557,570 shares that RBB Bank may receive in payment of the accrued dividends on the Series 10 Preferred. The above calculation also includes 3,006,250 shares of Common Stock that RBB Bank has the right to acquire upon exercise of various warrants, (i) to purchase up to 2,000,000 shares of Common Stock after December 31, 1996, which were granted to RBB Bank in connection with the sale to RBB Bank of the Series 3 Preferred at an exercise price of $2.00 per share for 1,000,000 shares, and $3.50 per share for 1,000,000 shares; (ii) to purchase up to 656,250 shares of Common Stock after December 31, 1997, which were granted to RBB Bank in connection with the sale to RBB Bank of the Series 4 Preferred at an exercise price of $1.8125 per share for 375,000 shares and $2.125 per share for 281,250 shares; and (iii) to purchase up to 350,000 shares of Common Stock after June 30, 1998, which were granted to RBB Bank in connection with the sale to RBB Bank of the Series 10 Preferred at an exercise price of $2.50 per share for 150,000 shares, and $1.875 per share for 200,000 shares. RBB Bank has advised the Company that it is holding the RBB Preferred on behalf of various clients of RBB Bank and that no client is the beneficial owner of more than 250 shares of such RBB Preferred. RBB Bank may be considered to be the beneficial owner of these shares with its clients. See "Potential Change in Control" and "Certain Relationships and Related Transactions." RBB Bank's address is Burgring 16, 8010 Graz, Austria.
Security Ownership of Management
The following table sets forth information as to the shares of voting securities beneficially owned as of March 15, 1999, by each Director and Named Executive Officers of the Company listed in the Summary Compensation table and all Directors and executive officers of the Company as a group. Beneficial ownership by the Company's stockholders has been determined in accordance with the rules promulgated under Section 13(d) of the Exchange Act. A person is deemed to be a beneficial owner of any voting securities for which that person has the right to acquire beneficial ownership within sixty (60) days. All voting securities are owned both of record and beneficially unless otherwise indicated. Number of Shares Name of of Common Stock Percentage of Beneficial Owner Beneficially Owned Common Stock(1) _____________________________ __________________ _______________ Dr. Louis F. Centofanti(2)(3) 976,745(3) 7.74% Steve Gorlin(2)(4) 647,607(4) 5.12% Mark A. Zwecker(2)(5) 210,209(5) 1.69% Jon Colin(2)(6) 33,582(6) * Richard T. Kelecy(2)(7) 58,740(7) * Timothy Kimball(2)(8) 42,067(8) * Roger Randall(2)(9) 40,000(9) * Bernhardt Warren(2)(10) 105,073(10) * Directors and Executive Officers as a Group (8 persons) 2,111,023 16.20% *Indicates beneficial ownership of less than one percent (1%). (1) See footnote (1) of the table under "Security Ownership of Certain Beneficial Owners." 71 (2) The business address of such person, for the purposes hereof, is c/o Perma-Fix Environmental Services, Inc., 1940 N.W. 67th Place, Gainesville, Florida 32653. (3) See footnote (2) of the table under "Security Ownership of Certain Beneficial Owners." (4) See footnote (3) of the table under "Security Ownership of Certain Beneficial Owners." (5) Mr. Zwecker has sole voting and investment power over these shares which include: (i) 171,327 shares of Common Stock held of record by Mr. Zwecker; (ii) 14,882 options to purchase Common Stock granted pursuant to the 1991 Performance Equity Plan; (iii) 4,000 options to purchase Common Stock pursuant to the 1993 Non-Qualified Stock Option Plan, which are immediately exercisable; and (iv) options to purchase 20,000 shares granted pursuant to the 1992 Outside Directors Stock Option and Incentive Plan which are immediately exercisable. Does not include options to purchase 1,000 shares of Common Stock granted pursuant to the 1993 Non-Qualified Stock Option Plan which are not exercisable within sixty (60) days. (6) Mr. Colin has sole voting and investment power over these shares which include: (i) 13,582 shares held of record by Mr. Colin, and (ii) options to purchase 20,000 shares granted pursuant to the 1992 Outside Directors Stock Option and Incentive Plan which are immediately exercisable. (7) Mr. Kelecy has sole voting and investment power over 2,740 shares of Common Stock held of record by Mr. Kelecy and 56,000 options to purchase Common Stock granted pursuant to the 1993 Non-Qualified Stock Option Plan. Does not include options to purchase 104,000 shares of Common Stock granted pursuant to the 1993 Non-Qualified Stock Option Plan which are not exercisable within sixty (60) days. (8) Mr. Kimball has sole voting and investment power over these shares which include: (i) 3,184 shares held of record by Mr. Kimball, (ii) 14,883 options to purchase Common Stock granted pursuant to the 1991 Performance Equity Plan, and (iii) 24,000 options to purchase Common Stock pursuant to the 1993 Non-Qualified Stock Option Plan, which are immediately exercisable. Does not include options to purchase 61,000 shares of Common Stock granted pursuant to the 1993 Non- Qualified Stock Option Plan which are not exercisable within sixty (60) days. (9) Mr. Randall has sole voting and investment power over these shares which include: (i) 40,000 options to purchase Common Stock pursuant to the 1993 Non-Qualified Stock Option Plan, which are immediately exercisable. Does not include options to purchase 100,000 shares of Common Stock granted pursuant to the 1993 Non-Qualified Stock Option Plan which are not exercisable within sixty (60) days. (10) Mr. Warren has sole voting and investment power over these shares which include 99,073 shares held by record by Mr. Warren and 6,000 options to purchase Common Stock granted pursuant to the 1993 Non-Qualified Stock Option Plan. Does not include options to purchase 49,000 shares of Common Stock granted pursuant to the 1993 Non-Qualified Stock Option Plan which are not exercisable within sixty (60) days.
Potential Change in Control RBB Bank has the right to acquire an aggregate of approximately 14,616,170 shares of Common Stock, consisting of (i) 4,612,613 shares upon conversion of the issued and outstanding Series 3 Preferred assuming the average closing bid quotation for the Common Stock for five trading days immediately preceding each of the conversion date or dates equals $1.15625 per share, which was the closing bid price of the Common Stock on March 15, 1999, and (ii) 2,702,703 shares upon conversion of the issued and outstanding Series 8 Preferred assuming the Conversion Price Adjustment (as defined in "Certain Relationships and Related Transactions") is in effect and the average closing bid quotation for the Common Stock for five trading days immediately preceding each of the conversion date or dates equals as illustrated above, depending upon the average closing bid price of Common Stock at the date of conversion; (iii) 3,006,250 shares upon the exercise of the RBB 72 Series 3 Warrants, RBB Series 4 Warrants and RBB Series 10 Warrants and (iv) 3,243,243 shares upon conversion of the issued and outstanding Series 10 Preferred assuming the Conversion Price Adjustment (as defined in "Certain Relationships and Related Transactions") is in effect and the average closing bid quotation for the Common Stock for five trading days immediately preceding each of the conversion date or dates equals $1.15625 per share, which was the closing bid price of the Common Stock on March 15, 1999. Upon such conversion and exercise, RBB Bank will own approximately 56.3% of the outstanding shares of Common Stock of the Company, which includes the 1,051,361 shares of Common Stock directly held by RBB Bank as of March 15, 1999, but does not include the 751,741 shares of Common Stock which have previously been or will be registered, to be issuable for payment of dividends on the Series 3 Preferred, Series 4 Preferred (prior to its exchange), Series 6 Preferred (prior to its exchange) and Series 10 Preferred.
The table below is provided in an attempt to approximate the potential issuance of Common Stock which could result from conversion of the Company's currently outstanding preferred stock assuming various average closing bid prices for the five days prior to conversion. As the price of the Common Stock moves downward, the number of shares of Common Stock which may be issued upon conversion of the Series 3 Preferred, Series 8 Preferred, Series 9 Preferred and Series 10 Preferred increases as follows: Average Closing Bid Price $2.50 $2.00 $1.00 $0.25 of Common Stock for five days prior to conversion Series 3 Conversion Price $1.50(1) $1.50(1) $0.75(1) $0.50(1) (minimum of $0.50, maximum $1.50) Number of Shares of Common 2,666,667 2,666,667 5,333,333 8,000,000 Stock Issuable upon Series 3 Conversion Series 8 Conversion Price $1.8125(2) $1.60(2) $0.80(2) $0.20(2) (maximum $1.8125) Number of Shares of Common 1,379,311 1,562,500 3,125,000 12,500,000 Stock Issuable upon Series 8 Conversion Series 9 Conversion Price $1.8125(2) $1.60(2) $0.80(2) $0.20(2) (maximum $1.8125) Number of Shares of Common 193,103(3) 218,750 437,500 1,750,000 Stock Issuable upon Series 9 Conversion Series 10 Conversion Price $1.875(2) $1.60(2) $0.80(2) $0.20(2) (maximum $1.875) Number of Shares of Common 1,600,000 1,875,000 3,750,000 15,000,000 Stock Issuable upon Series 10 Conversion Total shares of Common Stock 5,839,081 6,322,917 12,645,833 37,250,000(4) Issuable Upon Conversion (1) 75% of the product of the average of the closing bid quotation of the Common Stock for the five trading days immediately preceding the conversion date. (2) 80% of the product of the average of the closing bid quotation of the Common Stock for the five trading days immediately preceding the conversion date. (3) Although conversion at the maximum conversion price would result in the issuance of 193,103 shares of Common Stock, the Company agreed to register 200,000 shares to be issuable upon conversion of the Series 9 Preferred. 73 (4) The Company has 50,000,000 shares of Common Stock authorized for issuance. There are 12,267,631 shares of Common Stock issued and outstanding as of the date of this Prospectus, and 13,255,796 shares are issuable upon exercise of warrants outstanding as of the date of this Prospectus. The Company would probably not have sufficient shares of Common Stock authorized but unissued if it were required to issue 37,250,000 shares upon conversion of the Series 3 Preferred, Series 8 Preferred, Series 9 Preferred and Series 10 Preferred and 13,255,796 shares upon exercise of all such outstanding warrants.
As illustrated above, depending upon the average closing bid price of Common Stock at the date of conversion, RBB Bank could be the largest single shareholder of the Company, and the Company may not be able to avoid an actual change in control of the Company if RBB Bank seeks such a change in control. Moreover, if such conversion and exercise results in RBB Bank acquiring more than 50% of the then outstanding Common Stock of the Company, the Company would not be able to avoid a change in control. The foregoing estimates assume that no other shares of Common Stock are issued by the Company, no other warrants or options are exercised, the Company does not acquire additional shares of Common Stock as Treasury Stock, and RBB Bank does not dispose of any shares of Common Stock. See "Certain Relationships and Related Transactions." ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS As of January 1, 1998, Dr. Louis F. Centofanti, Chairman of the Board and Chief Executive Officer of the Company , held 40,000 Class B Warrants to purchase Common Stock ("Class B Warrants") each of which expires on June 17, 1999 and entitles the holder thereof to purchase one (1) share of Common Stock for $5.00 per share. The Class B Warrants are subject to certain antidilution provisions, which have resulted in an adjustment of such purchase price from $5.00 to $3.28 per share. As of January 1, 1998 RBB Bank Aktiengesellschaft, located in Graz, Austria ("RBB Bank") was the holder of 4,000 shares of Series 3 Class C Convertible Preferred Stock, par value $.001 ("Series 3 Preferred"). The Company issued 54,528 shares during January 1998 in payment of accrued dividends for the period July through December 1997. The accrued dividends for the period January 1, 1998, through June 3, 1998, in the amount of approximately $119,000 were paid in July 1998, in the form of 62,027 shares of Common Stock of the Company. The accrued dividends for the period July 1, 1998, through December 31, 1998, in the amount of approximately $121,000 were paid in January 1999, in the form of cash. Effective February 28, 1998, the Company entered into an Exchange Agreement with RBB Bank (the "Second RBB Exchange Agreement"), which provided that the 2,500 shares of Series 6 Preferred held by RBB Bank were tendered to the Company in exchange for 2,500 of a newly-created Series 8 Class H Preferred Stock, par value $.001 per share ("Series 8 Preferred"). The exchange was made in an exchange offer exempt from registration pursuant to Section 3(a)(9) of the Securities Act, and/or Section 4(2) of the Securities Act and/or Regulation D as promulgated under the Securities Act. The Series 8 Preferred was issued to RBB Bank during July 1998. The rights under the Series 8 Preferred are the same as the rights under the Series 6 Preferred, except for the conversion price. The Series 8 Preferred is convertible at $1.8125 per share, except that, in the event the average closing bid price reported in the over-the-counter market, or the closing sale price if listed on a national securities exchange for the five (5) trading days prior to a particular date of conversion, shall be less than $2.50, the conversion price for only that particular conversion shall be the average of the closing bid quotations of the Common Stock as reported on the over-the-counter market, or the closing sale price if listed on a national securities exchange, for the five (5) trading days immediately proceeding the date of such particular conversion notice provided by the holder to the Company multiplied by 80%. Notwithstanding the foregoing, the conversion price shall not be less than a minimum of $.75 per share, which minimum shall be eliminated from and after September 6, 1998. 74 The terms of the Series 8 Preferred has a liquidation preference over the Company's Common Stock equal to $1,000 consideration per outstanding share of Series 8 Preferred (the "Series 8 Liquidation Value"), plus an amount equal to all accrued and unpaid dividends. The Series 8 Preferred accrues dividends on a cumulative basis at a rate of four percent (4%) per annum of the Series 8 Liquidation Value ("Series 8 Dividend Rate"), and is payable semi-annually when and as declared by the Board of Directors. No dividends or other distributions may be paid or declared or set aside for payment on the Company's Common Stock until all accrued and unpaid dividends on all outstanding shares of Series 8 Preferred have been paid or set aside for payment. Dividends may be paid, at the option of the Company, in the form of cash or Common Stock of the Company. If the Company pays dividends in Common Stock, such is payable in the number of shares of Common Stock equal to the product of (a) the quotient of (i) the Series 8 Dividend Rate divided by (ii) the average of the closing bid quotation of the Common Stock as reported on the NASDAQ for the five trading days immediately prior to the date the dividend is declared, times (b) a fraction, the numerator of which is the number of days elapsed during the period for which the dividend is to be paid and the denominator of which is 365. The Company paid to RBB Bank the dividends on the Series 6 Preferred which accrued from the date of its issuance through February 28, 1998, the effective date of the Second RBB Exchange Agreement by issuing to RBB Bank 7,652 shares of Common Stock in payment of such accrued dividends. By letter dated July 14, 1998, RBB Bank agreed to waive certain penalties regarding the Series 4 Preferred and Series 6 Preferred. The accrued dividends for the period July 1, 1997, through December 31, 1997, for the Series 4 and Series 6 Preferred, total approximately $55,000, which were paid in January 1998, in the form of 27,377 shares of Common Stock of the Company. The accrued dividends for the Series 6 and 8 Preferred for the period January 1, 1998, through June 30, 1998, in the amount of approximately $49,000, were paid in July 1998, in the form of 25, 072 shares of Common Stock of the Company. The accrued dividends for the Series 8 Preferred for the period July 1, 1998, through December 31, 1998, in the amount of approximately $50,000, were paid in February 1999, the form of 38,046 shares of Common Stock of the Company. On or about June 30, 1998, the Company issued to RBB Bank Aktiengesellschaft, located in Graz, Austria ("RBB Bank"), 3,000 shares of newly-created Series 10 Class J Convertible Preferred Stock, par value $.001 per share ("Series 10 Preferred"), at a price of $1,000 per share, for an aggregate sales price of $3,000,000. The sale to RBB Bank was made in a private placement under Section 4(2) of the Securities Act of 1933, as amended (the "Act") and/or Rule 506 of Regulation D under the Act, pursuant to the terms of a Subscription and Purchase Agreement, dated June 30, 1998 between the Company and RBB Bank ("Subscription Agreement"). The net proceeds of $2,768,000 from this private placement, after the deduction for certain fees and expenses, was received by the Company on July 14, 1998. The Series 10 Preferred has a liquidation preference over the Company's Common Stock, par value $.001 per share ("Common Stock"), equal to $1,000 consideration per outstanding share of Series 10 Preferred (the "Liquidation Value"), plus an amount equal to all unpaid and accrued dividends thereon. The Series 10 Preferred accrues dividends on a cumulative basis at a rate of four percent (4%) per annum of the Liquidation Value ("Dividend Rate"), and is payable semi-annually within ten (10) business days after each subsequent June 30 and December 31 (each a "Dividend Declaration Date"), and shall be payable in cash or shares of the Company's Common Stock at the Company's option. The first Dividend Declaration Date was December 31, 1998. No dividends or other distributions may be paid or declared or set aside for payment on the Company's Common Stock until all accrued and unpaid dividends on all outstanding shares of Series 10 Preferred have been paid or set aside for payment. Dividends may be paid, at the option of the Company, in the form of cash or Common Stock of the Company. If the Company pays dividends in Common Stock, such is payable in the number of shares of Common Stock equal to the product of (a) the quotient of (i) the Dividend Rate divided by (ii) the average of the closing bid quotation of the Common Stock as reported on the NASDAQ for the five trading days immediate prior to the date the dividend is declared, times (b) a fraction, the numerator of which is the number of days elapsed during the period for which the dividend is to be paid and the denominator of which is 365. 75 The holder of the Series 10 Preferred may convert into Common Stock any or all of the Series 10 Preferred on and after 180 days after June 30, 1998 (December 28, 1998). The conversion price per outstanding share of Preferred Stock ("Conversion Price") is $1.875; except that if the average of the closing bid price per share of Common Stock quoted on the NASDAQ (or the closing bid price of the Common Stock as quoted on the national securities exchange if the Common Stock is not listed for trading on the NASDAQ but is listed for trading on a national securities exchange) for the five (5) trading days immediately prior to the particular date on which the holder notified the Company of a conversion ("Conversion Date") is less than $2.34, then the Conversion Price for that particular conversion shall be eighty percent (80 %) of the average of the closing bid price of the Common Stock on the NASDAQ (or if the Common Stock is not listed for trading on the NASDAQ but is listed for trading on a national securities exchange then eighty percent (80%) of the average of the closing bid price of the Common Stock on the national securities exchange) for the five (5) trading days immediately prior to the particular Conversion Date. As of June 30, 1998, the closing price of Common Stock on the NASDAQ was $1.875 per share. As of the date of this report, no shares of the Series 10 Preferred have been converted. As part of the of the sale of the Series 10 Preferred, the Company also issued to RBB Bank (a) a warrant entitling the holder to purchase up to an aggregate of 150,000 shares of Common Stock at an exercise price of $2.50 per share of Common Stock expiring three (3) years after June 30, 1998 and (b) a warrant entitling the holder to purchase up to an aggregate of 200,000 shares of Common Stock at an exercise price of $1.875 per share of Common Stock and expiring three (3) years after June 30, 1998. Collectively, these warrants are referred to herein as the "RBB Warrants." The Common Stock issuable upon the conversion of the Series 10 Preferred and upon the exercise of the RBB Warrants is subject to certain registration rights pursuant to the Subscription Agreement. The Company utilized the proceeds received on the sale of Series 10 Preferred for working capital and to reduce the outstanding balance of its credit facilities, subject to the Company reborrowing under such credit facilities. In connection with the placement of Series 10 Preferred to RBB Bank, the Company paid fees (excluding legal and accounting) of $210,000 and issued to (a) Liviakis Financial Communications, Inc. ("Liviakis") for assistance with the placement of the Series 10 Preferred, warrants entitling the holder to purchase up to an aggregate of 1,875,000 shares of Common Stock, subject to certain anti-dilution provisions, at an exercise price of $1.875 per share of Common Stock which warrants may be exercised after January 15, 1999, and which expire after four (4) years; (b) Robert B. Prag, an executive officer of Liviakis for assistance with the placement of the Series 10 Preferred, warrants entitling the holder to purchase up to an aggregate of 625,000 shares of Common Stock, subject to certain anti-dilution provisions, at an exercise price of $1.875 per share of Common Stock, which warrants may be exercised after January 15, 1999, and which expire after four (4) years; (c) JW Genesis Financial Corporation for assistance with the placement of the Series 10 Preferred, warrants entitling the holder to purchase up to an aggregate of 150,000 shares of Common Stock, subject to certain anti-dilution provisions, at an exercise price of $1.875 per share of Common Stock, which warrants expire after three (3) years; and (d) Fontenoy Investments for assistance with the placement of the Series 10 Preferred, warrants entitling the holder to purchase up to an aggregate of 350,000 shares of Common Stock, subject to certain anti-dilution provisions, at an exercise price of $1.875 per share of Common Stock, which warrants expire after three (3) years. Under the terms of each warrant, the holder is entitled to certain registration rights with respect to the shares of Common Stock issuable on the exercise of each warrant. In March, 1999, the Company entered into an Exchange Agreement dated March 14, 1999, with Liviakis and Prag whereby the warrants described in the preceding paragraph for the purchase of 2,500,000 shares of Common Stock were canceled and exchanged for 200,000 shares of Common Stock. 76 The accrued dividends for the Series 10 Preferred for the period July 14, 1998, through December 31, 1998, in the amount of approximately $56,000, were paid in February 1999, in the form of 42,430 shares of Common Stock of the Company. The Company believes that each of the transactions set forth above involving affiliates, officers or Directors of the Company was or is on terms at least as favorable to the Company as could have been obtained from an unaffiliated third party. The Company has adopted a policy that any transactions or loans between the Company and its Directors, principal stockholders or affiliates must be approved by a majority of the disinterested Directors of the Company and must be on terms no less favorable to the Company than those obtainable from unaffiliated third parties. 77 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K The following documents are filed as a part of this report: (a)(1) Consolidated Financial Statements See Item 8 for the Index to Consolidated Financial Statements. (a)(2) Financial Statement Schedules See Item 8 for the Index to Consolidated Financial Statements (which includes the Index to Financial Statement Schedules) (a)(3) Exhibits The Exhibits listed in the Exhibit Index are filed or incorporated by reference as a part of this report. (b) Reports on Form 8-K No report on Form 8-K was filed by the Company during the fourth quarter of 1998. 78 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Perma-Fix Environmental Services, Inc. By /s/ Dr. Louis F. Centofanti Date March 26, 1999 _______________________________ ___________________ Dr. Louis F. Centofanti Chairman of the Board Chief Executive Officer By /s/ Richard T. Kelecy Date March 26, 1999 __________________________________ ___________________ Richard T. Kelecy Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in capacities and on the dates indicated. /s/ Steve Gorlin Date March 26, 1999 ___________________________________ ____________________ Steve Gorlin, Director /s/ Mark A. Zwecker Date March 26, 1999 ___________________________________ ____________________ Mark A. Zwecker, Director /s/ Jon Colin Date March 26, 1999 ___________________________________ ____________________ Jon Colin, Director /s/ Dr. Louis F. Centofanti Date March 26, 1999 ___________________________________ ____________________ Dr. Louis F. Centofanti, Director 79 SCHEDULE II PERMA-FIX ENVIRONMENTAL SERVICES, INC.
VALUATION AND QUALIFYING ACCOUNTS For the years ended December 31, 1998, 1997 and 1996 (Dollars in thousands) Additions Charged to Balance at Costs, Balance Beginning Expenses At End Description of Year and Other Deductions of Year ______________________ __________ __________ __________ _______ Year ended December 31, 1998: Allowance for doubtful accounts(1) $ 374 $ 61 $ 122 $ 313 Year ended December 31, 1997: Allowance for doubtful accounts(1) $ 340 $ 133 $ 99 $ 374 Year ended December 31, 1996: Allowance for doubtful accounts(1) $ 351 $ 17 $ 28 $ 340 Divestiture reserve 450 - 450 - Restructuring reserve 257 - 257 - (1) Excludes Perma-Fix of Memphis, Inc. facility considered a discontinued operation. See Note 4 of Notes to Consolidated Financial Statements.
80 EXHIBIT INDEX Exhibit Sequential No. Description Page No. _______ ___________ __________ 3(i) Restated Certificate of Incorporation, as amended, and all Certificates of Designations are incorporated by reference from Exhibit 3(i) to the Company's Form 10-Q for the quarter ended June 30, 1998 3(ii) Bylaws are incorporated by reference from the Company's Registration Statement, No. 33-51874 4.1 Warrant Agreement, dated May 15, 1994, between the Company and Continental Stock Transfer & Trust Company, as Warrant Agent, is incorporated by reference from Exhibit 4.2 to the Company's Form 10-Q for the quarter ended June 30, 1994 4.2 Specimen Warrant Certificate relating to Class B Warrants, is incorporated by reference from Exhibit 4.9 to the Company's Registration Statement, No. 33-85118 4.3 Specimen Common Stock Certificate is incorporated by reference from Exhibit 4.3 to the Company's Registration Statement, No. 33-51874 4.4 Form of Subscription Agreement is incorporated by reference from Exhibit 4.1 to the Company's Form 10-Q for the quarter ended June 30, 1994 4.5 Subscription and Purchase Agreement dated July 17, 1996, between the Company and RBB Bank Aktiengesellschaft is incorporated by reference from Exhibit 4.4 to the Company's Form 10-Q for the quarter ended June 30, 1996 4.6 Form of Certificate for Series 3 Preferred is incorporated by reference from Exhibit 4.6 to the Company's Form 10-Q for the quarter ended June 30, 1996 4.7 Exchange Agreement dated November 6, 1997, to be considered effective as of September 16, 1997, between the Company and RBB Bank is incorporated by reference from Exhibit 4.11 to the Company's Form 10-Q for the quarter ended September 30, 1997 4.8 Exchange Agreement dated as of October 31, 1997, to be considered effective as of September 16, 1997, between the Company and the Infinity Fund, L.P. is incorporated by reference from Exhibit 4.12 to the Company's Form 10-Q for the quarter ended September 30, 1997 4.9 Loan and Security Agreement, dated January 15, 1998, between the Company, subsidiaries of the Company and Congress Financial Corporation (Florida) is incorporated by reference from Exhibit 4.1 to the Company's Form 8-K dated January 15, 1998 4.10 Private Securities Subscription Agreement, dated June 30, 1998, between the Company and RBB Bank Aktiengesellschaft as incorporated by reference from Exhibit 4.1 to the Company's Form 8-K dated June 30, 1998. 4.11 Certificate of Designations of Series 10 Class J Convertible Preferred Stock, dated July 16, 1998, as incorporated by reference from Exhibit 3(i) above. 4.12 Specimen copy of Certificate relating to the Series 10 Class J Convertible Preferred Stock as incorporated by reference from Exhibit 4.3 to the Company's Form 8-K, dated June 30, 1998. 81 4.13 Certificate of Designations of Series 8 Class H Convertible Preferred Stock as incorporated by reference from Exhibit 3(i) above. 4.14 Specimen copy of Certificate relating to the Series 8 Class H Convertible Preferred Stock as incorporated by reference from Exhibit 4.5 to the Company's Form 10-Q for the quarter ended June 30, 1998. 4.15 Certificate of Designations of Series 9 Class I Convertible Preferred Stock as incorporated by reference from Exhibit 3(i) above. 4.16 Specimen copy of Certificate relating to the Series 9 Class I Convertible Preferred Stock as incorporated by reference from Exhibit 4.7 to the Company's Form 10-Q for the quarter ended June 30, 1998. 4.17 Congress Financial, Inc. subordination and consent letter dated June 25, 1998, as incorporated by reference from Exhibit 4.1 to the Company's Form 10-Q for the quarter ended September 30, 1998. 4.18 Congress Financial, Inc. subordination and consent letter dated October 16, 1998, as incorporated by reference from Exhibit 4.2 to the Company's Form 10-Q for the quarter ended September 30, 1998. 4.19 Congress Financial, Inc. subordination and consent letter dated October 16, 1998, as incorporated by reference from Exhibit 4.3 to the Company's Form 10-Q for the quarter ended September 30, 1998. 10.1 Note and Warrant Purchase Agreement, dated February 10, 1992, between the Company and Al Warrington, Productivity Fund II, L.P. ("Productivity Fund"), Environmental Venture Fund, L.P. ("Environmental Venture Fund"), and Steve Gorlin is incorporated by reference from Exhibit 4.1 of the Company's Registration Statement, No. 33-85118 10.2 Amendments, dated February 7, 1997, to Common Stock Warrants for the Purchase of Shares of Common Stock, dated February 10, 1992, between the Company and each of Alfred C. Warrington, IV, Productivity Fund II, L.P., Environmental Venture Fund II, L.P., Steve Gorlin, and D.H. Blair Investment Banking Corporation is incorporated by reference from, respectively, Exhibits 4.2, 4.3, 4.4, 4.5 and 4.6 to the Company's Form 8-K dated February 7, 1997 10.3 1991 Performance Equity Plan of the Company is incorporated herein by reference from Exhibit 10.3 to the Company's Registration Statement, No. 33-51874 10.4 Warrant, dated September 1, 1994, granted by the Company to Productivity Fund is incorporated herein by reference from Exhibit 4.12 to the Company's Registration Statement No. 33-85118 10.5 Warrant, dated September 1, 1994, for the Purchase of Common Stock granted by the Company to Environmental Venture Fund is incorporated by reference from Exhibit 4.14 to the Company's Registration Statement No. 33-85118 10.6 Warrant, dated September 1, 1994, for the Purchase of Common Stock granted by the Company to Warrington is incorporated by reference from Exhibit 4.16 to the Company's Registration Statement No. 33-85118 82 10.7 Warrant, dated September 1, 1994, for the Purchase of Common Stock granted by the Company to Joseph Stevens & Company, L.P. ("Stevens") is incorporated by reference from Exhibit 4.17 to the Company's Registration Statement No. 33-85118 10.8 Warrant, dated October 6, 1994, for the Purchase of Common Stock granted by the Company to Stevens is incorporated by reference from Exhibit 4.20 to the Company's Registration Statement No. 33-85118. 10.9 Warrant, dated September 30, 1994, for the Purchase of Shares of Common Stock granted by the Company to Ally Capital Management, Inc. is incorporated by reference from Exhibit 4.27 to the Company's Registration Statement No. 33-85118. 10.10 Warrant, dated June 17, 1994, for the purchase of Common Stock granted by the Company to Sun Bank, National Association is incorporated by reference from Exhibit 4.2 to the Company's Form 8-K dated June 17, 1994. 10.11 Warrant, dated September 1, 1994, for the Purchase of Shares of Common Stock granted by the Company to D. H. Blair Investment Banking Corporation is incorporated by reference from Exhibit 10.24 to the Company's Form 10-K for the year ended December 31, 1994. Blair assigned a portion of its initial warrant to certain officers and directors of Blair. The warrants issued to such officers and directors are substantially similar to the warrant issued to Blair, except as to name of the warrant holder and the number of shares covered by each such warrant, as follows: J. Morton Davis 9,775 shares Martin A. Bell 8,000 shares Alan Stahler 39,100 shares Kalman Renov 39,100 shares Richard Molinsky 25,125 shares Jeff Berns 25,500 shares Nick DiFalco 21,000 shares Richard Molinsky 50,250 shares and the Company agrees to file copies of the omitted documents to the Commission upon the Commission's request. 10.12 1992 Outside Directors' Stock Option Plan of the Company is incorporated by reference from Exhibit 10.4 to the Company's Registration Statement, No. 33-51874. 10.13 First Amendment to 1992 Outside Directors' Stock Option Plan is incorporated by reference from Exhibit 10.29 to the Company's Form 10-K for the year ended December 31, 1994. 10.14 Second Amendment to the Company's 1992 Outside Directors' Stock Option Plan, is incorporated by reference from the Company's Proxy Statement, dated November 4, 1994. 10.15 Third Amendment to the Company's 1992 Outside Directors' Stock Option Plan is incorporated by reference from the Company's Proxy Statement, dated November 8, 1996. 83 10.16 Fourth Amendment to the Company's 1992 Outside Directors' Stock Option Plan is incorporated by reference from the Company's Proxy Statement, dated April 20, 1998. 10.17 1993 Non-qualified Stock Option Plan is incorporated by reference from the Company's Proxy Statement, dated October 12, 1993. 10.18 401(K) Profit Sharing Plan and Trust of the Company is incorporated by reference from Exhibit 10.5 to the Company's Registration Statement, No. 33-51874. 10.19 Common Stock Purchase Warrant Certificate, dated July 19, 1996, granted to RBB Bank Aktiengesellschaft is incorporated by reference from Exhibit 10.1 to the Company's Form 10-Q for the quarter ended June 30, 1996. 10.20 Common Stock Purchase Warrant Certificate, dated July 19, 1996, granted to RBB Bank Aktiengesellschaft is incorporated by reference from Exhibit 10.2 to the Company's Form 10-Q for the quarter ended June 30, 1996. 10.21 Common Stock Purchase Warrant Certificate No. 1-9-96, dated September 16, 1996, between the Company and J. P. Carey Enterprises, Inc. is incorporated by reference from Exhibit 4.8 to the Company's Registration Statement, No. 333-14513. 10.22 Common Stock Purchase Warrant Certificate No. 2-9-96, dated September 16, 1996, between the Company and J. P. Carey Enterprises, Inc. is incorporated by reference from Exhibit 4.9 to the Company's Registration Statement, No. 333-14513. 10.23 Common Stock Purchase Warrant Certificate No. 3-9-96, dated September 16, 1996, between the Company and J W Charles Financial Services, Inc. is incorporated by reference from Exhibit 4.10 to the Company's Registration Statement, No. 333-14513. 10.24 Common Stock Purchase Warrant Certificate No. 4-9-96, dated September 16, 1996, between the Company and Search Group Capital, Inc. is incorporated by reference from Exhibit 4.11 to the Company's Registration Statement, No. 333-14513. 10.25 Common Stock Purchase Warrant Certificate No. 5-9-96, dated September 16, 1996, between the Company and Search Group Capital, Inc. is incorporated by reference from Exhibit 4.12 to the Company's Registration Statement, No. 333-14513. 10.26 Common Stock Purchase Warrant Certificate No. 6-9-96, dated September 16, 1996, between the Company and Search Group Capital, Inc. is incorporated by reference from Exhibit 4.13 to the Company's Registration Statement, No. 333-14513. 10.27 Common Stock Purchase Warrant Certificate No. 7-9-96, dated September 16, 1996, between the Company and Marvin S. Rosen is incorporated by reference from Exhibit 4.14 to the Company's Registration Statement, No. 333-14513. 10.28 Common Stock Purchase Warrant Certificate No. 8-9-96, dated September 16, 1996, between the Company and D. H. Blair Investment Banking Corporation is incorporated by reference from Exhibit 4.15 to the Company's Registration Statement, No. 333-14513. 84 10.29 Common Stock Purchase Warrant Certificate No. 9-9-96, dated September 16, 1996, between the Company and Steve Gorlin is incorporated by reference from Exhibit 4.16 to the Company's Registration Statement, No. 333-14513. 10.30 Common Stock Purchase Warrant ($2.10) dated June 9, 1997, between the Company and RBB Bank Aktiengesellschaft is incorporated by reference from Exhibit 4.4 to the Company's Form 8-K, dated June 11, 1997. 10.31 Common Stock Purchase Warrant ($2.50) dated June 9, 1997, between the Company and RBB Bank Aktiengesellschaft is incorporated by reference from Exhibit 4.5 to the Company's Form 8-K, dated June 11, 1997. 10.32 Common Stock Purchase Warrant ($1.50) dated June 9, 1997, between the Company and J W Charles Securities, Inc. is incorporated by reference from Exhibit 4.6 to the Company's Form 8-K, dated June 11, 1997. 10.33 Common Stock Purchase Warrant ($2.00) dated June 9, 1997, between the Company and J W Charles Securities, Inc. is incorporated by reference from Exhibit 4.7 to the Company's Form 8-K, dated June 11, 1997. 10.34 Stock Purchase Agreement, dated June 30, 1997, between the Company and Dr. Louis F. Centofanti is incorporated by reference from Exhibit 4.4 to the Company's Form 8-K, dated July 7, 1997. 10.35 Amended Stock Purchase Agreement, dated October 7, 1997, between the Company and Dr. Louis F. Centofanti is incorporated by reference from Exhibit 10.6 to the Company's Form 10-Q for the quarter ended September 30, 1997. 10.36 Employment Agreement, dated October 1, 1997, between the Company and Dr. Louis F. Centofanti is incorporated by reference from Exhibit 10.9 to the Company's Form 10-Q for the quarter ended September 30, 1997. 10.37 Employment Agreement Dated April 7, 1998, between the Company and Bernhardt Warren is incorporated by reference from Exhibit 10.1 to the Company's Form 10-Q for the quarter ended March 31, 1998. 10.38 Common Stock Purchase Warrant ($1.875) dated June 30, 1998, between the Company and RBB Bank Aktiengesellschaft as incorporated by reference from Exhibit 4.4 to the Company's Form 8-K, dated June 30, 1998. 10.39 Common Stock Purchase Warrant ($2.50) dated June 30, 1998, between the Company and RBB Bank Aktiengesellschaft as incorporated by reference from Exhibit 4.5 to the Company's Form 8-K, dated June 30, 1998. 10.40 Consulting Agreement dated effective June 30, 1998, between the Company and Liviakis Financial Communications, Inc. as incorporated by reference from Exhibit 4.6 to the Company's Form 8-K, dated June 30, 1998. 10.41 Common Stock Purchase Warrant effective June 30, 1998, between the Company and Liviakis Financial Communications, Inc. as incorporated by reference from Exhibit 4.7 to the Company's Form 8-K, dated June 30, 1998. 10.42 Common Stock Purchase Warrant effective June 30, 1998, between the Company and Robert B. Prag as incorporated by reference from Exhibit 4.8 to the Company's Form 8-K, dated June 30, 1998. 85 10.43 Exchange Agreement dated as of April 30, 1998, to be considered effective as of February 28, 1998, between the Company and RBB Bank Aktiengesellschaft as incorporated by reference from Exhibit 10.6 to the Company' Form 10-Q for the quarter ended June 30, 1998. 10.44 Exchange Agreement dated as of April 30, 1998, to be considered effective as of February 28, 1998, between the Company and The Infinity Fund, L.P. as incorporated by reference from Exhibit 10.7 to the Company's Form 10-Q for the quarter ended June 30, 1998. 10.45 Common Stock Purchase Warrant effective June 30, 1998, between the Company and JW Genesis Financial Corporation as incorporated by reference from Exhibit 10.8 to the Company's Form 10-Q for the quarter ended June 30, 1998. 10.46 Common Stock Purchase Warrant effective June 30, 1998, between the Company and Fontenoy Investments as incorporated by reference from Exhibit 10.9 to the Company's Form 10-Q for the quarter ended June 30, 1998. 10.47 Consulting Agreement, dated April 8, 1998, and effective January 1, 1998, between the Company and Alfred C. Warrington, IV as incorporated by reference from Exhibit 10.11 to the Company's Form 10-Q for the quarter ended June 30, 1998. 10.48 Letter from RBB Bank to the Company, dated July 14, 1998, as incorporated by reference from Exhibit 10.12 to the Company's Form 10-Q for the quarter ended June 30, 1998. 10.49 Basic Oak Ridge Agreement between East Tennessee Materials and Energy Corporation (M&EC) and Bechtel Jacobs Company, LLC No. 1GB-99446V dated June 23, 1998, as incorporated by reference from Exhibit 10.1 to the Company's Form 10-Q for the quarter ended September 30, 1998. 10.50 Basic Oak Ridge Agreement between East Tennessee Materials and Energy Corporation (M&EC) and Bechtel Jacobs Company, LLC No. 1GB-99447V dated June 23, 1998, as incorporated by reference from Exhibit 10.2 to the Company's Form 10-Q for the quarter ended September 30, 1998. 10.51 Basic Oak Ridge Agreement between East Tennessee Materials and Energy Corporation (M&EC) and Bechtel Jacobs Company, LLC No. 1GB-99448V dated June 23, 1998, as incorporated by reference from Exhibit 10.3 to the Company's Form 10-Q for the quarter ended September 30, 1998. 10.52 General agreement between East Tennessee Materials and Energy Corporation (M&EC) and Perma-Fix Environmental Services, Inc. dated May 27, 1998, as incorporated by reference from Exhibit 10.4 to the Company's Form 10-Q for the quarter ended September 30, 1998. 10.53 Appendix B to general agreement between East Tennessee Materials and Energy Corporation (M&EC) and Perma-Fix Environmental Services, Inc. dated November 6, 1998, as incorporated by reference from Exhibit 10.5 to the Company's Form 10-Q for the quarter ended September 30, 1998. 86 10.54 Agreement and Plan of Merger dated March 4, 1999, among Perma-Fix Environmental Services, Inc., Florida Perma- Chem, Inc., Georgia Perma-Chem, Inc., Chemical Conservation Corporation, Chemical Conservation of Georgia, Inc. the Thomas P. Sullivan Living Trust and the Ann L. Sullivan Living Trust. (Exhibits to this contract as listed in the index are omitted, but will be provided to the Commission upon request.) 88 10.55 Agreement and Plan of Merger dated March 4, 1999, among Perma-Fix Environmental Services, Inc., Perma-Met, Inc. Chem-Met Services, Inc., the Thomas P. Sullivan Living Trust, the Ann L. Sullivan Living Trust, Thomas P. Sullivan and Ann L. Sullivan. (Exhibits to this contract as listed in the index are omitted, but will be provided to the Commission upon request.) 159 10.56 Exchange Agreement dated March 14, 1999, among Liviakis Financial Communications, Inc., Robert B. Prag and Perma- Fix Environmental Services, Inc. 223 21.1 List of Subsidiaries 232 23.1 Consent of BDO Seidman, LLP 233 27.1 Financial Data Schedule 1998 234 27.2 Financial Data Schedule 1997 235 EX-10 2 EXHIBIT 10.54 CHEMICAL CONSERVATION AGREEMENT/PLAN OF MERGER AGREEMENT AND PLAN OF MERGER among PERMA-FIX ENVIRONMENTAL SERVICES, INC., FLORIDA PERMA-CHEM, INC., GEORGIA PERMA-CHEM, INC., CHEMICAL CONSERVATION CORPORATION, CHEMICAL CONSERVATION OF GEORGIA, INC., THE THOMAS P. SULLIVAN LIVING TRUST, THE ANN L. SULLIVAN LIVING TRUST, THOMAS P. SULLIVAN, an individual and ANN L. SULLIVAN, an individual March 15, 1999 TABLE OF CONTENTS _________________ Page ____ ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . .3 1.1 "Affiliate" . . . . . . . . . . . . . . . . . . . . . .3 1.2 "Chem-Con Common Stock" . . . . . . . . . . . . . . . .3 1.3 "Chem-Con Intellectual Property Right" . . . . . . . .3 1.4 "Chem-Met " . . . . . . . . . . . . . . . . . . . . . .3 1.5 "Chem-Met Agreement " . . . . . . . . . . . . . . . . .3 1.6 "Chem-Met Merger" . . . . . . . . . . . . . . . . . . .3 1.7 "Closing" . . . . . . . . . . . . . . . . . . . . . . .3 1.8 "Closing Date". . . . . . . . . . . . . . . . . . . . .3 1.9 "Code". . . . . . . . . . . . . . . . . . . . . . . . .3 1.10 "Effective Time". . . . . . . . . . . . . . . . . . . .3 1.11 "Environmental Laws". . . . . . . . . . . . . . . . . .3 1.12 "Employment Agreement". . . . . . . . . . . . . . . . .4 1.13 "ERISA" . . . . . . . . . . . . . . . . . . . . . . . .4 1.14 "GAAP". . . . . . . . . . . . . . . . . . . . . . . . .4 1.15 "Governmental Authority". . . . . . . . . . . . . . . .4 1.16 "Laws". . . . . . . . . . . . . . . . . . . . . . . . .4 1.17 "Liens" . . . . . . . . . . . . . . . . . . . . . . . .4 1.18 "Mergers" . . . . . . . . . . . . . . . . . . . . . . .4 1.19 "Mineral Rights". . . . . . . . . . . . . . . . . . . .4 1.20 "Permitted Encumbrances". . . . . . . . . . . . . . . .4 1.21 "Perma-Fix Common Stock". . . . . . . . . . . . . . . .4 1.22 "Perma-Met" . . . . . . . . . . . . . . . . . . . . . .5 1.23 "Quanta". . . . . . . . . . . . . . . . . . . . . . . .5 1.24 "Real Property" . . . . . . . . . . . . . . . . . . . .5 1.25 "Returns" . . . . . . . . . . . . . . . . . . . . . . .5 1.26 "Securities Act". . . . . . . . . . . . . . . . . . . .5 1.27 "SEC" . . . . . . . . . . . . . . . . . . . . . . . . .5 1.28 "Shares". . . . . . . . . . . . . . . . . . . . . . . .5 1.29 "Subsidiaries". . . . . . . . . . . . . . . . . . . . .5 1.30 "Surviving Corporations". . . . . . . . . . . . . . . .5 1.31 "Taxes" . . . . . . . . . . . . . . . . . . . . . . . .5 ARTICLE 2 THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . .5 2.1 The Mergers. . . . . . . . . . . . . . . . . . . . . .5 2.1.1 Merger of Chemical Florida with and into Florida Perma-Chem.. . . . . . . . . . . . . . .5 2.1.2 Merger of Chemical Georgia with and into Georgia Perma-Chem.. . . . . . . . . . . . . . .6 2.2 Effective Time of the Mergers . . . . . . . . . . . . .6 2.3 Closing . . . . . . . . . . . . . . . . . . . . . . . .6 2.4 Effects of the Mergers. . . . . . . . . . . . . . . . .6 2.4.1 Chemical Florida . . . . . . . . . . . . . . . .6 2.4.2 Chemical Georgia . . . . . . . . . . . . . . . .7 2.5 ALS Trust/TPS Trust Nominee on Perma-Fix's Board of Directors . . . . . . . . . . . . . . . . . . . . . . .7 2.5.1 ALS Trust/TPS Trust Nominee to Perma-Fix Board of Directors . . . . . . . . . . . . . . . . . .7 2.5.2 Information Regarding Sullivan Nominees. . . . .8 ARTICLE 3 CONVERSION OF SECURITIES. . . . . . . . . . . . . . . . . .8 3.1 Conversion of Capital Stock . . . . . . . . . . . . . .8 3.1.1 Capital Stock of Perma-Fix . . . . . . . . . . .9 3.1.2 Capital Stock of Florida Perma Chem. . . . . . .9 3.1.3 Capital Stock of Georgia Perma-Chem. . . . . . .9 3.1.4 Chem-Con Capital Stock . . . . . . . . . . . . .9 3.1.5 Chem-Con Treasury Stock. . . . . . . . . . . . .9 3.2 Dissenters Rights . . . . . . . . . . . . . . . . . . .9 3.3 Exchange of Certificates. . . . . . . . . . . . . . . 10 3.3.1 Exchange. . . . . . . . . . . . . . . . . . . .10 3.3.2 Exchange Procedures . . . . . . . . . . . . . .10 3.3.3 No Further Ownership Rights in Chem-Con Common Stock . . . . . . . . . . . . . . . . . . . . .10 3.3.4 No Fractional Shares. . . . . . . . . . . . . .10 3.3.5 No Liability. . . . . . . . . . . . . . . . . .11 3.3.6 Lost Certificates . . . . . . . . . . . . . . .11 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE ALS TRUST, THE TPS TRUST, ALS, TPS AND CHEM-CON. . . . . . . . . . . 11 4.1 Organization of the Sullivan Trusts . . . . . . . . . 11 4.2 Organization of Chem-Con. . . . . . . . . . . . . . . 11 4.3 Capital Stock of Chem-Con . . . . . . . . . . . . . . 12 4.4 Ownership Interests in Securities . . . . . . . . . . 12 -ii- 4.5 Financials. . . . . . . . . . . . . . . . . . . . . . 12 4.5.1 Financial Statements . . . . . . . . . . . . . 13 4.5.2 Liabilities. . . . . . . . . . . . . . . . . . 13 4.5.3 Net Worth. . . . . . . . . . . . . . . . . . . 13 4.5.4 Transactions Since September 30, 1998. . . . . 13 4.6 Tax and Other Returns, Reports and Pooling of Interest. . . . . . . . . . . . . . . . . . . . . . . 14 4.6.1 Tax Returns. . . . . . . . . . . . . . . . . . 14 4.6.2 Payment of Taxes. . . . . . . . . . . . . . . .14 4.6.3 Waiver of Statute of Limitations. . . . . . . .14 4.6.4 Tax Deficiencies. . . . . . . . . . . . . . . .15 4.6.5 Pooling of Interests. . . . . . . . . . . . . .15 4.7 Property. . . . . . . . . . . . . . . . . . . . . . . 15 4.7.1 Assets. . . . . . . . . . . . . . . . . . . . .15 4.7.2 Real Property . . . . . . . . . . . . . . . . .15 4.7.3 Leases. . . . . . . . . . . . . . . . . . . . .15 4.7.4 Notice. . . . . . . . . . . . . . . . . . . . .16 4.7.5 Personal Property . . . . . . . . . . . . . . .16 4.7.6 Notice from Insurance Carrier . . . . . . . . .16 4.8 Intellectual Property . . . . . . . . . . . . . . . . 16 4.8.1 Ownership . . . . . . . . . . . . . . . . . . .16 4.8.2 No Breach of License. . . . . . . . . . . . . .17 4.8.3 Year 2000 Issues. . . . . . . . . . . . . . . .17 4.9 Agreements, Contracts and Commitments . . . . . . . . 