Quarterly report pursuant to sections 13 or 15(d)

Subsequent Event

v2.3.0.11
Subsequent Event
 9 Months Ended
Sep. 30, 2011
Subsequent Event [Abstract]  
Subsequent Event
12.
Subsequent Events
 
Divestiture of Perma-Fix of Orlando, Inc. (“PFO”)
On October 14, 2011, we completed the sale of our wholly-owned subsidiary, PFO, pursuant to the terms of an Asset Purchase Agreement, dated August 12, 2011.  In consideration for such assets, the buyer paid us $2,000,000 in cash at the closing and assumed certain liabilities of PFO.  The cash consideration is subject to certain working capital adjustments within one hundred twenty days after closing. The proceeds received were swept into a money market account.

Acquisition of Safety & Ecology Holdings Corporation
On October 31, 2011, the Company completed the acquisition of all of the issued and outstanding shares of capital stock of Safety & Ecology Holdings Corporation (“SEHC”) and its subsidiaries, Safety & Ecology Corporation, SEC Federal Services Corporation, Safety & Ecology Corporation Limited and SEC Radcon Alliance, LLC (collectively, “SEC”), pursuant to that certain Stock Purchase Agreement, dated July 15, 2011 (“Purchase Agreement”), between the Company, Homeland Capital Security Corporation (“Homeland”) and SEHC.  In consideration of the acquisition, the Company paid Homeland the following:

(i)
cash consideration of $13,884,256, after certain working capital closing adjustments and deduction for the amount due to the Company in connection with the purchase of the Company's common stock as discussed below;

(ii)
the sum of $2,000,000 deposited in an escrow account to satisfy any claims that the Company may have against Homeland for indemnification pursuant to the Purchase Agreement and the Escrow Agreement, dated October 31, 2011 (“Escrow Agreement”);

(iii)
$2,500,000 unsecured, non-negotiable promissory note (the “Note”), bearing an annual rate of interest of 6%, which Note provides that the Company has the right to prepay such at any time without interest or penalty.  The Company has agreed to prepay $500,000 of the principal amount of the Note within 10 days of closing of the acquisition.  The Note may be subject to offset of amounts Homeland owes the Company for indemnification for breach of, or failure to perform, certain terms and provisions of the Purchase Agreement if the Escrow Agreement has terminated pursuant to its terms or the amount held in escrow has been exhausted pursuant to the terms of the Purchase Agreement.  The principal of the Note and accrued interest due thereon is payable in 36 monthly installments of principal and interest.  Under the terms of the Note, in the event of a continuing Event of Default under the Note, Homeland has the option to convert the unpaid portion of the Note into the Company's restricted shares of common stock equal to the quotient determined by dividing the principal amount owing under the Note and all accrued and unpaid interest thereon, plus certain expenses, by the average of the closing prices per share of the Company common stock as reported by the primary national securities exchange or automatic quotation system on which the Company's common stock is traded during the 30 consecutive trading day period ending on the trading day immediately prior to receipt by the Company of Homeland's written notice of its election to receive the Company's common stock as a result of the Event of Default that is continuing; provided that the number of shares of common stock to be issued to Homeland under the Note in the event of a continuing Event of Default plus the number of shares of the Company common stock issued to the Management Investors, as discussed below, shall not exceed 19.9% of the voting power of all of the Company's voting securities issued and outstanding as of the date of the Purchase Agreement.  Upon issuance of the shares of the Company's common stock to Homeland in the event of a continuing Event of Default, the Company and Homeland will enter into a registration rights agreement.
 
Pursuant to the terms of the Purchase Agreement, upon closing of the Purchase Agreement certain security holders of Homeland (“Management Investors”) purchased approximately 813,007 restricted shares of the Company's Common Stock for a total consideration of approximately $1,000,000 or $1.23 a share.  The purchase of the shares of the Company's Common Stock was pursuant to a private placement under Section 4(2) of the Securities Act of 1933, as amended (the “Act”) or Rule 506 of Regulation D promulgated under the Act. The purchase price for these shares of the Company's Common Stock was deducted from the purchase price payable to Homeland.  See “Related Party Transactions” below for shares purchased by Mr. Christopher Leichtweis, who was appointed a Senior Vice President of the Company and President of SEC, upon the acquisition of SEHC and its subsidiaries.

The Company has not completed the valuations and accounting required under FASB ASC 805, “Business Combinations”.