18 4.9.1 Contracts . . . . . . . . . . . . . . . . . . .18 4.9.2 Written List. . . . . . . . . . . . . . . . . .20 4.10 No Breach of Statute or Contract; Governmental Authorizations . . . . . . . . . . . . . . . . . . . .21 4.10.1 No Violation. . . . . . . . . . . . . . . . . .21 4.10.2 Permits and Licenses. . . . . . . . . . . . . .22 4.10.3 Reports . . . . . . . . . . . . . . . . . . . .22 4.10.4 Violation of Law and Contamination of Real Property . . . . . . . . . . . . . . . . .22 4.10.5 Permits under Environmental Laws. . . . . . . .22 4.10.6 Other Permits . . . . . . . . . . . . . . . . .23 4.11 No Litigation or Adverse Effects. . . . . . . . . . . 23 4.12 Authorization, Execution and Delivery of Agreement. . 24 4.13 Ability to Conduct the Business . . . . . . . . . . . 24 4.14 Disclosure. . . . . . . . . . . . . . . . . . . . . . 24 4.15 Broker's or Finder's Fee. . . . . . . . . . . . . . . 25 4.16 Insurance . . . . . . . . . . . . . . . . . . . . . . 25 4.17 Completeness of Documents -- Chem-Con and CCC . . . . 25 4.18 Completeness of Documents -- Sullivan Trusts. . . . . 25 4.19 Disposition of Assets . . . . . . . . . . . . . . . . 25 -iii- 4.20 Obligations to Employees. . . . . . . . . . . . . . . 26 4.21 Condition of Plant, Machinery and Equipment . . . . . 27 4.22 Books of Account. . . . . . . . . . . . . . . . . . . 28 4.23 Stock Redemptions . . . . . . . . . . . . . . . . . . 28 4.24 Minute Books. . . . . . . . . . . . . . . . . . . . . 28 4.25 Indebtedness of Shareholders, etc . . . . . . . . . . 28 4.26 Business Prospects. . . . . . . . . . . . . . . . . . 28 4.27 Bank Accounts; Powers of Attorney . . . . . . . . . . 28 4.28 Sensitive Payments. . . . . . . . . . . . . . . . . . 28 ARTICLE 5 ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SULLIVANS AND THE SULLIVAN TRUSTS. . . . 29 5.1 Affiliate Status. . . . . . . . . . . . . . . . . . . 29 5.2 Rule 145. . . . . . . . . . . . . . . . . . . . . . . 29 5.3 Legend. . . . . . . . . . . . . . . . . . . . . . . . 29 5.4 Restrictions on Certain Actions . . . . . . . . . . . 30 5.4.1 Prohibition Against Acquisition . . . . . . . .30 5.4.2 Prohibition Against Solicitation. . . . . . . .30 5.4.3 Prohibition Against Control . . . . . . . . . .31 5.5 Attendance. . . . . . . . . . . . . . . . . . . . . . 31 5.6 Specific Enforcement. . . . . . . . . . . . . . . . . 31 ARTICLE 6 NO SOLICITATION OF TRANSACTIONS . . . . . . . . . . . . . 31 6.1 No Solicitation of Transactions . . . . . . . . . . . 31 ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF PERMA-FIX . . . . . . . 32 7.1 Organization, etc . . . . . . . . . . . . . . . . . . 32 7.2 Authorization, Execution and Delivery of Agreement. . 33 7.3 Capital Stock of Perma-Fix. . . . . . . . . . . . . . 33 7.4 SEC Filings . . . . . . . . . . . . . . . . . . . . . 33 7.4.1. . . . . . . . . . . . . . . . . . . . . . . . .33 7.4.2 Material Adverse Change . . . . . . . . . . . .34 7.5 Status of Perma-Fix Common Stock . . . . . . . . . . .34 7.6 No Breach of Statute or Contract, Governmental Authorizations . . . . . . . . . . . . . . . . . . . .34 7.7 No Litigation or Adverse Events. . . . . . . . . . . .35 -iv- 7.8 Broker's or Finder's Fees . . . . . . . . . . . . . . 35 ARTICLE 8 COVENANTS OF CONDUCT AND TRANSACTIONS PRIOR TO AND AFTER THE CLOSING. . . . . . . . . . . . . . 35 8.1 Investigations; Operation of Business of Chem-Con . . 35 8.1.1 Access to Premises and Books. . . . . . . . . .35 8.1.2 Business Organization of Chem-Con . . . . . . .36 8.1.3 Ordinary Course of Business . . . . . . . . . .36 8.1.4 Sale of Assets. . . . . . . . . . . . . . . . .38 8.2 No Selling of Shares or Granting of Options . . . . . 39 8.3 Consents. . . . . . . . . . . . . . . . . . . . . . . 39 8.4 Governmental Reports. . . . . . . . . . . . . . . . . 39 8.5 Conduct of Business . . . . . . . . . . . . . . . . . 39 8.6 Governmental Approvals. . . . . . . . . . . . . . . . 39 8.7 Encumber. . . . . . . . . . . . . . . . . . . . . . . 40 8.8 Title Policies for Real Property Owned by Chemical Florida. . . . . . . . . . . . . . . . . . . 40 8.9 Title Policies for Real Properties owned by Chemical Georgia. . . . . . . . . . . . . . . . . . . 40 8.10 Real Property Located in Orlando, Florida . . . . . . 40 8.11 Survey. . . . . . . . . . . . . . . . . . . . . . . . 41 8.12 Public Announcements. . . . . . . . . . . . . . . . . 41 8.13 Notification. . . . . . . . . . . . . . . . . . . . . 41 8.14 Filings . . . . . . . . . . . . . . . . . . . . . . . 42 8.15 Supplemental Disclosure . . . . . . . . . . . . . . . 42 8.16 SEC Filings . . . . . . . . . . . . . . . . . . . . . 42 8.17 Listing of Perma-Fix Common Stock . . . . . . . . . . 42 8.18 Perma-Fix Registration Statement, etc.. . . . . . . . 42 8.19 Information for Proxy Statements. . . . . . . . . . . 43 8.20 Registration Statement; Proxy Statement/ Prospectus. . . . . . . . . . . . . . . . . . . . . . 43 8.21 Disclosure in Proxy Statement.. . . . . . . . . . . . 44 8.22 Audited Financial Statements. . . . . . . . . . . . . 44 8.23 Public Disclosure . . . . . . . . . . . . . . . . . . 45 8.24 Pooling Accounting. . . . . . . . . . . . . . . . . . 45 8.25 Letter of Public Accountants. . . . . . . . . . . . . 45 8.26 Assumption of Liabilities . . . . . . . . . . . . . . 46 8.27 Liability to Broker . . . . . . . . . . . . . . . . . 46 8.28 Access to Premises and Books. . . . . . . . . . . . . 47 -v- ARTICLE 9 CONDITIONS OF TRANSACTIONS CONTEMPLATED BY AGREEMENT; ABANDONMENT OF AGREEMENT . . . . . . . . . . . 47 9.1 Closing Conditions of Perma-Fix, Florida Perma-Chem and Georgia Perma-Chem. . . . . . . . . . . . . . . . . . 47 9.1.1 Resolutions of Board of Directors and Shareholders of Chem-Con . . . . . . . . . . . 47 9.1.2 Delivery of Trust Documents. . . . . . . . . . 48 9.1.3 Approval by Lender. . . . . . . . . . . . . . .48 9.1.4 Representations and Warranties of the Sullivans and the Sullivan Trusts to be True and Correct and Compliance With Covenants. . . . . . . . . . . . . . . . . . . 48 9.1.5 Representations and Warranties of Chem-Con to be True and Compliance With Covenants . . . 48 9.1.6 Third Party Consents. . . . . . . . . . . . . .49 9.1.7 No Material Adverse Change. . . . . . . . . . .49 9.1.8 Statutory Requirements; Litigation. . . . . . .49 9.1.9 Opinion of Counsel of Chem-Con, the Sullivans and the Sullivan Trusts . . . . . . .50 9.1.10 Effective Registration Statement. . . . . . . .50 9.1.11 Due Diligence . . . . . . . . . . . . . . . . .50 9.1.12 Environmental Audit . . . . . . . . . . . . . .50 9.1.13 Stock Certificates. . . . . . . . . . . . . . .50 9.1.14 Permits . . . . . . . . . . . . . . . . . . . .51 9.1.15 No Liens on Assets. . . . . . . . . . . . . . .51 9.1.16 Listing of Perma-Fix Common Stock . . . . . . .51 9.1.17 Minute Books and Stock Ledgers. . . . . . . . .51 9.1.18 Financial Statements. . . . . . . . . . . . . .51 9.1.19 Orlando Real Estate . . . . . . . . . . . . . .51 9.1.20 Title Policies and Surveys. . . . . . . . . . .52 9.1.21 Good Standing Certificates. . . . . . . . . . .52 9.1.22 Resignation of Directors. . . . . . . . . . . .52 9.1.23 Chem-Met Agreement. . . . . . . . . . . . . . .52 9.1.24 Valdosta Remediation. . . . . . . . . . . . . .52 9.1.25 Pooling Letters.. . . . . . . . . . . . . . . .52 9.1.26 Shareholder Approval. . . . . . . . . . . . . .52 9.1.27 Shareholder Approval. . . . . . . . . . . . . .52 9.1.28 Accountants Letters . . . . . . . . . . . . . .53 9.1.29 Employment Agreement. . . . . . . . . . . . . .53 9.1.30 Officer and Director Waiver . . . . . . . . . .53 9.1.31 Fairness Opinion. . . . . . . . . . . . . . . .53 9.1.32 Closing Price of Perma-Fix Common Stock . . . .53 -vi- 9.2 Conditions to Obligations of Chem-Con and The ALS Trust . . . . . . . . . . . . . . . . . . . . . . 53 9.2.1 Resolutions of Perma-Fix Board of Directors and Shareholders . . . . . . . . . . . 53 9.2.2 Resolutions of Florida Perma-Chem and Georgia Perma-Chem Board of Directors and Shareholders. . . . . . . . . . . . . . . 54 9.2.3 Representations and Warranties of Perma- Fix to be True . . . . . . . . . . . . . . . . . 54 9.2.4 Employment Agreement . . . . . . . . . . . . . . 54 9.2.5 Effective Registration Statement . . . . . . . . 54 9.2.6 No Material Adverse Change . . . . . . . . . . . 54 9.2.7 Litigation . . . . . . . . . . . . . . . . . . . 55 9.2.8 Opinion of Counsel of Perma-Fix. . . . . . . . . 55 9.2.9 Closing Price of Perma-Fix Closing Stock . . . . 55 9.3 Termination of Agreement and Abandonment of Mergers . . . . . . . . . . . . . . . . . . . . . . . . 55 9.3.1 Conditions of the Sullivans, the Sullivan Trusts or Chem-Con Not Met. . . . . . . 55 9.3.2 Conditions of Perma-Fix Not Met. . . . . . . . . 55 9.3.3 Termination by Perma-Fix or the Sullivans of the Chem-Met Agreement. . . . . . . . . . . . 56 9.3.4 Mutual Consent . . . . . . . . . . . . . . . . . 56 9.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . 56 ARTICLE 10 TERMINATION OF OBLIGATIONS AND WAIVER OF CONDITIONS. . . . 56 10.1 Termination . . . . . . . . . . . . . . . . . . . . . . 56 10.2 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . 56 ARTICLE 11 INDEMNIFICATION AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . 57 11.1 Indemnification by the Sullivans and the Sullivan Trusts . . . . . . . . . . . . . . . . . . . . . . . . .57 11.2 Notice of Claim. . . . . . . . . . . . . . . . . . . . .57 11.3 Survival of Representations and Remedies . . . . . . . .57 11.4 Indemnification Period . . . . . . . . . . . . . . . . .58 11.5 Settlement of Indemnification Claims . . . . . . . . . .58 ARTICLE 12 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . .58 12.1 Entire Agreement and Amendment . . . . . . . . . . . . .58 -vii- 12.2 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . .58 12.3 Governing Law . . . . . . . . . . . . . . . . . . . . 58 12.4 Benefit of Parties; Assignment. . . . . . . . . . . . 59 12.5 Pronouns. . . . . . . . . . . . . . . . . . . . . . . 59 12.6 Headings. . . . . . . . . . . . . . . . . . . . . . . 59 12.7 Notices . . . . . . . . . . . . . . . . . . . . . . . 59 12.8 Time. . . . . . . . . . . . . . . . . . . . . . . . . 60 12.9 Severability. . . . . . . . . . . . . . . . . . . . . 60 12.10 Counterparts . . . . . . . . . . . . . . . . . . . . 60 Schedule "A" - List of all jurisdictions in which Chem-Con is authorized to do business Schedule "B" - List of all of Chem-Con's ownership interests in other business enterprises Schedule "C" - Liabilities Schedule "D" - List of all transactions of Chem-Con since September 30, 1998 Schedule "E" - Tax Returns; Payment of Taxes; Waiver of Statute of Limitations; Tax Deficiencies Schedule "F" - List of all Permitted Encumbrances and Liens on Chem-Con assets; Real Property owned by Chem-Con; title insurance policies; leases; Chem-Con personal property; notices of violations Schedule "G" - List of all contracts Schedule "H" - List of contracts, leases, and agreements re Chem-Con business (copies) Schedule "I" - Permits and licenses and reports since December 31, 1990 Schedule "J" - Litigation Schedule "K" - List of all trade names, trademarks, service marks, patents, copyrights and applications Schedule "L" - Insurance Schedule "M" - Disposition of Assets Schedule "N" - Determination letters on benefit plans Schedule "O" - Condition of plant, machinery and equipment Schedule "P" - Indebtedness of Shareholders Schedule "Q" - Bank accounts/borrowing resolutions of Chem- Con; Powers of Attorney Schedule "R" - Description of Quanta Tract Schedule "S" - Year 2000 Information Exhibit "A" - Employment Agreement with Thomas P. Sullivan Exhibit "B" - Permitted Encumbrances Exhibit "C" - Florida Articles of Merger Exhibit "D" - Georgia Certificate of Merger Exhibit "E" - Opinion of Counsel of Chem-Con Exhibit "F" - Opinion of Counsel of Perma-Fix -viii- AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of the 15th day of March, 1999, among PERMA-FIX ENVIRONMENTAL SERVICES, INC., a Delaware corporation ("Perma-Fix"); FLORIDA PERMA-CHEM, INC. a Florida corporation and a wholly-owned subsidiary of Perma-Fix ("Florida Perma-Chem"); GEORGIA PERMA-CHEM, INC., a Georgia corporation and a wholly-owned subsidiary of Perma- Fix ("Georgia Perma-Chem"); CHEMICAL CONSERVATION CORPORATION; a Florida corporation ("Chemical Florida"); CHEMICAL CONSERVATION OF GEORGIA, INC., a Georgia corporation ("Chemical Georgia"); The THOMAS P. SULLIVAN LIVING TRUST, dated September 6, 1978 ("TPS Trust"); The ANN L. SULLIVAN LIVING TRUST, dated September 6, 1978 ("ALS Trust"); THOMAS P. SULLIVAN, an individual ("TPS"); and ANN L. SULLIVAN, an individual ("ALS"). Collectively, the TPS Trust and the ALS Trust are referred to herein as the "Sullivan Trusts,"; TPS and ALS are collectively referred to as the "Sullivans"; Chemical Florida and Chemical Georgia are referred to herein as "Chem-Con," and Florida Perma-Chem and Georgia Perma-Chem are referred to herein as "Perma-Chem." W I T N E S S E T H: WHEREAS, the ALS Trust is the sole and exclusive owner of all of the issued and outstanding capital stock of Chemical Florida and Chemical Georgia (collectively the "Chem-Con Common Stock"); WHEREAS, ALS is the sole trustee and primary beneficiary of the ALS Trust; WHEREAS, TPS is the sole trustee and primary beneficiary of the TPS Trust; WHEREAS, the Sullivans are husband and wife; WHEREAS, Florida Perma-Chem and Georgia Perma-Chem are, directly or indirectly, wholly owned subsidiaries of Perma-Fix; WHEREAS, the Board of Directors of Perma-Fix, Florida Perma-Chem and Chemical Florida deem it advisable and in the best interest of each corporation and its respective stockholders that Chemical Florida merge with and into Florida Perma-Chem, with Florida Perma-Chem being the survivor, in order to advance the long-term business interest of each corporation; WHEREAS, the Board of Directors of Perma-Fix, Georgia Perma-Chem and Chemical Georgia deem it advisable and in the best interests of each corporation and its respective stockholders that Chemical Georgia merge with and into Georgia Perma-Chem, with Georgia Perma-Chem being the survivor, in order to advance the long-term business interest of each corporation; WHEREAS, Chem-Con Corporation, a Florida corporation ("CCC") is a wholly owned subsidiary of Chemical Florida; WHEREAS, the parties hereto desire that Chemical Florida shall be merged with and into Florida Perma-Chem, with Florida Perma-Chem being the survivor, (said transaction being hereinafter referred to as the " Florida Merger") pursuant to a plan of merger (the "Florida Plan of Merger") in which the stockholder of Chemical Florida will become a stockholder of Perma- Fix, and the parties desire to provide for certain undertakings, conditions, representations, warranties and covenants in connection with such transactions contemplated hereby; WHEREAS, the parties hereto desire that Chemical Georgia shall be merged with and into Georgia Perma-Chem, with Georgia Perma-Chem being the survivor, (said transaction being hereinafter referred to as the "Georgia Merger") pursuant to a plan of merger (the "Georgia Plan of Merger") in which the stockholder of Chemical Georgia will become a stockholder of Perma-Fix, and the parties desire to provide for certain undertakings, conditions, representations, warranties and covenants in connection with such transactions; WHEREAS, the Florida Merger and the Georgia Merger are collectively referred to herein as the "Mergers"; WHEREAS, for Federal income tax purposes, it is intended that the Mergers shall qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"); WHEREAS, for accounting purposes, it is intended that the Mergers shall be accounted for as a pooling of interests; WHEREAS, the Board of Directors of Perma-Fix, Florida Perma-Chem and Chemical Florida have approved and adopted the Florida Merger, this Agreement and the Florida Plan of Merger; and WHEREAS, the Board of Directors of Perma-Fix, Georgia Perma-Chem and Chemical Georgia have approved and adopted the Georgia Merger, this Agreement and the Georgia Plan of Merger. NOW, THEREFORE, in consideration of the premises and the mutual covenants, agreements, representations and warranties herein contained, the parties hereto agree as follows: -2- ARTICLE 1 DEFINITIONS For purposes of this Agreement, the following terms shall have the respective meanings set forth below: 1.1 "Affiliate" has the meaning set forth in Rule 405 promulgated under the Securities Act, whether or not such is an Affiliate now or becomes an Affiliate after the date hereof. 1.2 "Chem-Con Common Stock" has the meaning as specified in Section 4.3 hereof. 1.3 "Chem-Con Intellectual Property Right" has the meaning as defined in Section 4.8.1 of this Agreement. 1.4 "Chem-Met " shall mean Chem-Met Services, Inc. a Michigan corporation. 1.5 "Chem-Met Agreement " shall mean that certain Agreement and Plan of Merger among Perma-Fix, Perma-Met (as defined below), Chem-Met, the Sullivan Trusts and the Sullivans, dated as of the date of this Agreement, whereby Chem-Met is to merge with and into Perma-Met, a wholly owned subsidiary of Perma-Fix, with Perma-Met being the survivor. 1.6 "Chem-Met Merger" shall mean the merger of Chem-Met with and into Perma-Met (as defined below), with Perma-Met being the survivor, pursuant to the Chem-Met Agreement. 1.7 "Closing" has the meaning as specified in Section 2.3 hereof. 1.8 "Closing Date" has the meaning as specified in Section 2.3 hereof. 1.9 "Code" means the Internal Revenue Code of 1986, as amended. 1.10 "Effective Time" shall have the meaning set forth in Section 2.2 hereof. 1.11 "Environmental Laws" mean all federal, state, county, local and foreign environmental, health, and safety laws, codes, ordinances and all rules and regulations promulgated there- under, including, without limitation, laws relating to management, emissions, discharges, releases or threatened -3- releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment (including, without limitation, air, surface water, groundwater, land surface or subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, chemicals, petroleum products or industrial, solid, toxic or hazardous substances or wastes. Environmental Laws include, without limitation, (i) the Federal Water Pollution Control Act ("FWPCA"), 33 U.S.C. Section 1251, et seq.; (ii) the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601, et seq.; (iii) the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901, et seq.; (iv) the Clean Air Act ("Clean Air Act"), 42 U.S.C. Section 7401, et seq; (v) the Toxic Substances Control Act ("TSCA"), 15 U.S.C. Section 201, et seq.; (vi) any and all other analogous state and local statutes; and, (vii) all rules and regulations promulgated under any of the foregoing. 1.12 "Employment Agreement" shall have the meaning set forth in Section 9.2.4 hereof, a copy of which is attached hereto as Exhibit "A". 1.13 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder. 1.14 "GAAP" means United States generally accepted accounting prin- ciples. 1.15 "Governmental Authority" means any agency, instrumentality, department, commission, court, tribunal or board of any government, whether foreign or domestic and whether national, federal, state, provincial, or local. 1.16 "Laws" mean any and all federal, state and local laws, rules, regulations, codes, orders, ordinances, judgments, injunctions and decrees. 1.17 "Liens" mean all security interests, liens, mortgages, claims, charges, pledges, restrictions, equitable interests, easements, property rights or encumbrances of any nature. 1.18 "Mergers" has the meaning as defined in the eleventh WHEREAS clause of this Agreement. 1.19 "Mineral Rights" mean the mineral and oil and gas rights, interest and leases, pipelines and pipeline rights of way situated on and under the Real Property. 1.20 "Permitted Encumbrances" means (i) liens listed on Exhibit "B" attached hereto; (ii) liens for taxes not yet delinquent or being contested in good faith by appropriate proceedings; and, (iii) such technical imperfections of title and easements, if any, which do not in the sole discretion of Perma-Fix, when considered together, detract materially from the value of, or interfere with, the present or presently proposed use of, any Real Property. 1.21 "Perma-Fix Common Stock" means the Common Stock, par value $.001 per share, of Perma-Fix. -4- 1.22 "Perma-Met" shall mean Perma-Met, Inc., a Michigan corporation and a wholly owned subsidiary of Perma-Fix. 1.23 "Quanta" means Quanta Corporation, a Michigan corporation in which all of its issued and outstanding capital stock is owned by the ALS Trust. 1.24 "Real Property" means all real property, land, buildings, improvements and structures owned, leased or used by Chem-Con. 1.25 "Returns" mean all returns, declaration, reports, estimates, information returns and statements required to be filed with or supplied to any taxing authority in connection with any Taxes. 1.26 "Securities Act" means the Securities Act of 1933, as amended. 1.27 "SEC" means the U.S. Securities and Exchange Commission. 1.28 "Shares" means all of the issued and outstanding shares of capital stock of Chemical Florida and Chemical Georgia of whatsoever character and description. 1.29 "Subsidiaries" means all corporations fifty percent (50%) or more of the common stock or other form of equity of which shall be owned, directly or indirectly through one or more intermediaries, by another corporation. 1.30 "Surviving Corporations" has the meaning as defined in Section 2.4.2 of this Agreement. 1.31 "Taxes" mean all taxes, charges, fees, levies or other assess- ments, including, without limitation, income, gross receipts, excise, real and personal property, sales, transfer, license, payroll and franchise taxes, imposed by any Governmental Auth- ority and shall include any interest, penalties or additions to tax attributable to any of the foregoing. ARTICLE 2 THE MERGER 2.1 The Mergers. 2.1.1 Merger of Chemical Florida with and into Florida Perma- Chem. Subject to the terms of this Agreement, Chemical Florida shall merge with and into Florida Perma-Chem, with Florida Perma-Chem being the surviving -5- corporation, in accordance with the applicable provisions of the Florida Business Corporation Act ("FBCA") and the terms of this Agreement. Chemical Florida and Florida Perma-Chem agree to the Florida Merger. 2.1.2 Merger of Chemical Georgia with and into Georgia Perma- Chem. Subject to the terms of this Agreement, Chemical Georgia shall merge with and into Georgia Perma-Chem, with Georgia Perma-Chem being the surviving corporation, in accordance with the applicable provisions of the Georgia Business Corporation Code ("GBCC") and the terms of this Agreement. Chemical Georgia and Georgia Perma-Chem agree to the Georgia Merger. 2.2 Effective Time of the Mergers. Subject to the provisions of this Agreement, at the Closing (as defined below) (i) the Articles of Merger regarding the Florida Merger, a copy of which is attached hereto as Exhibit "C" (the "Florida Articles of Merger"), shall be duly executed and acknowledged by Chemical Florida and Florida Perma-Chem and delivered to and filed with the Secretary of State of Florida, as provided in the FBCA, on the Closing Date, and (ii) the Certificate of Merger regarding the Georgia Merger, a copy of which is attached hereto as Exhibit "D" ("Georgia Certficiate of Merger"), shall be duly executed and acknowledged by Chemical Georgia and Georgia Perma-Chem, and delivered to and filed with the Secretary of State of Georgia, as provided in the GBCC, on the Closing Date. The Mergers shall become effective upon the filing of the Florida Articles of Merger and the Georgia Articles of Merger (collectively, the "Articles of Merger") as herein described, or at such time thereafter as shall be provided in the Articles of Merger (the "Effective Time"). 2.3 Closing. The closing of the Mergers (the "Closing") will take place at 10:00 a.m., Eastern Standard Time, pursuant to the terms of this Agreement on a date to be specified by Perma-Fix and Chem-Con, which shall be no later than five business days after approval of the Mergers and the Chem-Met Merger by the shareholders of Perma-Fix entitled to vote thereon (the "Closing Date"), at the offices of Chemical Conservation Corporation, 10100 Rocket Boulevard, Orlando, Florida, 32824, unless another date, place or time is agreed to in writing by Perma-Fix and Chem-Con. 2.4 Effects of the Mergers. At the Effective Time: 2.4.1 Chemical Florida. Chemical Florida shall be merged with and into Florida Perma-Chem (Chemical Florida and Florida Perma-Chem are sometimes referred to below as the "Florida Constituent Corporations" and Florida Perma-Chem is sometimes referred to herein as the "Florida Surviving Corporation"), with Florida Perma- Chem being the survivor and Chemical Florida ceasing to exist, (ii) the Articles of Incorporation of Florida Perma-Chem immediately prior to the Effective Time shall be the Articles of Incorporation of the Florida -6- Surviving Corporation, except that at the Effective Time Florida Perma-Chem shall change its corporate name to [Chemical Conservation of Florida, Inc.,] (iii) the Bylaws of Florida Perma-Chem as in effect immediately prior to the Effective Time shall be the Bylaws of the Florida Surviving Corporation, and (iv) the purpose of the Florida Surviving Corporation shall be as set forth in Article II of the Articles of Incorporation of Florida Perma-Chem immediately prior to the Effective Time. 2.4.2 Chemical Georgia. Chemical Georgia shall be merged with and into Georgia Perma-Chem (Chemical Georgia and Georgia Perma-Chem are sometimes referred to below as the "Georgia Constituent Corporations" and Georgia Perma-Chem is sometimes referred to herein as the "Georgia Surviving Corporation"), with Georgia Perma- Chem being the survivor and Chemical Georgia ceasing to exist, (ii) the Articles of Incorporation of Georgia Perma-Chem immediately prior to the Effective Time shall be the Articles of Incorporation of the Georgia Surviving Corporation, except that at the Effective Time Georgia Perma-Chem shall change its name to Chemical Conservation of Georgia, Inc.,(iii) the Bylaws of Georgia Perma-Chem as in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation, and (iv) the purpose of the Georgia Surviving Corporation shall be as set forth in Article II of the Articles of Incorporation of Georgia Perma- Chem immediately prior to the Effective Time. "Surviving Corporation" shall refer to the Florida Surviving Corporation and the Georgia Surviving Corporation. 2.5 ALS Trust/TPS Trust Nominee on Perma-Fix's Board of Directors. 2.5.1 ALS Trust/TPS Trust Nominee to Perma-Fix Board of Directors. Subject to, and except as otherwise provided by, the terms of this Section 2.5.1, after the Closing Date, and provided that at all times through the date of Perma-Fix's annual meeting of shareholders at which the Sullivan Trusts are entitled to have their one (1) nominee ("Sullivan Nominee") elected to Perma- Fix's Board of Directors under this Section 2.5.1, the Sullivan Trusts owns of record, in the aggregate, not less than 1,500,000 shares of the Perma-Fix Common Stock that the Sullivan Trusts acquired under this Agreement and the Chem-Met Agreement, the Sullivan Trusts may select one (1) nominee for nomination to Perma-Fix's Board of Directors and Perma-Fix agrees to recommend to the shareholders of Perma-Fix at Perma- Fix's annual meeting of shareholders the one nominee selected by the Sullivan Trusts if such Sullivan Nominee is satisfactory to the Board of Directors of Perma-Fix, along with all other nominees nominated by the Board of Directors of Perma-Fix, for election to the Board of Directors of Perma-Fix. Notwithstanding the above, if at any time and for any reason after the Closing Date the Sullivan Trusts' ownership of record -7- of Perma-Fix Common Stock acquired under this Agreement and the Chem-Met Agreement is, in the aggregate, less than1,500,000 shares of Perma-Fix Common Stock, then the Sullivan Trusts shall not be entitled to have a Sullivan Nominee elected or recommended by Perma-Fix for election to the Board of Directors of Perma-Fix. Nothing contained in this Section 2.5.1 shall obligate or cause the Board of Directors of Perma-Fix to violate any of their fiduciary duties. Notwithstanding the foregoing, from and after the breach or default by any of the Sullivans and/or the Sullivan Trusts of any of their obligations, agreements or covenants contained in this Agreement or the Chem-Met Agreement or the Employment Agreement, the Sullivan Trusts shall have no further rights under this Section 2.5.1 and no further right to designate a Sullivan Nominee and Perma-Fix shall have no obligation to recommend or otherwise take affirmative action regarding any nominee of the Sullivan Trusts for a position on the Perma-Fix Board of Directors. 2.5.2 Information Regarding Sullivan Nominees. During the period that the Sullivan Trusts are entitled to have one nominee elected to the Board of Directors of Perma- Fix, the Sullivan Trusts shall provide to the President of Perma-Fix the name of such nominee or nominees and a written description of such nominee or nominees within 120 days prior to the date of the annual meeting of shareholders at which the Sullivan Nominee is to be elected to Perma-Fix's Board of Directors. The written description of such nominee or nominees must contain all such information regarding such nominee or nominees as is required to be disclosed in a Perma-Fix Proxy Statement relating to the election of directors under Schedule 14A as promulgated under Section 14(a) of the Exchange Act (including, but not limited to, informa- tion required by Item 401 of Regulation S-K). Within thirty (30) days after receipt by the President of Perma-Fix of such written information regarding the Sullivan Trusts proposed nominee, Perma-Fix shall advise the Sullivan Trusts if such nominee is not acceptable to the Board of Directors of Perma-Fix. If any such nominee selected by the Sullivan Trusts is not acceptable, the Sullivan Trusts shall, within ten (10) days from being advised by Perma-Fix that its nominee is not acceptable to the Board of Directors of Perma- Fix, supply the name and the required written descrip- tion concerning the Sullivan Trusts' new nominee, if any, with such new nominee to be satisfactory to the Board of Directors of Perma-Fix. ARTICLE 3 CONVERSION OF SECURITIES 3.1 Conversion of Capital Stock. As of the Effective Time: -8- 3.1.1 Capital Stock of Perma-Fix. Each share of capital stock of Perma-Fix issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding and be unchanged by the Mergers; 3.1.2 Capital Stock of Florida Perma Chem. Each share of capital stock of Florida Perma-Chem issued and outstanding immediately prior to the Effective Time shall remain issued and be unchanged by the Florida Merger. 3.1.3 Capital Stock of Georgia Perma-Chem. Each share of capital stock of Georgia Perma-Chem issued and outstanding immediately prior to the Effective Time shall remain issued and be unchanged by the Georgia Merger. 3.1.4 Chem-Con Capital Stock. Each share of capital stock of Chemical Florida and each share of capital stock of Chemical Georgia issued and outstanding immediately prior to the Effective Time shall, by virtue of the Mergers, and without any action on the part of the holder thereof, be automatically canceled, be null and void and, subject to the terms of this Article 3, all shares of Chem-Con Common Stock issued and outstanding immediately prior to the Effective Time shall by virtue of the Mergers, and without any action on the part of the holder thereof, be exchanged for that number of fully paid and nonassessable shares of Perma-Fix Common Stock determined by dividing $6,500,000 by the average of the closing sale prices per share of the Perma-Fix Common Stock as reported on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") for five consecutive trading days ending with the trading day immediately prior to the Effective Time. During the five consecutive trading days ending with the trading day immediately prior to the Effective Time, the Company shall not, and shall cause its officers and directors to not, buy or sell any Perma- Fix Common Stock over the NASDAQ or the Boston Stock Exchange. 3.1.5 Chem-Con Treasury Stock. All shares of Chem-Con Common Stock that are owned by Chem-Con as treasury stock, if any, shall be canceled and retired and shall cease to exist and no Perma-Fix Common Stock or other consideration shall be delivered in exchange therefor. 3.2 Dissenters Rights. The holders of all issued and outstanding shares of Chem-Con Common Stock are parties to this Agreement and they each agree, represent and warrant that none of them shall exercise or attempt to exercise any dissenters rights, right of appraisal or similar rights provided for under the FBCA or the GBCC. -9- 3.3 Exchange of Certificates. The procedures for exchanging outstanding shares of Chem-Con Common Stock for Perma-Fix Common Stock pursuant to the Mergers are as follows: 3.3.1 Exchange. As of the Effective Time, Perma-Fix shall deliver to the ALS Trust certificates representing the shares of Perma-Fix Common Stock ( the "Exchange Certificates") issuable pursuant to Section 3.1.4 in exchange for outstanding shares of Chem-Con Common Stock. 3.3.2 Exchange Procedures. At the Effective Time, the ALS Trust, being the sole beneficial and record owner of all of the issued and outstanding shares of capital stock of Chem-Con, shall surrender to Perma-Fix all certificates representing all of the issued and outstanding shares of capital stock of Chem-Con (the "Certificates"), duly and validly endorsed, in blank, with signatures guaranteed by a national bank or investment banking firm, for cancellation, and, subject to the terms and conditions of this Agreement, the ALS Trust, being the sole and exclusive holder of any and all such Certificates shall be entitled to receive in exchange for all of the shares of Chem-Con Common Stock a certificate representing that number of whole shares of Perma-Fix Common Stock which such holder has the right to receive pursuant to the provisions of Section 3.1.4 hereof, and the Certificates so surrendered shall immediately be canceled. Until surrendered as contemplated by this Section 3.3.2, the Certificates representing shares of Chem-Con Common Stock shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the certificate representing shares of Perma-Fix Common Stock as contemplated by this Section 3.1.4. 3.3.3 No Further Ownership Rights in Chem-Con Common Stock. All shares of Perma-Fix Common Stock issued upon the surrender for exchange of Certificates in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of Chem-Con Common Stock. From and after the Effective Time there shall be no further registration of transfers on the stock transfer books of the Surviving Corporations of the shares of Chem-Con Common Stock which were outstanding immediately prior to the Effective Time. 3.3.4 No Fractional Shares. No certificate or scrip representing fractional shares of Perma-Fix Common Stock shall be issued upon the surrender for exchange of Certificates, and such fractional share interests will not entitle the owner thereof to vote or to any other rights of a stockholder of Perma-Fix. -10- 3.3.5 No Liability. Neither Perma-Fix nor Chem-Con shall be liable to any holder of shares of Chem-Con Common Stock or Perma-Fix Common Stock, as the case may be, for such shares (or dividends or distributions with respect thereto) delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. 3.3.6 Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by either of the Surviving Corporations, the posting by such person of a bond in such reasonable amount as such Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such Certificate, Perma-Fix will issue in exchange for such lost, stolen or destroyed Certificate the shares of Perma-Fix Common Stock and unpaid dividends and distributions on shares of Perma- Fix Common Stock deliverable in respect thereof pursuant to this Agreement. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE ALS TRUST, THE TPS TRUST, ALS, TPS AND CHEM-CON The ALS Trust, the TPS Trust, ALS, TPS, Chemical Florida and Chemical Georgia, jointly and severally, represent and warrant to Perma-Fix, Florida Perma-Chem and Georgia Perma-Chem that, as of the date of this Agreement and as of the Closing, the following: 4.1 Organization of the Sullivan Trusts. The Sullivan Trusts are valid trusts. ALS is the primary beneficiary under the ALS Trust, and ALS is the sole trustee under the ALS Trust. TPS is the primary beneficiary of the TPS Trust, and TPS is the sole trustee under the TPS Trust. ALS, as sole trustee under the ALS Trust, and TPS as sole trustee under the TPS Trust, have full power, authority and capacity to enter into this Agreement and to perform any and all obligations and covenants of the ALS Trust and the TPS Trust under this Agreement. 4.2 Organization of Chem-Con. Each of Chemical Florida, Chemical Georgia and CCC is a corporation duly organized, validly existing and in good standing under the laws of the respective jurisdiction of its incorporation, and each has the corporate power to own its properties and to carry on its business as is now being conducted. Each of Chemical Florida, Chemical Georgia and CCC is duly qualified and in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted by it or the character of the -11- property owned, leased or used by it makes such qualification necessary. A list of all such jurisdictions, separately shown and indicated, is set forth on Schedule "A" attached hereto. 4.3 Capital Stock of Chem-Con. The authorized capital stock of Chemical Florida consists solely of seven thousand five hundred (7,500) shares of common stock, par value $1.00 ("Chemical Florida Common Stock"), of which two hundred (200) shares are issued and outstanding and all of such issued and outstanding shares of Chemical Florida Common Stock are owned of record and beneficially by the ALS Trust. The authorized capital stock of Chemical Georgia consists solely of one hundred thousand (100,000) shares of common stock, par value $1.00 ("Chemical Georgia Common Stock"), of which seventy-five thousand (75,000) shares are issued and outstanding and all of such issued and outstanding shares of Chemical Georgia Common Stock are owned of record and beneficially by the ALS Trust. The authorized capital stock of CCC consists solely of seven thousand five hundred (7,500) shares of common stock, par value $1.00 ("CCC Common Stock"), of which one hundred (100) shares are issued and outstanding and all of such issued and outstanding shares of CCC Common Stock are owned of record and beneficially by Chemical Florida. Collectively, the Chemical Florida Common Stock, and the Chemical Georgia Common Stock are referred to herein as the "Chem-Con Common Stock." No shares of Chem-Con Common Stock or shares of CCC Common Stock are held in treasury or reserved for issuance at a later date. All of the issued and outstanding shares of Chem-Con Common Stock and of CCC Common Stock are (i) validly authorized and issued, (ii) fully paid and nonassessable and (iii) free and clear of any and all Liens. Subsequent to September 30, 1998, Chem-Con has not declared or paid any dividend, or declared or made any distribution on, or authorized the creation or issuance of, or issued, or authorized or effected any split-up or any other recapitalization of, any of its capital stock, or directly or indirectly redeemed, purchased or otherwise acquired any of their respective outstanding capital stock or agreed to take any such action. There are no outstanding contractual obligations of Chem-Con or CCC to repurchase, redeem or otherwise acquire any of their respective out- standing shares of capital stock. There are no outstanding agreements, options, warrants or rights to subscribe for or purchase from or otherwise receive from Chem-Con, CCC, or the ALS Trust or any other party any of Chem-Con's or CCC's capital stock or other securities of any kind or description of Chem-Con or CCC. 4.4 Ownership Interests in Securities. Set forth on Schedule "B" attached hereto is a list of all equity or ownership interests in, and all bonds and debentures of, other business enter- prises which Chem-Con owns and such Schedule indicates any such interests which are held subject to any legal, contrac- tual or other limitations or restrictions on the right to resell the same. -12- 4.5 Financials. 4.5.1 Financial Statements. Chemical Florida and Chemical Georgia have previously furnished Perma-Fix a true and correct copy of the audited financial statements for Chemical Florida, Chemical Georgia, Chem-Met and their Subsidiaries, on a combined basis, for the fiscal year ended September 30, 1998, ("Audited Financial Statements"), consisting of, among other things, (i) a balance sheet as of September 30, 1998, and (ii) statement of income and related earnings for the fiscal year ended September 30, 1998. The Audited Financial Statements are true, correct and complete in all material respects and correctly present the financial conditions and results of operations of Chemical Florida, Chemical Georgia, Chem-Met and their Subsidiaries on a combined basis as of the date thereof. For the purposes of this Agreement, the Audited Financial Statements shall be deemed to include any notes to such financial statements. The Audited Financial Statements have been prepared in conformity with GAAP, consistently applied throughout the periods indicated and on a basis consistent with prior periods. 4.5.2 Liabilities. Except as set forth in Schedule "C" attached hereto, Chemical Florida, Chemical Georgia and their Subsidiaries do not have any liabilities or obli- gations either accrued, absolute, contingent, known or unknown, matured or unmatured, or otherwise, which have not been: 4.5.2.1 reflected in the Audited Financial Statements; or 4.5.2.2 incurred consistent with past practices of Chem-Con in the ordinary and normal course of Chem-Con's business since September 30, 1998. 4.5.3 Net Worth. Except as set forth in Schedule "C" attached hereto, there are no claims against or liabil- ities or obligations of, or any legal basis for any claims against or liabilities or obligations of, Chem- Con or its Subsidiaries which might result in a material reduction in the net worth of Chem-Con and its Subsidiaries from that shown in the Audited Financial Statements or any material charge against net earnings of Chem-Con and its Subsidiaries. 4.5.4 Transactions Since September 30, 1998. Except as set forth on Schedule "D", between September 30, 1998, and the date of this Agreement, Chem-Con and its Subsidiaries have not engaged in any material transaction not in the ordinary and normal course of business and, except as set forth on such Schedule "D", there has not been, occurred or arisen since September 30, 1998: -13- 4.5.4.1 any material adverse change in the financial condition or in the operations of the business of Chem-Con or its Subsidiaries from that shown on the Audited Financial Statements; or 4.5.4.2 any damage or destruction in the nature of a casualty loss, or interference with its business from such loss or from any labor dispute or court or governmental action, order or decree, whether covered by insurance or not, materially and adversely affecting the properties or business of Chem-Con or its Subsidiaries; or 4.5.4.3 any increase, except increases given in accordance with prior practice, in the com- pensation payable or to become payable by Chem-Con or its Subsidiaries to any of Chem- Con's or its Subsidiaries' employees or any increase in the benefits, regardless of amount, in any bonus, insurance, pension or other plan, program, payment or arrangement with respect to employee benefits made to, for or with any officers or employees; or 4.5.4.4 any extraordinary loss (as defined in Opinions No. 9 and No. 30 of the Accounting Principles Board of American Institute of Certified Public Accountants) suffered by Chem-Con or its Subsidiaries which is material to Chem-Con or its Subsidiaries, or any waiver by Chem-Con or its Subsidiaries of any rights which are material to Chem-Con or its Subsidiaries. 4.6 Tax and Other Returns, Reports and Pooling of Interest. 4.6.1 Tax Returns. All federal, state, local, foreign, personal property, and real property tax returns required to be filed by the ALS Trust and Chem-Con and its Subsidiaries have been timely filed with the appropriate governmental agencies in all jurisdictions in which such returns and reports are required to be filed. 4.6.2 Payment of Taxes. All federal, state, local and foreign taxes (including interest and penalties), due from the ALS Trust, Chem-Con and its Subsidiaries (i) have been fully paid, or (ii) are being contested in good faith by appropriate proceedings and are disclosed on Schedule "E" attached hereto. 4.6.3 Waiver of Statute of Limitations. No waivers of statutes of limitation in respect of any Returns or tax reports have been given or requested, except as shown on such Schedule "E". -14- 4.6.4 Tax Deficiencies. There are no potential tax defic- iencies which may arise from issues which have been raised or which have not yet been raised but which might reasonably be expected to be raised by the Internal Revenue Service ("IRS") or any other taxing authority that have not been disclosed on Schedule "E" and may reasonably be expected to have a material adverse effect on Chem-Con or its Subsidiaries. 4.6.5 Pooling of Interests. To the best of their knowledge, after consulting with its independent auditors, neither Chem-Con, the Sullivans, the Sullivan Trusts nor any of its Affiliates has taken or agreed to take any action which would (i) prevent Perma-Fix from accounting for the business combination to be effected by the Mergers as a pooling of interests or (ii) prevent the Mergers from, collectively, constituting a transaction qualifying as a reorganization under 368(a) of the Code. 4.7 Property. 4.7.1 Assets. Except as disclosed in Schedule F attached hereto: Chem-Con and its Subsidiaries own and have good and marketable title in and to all of the assets used by them in the operation or conduct of their business, or required by Chem-Con and its Subsidiaries for the normal and ordinary conduct of their business, free and clear of any and all Liens, except for Permitted Encum- brances. 4.7.2 Real Property. Schedule "F" attached hereto lists all Real Properties owned by Chem-Con and its Subsidiaries. Chem-Con and its Subsidiaries have good and marketable title in fee simple to all of the respective Real Property owned by them, free and clear of any and all Liens, except for Permitted Encumbrances, and have access thereto such as is reasonable to permit the present or presently proposed use of any such properties. Schedule "F" indicates which of the pro- perties listed is covered by a title insurance policy and a description of each such title insurance policy is set forth on Schedule "F". The Real Property owned by Chem-Con and its Subsidiaries contains no encroach- ments on abutting property, public or private, and no material encroachments by others on either of their properties. Chem-Con and its Subsidiaries, whichever is applicable, owns all of the Mineral Rights under the Real Property owned by them. 4.7.3 Leases. Schedule "F" sets forth a true and complete list of each lease of real or personal property exe- cuted by or binding upon Chem-Con or its Subsidiaries, as lessee, sublessee, tenant or assignee setting forth in each case a brief description of the property covered by the lease, the rental and the terms thereunder. Each lease is in full force and effect, without any default or breach thereof by any party thereto. No consent of any landlord, lessor or any other party is required under any such lease to keep such lease in full force and effect without being term- inable or in default after the execution and delivery of this Agreement and consummation of the transactions contemplated by this Agreement. True and complete copies of all leases required to be listed on Schedule "F", including all amendments, addenda, waivers and all other binding documents, have heretofore been delivered to Perma-Fix. -15- 4.7.4 Notice. Except as set forth on Schedule "F", none of Chem-Con or any of its Subsidiaries, any of the Sullivan Trust nor any of the Sullivans has received actual or constructive notice of any violation of any zoning, use, occupancy, building, or environmental statute, ordinance, regulation, order, or other law or requirement affecting or relating to any activities performed at any time on any Real Property. None of the Sullivan Trusts, the Sullivans, Chem-Con nor any of the Subsidiaries of Chem-Con has any knowledge of any past, present, or future events, conditions, circumstances, activities, incidents, actions, or plans that may in any way interfere with or limit the continued use of said Real Property for all present or presently proposed use of said Real Property. 4.7.5 Personal Property. Chem-Con and its Subsidiaries own the full right and interest and have good and market- able title in and to all material personal and intang- ible property used by Chem-Con and its Subsidiaries in the conduct of Chem-Con's and its Subsidiaries' business and none of such personal and intangible property is subject (i) to any contracts of sale, or (ii) to any Liens, except for Permitted Encumbrances. 4.7.6 Notice from Insurance Carrier. None of the Sullivans, the Sullivan Trusts, Chem-Con nor its Subsidiaries has received any notice of, or writing referring to, any requirements or recommendations by any insurance company which has issued a policy covering any part of the Real Property requiring or recommending any repairs or work or other action being taken on any part of the Real Property, except as otherwise disclosed in Schedule "F". All utilities required for the operation of the Real Property in the manner currently operated by Chem-Con or its Subsidiaries are installed and operating, and all installation and connection charges have been paid in full or provided for. 4.8 Intellectual Property. 4.8.1 Ownership. Schedule "K" attached hereto is a true and complete list of all patents, trademarks, trade names, service marks, copyrights, web domain addresses, mask -16- works, any applications for and registrations of such patents, trademarks, trade names, service marks, copyrights, mask works, web domain addresses, and all processes, formulae, methods, schematics, technology, know-how, computer software programs or applications and tangible or intangible proprietary information or material that Chem-Con or its Subsidiaries is licensed or otherwise possesses legally enforceable rights to use and are necessary to conduct the business of Chem- Con or its Subsidiaries as currently conducted, or planned to be conducted , the absence of which would be reasonably likely to have a material adverse effect upon Chem-Con or its Subsidiaries (the "Chem-Con Intellectual Property Rights"). None of the Chem-Con Intellectual Property Rights is subject to any outstanding order, judgment, decree, stipulation, or agreement restricting the use of such Chem-Con Intellectual Property Rights, and to the best of their knowledge none infringes on, or is being infringed by, other intellectual property rights of any other person or entity. Chem-Con and its Subsidiaries have promulgated and used commercially reasonable efforts to enforce and maintain any reasonably necessary trade secret or confidentiality measures regarding the Chem- Con Intellectual Property Rights. Neither Chem-Con nor its Subsidiaries has given and are not bound by an agreement or indemnification regarding Chem-Con Intellectual Property Rights in connection with any property or service produced, used or sold by Chem-Con or its Subsidiaries. 4.8.2 No Breach of License. None of the ALS Trust, Chem-Con nor its Subsidiaries is, or will as a result of the execution and delivery of this Agreement or the performance of their respective obligations under this Agreement or otherwise be, in breach of any license, sublicense or other agreement relating to the Chem-Con Intellectual Property Rights, or any material licenses, sublicenses and other agreements as to which Chem-Con or its Subsidiaries is a party and pursuant to which Chem-Con or its Subsidiaries is authorized to use any third party patents, trademarks or copyrights ("Chem- Con Third Party Intellectual Property Rights"), including software which is used in the manufacture of, incorporated in, or forms a part of any product sold or services rendered by or expected to be sold or services rendered by Chem-Con or its Subsidiaries, the breach of which would be reasonably likely to have a material adverse effect upon Chem-Con or its Subsidiaries, except as disclosed in Schedule "K" hereof. 4.8.3 Year 2000 Issues. Schedule S hereof identifies each "Year 2000" audit, report or investigation that has been performed by or on behalf of Chem-Con and its Subsidiaries with respect to their business and operations, and Chem-Con has provided to Perma-Fix true and correct copies of all such audits, reports or investigations. Except as set forth in such audits, reports and investigations, neither the Sullivans, the Sullivan Trusts nor Chem-Con or its Subsidiaries are -17- aware of any failure to be Year 2000 Compliant of (i) any software products sold or licensed by Chem-Con or its Subsidiaries to third parties or (ii) any computer software products used by or licensed to Chem-Con or its Subsidiaries from third parties for internal use by Chem-Con or its Subsidiaries. For purposes of this Agreement, "Year 2000 Compliant" means, with respect to each software product referred to in the prior sentence, that such system (i) will accurately receive, record, store, provide, recognize and process all date and time data from, during, into and between the twentieth and twenty-first centuries; (ii) will accurately perform all date-dependent calculations and operations (including, without limitation, mathematical operations, sorting, comparing and reporting) from, during, into and between the twentieth and twenty-first centuries; and (iii) will not malfunction, cease to function or provide invalid or incorrect results as a result of (x) the change of century, (y) date data, including date data which represents or references different centuries or more than one century or (z) the occurrence of any particular date; in each case without human intervention, other than original data entry; provided, in each case, that all applications, hardware and other systems used in conjunction with such system which are not owned or licensed by Chem-Con or its Subsidiaries correctly exchange date data with or provide data to such system. Neither Chem-Con nor its Subsidiaries has provided any guarantee or warranty for any product sold or licensed, or services provided, by Chem-Con or its Subsidiaries to the effect that such product or service (i) complies with or accounts for the fact of the arrival of the year 2000 or (ii) will not be adversely affected with respect to functionality, operability, performance or volume capacity (including without limitation the processing and reporting of data) by virtue of the arrival of the year 2000. Chem-Con and its Subsidiaries have performed audits regarding their primary suppliers, customers, creditors and financial service organizations with which they have substantial interaction ("Outside Persons") and have determined that all of these Outside Persons are substantially Year 2000 Compliant to the extent that there will be no material adverse effects to Chem-Con or its Subsidiaries resulting from a failure of such Outside Persons to be Year 2000 Compliant. In addition, Schedule "S" shall set forth in detail the status of Chem-Con and its Subsidiaries' efforts to address the Year 2000 issues involving Chem-Con and its Subsidiaries and outside persons. 4.9 Agreements, Contracts and Commitments. 4.9.1 Contracts. Except as set forth on Schedule "G", neither Chem-Con nor its Subsidiaries is a party to or bound by: 4.9.1.1 any collective bargaining agreements or any agreements that contain any severance pay liabilities or obligations; -18- 4.9.1.2 any bonus, deferred compensation, pension, profit-sharing or retirement plans, programs or other similar employee benefit arrange- ments; 4.9.1.3 any employment agreement, contract or commit- ment with an employee; 4.9.1.4 any agreement of guaranty or indemnification running from Chem-Con or its Subsidiaries to any person or entity, including, but not limited to, any Affiliate, other than guarantees or indemnifications issued in the ordinary course of Chem-Con's business relating solely to the indemnification of certain of its customers due to Chem-Con's disposal of waste generated by such customers at permitted disposal facilities not affiliated with Chem-Con; 4.9.1.5 any agreement, contract or commitment which would reasonably be expected to have a material adverse impact on the business of Chem-Con or its Subsidiaries; 4.9.1.6 any agreement, indenture or other instrument which contains restrictions with respect to payment of dividends or any other distribution in respect of Chem-Con or its Subsidiaries or any other outstanding securities of Chem-Con or its Subsidiaries; 4.9.1.7 any agreement, contract or commitment con- taining any covenant limiting the freedom of Chem-Con or its Subsidiaries to engage in any line of business or compete with any person; 4.9.1.8 any agreement, contract or commitment relating to capital expenditures in excess of ten thousand dollars ($10,000.00) and involving future payments; 4.9.1.9 any agreement, contract or commitment relating to the acquisition of assets or capital stock of any business enterprise; 4.9.1.10 any contract with the Department of Defense or any other department or agency of the United States Government, or to any subcontract under any such contract, which is subject to renegotiation under the Renegotiation Act of 1951, as amended; or 4.9.1.11 any agreement, contract or commitment not made in the ordinary course of business which involves Ten Thousand Dollars ($10,000) or more or -19- has a remaining term of one (1) year or more from December 31, 1998, or is not cancelable on thirty (30) days or less notice without penalty. Neither Chem-Con nor its Subsidiaries has breached, and there is not any claim, or, to the best of Chem- Con's or the ALS Trust's knowledge, any claim that Chem-Con or its Subsidiaries have breached any of the terms or conditions of any agreement, contract or commitment set forth in this Agreement or in any of the Schedules attached hereto or of any other agreement, contract or commitment, if any such breach or breaches in the aggregate could result in the imposition of damages or the loss of benefits in an amount or of a kind material to Chem-Con or its Subsidiaries. 4.9.2 Written List. Attached hereto as Schedule "H" is a written list of all contracts, leases, agreements and instruments which are in any single case of material importance to the conduct of the business of Chem-Con or its Subsidiaries, together with true and correct copies of each document requested by Perma-Fix and a written description of each oral arrangement so listed. Without limiting the generality of the foregoing, the aforesaid list includes all the contracts, agreements and instruments of the following types to which Chem- Con or its Subsidiaries is a party, or by which it is bound (without regard to whether such contracts, agree- ments and instruments are material): 4.9.2.1 leases of, and contracts for, the purchase or sale of Real Property; 4.9.2.2 labor union contracts together with a list of all labor unions representing or, to their best knowledge, attempting to represent employees of Chem-Con or its Subsidiaries; 4.9.2.3 pension, retirement, profit-sharing, bonus, stock purchase, stock option, hospitalization or insurance plans (and certificates or other documents issued thereunder) or vacation pay, severance pay and other similar benefit arrangements for officers, directors, employees or agents; 4.9.2.4 employment contracts or agreements, contracts with other persons engaged in sales or service activities, and advertising contracts, and brokering contracts, which are not terminable by Chem-Con or its Subsidiaries without lia- bility upon termination notice of thirty (30) days or less; 4.9.2.5 written or oral agreements, understandings and arrangements with officers, directors, employees, shareholders, agents, or Affiliates -20- of Chem-Con or its Subsidiaries, the Sullivans or the Sullivan Trusts relating to present or future compensation of, or other benefits available to, such persons; 4.9.2.6 contracts, and other arrangements of any kind, whether oral or written, with any director, officer, employee, trustee, stockholder or Affiliate of Chem-Con or its Subsidiaries, the Sullivans or the Sullivan Trusts or to which any director, officer, employee or Affiliate of Chem-Con or any of its Subsidiaries is a party; 4.9.2.7 contracts, purchase orders and other arrange- ments of any nature involving an expenditure of Five Thousand Dollars ($5,000.00) or more not made in the ordinary course of business or which involve an unperformed commitment, under contracts not otherwise disclosed hereunder, in excess of Twenty-Five Thousand Dollars ($25,000.00); and 4.9.2.8 indentures, loan agreements, notes, mortgages, conditional sales contracts, and other agreements for financing. 4.10 No Breach of Statute or Contract; Governmental Authorizations. 4.10.1 No Violation. Neither the execution and delivery of this Agreement by Chem-Con, the Sullivans or the Sullivan Trusts nor the performance or compliance by the Chem-Con or its Subsidiaries, the Sullivans or the Sullivan Trusts with any of the terms and provisions of this Agreement will violate any Laws of any govern- mental agency or authority, domestic or foreign, or will at the Closing conflict with or result in a breach of any of the terms, conditions or provisions of any judgment, order, injunction, decree or ruling of any court or governmental agency or authority, domestic or foreign, to which any of Chem-Con or its Subsidiaries, the Sullivans or the Sullivan Trusts may be subject to, or bound by, or of any agreement or instrument to which Chem-Con or its Subsidiaries, the Sullivans or the Sullivan Trusts is a party or by which any of them is bound, or constitute a default thereunder, or result in the creation of any Liens upon the Chem-Con Common Stock or any of the property or assets of Chem-Con or its Subsidiaries, or cause any acceleration of maturity of any obligation or loan, or give to others any interest or rights, including rights of termination or cancellation, in or with respect to any of the proper- ties, assets, agreements, contracts, or business of Chem-Con or its Subsidiaries, the Sullivans or the Sullivan Trusts or cause any acceleration or termination or cancellation, in or with respect to any -21- of the properties, assets, agreements, contracts or business of Chem-Con or its Subsidiaries, the Sullivans or the Sullivan Trusts. 4.10.2 Permits and Licenses. Schedule "I" attached hereto is a true and complete list of all permits, licenses and franchises presently held by, or used in connection with, the normal and ordinary business of Chem-Con or its Subsidiaries and all applications for any of the foregoing filed by Chem-Con or its Subsidiaries, the Sullivans or the Sullivan Trusts relating to the business of Chem-Con or its Subsidiaries with any Governmental Authority. All permits, licenses and franchises used by Chem-Con or its Subsidiaries to conduct Chem-Con's or its Subsidiaries' business are in the name of Chem-Con or its Subsidiaries and none are in the name of any other party. 4.10.3 Reports. Schedule "I" is a true and complete list of all reports made by, or with respect to Chem-Con or its Subsidiaries, the Sullivans or the Sullivan Trusts since September 30, 1998, except as otherwise furnished pursuant to this Agreement, to or from the Federal Trade Commission ("FTC"), Environmental Protection Agency ("EPA"), Equal Employment Opportunity Commission ("EEOC"), reports under the Occupational Safety and Health Act ("OSHA"), the Department of Labor, Florida Department of Environmental Protection, Georgia Department of Natural Resources, all other state or federal government agencies or departments, and tax returns to, tax rulings from, and tax audit reports from the IRS, relating in any manner to the business of Chem-Con or its Subsidiaries. 4.10.4 Violation of Law and Contamination of Real Property. Except as disclosed in Schedule "I", none of Chem-Con or its Subsidiaries, the Sullivans nor the Sullivan Trusts is in violation of any Laws, (including, but not limited to, Environmental Laws) which violation might have a material adverse effect on Chem-Con or its Subsidiaries or the business of Chem-Con or its Subsidiaries or the financial condition or operations of Chem-Con or its Subsidiaries, and none of the Real Property owned or leased by Chem-Con and/or its Subsidiaries is contaminated or requires remediation of any kind as a result of being contaminated. 4.10.5 Permits under Environmental Laws. Chem-Con and its Subsidiaries have obtained, presently holds and has adhered to all permits, licenses, and other authori- zations required under federal, state, and local laws (including, but not limited to, any and all Environmental Laws), (i) which are necessary for, or material to, the conduct of Chem-Con's business or its Subsidiaries' business as such businesses are currently being operated, including, but not limited to, any and all permits and licenses required under the Environmental Laws for Chem-Con and its Subsidiaries to conduct Chem-Con's business or its Subsidiaries' -22- business as currently conducted, and (ii) such other permits, licenses and other authorizations relating to pollution or protection of the environment, including, without limitation, laws relating to emissions, dis- charges, releases or threatened releases of pollutants, contaminants (chemicals or industrial or toxic wastes into the environment including, without limitation, ambient air, surface waste, groundwater, soil or land), or otherwise relating to the manufacture, processing, recycling, reclamation, distribution, use, treatment, storage, disposal, transport, or handling of pollut- ants, contaminants, chemicals, petroleum products, or industrial or solid or toxic wastes or radioactive materials, except as disclosed in Schedule I attached hereto. Chem-Con and its Subsidiaries are in com- pliance with all terms and conditions of all such required permits, licenses and other authorizations, and with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules, and timetables contained in such Environmental Laws, except as disclosed in Schedule I attached hereto. None of Chem-Con or its Subsidiaries, the Sullivans nor the Sullivan Trusts, after due inquiry, has any knowledge of any past, present, or future events, actions, or plans that may interfere with or prevent full compliance or continued full compliance as described above, or that may give rise to any common law or legal liability or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing, study, or investigation related to the manufacture, processing, recycling, reclamation, distribution, use, treatment, storage, disposal, transport or threatened release of, any pollutant, contaminant, chemical or industrial or solid or toxic waste or radioactive materials. 4.10.6 Other Permits. Except as set forth in Schedule "I", neither the execution and delivery of this Agreement nor the consummation thereof will violate any of the terms of any of the permits, licenses, approvals and authorities held by Chem-Con or its Subsidiaries or cause the termination or cancellation of any of the permits, licenses, approvals and authorities held by Chem-Con or its Subsidiaries. None of Chem-Con or its Subsidiaries, the Sullivans nor the Sullivan Trusts has received official notice that Chem-Con or its Subsidiaries is in violation of any law, regulation, ordinance or rule applicable to them or their oper- ations. 4.11 No Litigation or Adverse Effects. Except as set forth in Schedule "J", there is no suit, action or legal, administra- tive, arbitration, or other proceeding, or governmental investigation, or any change in the zoning, use, occupancy or building ordinances affecting the real property or any lease- hold interests of Chem-Con or its Subsidiaries pending or, to the best of their knowledge threatened, which could adversely affect the financial condition, results of operations or business, assets or properties of Chem-Con or its Subsidiaries, or the conduct of business of Chem-Con or its Subsidiaries. Further, there is no suit, action or legal, administrative, arbitration, governmental investigation or -23- other proceeding against Chem-Con or its Subsidiaries, or to the best of their knowledge threatened, involving any claims based upon negligence, product warranties, product liability or any other type of claim (including, but not limited to, those arising under any Environmental Laws) exceeding poten- tial liability (including costs of defense and attorneys' fees), whether or not covered by insurance, in an amount in excess of Ten Thousand Dollars ($10,000.00) with respect to the individual suit, action, proceeding or investigation, or potential liability (including costs of defense and attorneys' fees) of Twenty-Five Thousand Dollars ($25,000.00) in the aggregate of all such suits, actions, proceedings or investigations, except (a) workers' compensation, automobile accident and other routine claims wholly covered by existing insurance (including costs of defense and attorneys' fees) and (b) as set forth in Schedule "J" hereto. 4.12 Authorization, Execution and Delivery of Agreement. Each of Chem-Con, the Sullivans and the Sullivan Trusts has the power, authority and capacity to enter into this Agreement and to carry out the transactions contemplated hereby. The execution, delivery and the performance of this Agreement by Chem-Con, the Sullivans and the Sullivan Trusts have been duly and validly authorized and approved by all requisite corporate action on the part of Chem-Con and all requisite action of the trustees under the Sullivan Trusts, and this Agreement constitutes the valid and binding agreement and obligation of Chem-Con, the Sullivans and the Sullivan Trusts enforceable in accordance with its terms, subject to bankruptcy, insolvency and other laws of similar import. 4.13 Ability to Conduct the Business. None of Chem-Con, its Subsidiaries, the Sullivans nor the Sullivan Trusts is subject to, or bound by, any judgment, order, writ, injunction or decree of any court or of any governmental body or agency or of any arbitrator which could prevent the execution, delivery or performance of this Agreement or the use by Chem-Con or its Subsidiaries of assets owned, leased or used by Chem-Con or its Subsidiaries, or the conduct of Chem-Con or its Subsidiaries's business, as presently conducted by Chem-Con or its Subsidiaries, in accordance with present practices, after the Closing. None of Chem-Con or its Subsidiaries, the Sullivans nor the Sullivan Trusts is a party to, bound by, or a beneficiary of, any agreement which could prevent the use of assets material to Chem-Con or its Subsidiaries or the conduct of business as currently conducted by Chem-Con or its Subsidiaries in each case after the Closing. 4.14 Disclosure. No representation or warranty by Chem-Con, the Sullivans and the Sullivan Trust contained in this Agreement and no statement contained in any certificate, list, disclosure schedule, exhibit or other instrument furnished, or to be furnished, to Perma-Fix, Florida Perma-Chem and/or Georgia Perma-Chem pursuant hereto, contains or will contain any untrue statement of a material fact or omits, or will omit, to state a material fact necessary to make the state- ments contained therein not misleading. -24- 4.15 Broker's or Finder's Fee. No agent, broker, person or firm acting on behalf of the Chem-Con, the Sullivans and/or the Sullivan Trust or under the authority of Chem-Con, the Sullivans and/or the Sullivan Trusts is or will be entitled to any commission or broker's or finder's fee from any of the parties hereto in connection with this Agreement or any of the transactions contemplated herein, except the Sullivans have retained WHCA Partners as an agent or firm acting on behalf of the Sullivans and the Sullivan Trusts in connection with this Agreement and the transactions contemplated by this Agreement. The Sullivans and the Sullivan Trusts shall pay to WHCA Partners any and all fees and other renumeration due to WHCA Partners in connection with this Agreement and the transactions contemplated by this Agreement. Chem-Con shall pay any expenses due to WHCA Partners for work performed by WHCA Partners on behalf of Chem-Con prior to November 5, 1998; provided however, Chem-Con shall not pay any commissions or fees due to WHCA Partners in connection with this Agreement or the transactions contemplated by this Agreement. 4.16 Insurance. Chem-Con and its Subsidiaries have in full force and effect policies of insurance of the types, including insurance policies under which Chem-Con, its Subsidiaries and Chem-Con's or its Subsidiaries' officers, directors and Affil- iates or any of them, in such capacity, is named insured, and in the amounts and with insurance carriers as set forth in Schedule "L" attached hereto, and will continue all of such insurance in full force and effect up to and until the Closing. The amounts and types of such insurance policies and the insurance carriers issuing such policies fully meet Chem- Con's and its Subsidiaries' contractual, legal or regulatory commitments and are fully adequate to insure against risks to which Chem-Con or its Subsidiaries is normally exposed in the operation of its businesses and as required by Governmental Authority and the Environmental Laws. 4.17 Completeness of Documents -- Chem-Con and CCC. The copies of the Articles of Incorporation and Bylaws of Chem-Con and CCC, and of all leases, instruments, agreements or other documents (including all Schedules and documents delivered pursuant to this Agreement) which have been or will be delivered to Perma- Fix pursuant to the terms of this Agreement or in connection with the transactions contemplated hereby, are, or if not now delivered, will when delivered, be true, complete and correct. 4.18 Completeness of Documents -- Sullivan Trusts. The copies of the organizational documents of the Sullivan Trusts, which have been or will be delivered to Perma-Fix pursuant to the terms of this Agreement or in connection with the transactions contemplated hereby, are, or if not now delivered, will when delivered, be true, complete and correct. 4.19 Disposition of Assets. Since September 30, 1998, neither Chem-Con nor its Subsidiaries have made any sale or other disposition of any of their properties or assets or sur- rendered any of their rights with respect thereto, or made any additions to their properties or assets, or entered into any agreements, or entered into any other transaction, except in -25- each instance in the ordinary course of business or as set forth in Schedule "M" attached hereto, and no such sale, dis- position, surrender, addition, agreement or transaction set forth in such Schedule "M" has any material adverse effect upon the results of operations or financial condition of Chem- Con or its Subsidiaries or Chem-Con's or its Subsidiaries' ability to conduct Chem-Con's and its Subsidiaries' business as currently conducted. 4.20 Obligations to Employees. All obligations of Chem-Con and/or any Affiliates, whether arising by operation of law, contract, agreement, or otherwise, for payments to trusts or other funds or to any governmental agency or to any employees, directors, officers, agents, or any other individual (or any of their respective heirs, legatees, beneficiaries, or legal representatives) with respect to profit-sharing, pension or retirement benefits, or any other employee benefit of any kind whatsoever relating to Chem-Con, its Subsidiaries or any of their employees, have been paid. All legally enforceable obligations of Chem-Con or its Subsidiaries, whether arising by operation of law, contract, agreement, or otherwise, for bonuses or other forms of compensation or benefits which are, or may become, payable to its employees, directors, officers, agents, or any other individual (or their respective heirs, legatees, beneficiaries or legal representative) relating to Chem-Con or its Subsidiaries or any of the employees of Chem- Con or its Subsidiaries with respect to periods ending on or before the Closing have been paid, or adequate accruals for payment thereof are reflected on the Audited Financial Statements. Neither Chem-Con nor any of its Affiliates has any accumulated funding deficiencies, as such term is defined in the Employee Retirement Income Security Act of 1974 ("ERISA") and in the Code with respect to any employee benefit plan as defined in ERISA maintained or established for employees of Chem-Con or its Subsidiaries. Neither Chem-Con nor its Subsidiaries has incurred any liability to the Pension Benefit Guaranty Corporation ("PBGC") other than for the payment of insurance premiums all of which have been paid when due, the IRS or the Department of Labor ("DOL") with respect to any such employee benefit plan that affects, or might affect Chem-Con, and does not have any withdrawal liability with respect to any multiemployer pension plan ("Multiemployer Plan") which is subject to the Multiemployer Pension Plan Amendments Act of 1980. The consummation of this Agreement will not result in either a complete or partial withdrawal from any of the Multiemployer Plans. All of the employee benefit plans of which Chem-Con or any Affiliate of Chem-Con is the plan sponsor relating to Chem-Con and its Subsidiaries or any of their employees have been amended as, when and to the extent necessary to comply with and qualify under the applicable provisions of the Code; and all such employee benefit plans have been administered in accordance with the applicable provisions of the Code and ERISA. Except as indicated on Schedule "N", any employee benefit plans relating to Chem-Con or its Subsidiaries or any of their employees which are pension benefit plans have received, or have applied for and expect to receive, determination letters from the IRS to the effect that such plans are qualified and exempt from federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, and, no amendments have been made to any such employee benefit plans other than those covered by such -26- determination letters or applications for such determination letters with respect to such amendments which have been timely filed with the IRS. No determination letter received with respect to any employee benefit plan relating to Chem-Con or its Subsidiaries or any of their employees has been revoked nor has revocation been threatened. Each of the employee benefit plans have been administered at all times and in all respects in accordance with their respective terms. There are no pending investigations by any Governmental Authority involving any employee benefit plans relating to Chem-Con or its Subsidiaries or any of their employees, no deficiency or termination proceedings involving such employee benefit plans, and no threatened or pending claims (except for claims for benefits payable in the normal operation of the employee benefit plans), suits or proceedings against any such employee benefit plan or asserting any rights or claims to benefits under any such employee benefit plan nor are there any facts which could give rise to any liability in the event of any such investigation, claim, suit or proceeding. Neither the employee benefit plans nor any trusts created thereunder relating to Chem-Con or its Subsidiaries or to any of their employees, nor any trustee, administrator or other fiduciary thereof, has engaged in a "prohibited transaction" (as such term is defined in Section 4975 of the Code or Section 406 of the ERISA); and has not experienced any reportable event within the meaning of ERISA or other event or condition which presents a material risk of termination of any such employee benefit plan by the PBGC, has had any tax imposed upon it by the IRS for any alleged violation under Section 4975 of the Code, or has engaged in any transaction which might subject Chem-Con or its Subsidiaries or any such employee benefit plan to any liability for such tax. The terms of any such employee benefit plans comply with ERISA and the Code in all respects, and, any and all reporting and disclosure requirements of ERISA or the Code and the DOL with respect to any such employee benefit plan have been timely met. The information supplied to the actuary by Chem-Con or its Subsidiaries, the Sullivans or the Sullivan Trusts for use in preparing those reports was complete and accurate and none of Chem-Con, the Sullivans nor the Sullivan Trusts has reason to believe that the conclusions expressed in such reports are incorrect. In the event of termination of any employee benefit plan of Chem- Con or any of its Affiliates relating to Chem-Con or its Subsidiaries or to any of their employees, there will be no liability of Chem-Con or its Subsidiaries or the plan with respect to the providing of benefits accrued thereunder subject to future variations in levels of compensation assuming continued investment returns at rates actuarially predicted. Further, if termination (whether complete or partial) of any plan has occurred, then, all liabilities with respect thereto have been satisfied in full and no present liability exists with respect to any such prior termination. Schedule "N" also includes a list of any and all pension or benefit obligations of Chem-Con and/or its Affiliates which have not been fully funded. 4.21 Condition of Plant, Machinery and Equipment. Except as set forth on Schedule "O", all of the items of the property, plant and equipment owned, operated or leased by Chem-Con or its Subsidiaries are, in all material respects, in good condition -27- and repair, reasonable wear and tear excepted, and Chem-Con and its Subsidiaries agree to maintain such items in good operating condition until the Closing. Casualty losses to such property, plant and equipment are covered by insurance with normal industry deductibles being applicable. 4.22 Books of Account. Chem-Con has maintained its books of account in accordance with GAAP, applied on a consistent basis with prior periods. 4.23 Stock Redemptions. There are no shares of Chem-Con Common Stock which are subject to redemption or purchase in lieu of redemption, which prior to September 30, 1998, were not paid for in full. From September 30, 1998, through the date of this Agreement, Chem-Con has not purchased or redeemed or entered into any agreement to purchase or redeem any Chem-Con Common Stock. 4.24 Minute Books. Chem-Con and its Subsidiaries have maintained their corporate minute books and all such books are current. 4.25 Indebtedness of Shareholders, etc. Except as set forth on Schedule "P", none of the shareholders, Affiliates, officers, directors or employees of Chem-Con is (i) indebted to Chem-Con or its Subsidiaries, and neither Chem-Con nor its Subsidiaries is indebted to their Affiliates, shareholders or any of their officers, directors or employees, (ii) a party to or has any interest in a material contract, agreement or lease with Chem- Con or its Subsidiaries or in which Chem-Con or its Subsidiaries is a party to or bound by, or (iii) a customer or supplier of Chem-Con or its Subsidiaries, which during any one of the preceding three (3) years supplied to or purchased from Chem-Con or its Subsidiaries a amount of property or services exceeding Ten Thousand Dollars ($10,000.00) in any one (1) year. 4.26 Business Prospects. Since September 30, 1998, there has not occurred any event or other occurrence which might have a material adverse effect on the business or business prospects of Chem-Con or its Subsidiaries. 4.27 Bank Accounts; Powers of Attorney. Schedule "Q" attached hereto sets forth each bank account and borrowing resolution authorizing officers or agents of Chem-Con or its Subsidiaries to borrow money and lists the persons authorized to transact business on behalf of Chem-Con or its Subsidiaries with respect to each such account or borrowing resolution. Schedule "Q" also lists all powers of attorney granted by Chem-Con or its Subsidiaries to any other person. 4.28 Sensitive Payments. Neither Chem-Con nor its Subsidiaries has made or received, and to their best knowledge, after reasonable due inquiry, none of their officers, directors, employees, agents, shareholders or other representative of Chem-Con or its Subsidiaries or any person acting on behalf of Chem-Con or its Subsidiaries, has made or received, directly or indirectly, any bribes, kickbacks, illegal political contributions with corporate funds, improper payments from -28- corporate funds that are falsely recorded on the books and records of Chem-Con, payments to governmental officials in their individual capacities or illegal payments from corporate funds to obtain or retain business. ARTICLE 5 ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SULLIVANS AND THE SULLIVAN TRUSTS The Sullivans and the Sullivan Trusts, jointly and severally, provide to Perma-Fix the following additional repre- sentations, warranties and covenants: 5.1 Affiliate Status. Upon the execution of this Agreement, Chem- Con, the Sullivans and the Sullivan Trusts will provide Perma- Fix with a list of those persons who are, in Chem-Con's reasonable judgment, "Affiliates" of Chem-Con within the meaning of Rule 145 as promulgated under the Securities Act ("Rule 145") (each such person who is an "affiliate of Chem- Con within the meaning of Rule 145 is referred to as a "Chem- Con Affiliate"). Chem-Con, the Sullivans and the Sullivan Trusts shall provide Perma-Fix with such information and documents as Perma-Fix shall reasonably request for purposes of reviewing such list and shall notify Perma-Fix in writing regarding any change in the identity of the Chem-Con Affiliates prior to the Closing Date. 5.2 Rule 145. The Sullivans and the Sullivan Trusts will not offer, sell, pledge, hypothecate, transfer or otherwise dispose of, or reduce their interest in or risk relating to, any of the shares of Perma-Fix Common Stock issued to the ALS Trust under this Agreement as a result of the Mergers unless at such time either: (i) such transaction is permitted pursuant to the provisions of Rule 145 under the Securities Act; (ii) the undersigned shall have furnished to Perma-Fix an opinion of counsel, reasonably satisfactory to Perma-Fix, to the effect that such transaction is otherwise exempt from the registration requirements of the Securities Act; or (iii) a registration statement under the Securities Act covering the proposed offer, sale, pledge, hypothecation, transfer or other disposition shall be effective under the Securities Act. 5.3 Legend. The Sullivans and the Sullivan Trusts understand and agree that stop transfer instructions will be given to Perma- Fix's transfer agent and that there will be placed on the certificate or certificates representing the Perma-Fix Common Stock issuable under this Agreement, any substitutions therefor and any certificates for additional shares which might be distributed with respect to such Perma-Fix Common Stock, a legend stating in substance: -29- "The shares represented by this certificate were issued in a transaction to which Rule 145 of the Securities Act of 1933 applies and may only be transferred in accordance with the provisions of such rule. In addition, the shares represented by this certificate may only be transferred in accordance with the terms of an Agreement and Plan of Merger dated March 15, 1999, among Perma- Fix Environmental Services, Inc. ("Perma-Fix"), Florida Perma-Chem, Inc., Georgia Perma-Chem, Inc., Chemical Conservation Corporation, Chemical Conservation of Georgia, Inc., The Thomas P. Sullivan Living Trust, dated September 6, 1978, The Ann L. Sullivan Living Trust, dated September 6, 1978, Thomas P. Sullivan and Ann L. Sullivan, a copy of which agreement may be inspected by the holder of this certificate at the principal offices of Perma-Fix, or furnished by Perma-Fix to the holder of this certificate upon written request, without charge." 5.4 Restrictions on Certain Actions. For a period of two (2) years from the date of Closing, neither any of the Sullivan Trusts nor any of the Sullivans shall, without the prior consent of the Board of Directors of Perma-Fix (specifically expressed in a resolution adopted by a majority of the Board of Directors of Perma-Fix who are not employees, representatives or agents of the Sullivan Trusts and/or the Sullivans or any of their Affiliates): 5.4.1 Prohibition Against Acquisition. Except for the shares of Perma-Fix Common Stock which the Sullivan Trusts acquire under this Agreement and the Chem-Met Agreement, or through stock splits, stock dividends or stock options granted by Perma-Fix to TPS, acquire, offer or propose to acquire, or permit any Affiliate of the Sullivan Trusts or any of the Sullivans to acquire, directly or indirectly, or in conjunction with or through any other person, firm, corporation, entity, partnership, company or association, by purchase or otherwise, beneficial ownership of any shares of Perma- Fix Common Stock or any other voting securities of Perma-Fix or any rights or option to acquire voting securities of Perma-Fix or any securities convertible into any voting securities of Perma-Fix (collectively, "Perma-Fix Voting Securities") except as otherwise agreed to in writing by the President of Perma-Fix or approved by the Board of Directors (or a duly authorized committee of the Board of Directors) of Perma-Fix. Notwithstanding anything in this Section 5.4.1 to the contrary, Michael F. Sullivan and Patrick Sullivan, sons of TPS and ALS, may acquire shares of Perma-Fix Common Stock; 5.4.2 Prohibition Against Solicitation. Directly or indirectly, or through or in conjunction with any other person, firm, corporation, entity, partnership, company or association, solicit, or encourage any solicitation -30- of, or permit any Affiliate of the Sullivans or any of the Sullivan Trusts to solicit, or encourage any solicitation of, (i) proxies with respect to Perma-Fix Voting Securities under any circumstances, or (ii) tender or exchange offers for Perma-Fix Voting Securities under any circumstances or (iii) any election contest relating to the election of directors of Perma-Fix; or 5.4.3 Prohibition Against Control. Take any action alone or in concert with any other person, firm, corporation, partnership, company or association to acquire or affect the control of Perma-Fix or to influence the management, board of directors or policies of Perma- Fix, or, directly or indirectly, or encourage the formation of, any group within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, seeking to obtain or take control of Perma-Fix or to influence the management, board of directors policies of Perma-Fix, except it is recognized that the Sullivan Trusts have the right to select one (1) nominee to the Board of Directors of Perma-Fix under certain limited conditions; or 5.5 Attendance. During the period that any of the Sullivans or Sullivan Trusts is the beneficial owner of any shares of Perma-Fix Common Stock acquired under this Agreement and the Chem-Met Agreement, the Sullivan Trusts shall cause all such shares of Perma-Fix Common Stock which they beneficially own to be duly represented, in person or by proxy, at each meeting of stockholders of Perma-Fix. 5.6 Specific Enforcement. The parties hereto recognize and agree that, in the event any of the Sullivans or any of the Sullivan Trusts breach or threaten to breach any of the provisions of this Article 5, immediate irreparable injury would be caused to Perma-Fix, for which there is no adequate remedy at law. It is accordingly agreed that in the event of a failure by any of the Sullivans or Sullivan Trusts to perform their obliga- tions under this Article 5, Perma-Fix shall be entitled to specific performance through injunctive relief to prevent breaches of any provision of this Article 5 and to specif- ically enforce any provision of Article 5 and the terms and provisions thereof in any action instituted in any court of the United States or any state thereof having subject matter jurisdiction, in addition to any other remedy to which Perma- Fix may be entitled, at law or in equity. ARTICLE 6 NO SOLICITATION OF TRANSACTIONS 6.1 No Solicitation of Transactions. Chem-Con, the Sullivans and the Sullivan Trusts shall not, and will not allow any of their employees, agents, representatives or Affiliates (including, but not limited to any of Chem-Con's and/or Chem-Met's officers, directors, employees, agents, representatives or Affiliates), to (i) negotiate, sell, offer to sell or solicit -31- offers to purchase any of the assets of Chem-Con and/or Chem- Met (other than sales of products in the ordinary course of their businesses); (ii) negotiate, sell, offer to sell or solicit offers to purchase or exchange, any capital stock of Chem-Con, Chem-Met or any Subsidiary of Chem-Con or Chem-Met to, from or with any other party (other than pursuant to the terms of this Agreement and the Chem-Met Agreement) or enter into any merger, consolidation, liquidation or similar trans- action involving, directly or indirectly, Chem-Con , Chem-Met or any Subsidiary of Chem-Con or Chem-Met (other than pursuant to the terms of this Agreement and the Chem-Met Agreement) and none of the Sullivan, the Sullivan Trusts, Chem-Con, Chem-Met nor any of their Affiliates will negotiate with or provide financial, technical or other information to any person (other than pursuant to the terms of this Agreement and the Chem-Met Agreement) in connection with any such proposed purchase or transaction; or, (iii) negotiate, sell, offer to sell or solicit any offers to purchase any outstanding shares of Chem- Con's and Chem-Met's capital stock or any other securities of Chem-Con and Chem-Met (other than pursuant to the terms of this Agreement and the Chem-Met Agreement). ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF PERMA-FIX Perma-Fix, Florida Perma-Chem and Georgia Perma-Chem, jointly and severally, represent and warrant to the ALS Trust as follows: 7.1 Organization, etc. Perma-Fix is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Florida Perma-Chem is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida. Georgia Perma-Chem is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia. Perma-Fix has the corporate power to own its property and to carry on its business as now being conducted; Perma-Fix has the corporate power and authority to execute and deliver this Agreement and, after the Registration Statement has been declared effective by the SEC and obtaining approvals from its shareholders, its lender, the Boston Stock Exchange ("BSE") and the National Association of Securities Dealers, Inc. ("NASDAQ"), to issue the Perma-Fix Common Stock to be delivered pursuant to Section 3.1.4 hereof and consummate the transactions contemplated hereby and the Chem-Met Agreement, and to perform the transactions contemplated by this Agreement. Each of Florida Perma-Chem and Georgia Perma-Chem has the corporate power and authority to execute and deliver this Agreement and, subject to the Registration Statement being declared effective by the SEC and Perma-Fix obtaining approvals from its shareholders and its lender, to consummate the transactions contemplated hereby. -32- 7.2 Authorization, Execution and Delivery of Agreement. The exe- cution, delivery and performance of this Agreement by Perma- Fix, Florida Perma-Chem and Georgia Perma-Chem have been duly and validly authorized and approved by the Board of Directors of Perma-Fix. This Agreement constitutes the valid and binding agreement of Perma-Fix, enforceable in accordance with its terms, subject to bankruptcy, insolvency and other laws of similar import, and Perma-Fix, Florida Perma-Chem and Georgia Perma-Chem have taken, or will use reasonable efforts to take prior to the Closing, all other action required by law on the part of Perma-Fix, Florida Perma-Chem and Georgia Perma-Chem and Perma-Fix's, Florida Perma-Chem's and Georgia Perma-Chem's Certificate or Articles of Incorporation and bylaws or otherwise to effect the transactions contemplated by this Agreement. 7.3 Capital Stock of Perma-Fix. As of the date of this Agreement, the authorized capital stock of Perma-Fix consists of (i) 2,000,000 shares of Preferred Stock, $.001 par value, 9,850 of which are outstanding as of the date hereof; and (ii) 50,000,000 shares of Perma-Fix Common Stock, of which 12,419,080 shares are issued and outstanding as of the date hereof and 13,577,163 shares are reserved for issuance under Perma-Fix's Stock Option Plans (such Plans being here- inafter referred to as the "Perma-Fix Plans") and warrants or rights to subscribe for or purchase from Perma-Fix any Perma- Fix Common Stock. 7.4 SEC Filings. 7.4.1 Perma-Fix has previously furnished Chem-Con and the ALS Trust true and complete copies of the following docu- ments which have been filed by Perma-Fix with the SEC pursuant to Sections 13(a), 14(a), (b) or (c) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") (such documents are hereinafter collectively called the "Perma-Fix SEC Filings"): 7.4.1.1 its Annual Report on Form 10-K for the year ended December 31, 1997 (the "Form 10-K"), as amended by Amendment No. 1 on Form 10-K/A filed with the SEC on January 14, 1999; 7.4.1.2 quarterly reports on Form 10-Q for the quarters ended March 31, 1998 and June 30, 1998; and 7.4.1.3 quarterly report on Form 10-Q for the quarter ended September 30, 1998 as amended by Amendment No. 1 on Form 10-Q/A filed with the SEC on January 14, 1999. 7.4.1.4 Proxy Statement, dated April 20, 1998, in connection with its 1998 Annual Meeting of Stockholders; and -33- 7.4.1.5 Form 8-K, Date of Report (date of earliest event reported): June 30, 1998. The audited and unaudited financial statements con- tained in the Perma-Fix SEC Filings, as amended, present fairly the consolidated financial condition and results of operations and changes in shareholders' equity and changes in financial position of Perma-Fix as of the dates and for the periods indicated, except as may otherwise be stated in such financial state- ments. For purposes of this Agreement, all financial statements of Perma-Fix shall be deemed to include any notes to such financial statements. The financial statements described in this Section 7.4 are hereinafter referred to as the "Perma-Fix Financial Statements." 7.4.2 Material Adverse Change. Since September 30, 1998, there has not been, occurred or arisen, which has not been publicly disclosed to the shareholders of Perma- Fix or contained in the Perma-Fix SEC Filings, as amended: 7.4.2.1 any material adverse change in the consoli- dated financial condition or in the operations of the business of Perma-Fix and its subsidiaries, taken as a whole, from that shown on the Perma-Fix Financial Statements; or 7.4.2.2 any event, condition or state of facts (other than the general state of the national economy and proposed federal legislation or regulation) of any character which, to the knowledge of Perma-Fix, materially and adversely affects the results of operations or business or financial condition or properties of Perma-Fix and its subsidiaries, taken as a whole, except as otherwise disclosed in this Section 7.4. 7.5 Status of Perma-Fix Common Stock. The shares of Perma-Fix Common Stock to be delivered pursuant to Section 3.1.4 hereof, when so issued pursuant to this Agreement, will be duly and validly authorized and issued, fully paid and nonassessable. 7.6 No Breach of Statute or Contract, Governmental Authorizations. Subject to the Registration Statement being declared effective by the SEC, obtaining approval by the shareholders of Perma- Fix, the National Association of Securities Dealers ("NASD"), the BSE and Perma-Fix's lender, neither the execution and delivery of this Agreement by Perma-Fix, Florida Perma-Chem and Georgia Perma-Chem nor compliance with the terms and pro- visions of this Agreement by Perma-Fix, Florida Perma-Chem and Georgia Perma-Chem will violate (i) any law, statute, rule or regulation of any governmental authority, domestic or foreign, or will at the Closing Date conflict with or result in a breach of any of the terms, conditions or provisions of any judgment, order, injunction, decree or ruling of any court or -34- governmental agency or authority to which Perma-Fix, Florida Perma-Chem and Georgia Perma-Chem are subject, which in the aggregate would have a material adverse effect on Perma-Fix and its subsidiaries, taken as a whole, or (ii) any agreement or instrument to which it is a party or by which it is bound or constitute a default thereunder which would have a material adverse effect on Perma-Fix, Florida Perma-Chem and Georgia Perma-Chem and their subsidiaries, taken as a whole, or (iii) result in the creation of any Lien upon any property or assets of Perma-Fix or cause any acceleration of maturity of any obligation or loan which would have a material adverse effect on Perma-Fix and its subsidiaries, taken as a whole, or (iv) give to others any interest or rights, including rights of termination or cancellation, in or with respect to any of the material properties, assets, agreements, contracts or business of Perma-Fix which would have a material adverse effect on Perma-Fix and its subsidiaries, taken as a whole. 