Amended and Restated Revolving Credit, Term Loan and Security Agreement
In connection with the acquisition of SEHC and its subsidiaries as discussed above, the Company entered into an Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated October 31, 2011 (“Amended Loan Agreement”), with its lender, PNC Bank, National Association (“PNC”), replacing its previous Loan Agreement with PNC discussed in Note 6.  The Amended Loan Agreement provides the Company with the following credit facilities:

 
·
up to $25,000,000 revolving credit facility, subject to the amount of borrowings based on a percentage of eligible receivables and subject to certain reserves;

 
·
a term loan of $16,000,000, which requires monthly installments of approximately $190,000; and

 
·
equipment line of credit up to $2,500,000, subject to certain limitations.

The Amended Loan Agreement terminates as of October 31, 2016, unless sooner terminated.

The Company has the option of paying an annual rate of interest due on the revolving credit facility at prime plus 2% or London Inter Bank Offer Rate (“LIBOR”) plus 3% and the term and equipment credit facilities at prime plus 2.5% or LIBOR plus 3.5%.

As a condition of the Amended Loan Agreement, the Company paid the remaining balance due under the term loan of its previous Loan Agreement totaling $3,833,346, and paid PNC a fee of $217,500 plus it's out of pocket legal fees using its credit facilities under the Amended Loan Agreement.

The Company financed the acquisition of SEHC utilizing its credit facilities under the Amended Loan Agreement.  As of the close of business on October 31, 2011, after utilizing its credit facilities under the Amended Loan Agreement in connection with the acquisition of SEHC and payments discussed in the preceding paragraph, the Company's excess availability under its revolving credit facility as provided in the Amended Loan Agreement was approximately $18,708,000 based on the amount of the Company's eligible receivables.

Pursuant to the Amended Loan Agreement, the Company may terminate the Amended Loan Agreement upon 90 days' prior written notice upon payment in full of its obligations under the Amended Loan Agreement.  The Company has agreed to pay PNC 1.0% of the total financing in the event it pays off its obligations on or before October 31, 2012 and 1/2% of the total financing if it pays off its obligations after October 31, 2012 but prior to or on October 31, 2013. No early termination fee shall apply if the Company pays off its obligations after October 31, 2013.

Related Party Transactions
Upon the closing of the acquisition of SEHC on October 31, 2011, Mr. Christopher Leichtweis (“Leichtweis”), a former officer and director of Homeland, was appointed a Senior Vice President of the Company and President of SEC pursuant to the terms of a four year employment agreement.  In connection with Leichtweis' employment on October 31, 2011, we granted Leichtweis a non-qualified stock option (the “Option”) to purchase up to 250,000 shares of our Common Stock as reported on the Nasdaq on the grant date, which was $1.35.  The Option has a term of 10 years from grant date, with 25% yearly vesting over a four-year period.  The Option was granted in accordance with, and is subject to, Non-Qualified Stock Option Agreement, dated October 31, 2011.

Under an agreement of indemnity, SEC, Leichtweis and his spouse, jointly and severally, agreed to indemnify the individual surety with respect to contingent liabilities that may be incurred by the individual surety under certain of SEC's bonded projects.  In addition, SEC has agreed to indemnify Leichtweis against judgments, penalties, fines, and expense associated with those SEC performance bonds that Leichtweis has agreed to indemnify in the event SEC cannot perform, which has an aggregate bonded amount of approximately $14,000,000.  The indemnification agreement provided by SEC to Leichtweis also provides for compensating Leichtweis at a rate of 0.75% of the value of bonds (60% having been paid previously and the balance at substantial completion of the contract).

Under a Lease Agreement, dated June 1, 2008 (the “Lease”), between Leichtweis Enterprises, LLC, as lessor, and SEHC, as lessee, SEHC is obligated to make lease payments of approximately $29,000 per month through June 2018.  The Lease covers SEHC's principal offices in Knoxville, Tennessee.  Leichtweis Enterprises is owned by Leichtweis.

As a member of the Management Investors who purchased in a private placement restricted shares of the Company's Common Stock pursuant to the Purchase Agreement, as discussed in “Acquisition of Safety and Ecology Holdings Corporation”, Leichtweis purchased 747,112 shares of the Company's Common Stock for the aggregate purchase price of approximately $918,948 or $1.23 per share.  The purchase price for these shares was deducted from the consideration paid to Homeland for the acquisition of SEHC.