7.7 No Litigation or Adverse Events. Except as set forth in the SEC Filings, copies of which have been or will be delivered to Chem-Con, there is no suit, action, or legal, administrative, arbitration or other proceeding or governmental investigation pending, or to the best of the knowledge of Perma-Fix threatened, which could materially and adversely affect the financial condition and results of operations of Perma-Fix and its subsidiaries, taken as a whole. 7.8 Broker's or Finder's Fees. No agent, broker, person or firm acting on behalf of Perma-Fix, or under its authority, is or will be entitled to any commission or broker's or finder's fee from any of the parties hereto in connection with any of the transactions contemplated herein. ARTICLE 8 COVENANTS OF CONDUCT AND TRANSACTIONS PRIOR TO AND AFTER THE CLOSING 8.1 Investigations; Operation of Business of Chem-Con. Chem-Con, the Sullivans and the Sullivan Trusts agree, jointly and severally, between the date of this Agreement and the Closing: 8.1.1 Access to Premises and Books. That Perma-Fix, Florida Perma-Chem and Georgia Perma-Chem and their repre- sentatives shall have full access to all their premises and books and records relating to Chem-Con, and shall cause Chem-Con to provide to Perma-Fix and its repre- sentatives full access to their premises and books and records, and to cause Chem-Con's officers to furnish Perma-Fix, Florida Perma-Chem and Georgia Perma-Chem with such financial and operating data and other information with respect to the business and properties -35- of Chem-Con, as Perma-Fix, Florida Perma-Chem and Georgia Perma-Chem shall from time to time request; provided, however, that any such investigation shall not affect any of the representations, warranties or covenants of Chem-Con, the Sullivans and/or the Sullivan Trusts hereunder; and, provided further, that any such investigation shall be conducted in such manner as not to interfere unreasonably with the operation of the business of Chem-Con. In the event of termination of this Agreement, Perma-Fix will return to Chem-Con any and all financial statements, agreements, documents, memoranda or other repositories of informa- tion relating to Chem-Con that Perma-Fix, Florida Perma-Chem and/or Georgia Perma-Chem has obtained in connection with its review, and Perma-Fix agrees that any written information relating to Chem-Con and Chem- Con's financial condition, business, operations and prospects are strictly confidential and shall not be voluntarily disclosed to any third party or used by Perma-Fix for its benefit or the benefit of any other person, except for such information or documents (i) available generally to the public, (ii) in the posses- sion of Perma-Fix prior to its receipt under this Agreement, (iii) obtained by Perma-Fix from a third party who has an independent right to such information or documents, or (iv) as otherwise required by law to be disclosed; provided, however, that any confidentiality requirements contained in this Section shall terminate and be null and void twelve (12) months from the date of this Agreement. 8.1.2 Business Organization of Chem-Con. To cause Chem-Con and its Subsidiaries, to the extent required for continued operation of Chem-Con's and its Subsidiaries' business without impairment, to use Chem-Con's best efforts to preserve substantially intact the business organization of Chem-Con and its Subsidiaries to keep available the services of the present officers and employees of Chem-Con and its Subsidiaries, and to preserve the present relationships of Chem-Con and its Subsidiaries with persons having significant business relations therewith such as suppliers, customers, brokers, agents or otherwise. 8.1.3 Ordinary Course of Business. To cause Chem-Con to con- duct Chem-Con's and its Subsidiaries' businesses only in the ordinary course and, by way of amplification and not limitation, Chem-Con and its Subsidiaries will not without the prior written consent of Perma-Fix (except as otherwise specifically provided in this Agreement): 8.1.3.1 issue any capital stock or make any changes to its authorized, issued or outstanding capital stock, grant any stock options or rights to acquire shares of any of its capital stock or any security convertible into any class of its capital stock or agree to do any of the foregoing; or -36- 8.1.3.2 declare, set aside, or pay any dividend or distribution with respect to any of its capital stock or any other securities convertible into any class of capital stock; or 8.1.3.3 directly or indirectly redeem, purchase or otherwise acquire any of its capital stock or enter into any agreement to purchase or redeem any of the Chem-Con Common Stock; or 8.1.3.4 effect a split or reclassification of any of its capital stock convertible into any class of capital stock, purchase, redeem, retire or otherwise acquire any shares of any class of its capital stock or any security convertible into any class of its capital stock or agree to do any of the foregoing; or 8.1.3.5 change its charter or bylaws; or 8.1.3.6 except consistent with past practices, grant any increase in the compensation payable or to become payable by it to its officers or employees or any increase, regardless of amount, in any bonus, insurance, pension or other benefit plan, program, payment or arrangement made to, for, or with any officers or employees; or 8.1.3.7 engage in any transaction not in the ordinary course of business; or 8.1.3.8 borrow or agree to borrow any funds or assume, endorse, guarantee or agree to guarantee or otherwise as an accommodation become liable or responsible for obligations of any other individual, firm or corporation; or 8.1.3.9 waive any rights of substantial value; or 8.1.3.10 enter into an agreement, contract or com- mitment which, if entered into prior to the date of this Agreement, would be required to be listed in a Schedule pursuant to the terms of this Agreement and is in excess of Twenty-Five Thousand Dollars ($25,000.00); or 8.1.3.11 acquire any Real Property; or 8.1.3.12 enter into any agreement with Affiliates or trustees of the Sullivan Trusts or Affiliates, officers or directors of Chem-Con; or -37- 8.1.3.13 adopt, enter into, or amend materially any employment contract or any bonus, stock option, profit-sharing, pension, retirement, incentive, or similar employee benefit program; or 8.1.3.14 pay or incur any obligation or liability, absolute or contingent, other than lia- bilities incurred in the ordinary and usual course of its business; or 8.1.3.15 mortgage, pledge, or subject to lien or other encumbrance any of its properties or assets; or 8.1.3.16 except for transactions in the ordinary and usual course of its business, sell or transfer any of its properties or assets or cancel, release or assign any indebt- edness owed to it or any claims held by it; or 8.1.3.17 make any investment of a capital nature in excess of Twenty-Five Thousand Dollars ($25,000.00) for any one item or group of similar items, contributions to capital, property transfers, or otherwise, or by the purchase of any property or assets of any other individual, firm, or corpor- ation; or 8.1.3.18 enter into any other agreement not in the ordinary and usual course of business; or 8.1.3.19 merge or consolidate with any other cor- poration, acquire any of its assets or capital stock, solicit any offers for any of its assets or capital stock, or, except in the ordinary course of busi- ness, acquire any assets of any other person, corporation, or other business organization, or enter into any discus- sions with any person concerning, or agree to do, any of the foregoing; or 8.1.3.20 enter into any transaction or take any action which would, if effected prior to the Closing, constitute a breach of any of the representations, warranties or covenants contained in this Agreement. 8.1.4 Sale of Assets. Without the prior written consent of Perma-Fix, neither Chem-Con nor any of its Subsidiaries will undertake or enter into any sale, disposition, surrender, acquisition, agreement or transaction relating to any of its assets except in the ordinary course of business or as contemplated by this Agreement. -38- 8.2 No Selling of Shares or Granting of Options. Prior to the Closing, neither the ALS Trust, Chem-Con nor CCC shall sell, transfer, assign or otherwise dispose of any of the Shares or the shares of capital stock of CCC or grant any options, warrants, or other rights to purchase or otherwise acquire any Shares or other shares of the capital stock of Chem-Con or CCC, or issue any securities convertible into any shares of the capital stock of Chem-Con or CCC. 8.3 Consents. Chem-Con, the Sullivans, the Sullivan Trusts and Perma-Fix shall each use its best efforts to obtain the consent or approval of each person or Governmental Authority whose consent or approval shall be required in order to permit Chem-Con, the Sullivans, the Sullivan Trusts or Perma-Fix, as the case may be, to consummate the transactions contemplated by this Agreement. 8.4 Governmental Reports. Between the date of this Agreement and the Closing, the Sullivans, the Sullivan Trusts and Chem-Con shall furnish, make available to Perma-Fix any and all reports, not heretofore delivered to Perma-Fix under this Agreement or which are filed subsequent to the date of this Agreement, to any state, federal or local government, agency or department, including, but not limited to, the SEC, the IRS, the EPA, the FTC and the PBGC. 8.5 Conduct of Business. Prior to the Closing, Chem-Con shall conduct its business in the ordinary and usual course as heretofore conducted and to use its best efforts (i) to preserve its business and business organization intact; (ii) to keep available to Chem-Con the services of the present officers and employees of Chem-Con; (iii) to preserve the goodwill of customers and others having business relations with Chem-Con; (iv) to maintain its properties in customary repair, working order and condition (reasonable wear and tear excepted); (v) to comply with all Laws applicable to it and the conduct of its businesses; (vi) to keep in force at not less than their present limits all existing policies of insurance; (vii) to make no material changes in the customary terms and conditions upon which it does business; (viii) to duly and timely file all reports, returns, and other documents required to be filed with federal, state, local and other Governmental Authorities; and, (ix) unless it is contesting the same in good faith and has established reasonable reserves therefor, to pay, when required to be paid, all Taxes indicated by Returns so filed or otherwise lawfully levied or assessed upon it or any of its properties and to withhold or collect and pay to the proper Governmental Authorities or hold in separate bank accounts for such payment all taxes and other assessments which it believes in good faith to be required by Law to be so withheld or collected. 8.6 Governmental Approvals. Prior to Closing, each of Chem-Con, the Sullivans and the Sullivan Trusts shall use its best efforts in good faith to take or cause to be taken as promptly as practicable all such steps as shall be necessary to obtain all required Governmental Approvals as promptly as practicable to consummate the transactions contemplated by this Agreement. -39- 8.7 Encumber. None of Chem-Con, the ALS Trust nor the Sullivan Trusts shall sell, pledge, encumber or otherwise hypothecate or transfer or grant an option, warrant or right to sell or dispose of any shares of capital stock of Chem-Con prior to the Closing other than pursuant to this Agreement. 8.8 Title Policies for Real Property Owned by Chemical Florida. On or before five (5) days prior to the Closing Date, Chemical Florida shall deliver to Perma-Fix a fully paid policy or policies of title insurance, dated as of a date within five (5) days of the Closing Date, issued to Chemical Florida and Florida Perma-Chem by a title company of nationally recognized standing, reasonably satisfactory to Perma-Fix, on a standard ALTA's owner title insurance policy form, insuring that Chemical Florida has good and marketable fee simple title in and to each parcel of Real Property owned by Chemical Florida listed on Schedule F hereto, free and clear of all Liens and containing no exceptions, except (a) standard printed exceptions (other than exceptions for mechanics', artisans' or materialmen's liens and for matters that would be revealed by a survey) and (b) Permitted Encumbrances. The amount of such title insurance for each parcel of Real Property owned by Chemical Florida shall be as set forth on Schedule F hereto. The cost and expense for such title insurance shall be shared equally by the Sullivans and Perma-Fix. 8.9 Title Policies for Real Properties owned by Chemical Georgia. On or before five (5) days prior to the Closing Date, Chemical Georgia shall deliver to Perma-Fix a fully paid policy or policies of title insurance, dated as of a date within five (5) days of the Closing Date, issued to Chemical Georgia and Georgia Perma-Chem by a company of nationally recognized standing, reasonably satisfactory to Perma-Fix, or a standard ALTA's owner title insurance policy form, insuring to Chemical Georgia and Georgia Perma-Chem that Chemical Georgia has good and marketable fee simple title in and to each parcel of Real Property owned by Chemical Georgia listed on Schedule F hereto, free and clear of all Liens and containing no exceptions, except (a) standard printed exceptions (other than exemptions for mechanics, artisans' or materialmen's liens and for matters that would be revealed by a survey) and (b) Permitted Encumbrances. The amount of such title insurance for each parcel of Real Property owned by Chemical Georgia shall be as set forth on Schedule F hereto. The cost and expenses for such title insurance shall be shared equally by the Sullivans and Perma-Fix. 8.10 Real Property Located in Orlando, Florida. The Real Property located in Orlando, Florida, as described in Schedule F attached hereto, and all improvements located thereon (the "Orlando Real Property"), which Orlando Real Property is being leased by Chemical Florida, from the ALS Trust. ALS Trust represents and warrants that it has good and marketable fee simple title in and to the Orlando Real Property and all of the Mineral Rights thereunder, free and clear of any and all Liens except for (a) Permitted Encumbrances and (b) two mortgages owed to and held by (i) Sun Trust Bank with the -40- principal amount of such indebtedness as of December 31, 1998, being approximately $110,000.00 ("Sun Trust Debt") and (ii) Commercial Carrier with the principal amount of such indebtedness as of the date hereof being approximately $138,000.00 ("Carrier Debt"). The Sun Trust Debt and Carrier Debt are collectively referred to herein as the "Two Mortgages." Within ten (10) days prior to the Closing, the ALS Trust shall, through a capital contribution, transfer and convey good and marketable fee simple title to all of the Orlando Real Property, all improvements located thereon and all of the Mineral Rights thereunder, by a general warranty deed in form and contents satisfactory to Perma-Fix, to Chemical Florida, free and clear of any and all Liens except for Permitted Encumbrances and the Two Mortgages. ALS Trust represents and warrants that the Two Mortgages are current and without default and no event has occurred under the Two Mortgages which would, with the passage of time, result in a default. On or before five (5) days prior to the Closing Date, the ALS Trust shall deliver to Perma-Fix a fully paid policy of title insurance, dated as of the date within five (5) days of the Closing Date, issued to Chemical Florida and Florida Perma-Chem by a title company of nationally recognized standing, reasonably satisfactory to Perma-Fix, on a standard ALTA's owner title insurance policy form, insuring to Chemical Florida and Florida Perma-Chem that Chemical Florida has good and marketable fee simple title in and to the Orlando Real Property, free and clear of all Liens and containing no exceptions other than (a) standard printed exceptions (other than exceptions for mechanics, artisans or materialmen's liens and for matters that would be revealed by a survey), (b) Permitted Encumbrances and (c) the Two Mortgages. The amount of such title insurance shall be $385,000.00. The cost and expense for such title insurance shall be shared equally by the ALS Trust and Perma-Fix. 8.11 Survey. Simultaneously with the delivery of the title policies to Perma-Fix pursuant to Sections 8.8, 8.9 and 8.10 hereof, Chem-Con shall deliver to Perma-Fix and the title company issuing the title insurance under Sections 8.8, 8.9 and 8.10 hereof, a written survey prepared by a duly licensed surveyor reasonably satisfactory to Perma-Fix covering each of the Real Properties owned by Chem-Con and the Orlando Real Property, which survey shall be satisfactory to Perma-Fix and to the title company issuing the ALTA's owner's title insurance policies. The cost and expense for such survey shall be shared equally by the Sullivans and Perma-Fix. 8.12 Public Announcements. Perma-Fix, the Sullivans and the Sullivan Trusts agree that they will consult with each other before issuing any press releases or otherwise making any public statements with respect to this Agreement or the transactions contemplated hereby and any press release or any public statement shall be subject to mutual agreement of the parties, except as may be required by the disclosure obligations of either party or their Affiliates under applicable securities law. 8.13 Notification. Chem-Con, the Sullivans and the Sullivan Trusts shall give Perma-Fix prompt written notice of (i) the -41- existence of any fact or the occurrence of any event which constitutes, or with the giving of notice or the passage of time or both would constitute a breach of any representation or warranty of Chem-Con, the Sullivans or the Sullivan Trusts made herein or pursuant hereto and (ii) the taking of any action by Chem-Con, the Sullivans or the Sullivan Trusts that would breach or violate, or constitute a default under, any agreement or covenant of Chem-Con, the Sullivans or the Sullivan Trusts made herein or pursuant hereto. Upon the giving of such notice, Perma-Fix may terminate this Agreement in accordance with the terms hereof. 8.14 Filings. The parties hereto shall, as promptly as practicable after the date hereof, submit applications, all documents, reports and notifications, and satisfy all requests for additional information, if any, pursuant to 40 Code of Federal Regulations ("CFR") Part 270 and all other requirements under any and all applicable Environmental Laws, with regard to the transfer of, or changes in the ownership or operational control of Chem-Con or any of its Subsidiaries or the permits, licenses or approvals held or used by Chem-Con or any of its Subsidiaries relating to the businesses of Chem-Con or any of its Subsidiaries. Each of the parties hereto agree to reasonably cooperate with each other to obtain all authoriza- tions required under any and all applicable laws, to consummate the transactions contemplated hereby. 8.15 Supplemental Disclosure. Chem-Con, the Sullivans and the Sullivan Trusts agree that, with respect to their representations and warranties made in this Agreement, they will have a continuing obligation to supplement or amend the Schedules hereto with respect to any matter hereafter arising or discovered which, if existing or known at the date of this Agreement, would have been required to be set forth or described in the Schedules hereto. Upon the supplementing or amending of any Schedules by Chem-Con, the Sullivans or the Sullivan Trusts or the discovery of any matters by Perma-Fix in the course of its investigations, Perma-Fix may, at its option, terminate this Agreement without any liability or obligation on the part of Perma-Fix, Florida Perma-Chem and Georgia Perma-Chem. 8.16 SEC Filings. Perma-Fix shall provide the Sullivans with all reports and other filings it makes with the SEC under the Securities Act or under the Exchange Act from the date of this Agreement to the Closing. 8.17 Listing of Perma-Fix Common Stock. Perma-Fix shall use reasonable efforts to obtain, prior to the Closing, approval for listing on the BSE and NASDAQ Small Cap Market, upon official notice of issuance, of the shares of Perma-Fix Common Stock to be delivered pursuant to the provisions of Section 3.3 hereof. 8.18 Perma-Fix Registration Statement, etc. Prior to the Effective Date of the Mergers, Perma-Fix shall have prepared and filed with the SEC a registration statement on Form S-4 (the "Registration Statement") under the Securities Act for the -42- purpose of registering the shares of Perma-Fix Common Stock to be issued pursuant to the terms of this Agreement and the Chem-Met Agreement. Perma-Fix will use all reasonable efforts to cause the Registration Statement to become effective as soon as practicable and to thereafter maintain the effectiveness of the Registration Statement up to the time of the shareholders meetings of Chem-Con, Chem-Met and Perma-Fix called for the purpose of approving this Agreement, the Chem- Met Agreement and the Mergers are held and up to and at the time of the delivery of the shares of Perma-Fix Common Stock to be delivered to Chem-Con and Chem-Met shareholders under the terms and provisions of this Agreement and the Chem-Met Agreement as may be required by law and the regulations of the SEC. Chem-Con, Chem-Met, the Sullivans, the Sullivan Trusts and Perma-Fix will each take such steps as may be necessary on their respective parts to comply with any state securities or Blue Sky Laws applicable to the action to be taken by them in connection with the delivery by Perma-Fix to Chem-Con and Chem-Met stockholders of the Perma-Fix Common Stock. 8.19 Information for Proxy Statements. The parties hereto will each furnish to the other such data and information relating to it as the other may reasonably request for the purpose of including such data and information in the Registration Statement and the Proxy Statement (as defined below) provided for by this Agreement and the Agreement of Merger. 8.20 Registration Statement; Proxy Statement/Prospectus. Chem-Con, the Sullivans and the Sullivan Trusts, jointly and severally, covenant and agree that the information to be supplied by Chem-Con, the Sullivans and/or the Sullivan Trusts pursuant to this Agreement and the Chem-Met Agreement for inclusion in the Registration Statement pursuant to which shares of Perma-Fix Common Stock issued in the Mergers will be registered under the Securities Act shall not at the time the Registration Statement is declared effective by the SEC ("Effective Date") contain any untrue statement of a material fact or omit to state any material fact required to be stated in the Registration Statement or necessary in order to make the statements in the Registration Statement, in light of the circumstances under which they were made, not misleading. The information supplied by Chem-Con, the Sullivans and/or the Sullivan Trusts for inclusion in the proxy statement/prospectus (the "Proxy Statement") to be sent to the stockholders of Perma-Fix in connection with the meeting of Perma-Fix's stockholders (the "Perma-Fix Stockholders' Meeting") to consider this Agreement, the Mergers and the issuance of shares of Perma-Fix Common Stock pursuant to the Mergers shall not, on the date the Proxy Statement is first mailed to stockholders of Perma-Fix, at the time of the Perma- Fix Stockholders' Meeting and at the Effective Time, contain any statement which, at such time and in light of the circumstances under which it shall be made, is false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements made in the Proxy Statement not false or misleading; or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Perma-Fix Stockholders' Meeting which has become false or misleading. If at any time prior to the -43- Effective Time any event relating to Chem-Con or any of its Affiliates, officers, directors, employees or shareholders which should be discovered by Chem-Con, the Sullivans and/or the Sullivan Trusts which should be set forth in an amendment to the Registration Statement or a supplement to the Proxy Statement, Chem-Con, the Sullivans and/or the Sullivan Trusts shall promptly inform Perma-Fix. 8.21 Disclosure in Proxy Statement. Perma-Fix agrees that none of the information which has been or will be supplied in writing by Perma-Fix for inclusion in the Proxy Statement relating to the Mergers will, at the time such Proxy Statement is mailed or at the time of the meeting to which such Proxy Statement relates, be false or misleading with respect to any material fact, or will omit to state any material fact relating to Perma-Fix necessary to order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of any proxy for the meeting in connection with such Proxy Statement. 8.22 Audited Financial Statements. For inclusion in the Registration Statement and Proxy Statement, Chem-Met, the Sullivans and the Sullivan Trusts shall have Bovitz & Co., P.C., prepare, audit and deliver to Perma-Fix true, correct and complete copies of the 1998, 1997 and 1996 audited financial statements of Chem-Con and Chem-Met, on a combined basis, consisting of (i) balance sheet as of fiscal years ended September 30, 1998, September 30, 1997 and September 30, 1996; (ii) statement of income and related earnings for the fiscal years ended September 30, 1998, September 30, 1997 and September 30, 1996; (iii) statement of stockholders' equity and statement of cash flow for the years ended September 30, 1998, September 30, 1997 and September 30, 1996, and (iv) notes thereto, with auditors' report thereon being unqualified, all of which shall have been examined by Bovtiz & Co., P.C., independent certified public accountants, and be in accordance with Regulation S-X (17 C.F.R. Part 210) and GAAP, consistently applied. The audited financial statements referred to in this Section 8.22 shall include Chem-Con and Chem-Met, on a combined basis. Perma-Fix agrees to pay for that portion of such audited financial statements for Chem-Con and Chem-Met, on a combined basis, relating to years ended September 30, 1996, 1997 and 1998 unless the audit finds that the income of Chem-Con and Chem-Met, on a combined basis, is twenty percent (20%) less than represented prior to accounting entries as follows: (i) reversal of officer notes receivable of $1,125,919 offset by a note payable from the officer in the amount of $60,980; (ii) increased allowance for doubtful accounts of Two Hundred Thousand Dollars ($200,000); (iii) accrued expenses of Six Hundred Thousand Dollars ($600,000); (iv) reserve for remediation of Chem-Con's Valdosta, Georgia facility of One Million Eight Hundred Thousand Dollars ($1,800,000); and (v) accrued closure costs of Six Hundred Thirty-Five Thousand Eight Hundred Two Dollars ($635,802), in which case the audit shall be paid for in its entirety by Chem-Con. -44- 8.23 Public Disclosure. Perma-Fix and the Sullivans shall consult with each other before issuing any press release or otherwise making any public statement with respect to the Mergers or this Agreement and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by law or any listing agreement with a national securities exchange or the NASDAQ. 8.24 Pooling Accounting. From and after the date hereof and until the Effective Time, neither Chem-Con nor Perma-Fix shall knowingly take any action, or knowingly fail to take any action, that is reasonably likely to jeopardize the treatment of the Mergers and the Chem-Met Merger as provided in the Chem-Met Agreement as a pooling of interests for accounting purposes. 8.25 Letter of Public Accountants. Chem-Con, the Sullivans and the Sullivan Trusts shall cause to be delivered to Perma-Fix letters, the first ("First Accountant Letter") of which shall be dated not less than two days prior to the date on which the Registration Statement becomes effective, and the second (the "Second Accountant Letter") of which shall be dated not less than five days prior to the Closing Date from Bovitz & Co., P.C., which shall be addressed to Perma-Fix and be in form reasonably satisfactory to Perma-Fix and customary in scope and substance for letters delivered by independent public accountants in connection with registration statements similar to the Registration Statement and shall contain, without limitation, the following statements: (i) the combined Audited Financial Statements of Chem-Con and Chem-Met examined by them and included in the Proxy Statement and Registration Statement comply as to form in all material respects with the applicable accounting requirement of the Securities Act and of the published Rules and Regulations thereunder and (ii) on the basis of a reading of the latest available unaudited consolidated financial statements, inquiries of officers of Chem-Con and Chem-Met responsible for financial and accounting matters and a reading of the minutes, nothing has come to their attention which caused them to believe that (a) as of the date of the latest available unaudited interim financial statements prepared by Chem-Con and Chem-Met there was any change in the capital stock or long-term debt of Chem-Con, Chem-Met and their subsidiaries consolidated or any decreases in consolidated net current assets or in consolidated net assets, as compared with the amounts shown in the September 30, 1998, consolidated Balance Sheet, or (b) for the period from September 30, 1998, to the date of the latest available unaudited interim consolidated financial statements prepared by Chem-Con, there were any decreases, as compared with the corresponding period in the preceding year, in consolidated net revenues or in total or per share amounts of consolidated income (loss) before extraordinary items or of consolidated net income, except in all instances for changes or decreases which the Proxy Statement discloses have occurred or may occur, and (c) that on the basis of inquiries of officers of Chem-Con and Chem-Met responsible for financial and accounting matters and a reading of the minutes, nothing -45- has come to their attention which caused them to believe that (1) at a specified date within five (5) days of the Effective Date of the Registration Statement and not more than five (5) days prior to the Effective Time of the Mergers there was any change in the capital stock or long-term debt of Chem-Con and Chem-Met and their subsidiaries consolidated or any decreases in consolidated net current assets or in consolidated net assets, as compared with amounts shown on the September 30, 1998, consolidated Balance Sheet or (2) for the period from the date of the latest available unaudited consolidated interim financial statements prepared by Chem-Con and Chem-Met to a specified date within five (5) days of the effective date of the Registration Statement and not more than five (5) days prior to the Effective Time of the Merger there were any decreases as compared with the corresponding period in the preceding year, in consolidated net revenues or in the total or per-share amounts of consolidated income before extraordinary items or of consolidated net income, except in all instances for changes or decreases which the Proxy Statement and Registration Statement discloses have occurred or may occur, and (d) that they have compared the financial information which related to Chem-Con and Chem-Met appearing in the Proxy Statement and Registration Statement with amounts in the consolidated financial statements or accounting records of Chem-Con and Chem-Met and have found them to be in agreement. 8.26 Assumption of Liabilities. Each of the Sullivans and the Sullivan Trusts, jointly and severally, assume, and agree to pay, when due, and to perform or discharge, as the case may be, any and all (i) federal and/or state tax obligations and liabilities of Chem-Con and Quanta (and any other corporation with respect to periods for which such corporation was included and consolidated federal income tax returns with Chem-Con or Quanta) for any period ending on or prior to the Closing Date, without regard to whether such liabilities have been or would be properly provided for in the financial records of any person under generally accepted accounting principals, and including, without limitation, any such obligations or liabilities arising from (A) the transactions contemplated by this Agreement, (B) the determination of any tax on a consolidated basis with any other corporation, or (C) any tax sharing or tax allocation agreement, and (ii) obligations and liabilities (absolute or contingent known or unknown)of Quanta that have been incurred by Quanta in any manner whatsoever prior to the Closing Date or arising in any way in connection with the business or operations of Quanta prior to the Closing Date. 8.27 Liability to Broker. The Sullivans have retained WHCA Partners as an agent or firm acting on behalf of the Sullivans and the Sullivan Trusts in connection with this Agreement and the transactions contemplated by this Agreement. Except as otherwise expressly provided in Section 4.15 hereof, the Sullivans and the Sullivan Trusts shall, jointly and severally, pay any and all fees or renumeration due and payable to WHCA Partners as a result of this Agreement and/or consummation of the transactions contemplated by this Agreement. -46- 8.28 Access to Premises and Books. Perma-Fix agrees that the Sullivans, the Sullivan Trusts and their representatives shall have full access to all their premises and books and records relating to Perma-Fix, and Perma-Fix shall provide to the Sullivans, the Sullivan Trusts and their representatives full access to their premises and books and records, and to cause Perma-Fix's officers to furnish the Sullivans, the Sullivan Trusts with such financial and operating data and other information with respect to the business and properties of Perma-Fix, as the Sullivans or Sullivan Trusts shall from time to time request; provided, however, that any such investi- gation shall not affect any of the representations, warranties or covenants of Perma-Fix hereunder; and, provided further, that any such investigation shall be conducted in such manner as not to interfere unreasonably with the operation of the business of Perma-Fix. In the event of termination of this Agreement, the Sullivans and the Sullivan Trusts will return to Perma-Fix any and all financial statements, agreements, documents, memoranda or other repositories of information re- lating to Perma-Fix and its Subsidiaries that Chem-Con, the Sullivans or the Sullivan Trusts have obtained in connection with their review, and Chem-Con, the Sullivans and the Sullivan Trusts agree that any written information relating to Perma-Fix and its Subsidiaries and Perma-Fix's and its Subsidiaries' financial condition, business, operations and prospects are strictly confidential and shall not be volun- tarily disclosed to any third party or used by any of Chem- Con, the Sullivans or the Sullivan Trusts for its benefit or the benefit of any other person, except for such information or documents (i) available generally to the public, (ii) in the possession of Chem-Con prior to its receipt under this Agreement, (iii) obtained by any of Chem-Con, the Sullivans or the Sullivan Trusts from a third party who has an independent right to such information or documents, or (iv) as otherwise required by law to be disclosed; provided, however, that any confidentiality requirements contained in this Section shall terminate and be null and void twelve (12) months from the date of this Agreement. ARTICLE 9 CONDITIONS OF TRANSACTIONS CONTEMPLATED BY AGREEMENT; ABANDONMENT OF AGREEMENT 9.1 Closing Conditions of Perma-Fix, Florida Perma-Chem and Georgia Perma-Chem. The obligations of Perma-Fix, Florida Perma-Chem and Georgia Perma-Chem to consummate this Agreement or to effect the transactions contemplated by this Agreement shall be subject to the following conditions: 9.1.1 Resolutions of Board of Directors and Shareholders of Chem-Con. Chem-Con shall have furnished to Perma-Fix, in form and substance satisfactory to Perma-Fix: -47- 9.1.1.1 certified copies of resolutions of the shareholder and Board of Directors of Chem- Con, duly adopted by the Board of Directors and shareholder of Chem-Con, authorizing, the execution, delivery and performance of this Agreement by Chem-Con and its shareholder; 9.1.1.2 Incumbency certificate for the officers of Chem-Con. 9.1.2 Delivery of Trust Documents. The trust documents creating the Sullivan Trust shall have been delivered to Perma-Fix evidencing, in form and content satisfactory to Perma-Fix that each of the Sullivan Trusts has the full, valid and legal capacity and authority to execute, deliver and perform all of its agreements, obligations, terms and conditions of this Agreement. 9.1.3 Approval by Lender. Perma-Fix's lender shall have approved the transactions contemplated by this Agreement and the Chem-Met Agreement, and Perma-Fix shall have obtained for Florida Perma-Chem and Georgia Perma-Chem a working capital line of credit from and after consummation of the Mergers on terms satisfactory to Perma-Fix. 9.1.4 Representations and Warranties of the Sullivans and the Sullivan Trusts to be True and Correct and Compliance With Covenants. Except to the extent waived in writing by Perma-Fix hereunder, (i) the representations and warranties of the Sullivans and the Sullivan Trusts herein contained shall be true and correct in all material respects on the Closing Date with the same effect as though made at such time; and (ii) the Sullivans and the Sullivan Trusts shall have performed all of their obligations and complied with all covenants, obligations, and agreements required by this Agreement to be performed or complied with by the Sullivans and the Sullivan Trusts on or prior to the Closing Date. The Sullivans and Sullivan Trusts shall also have delivered to Perma-Fix a certificate, dated the Closing Date and signed by each of the Sullivans and all trustees of the Sullivan Trusts, to both of the aforementioned effects. The Certificate is to be in form and substance satisfactory to Perma-Fix. 9.1.5 Representations and Warranties of Chem-Con to be True and Compliance With Covenants. Except to the extent waived in writing by Perma-Fix hereunder, (i) the representations and warranties of Chem-Con herein con- tained shall be true in all material respects on the Closing Date with the same effect as though made at such time; and (ii) Chem-Con shall have performed all obligations and complied with all covenants, obliga- tions, and agreements required by this Agreement to be performed or complied with by Chem-Con on or prior to the Closing Date. Chem-Con shall also have delivered -48- to Perma-Fix a certificate of Chemical Florida (in form and substance satisfactory to Perma-Fix), dated the Closing Date and signed by the chief executive officer of Chemical Florida, to both of the aforementioned effects. Chem-Con shall also have delivered to Perma- Fix a certificate of Chemical Georgia (in form and sub- stance satisfactory to Perma-Fix), dated the Closing Date and signed by the chief executive officer of Chemical Georgia, to both of the aforementioned effects. 9.1.6 Third Party Consents. Chem-Con, the Sullivans and the Sullivan Trusts shall have obtained consents to the transactions contemplated by this Agreement from the parties to all contracts, permits, agreements, debt instruments and other documents referred to in the Schedules delivered by Chem-Con, the Sullivans or the Sullivan Trusts to Perma-Fix in accordance with this Agreement or otherwise, which require such consents and consents from, or notification to, all Governmental Authorities which require such consents or noti- fications. 9.1.7 No Material Adverse Change. There shall not have occurred (i) any material adverse change since September 30, 1998, in the business, properties, assets, results of operations or financial condition of Chem-Con, or (ii) any loss or damage to any of the properties or assets (whether or not covered by insurance) of Chem-Con which will materially affect or impair the ability of Chem-Con to conduct, after con- summation of the transactions contemplated hereby, the business of Chem-Con as now being conducted by Chem- Con. 9.1.8 Statutory Requirements; Litigation. In a manner satisfactory to Perma-Fix, (i) all statutory requirements for the valid consummation by Chem-Con, the Sullivan Trusts and the Sullivans of the transactions contemplated by this Agreement shall have been fulfilled; all authorizations, consents and approvals of all Governmental Authorities required to be obtained in order to permit consummation by the Chem-Con, the Sullivan Trusts and the Sullivans of the transactions contemplated by this Agreement and to permit the business presently conducted by Chem-Con to continue unimpaired immediately following the Closing shall have been obtained; and, (ii) all applications for permits shall have been approved by the appropriate Governmental Authorities and all authorizations and approvals relating to all permits and licenses held by Chem-Con shall have been obtained from the appropriate Governmental Authorities under any and all of the Environmental Laws as a result of the change in ownership of Chem-Con, pursuant to the terms of this Agreement, with such permits, approvals and authori- zations to be in form and substance satisfactory to Perma-Fix, so that Chem-Con is permitted to continue unimpaired immediately following the Closing Date the same business operations that Chem-Con carried on as of the date of this Agreement and the Closing Date. Between the date of this Agreement and the Closing, no -49- Governmental Authority, whether federal, state or local, shall have instituted (or threatened to institute either orally or in a writing directed to any of Chem-Con, the Sullivans and/or the Sullivan Trusts or any of their subsidiaries) an investigation which is pending on the Closing relating to this Agreement and the transactions contemplated hereby, and between the date of this Agreement and the Closing no action or proceeding shall have been instituted or, to the knowledge of Perma-Fix, shall have been threatened before a court or other governmental body or by any public authority to restrain or prohibit the trans- actions contemplated by this Agreement or to obtain damages in respect thereof. 9.1.9 Opinion of Counsel of Chem-Con, the Sullivans and the Sullivan Trusts. Perma-Fix shall have received from O'Rourke & Myers, counsel to Chem-Con, the Sullivans and the Sullivan Trusts, or such other counsel acceptable to Perma-Fix and its counsel, an opinion or opinions, dated the Closing Date, substantially in the form of Exhibit "E" hereto, with the form and contents thereof reasonably satisfactory to Perma-Fix and its counsel. 9.1.10 Effective Registration Statement. The Registration Statement shall have become effective under the Securities Act and shall not be subject to a stop order or a proceeding seeking a stop order. 9.1.11 Due Diligence. Perma-Fix shall have completed its financial due diligence of Chem-Con, with the results thereof satisfactory to Perma-Fix. 9.1.12 Environmental Audit. Perma-Fix shall have conducted and completed an environmental audit of Chem-Con, and shall have determined to the satisfaction of Perma-Fix that, (i) Chem-Con has been and is currently in compliance in all material respects with all applicable Environmental Laws, except as otherwise disclosed herein; (ii) none of the assets (including, but not limited to, the soils and groundwater on or under any of the Real Properties) owned, leased, operated or used by Chem-Con are contaminated with any hazardous substance (as defined in Section 101(14) of CERCLA or any analogous state or local Laws) or petroleum (as defined in Subtitle I of RCRA or any analogous state or local Laws) in a manner that might have a material adverse effect on Chem-Con, except as otherwise disclosed herein; and (iii) Chem-Con is not or would not be subject to any liability in any material amount under any provision, or as a result of any past or present violation, of any applicable Environmental Laws. 9.1.13 Stock Certificates. On or prior to the Closing, the ALS Trust shall execute, endorse in blank and deliver to Perma-Fix, with signatures guaranteed by a bank or investment banking firm and in form acceptable to -50- Perma-Fix, all of the stock certificates representing the Shares, duly and validly endorsed for transfer, free and clear of any and all Liens. 9.1.14 Permits. All permits (including, but not limited to, all permits issued or issuable by Governmental Authorities under all Environmental Laws) which Perma- Fix deems necessary to conduct Chem-Con's business after the Effective Time as currently conducted by Chem-Con (i) have been duly and validly transferred, or approved for transfer effective upon the Closing, to Florida Perma-Chem and Georgia Perma-Chem, whichever is appropriate, by all Governmental Authorities or (ii) have been duly and validly issued to Florida Perma-Chem and Georgia Perma-Chem, whichever is appropriate, by all appropriate Governmental Authorities, all in form and content satisfactory to Perma-Fix. 9.1.15 No Liens on Assets. All assets of Chem-Con (real and personal) shall be free and clear of any and all Liens, except for Permitted Encumbrances. 9.1.16 Listing of Perma-Fix Common Stock. The BSE and the NASDAQ Small Cap Market shall have approved for listing, upon official notice of issuance, the shares of Perma-Fix Common Stock to be delivered pursuant to the provisions of Article 3 hereof. 9.1.17 Minute Books and Stock Ledgers. The ALS Trust shall have delivered to Perma-Fix the minute books and stock ledgers for Chem-Con. 9.1.18 Financial Statements. Perma-Fix shall have received from Bovitz & Co., P.C. audited financial statements ("Chem-Con Audited Financial Statements") of Chem-Con for all years required to be included in the Registration Statement and Proxy Statement and Form 8-K to be filed by Perma-Fix as a result of consummation of this Agreement and the Chem-Met Agreement and as required by Regulation S-X (17 CFR Part 210), with such audited financial statements to be prepared in accord- ance with Regulation S-X (17 CFR Part 210) and GAAP, consistently applied throughout the periods, and with the Bovitz & Co., P.C. report in connection therewith to be unqualified. 9.1.19 Orlando Real Estate. Good and marketable fee simple title in and to the Orlando Real Estate and all improvements thereon shall have been transferred and conveyed to Chemical Florida by a capital contribution, free and clear of any and all Liens, except for the Permitted Encumbrances and the Two Mortgages. -51- 9.1.20 Title Policies and Surveys. Prior to the Closing Date, Perma-Fix shall have received the title insurance policies and surveys pursuant to Sections 8.8, 8.9, 8.10and 8.11 hereof. 9.1.21 Good Standing Certificates. Good standing and tax certificates (or analogous documents), dated as close as practicable to the Closing, from the appropriate authorities in each jurisdiction of incorporation of Chem-Con and in each jurisdiction in which Chem-Con is qualified to do business, showing Chem-Con to be in good standing and to have paid all taxes due in the applicable jurisdiction. 9.1.22 Resignation of Directors. All of the directors of Chem-Con shall have resigned as members of the Board of Directors of Chem-Con, effective as of the Closing Date, except for any existing director of Chem-Con who Perma-Fix advises the ALS Trust in writing prior to Closing is to remain a director of Chem-Con, whichever is applicable, prior to Closing. 9.1.23 Chem-Met Agreement. The Chem-Met Agreement shall have closed contemporaneously with the Closing of this Agreement. 9.1.24 Valdosta Remediation. Prior to Closing, Perma-Fix shall have determined that the cost to remediate the contamination at the Valdosta, Georgia facility where Chemical Georgia is located shall not, in the aggregate, exceed $1,800,000. 9.1.25 Pooling Letters. Perma-Fix shall have received a letter from BDO Seidman, LLP and a letter from Bovitz & Co., P.C. addressed to Perma-Fix, regarding its concurrence with management's conclusions that the acquisition of Chem-Con pursuant to the terms of this Agreement and the acquisition of Chem-Met pursuant to the terms of the Chem-Met Agreement qualify for pooling-of-interests accounting under Accounting Principles Board Opinion No. 16, as contemplated to be effected as of the date of the letter, it being agreed that Perma-Fix and Chem-Con shall each provide reasonable cooperation to BDO Seidman, LLP and Bovitz & Co., P.C., to enable them to issue such a letter. 9.1.26 Shareholder Approval. Perma-Fix shareholders shall have approved the Mergers contemplated by this Agreement and the Chem-Met Agreement as required under Delaware law and/or under the requirements of NASDAQ or the BSE. 9.1.27 Shareholder Approval. The shareholders of Chem-Con shall have approved the Merger transactions contemplated by this Agreement pursuant to the laws of the states of incorporation of Chem-Con and no -52- shareholders of Chem-Con shall have exercised or attempted to exercise dissenters rights or other similar rights in connection with the transactions contemplated hereby. 9.1.28 Accountants Letters. Perma-Fix shall have received the First Accountant Letter and the Second Accountant Letter and such shall be satisfactory to Perma-Fix. 9.1.29 Employment Agreement. Perma-Fix and TPS shall have entered into the Employment Agreement. 9.1.30 Officer and Director Waiver. Each officer and director of Chem-Con and CCC shall have executed and delivered to Perma-Fix an agreement, in form and substance satisfactory to Perma-Fix pursuant to which each such officer and director shall waive any and all rights to indemnification which any such officer and director may have from Chem-Con and/or CCC pursuant to Chem-Con's or CCC's Certificate of Incorporation, Bylaws, any indemnification agreements, or otherwise. 9.1.31 Fairness Opinion. Prior to the filing of the Registration Statement with the SEC and within five (5) days prior to the Closing, Perma-Fix shall have received a fairness opinion from an investment banker selected by Perma-Fix that the consideration to be issued by Perma-Fix under this Agreement and the Chem- Met Agreement is fair to Perma-Fix and its shareholders from a financial standpoint, with the form and contents of such opinion to be satisfactory to Perma-Fix. 9.1.32 Closing Price of Perma-Fix Common Stock. The average closing sale prices per share of the Perma-Fix Common Stock as reported on the NASDAQ for the five consecutive trading days ending with the trading day immediately prior to the Effective Date shall be not less than $1.25. 9.2 Conditions to Obligations of Chem-Con and The ALS Trust. The obligation of Chem-Con and the ALS Trust to consummate this Agreement or to effect the transactions contemplated by this Agreement shall be subject to the following conditions: 9.2.1 Resolutions of Perma-Fix Board of Directors and Shareholders. Perma-Fix shall have furnished Chem-Con with: 9.2.1.1 certified copies of resolutions duly adopted by the Board of Directors and the shareholders of Perma-Fix approving and authorizing execution, delivery and performance of the transactions contemplated by this Agreement; -53- 9.2.1.2 Incumbency Certificates for the officers of Perma-Fix. 9.2.2 Resolutions of Florida Perma-Chem and Georgia Perma- Chem Board of Directors and Shareholders. Perma-Fix shall have furnished Chem-Con with: 9.2.2.1 certified copies of resolutions duly adopted by Florida Perma-Chem and Georgia Perma-Chem approving and authorizing execution, delivery and performance of the transactions contemplated by this Agreement; and 9.2.2.2 Incumbency Certificate for the officers of Florida Perma-Chem and Georgia Perma-Chem. 9.2.3 Representations and Warranties of Perma-Fix to be True. Except to the extent waived hereunder, (i) the repre- sentations and warranties of Perma-Fix, Florida Perma- Chem and Georgia Perma-Chem herein contained shall be true in all material respects at the Closing with the same effect as though made at such time, except for such which do not have a material adverse effect on Perma-Fix and its subsidiaries, taken as a whole; and (ii) Perma-Fix, Florida Perma-Chem and Georgia Perma- Chem shall have performed all material obligations and complied with all material covenants required by this Agreement to be performed or complied with by it prior to the Closing. Perma-Fix shall also have delivered to the ALS Trust a certificate of Perma-Fix, dated the Closing and signed by its President or a Vice President to both of the aforementioned effects. 9.2.4 Employment Agreement. Perma-Fix shall have entered into the Employment Agreement ("Employment Agreement") with Thomas P. Sullivan. 9.2.5 Effective Registration Statement. The Registration Statement shall have become effective under the Securities Act and shall not be subject to a stop order or a proceeding seeking a stop order. 9.2.6 No Material Adverse Change. Except as otherwise dis- closed in this Agreement or as publicly disclosed to the shareholders of Perma-Fix or contained in the Perma-Fix SEC Filings, there shall not have occurred (i) any material adverse change since December 31, 1998, in the consolidated financial condition of Perma- Fix (it being understood that anything disclosed in any of the financial data furnished by Perma-Fix to the Sullivans or the Sullivan Trusts pursuant to this Agreement, or in an annual, interim or other report filed by Perma-Fix with the SEC or press releases issued by Perma-Fix (copies of which shall have been furnished to the ALS Trust) since December 31, 1998, and prior to the date of this Agreement (copies of which shall have been furnished to Chem-Con, the -54- Sullivans or the Sullivan Trusts), shall not constitute such a material adverse change or (ii) any loss or damage to any of the material properties or assets of Perma-Fix which would have a material adverse effect on Perma-Fix and its subsidiaries considered as a whole. 9.2.7 Litigation. Between the date of this Agreement and the Closing, no Governmental Authority, whether federal, state or local, shall have instituted (or threatened to institute, either orally or in writing, directed to the ALS Trust, Perma-Fix, Chem-Con, or any of their subsidiaries) an investigation which is pending on the Closing Date relating to the transactions contemplated by this Agreement and between the date of this Agreement and the Closing Date, no action or proceeding shall have been instituted or, to the knowledge of the Sullivans, the Sullivan Trusts, Perma-Fix or Chem-Con, shall have been threatened before a court or other governmental body or by any public authority to restrain or prohibit the transactions contemplated by this Agreement or to obtain damages in respect thereof. 9.2.8 Opinion of Counsel of Perma-Fix. The ALS Trust shall have received from Conner & Winters, a Professional Corporation, counsel to Perma-Fix, or such other counsel reasonably acceptable to the ALS Trust and its counsel, an opinion, dated the Closing Date, substantially in the form of Exhibit "F" hereto, with the form and content thereof reasonably satisfactory to Chem-Con and its counsel. 9.2.9 Closing Price of Perma-Fix Closing Stock. The average closing sale prices per share of Perma-Fix Common Stock as reported on the NASDAQ for the five consecutive trading days ending with the trading day immediately prior to the Effective Date shall not be less than $1.25. 9.3 Termination of Agreement and Abandonment of Mergers. Except as otherwise provided in Sections 8.1.1 and 8.29 hereof, this Agreement and the transactions contemplated hereby may be terminated at any time before the Closing, whether before or after approval of this Agreement by the shareholders of Perma- Fix or Chem-Con, as follows and in no other manner: 9.3.1 Conditions of the Sullivans, the Sullivan Trusts or Chem-Con Not Met. By Perma-Fix if, by June 30, 1999, the conditions set forth in Section 9.1 of this Article 9 shall not have been met (or waived as provided in Article 10 of this Agreement). 9.3.2 Conditions of Perma-Fix Not Met. By the Sullivans if, by June 30, 1999, the conditions set forth in Section 9.2 of this Article 9 shall not have been met (or waived as provided in Article 10 of this Agreement). -55- 9.3.3 Termination by Perma-Fix or the Sullivans of the Chem- Met Agreement. By Perma-Fix or by the Sullivans, if the Chem-Met Agreement is terminated pursuant to the terms thereof. 9.3.4 Mutual Consent. By the mutual written consent of both Perma-Fix and Chem-Con. 9.4 Expenses. Each party shall bear its own out-of-pocket expenses incurred in connection with the transactions contemplated by this Agreement, including, without limitation, all legal, accounting, consulting, brokers, advisory, travel, communications and other similar fees and expenses; provided, however, that any and all such expenses incurred by Chem-Con in connection with this Agreement and consummation of the transactions contemplated by this Agreement shall be considered as incurred by the ALS Trust and shall be paid by the ALS Trust. ARTICLE 10 TERMINATION OF OBLIGATIONS AND WAIVER OF CONDITIONS 10.1 Termination. In the event that this Agreement shall be terminated pursuant to Section 9.3 hereof, all further obligations of the parties hereto under this Agreement shall terminate without further liability of any party to another and each party hereto will pay its own costs and expenses incident to its negotiation and preparation of this Agreement and to its performance and compliance with all agreements and conditions contained herein on its part to be performed or complied with, including the fees, expenses and disbursements of its counsel. 10.2 Waiver. If any of the conditions specified in Section 9.1 of Article 9 hereof has not been satisfied, Perma-Fix may nevertheless at the election of Perma-Fix proceed with the transactions contemplated hereby; and, if any of the condi- tions specified in Section 9.2 of Article 9 hereof has not been satisfied, the ALS Trust may nevertheless at the ALS Trust' election proceed with the transactions contemplated hereby. Any such election to proceed shall be evidenced by a certificate executed on behalf of the electing party. Any such waiver shall not be considered as a waiver of any of the other terms and provisions of this Agreement by the electing party. -56- ARTICLE 11 INDEMNIFICATION AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES 11.1 Indemnification by the Sullivans and the Sullivan Trusts. The Sullivans and the Sullivan Trusts shall, jointly and severally, defend, indemnify and hold harmless each of Perma- Fix, Chem-Con, Florida Perma-Chem, Georgia Perma-Chem and each of their officers, directors, employees, agents, representatives and Affiliates from and against any and all claims, judgments, demands, damages, penalties, fines, losses, orders (judicial or administrative), decrees, liabilities, obligations, costs, claims and expenses (including, without limitation, reasonable attorneys' fees and accountant fees) which any of Perma-Fix, Chem-Con, Florida Perma-Chem, Georgia Perma-Chem and each of their officers, directors employees, agents, representatives and Affiliates incurs or suffers or may incur or suffer at any time as a result of or in connection with or arising out of (i) any representation or warranty made by any of Chem-Con, the Sullivans and/or the Sullivan Trusts in this Agreement or any certificate or other document delivered to Perma-Fix, Florida Perma-Chem or Georgia Perma-Chem pursuant to this Agreement that is false or misleading; (ii) any breach of or failure to perform any agreements, covenants, promises or obligations of Chem-Con, the Sullivans and/or Sullivan Trusts contained in this Agree- ment; (iii) any liabilities, obligations or claims arising in any way from any and all federal or state income tax liability which Chem-Con, Chem-Met and/or Quanta may be liable to pay for any reason whatsoever for any and all periods prior to the Closing Date; (iv) any and all liabilities, obligations or claims incurred by Quanta prior to the Closing Date or arising in any way in connection with the business or operations of Quanta prior to the Closing Date, or (v) any liabilities, obligations or claims brought under CERCLA or RCRA or any analogous state statute for the release or threatened release of any hazardous substances (as defined in CERCLA) or hazardous waste (as defined in RCRA) in which Sullivan or Chem-Con knew was pending or threatened against Chem-Con as of the date hereof or at the Closing Date but failed for any reason to disclose such in this Agreement or was, directly or indirectly, caused by or resulted from the knowing or willful violation by Sullivan or Chem-Con on or prior to the Closing Date of CERCLA, RCRA or any analogous state statute. 11.2 Notice of Claim. Perma-Fix shall give the Sullivans and the Sullivan Trusts a written notice (the "Notice of Claim") within ninety (90) days of the discovery of any matter in respect of which the right to indemnification contained in Section 11 can be claimed. Notwithstanding the foregoing, failure to give such notice will not terminate any obligation of the Sullivans and the Sullivan Trusts hereunder. 11.3 Survival of Representations and Remedies. All representations and warranties contained in this Agreement shall survive the Closing, regardless of the investigation made by either party -57- hereto. This Agreement and all covenants and agreements contained in this Agreement shall survive the Closing. 11.4 Indemnification Period. Any claim for indemnification under this Section 11 must be made and settled in full within one year from the Closing Date ("Indemnification Period"). Upon expiration of the Indemnification Period, this Section 11 is terminated and any claims for indemnification pursuant to this Section 11 are terminated. 11.5 Settlement of Indemnification Claims. Settlement of any claims for indemnification pursuant to this Section 11 shall be made through the delivery by the Sullivans and/or the Sullivan Trusts of that number of shares of Perma-Fix Common Stock determined by dividing the total amount of indemnification due and owing from the Sullivans and/or the Sullivan Trusts to Perma-Fix by the average of the closing sale prices per share of Perma-Fix Common Stock as reported on the NASDAQ for five consecutive trading days ending with the trading day immediately prior to the Effective Time. ARTICLE 12 MISCELLANEOUS 12.1 Entire Agreement and Amendment. This Agreement, including the Exhibits and Schedules hereto, sets forth the entire agreement and understanding between the parties and merges and supersedes all prior discussions, agreements and under- standings of every kind and nature among them as to the subject matter hereof, and no party shall be bound by any condition, definition, warranty or representation other than as expressly provided for in this Agreement or as may be on a date on or subsequent to the date hereof duly set forth in writing signed by each party which is to be bound thereby. Unless otherwise expressly defined, terms defined in the Agreement shall have the same meanings when used in any Exhibit or Schedule and terms defined in any Exhibit or Schedule shall have the same meanings when used in the Agreement or in any other Exhibit or Schedule. This Agreement (including the Exhibits and Schedules hereto) shall not be changed, modified or amended except by a writing signed by each party to be charged and this Agreement may not be dis- charged except by performance in accordance with its terms or by a writing signed by each party to be charged. 12.2 Taxes. Any Taxes in the nature of a sales or transfer tax (including any realty transfer tax or realty gains transfer tax), and any stock transfer tax, payable on the consummation of any other transaction contemplated hereby shall be paid by the Sullivans and the Sullivan Trusts. 12.3 Governing Law. This agreement shall be construed in accord- ance with and governed by the Laws of Delaware, without regard to the principles of conflicts of laws thereof. -58- 12.4 Benefit of Parties; Assignment. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. The Agreement may not be assigned by any of the parties hereto except with the prior written consent of the other parties hereto. Nothing herein contained shall confer or is intended to confer on any third party or entity which is not a party to this Agreement any rights under this Agreement. 12.5 Pronouns. Whenever the context requires, the use in this Agreement of a pronoun of any gender shall be deemed to refer also to any other gender, and the use of the singular shall be deemed to refer also to the plural. 12.6 Headings. The headings in the sections, paragraphs, Schedules and Exhibits of this Agreement are inserted for convenience of reference only and shall not constitute a part hereof. The words "herein", "hereof", "hereto" and "hereunder", and other words of similar import refer to this Agreement as a whole and not to any particular provision of this Agreement. 12.7 Notices. Any notices or other communications required or permitted hereunder shall be sufficiently given if sent by registered mail or certified mail, postage prepaid, addressed: If to Perma-Fix: Perma-Fix Environmental Services, Inc. 1940 Northwest 67th Place Gainesville, Florida 32653 Attention: President With a copy to: Irwin H. Steinhorn, Esquire Conner & Winters One Leadership Square 211 North Robinson, Suite 1700 Oklahoma City, Oklahoma 73102 If to Chem-Con, the Sullivans and the Sullivan Trusts: Mr. Thomas P. Sullivan 1021 Harvard Road Grosse Pointe Park, Michigan 48230 With a copy to: Peter E. O'Rourke, Esq. O'Rourke & Myers 241 Lewiston Grosse Pointe Farms, Michigan 48236 -59- or to such other address as shall be furnished in writing by either party. Any such notice or communication shall be deemed to have been given as of three (3) days after posting, one (1) day after next day delivery service or upon personal delivery. 12.8 Time. Time is of the essence of this Agreement. 12.9 Severability. Each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law; but, if any provision of this Agreement is held to be invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 12.10 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to each of the other parties hereto. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -60- IN WITNESS WHEREOF, the parties hereto execute this Agreement on the 15th day of March, 1999. PERMA-FIX ENVIRONMENTAL SERVICES, INC. By: /s/ Louis F. Centofanti _____________________________________ Dr. Louis F. Centofanti President FLORIDA PERMA-CHEM, INC. By: /s/ Louis F. Centofanti _____________________________________ Dr. Louis F. Centofanti President GEORGIA PERMA-CHEM, INC. By: /s/ Louis F. Centofanti _____________________________________ Dr. Louis F. Centofanti President CHEMICAL CONSERVATION CORPORATION By: /s/ Thomas P. Sullivan _____________________________________ Thomas P. Sullivan President CHEMICAL CONSERVATION CORPORATION OF GEORGIA, INC. By: /s/ Thomas P. Sullivan _____________________________________ Thomas P. Sullivan President -61- THE THOMAS P. SULLIVAN LIVING TRUST, Dated September 6, 1978 By: /s/ Thomas P. Sullivan _____________________________________ Thomas P. Sullivan, Sole Trustee, under the Thomas P. Sullivan Living Trust, Dated September 6, 1978, and any amendments thereto. THE ANN L. SULLIVAN LIVING TRUST, Dated September 6, 1978 By: /s/ Ann L. Sullivan _____________________________________ Ann L. Sullivan, Sole Trustee under the Ann L. Sullivan Living Trust, Dated September 6, 1978, and any amendments thereto. THOMAS P. SULLIVAN By: /s/ Thomas P. Sullivan _____________________________________ Thomas P. Sullivan, individually ANN L. SULLIVAN By: /s/ Ann L. Sullivan _____________________________________ Ann L. Sullivan, individually -62- EX-10 3 EXHIBIT 10.55 CHEM-MET AGREEMENT/PLAN OF MERGER AGREEMENT AND PLAN OF MERGER among PERMA-FIX ENVIRONMENTAL SERVICES, INC., PERMA-MET, INC., CHEM-MET SERVICES, INC., THE THOMAS P. SULLIVAN LIVING TRUST, THE ANN L. SULLIVAN LIVING TRUST, THOMAS P. SULLIVAN, an individual and ANN L. SULLIVAN, an individual MARCH 15, 1999 TABLE OF CONTENTS _________________ Page ____ ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . .2 1.1 "Affiliate" . . . . . . . . . . . . . . . . . . . . . .2 1.2 "Chem-Con " . . . . . . . . . . . . . . . . . . . . . .2 1.3 "Chem-Con Agreement " . . . . . . . . . . . . . . . . .2 1.4 "Chem-Con Merger" . . . . . . . . . . . . . . . . . . .2 1.5 "Chem-Fix Settlement Agreement" . . . . . . . . . . . .2 1.6 "Chem-Met Common Stock. . . . . . . . . . . . . . . . .3 1.7 "Chem-Met Intellectual Property Right". . . . . . . . .3 1.8 "Closing" . . . . . . . . . . . . . . . . . . . . . . .3 1.9 "Closing Date". . . . . . . . . . . . . . . . . . . . .3 1.10 "Code". . . . . . . . . . . . . . . . . . . . . . . . .3 1.11 "Effective Time". . . . . . . . . . . . . . . . . . . .3 1.12 "Environmental Laws". . . . . . . . . . . . . . . . . .3 1.13 "Employment Agreement". . . . . . . . . . . . . . . . .3 1.14 "ERISA" . . . . . . . . . . . . . . . . . . . . . . . .3 1.15 "Florida Perma-Chem". . . . . . . . . . . . . . . . . .3 1.16 "Facility". . . . . . . . . . . . . . . . . . . . . . .3 1.17 "Four County Landfill". . . . . . . . . . . . . . . . .4 1.18 "GAAP". . . . . . . . . . . . . . . . . . . . . . . . .4 1.19 "Georgia Perma-Chem". . . . . . . . . . . . . . . . . .4 1.20 "Governmental Authority". . . . . . . . . . . . . . . .4 1.21 "Laws". . . . . . . . . . . . . . . . . . . . . . . . .4 1.22 "Liens" . . . . . . . . . . . . . . . . . . . . . . . .4 1.23 "Merger". . . . . . . . . . . . . . . . . . . . . . . .4 1.24 "Mineral Rights". . . . . . . . . . . . . . . . . . . .4 1.25 "Permitted Encumbrances". . . . . . . . . . . . . . . .4 1.26 "Perma-Chem". . . . . . . . . . . . . . . . . . . . . .4 1.27 "Perma-Fix Common Stock". . . . . . . . . . . . . . . .4 1.28 "Quanta". . . . . . . . . . . . . . . . . . . . . . . .4 1.29 "Real Property" . . . . . . . . . . . . . . . . . . . .4 1.30 "Returns" . . . . . . . . . . . . . . . . . . . . . . .5 1.31 "Securities Act". . . . . . . . . . . . . . . . . . . .5 1.32 "Shares". . . . . . . . . . . . . . . . . . . . . . . .5 1.33 "SEC" . . . . . . . . . . . . . . . . . . . . . . . . .5 1.34 "Subsidiaries". . . . . . . . . . . . . . . . . . . . .5 1.35 "Surviving Corporations". . . . . . . . . . . . . . . .5 1.36 "Taxes" . . . . . . . . . . . . . . . . . . . . . . . .5 i 1.37 "10 Acre Tract" . . . . . . . . . . . . . . . . . . . .5 ARTICLE 2 THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . .5 2.1 The Merger. . . . . . . . . . . . . . . . . . . . . .5 The Merger of Chem-Met with and into Perma-Met. . . . .5 2.2 Effective Time of the Merger. . . . . . . . . . . . . .5 2.3 Closing . . . . . . . . . . . . . . . . . . . . . . . .6 2.4 Effects of the Merger . . . . . . . . . . . . . . . . .6 ARTICLE 3 CONVERSION OF SECURITIES. . . . . . . . . . . . . . . . . .6 3.1 Conversion of Capital Stock . . . . . . . . . . . . . .6 3.1.1 Capital Stock of Perma-Fix . . . . . . . . . . .6 3.1.2 Capital Stock of Perma-Met . . . . . . . . . . .6 3.1.3 Chem-Met Capital Stock . . . . . . . . . . . . .6 3.1.4 Chem-Met Treasury Stock. . . . . . . . . . . . .7 3.2 Dissenters Rights . . . . . . . . . . . . . . . . . . .7 3.3 Exchange of Certificates. . . . . . . . . . . . . . . .7 3.3.1 Exchange . . . . . . . . . . . . . . . . . . . .7 3.3.2 Exchange Procedures. . . . . . . . . . . . . . .7 3.3.3 No Further Ownership Rights in Chem-Met Common Stock. . . . . . . . . . . . . . . . . . . . . .8 3.3.4 No Fractional Shares . . . . . . . . . . . . . .8 3.3.5 No Liability . . . . . . . . . . . . . . . . . .8 3.3.6 Lost Certificates. . . . . . . . . . . . . . . .8 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE ALS TRUST, THE TPS TRUST, ALS, TPS AND CHEM-MET. . . . . . . . . . . .8 4.1 Organization of the Sullivan Trusts . . . . . . . . . .9 4.2 Organization of Chem-Met. . . . . . . . . . . . . . . .9 4.3 Capital Stock of Chem-Met . . . . . . . . . . . . . . .9 4.4 Ownership Interests in Securities . . . . . . . . . . .9 4.5 Financials. . . . . . . . . . . . . . . . . . . . . . 10 4.5.1 Financial Statements . . . . . . . . . . . . . 10 4.5.2 Liabilities. . . . . . . . . . . . . . . . . . 10 4.5.3 Net Worth. . . . . . . . . . . . . . . . . . . 10 4.5.4 Transactions Since September 30, 1998. . . . . 10 4.6 Tax and Other Returns, Reports and Pooling of Interest. . . . . . . . . . . . . . . . . . . . . . . 11 4.6.1 Tax Returns. . . . . . . . . . . . . . . . . . 11 ii 4.6.2 Payment of Taxes . . . . . . . . . . . . . . . 11 4.6.3 Waiver of Statute of Limitations . . . . . . . 11 4.6.4 Tax Deficiencies . . . . . . . . . . . . . . . 11 4.6.5 Pooling of Interests . . . . . . . . . . . . . 11 4.7 Property. . . . . . . . . . . . . . . . . . . . . . . 12 4.7.1 Assets . . . . . . . . . . . . . . . . . . . . 12 4.7.2 Real Property. . . . . . . . . . . . . . . . . 12 4.7.3 Leases . . . . . . . . . . . . . . . . . . . . 12 4.7.4 Notice . . . . . . . . . . . . . . . . . . . . 12 4.7.5 Personal Property. . . . . . . . . . . . . . . 13 4.7.6 Notice from Insurance Carrier. . . . . . . . . 13 4.8 Intellectual Property . . . . . . . . . . . . . . . . 13 4.8.1 Ownership. . . . . . . . . . . . . . . . . . . 13 4.8.2 No Breach of License . . . . . . . . . . . . . 14 4.8.3 Year 2000 Issues . . . . . . . . . . . . . . . 14 4.9 Agreements, Contracts and Commitments . . . . . . . . 15 4.9.1 Contracts. . . . . . . . . . . . . . . . . . . 15 4.9.2 Written List . . . . . . . . . . . . . . . . . 16 4.10 No Breach of Statute or Contract; Governmental Authorizations. . . . . . . . . . . . . . . . . . 17 4.10.1 No Violation . . . . . . . . . . . . . . . . . 17 4.10.2 Permits and Licenses . . . . . . . . . . . . . 18 4.10.3 Reports. . . . . . . . . . . . . . . . . . . . 18 4.10.4 Violation of Law . . . . . . . . . . . . . . . 18 4.10.5 Permits under Environmental Laws . . . . . . . 18 4.10.6 Other Permits. . . . . . . . . . . . . . . . . 19 4.11 No Litigation or Adverse Effects. . . . . . . . . . . 19 4.12 Authorization, Execution and Delivery of Agreement. . 20 4.13 Ability to Conduct the Business . . . . . . . . . . . 20 4.14 Disclosure. . . . . . . . . . . . . . . . . . . . . . 20 4.15 Broker's or Finder's Fee. . . . . . . . . . . . . . . 20 4.16 Insurance . . . . . . . . . . . . . . . . . . . . . . 21 4.17 Completeness of Documents -- Chem-Met . . . . . . . . 21 4.18 Completeness of Documents -- Sullivan Trusts. . . . . 21 4.19 Disposition of Assets . . . . . . . . . . . . . . . . 21 4.20 Obligations to Employees. . . . . . . . . . . . . . . 21 4.21 Condition of Plant, Machinery and Equipment . . . . . 23 4.22 Books of Account. . . . . . . . . . . . . . . . . . . 23 4.23 Stock Redemptions . . . . . . . . . . . . . . . . . . 23 4.24 Minute Books. . . . . . . . . . . . . . . . . . . . . 23 4.25 Indebtedness of Shareholders, etc . . . . . . . . . . 23 4.26 Business Prospects. . . . . . . . . . . . . . . . . . 24 4.27 Bank Accounts; Powers of Attorney . . . . . . . . . . 24 4.28 Sensitive Payments. . . . . . . . . . . . . . . . . . 24 iii ARTICLE 5 ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SULLIVANS AND THE SULLIVAN TRUSTS. . 24 5.1 Affiliate Status. . . . . . . . . . . . . . . . . . . 24 5.2 Rule 145. . . . . . . . . . . . . . . . . . . . . . . 25 5.3 Legend. . . . . . . . . . . . . . . . . . . . . . . . 25 5.4 Restrictions on Certain Actions . . . . . . . . . . . 25 5.4.1 Prohibition Against Acquisition . . . . . . . .25 5.4.2 Prohibition Against Solicitation. . . . . . . .26 5.4.3 Prohibition Against Control . . . . . . . . . .26 5.5 Attendance. . . . . . . . . . . . . . . . . . . . . . 26 5.6 Specific Enforcement. . . . . . . . . . . . . . . . . 26 ARTICLE 6 NO SOLICITATION OF TRANSACTIONS . . . . . . . . . . . . . 27 6.1 No Solicitation of Transactions . . . . . . . . . . . 27 ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF PERMA-FIX . . . . . . . 27 7.1 Organization, etc . . . . . . . . . . . . . . . . . . 27 7.2 Authorization, Execution and Delivery of Agreement. . 28 7.3 Capital Stock of Perma-Fix. . . . . . . . . . . . . . 28 7.4 SEC Filings . . . . . . . . . . . . . . . . . . . . . 28 7.4.1 . . . . . . . . . . . . . . . . . . . . . . . . 28 7.4.2 . . . . . . . . . . . . . . . . . . . . . . . . 29 7.4.3 Material Adverse Change. . . . . . . . . . . . 29 7.5 Status of Perma-Fix Common Stock. . . . . . . . . . . 29 7.6 No Breach of Statute or Contract, Governmental Authorizations. . . . . . . . . . . . . . . . . . . . 29 7.7 No Litigation or Adverse Events . . . . . . . . . . . 30 7.8 Broker's or Finder's Fees . . . . . . . . . . . . . . 30 ARTICLE 8 COVENANTS OF CONDUCT AND TRANSACTIONS PRIOR TO AND AFTER THE CLOSING. . . . . . . . . . . . . . 30 8.1 Investigations; Operation of Business of Chem-Met . . 30 8.1.1 Access to Premises and Books . . . . . . . . . 30 8.1.2 Business Organization of Chem-Met. . . . . . . 31 8.1.3 Ordinary Course of Business . . . . . . . . . .31 iv 8.1.4 Sale of Assets. . . . . . . . . . . . . . . . .33 8.2 No Selling of Shares or Granting of Options . . . . . 33 8.3 Disclosure in Proxy Statement . . . . . . . . . . . . 34 8.4 Consents. . . . . . . . . . . . . . . . . . . . . . . 34 8.5 Governmental Reports. . . . . . . . . . . . . . . . . 34 8.6 Conduct of Business . . . . . . . . . . . . . . . . . 34 8.7 Governmental Approvals. . . . . . . . . . . . . . . . 35 8.8 Encumber. . . . . . . . . . . . . . . . . . . . . . . 35 8.9 Title Policies for Real Property Owned by Chem-Met. . 35 8.10 Survey. . . . . . . . . . . . . . . . . . . . . . . . 35 8.11 Public Announcements. . . . . . . . . . . . . . . . . 35 8.12 Notification. . . . . . . . . . . . . . . . . . . . . 36 8.13 Filings . . . . . . . . . . . . . . . . . . . . . . . 36 8.14 Supplemental Disclosure . . . . . . . . . . . . . . . 36 8.15 SEC Filings . . . . . . . . . . . . . . . . . . . . . 36 8.16 Listing of Perma-Fix Common Stock . . . . . . . . . . 36 8.17 Perma-Fix Registration Statement, etc.. . . . . . . . 36 8.18 Information for Proxy Statements. . . . . . . . . . . 37 8.19 Registration Statement; Proxy Statement/Prospectus. . 37 8.20 Audited Financial Statements. . . . . . . . . . . . . 38 8.21 Public Disclosure . . . . . . . . . . . . . . . . . . 38 8.22 Pooling Accounting. . . . . . . . . . . . . . . . . . 38 8.23 Letter of Public Accountants. . . . . . . . . . . . . 38 8.24 Liability to Broker . . . . . . . . . . . . . . . . . 40 8.25 Assumption of Tax Liability and Quanta Liability. . . 40 8.26 Access to Premises and Books. . . . . . . . . . . . . 40 8.27 Quanta Merger and Exchange. . . . . . . . . . . . . . 41 8.28 T.A.S. Leasing, Inc . . . . . . . . . . . . . . . . . 41 ARTICLE 9 CONDITIONS OF TRANSACTIONS CONTEMPLATED BY AGREEMENT; ABANDONMENT OF AGREEMENT. . . . . . . . . . . . . . . . . 42 9.1 Closing Conditions of Perma-Fix and Perma-Chem. . . . 42 9.1.1 Resolutions of Board of Directors and Shareholders of Chem-Met . . . . . . . . . . . 42 9.1.2 Delivery of Trust Documents. . . . . . . . . .42 9.1.3 Approval by Lender. . . . . . . . . . . . . . . . . 42 9.1.4 Representations and Warranties of the Sullivans and the Sullivan Trusts to be True and Correct and Compliance With Covenants . . . . . . . . . . . . . . . . . . . 42 v 9.1.5 Representations and Warranties of Chem-Met to be True and Compliance With Covenants . . . . 43 9.1.6 Third Party Consents. . . . . . . . . . . . . . .43 9.1.7 No Material Adverse Change. . . . . . . . . . . .43 9.1.8 Statutory Requirements; Litigation. . . . . . . .43 9.1.9 Opinion of Counsel of Chem-Met, the Sullivans and the Sullivan Trusts. . . . . . . . 44 9.1.10 Effective Registration Statement. . . . . . . . .44 9.1.11 Due Diligence . . . . . . . . . . . . . . . . . .44 9.1.12 Environmental Audit . . . . . . . . . . . . . . .44 9.1.13 Stock Certificates. . . . . . . . . . . . . . . .45 9.1.14 Permits . . . . . . . . . . . . . . . . . . . . .45 9.1.15 No Liens on Assets. . . . . . . . . . . . . . . .45 9.1.16 Listing of Perma-Fix Common Stock . . . . . . . .45 9.1.17 Minute Books and Stock Ledgers. . . . . . . . . .45 9.1.18 Financial Statements. . . . . . . . . . . . . . .45 9.1.19 Title Policies and Surveys. . . . . . . . . . . .45 9.1.20 Good Standing Certificates. . . . . . . . . . . .46 9.1.21 Resignation of Directors. . . . . . . . . . . . .46 9.1.22 Chem-Con Agreement. . . . . . . . . . . . . . . .46 9.1.23 Facility Remediation. . . . . . . . . . . . . . .46 9.1.24 Settlement of Four County Landfill PRP Claims . . . . . . . . . . . . . . . . . . . . . 46 9.1.25 Settlement of Chem-Fix Claims.. . . . . . . . . .46 9.1.26 Pooling Letters.. . . . . . . . . . . . . . . . .46 9.1.27 Shareholder Approval. . . . . . . . . . . . . . .47 9.1.28 Shareholder Approval. . . . . . . . . . . . . . .47 9.1.29 Accountants Letters . . . . . . . . . . . . . . .47 9.1.30 Employment Agreement. . . . . . . . . . . . . . .47 9.1.31 Officer and Director Waiver . . . . . . . . . . .47 9.1.32 Quanta Transactions . . . . . . . . . . . . . . .47 9.1.33 Fairness Opinion. . . . . . . . . . . . . . . . .47 9.1.34 Closing Price of Perma-Fix Common Stock . . . . .47 9.1.35 TAS Lease . . . . . . . . . . . . . . . . . . . .48 9.2 Conditions to Obligations of Chem-Met and The TPS Trust. . . . . . . . . . . . . . . . . . . . . . . .48 9.2.1 Resolutions of Perma-Fix Board of Directors and Shareholders. . . . . . . . . . . .48 9.2.2 Resolutions of Perma-Met Board of Directors and Shareholders. . . . . . . . . . . . 48 9.2.3 Representations and Warranties of Perma-Fix to be True. . . . . . . . . . . . . . . . . . . . 48 9.2.4 Employment Agreement. . . . . . . . . . . . . . . 48 9.2.5 Effective Registration Statement. . . . . . . . . 48 9.2.6 No Material Adverse Change. . . . . . . . . . . . 49 9.2.7 Litigation. . . . . . . . . . . . . . . . . . . . 49 vi 9.2.8 Opinion of Counsel of Perma-Fix . . . . . . . . . 49 9.2.9 Escrow Agreement. . . . . . . . . . . . . . . . . 49 9.2.10 Closing Price of Perma-Fix Closing Stock. . . . . 49 9.3 Termination of Agreement and Abandonment of Merger. . . .49 9.3.1 Conditions . . . . . . . . . . . . . . . . . . . .50 9.3.2 Conditions of Perma-Fix Not Met. . . . . . . . . .50 9.3.3 Termination by Perma-Fix or the Sullivans under Section 9.3 of the Chem-Con Agreement . . . . . . . . . . . . . . . .50 9.3.4 Mutual Consent . . . . . . . . . . . . . . . . . .50 9.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . .50 ARTICLE 10 TERMINATION OF OBLIGATIONS AND WAIVER OF CONDITIONS 50 10.1 Termination . . . . . . . . . . . . . . . . . . . . . . .50 10.2 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . .50 ARTICLE 11 INDEMNIFICATION AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . .51 11.1 Indemnification by the Sullivans and the Sullivan Trusts . . . . . . . . . . . . . . . . . . . . .51 11.2 Notice of Claim . . . . . . . . . . . . . . . . . . . . .51 11.3 Survival of Representations and Remedies. . . . . . . . .52 11.4 Indemnification Period. . . . . . . . . . . . . . . . . .52 11.5 Settlement of Indemnification Claims. . . . . . . . . . .52 ARTICLE 12 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . .52 12.1 Entire Agreement and Amendment. . . . . . . . . . . . . .52 12.2 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .53 12.3 Governing Law . . . . . . . . . . . . . . . . . . . . . .53 12.4 Benefit of Parties; Assignment. . . . . . . . . . . . . .53 12.5 Pronouns. . . . . . . . . . . . . . . . . . . . . . . . .53 12.6 Headings. . . . . . . . . . . . . . . . . . . . . . . . .53 12.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . .53 12.8 Time. . . . . . . . . . . . . . . . . . . . . . . . . . .54 12.9 Severability. . . . . . . . . . . . . . . . . . . . . . .54 12.10 Counterparts. . . . . . . . . . . . . . . . . . . . . .54 Schedule "A" - List of all jurisdictions in which Chem-Met is authorized to do business Schedule "B" - List of all of Chem-Met's ownership interests in other business enterprises Schedule "C" - Liabilities vii Schedule "D" - List of all transactions of Chem-Met since September 30, 1998 Schedule "E" - Tax Returns; Payment of Taxes; Waiver of Statute of Limitations; Tax Deficiencies Schedule "F" - List of all Permitted Encumbrances and Liens on Chem-Met assets; Real Property owned by Chem-Met; title insurance policies; leases; Chem-Met personal property; notices of violations Schedule "G" - List of all contracts Schedule "H" - List of contracts, leases, and agreements re Chem-Met business (copies) Schedule "I" - Permits and licenses and reports since December 31, 1990 Schedule "J" - Litigation Schedule "K" - List of all trade names, trademarks, service marks, patents, copyrights and applications Schedule "L" - Insurance Schedule "M" - Disposition of Assets Schedule "N" - Determination letters on benefit plans Schedule "O" - Condition of plant, machinery and equipment Schedule "P" - Indebtedness of Shareholders Schedule "Q" - Bank accounts/borrowing resolutions of Chem- Met; Powers of Attorney Schedule "R" - Description of Quanta Tract Schedule "S" - Year 2000 Information Exhibit "A" - Employment Agreement with Thomas P. Sullivan Exhibit "B" - Facility Exhibit "C" - Permitted Encumbrances Exhibit "D" - Description of 10 Acre Tract Exhibit "E" - Certificate of Merger Exhibit "F" - Opinion of Counsel of Chem-Met Exhibit "G" - Opinion of Counsel of Perma-Fix viii AGREEMENT AND PLAN OF MERGER ____________________________ THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of the 15th day of March, 1999, among PERMA-FIX ENVIRONMENTAL SERVICES, INC., a Delaware corporation ("Perma-Fix"); PERMA-MET, INC. a Michigan corporation and a wholly-owned subsidiary of Perma- Fix ("Perma-Met"); CHEM-MET SERVICES, INC., a Michigan corporation ("Chem-Met"); The THOMAS P. SULLIVAN LIVING TRUST, dated September 6, 1978 ("TPS Trust"); The ANN L. SULLIVAN LIVING TRUST, dated September 6, 1978 ("ALS Trust"); THOMAS P. SULLIVAN, an individual ("TPS"); and ANN L. SULLIVAN, an individual ("ALS"). Collectively, the TPS Trust and the ALS Trust are referred to herein as the "Sullivan Trusts," and TPS and ALS are collectively referred to as the "Sullivans." W I T N E S S E T H: WHEREAS, the TPS Trust is the sole and exclusive owner of all of the issued and outstanding capital stock of Chem-Met (the "Chem-Met Common Stock"); WHEREAS, TPS is the sole trustee and primary beneficiary of the TPS Trust; WHEREAS, ALS is the sole trustee and primary beneficiary of the ALS Trust; WHEREAS, the Sullivans are husband and wife; WHEREAS, Perma-Met is directly or indirectly, a wholly owned subsidiary of Perma-Fix; WHEREAS, the Board of Directors of Perma-Fix, Perma-Met and Chem-Met deem it advisable and in the best interest of each corporation and its respective stockholders that Chem-Met merge with and into Perma-Met, with Perma-Met being the survivor, in order to advance the long-term business interest of each corporation; WHEREAS, the parties hereto desire that Chem-Met shall be merged with and into Perma-Met, with Perma-Met being the survivor (said transaction being hereinafter referred to as the "Merger") pursuant to a plan of merger (the "Plan of Merger") in which the stockholder of Chem-Met will become a stockholder of Perma-Fix, and the parties desire to provide for certain undertakings, conditions, representations, warranties and covenants in connection with such transactions contemplated hereby; WHEREAS, for Federal income tax purposes, it is intended that the Merger shall qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"); WHEREAS, for accounting purposes, it is intended that the Merger shall be accounted for as a pooling of interests; WHEREAS, the Board of Directors of Perma-Fix, Perma-Met and Chem-Met have approved and adopted the Merger and this Agreement; and NOW, THEREFORE, in consideration of the premises and the mutual covenants, agreements, representations and warranties herein contained, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS For purposes of this Agreement, the following terms shall have the respective meanings set forth below: 1.1 "Affiliate" has the meaning set forth in Rule 405 promulgated under the Securities Act, whether or not such is an Affiliate now or becomes an Affiliate after the date hereof. 1.2 "Chem-Con " shall collectively mean Chemical Conservation Corporation, a Florida corporation ("Chemical Florida") and Chemical Conservation of Georgia, Inc., a Georgia corporation ("Chemical Georgia"). 1.3 "Chem-Con Agreement " shall mean that certain Agreement and Plan of Merger among Perma-Fix, Perma-Con (as defined below), Chem-Con, the Sullivan Trusts and the Sullivans, dated as of the date of this Agreement, whereby Chemical Florida is to merge with and into Florida Perma-Chem, a wholly owned subsidiary of Perma-Fix, with Florida Perma-Chem being the survivor Chemical Georgia is to merge with and into Georgia Perma-Chem, a wholly owned subsidiary of Perma-Fix, with Georgia Perma-Chem being the survivor. 1.4 "Chem-Con Merger" shall collectively mean the merger of Chemical Florida with and into Florida Perma-Chem, with Florida Perma-Chem being the survivor, and the merger of Chemical Georgia with and into Georgia Perma-Chem, with Georgia Perma-Chem being the survivor, all pursuant to the Chem-Con Agreement. 1.5 "Chem-Fix Settlement Agreement" shall mean that certain settlement agreement regarding the settlement of the American Arbitration Association proceeding, No. 54 1990077 92, between Chem-Fix Technologies, Inc. and Chem-Met. 2 1.6 "Chem-Met Common Stock" means the Chem-Met common stock, par value $10.00 per share. 1.7 "Chem-Met Intellectual Property Right" has the meaning as defined in Section 4.8.1 of this Agreement. 1.8 "Closing" has the meaning as specified in Section 2.3 hereof. 1.9 "Closing Date" has the meaning as specified in Section 2.3 hereof. 1.10 "Code" means the Internal Revenue Code of 1986, as amended. 1.11 "Effective Time" shall have the meaning set forth in Section 2.2 hereof. 1.12 "Environmental Laws" mean all federal, state, county, local and foreign environmental, health, and safety laws, codes, ordinances and all rules and regulations promulgated there- under, including, without limitation, laws relating to management, emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment (including, without limitation, air, surface water, groundwater, land surface or subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, chemicals, petroleum products or industrial, solid, toxic or hazardous substances or wastes. Environmental Laws include, without limitation, (i) the Federal Water Pollution Control Act ("FWPCA"), 33 U.S.C. Section 1251, et seq.; (ii) the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601, et seq.; (iii) the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901, et seq.; (iv) the Clean Air Act ("Clean Air Act"), 42 U.S.C. Section 7401, et seq; (v) the Toxic Substances Control Act ("TSCA"), 15 U.S.C. Section 201, et seq.; (vi) any and all other analogous state and local statutes; and, (vii) all rules and regulations promulgated under any of the foregoing. 1.13 "Employment Agreement" shall have the meaning set forth in Section 9.2.4 hereof, a copy of which is attached hereto as Exhibit "A". 1.14 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder. 1.15 "Florida Perma-Chem" shall mean Florida Perma-Chem, Inc., a Florida corporation and a wholly owned subsidiary of Perma- Fix. 1.16 "Facility" means the Real Property (as defined below) operated and owned by Chem-Met, located at 18550 Allen Road, Wyandotte, Michigan, and described in Exhibit "B" attached hereto. 3 1.17 "Four County Landfill" shall mean that certain landfill facility located in DeLong, Indiana, known as the "Four County Landfill Site". 1.18 "GAAP" means United States generally accepted accounting prin- ciples. 1.19 "Georgia Perma-Chem" shall mean Georgia Perma-Chem, Inc., a Georgia corporation and a wholly owned subsidiary of Perma- Fix. 1.20 "Governmental Authority" means any agency, instrumentality, department, commission, court, tribunal or board of any government, whether foreign or domestic and whether national, federal, state, provincial, or local. 1.21 "Laws" mean any and all federal, state and local laws, rules, regulations, codes, orders, ordinances, judgments, injunctions and decrees. 1.22 "Liens" mean all security interests, liens, mortgages, claims, charges, pledges, restrictions, equitable interests, easements, property rights or encumbrances of any nature. 1.23 "Merger" has the meaning as defined in the seventh WHEREAS clause of this Agreement. 1.24 "Mineral Rights" mean the mineral and oil and gas rights, interest and leases, pipelines and pipeline rights of way situated on and under the Real Property. 1.25 "Permitted Encumbrances" means (i) liens listed on Exhibit "C" attached hereto; (ii) liens for taxes not yet delinquent or being contested in good faith by appropriate proceedings; and, (iii) such technical imperfections of title and easements, if any, which do not in the sole discretion of Perma-Fix, when considered together, detract materially from the value of, or interfere with, the present or presently proposed use of, any Real Property. 1.26 "Perma-Chem" shall collectively mean Florida Perma-Chem, a Florida corporation and a wholly owned subsidiary of Perma-Fix and Georgia Perma-Chem, a Georgia corporation and a wholly owned subsidiary of Perma-Fix. 1.27 "Perma-Fix Common Stock" means the Common Stock, par value $.001 per share, of Perma-Fix. 1.28 "Quanta" means Quanta Corporation, a Michigan corporation in which all of its issued and outstanding capital stock is owned by the ALS Trust. 1.29 "Real Property" means all real property, land, buildings, improvements and structures owned, leased or used by Chem-Met. 4 1.30 "Returns" mean all returns, declaration, reports, estimates, information returns and statements required to be filed with or supplied to any taxing authority in connection with any Taxes. 1.31 "Securities Act" means the Securities Act of 1933, as amended. 1.32 "Shares" means all of the issued and outstanding shares of capital stock of Chem-Met of whatsoever character and description. 1.33 "SEC" means the U.S. Securities and Exchange Commission. 1.34 "Subsidiaries" means all corporations fifty percent (50%) or more of the common stock or other form of equity of which shall be owned, directly or indirectly through one or more intermediaries, by another corporation. 1.35 "Surviving Corporations" has the meaning as defined in Section 2.4.2 of this Agreement. 1.36 "Taxes" mean all taxes, charges, fees, levies or other assess- ments, including, without limitation, income, gross receipts, excise, real and personal property, sales, transfer, license, payroll and franchise taxes, imposed by any Governmental Auth- ority and shall include any interest, penalties or additions to tax attributable to any of the foregoing. 1.37 "10 Acre Tract" means that Real Property described in Exhibit "D" attached hereto. ARTICLE 2 THE MERGER 2.1 The Merger. The Merger of Chem-Met with and into Perma-Met. Subject to the terms of this Agreement, Chem-Met shall merge with and into Perma-Met, with Perma-Met being the surviving corporation, in accordance with the applicable provisions of the Michigan Business Corporation Act ("MBCA") and the terms of this Agreement. Chem-Met and Perma-Met agree to the Merger. 2.2 Effective Time of the Merger. Subject to the provisions of this Agreement, at the Closing (as defined below) (i) the Certificate of Merger regarding the Merger, a copy of which is attached hereto as Exhibit "E" (the "Certificate of Merger"), shall be duly executed and acknowledged by Chem-Met and Perma- Met and delivered to and filed with the Secretary of State of Michigan, as provided in the MBCA, on the Closing Date. The Merger shall become effective upon the filing of the Articles of Merger as herein described, or at such time thereafter as shall be provided in the Articles of Merger (the "Effective Time"). 5 2.3 Closing. The closing of the Merger (the "Closing") will take place at 10:00 a.m., Eastern Standard Time, pursuant to the terms of this Agreement on a date to be specified by Perma-Fix and Chem-Met, which shall be no later than five business days after approval of the Merger and the Chem-Con Merger by the shareholders of Perma-Fix entitled to vote thereon (the "Closing Date"), at the offices of Chemical Conversation Corporation, 10100 Rocket Blvd., Orlando, Florida 32824, unless another date, place or time is agreed to in writing by Perma-Fix and Chem-Met. 2.4 Effects of the Merger. At the Effective Time, Chem-Met shall be merged with and into Perma-Met (Chem-Met and Perma-Met are sometimes referred to below as the "Constituent Corporations" and Perma-Met is sometimes referred to herein as the "Surviving Corporation"), with Perma-Met being the survivor and Chem-Met ceasing to exist, (ii) the Articles of Incorporation of Perma-Met immediately prior to the Effective Time shall be the Articles of Incorporation of the Surviving Corporation, except that at the Effective Time Perma-Met shall change its corporate name to Chem-Met Services, Inc. (iii) the Bylaws of Perma-Met as in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation, and (iv) the purpose of the Surviving Corporation shall be as set forth in Article II of the Articles of Incorporation of Perma-Met immediately prior to the Effective Time. ARTICLE 3 CONVERSION OF SECURITIES 3.1 Conversion of Capital Stock. As of the Effective Time: 3.1.1 Capital Stock of Perma-Fix. Each share of capital stock of Perma-Fix issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding and be unchanged by the Merger; 3.1.2 Capital Stock of Perma-Met. Each share of capital stock of Perma-Met issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding and be unchanged by the Merger; 3.1.3 Chem-Met Capital Stock. Each share of Chem-Met capital stock issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger, and without any action on the part of the holder thereof, be automatically canceled, be null and void and, subject to the terms of this Article 3, all shares of Chem-Met Common Stock issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger, and without any action on the part of the holder thereof, be exchanged for that number of fully paid and nonassessable shares of Perma- Fix Common Stock determined by dividing $900,000 by the 6 average of the closing sale prices per share of the Perma-Fix Common Stock as reported on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") for five consecutive trading days ending with the trading day immediately prior to the Effective Time. During the five consecutive trading days ending with the trading day immediately prior to the Effective Time, the Company shall not, and shall cause its officers and directors to not, buy or sell any Perma-Fix Common Stock over the NASDAQ or the Boston Stock Exchange. 3.1.4 Chem-Met Treasury Stock. All shares of Chem-Met Common Stock that are owned by Chem-Met as treasury stock, if any, shall be canceled and retired and shall cease to exist and no Perma-Fix Common Stock or other consideration shall be delivered in exchange therefor. 3.2 Dissenters Rights. The holders of all issued and outstanding shares of Chem-Met Common Stock are parties to this Agreement and they each agree, represent and warrant that none of them shall exercise or attempt to exercise any dissenters rights, right of appraisal or similar rights provided for under the MBCA. 3.3 Exchange of Certificates. The procedures for exchanging outstanding shares of Chem-Met Common Stock for Perma-Fix Common Stock pursuant to the Merger are as follows: 3.3.1 Exchange. As of the Effective Time, Perma-Fix shall deliver to the TPS Trust certificates representing the shares of Perma-Fix Common Stock ( the "Exchange Certificates") issuable pursuant to Section 3.1.2 in exchange for outstanding shares of Chem-Met Common Stock. 3.3.2 Exchange Procedures. At the Effective Time, the TPS Trust, being the sole beneficial and record owner of all of the issued and outstanding shares of capital stock of Chem-Met, shall surrender to Perma-Fix all certificates representing all of the issued and outstanding shares of capital stock of Chem-Met (the "Certificates"), duly and validly endorsed, in blank, with signatures guaranteed by a national bank or investment banking firm, for cancellation, and, subject to the terms and conditions of this Agreement, the TPS Trust, being the sole and exclusive holder of any and all such Certificates shall be entitled to receive in exchange for all of the shares of Chem-Met Common Stock a certificate representing that number of whole shares of Perma-Fix Common Stock which such holder has the right to receive pursuant to the provisions of Section 3.1.3 hereof, and the Certificates shall immediately be canceled at the Effective Time. Until surrendered as contemplated by this Section 3.3.2, the Certificates representing shares of Chem-Met Common Stock shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the certificate representing shares of Perma-Fix Common Stock as contemplated by Section 3.1.3 hereof. 7 3.3.3 No Further Ownership Rights in Chem-Met Common Stock. All shares of Perma-Fix Common Stock issued upon the surrender for exchange of Certificates in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of Chem-Met Common Stock. From and after the Effective Time there shall be no further registration of transfers on the stock transfer books of the Surviving Corporations of the shares of Chem-Met Common Stock which were outstanding immediately prior to the Effective Time. 3.3.4 No Fractional Shares. No certificate or scrip representing fractional shares of Perma-Fix Common Stock shall be issued upon the surrender for exchange of Certificates, and such fractional share interests will not entitle the owner thereof to vote or to any other rights of a stockholder of Perma-Fix. 3.3.5 No Liability. Neither Perma-Fix nor Chem-Met shall be liable to any holder of shares of Chem-Met Common Stock or Perma-Fix Common Stock, as the case may be, for such shares (or dividends or distributions with respect thereto) delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. 3.3.6 Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such person of a bond in such reasonable amount as such Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such Certificate, Perma-Fix will issue in exchange for such lost, stolen or destroyed Certificate the shares of Perma-Fix Common Stock and unpaid dividends and distributions on shares of Perma-Fix Common Stock deliverable in respect thereof pursuant to this Agreement. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE ALS TRUST, THE TPS TRUST, ALS, TPS AND CHEM-MET The ALS Trust, the TPS Trust, ALS, TPS, and Chem-Met, jointly and severally, represent and warrant to Perma-Fix and Perma-Met that, as of the date of this Agreement and as of the Closing, the following: 4.1 Organization of the Sullivan Trusts. The Sullivan Trusts are valid trusts. ALS is the primary beneficiary under the ALS 8 Trust, and ALS is the sole trustee under the ALS Trust. TPS is the primary beneficiary of the TPS Trust, and TPS is the sole trustee under the TPS Trust. ALS, as sole trustee under the ALS Trust, and TPS, as sole trustee under the TPS Trust, have full power, authority and capacity to enter into this Agreement and to perform any and all obligations and covenants of the ALS Trust and the TPS Trust under this Agreement. 4.2 Organization of Chem-Met. Chem-Met is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and has the corporate power to own its properties and to carry on its bus- iness as is now being conducted. Chem-Met is duly qualified and in good standing as a foreign corporation in each juris- diction in which the nature of the business conducted by it or the character of the property owned, leased or used by it makes such qualification necessary. A list of all such jurisdictions, separately shown and indicated, is set forth on Schedule "A" attached hereto. 4.3 Capital Stock of Chem-Met. The authorized capital stock of Chem-Met consists solely of five thousand (5,000) shares of Chem-Met Common Stock, of which one hundred (100) shares are issued and outstanding and all of such issued and outstanding shares of Chem-Met Common Stock are owned of record and beneficially by the TPS Trust. No shares of Chem-Met Common Stock are held in treasury or reserved for issuance at a later date. All of the issued and outstanding shares of Chem-Met Common Stock are (i) validly authorized and issued, (ii) fully paid and nonassessable and (iii) free and clear of any and all Liens. Subsequent to September 30, 1998, Chem-Met has not declared or paid any dividend, or declared or made any distribution on, or authorized the creation or issuance of, or issued, or authorized or effected any split-up or any other recapitalization of, any of its capital stock, or directly or indirectly redeemed, purchased or otherwise acquired any of their respective outstanding capital stock or agreed to take any such action. There are no outstanding contractual obligations of Chem-Met to repurchase, redeem or otherwise acquire any of its respective outstanding shares of capital stock. There are no outstanding agreements, options, warrants or rights to subscribe for or purchase from or otherwise receive from Chem-Met or the TPS Trust or any other party any of Chem-Met's capital stock or other securities of any kind or description of Chem-Met. 4.4 Ownership Interests in Securities. Set forth on Schedule "B" attached hereto is a list of all equity or ownership interests in, and all bonds and debentures of, other business enter- prises which Chem-Met owns and such Schedule indicates any such interests which are held subject to any legal, contrac- tual or other limitations or restrictions on the right to resell the same. 9 4.5 Financials. 4.5.1 Financial Statements. Chem-Met has previously furn- ished Perma-Fix with a true and correct copy of the audited financial statements of Chemical Florida, Chemical Georgia, Chem-Met and their Subsidiaries on a combined basis for the fiscal year ended September 30, 1998 ("Audited Financial Statements"), consisting of, among other things (i) a balance sheet as of September 30, 1998, and (ii) statement of income and related earnings for the fiscal year ended September 30, 1998. The above-referenced Audited Financial Statements are true, correct and complete in all material respects and correctly present the finan- cial conditions and results of operations of Chemical Florida, Chemical Georgia, Chem-Met and their Subsidiaries on a combined basis as of the date thereof. For the purposes of this Agreement, the Audited Financial Statements shall be deemed to include any notes to such financial statements. The Audited Financial Statements have been prepared in conformity with GAAP, consistently applied throughout the periods indicated and on a basis consistent with prior periods. 4.5.2 Liabilities. Except as set forth in Schedule "C" attached hereto, Chem-Met does not have any liabilities or obligations either accrued, absolute, contingent, known or unknown, matured or unmatured, or otherwise, which have not been: 4.5.2.1 reflected in the Audited Financial Statements; or 4.5.2.2 incurred consistent with past practices of Chem-Met in the ordinary and normal course of Chem-Met's business since September 30, 1998. 4.5.3 Net Worth. Except as set forth in Schedule "C" attached hereto, there are no claims against or liabil- ities or obligations of, or any legal basis for any claims against or liabilities or obligations of, Chem- Met which might result in a material reduction in the net worth of Chem-Met from that shown in the Audited Financial Statements or any material charge against net earnings of Chem-Met. 4.5.4 Transactions Since September 30, 1998. Except as set forth on Schedule "D", between September 30, 1998, and the date of this Agreement, Chem-Met has not engaged in any material transaction not in the ordinary and normal course of business and, except as set forth on such Schedule "D", there has not been, occurred or arisen since September 30, 1998: 4.5.4.1 any material adverse change in the financial condition or in the operations of the business of Chem-Met from that shown on the Audited Financial Statements; or 4.5.4.2 any damage or destruction in the nature of a casualty loss, or interference with its business from such loss or from any labor dispute or court or governmental action, order 10 or decree, whether covered by insurance or not, materially and adversely affecting the properties or business of Chem-Met; or 4.5.4.3 any increase, except increases given in accordance with prior practice, in the com- pensation payable or to become payable by Chem-Met to any of Chem-Met's employees or any increase in the benefits, regardless of amount, in any bonus, insurance, pension or other plan, program, payment or arrangement with respect to employee benefits made to, for or with any officers or employees; or 4.5.4.4 any extraordinary loss (as defined in Opinions No. 9 and No. 30 of the Accounting Principles Board of American Institute of Certified Public Accountants) suffered by Chem-Met which is material to Chem-Met, or any waiver by Chem-Met of any rights which are material to Chem-Met. 4.6 Tax and Other Returns, Reports and Pooling of Interest. 4.6.1 Tax Returns. All federal, state, local, foreign, personal property, real property and foreign tax returns required to be filed by the TPS Trust and Chem- Met have been timely filed with the appropriate govern- mental agencies in all jurisdictions in which such returns and reports are required to be filed. 4.6.2 Payment of Taxes. All federal, state, local and foreign taxes (including interest and penalties), due from the TPS Trust and Chem-Met (i) have been fully paid, or (ii) are being contested in good faith by appropriate proceedings and are disclosed on Schedule "E" attached hereto. 4.6.3 Waiver of Statute of Limitations. No waivers of statutes of limitation in respect of any Returns or tax reports have been given or requested, except as shown on such Schedule "E". 4.6.4 Tax Deficiencies. There are no potential tax defic- iencies which may arise from issues which have been raised or which have not yet been raised but which might reasonably be expected to be raised by the Internal Revenue Service ("IRS") or any other taxing authority that have not been disclosed on Schedule "E" and may reasonably be expected to have a material adverse effect on Chem-Met 4.6.5 Pooling of Interests. To the best of their knowledge, after consulting with its independent auditors, none of Chem-Met, the Sullivans, the Sullivan Trusts nor any of their Affiliates has taken or agreed to take any action which would (i) prevent Perma-Fix from accounting for the business combination to be effected by the Merger 11 as a pooling of interests or (ii) prevent the Merger from constituting a transaction qualifying as a reorganization under 368(a) of the Code. 4.7 Property. 4.7.1 Assets. Except as disclosed in Schedule F attached hereto: Chem-Met owns and has good and marketable title in and to all of the assets used by it in the operation or conduct of its business, or required by Chem-Met for the normal and ordinary conduct of their business, free and clear of any and all Liens, except for Permitted Encumbrances. 4.7.2 Real Property. Schedule "F" attached hereto lists all Real Properties owned by Chem-Met. Chem-Met has good and marketable title in fee simple to all of the Real Property owned by it, free and clear of any and all Liens, except for Permitted Encumbrances, and have access thereto such as is reasonable to permit the present or presently proposed use of any such properties. Schedule "F" indicates which of the pro- perties listed is covered by a title insurance policy and a description of each such title insurance policy is set forth on Schedule "F". The Real Property owned by Chem-Met contains no encroachments on abutting pro- perty, public or private, and no material encroachments by others on either of their properties. Chem-Met owns all of the Mineral Rights under the Real Property owned by them. 4.7.3 Leases. Schedule "F" sets forth a true and complete list of each lease of real or personal property exe- cuted by or binding upon Chem-Met, as lessee, sub- lessee, tenant or assignee setting forth in each case a brief description of the property covered by the lease, the rental and the terms thereunder. Each lease is in full force and effect, without any default or breach thereof by any party thereto. No consent of any landlord, lessor or any other party is required under any such lease to keep such lease in full force and effect without being terminable or in default after the execution and delivery of this Agreement and consum- mation of the transactions contemplated by this Agree- ment. True and complete copies of all leases required to be listed on Schedule "F", including all amendments, addenda, waivers and all other binding documents, have heretofore been delivered to Perma-Fix. 4.7.4 Notice. Except as set forth on Schedule "F", none of Chem-Met, any of the Sullivan Trusts nor any of the Sullivans has received actual or constructive notice of any violation of any zoning, use, occupancy, build- ing, or environmental statute, ordinance, regulation, order, or other law or requirement affecting or relating to any activities performed at any time on any Real Property. None of the Sullivan Trusts, the Sullivans nor Chem-Met has any knowledge of any past, 12 present, or future events, conditions, circumstances, activities, incidents, actions, or plans that may in any way interfere with or limit the continued use of said Real Property for all present or presently proposed use of said Real Property. 4.7.5 Personal Property. Chem-Met owns the full right and interest and has good and marketable title in and to all material personal and intangible property used by Chem-Met in the conduct of Chem-Met's business and none of such personal and intangible property is subject (i) to any contracts of sale, or (ii) to any Liens, except for Permitted Encumbrances. 4.7.6 Notice from Insurance Carrier. None of the Sullivans, the Sullivan Trusts, nor Chem-Met has received any notice of, or writing referring to, any requirements or recommendations by any insurance company which has issued a policy covering any part of the Real Property requiring or recommending any repairs or work or other action being taken on any part of the Real Property, except as otherwise disclosed in Schedule "F". All utilities required for the operation of the Real Property in the manner currently operated by Chem-Met are installed and operating, and all installation and connection charges have been paid in full or provided for. 4.8 Intellectual Property. 4.8.1 Ownership. Schedule "K" attached hereto is a true and complete list of all patents, trademarks, trade names, service marks, copyrights, web domain addresses, mask works, any applications for and registrations of such patents, trademarks, trade names, service marks, copyrights, mask works, web domain addresses, and all processes, formulae, methods, schematics, technology, know-how, computer software programs or applications and tangible or intangible proprietary information or material that Chem-Met is licensed or otherwise possesses legally enforceable rights to use and are necessary to conduct the business of Chem-Met as currently conducted, or planned to be conducted , the absence of which would be reasonably likely to have a material adverse effect upon Chem-Met (the "Chem-Met Intellectual Property Rights"). None of the Chem-Met Intellectual Property Rights is subject to any outstanding order, judgment, decree, stipulation, or agreement restricting the use of such Chem-Met Intellectual Property Rights, and to the best of their knowledge none infringes on, or is being infringed by, other intellectual property rights of any other person or entity. Chem-Met has promulgated and used commercially reasonable efforts to enforce and maintain any reasonably necessary trade secret or confidentiality measures regarding the Chem-Met Intellectual Property Rights. Chem-Met has not given and is not bound by an agreement or indemnification regarding Chem-Met Intellectual Property Rights in connection with any property or service produced, used or sold by Chem-Met. 13 4.8.2 No Breach of License. Neither the TPS Trust nor Chem- Met is, or will as a result of the execution and delivery of this Agreement or the performance of their respective obligations under this Agreement or otherwise be, in breach of any license, sublicense or other agreement relating to the Chem-Met Intellectual Property Rights, or any material licenses, sublicenses and other agreements as to which Chem-Met is a party and pursuant to which Chem-Met is authorized to use any third party patents, trademarks or copyrights ("Chem- Met Third Party Intellectual Property Rights"), including software which is used in the manufacture of, incorporated in, or forms a part of any product sold or services rendered by or expected to be sold or services rendered by Chem-Met, the breach of which would be reasonably likely to have a material adverse effect upon Chem-Met, except as disclosed in Schedule "K" hereof. 4.8.3 Year 2000 Issues. Schedule "S" hereof identifies each "Year 2000" audit, report or investigation that has been performed by or on behalf of Chem-Met with respect to their business and operations, and Chem-Met has provided to Perma-Fix true and correct copies of all such audits, reports or investigations. Except as set forth in such audits, reports and investigations, neither the Sullivans, the Sullivan Trusts nor Chem-Met are aware of any failure to be Year 2000 Compliant of (i) any software products sold or licensed by Chem-Met to third parties or (ii) any computer software products used by or licensed to Chem-Met from third parties for internal use by Chem-Met. For purposes of this Agreement, "Year 2000 Compliant" means, with respect to each software product referred to in the prior sentence, that such system (i) will accurately receive, record, store, provide, recognize and process all date and time data from, during, into and between the twentieth and twenty-first centuries; (ii) will accurately perform all date-dependent calculations and operations (including, without limitation, mathematical operations, sorting, comparing and reporting) from, during, into and between the twentieth and twenty-first centuries; and (iii) will not malfunction, cease to function or provide invalid or incorrect results as a result of (x) the change of century, (y) date data, including date data which represents or references different centuries or more than one century or (z) the occurrence of any particular date; in each case without human intervention, other than original data entry; provided, in each case, that all applications, hardware and other systems used in conjunction with such system which are not owned or licensed by Chem-Met correctly exchange date data with or provide data to such system. Chem-Met has not provided any guarantee or warranty for any product sold or licensed, or services provided, by Chem-Met to the effect that such product or service (i) complies with or accounts for the fact of the arrival of the year 2000 or (ii) will not be adversely affected with respect to functionality, operability, performance or volume capacity (including without limitation the processing and reporting of data) by virtue of the arrival of the year 2000. Chem-Met has performed audits regarding its primary suppliers, customers, 14 creditors and financial service organizations with which they have substantial interaction ("Outside Persons") and has determined that all of these Outside Persons are substantially Year 2000 Compliant to the extent that there will be no material adverse effects to Chem-Met resulting from a failure of such Outside Persons to be Year 2000 Compliant. In addition, Schedule "S" shall set forth in detail the status of Chem-Met's efforts to address the Year 2000 issues relating to Chem-Met and such Outside Persons. 4.9 Agreements, Contracts and Commitments. 4.9.1 Contracts. Except as set forth on Schedule "G", Chem- Met is not a party to or bound by: 4.9.1.1 any collective bargaining agreements or any agreements that contain any severance pay liabilities or obligations; 4.9.1.2 any bonus, deferred compensation, pension, profit-sharing or retirement plans, programs or other similar employee benefit arrange- ments; 4.9.1.3 any employment agreement, contract or commit- ment with an employee; 4.9.1.4 any agreement of guaranty or indemnification running from Chem-Met to any person or entity, including, but not limited to, any Affiliate, other than guarantees or indemnifications in the ordinary course of Chem-Met's business relating solely to indemnification of certain of its customers due to Chem-Met's disposal of waste generated by such customers at permitted disposal facilities not affiliated with Chem- Met; 4.9.1.5 any agreement, contract or commitment which would reasonably be expected to have a material adverse impact on the business of Chem-Met; 4.9.1.6 any agreement, indenture or other instrument which contains restrictions with respect to payment of dividends or any other distribution in respect of Chem-Met or any other outstanding securities of Chem-Met; 4.9.1.7 any agreement, contract or commitment con- taining any covenant limiting the freedom of Chem-Met to engage in any line of business or compete with any person; 15 4.9.1.8 any agreement, contract or commitment relating to capital expenditures in excess of ten thousand dollars ($10,000.00) and involving future payments; 4.9.1.9 any agreement, contract or commitment relating to the acquisition of assets or capital stock of any business enterprise; 4.9.1.10 any contract with the Department of Defense or any other department or agency of the United States Government, or to any subcontract under any such contract, which is subject to renegotiation under the Renegotiation Act of 1951, as amended; or 4.9.1.11 any agreement, contract or commitment not made in the ordinary course of business which involves Ten Thousand Dollars ($10,000) or more or has a remaining term of one (1) year or more from December 31, 1998, or is not cancelable on thirty (30) days or less notice without penalty. Chem-Met has not breached, and there is not any claim, or, to the best of Chem-Met's or the Sullivans or the Sullivan Trusts' knowledge, any claim that Chem-Met has breached any of the terms or conditions of any agreement, contract or commitment set forth in this Agreement or in any of the Schedules attached hereto or of any other agreement, contract or commitment, if any such breach or breaches in the aggregate could result in the imposition of damages or the loss of benefits in an amount or of a kind material to Chem-Met. 4.9.2 Written List. Attached hereto as Schedule "H" is a written list of all contracts, leases, agreements and instruments which are in any single case of material importance to the conduct of the business of Chem-Met, together with true and correct copies of each document requested by Perma-Fix and a written description of each oral arrangement so listed. Without limiting the generality of the foregoing, the aforesaid list includes all the contracts, agreements and instruments of the following types to which Chem-Met is a party, or by which it is bound (without regard to whether such contracts, agreements and instruments are material): 4.9.2.1 leases of, and contracts for, the purchase or sale of Real Property; 4.9.2.2 labor union contracts together with a list of all labor unions representing or, to their best knowledge, attempting to represent employees of Chem-Met; 4.9.2.3 pension, retirement, profit-sharing, bonus, stock purchase, stock option, hospitalization or insurance plans (and certificates or other documents issued thereunder) or vacation pay, 16 severance pay and other similar benefit arrangements for officers, directors, employees or agents; 4.9.2.4 employment contracts or agreements, contracts with other persons engaged in sales or service activities, advertising contracts and brokering contracts which are not terminable by Chem-Met without liability upon termination notice of thirty (30) days or less; 4.9.2.5 written or oral agreements, understandings and arrangements with officers, directors, employees, shareholders, agents, or Affiliates of Chem-Met, the Sullivans or the Sullivan Trusts relating to present or future compensa- tion of, or other benefits available to, such persons; 4.9.2.6 contracts, and other arrangements of any kind, whether oral or written, with any director, officer, employee, trustee, stockholder or Affiliate of Chem-Met, the Sullivans or the Sullivan Trusts or to which any director, officer, employee or Affiliate of Chem-Met is a party; 4.9.2.7 contracts, purchase orders and other arrange- ments of any nature involving an expenditure of Five Thousand Dollars ($5,000.00) or more not made in the ordinary course of business or which involve an unperformed commitment, under contracts not otherwise disclosed hereunder, in excess of Twenty-Five Thousand Dollars ($25,000.00); and 4.9.2.8 indentures, loan agreements, notes, mortgages, conditional sales contracts, and other agreements for financing. 4.10 No Breach of Statute or Contract; Governmental Authorizations. 4.10.1 No Violation. Neither the execution and delivery of this Agreement by Chem-Met, the Sullivans or the Sullivan Trusts nor the performance or compliance by the Chem-Met, the Sullivans or the Sullivan Trusts with any of the terms and provisions of this Agreement will violate any Laws of any governmental agency or auth- ority, domestic or foreign, or will at the Closing con- flict with or result in a breach of any of the terms, conditions or provisions of any judgment, order, injunction, decree or ruling of any court or governmental agency or authority, domestic or foreign, to which any of Chem-Met, the Sullivans or the Sullivan Trusts may be subject to, or bound by, or of any agreement or instrument to which Chem-Met, the Sullivans or the Sullivan Trusts is a party or by which any of them is bound, or constitute a default there- under, or result in the creation of any Liens upon the 17 Chem-Met Common Stock or any of the property or assets of Chem-Met, or cause any acceleration of maturity of any obligation or loan, or give to others any interest or rights, including rights of termination or cancella- tion, in or with respect to any of the properties, assets, agreements, contracts, or business of Chem-Met, the Sullivans or the Sullivan Trusts or cause any acceleration or termination or cancellation, in or with respect to any of the properties, assets, agreements, contracts or business of Chem-Met, the Sullivans or the Sullivan Trusts. 4.10.2 Permits and Licenses. Schedule "I" attached hereto is a true and complete list of all permits, licenses and franchises presently held by, or used in connection with, the normal and ordinary business of Chem-Met and all applications for any of the foregoing filed by Chem-Met, the Sullivans or the Sullivan Trusts relating to the business of Chem-Met with any Governmental Authority. All permits, licenses and franchises used by Chem-Met to conduct Chem-Met's business are in the name of Chem-Met none are in the name of any other party. 4.10.3 Reports. Schedule "I" is a true and complete list of all reports made by, or with respect to Chem-Met, the Sullivans or the Sullivan Trusts since September 30, 1998, except as otherwise furnished pursuant to this Agreement, to or from the Federal Trade Commission ("FTC"), Environmental Protection Agency ("EPA"), Equal Employment Opportunity Commission ("EEOC"), reports under the Occupational Safety and Health Act ("OSHA"), the Department of Labor, Michigan Department of Environmental Quality and all other state or federal government agencies or departments, and tax returns to, tax rulings from, and tax audit reports from the IRS, relating in any manner to the business of Chem-Met. 4.10.4 Violation of Law. Except as disclosed in Schedule "I", none of Chem-Met, the Sullivans nor the Sullivan Trusts is in violation of any Laws, (including, but not limited to, Environmental Laws), which violation might have a material adverse effect on Chem-Met or the business of Chem-Met or the financial condition or operations of Chem-Met, and none of the Real Property owned or leased by Chem-Met is contaminated or requires remediation of any kind as a result of being contaminated. 4.10.5 Permits under Environmental Laws. Chem-Met has obtained, presently holds and has adhered to all permits, licenses, and other authorizations required under federal, state, and local laws (including, but not limited to, any and all Environmental Laws), (i) which are necessary for, or material to, the conduct of Chem-Met's business as such business is currently being operated, including, but not limited to, any and all permits and licenses required under the Environmental Laws for Chem-Met to conduct Chem-Met's business as currently conducted, and (ii) such other permits, licenses and other authorizations relating to pollution 18 or protection of the environment, including, without limitation, laws relating to emissions, discharges, releases or threatened releases of pollutants, contam- inants (chemicals or industrial or toxic wastes into the environment including, without limitation, ambient air, surface waste, groundwater, soil or land), or otherwise relating to the manufacture, processing, recycling, reclamation, distribution, use, treatment, storage, disposal, transport, or handling of pollut- ants, contaminants, chemicals, petroleum products, or industrial or solid or toxic wastes or radioactive materials, except as disclosed in Schedule I attached hereto. Chem-Met is in compliance with all terms and conditions of all such required permits, licenses and other authorizations, and with all other limitations, restrictions, conditions, standards, prohibitions, re- quirements, obligations, schedules, and timetables contained in such Environmental Laws, except as disclosed in Schedule I attached hereto. None of Chem- Met, the Sullivans nor the Sullivan Trusts after due inquiry, has any knowledge of any past, present, or future events, actions, or plans that may interfere with or prevent full compliance or continued full com- pliance as described above, or that may give rise to any common law or legal liability or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing, study, or investigation related to the manufacture, processing, recycling, reclamation, distribution, use, treatment, storage, disposal, transport or threatened release of, any pollutant, contaminant, chemical or industrial or solid or toxic waste or radioactive materials. 4.10.6 Other Permits. Except as set forth in Schedule "I", neither the execution and delivery of this Agreement nor the consummation thereof will violate any of the terms of any of the permits, licenses, approvals and authorities held by Chem-Met or cause the termination or cancellation of any of the permits, licenses, approvals and authorities held by Chem-Met. None of Chem-Met, the Sullivans nor the Sullivan Trusts has received official notice that Chem-Met is in violation of any law, regulation, ordinance or rule applicable to them or their operations. 4.11 No Litigation or Adverse Effects. Except as set forth in Schedule "J", there is no suit, action or legal, administra- tive, arbitration, or other proceeding, or governmental investigation, or any change in the zoning, use, occupancy or building ordinances affecting the real property or any lease- hold interests of Chem-Met pending or, to the best of their knowledge threatened, which could adversely affect the financial condition, results of operations or business, assets or properties of Chem-Met, or the conduct of business of Chem- Met. Further, there is no suit, action or legal, administrative, arbitration, governmental investigation or other proceeding against Chem-Met, or to the best of their knowledge threatened, involving any claims based upon negli- gence, product warranties, product liability or any other type of claim (including, but not limited to, those arising under any Environmental Laws) exceeding potential liability (including costs of defense and attorneys' fees), whether or not covered by insurance, in an amount in excess of Ten Thousand Dollars ($10,000.00) with respect to the individual suit, action, proceeding or investigation, or potential 19 liability (including costs of defense and attorneys' fees) of Twenty-Five Thousand Dollars ($25,000.00) in the aggregate of all such suits, actions, proceedings or investigations, except (a) workers' compensation, automobile accident and other routine claims wholly covered by existing insurance (including costs of defense and attorneys' fees) and (b) as set forth in Schedule "J" hereto. 4.12 Authorization, Execution and Delivery of Agreement. Each of Chem-Met, the Sullivans and the Sullivan Trusts has the power, authority and capacity to enter into this Agreement and to carry out the transactions contemplated hereby. The execution, delivery and the performance of this Agreement by Chem-Met, the Sullivans and the Sullivan Trusts have been duly and validly authorized and approved by all requisite corporate action on the part of Chem-Met and all requisite action of the trustees under the Sullivan Trusts, and this Agreement constitutes the valid and binding agreement and obligation of Chem-Met, the Sullivans and the Sullivan Trusts enforceable in accordance with its terms, subject to bankruptcy, insolvency and other laws of similar import. 4.13 Ability to Conduct the Business. None of Chem-Met, the Sullivans nor the Sullivan Trusts is subject to, or bound by, any judgment, order, writ, injunction or decree of any court or of any governmental body or agency or of any arbitrator which could prevent the execution, delivery or performance of this Agreement or the use by Chem-Met of assets owned, leased or used by Chem-Met, or the conduct of Chem-Met's business, as presently conducted by Chem-Met, in accordance with present practices, after the Closing. None of Chem-Met, the Sullivans nor the Sullivan Trusts is a party to, bound by, or a bene- ficiary of, any agreement which could prevent the use of assets material to Chem-Met or the conduct of business as currently conducted by Chem-Met in each case after the Closing. 4.14 Disclosure. No representation or warranty by Chem-Met, the Sullivans or the Sullivan Trusts contained in this Agreement and no statement contained in any certificate, list, disclosure schedule, exhibit or other instrument furnished, or to be furnished, to Perma-Fix or Perma-Chem pursuant hereto, contains or will contain any untrue statement of a material fact or omits, or will omit, to state a material fact necessary to make the statements contained therein not misleading. 4.15 Broker's or Finder's Fee. No agent, broker, person or firm acting on behalf of the Chem-Met, the Sullivans and/or the Sullivan Trust or under the authority of Chem-Met, the Sullivans and/or the Sullivan Trusts is or will be entitled to any commission or broker's or finder's fee from any of the parties hereto in connection with this Agreement or any of the transactions contemplated herein, except the Sullivans have retained WHCA Partners as an agent or firm acting on behalf of the Sullivans and the Sullivan Trusts in connection with this Agreement and the transactions contemplated herein. The Sullivans and the Sullivan Trusts shall pay to WHCA Partners any and all fees due to WHCA Partners in connection with this Agreement and the transactions contemplated by this Agreement. Chem-Met shall pay any expenses to WHCA Partners for work performed by WHCA Partners on behalf of Chem-Met prior to 20 November 5, 1998; provided however, Chem-Met shall not pay any commissions or fees due to WHCA Partners in connection with this Agreement or the transactions contemplated by this Agreement. 4.16 Insurance. Chem-Met has in full force and effect policies of insurance of the types, including insurance policies under which Chem-Met officers, directors and Affiliates or any of them, in such capacity, is named insured, and in the amounts and with insurance carriers as set forth in Schedule "L" attached hereto, and will continue all of such insurance in full force and effect up to and until the Closing. The amounts and types of such insurance policies and the insurance carriers issuing such policies fully meet Chem-Met's con- tractual, legal or regulatory commitments and are fully adequate to insure against risks to which Chem-Met is normally exposed in the operation of its businesses and as required by Governmental Authority and the Environmental Laws. 4.17 Completeness of Documents -- Chem-Met. The copies of the Articles of Incorporation and Bylaws of Chem-Met, and of all leases, instruments, agreements or other documents (including all Schedules and documents delivered pursuant to this Agree- ment) which have been or will be delivered to Perma-Fix pursuant to the terms of this Agreement or in connection with the transactions contemplated hereby, are, or if not now delivered, will when delivered, be true, complete and correct. 4.18 Completeness of Documents -- Sullivan Trusts. The copies of the organizational documents of the Sullivan Trusts, which have been or will be delivered to Perma-Fix pursuant to the terms of this Agreement or in connection with the transactions contemplated hereby, are, or if not now delivered, will when delivered, be true, complete and correct. 4.19 Disposition of Assets. Since September 30, 1998, Chem-Met has not made any sale or other disposition of any of their pro- perties or assets or surrendered any of their rights with respect thereto, or made any additions to their properties or assets, or entered into any agreements, or entered into any other transaction, except in each instance in the ordinary course of business or as set forth in Schedule "M" attached hereto, and no such sale, disposition, surrender, addition, agreement or transaction set forth in such Schedule "M" has any material adverse effect upon the results of operations or financial condition of Chem-Met or Chem-Met's ability to conduct Chem-Met's business as currently conducted. 4.20 Obligations to Employees. All obligations of Chem-Met and/or any of its Affiliates, whether arising by operation of law, contract, agreement, or otherwise, for payments to trusts or other funds or to any governmental agency or to any employees, directors, officers, agents, or any other individual (or any of their respective heirs, legatees, beneficiaries, or legal representatives) with respect to profit-sharing, pension or retirement benefits, or any other employee benefit of any kind whatsoever relating to Chem-Met or any of its employees, have been paid. All legally enforceable obligations of Chem-Met, whether arising by operation of law, contract, agreement, or otherwise, for bonuses or other forms of compensation or 21 benefits which are, or may become, payable to its employees, directors, officers, agents, or any other individual (or their respective heirs, legatees, beneficiaries or legal representative) relating to Chem-Met or any of the employees of Chem-Met with respect to periods ending on or before the Closing have been paid, or adequate accruals for payment thereof are reflected on the Audited Financial Statements. Neither Chem-Met nor any of its Affiliates has any accumulated funding deficiencies, as such term is defined in the Employee Retirement Income Security Act of 1974 ("ERISA") and in the Code with respect to any employee benefit plan as defined in ERISA maintained or established for employees of Chem-Met. Chem-Met has not incurred any liability to the Pension Benefit Guaranty Corporation ("PBGC") other than for the payment of insurance premiums all of which have been paid when due, the IRS or the Department of Labor ("DOL") with respect to any such employee benefit plan that affects, or might affect Chem- Met, and does not have any withdrawal liability with respect to any multiemployer pension plan ("Multiemployer Plan") which is subject to the Multiemployer Pension Plan Amendments Act of 1980. The consummation of this Agreement will not result in either a complete or partial withdrawal from any of the Multiemployer Plans. All of the employee benefit plans of which Chem-Met or any Affiliate of Chem-Met is the plan sponsor relating to Chem-Met or any of their employees have been amended as, when and to the extent necessary to comply with and qualify under the applicable provisions of the Code; and all such employee benefit plans have been administered in accordance with the applicable provisions of the Code and ERISA. Except as indicated on Schedule "N", any employee benefit plans relating to Chem-Met or any of their employees which are pension benefit plans have received, or have applied for and expect to receive, determination letters from the IRS to the effect that such plans are qualified and exempt from federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, and, no amendments have been made to any such employee benefit plans other than those covered by such determination letters or applications for such determination letters with respect to such amendments which have been timely filed with the IRS. No determination letter received with respect to any employee benefit plan relating to Chem-Met or any of its employees has been revoked nor has revocation been threatened. Each of the employee benefit plans have been administered at all times and in all respects in accordance with their respective terms. There are no pending investiga- tions by any Governmental Authority involving any employee benefit plans relating to Chem-Met or any of its employees, no deficiency or termination proceedings involving such employee benefit plans, and no threatened or pending claims (except for claims for benefits payable in the normal operation of the employee benefit plans), suits or proceedings against any such employee benefit plan or asserting any rights or claims to benefits under any such employee benefit plan nor are there any facts which could give rise to any liability in the event of any such investigation, claim, suit or proceeding. Neither the employee benefit plans nor any trusts created thereunder relating to Chem-Met or to any of their employees, nor any trustee, administrator or other fiduciary thereof, has engaged in a "prohibited transaction" (as such term is defined in Section 4975 of the Code or Section 406 of the ERISA); and has not experi- enced any reportable event within the meaning of ERISA or other event or condition which presents a material risk of termination of any such employee benefit plan by the PBGC, has 22 had any tax imposed upon it by the IRS for any alleged viola- tion under Section 4975 of the Code, or has engaged in any trans- action which might subject Chem-Met or any such employee benefit plan to any liability for such tax. The terms of any such employee benefit plans comply with ERISA and the Code in all respects, and, any and all reporting and disclosure requirements of ERISA or the Code and the DOL with respect to any such employee benefit plan have been timely met. The information supplied to the actuary by Chem-Met, the Sullivans or the Sullivan Trusts for use in preparing those reports was complete and accurate and none of Chem-Met, the Sullivans nor the Sullivan Trusts has reason to believe that the conclusions expressed in such reports are incorrect. In the event of termination of any employee benefit plan of Chem-Met or any of its Affiliates relating to Chem-Met or to any of their employees, there will be no liability of Chem-Met or the plan with respect to the providing of benefits accrued thereunder subject to future variations in levels of compensation assuming continued investment returns at rates actuarially predicted. Further, if termination (whether complete or partial) of any plan has occurred, then, all liabilities with respect thereto have been satisfied in full and no present liability exists with respect to any such prior termination. Schedule "N" also includes a list of any and all pension or benefit obligations of Chem-Met and/or its Affiliates which have not been fully funded. 4.21 Condition of Plant, Machinery and Equipment. Except as set forth on Schedule "O", all of the items of the property, plant and equipment owned, operated or leased by Chem-Met is, in all material respects, in good condition and repair, reasonable wear and tear excepted, and Chem-Met agrees to maintain such items in good operating condition until the Closing. Casualty losses to such property, plant and equipment are covered by insurance with normal industry deductibles being applicable. 4.22 Books of Account. Chem-Met has maintained its books of account in accordance with GAAP, applied on a consistent basis with prior periods. 4.23 Stock Redemptions. There are no shares of Chem-Met Common Stock which are subject to redemption or purchase in lieu of redemption, which prior to September 30, 1998, were not paid for in full. From September 30, 1998, through the date of this Agreement, Chem-Met has not purchased or redeemed or entered into any agreement to purchase or redeem any Chem-Met Common Stock. 4.24 Minute Books. Chem-Met have maintained their corporate minute books and all such books are current. 4.25 Indebtedness of Shareholders, etc. Except as set forth on Schedule "P", none of the shareholders, Affiliates, officers, directors or employees of Chem-Met is (i) indebted to Chem- Met, and Chem-Met is not indebted to their Affiliates, share- holders or any of their officers, directors or employees, (ii) a party to or has any interest in a material contract, agree- ment or lease with Chem-Met or in which Chem-Met is a party to or bound by, or (iii) a customer or supplier of Chem-Met, which during any one of the preceding three (3) years supplied 23 to or purchased from Chem-Met a amount of property or services exceeding Ten Thousand Dollars ($10,000.00) in any one (1) year. 4.26 Business Prospects. Since September 30, 1998, there has not occurred any event or other occurrence which might have a material adverse effect on the business or business prospects of Chem-Met. 4.27 Bank Accounts; Powers of Attorney. Schedule "Q" attached hereto sets forth each bank account and borrowing resolution authorizing officers or agents of Chem-Met to borrow money and lists the persons authorized to transact business on behalf of Chem-Met with respect to each such account or borrowing reso- lution. Schedule "Q" also lists all powers of attorney granted by Chem-Met to any other person. 4.28 Sensitive Payments. Chem-Met has not made or received, and to their best knowledge, after reasonable due inquiry, none of their officers, directors, employees, agents, shareholders or other representative of Chem-Met or any person acting on behalf of Chem-Met, has made or received, directly or indirectly, any bribes, kickbacks, illegal political contri- butions with corporate funds, improper payments from corporate funds that are falsely recorded on the books and records of Chem-Met, payments to governmental officials in their individual capacities or illegal payments from corporate funds to obtain or retain business. ARTICLE 5 ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SULLIVANS AND THE SULLIVAN TRUSTS The Sullivans and the Sullivan Trusts, jointly and severally, provide to Perma-Fix the following additional repre- sentations, warranties and covenants: 5.1 Affiliate Status. Upon the execution of this Agreement, Chem- Met, the Sullivans and the Sullivan Trusts will provide Perma- Fix with a list of those persons who are, in Chem-Met's reasonable judgment, "Affiliates" of Chem-Met within the meaning of Rule 145 as promulgated under the Securities Act ("Rule 145") (each such person who is an "affiliate of Chem- Met within the meaning of Rule 145 is referred to as a "Chem- Met Affiliate"). Chem-Met, the Sullivans and the Sullivan Trusts shall provide Perma-Fix with such information and documents as Perma-Fix shall reasonably request for purposes of reviewing such list and shall notify Perma-Fix in writing regarding any change in the identity of the Chem-Met Affiliates prior to the Closing Date. 5.2 Rule 145. The Sullivans and the Sullivan Trusts will not offer, sell, pledge, hypothecate, transfer or otherwise dispose of, or reduce their interest in or risk relating to, any of the shares of Perma-Fix Common Stock issued to the 24 Sullivan Trusts under this Agreement as a result of the Merger unless at such time either: (i) such transaction is permitted pursuant to the provisions of Rule 145 under the Securities Act; (ii) the undersigned shall have furnished to Perma-Fix an opinion of counsel, reasonably satisfactory to Perma-Fix, to the effect that such transaction is otherwise exempt from the registration requirements of the Securities Act; or (iii) a registration statement under the Securities Act covering the proposed offer, sale, pledge, hypothecation, transfer or other disposition shall be effective under the Securities Act. 5.3 Legend. The Sullivans and the Sullivan Trusts understand and agree that stop transfer instructions will be given to Perma- Fix's transfer agent and that there will be placed on the certificate or certificates representing the Perma-Fix Common Stock issuable under this Agreement, any substitutions therefor and any certificates for additional shares which might be distributed with respect to such Perma-Fix Common Stock, a legend stating in substance: "The shares represented by this certificate were issued in a transaction to which Rule 145 of the Securities Act of 1933 applies and may only be transferred in accordance with the provisions of such rule. In addition, the shares represented by this certificate may only be transferred in accordance with the terms of an Agreement and Plan of Merger dated March 15, 1999, among Perma- Fix Environmental Services, Inc. ("Perma-Fix"), Perma-Met, Inc., Chem-Met Services, Inc., The Thomas P. Sullivan Living Trust, dated September 6, 1978, The Ann L. Sullivan Living Trust, dated September 6, 1978, Thomas P. Sullivan and Ann L. Sullivan, a copy of which agreement may be inspected by the holder of this certificate at the principal offices of Perma- Fix, or furnished by Perma-Fix to the holder of this certificate upon written request, without charge." 5.4 Restrictions on Certain Actions. For a period of two (2) years from the date of Closing, neither any of the Sullivan Trusts nor any of the Sullivans shall, without the prior consent of the Board of Directors of Perma-Fix (specifically expressed in a resolution adopted by a majority of the Board of Directors of Perma-Fix who are not employees, representatives or agents of the Sullivan Trusts and/or the Sullivans or any of their Affiliates): 5.4.1 Prohibition Against Acquisition. Except for the shares of Perma-Fix Common Stock which the Sullivan Trusts acquire under this Agreement and the Chem-Con Agreement, or through stock splits, stock dividends or stock options granted by Perma-Fix to TPS, acquire, offer or propose to acquire, or permit any Affiliate of the Sullivan Trusts or any of the Sullivans to acquire, directly or indirectly, or in conjunction with or through any other person, firm, corporation, entity, partnership, company or association, by purchase or otherwise, beneficial ownership of any shares of Perma- Fix Common Stock or any other voting securities of Perma-Fix or any rights or option to acquire voting securities of Perma-Fix or any securities convertible into any voting securities of Perma-Fix (collectively, 25 "Perma-Fix Voting Securities"), except as otherwise agreed to in writing by the President of Perma-Fix or approved by the Board of Directors (or a committee of the Board of Directors) of Perma-Fix. Notwithstanding anything in Section 5.4.1 to the contrary, Michael F. Sullivan and Patrick Sullivan, sons of TPS and ALS, may acquire shares of Perma-Fix Common Stock. 5.4.2 Prohibition Against Solicitation. Directly or indirectly, or through or in conjunction with any other person, firm, corporation, entity, partnership, company or association, solicit, or encourage any solicitation of, or permit any Affiliate of the Sullivans or any of the Sullivan Trusts to solicit, or encourage any solicitation of, (i) proxies with respect to Perma-Fix Voting Securities under any circumstances, tender or exchange offers with respect to Perma-Fix Voting Securities under any circumstances, or (ii) any election contest relating to the election of directors of Perma-Fix; or 5.4.3 Prohibition Against Control. Take any action alone or in concert with any other person, firm, corporation, partnership, company or association to acquire or affect the control of Perma-Fix or to influence the management, board of directors or policies of Perma- Fix, or, directly or indirectly, or encourage the formation of, any group within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, seeking to obtain or take control of Perma-Fix or to influence the management, board of directors or policies of Perma-Fix except it is recognized that the Sullivan Trusts have the right to select one (1) nominee to the Board of Directors of Perma-Fix under certain limited conditions. 5.5 Attendance. During the period that any of the Sullivans or Sullivan Trusts is the beneficial owner of any shares of Perma-Fix Common Stock acquired under this Agreement and the Chem-Con Agreement, the Sullivan Trusts shall cause all such shares of Perma-Fix Common Stock which they beneficially own to be duly represented, in person or by proxy, at each meeting of stockholders of Perma-Fix. 5.6 Specific Enforcement. The parties hereto recognize and agree that, in the event any of the Sullivans or any of the Sullivan Trusts breach or threaten to breach any of the provisions of this Article 5, immediate irreparable injury would be caused to Perma-Fix, for which there is no adequate remedy at law. It is accordingly agreed that in the event of a failure by any of the Sullivans or Sullivan Trusts to perform their obliga- tions under this Article 5, Perma-Fix shall be entitled to specific performance through injunctive relief to prevent breaches of any provision of this Article 5 and to specif- ically enforce any provision of Article 5 and the terms and provisions thereof in any action instituted in any court of the United States or any state thereof having subject matter jurisdiction, in addition to any other remedy to which Perma- Fix may be entitled, at law or in equity. 26 ARTICLE 6 NO SOLICITATION OF TRANSACTIONS 6.1 No Solicitation of Transactions. Chem-Met, the Sullivans and the Sullivan Trusts shall not, and will not allow any of their employees, agents, representatives or Affiliates (including, but not limited to any of Chem-Con's and/or Chem-Met's officers, directors, employees, agents, representatives or Affiliates), to (i) negotiate, sell, offer to sell or solicit offers to purchase any of the assets of Chem-Con and/or Chem- Met (other than sales of products in the ordinary course of their businesses); (ii) negotiate, sell, offer to sell or solicit offers to purchase or exchange, any capital stock of Chem-Con, Chem-Met or any Subsidiary of Chem-Con or Chem-Met to, from or with any other party (other than pursuant to the terms of this Agreement and the Chem-Con Agreement) or enter into any merger, consolidation, liquidation or similar trans- action involving, directly or indirectly, Chem-Con, Chem-Met or any Subsidiary of Chem-Con or Chem-Met (other than pursuant to the terms of this Agreement and the Chem-Con Agreement) and none of the Sullivans nor the Sullivan Trusts, Chem-Con, Chem- Met nor any of their Affiliates will negotiate with or provide financial, technical or other information to any person (other than pursuant to this Agreement and the Chem-Con Agreement) in connection with any such proposed purchase or transaction; or, (iii) negotiate, sell, offer to sell or solicit any offers to purchase any outstanding shares of Chem-Con's and Chem-Met's capital stock or any other securities of Chem-Con and Chem-Met (other than pursuant to the terms of this Agreement and the Chem-Con Agreement). ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF PERMA-FIX Perma-Fix and Perma-Met, jointly and severally, represent and warrant to the TPS Trust as follows: 7.1 Organization, etc. Perma-Fix is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Perma-Met is a corporation duly organized, validly existing and in good standing under the laws of the State of Michigan. Perma-Fix has the corporate power to own its property and to carry on its business as now being con- ducted; Perma-Fix has the corporate power and authority to execute and deliver this Agreement and, after the Registration Statement has been declared effective by the SEC and obtaining approvals from its shareholders, its lender, the Boston Stock Exchange ("BSE") and the National Association of Securities Dealers, Inc. ("NASDAQ"), to issue the Perma-Fix Common Stock to be delivered pursuant to Section 3.1.3 hereof and consum- mate the transactions contemplated hereby and the Chem-Con 27 Agreement, and to perform the transactions contemplated by this Agreement. Perma-Met has the corporate power and authority to execute and deliver this Agreement and, subject to the Registration Statement being declared effective by the SEC and Perma-Fix obtaining approval from its shareholders and its lender, to consummate the transactions contemplated hereby. 7.2 Authorization, Execution and Delivery of Agreement. The exe- cution, delivery and performance of this Agreement by Perma- Fix and Perma-Met have been duly and validly authorized and approved by the Board of Directors of Perma-Fix. This Agree- ment constitutes the valid and binding agreement of Perma-Fix, enforceable in accordance with its terms, subject to bank- ruptcy, insolvency and other laws of similar import, and Perma-Fix and Perma-Met have taken, or will use reasonable efforts to take prior to the Closing, all other action required by law on the part of Perma-Fix and Perma-Met and Perma-Fix's and Perma-Met's Certificate or Articles of Incorporation and bylaws or otherwise to effect the transactions contemplated by this Agreement. 7.3 Capital Stock of Perma-Fix. As of the date of this Agreement, the authorized capital stock of Perma-Fix consists of (i) 2,000,000 shares of Preferred Stock, $.001 par value, 9,850 of which are outstanding as of the date hereof; and (ii)50,000,000 shares of Perma-Fix Common Stock, of which 12,419,080 shares are issued and outstanding as of the date hereof and 13,577,163 shares are reserved for issuance under Perma-Fix's Stock Option Plans (such Plans being hereinafter referred to as the "Perma-Fix Plans") and warrants or rights to subscribe for or purchase from Perma-Fix any Perma-Fix Common Stock. 7.4 SEC Filings. 7.4.1 Perma-Fix has previously furnished Chem-Met and the TPS Trust true and complete copies of the following docu- ments which have been filed by Perma-Fix with the SEC pursuant to Sections 13(a), 14(a), (b) or (c) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") (such documents are hereinafter collectively called the "Perma-Fix SEC Filings"): 7.4.1.1 its Annual Report on Form 10-K for the year ended December 31, 1997 (the "Form 10-K"), as amended by Amendment No. 1 on Form 10-K/A filed with the SEC on January 14, 1999; 7.4.1.2 quarterly reports on Form 10-Q for the quarters ended March 31, 1998 and June 30, 1998; and 7.4.1.3 quarterly report on Form 10-Q for the quarter ended September 30, 1998 ("Third Quarter 10- Q"), as amended by Amendment No. 1 on Form 10- Q/A filed January 14, 1999. 28 7.4.1.4 Proxy Statement, dated April 20, 1998, in connection with its 1998 Annual Meeting of Stockholders; and 7.4.1.5 Form 8-K, Date of Report (date of earliest event reported): June 30, 1998. 7.4.2 The audited and unaudited financial statements con- tained in the Perma-Fix SEC Filings, as amended, present fairly the consolidated financial condition and results of operations and changes in shareholders' equity and changes in financial position of Perma-Fix as of the dates and for the periods indicated, except as may otherwise be stated in such financial state- ments. For purposes of this Agreement, all financial statements of Perma-Fix shall be deemed to include any notes to such financial statements. The financial statements described in this Section 7.4 are hereinafter referred to as the "Perma-Fix Financial Statements." 7.4.3 Material Adverse Change. Since September 30, 1998, there has not been, occurred or arisen, which has not been publicly disclosed to the shareholders of Perma- Fix or contained in the Perma-Fix SEC Filings, as amended: 7.4.3.1 any material adverse change in the consoli- dated financial condition or in the operations of the business of Perma-Fix and its subsidiaries, taken as a whole, from that shown on the Perma-Fix Financial Statements; or 7.4.3.2 any event, condition or state of facts (other than the general state of the national economy and proposed federal legislation or regulation) of any character which, to the knowledge of Perma-Fix, materially and adversely affects the results of operations or business or financial condition or properties of Perma-Fix and its subsidiaries, taken as a whole, except as otherwise disclosed in this Section 7.4. 7.5 Status of Perma-Fix Common Stock. The shares of Perma-Fix Common Stock to be delivered pursuant to Article 3 hereof, when so issued pursuant to this Agreement, will be duly and validly authorized and issued, fully paid and nonassessable. 7.6 No Breach of Statute or Contract, Governmental Authorizations. Subject to the Registration Statement being declared effective by the SEC, obtaining approval by the shareholders of Perma- Fix, the National Association of Securities Dealers ("NASD"), the BSE and Perma-Fix's lender, neither the execution and delivery of this Agreement by Perma-Fix and Perma-Met nor compliance with the terms and provisions of this Agreement by Perma-Fix and Perma-Met will violate (i) any law, statute, rule or regulation of any governmental authority, domestic or foreign, or will at the Closing Date conflict with or result in a breach of any of the terms, conditions or provisions of 29 any judgment, order, injunction, decree or ruling of any court or governmental agency or authority to which Perma-Fix or Perma-Met are subject, which in the aggregate would have a material adverse effect on Perma-Fix and its subsidiaries, taken as a whole, or (ii) any agreement or instrument to which it is a party or by which it is bound or constitute a default thereunder which would have a material adverse effect on Perma-Fix and Perma-Met and their Subsidiaries, taken as a whole, or (iii) result in the creation of any Lien upon any property or assets of Perma-Fix or cause any acceleration of maturity of any obligation or loan which would have a material adverse effect on Perma-Fix and its subsidiaries, taken as a whole, or (iv) give to others any interest or rights, including rights of termination or cancellation, in or with respect to any of the material properties, assets, agreements, contracts or business of Perma-Fix which would have a material adverse effect on Perma-Fix and its subsidiaries, taken as a whole. 7.7 No Litigation or Adverse Events. Except as set forth in the SEC Filings, copies of which have been or will be delivered to Chem-Met, there is no suit, action, or legal, administrative, arbitration or other proceeding or governmental investigation pending, or to the best of the knowledge of Perma-Fix threatened, which could materially and adversely affect the financial condition and results of operations of Perma-Fix and its subsidiaries, taken as a whole. 7.8 Broker's or Finder's Fees. No agent, broker, person or firm acting on behalf of Perma-Fix, or under its authority, is or will be entitled to any commission or broker's or finder's fee from any of the parties hereto in connection with any of the transactions contemplated herein. ARTICLE 8 COVENANTS OF CONDUCT AND TRANSACTIONS PRIOR TO AND AFTER THE CLOSING 8.1 Investigations; Operation of Business of Chem-Met. Chem-Met, the Sullivans and the Sullivan Trusts agree, jointly and severally, between the date of this Agreement and the Closing: 8.1.1 Access to Premises and Books. That Perma-Fix and Perma-Met, and their representatives shall have full access to all their premises and books and records relating to Chem-Met, and shall cause Chem-Met to provide to Perma-Fix and its representatives full access to their premises and books and records, and to cause Chem-Met's officers to furnish Perma-Fix and Perma-Met with such financial and operating data and other information with respect to the business and pro- perties of Chem-Met, as Perma-Fix and Perma-Met shall from time to time request; provided, however, that any such investigation shall not affect any of the representations, warranties or covenants of Chem-Met, 30 the Sullivans and/or the Sullivan Trusts hereunder; and, provided further, that any such investigation shall be conducted in such manner as not to interfere unreasonably with the operation of the business of Chem-Met. In the event of termination of this Agree- ment, Perma-Fix will return to Chem-Met any and all financial statements, agreements, documents, memoranda or other repositories of information relating to Chem- Met that Perma-Fix and Perma-Met have obtained in connection with their review, and Perma-Fix agrees that any written information relating to Chem-Met and Chem- Met's financial condition, business, operations and prospects are strictly confidential and shall not be voluntarily disclosed to any third party or used by Perma-Fix for its benefit or the benefit of any other person, except for such information or documents (i) available generally to the public, (ii) in the posses- sion of Perma-Fix prior to its receipt under this Agreement, (iii) obtained by Perma-Fix from a third party who has an independent right to such information or documents, or (iv) as otherwise required by law to be disclosed; provided, however, that any confidentiality requirements contained in this Section shall terminate and be null and void twelve (12) months from the date of this Agreement. 8.1.2 Business Organization of Chem-Met. To cause Chem-Met, to the extent required for continued operation of Chem- Met's business without impairment, to use Chem-Met's best efforts to preserve substantially intact the busi- ness organization of Chem-Met to keep available the services of the present officers and employees of Chem- Mets and to preserve the present relationships of Chem- Met with persons having significant business relations therewith such as suppliers, customers, brokers, agents or otherwise. 8.1.3 Ordinary Course of Business. To cause Chem-Met to con- duct Chem-Met's businesses only in the ordinary course and, by way of amplification and not limitation, Chem- Met will not without the prior written consent of Perma-Fix (except as otherwise specifically provided in this Agreement): 8.1.3.1 issue any capital stock or make any changes to its authorized, issued or outstanding capital stock, grant any stock options or rights to acquire shares of any of its capital stock or any security convertible into any class of its capital stock or agree to do any of the foregoing; or 8.1.3.2 declare, set aside, or pay any dividend or distribution with respect to any of its capital stock or any other securities convertible into any class of capital stock; or 31 8.1.3.3 directly or indirectly redeem, purchase or otherwise acquire any of its capital stock or enter into any agreement to purchase or redeem any of the Chem-Met Common Stock; or 8.1.3.4 effect a split or reclassification of any of its capital stock convertible into any class of capital stock, purchase, redeem, retire or otherwise acquire any shares of any class of its capital stock or any security convertible into any class of its capital stock or agree to do any of the foregoing; or 8.1.3.5 change its charter or bylaws; or 8.1.3.6 except consistent with past practices, grant any increase in the compensation payable or to become payable by it to its officers or employees or any increase, regardless of amount, in any bonus, insurance, pension or other benefit plan, program, payment or arrangement made to, for, or with any officers or employees; or 8.1.3.7 engage in any transaction not in the ordinary course of business; or 8.1.3.8 borrow or agree to borrow any funds or assume, endorse, guarantee or agree to guarantee or otherwise as an accommo- dation become liable or responsible for obligations of any other individual, firm or corporation; or 8.1.3.9 waive any rights of substantial value; or 8.1.3.10 enter into an agreement, contract or com- mitment which, if entered into prior to the date of this Agreement, would be required to be listed in a Schedule pursuant to the terms of this Agreement and is in excess of Twenty-Five Thousand Dollars ($25,000.00); or 8.1.3.11 acquire any Real Property; or 8.1.3.12 enter into any agreement with Affiliates or trustees of the Sullivan Trusts or Affiliates, officers or directors of Chem-Met; or 8.1.3.13 adopt, enter into, or amend materially any employment contract or any bonus, stock option, profit-sharing, pension, retirement, incentive, or similar employee benefit program; or 32 8.1.3.14 pay or incur any obligation or liability, absolute or contingent, other than lia- bilities incurred in the ordinary and usual course of its business; or 8.1.3.15 mortgage, pledge, or subject to lien or other encumbrance any of its properties or assets; or 8.1.3.16 except for transactions in the ordinary and usual course of its business, sell or transfer any of its properties or assets or cancel, release or assign any indebt- edness owed to it or any claims held by it; or 8.1.3.17 make any investment of a capital nature in excess of Twenty-Five Thousand Dollars ($25,000.00) for any one item or group of similar items, contributions to capital, property transfers, or otherwise, or by the purchase of any property or assets of any other individual, firm, or corpor- ation; or 8.1.3.18 enter into any other agreement not in the ordinary and usual course of business; or 8.1.3.19 merge or consolidate with any other cor- poration, acquire any of its assets or capital stock, solicit any offers for any of its assets or capital stock, or, except in the ordinary course of busi- ness, acquire any assets of any other person, corporation, or other business organization, or enter into any discus- sions with any person concerning, or agree to do, any of the foregoing; or 8.1.3.20 enter into any transaction or take any action which would, if effected prior to the Closing, constitute a breach of any of the representations, warranties or covenants contained in this Agreement. 8.1.4 Sale of Assets. Without the prior written consent of Perma-Fix, Chem-Met will not undertake or enter into any sale, disposition, surrender, acquisition, agreement or transaction relating to any of its assets except in the ordinary course of business or as contemplated by this Agreement. 8.2 No Selling of Shares or Granting of Options. Prior to the Closing, neither the TPS Trust nor Chem-Met shall sell, transfer, assign or otherwise dispose of any of the Shares or grant any options, warrants, or other rights to purchase or otherwise acquire any Shares or other shares of the capital stock of Chem-Met or issue any securities convertible into any shares of the capital stock of Chem-Met. 33 8.3 Disclosure in Proxy Statement. Perma-Fix agrees that none of the information which has been or will be supplied in writing by Perma-Fix for inclusion in the Proxy Statement relating to the Merger will, at the time such Proxy Statement is mailed or at the time of the meeting to which such Proxy Statement relates, be false or misleading with respect to any material fact, or will omit to state any material fact relating to Perma-Fix necessary to order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of any proxy for the meeting in connection with such Proxy Statement. 8.4 Consents. Chem-Met, the Sullivans, the Sullivan Trusts and Perma-Fix shall each use its best efforts to obtain the consent or approval of each person or Governmental Authority whose consent or approval shall be required in order to permit Chem-Met, the Sullivans, the Sullivan Trusts or Perma-Fix, as the case may be, to consummate the transactions contemplated by this Agreement. 8.5 Governmental Reports. Between the date of this Agreement and the Closing, the Sullivans, the Sullivan Trusts and Chem-Met shall furnish, make available to Perma-Fix any and all reports, not heretofore delivered to Perma-Fix under this Agreement or which are filed subsequent to the date of this Agreement, to any state, federal or local government, agency or department, including, but not limited to, the SEC, the IRS, the EPA, the FTC and the PBGC. 8.6 Conduct of Business. Prior to the Closing, Chem-Met shall conduct its business in the ordinary and usual course as heretofore conducted and to use its best efforts (i) to preserve its business and business organization intact; (ii) to keep available to Chem-Met the services of the present officers and employees of Chem-Met; (iii) to preserve the goodwill of customers and others having business relations with Chem-Met; (iv) to maintain its properties in customary repair, working order and condition (reasonable wear and tear excepted); (v) to comply with all Laws applicable to it and the conduct of its businesses; (vi) to keep in force at not less than their present limits all existing policies of insurance; (vii) to make no material changes in the customary terms and conditions upon which it does business; (viii) to duly and timely file all reports, returns, and other documents required to be filed with federal, state, local and other Governmental Authorities; and, (ix) unless it is contesting the same in good faith and has established reasonable reserves therefor, to pay, when required to be paid, all Taxes indicated by Returns so filed or otherwise lawfully levied or assessed upon it or any of its properties and to withhold or collect and pay to the proper Governmental Authorities or hold in separate bank accounts for such payment all taxes and other assessments which it believes in good faith to be required by Law to be so withheld or collected. 8.7 Governmental Approvals. Prior to Closing, each of Chem-Met, the Sullivans and the Sullivan Trusts shall use its best efforts in good faith to take or cause to be taken as promptly as practicable all such steps as shall be necessary to obtain 34 all required Governmental Approvals as promptly as practicable to consummate the transactions contemplated by this Agreement. 8.8 Encumber. None of Chem-Met, the TPS Trust nor the Sullivan Trusts shall sell, pledge, encumber or otherwise hypothecate or transfer or grant an option, warrant or right to sell or dispose of any shares of capital stock of Chem-Met prior to the Closing other than pursuant to this Agreement. 8.9 Title Policies for Real Property Owned by Chem-Met. On or before five (5) days prior to the Closing Date, Chem-Met shall deliver to Perma-Fix a fully paid policy or policies of title insurance, dated as of a date within five (5) days of the Closing Date, issued to Chem-Met and Perma-Met by a title company of nationally recognized standing, reasonably satisfactory to Perma-Fix, on a standard ALTA's owner title insurance policy form, insuring that Chem-Met has good and marketable fee simple title in and to each parcel of Real Property owned by Chem-Met listed on Schedule "F" hereto and the 10 Acre Tract, free and clear of all Liens and containing no exceptions, except (a) standard printed exceptions (other than exceptions for mechanics', artisans' or materialmen's liens and for matters that would be revealed by a survey) and (b) Permitted Encumbrances. The amount of such title insurance for each parcel of Real Property owned by Chem-Met shall be as set forth on Schedule "F" hereto. The amount of such title insurance as to the 10 Acre Tract shall be $700,000.00. The cost and expense for such title insurance shall be shared equally by the Sullivans and Perma-Fix. 8.10 Survey. Simultaneously with the delivery of the title policies to Perma-Fix pursuant to Sections 8.8 hereof, Chem- Met shall deliver to Perma-Fix and the title company issuing the title insurance under Sections 8.8 hereof, a written survey prepared by a duly licensed surveyor reasonably satisfactory to Perma-Fix covering each of the Real Properties owned by Chem-Met and the 10 Acre Tract, which survey shall be satisfactory to Perma-Fix and to the title company issuing the ALTA's owner's title insurance policies. The cost and expense for such survey shall be shared equally by the Sullivans and Perma-Fix. 8.11 Public Announcements. Perma-Fix, the Sullivans and the Sullivan Trusts agree that they will consult with each other before issuing any press releases or otherwise making any public statements with respect to this Agreement or the transactions contemplated hereby and any press release or any public statement shall be subject to mutual agreement of the parties, except as may be required by the disclosure obligations of either party or their Affiliates under applicable securities law. 8.12 Notification. Chem-Met, the Sullivans and the Sullivan Trusts shall give Perma-Fix prompt written notice of (i) the existence of any fact or the occurrence of any event which constitutes, or with the giving of notice or the passage of 35 time or both would constitute a breach of any representation or warranty of Chem-Met, the Sullivans or the Sullivan Trusts made herein or pursuant hereto and (ii) the taking of any action by Chem-Met, the Sullivans or the Sullivan Trusts that would breach or violate, or constitute a default under, any agreement or covenant of Chem-Met, the Sullivans or the Sullivan Trusts made herein or pursuant hereto. Upon the giving of such notice, Perma-Fix may terminate this Agreement in accordance with the terms hereof. 8.13 Filings. The parties hereto shall, as promptly as practicable after the date hereof, submit applications, all documents, reports and notifications, and satisfy all requests for additional information, if any, pursuant to 40 Code of Federal Regulations ("CFR") Part 270 and all other requirements under any and all applicable Environmental Laws, with regard to the transfer of, or changes in the ownership or operational control of Chem-Met or the permits, licenses or approvals held or used by Chem-Met relating to the businesses of Chem-Met. Each of the parties hereto agree to reasonably cooperate with each other to obtain all authorizations required under any and all applicable laws, to consummate the transactions contemplated hereby. 8.14 Supplemental Disclosure. Chem-Met, the Sullivans and the Sullivan Trusts agree that, with respect to their representations and warranties made in this Agreement, they will have a continuing obligation to supplement or amend the Schedules hereto with respect to any matter hereafter arising or discovered which, if existing or known at the date of this Agreement, would have been required to be set forth or described in the Schedules hereto. Upon the supplementing or amending of any Schedules by Chem-Met, the Sullivans or the Sullivan Trusts or the discovery of any matters by Perma-Fix in the course of its investigations, Perma-Fix may, at its option, terminate this Agreement without any liability or obligation on the part of Perma-Fix or Perma-Met. 8.15 SEC Filings. Perma-Fix shall provide the Sullivans with all reports and other filings it makes with the SEC under the Securities Act or under the Exchange Act from the date of this Agreement to the Closing. 8.16 Listing of Perma-Fix Common Stock. Perma-Fix shall use reasonable efforts to obtain, prior to the Closing, approval for listing on the BSE and NASDAQ Small Cap Market, upon official notice of issuance, of the shares of Perma-Fix Common Stock to be delivered pursuant to the provisions of Article 3 hereof. 8.17 Perma-Fix Registration Statement, etc. Prior to the Effective Date of the Merger, Perma-Fix shall have prepared and filed with the SEC a registration statement on Form S-4 (the "Registration Statement") under the Securities Act for the purpose of registering the shares of Perma-Fix Common Stock to be issued pursuant to the terms of this Agreement and the Chem-Con Agreement. Perma-Fix will use all reasonable efforts to cause the Registration Statement to become effective as soon as practicable and to thereafter maintain the effectiveness of the Registration Statement up to the time of 36 the shareholders meetings of Chem-Con, Chem-Met and Perma-Fix called for the purpose of approving this Agreement, the Merger, the Chem-Con Agreement and the mergers thereunder are held and up to and at the time of the delivery of the shares of Perma-Fix Common Stock to be delivered to Chem-Con and Chem-Met shareholders under the terms and provisions of this Agreement and the Chem-Con Agreement as may be required by law and the regulations of the SEC. Chem-Con, Chem-Met, the Sullivans, the Sullivan Trusts and Perma-Fix will each take such steps as may be necessary on their respective parts to comply with any state securities or Blue Sky Laws applicable to the action to be taken by them in connection with the delivery by Perma-Fix to Chem-Con and Chem-Met stockholders of the Perma-Fix Common Stock. 8.18 Information for Proxy Statements. The parties hereto will each furnish to the other such data and information relating to it as the other may reasonably request for the purpose of including such data and information in the Registration Statement and the Proxy Statement (as defined below) provided for by this Agreement and the Agreement of Merger. 8.19 Registration Statement; Proxy Statement/Prospectus. Chem- Met, the Sullivans and the Sullivan Trusts, jointly and severally, covenant and agree that the information to be supplied by Chem-Met, the Sullivans and/or the Sullivan Trusts pursuant to this Agreement and the Chem-Con Agreement for inclusion in the Registration Statement pursuant to which shares of Perma-Fix Common Stock issued in the Merger will be registered under the Securities Act shall not at the time the Registration Statement is declared effective by the SEC ("Effective Date") contain any untrue statement of a material fact or omit to state any material fact required to be stated in the Registration Statement or necessary in order to make the statements in the Registration Statement, in light of the circumstances under which they were made, not misleading. The information supplied by Chem-Met, the Sullivans and/or the Sullivan Trusts for inclusion in the proxy statement/prospectus (the "Proxy Statement") to be sent to the stockholders of Perma-Fix in connection with the meeting of Perma-Fix's stockholders (the "Perma-Fix Stockholders' Meeting") to consider this Agreement, the Merger and the issuance of shares of Perma-Fix Common Stock pursuant to the Merger shall not, on the date the Proxy Statement is first mailed to stockholders of Perma-Fix, at the time of the Perma- Fix Stockholders' Meeting and at the Effective Time, contain any statement which, at such time and in light of the circumstances under which it shall be made, is false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements made in the Proxy Statement not false or misleading; or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Perma-Fix Stockholders' Meeting which has become false or misleading. If at any time prior to the Effective Time any event relating to Chem-Met or any of its Affiliates, officers, directors, employees or shareholders which should be discovered by Chem-Met, the Sullivans and/or the Sullivan Trusts which should be set forth in an amendment to the Registration Statement or a supplement to the Proxy Statement, Chem-Met, the Sullivans and/or the Sullivan Trusts shall promptly inform Perma-Fix. 37 8.20 Audited Financial Statements. For inclusion in the Registration Statement and Proxy Statement, Chem-Con, Chem- Met, the Sullivans and the Sullivan Trusts shall have Bovitz & Co., P.C., prepare, audit and deliver to Perma-Fix true, correct and complete copies of the 1998, 1997 and 1996 Audited Financial Statements of Chem-Con and Chem-Met, on a combined basis, consisting of (i) balance sheet as of fiscal years ended September 30, 1998, September 30, 1997 and September 30, 1996; (ii) statement of income and related earnings for the fiscal years ended September 30, 1998, September 30, 1997 and September 30, 1996; (iii) statement of stockholders' equity and statement of cash flow for the years ended September 30, 1998, September 30, 1997 and September 30, 1996, and (iv) notes thereto, with auditors' report thereon being unqualified, all of which shall have been examined by Bovitz & Co., P.C., independent certified public accountants, and be in accordance with Regulation S-X (17 C.F.R. Part 210) and GAAP, consistently applied. The audited financial statements referred to in this Section 8.22 shall include Chem-Con and Chem-Met, on a combined basis. Perma-Fix agrees to pay for that portion of such audited financial statements for Chem-Con and Chem-Met, on a combined basis, relating to years ended September 30, 1996, 1997 and 1998 unless the audit finds that the income of Chem-Con and Chem-Met, on a combined basis, is twenty percent (20%) less than represented prior to accounting entries as follows: (i) reversal of officer notes receivable of $1,125,919, offset by a note payable from the officer in the amount of $60,980; (ii) increased allowance for doubtful accounts of $200,000; (iii) accrued expenses of $600,000; (iv) reserve for remediation of Chem-Con's Valdosta, Georgia facility of $1,800,000; and (v) accrued closure costs of $635,802, in which case the audit shall be paid for in its entirety by Chem-Con. 8.21 Public Disclosure. Perma-Fix and the Sullivans shall consult with each other before issuing any press release or otherwise making any public statement with respect to the Merger or this Agreement and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by law or any listing agreement with a national securities exchange or the NASDAQ. 8.22 Pooling Accounting. From and after the date hereof and until the Effective Time, neither Chem-Met nor Perma-Fix shall knowingly take any action, or knowingly fail to take any action, that is reasonably likely to jeopardize the treatment of the Merger and the Chem-Con Merger as provided in the Chem- Con Agreement as a pooling of interests for accounting purposes. 8.23 Letter of Public Accountants. Chem-Met, the Sullivans and the Sullivan Trusts shall cause to be delivered to Perma-Fix letters, the first ("First Accountant Letter") of which shall be dated not less than two days prior to the date on which the Registration Statement becomes effective, and the second (the "Second Accountant Letter") of which shall be dated not less than five days prior to the Closing Date from Bovitz & Co., P.C., which shall be addressed to Perma-Fix and be in form reasonably satisfactory to Perma-Fix and customary in scope and substance for letters delivered by independent public 38 accountants in connection with registration statements similar to the Registration Statement and shall contain, without limitation, the following statements: (i) the combined Audited Financial Statements of Chem-Con and Chem-Met examined by them and included in the Proxy Statement and Registration Statement comply as to form in all material respects with the applicable accounting requirement of the Securities Act and of the published Rules and Regulations thereunder and (ii) on the basis of a reading of the latest available unaudited financial statements, inquiries of officers of Chem-Con and Chem-Met responsible for financial and accounting matters and a reading of the minutes, nothing has come to their attention which caused them to believe that (a) as of the date of the latest available unaudited consolidated interim financial statements prepared by Chem-Con and Chem-Met there was any change in the capital stock or long-term debt of Chem-Con, Chem-Met and their subsidiaries consolidated or any decreases in consolidated net current assets or in consolidated net assets, as compared with the amounts shown in the September 30, 1998, consolidated Balance Sheet, or (b) for the period from September 30, 1998, to the date of the latest available unaudited interim consolidated financial statements prepared by Chem-Met, there were any decreases, as compared with the corresponding period in the preceding year, in consolidated net revenues or in total or per share amounts of consolidated income (loss) before extraordinary items or of consolidated net income, except in all instances for changes or decreases which the Proxy Statement discloses have occurred or may occur, and (c) that on the basis of inquiries of officers of Chem-Con and Chem-Met responsible for financial and accounting matters and a reading of the minutes, nothing has come to their attention which caused them to believe that (1) at a specified date within five (5) days of the Effective Date of the Registration Statement and not more than five (5) days prior to the Effective Time of the Merger there was any change in the capital stock or long-term debt of Chem-Con and Chem- Met and their subsidiaries consolidated or any decreases in consolidated net current assets or in consolidated net assets, as compared with amounts shown on the September 30, 1998, consolidated Balance Sheet or (2) for the period from the date of the latest available unaudited consolidated interim financial statements prepared by Chem-Con and Chem-Met to a specified date within five (5) days of the effective date of the Registration Statement and not more than five (5) days prior to the Effective Time of the Merger there were any decreases as compared with the corresponding period in the preceding year, in consolidated net revenues or in the total or per-share amounts of consolidated income before extraordinary items or of consolidated net income, except in all instances for changes or decreases which the Proxy Statement and Registration Statement discloses have occurred or may occur, and (d) that they have compared the financial information which related to Chem-Con and Chem-Met appearing in the Proxy Statement and Registration Statement with amounts in the consolidated financial statements or accounting records of Chem-Con and Chem-Met and have found them to be in agreement. 8.24 Liability to Broker. The Sullivans have retained WHCA Partners as an agent or firm acting on behalf of the Sullivans and/or the Sullivan Trusts in connection with this Agreement. Except as otherwise expressly provided in Section 4.15 hereof, the Sullivans and the Sullivan Trusts shall, jointly and severally, pay any and all fees or renumeration 39 due and payable to WHCA Partners as a result of this Agreement and/or consummation of the transactions contemplated by this Agreement. 8.25 Assumption of Tax Liability and Quanta Liability. Each of the Sullivans and the Sullivan Trusts, jointly and severally, assume and agree to pay, when due, and to perform or discharge, as the case may be, any and all (i) federal and/or state tax obligations and liabilities of Chem-Con, Chem-Met and Quanta (and any other corporation with respect to periods for which such corporation was included and consolidated federal income tax returns with Chem-Con, Chem-Met or Quanta) for any period ending on or prior to the Closing Date, without regard to whether such liabilities have been or would be properly provided for in the financial records of any person under generally accepted accounting principals, and including, without limitation, any such obligations or liabilities arising from (A) the transactions contemplated by this Agreement, (B) the determination of any tax on a consolidated basis with any other corporation, or (C) any tax sharing or tax allocation agreement, and (ii) obligations and liabilities (absolute or contingent, known or unknown)of Quanta that have been incurred by Quanta in any manner whatsoever prior to the Closing Date or arising in any way in connection with the business or operations of Quanta prior to the Closing Date. 8.26 Access to Premises and Books. That the Sullivans, the Sullivan Trusts and their representatives shall have full access to all their premises and books and records relating to Perma-Fix, and Perma-Fix shall provide to the Sullivans, the Sullivan Trusts and their representatives full access to their premises and books and records, and to cause Perma- Fix's officers to furnish the Sullivans, the Sullivan Trusts with such financial and operating data and other information with respect to the business and properties of Perma-Fix, as the Sullivans or Sullivan Trusts shall from time to time re- quest; provided, however, that any such investigation shall not affect any of the representations, warranties or covenants of Perma-Fix hereunder; and, provided further, that any such investigation shall be conducted in such manner as not to interfere unreasonably with the operation of the busi- ness of Perma-Fix. In the event of termination of this Agreement, the Sullivans and the Sullivan Trusts will return to Perma-Fix any and all financial statements, agreements, documents, memoranda or other repositories of information re- lating to Perma-Fix and its Subsidiaries that Chem-Met, the Sullivans or the Sullivan Trusts have obtained in connection with its review, and Chem-Met, the Sullivans and the Sullivan Trusts agree that any written information relating to Perma- Fix and its Subsidiaries and Perma-Fix's and its Subsidiaries' financial condition, business, operations and prospects are strictly confidential and shall not be volun- tarily disclosed to any third party or used by any of Chem- Met, the Sullivans or the Sullivan Trusts for its benefit or the benefit of any other person, except for such information or documents (i) available generally to the public, (ii) in the possession of Chem-Met prior to its receipt under this Agreement, (iii) obtained by any of Chem-Met, the Sullivans or the Sullivan Trusts from a third party who has an inde- pendent right to such information or documents, or (iv) as otherwise required by law to be disclosed; provided, however, that any confidentiality requirements contained in this 40 Section shall terminate and be null and void twelve (12) months from the date of this Agreement. 8.27 Quanta Merger and Exchange. Prior to the Closing Date, (i) Quanta shall have merged with and into Chem-Met, with Chem- Met being the survivor ("Quanta Merger"), without any consideration being paid to the stockholders of Quanta and without any resulting tax consequences as a result thereof, with such Quanta Merger being on terms and conditions satisfactory to Perma-Fix, and (ii) after the Quanta Merger but prior to the Closing, Chem-Met and Allen Sibley Limited Liability Company, a Michigan limited liability company ("Allen Sibley") shall have completed the transaction in which Allen Sibley shall have transferred and conveyed to Chem-Met good and marketable fee simple title, free and clear of any and all Liens except Permitted Encumbrances, in and to the 10 Acre Tract and shall have assigned and transferred the promissory note due by Quanta to Allen Sibley in the principal sum of $365,000 ("Sibley Note") and the promissory note due by Chem-Con to the TPS Trust in the principal sum of $60,900 ("Chem-Con Note") in exchange for the two promissory notes held by Chem-Met in the aggregate principle amount of $1,125,919, with one note due from the TPS Trust and payable to Quanta in the principal sum of $726,105 and the other note due from the TPS Trust and payable to Chem-Met in the principal sum of $399,814 (the "Exchange Transaction"). The transfer of the 10 Acre Tract by Allen Sibley to Chem-Met shall be by a general warranty deed, and such shall convey good and marketable fee simple title, free and clear of any and all Liens except for Permitted Encumbrances in and to the 10 Acre Tract to Chem-Met. At the time of the Quanta Exchange, Allen Sibley shall have full ownership of and have full and complete authority to transfer and assign, the Sibley Note and the Chem-Con Note to Chem-Met, free and clear of any and all Liens. The transaction contemplated by the Exchange Transaction shall be on terms and in a manner that is satisfactory to Perma-Fix. Notwithstanding anything in this Section 8.27 to the contrary, the Quanta Merger and the Exchange Transaction shall be consummated only if such do not adversely effect Perma-Fix's ability to account for the Merger and the Chem-Con Merger as a pooling of interest. 8.28 T.A.S. Leasing, Inc. Prior to the Closing Date, the ALS Trust, who owns all of the outstanding capital stock of T.A.S. Leasing, Inc. ("TAS Leasing"), shall transfer or assign all of the outstanding capital stock of TAS Leasing to Chem-Met, without any consideration being paid to the ALS Trust as a result thereof and without any tax consequences to Chem-Met as a result thereof, all in a manner satisfactory to Perma-Fix. Upon such transfer, TAS Leasing shall be a wholly owned subsidiary of Chem-Met. 41 ARTICLE 9 CONDITIONS OF TRANSACTIONS CONTEMPLATED BY AGREEMENT; ABANDONMENT OF AGREEMENT 9.1 Closing Conditions of Perma-Fix and Perma-Chem. The obliga- tions of Perma-Fix and Perma-Chem to consummate this Agreement or to effect the transactions contemplated by this Agreement shall be subject to the following conditions: 9.1.1 Resolutions of Board of Directors and Shareholders of Chem-Met. Chem-Met shall have furnished to Perma-Fix, in form and substance satisfactory to Perma-Fix: 9.1.1.1 certified copies of resolutions of the shareholder and Board of Directors of Chem-Met, duly adopted by the Board of Directors and shareholder of Chem-Met, authorizing, the execution, delivery and performance of this Agreement by Chem-Met and its shareholder; 9.1.1.2 Incumbency certificate for the officers of Chem-Met. 9.1.2 Delivery of Trust Documents. The trust documents creating the Sullivan Trust shall have been delivered to Perma-Fix evidencing, in form and content satisfactory to Perma-Fix that each of the Sullivan Trusts has the full, valid and legal capacity and authority to execute, deliver and perform all of its agreements, obligations, terms and conditions of this Agreement. 9.1.3 Approval by Lender. Perma-Fix's lender shall have approved the transactions contemplated by this Agreement and the Chem-Con Agreement, and Perma-Fix shall have obtained for Perma-Met a working capital line of credit from and after consummation of the Merger on terms satisfactory to Perma-Fix. All of Chem-Met's debts and obligations to Charter Bank shall have been paid in full, and Charter Bank shall have released all liens and security interest in and to the assets of Chem-Met, all in form and substance satisfactory to Perma-Fix. 9.1.4 Representations and Warranties of the Sullivans and the Sullivan Trusts to be True and Correct and Compliance With Covenants. Except to the extent waived in writing by Perma-Fix hereunder, (i) the representations and warranties of the Sullivans and the Sullivan Trusts herein contained shall be true and correct in all material respects on the Closing Date with the same effect as though made at such time; and (ii) the Sullivans and the Sullivan Trusts shall have performed all of their obligations and complied with all covenants, obligations, and agreements required by this Agreement to be performed or complied with by the Sullivans and the Sullivan Trusts on or prior to the Closing Date. The Sullivans and Sullivan Trusts shall also have delivered to Perma-Fix a certificate, dated the Closing Date and signed by each of the Sullivans and all trustees of the Sullivan Trusts, to both of the aforementioned effects. The Certificate is to be in form and substance satisfactory to Perma-Fix. 42 9.1.5 Representations and Warranties of Chem-Met to be True and Compliance With Covenants. Except to the extent waived in writing by Perma-Fix hereunder, (i) the representations and warranties of Chem-Met herein con- tained shall be true in all material respects on the Closing Date with the same effect as though made at such time; and (ii) Chem-Met shall have performed all obligations and complied with all covenants, obliga- tions, and agreements required by this Agreement to be performed or complied with by Chem-Met on or prior to the Closing Date. Chem-Met shall also have delivered to Perma-Fix a certificate of Chem-Met (in form and substance satisfactory to Perma-Fix), dated the Closing Date and signed by the chief executive officer of Chem-Met, to both of the aforementioned effects. Chem-Met shall also have delivered to Perma-Fix a certificate of Chem-Met (in form and substance satisfactory to Perma-Fix), dated the Closing Date and signed by the chief executive officer of Chem-Met, to both of the aforementioned effects. 9.1.6 Third Party Consents. Chem-Met, the Sullivans and the Sullivan Trusts shall have obtained consents to the transactions contemplated by this Agreement from the parties to all contracts, permits, agreements, debt instruments and other documents referred to in the Schedules delivered by Chem-Met, the Sullivans or the Sullivan Trusts to Perma-Fix in accordance with this Agreement or otherwise, which require such consents and consents from, or notification to, all Gov- ernmental Authorities which require such consents or notifications. 9.1.7 No Material Adverse Change. There shall not have occurred (i) any material adverse change since September 30, 1998, in the business, properties, assets, results of operations or financial condition of Chem-Met, or (ii) any loss or damage to any of the properties or assets (whether or not covered by insurance) of Chem-Met which will materially affect or impair the ability of Chem-Met to conduct, after con- summation of the transactions contemplated hereby, the business of Chem-Met as now being conducted by Chem- Met. 9.1.8 Statutory Requirements; Litigation. In a manner satisfactory to Perma-Fix, (i) all statutory requirements for the valid consummation by Chem-Met, the Sullivan Trusts and the Sullivans of the transactions contemplated by this Agreement shall have been fulfilled; all authorizations, consents and approvals of all Governmental Authorities required to be obtained in order to permit consummation by Chem- Met, the Sullivan Trusts and the Sullivans of the transactions contemplated by this Agreement and to permit the business presently conducted by Chem-Met to continue unimpaired immediately following the Closing shall have been obtained; and, (ii) all applications for permits shall have been approved by the appropriate Governmental Authorities and all authorizations and approvals relating to all permits and licenses held by Chem-Met shall have been obtained from the appropriate Governmental Authorities under 43 any and all of the Environmental Laws as a result of the change in ownership of Chem-Met, pursuant to the terms of this Agreement, with such permits, approvals and authorizations to be in form and substance satis- factory to Perma-Fix, so that Chem-Met is permitted to continue unimpaired immediately following the Closing Date the same business operations that Chem-Met carried on as of the date of this Agreement and the Closing Date. Between the date of this Agreement and the Closing, no Governmental Authority, whether federal, state or local, shall have instituted (or threatened to institute either orally or in a writing directed to any of Chem-Met, the Sullivans and/or the Sullivan Trusts or any of their subsidiaries) an investigation which is pending on the Closing relating to this Agreement and the transactions contemplated hereby, and between the date of this Agreement and the Closing no action or proceeding shall have been instituted or, to the knowledge of Perma-Fix, shall have been threatened before a court or other govern- mental body or by any public authority to restrain or prohibit the transactions contemplated by this Agree- ment or to obtain damages in respect thereof. 9.1.9 Opinion of Counsel of Chem-Met, the Sullivans and the Sullivan Trusts. Perma-Fix shall have received from O'Rourke & Myers, counsel to Chem-Met, the Sullivans and the Sullivan Trusts, or such other counsel acceptable to Perma-Fix and its counsel, an opinion or opinions, dated the Closing Date, substantially in the form of Exhibit "F" hereto, with the form and contents thereof reasonably satisfactory to Perma-Fix and its counsel. 9.1.10 Effective Registration Statement. The Registration Statement shall have become effective under the Securities Act and shall not be subject to a stop order or a proceeding seeking a stop order. 9.1.11 Due Diligence. Perma-Fix shall have completed its financial due diligence of Chem-Met, with the results thereof satisfactory to Perma-Fix. 9.1.12 Environmental Audit. Perma-Fix shall have conducted and completed an environmental audit of Chem-Met, and shall have determined to the satisfaction of Perma-Fix that, (i) Chem-Met has been and is currently in compliance in all material respects with all applicable Environmental Laws, except as otherwise disclosed herein; (ii) none of the assets (including, but not limited to, the soils and groundwater on or under any of the Real Property) owned, leased, operated or used by Chem-Met are contaminated with any hazardous substance (as defined in Section 101(14) of CERCLA or any analogous state or local Laws) or petroleum (as defined in Subtitle I of RCRA or any analogous state or local Laws) in a manner that might have a material adverse effect on Chem-Met, except as otherwise disclosed herein; and (iii) Chem-Met is not or would not be subject to any liability in any material amount under any provision, or as a result of any past or present violation, of any applicable Environmental Laws. 44 9.1.13 Stock Certificates. On or prior to the Closing, the TPS Trust shall execute, endorse in blank and deliver to Perma-Fix, with signatures guaranteed by a bank or investment banking firm and in form acceptable to Perma-Fix, all of the stock certificates representing the Shares, duly and validly endorsed for transfer, free and clear of any and all Liens. 9.1.14 Permits. All permits (including, but not limited to, all permits issued or issuable under all Environmental Laws) which Perma-Fix deems necessary to conduct Chem-Met's business after the Effective Time as currently conducted by Chem-Met shall have been (i) duly and validly transferred, or approved for transfer effective upon the Closing, to Perma-Met by all appropriate Governmental Authorities issuing such permits, or (ii) duly and validly issued to Perma-Met by all appropriate Governmental Authorities, all in form and content satisfactory to Perma-Fix. 9.1.15 No Liens on Assets. All assets of Chem-Met (real and personal) shall be free and clear of any and all Liens, except for Permitted Encumbrances. 9.1.16 Listing of Perma-Fix Common Stock. The BSE and the NASDAQ shall have approved for listing, upon official notice of issuance, the shares of Perma-Fix Common Stock to be delivered pursuant to the provisions of Article 3 hereof. 9.1.17 Minute Books and Stock Ledgers. The TPS Trust shall have delivered to Perma-Fix the minute books and stock ledgers for Chem-Met. 9.1.18 Financial Statements. Perma-Fix shall have received from Bovitz & Co., P.C., Audited Financial Statements ("Chem-Met Audited Financial Statements") of Chem-Met and Chem-Con for all years required to be included in the Registration Statement and Proxy Statement and Form 8-K to be filed by Perma-Fix as a result of consummation of this Agreement and the Chem-Con Agreement and as required by Regulation S-X (17 CFR Part 210), with such audited financial statements to be prepared in accordance with Regulation S-X (17 CFR Part 210) and GAAP, consistently applied throughout the periods, and with Bovtiz & Co., P.C., report in connection therewith to be unqualified. 9.1.19 Title Policies and Surveys. Prior to the Closing Date, Perma-Fix shall have received the title insurance policies and surveys pursuant to Sections 8.8 and 8.9 hereof. 9.1.20 Good Standing Certificates. Good standing and tax certificates (or analogous documents), dated as close as practicable to the Closing, from the appropriate authorities in each jurisdiction of incorporation of Chem-Met and in each jurisdiction in which Chem-Met is qualified to do business, showing Chem-Met to be in good standing and to have paid all taxes due in the applicable jurisdiction. 45 9.1.21 Resignation of Directors. All of the directors of Chem-Met shall have resigned as members of the Board of Directors of Chem-Met, effective as of the Closing Date, except for any existing director of Chem-Met who Perma-Fix advises the TPS Trust in writing prior to Closing is to remain a director of Chem-Met, whichever is applicable, prior to Closing. 9.1.22 Chem-Con Agreement. The Chem-Con Agreement shall have closed contemporaneously with the Closing of this Agreement. 9.1.23 Facility Remediation. Perma-Fix shall determine, in its sole discretion, that the total cost to remediate any and all contamination on, under or at the Facility (including, but not limited to, the areas designated as Area 4 and Area 5 on Exhibit "B" describing the Facility) shall not exceed, in the aggregate, $2,000,000. 9.1.24 Settlement of Four County Landfill PRP Claims. Chem- Met shall have entered into a valid and binding definitive settlement agreements with the Indiana Department of Natural Resources and the Four County PRP Groups settling any and all claims and liabilities of Chem-Met and its Affiliates, both potential and actual, for an amount not to exceed $900,000 and providing contribution protection to Chem-Met and its Affiliates, arising out of Chem-Met's status as a PRP regarding the Four County Landfill, with all such settlement agreements being satisfactory to Perma-Fix and having been approved and entered by the Indiana Department of Natural Resources and the executed Four County PRP Groups, all in a manner satisfactory to Perma-Fix. 9.1.25 Settlement of Chem-Fix Claims. Chem-Met's liability under the Chem-Fix Settlement Agreement shall not exceed $360,000. 9.1.26 Pooling Letters. Perma-Fix shall have received a letter from BDO Seidman, LLP and a letter from Bovitz & Co., P.C., addressed to Perma-Fix, regarding its concurrence with management's conclusions that the acquisition of Chem-Met pursuant to the terms of this Agreement and the acquisition of Chem-Con pursuant to the terms of the Chem-Con Agreement qualify for pooling-of-interests accounting under Accounting Principles Board Opinion No. 16, as contemplated to be effected as of the date of the letter, it being agreed that Perma-Fix and Chem-Met shall each provide reasonable cooperation to BDO Seidman, LLP and Bovitz and Co., P.C., to enable them to issue such a letter. 46 9.1.27 Shareholder Approval. Perma-Fix shareholders shall have approved the Merger contemplated by this Agreement and the mergers under the Chem-Con Agreement as required under Delaware law and/or under the requirements of NASDAQ or the BSE. 9.1.28 Shareholder Approval. The shareholders of Chem-Met shall have approved the Merger transactions contemplated by this Agreement pursuant to the laws of the states of incorporation of Chem-Met and no shareholders of Chem-Met shall have exercised or attempted to exercise dissenters rights or other similar rights in connection with the transactions contemplated hereby. 9.1.29 Accountants Letters. Perma-Fix shall have received the First Accountant Letter and the Second Accountant Letter and such shall be satisfactory to Perma-Fix. 9.1.30 Employment Agreement. Perma-Fix and TPS shall have entered into the Employment Agreement. 9.1.31 Officer and Director Waiver. Each officer and director of Chem-Met shall have executed and delivered to Perma-Fix an agreement, in form and substance satisfactory to Perma-Fix pursuant to which each such officer and director shall waive any and all rights to indemnification which any such officer and director may have from Chem-Met pursuant to Chem-Met's Certificate of Incorporation, Bylaws, any indemnification agreements, or otherwise. 9.1.32 Quanta Transactions. On or prior to Closing (i) the Quanta Merger and the Exchange Transaction shall have been completed pursuant to Section 8.27 hereof and in a manner satisfactory to Perma-Fix. 9.1.33 Fairness Opinion. Prior to the filing of the Registration Statement with the SEC and within five (5) days of the Closing, Perma-Fix shall have received a fairness opinion from an investment banker selected by Perma-Fix that this Agreement and the Chem-Con Agreement and consideration to be issued by Perma-Fix under this Agreement and the Chem-Con Agreement are fair to Perma-Fix and its shareholders from a financial standpoint, with the form and content of such opinions to be satisfactory to Perma-Fix. 9.1.34 Closing Price of Perma-Fix Common Stock. The average closing sale prices per share of Perma-Fix Common Stock as reported on the NASDAQ for the five consecutive trading days ending with the trading day immediately prior to the Effective Date shall be not less than $1.25. 9.1.35 TAS Lease. Prior to the Closing, TAS Leasing shall become a wholly owned subsidiary of Chem-Met pursuant to the terms of Section 8.28 hereof. 47 9.2 Conditions to Obligations of Chem-Met and The TPS Trust. The obligation of Chem-Met and the TPS Trust to consummate this Agreement or to effect the transactions contemplated by this Agreement shall be subject to the following conditions: 9.2.1 Resolutions of Perma-Fix Board of Directors and Shareholders. Perma-Fix shall have furnished Chem-Fix with: 9.2.1.1 certified copies of resolutions duly adopted by the Board of Directors and the shareholders of Perma-Fix approving and authorizing execution, delivery and performance of the transactions contemplated by this Agreement; 9.2.1.2 Incumbency Certificates for the officers of Perma-Fix. 9.2.2 Resolutions of Perma-Met Board of Directors and Shareholders. Perma-Fix shall have furnished Chem- Met with: 9.2.2.1 certified copies of resolutions duly adopted by Perma-Met approving and authorizing execution, delivery and performance of the transactions contemplated by this Agreement; and 9.2.2.2 Incumbency Certificate for the officers of Perma-Met. 9.2.3 Representations and Warranties of Perma-Fix to be True. Except to the extent waived hereunder, (i) the representations and warranties of Perma-Fix and Perma- Met herein contained shall be true in all material respects at the Closing with the same effect as though made at such time, except for such which do not have a material adverse effect on Perma-Fix and its subsidiaries, taken as a whole; and (ii) Perma-Fix and Perma-Met shall have performed all material obligations and complied with all material covenants required by this Agreement to be performed or complied with by it prior to the Closing. Perma-Fix shall also have delivered to the TPS Trust a certificate of Perma-Fix, dated the Closing and signed by its President or a Vice President to both of the aforementioned effects. 9.2.4 Employment Agreement. Perma-Fix shall have entered into the Employment Agreement ("Employment Agreement") with Thomas P. Sullivan. 9.2.5 Effective Registration Statement. The Registration Statement shall have become effective under the Securities Act and shall not be subject to a stop order or a proceeding seeking a stop order. 9.2.6 No Material Adverse Change. Except as otherwise dis- closed in this Agreement or as publicly disclosed to the shareholders of Perma-Fix or contained in the 48 Perma-Fix SEC Filings, there shall not have occurred (i) any material adverse change since December 31, 1998, in the consolidated financial condition of Perma-Fix (it being understood that anything disclosed in any of the financial data furnished by Perma-Fix to the Sullivans or the Sullivan Trusts pursuant to this Agreement, or in an annual, interim or other report filed by Perma-Fix with the SEC or press releases issued by Perma-Fix (copies of which shall have been furnished to the TPS Trust) since December 31, 1998, and prior to the date of this Agreement (copies of which shall have been furnished to Chem-Met, the Sullivans or the Sullivan Trusts), shall not constitute such a material adverse change or (ii) any loss or damage to any of the material properties or assets of Perma-Fix which would have a material adverse effect on Perma-Fix and its subsidiaries con- sidered as a whole. 9.2.7 Litigation. Between the date of this Agreement and the Closing, no Governmental Authority, whether federal, state or local, shall have instituted (or threatened to institute, either orally or in writing, directed to the TPS Trust, Perma-Fix, Chem-Met, or any of their subsidiaries) an investigation which is pending on the Closing Date relating to the trans- actions contemplated by this Agreement and between the date of this Agreement and the Closing Date, no action or proceeding shall have been instituted or, to the knowledge of the Sullivans, the Sullivan Trusts, Perma-Fix or Chem-Met, shall have been threatened before a court or other governmental body or by any public authority to restrain or prohibit the trans- actions contemplated by this Agreement or to obtain damages in respect thereof. 9.2.8 Opinion of Counsel of Perma-Fix. The TPS Trust shall have received from Conner & Winters, a Professional Corporation, counsel to Perma-Fix, or such other counsel reasonably acceptable to the TPS Trust and its counsel, an opinion, dated the Closing Date, substantially in the form of Exhibit "G" hereto, with the form and content thereof reasonably satisfactory to Chem-Met and its counsel. 9.2.9 Escrow Agreement. Perma-Fix and the Escrow Agent shall have executed the Escrow Agreement. 9.2.10 Closing Price of Perma-Fix Closing Stock. The average closing sale prices per share of Perma-Fix Common Stock as reported on the NASDAQ for the five consecutive trading days ending with the trading day immediately prior to the Effective Date shall not be less than $1.25. 9.3 Termination of Agreement and Abandonment of Merger. Except as otherwise provided in Sections 8.1 and 8.27 hereof, this Agreement and the transactions contemplated hereby may be terminated at any time before the Closing, whether before or 49 after approval of this Agreement by the shareholders of Perma-Fix or Chem-Met, as follows and in no other manner: 9.3.1 Conditions of the Sullivans, the Sullivan Trusts or Chem-Met Not Met. By Perma-Fix if, by June 30, 1999 the conditions set forth in Section 9.1 of this Article 9 shall not have been met (or waived as provided in Article 10 of this Agreement). 9.3.2 Conditions of Perma-Fix Not Met. By the Sullivans if, by June 30, 1999, the conditions set forth in Section 9.2 of this Article 9 shall not have been met (or waived as provided in Article 10 of this Agreement). 9.3.3 Termination by Perma-Fix or the Sullivans under Section 9.3 of the Chem-Con Agreement. By Perma-Fix or by the TPS Trust if the Chem-Con Agreement is terminated pursuant to the terms thereof. 9.3.4 Mutual Consent. By the mutual written consent of both Perma-Fix and Chem-Met 9.4 Expenses. Each party shall bear its own out-of-pocket expenses incurred in connection with the transactions contemplated by this Agreement, including, without limitation, all legal, accounting, consulting, brokers, advisory, travel, communications and other similar fees and expenses; provided, however, that any and all such expenses incurred by Chem-Met in connection with this Agreement and consummation of the transactions contemplated by this Agreement shall be considered as incurred by the TPS Trust and shall be paid by the TPS Trust. ARTICLE 10 TERMINATION OF OBLIGATIONS AND WAIVER OF CONDITIONS 10.1 Termination. In the event that this Agreement shall be terminated pursuant to Section 9.3 hereof, all further obligations of the parties hereto under this Agreement shall terminate without further liability of any party to another and each party hereto will pay its own costs and expenses incident to its negotiation and preparation of this Agreement and to its performance and compliance with all agreements and conditions contained herein on its part to be performed or complied with, including the fees, expenses and disbursements of its counsel. 10.2 Waiver. If any of the conditions specified in Section 9.1 of Article 9 hereof has not been satisfied, Perma-Fix may nevertheless at the election of Perma-Fix proceed with the transactions contemplated hereby; and, if any of the condi- 50 tions specified in Section 9.2 of Article 9 hereof has not been satisfied, the TPS Trust may nevertheless at the TPS Trust' election proceed with the transactions contemplated hereby. Any such election to proceed shall be evidenced by a certificate executed on behalf of the electing party. Any such waiver shall not be considered as a waiver of any of the other terms and provisions of this Agreement by the electing party. ARTICLE 11 INDEMNIFICATION AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES 11.1 Indemnification by the Sullivans and the Sullivan Trusts. The Sullivans and the Sullivan Trusts shall, jointly and severally, defend, indemnify and hold harmless each of Perma- Fix, Chem-Met, Perma-Met, and each of their officers, directors, employees, agents, representatives and Affiliates from and against any and all claims, judgments, demands, damages, penalties, fines, losses, orders (judicial or administrative), decrees, liabilities, obligations, costs, claims and expenses (including, without limitation, reasonable attorneys' fees and accountant fees) which any of Perma-Fix, Chem-Met, Perma-Met, and each of their officers, directors employees, agents, representatives and Affiliates incurs or suffers or may incur or suffer at any time as a result of or in connection with or arising out of (i) any representation or warranty made by any of Chem-Met, the Sullivans and/or the Sullivan Trusts in this Agreement or any certificate or other document delivered to Perma-Fix or Perma-Met pursuant to this Agreement that is false or misleading; (ii) any breach of or failure to perform any agreements, covenants, promises or obligations of Chem-Met, the Sullivans and/or Sullivan Trusts contained in this Agree- ment; (iii) any liabilities, obligations or claims arising in any way from any and all federal or state income tax liability which Chem-Con, Chem-Met and/or Quanta may incur or be liable to pay for any reason whatsoever for any and all periods prior to the Closing Date; (iv) any and all liabilities, obligations or claims incurred by Quanta prior to the Closing Date or arising in any way in connection with the business or operations of Quanta prior to the Closing Date; or (v) any liabilities, obligations or claims brought under CERCLA or RCRA or any analogous state statute for the release or threatened release of any hazardous substances (as defined in CERCLA) or hazardous waste (as defined in RCRA) in which Sullivan or Chem-Met knew was pending or threatened against Chem-Met as of the date hereof or at the Closing Date but failed for any reason to disclose such in this Agreement or was, directly or indirectly, caused by or resulted from the knowing or willful violation by Sullivan or Chem-Met on or prior to the Closing Date of CERCLA, RCRA or any analogous state statute. 11.2 Notice of Claim. Perma-Fix shall give the Sullivans and the Sullivan Trusts a written notice (the "Notice of Claim") within ninety (90) days of the discovery of any matter in respect of which the right to indemnification contained in Section 11 can be claimed. Notwithstanding the foregoing, failure to give such notice will not terminate any obligation of the Sullivans and the Sullivan Trusts hereunder. 51 11.3 Survival of Representations and Remedies. All representa- tions and warranties contained in this Agreement shall survive the Closing, regardless of the investigation made by either party hereto. This Agreement and all covenants and agreements contained in this Agreement shall survive the Closing. 11.4 Indemnification Period. Any claim for indemnification under this Section 11 must be made and settled in full within one year from the Closing Date ("Indemnification Period"). Upon expiration of the Indemnification Period, this Section 11 is terminated and any claims for indemnification pursuant to this Section 11 are terminated. 11.5 Settlement of Indemnification Claims. Settlement of any claims for indemnification pursuant to this Section 11 shall be made through the delivery by the Sullivans and/or the Sullivan Trusts of that number of shares of Perma-Fix Common Stock determined by dividing the total amount of indemnification due and owing from the Sullivans and/or the Sullivan Trusts to Perma-Fix by the average of the closing sale prices per share of Perma-Fix Common Stock as reported on the NASDAQ for five consecutive trading days ending with the trading day immediately prior to the Effective Time. ARTICLE 12 MISCELLANEOUS 12.1 Entire Agreement and Amendment. This Agreement, including the Exhibits and Schedules hereto, sets forth the entire agreement and understanding between the parties and merges and supersedes all prior discussions, agreements and under- standings of every kind and nature among them as to the subject matter hereof, and no party shall be bound by any condition, definition, warranty or representation other than as expressly provided for in this Agreement or as may be on a date on or subsequent to the date hereof duly set forth in writing signed by each party which is to be bound thereby. Unless otherwise expressly defined, terms defined in the Agreement shall have the same meanings when used in any Exhibit or Schedule and terms defined in any Exhibit or Schedule shall have the same meanings when used in the Agreement or in any other Exhibit or Schedule. This Agree- ment (including the Exhibits and Schedules hereto) shall not be changed, modified or amended except by a writing signed by each party to be charged and this Agreement may not be dis- charged except by performance in accordance with its terms or by a writing signed by each party to be charged. 12.2 Taxes. Any Taxes in the nature of a sales or transfer tax (including any realty transfer tax or realty gains transfer tax), and any stock transfer tax, payable on the consummation of any other transaction contemplated hereby shall be paid by the Sullivans and the Sullivan Trusts. 52 12.3 Governing Law. This agreement shall be construed in accord- ance with and governed by the Laws of Delaware, without regard to the principles of conflicts of laws thereof. 12.4 Benefit of Parties; Assignment. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. The Agreement may not be assigned by any of the parties hereto except with the prior written consent of the other parties hereto. Nothing herein contained shall confer or is intended to confer on any third party or entity which is not a party to this Agreement any rights under this Agreement. 12.5 Pronouns. Whenever the context requires, the use in this Agreement of a pronoun of any gender shall be deemed to refer also to any other gender, and the use of the singular shall be deemed to refer also to the plural. 12.6 Headings. The headings in the sections, paragraphs, Schedules and Exhibits of this Agreement are inserted for convenience of reference only and shall not constitute a part hereof. The words "herein", "hereof", "hereto" and "hereunder", and other words of similar import refer to this Agreement as a whole and not to any particular provision of this Agreement. 12.7 Notices. Any notices or other communications required or permitted hereunder shall be sufficiently given if sent by registered mail or certified mail, postage prepaid, addressed: If to Perma-Fix: Perma-Fix Environmental Services, Inc. 1940 Northwest 67th Place Gainesville, Florida 32653 Attention: President With a copy to: Irwin H. Steinhorn, Esquire Conner & Winters One Leadership Square 211 North Robinson, Suite 1700 Oklahoma City, Oklahoma 73102 If to Chem-Met, the Sullivans and the Sullivan Trusts: Mr. Thomas P. Sullivan 1021 Harvard Road Grosse Pointe Park, Michigan 48230 Attn: Mr. Thomas P. Sullivan, President 53 With a copy to: Peter O'Rourke, Esq. O'Rourke & Myers 241 Lewiston Road Grosse Pointe Farms, Michigan 48236 or to such other address as shall be furnished in writing by either party. Any such notice or communication shall be deemed to have been given as of three (3) days after posting, one (1) day after next day delivery service or upon personal delivery. 12.8 Time. Time is of the essence of this Agreement. 12.9 Severability. Each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law; but, if any provision of this Agreement is held to be invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 12.10 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to each of the other parties hereto. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK 54 IN WITNESS WHEREOF, the parties hereto execute this Agreement on the 15th day of March, 1999. PERMA-FIX ENVIRONMENTAL SERVICES, INC. By: /s/ Louis F. Centofanti _________________________________________ Dr. Louis F. Centofanti President PERMA-MET, INC. By: /s/ Louis F. Centofanti _________________________________________ Dr. Louis F. Centofanti President CHEM-MET SERVICES, INC. By: /s/ Thomas P. Sullivan _________________________________________ Thomas P. Sullivan President 55 THE THOMAS P. SULLIVAN LIVING TRUST, Dated September 6, 1978 By: /s/ Thomas P. Sullivan _______________________________________ Thomas P. Sullivan, Sole Trustee, under the Thomas P. Sullivan Living Trust, Dated September 6, 1978, and any Amendments thereto. THE ANN L. SULLIVAN LIVING TRUST, Dated September 6, 1978 By: /s/ Ann L. Sullivan __________________________________________ Ann L. Sullivan, Sole Trustee, under the Ann L. Sullivan Living Trust, Dated September 6, 1978, and any amendments thereto. THOMAS P. SULLIVAN By: /s/ Thomas P. Sullivan __________________________________________ Thomas P. Sullivan, individually ANN L. SULLIVAN By: /s/ Ann L. Sullivan _________________________________________ Ann L. Sullivan, individually EX-10 4 EXHIBIT 10.56 EXCHANGE AGREEMENT EXCHANGE AGREEMENT among PERMA-FIX ENVIRONMENTAL SERVICES, INC., LIVIAKIS FINANCIAL COMMUNICATIONS, INC. and ROBERT B. PRAG Liviakis Financial Communications, Inc., a California corporation ("Liviakis"), Robert B. Prag, an executive officer of Liviakis ("Prag"), and Perma-Fix Environmental Services, Inc., a Delaware corporation (the "Company"), previously entered into a Consulting Agreement (the "Consulting Agreement"), effective as of June 30, 1998, pursuant to which Liviakis and Prag received warrants to purchase 2,500,000 shares of the Company's Common Stock, par value $.001 per share ("Common Stock"), for $1.875 per share ("Warrants") of which 1,875,000 were issued to Liviakis and 625,000 were issued to Prag in the name of Robert B. Prag. The Warrants have a term of 4 years. The Consulting Agreement has been terminated and Liviakis and Prag (collectively, the "Subscribers") and the Company have agreed to enter into this Agreement as of the 14th day of March, 1999, pursuant to which the Warrants will be tendered and delivered to the Company in exchange for 200,000 shares of Common Stock to be issued by the Company as described herein. 1. Exchange of Securities. 1.1 Issuance of Common Stock. In full and complete termination of the Warrants and the Subscribers' rights, and the interest in and to the Warrants, and in full and complete release of any and all obligations of the Company under the Warrants, at the Closing the Subscribers shall deliver the Warrants to the Company in exchange for 200,000 shares of Common Stock, pursuant to such terms, conditions and provisions as set forth in this Agreement. 1.1.1 Delivery. The Company shall as soon as practicable upon execution of this Agreement, deliver or cause to be delivered, (a) to Liviakis, a certificate or certificates 1 representing the 150,000 shares of Common Stock issued in the name of Liviakis; and (b) to Prag, a certificate or certificates representing the 50,000 shares of Common Stock issued in the name of Prag. The Subscribers agree that they shall upon delivery of the 200,000 shares of Common Stock, immediately deliver to the Company the Warrants marked "Canceled" and duly assigned to the Company. 1.1.2 Cancellation of Warrants. Upon execution of this Agreement the Warrants shall be immediately terminated and rendered null and void in all respects regardless of the completion of the delivery of the Warrants to the Company as described in this Section 1. 1.1.3 Restrictive Legends. Subscribers agree that all certificates representing the Common Stock delivered hereunder ("Shares") shall bear the restrictive legend substantially in the form set forth in Section 3.7 below which shall include, but not be limited to, a legend to the effect that (a)the Shares represented by such certificate have not been registered under the Securities Act of 1933, as amended ("Securities Act"), and (b) unless there is an effective registration statement relating to the Shares, the Shares may not be offered, sold, transferred, mortgaged, pledged or hypothecated without an exemption from registration and an opinion of counsel to the Company with respect thereto, or an opinion from counsel for the Subscribers, which opinion is satisfactory to the Company, to the effect that registration under the Securities Act is not required in connection with such sale or transfer and the reasons therefor. The legend on all such certificates shall make reference to the registration rights set forth in Section 4 hereof. 1.2 Discharge. As of the execution of this Agreement, the Warrants shall be fully terminated in all respects. From and after the execution of this Agreement and delivery of the 200,000 shares of Common Stock to Liviakis and Prag as described in Section 1.1.1, (i) the Subscribers release, acquit and forever discharge the Company, and all of its respective subsidiaries, affil- iates, agents, employees, officers, and directors, as well as their respective heirs, successors, legal and personal representatives, and assigns of any and all of them, from and against any and all claims, liabilities, losses, damages, cause or causes of action of any kind or character whatsoever, whether liquidated, unliquidated or disputed, asserted or assertable, known or unknown, in contract or in tort, at law or in equity, which the Subscribers might now or hereafter have arising out of or in connection with or relating to the Warrants and/or the Consulting Agreement and (ii) the Company releases, acquits and forever discharges Prag and Liviakis, and all of Liviakis' subsidiaries, affiliates, agents, employees, officers, and directors, as well as the Subscribers' respective heirs, successors, legal and personal representatives, and assigns of any and all of them, from and against any and all claims, liabilities, losses, damages, cause or causes of action of any kind or character whatsoever, whether liquidated, unliquidated or disputed, asserted or assertable, known or unknown, in 2 contract or in tort, at law or in equity, which the Company might now or hereafter have arising out of or in connection with or relating to the Warrants and/or the Consulting Agreement. 1.3 Exchange. On the basis of the representations, warranties, covenants and agreements, and subject to the terms and conditions set forth herein, at the Closing, the Company agrees to exchange and deliver to the Subscribers, and the Subscribers agree to accept in such exchange the delivery from the Company, of the Shares in exchange for the transfer of the Warrants from the Subscribers to the Company. 1.4 Reporting Company. The Company is a reporting company under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and has filed with the United States Securities and Exchange Commission (the "SEC") all reports required to be filed by the Company under Section 13 or 15(d) of the Exchange Act. The Subscriber has had the opportunity to review, and has reviewed, all such reports and information which the Subscriber deemed material to an investment decision regarding the acquisition of the Shares. 2. Closing. 2.1 Closing. The consummation of this Agreement (the "Closing") will occur on the date that the Warrants are delivered by the Subscribers to the Company (the "Closing Date"). 3. Representations, Warranties and Covenants of Subscribers. The Subscribers hereby represent, warrant and covenant to the Company as follows: 3.1 Liviakis and Prag each acknowledge that the Shares have not been registered under the Securities Act and accordingly are "restricted securities" within the meaning of Rule 144 of the Securities Act. As such, the Shares may not be resold or transferred unless the Shares have been registered under the Securities Act or the Company has received an opinion of counsel reasonably satisfactory to the Company that such resale or transfer is exempt from the registration requirements of that Securities Act. Consultant and Prag each further understand that the exemption from registration afforded by Rule 144 under the Securities Act depends upon the satisfaction of various conditions and that, if applicable, Rule 144 affords the basis for sale only in limited amounts. 3.2 Liviakis and Prag each acknowledge that they have been afforded the opportunity to ask questions of and receive answers from duly authorized officers or other representatives of the Company concerning an investment in the Shares, and regarding any additional information which Liviakis and Prag have requested. 3 3.3 Liviakis and Prag have each had experience in investments in restricted and publicly traded securities, and Liviakis and Prag have each had experience in investments in speculative securities and other investments which involve the risk of loss of investment. Liviakis and Prag each acknowledge that an investment in the Shares is speculative and involves the risk of loss. Both Liviakis and Prag have the requisite knowledge to assess the relative merits and risks of this investment without the necessity of relying upon other advisors, and Liviakis and Prag can afford the risk of loss of their entire investment in the Shares. Liviakis is an "accredited investor," as that term is defined in Rule 501 of Regulation D promulgated under the Securities Act, due to the fact that Liviakis (a) was not created solely to permit the acquisition of Shares and has total assets in excess of $5,000,000 and/or (b) is wholly owned by persons who qualify as accredited investors. Prag is an "accredited investor," as that term is defined in Rule 501 of Regulation D promulgated under the Securities Act, due to the fact that Prag (a) has an individual net worth, or joint net worth with his spouse in excess of $1,000,000 and/or (b) had an individual income in excess of $200,000 in each of the two most recent years or joint income with his spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income based in the current year. Both Liviakis and Prag are purchasers described in Section 25102 (f) (2) of the California Corporate Securities Law of 1968, as amended. 3.4 Each of Liviakis and Prag is acquiring the Shares for its or his own account for long-term investment and not with a view toward resale or distribution thereof except in accordance with applicable securities laws. 3.5 Each of Liviakis and Prag acknowledges that issuance of the Shares has not been made in connection with any advertisement. 3.6 Each of Liviakis and Prag acknowledges it or he has received copies of (i) the Company's Form 10-K for the year ended December 31, 1997, as amended by the Company's Form 10-K/A filed on January 14, 1999, (ii) the Company's Form 10-Q for the quarter ended March 31, 1998, (iii) the Company's Form 10-Q for the quarter ended June 30, 1998, (iv) the Company's Form 10-Q for the quarter ended September 30, 1998, as amended by the Company's Form 10-Q/A filed on January 14, 1999, and proxy soliciting material for the Company's 1998 annual meeting of shareholders. 3.7 Each of Liviakis and Prag acknowledges that the Shares shall upon issuance thereof have stamped or imprinted thereon or affixed thereto a legend to the following effect: THE REGISTERED HOLDER HEREOF HAS ACQUIRED THE SHARES REPRESENTED BY THIS CERTIFICATE FOR INVESTMENT AND NOT FOR RESALE IN CONNECTION WITH A DISTRIBUTION THEREOF. ACCORDINGLY, SUCH SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, 4 TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO A CURRENTLY EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR OTHERWISE IN A TRANSACTION EXEMPT FROM THE PROVISIONS OF SECTION5 OF SAID ACT. 3.8 Each of Liviakis and Prag agrees that it or he shall not sell, transfer, pledge, hypothecate, dispose, sell short or otherwise take actions to reduce their economic interest in the Shares, for a two month period from the date of this Agreement. At the end of such two month period and after each of the next five 30 day periods passing after the end of the two month period, Liviakis and Prag shall be permitted to sell, transfer, pledge, hypothecate, dispose or otherwise reduce its or his economic interest in 1/6 of the total Shares delivered to such party pursuant to this Agreement in addition to any other Shares which have been previously released from the lockup arrangement described in this Section 3.8 so that 150 days after the end of such two month period, all Shares shall be free of restrictions under this Section 3.8. 4. Registration Rights. 4.1 Subject to the terms of this Section 4, the Subscribers shall have the right to include all of the Shares as part of Registration No. 333-43149 filed by the Company and to be amended on or before April 30, 1999, and thereafter prosecuted diligently to effectiveness. The Subscribers hereby elect to include the Shares as part of the registration. Notwithstanding the foregoing provisions, the Company may, prior to effectiveness, withdraw any registration statement without incurring any liability to the Subscribers if (i) the Company's Board of Directors determines in good faith that the withdrawal of such registration statement is in the best interests of the Company, (ii) the Company shall refile a registration statement covering the Shares within four (4) months of the withdrawal, and (iii) the Shares and other shares of Common Stock of the Company covered by Registration No. 333-43149 shall be treated in a like manner regarding inclusion in any registration statement filed by the Company. 4.2 The Company shall use reasonable efforts to keep effective and current the registration statement filed by the Company under Section 4.1 hereof, which registration statement has been declared effective by the Commission, with respect to the Shares for an aggregate period ending upon the earlier of (i) two (2) years after the Closing Date or(ii) the disposal or transfer of all of the Shares by the Subscribers such that there is a change in beneficial ownership of the Shares. 4.3 Unless terminated sooner, the registration rights set forth in Section 4.1 above (but not Section 4.2) shall cease upon the earliest of (a) the effective registration under the Securities Act of all of the Shares, (b) the disposal or transfer of such Shares by the Subscribers such that there is a change in beneficial ownership of the Shares or (c) registration under the Securities Act is no longer required for the immediate public distribution of such Shares as a result of the provisions of Rule 144 promulgated under the Securities Act. 5 4.4 Subject to the immediately following sentence, the Company shall in all events pay and be responsible for all fees, expenses, costs and disbursements associated with the registering of the Shares under this Section 4, including filing fees, fees, costs and disbursements of the Company's counsel, accountants and other consultants representing the Company therewith. Notwithstanding anything set forth herein to the contrary, Subscribers shall be responsible for and shall pay any and all underwriting discounts and commissions in connection with the sale of the Shares pursuant to this Section 4 and all fees of its legal counsel and other advisors retained by the Subscribers in connection with reviewing any registration statement. 4.5 (i) The Company will indemnify and hold harmless the Subscribers and their directors and officers and any underwriter (as defined in the Securities Act) for the Subscribers and each person, if any, who controls the Subscribers or such underwriter within the meaning of the Securities Act, from and against, and will reimburse the Subscribers and each such underwriter and controlling person with respect to, any and all loss, damage, liability, cost and expense to which such Subscribers or any such underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, damages, liabilities, costs or expenses are caused by any untrue statement or alleged untrue statement of any material fact contained in such registration statement referred to in Section 4.1 of this Agreement, any prospectus contained therein or any amendment or supplement thereto, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made not misleading; provided, however, that the Company will not be liable in any such case to the extent that any such loss, damage, liability, cost or expense arises out of, or is based upon, any untrue statement or alleged untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by the Subscribers, such underwriter or such controlling person in writing specifically for use in the preparation thereof. (ii) The Subscribers will jointly and severally indemnify and hold harmless the Company, its directors and officers, any controlling person and any underwriter from and against, and will reimburse the Company, its directors and officers, any controlling person and any underwriter with respect to, any and all loss, damage, liability, cost or expenses to which the Company or any controlling person and/or any underwriter may become subject under the Securities Act or otherwise, insofar as such losses, damages, liabilities, costs or expenses are caused by any untrue statement, or alleged untrue statement, of any material fact contained in such registration statement referred to in Section 4.1 of this Agreement, any prospectus contained therein or any amendment or supplement thereto, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was so made in reliance upon, and in strict conformity with, written information furnished by, or on behalf of, the Subscribers specifically for use in the preparation thereof. 6 5. Legal Representation. Liviakis and Prag each represents that it or he has consulted with independent legal counsel and/or tax, financial and business advisors, to the extent deemed necessary. 6. Attorney's Fee. If any legal action or any arbitration or other proceeding is brought for the enforcement or interpretation of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with or related to this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys' fees and other costs in connection with that action or proceeding, in addition to any other relief to which it or they may be entitled. 7. Waiver. The waiver by any party of a breach of any provision of this Agreement by another party shall not operate or be construed as a waiver of any subsequent breach by such other party. 8. Notices. All notices, requests, and other communications hereunder shall be deemed to be duly given if sent by U.S. mail, postage prepaid, addressed to the other parties at the address as set forth herein below: To the Company: Perma Fix Environmental Services, Inc. Dr. Louis F. Centofanti, CEO Perma-Fix Environmental Services, Inc. 1940 Northwest 67th Place Gainesville, Florida 32606-1649 with copies simultaneously by like means to: Conner & Winters One Leadership Square, Suite 1700 211 North Robinson Oklahoma City, Oklahoma 73102 Attention: Irwin H. Steinhorn, Esquire To Liviakis: Liviakis Financial Communications, Inc. John M. Liviakis, President 2420 "K" Street, Suite 220 Sacramento, California 95816 7 To Prag: Robert B. Prag 2455 El Amigo Road Del Mar, California 92014 with copies simultaneously by like means to: Kelly Lytton Mintz & Vann 1900 Avenue of the Stars Suite 1450 Los Angeles, California 70067 Attention: Alan Jacobson, Esquire It is understood that any party may change the address to which notices for it shall be addressed by providing notice of such change to the other parties in the manner set forth in this paragraph. 9. Choice of Law, Jurisdiction and Venue. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Delaware. 10. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the alleged breach thereof, shall be settled by binding arbitration in Chicago, Illinois in accordance with the applicable rules of the American Arbitration Association, and judgment on the award rendered by the arbitrator(s) shall be binding on the parties and may be entered in any court having jurisdiction thereof. 11. Complete Agreement. This Agreement contains the entire agreement of the parties relating to the subject matter hereof. This Agreement and its terms may not be changed orally but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. This Agreement supercedes in all respects that certain Letter Agreement, dated March 8, 1999, between the Company and Liviakis ("Letter Agreement") and renders such Letter Agreement null and void in all respects and without any effect whatsoever. 12. Counterparts. This Agreement may be executed in any number of counterparts which, taken together, shall constitute one and the same instrument. The next page is the signature page. 8 AGREED TO: "Company" PERMA-FIX ENVIRONMENTAL SERVICES, INC. By: /s/ Louis F. Centofanti _____________________________________ Dr. Louis F. Centofanti, President and Chief Executive Officer "Liviakis" LIVIAKIS FINANCIAL COMMUNICATIONS, INC. By: /s/ John M. Liviakis _____________________________________ John M. Liviakis, President By: /s/ Robert B. Prag _____________________________________ Robert B. Prag, Sr. Vice-President "Prag" /s/ Robert B. Prag ________________________________________ Robert B. Prag, individually 9 EX-21 5 EXHIBIT 21.1 LIST OF SUBSIDIARIES LIST OF SUBSIDIARIES OF PERMA-FIX ENVIRONMENTAL SERVICES, INC. (THE "COMPANY") Perma-Fix of Florida, Inc. ("PFF"), a Florida corporation,. is a 100% owned subsidiary of the Company. Perma-Fix of Fort Lauderdale, Inc. ("PFL"), a Florida corporation, is a 100% owned subsidiary of the Company. Perma-Fix of Dayton, Inc. ("PFD"), an Ohio corporation, is a 100% owned subsidiary of the Company. Perma-Fix Treatment Services, Inc. ("PFTS"), an Oklahoma corporation, is a 100% owned subsidiary of the Company. Perma-Fix of Memphis, Inc. ("PPM"), a Tennessee corporation, is a 100% owned subsidiary of the Company. Perma-Fix, Inc. ("PFI"), an Oklahoma corporation, is a 100% owned subsidiary of the Company. Perma-Fix of New Mexico, Inc., a New Mexico corporation, is a 100% owned subsidiary of PFI. Reclamation Systems, Inc. ("RSI"), an Oklahoma corporation, is a 100% owned subsidiary of PFI. Industrial Waste Management, Inc. ("IWM"), a Missouri corporation, is a 100% owned subsidiary of the Company. Schreiber, Yonley & Associates ("SYA"), a Missouri corporation, is a 100% owned subsidiary of lWM. Mintech, Inc., an Oklahoma corporation, is a 100% owned subsidiary of PFI. EX-23 6 EXHIBIT 23.1 BDO CONSENT CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Perma-Fix Environmental Services, Inc. Gainesville, Florida We hereby consent to the incorporation by reference of our report dated March 5, 1999, relating to the consolidated financial statements and schedule of Perma-Fix Environmental Services, Inc. and subsidiaries appearing in the Company's Annual Report on Form 10-K/A for the year ended December 31, 1998, into the Company's previously filed Forms S-3 and S-8 Registration Statements, File Nos. 33-85118 (S-3), 333-14513 (S-3), 333-43149 (S-3), 33-80580 (S-8), 333-3664 (S-8), 333-17899 (S-8) and 333-25835 (S-8). /s/ BDO Seidman, LLP BDO Seidman, LLP Orlando, Florida March 26, 1999 EX-27 7 EXHIBIT 27.1 - FINANCIAL DATA SCHEDULE 1998
5 YEAR DEC-31-1998 DEC-31-1998 $ 887,000 0 6,263,000 313,000 145,000 7,953,000 17,741,000 5,836,000 28,748,000 7,181,000 2,087,000 0 0 13,000 15,940,000 28,748,000 0 30,551,000 0 21,064,000 2,109,000 61,000 294,000 (698,000) 0 (698,000) 0 0 0 (698,000) (.06) (.06)
EX-27 8 EXHIBIT 27.2 - FINANCIAL DATA SCHEDULE 1997
5 YEAR DEC-31-1997 DEC-31-1997 $ 635,000 0 5,656,000 374,000 119,000 8,735,000 16,548,000 5,564,000 28,570,000 7,981,000 3,997,000 0 0 12,000 12,182,000 28,570,000 0 28,413,000 0 19,827,000 1,980,000 133,000 431,000 (5,169,000) 0 (1,068,000) (4,101,000) 0 0 (5,169,000) (.49) (.49)
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