<SUBMISSION>
<ACCESSION-NUMBER>0000948600-02-000034
<TYPE>DEF 14A
<PUBLIC-DOCUMENT-COUNT>1
<PERIOD>20020614
<FILING-DATE>20020509
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>PERMA FIX ENVIRONMENTAL SERVICES INC
<CIK>0000891532
<ASSIGNED-SIC>4955
<IRS-NUMBER>581954497
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>DEF 14A
<ACT>34
<FILE-NUMBER>001-11596
<FILM-NUMBER>02638874
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>1940 NORTHWEST 67TH PLACE
<STREET2>SUITE A
<CITY>GAINESVILLE
<STATE>FL
<ZIP>32653
<PHONE>3523734200
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>1940 NW 67TH PL
<STREET2>SUITE A
<CITY>GAINESVILLE
<STATE>FL
<ZIP>32653
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>proxy-def1.htm
<DESCRIPTION>DEFINITIVE PROXY STATEMENT (SPECIAL 06-02)
<TEXT>
<HTML><HEAD><TITLE>Definitive Proxy Statement (Special Meeting)</TITLE>
</HEAD>
<BODY aLink=#ff0000 bgColor=#c0c0c0 link=#0000ff text=#000000 vLink=#551a8b>
<P><FONT face="CG Times Regular">
<CENTER>SCHEDULE 14A INFORMATION<BR><BR>Proxy Statement Pursuant to Section
14(a) of the<BR>Securities Exchange Act of 1934<BR>(Amendment No.
2)</CENTER></FONT>
<P></P><FONT face="CG Times Regular">Filed by the
Registrant [X]<BR><BR>Filed by a Party other than the Registrant [
]<BR><BR>Check the appropriate
box:<BR><BR>[&nbsp;&nbsp; ]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preliminary Proxy
Statement<BR>[&nbsp;&nbsp;&nbsp;]&nbsp;&nbsp;&nbsp;&nbsp;Confidential, for Use
of the Commission
Only<BR></FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="CG Times Regular">(as permitted by Rule 14a-6(e)(2))<BR>[X]&nbsp;&nbsp;&nbsp;&nbsp;Definitive Proxy
Statement<BR>[&nbsp;&nbsp;&nbsp;]&nbsp;&nbsp;&nbsp;&nbsp;Definitive Additional
Materials<BR>[&nbsp;&nbsp;&nbsp;]&nbsp;&nbsp;&nbsp;&nbsp;Soliciting Material
Pursuant to Section 240.14a-11(c) or Section 240.14a-12</FONT>
<P align=left><BR><BR WP="BR1"><FONT
face="CG Times Regular"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Perma-Fix
Environmental Services,
Inc.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<BR></U></FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<EM><FONT
face="CG Times Regular">(Name of Registrant as Specified in its
Charter)</FONT></EM>
<P><BR WP="BR1"><BR WP="BR2"><FONT
face="CG Times Regular"><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<BR></U></FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<EM><FONT face="CG Times Regular">(Name of Person(s) Filing Proxy Statement, if
other<BR></FONT></EM>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<EM><FONT
face="CG Times Regular">than the Registrant)</FONT></EM>
<P><BR WP="BR1"><BR WP="BR2"><FONT face="CG Times Regular">Payment of Filing Fee
(Check the appropriate box)<BR><BR>[X]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No fee
required<BR><BR>[&nbsp;&nbsp;&nbsp;]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fee computed
on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.<BR><BR></FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="CG Times Regular">1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Title of each class of
securities to which transaction applies:<BR><BR></FONT><BR
WP="BR1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="CG Times Regular">___________________________________________________________________</FONT>

<P><FONT
face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2)&nbsp;&nbsp;&nbsp;&nbsp;Aggregate
number of securities to which transaction applies:</FONT></P><BR WP="BR1"><BR
WP="BR2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="CG Times Regular">___________________________________________________________________</FONT>

<P><BR WP="BR1">
<P>
<P><FONT
face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Per
unit price or other underlying value of transaction computed pursuant to
Exchange&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Act
Rule 0-11 (set forth the amount in which the filing fee is calculated and state
how&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;it
was determined):</FONT></P><BR WP="BR1"><BR
WP="BR2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="CG Times Regular">____________________________________________________________________</FONT>

<P><BR WP="BR1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="CG Times Regular">4)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proposed maximum
aggregate value of transaction:</FONT>
<P><BR
WP="BR1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="CG Times Regular">____________________________________________________________________</FONT>

<P><BR WP="BR1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="CG Times Regular">5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total fee paid:</FONT>
<P><BR WP="BR1"><BR
WP="BR2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="CG Times Regular">____________________________________________________________________</FONT>

<P><FONT face="CG Times Regular">[&nbsp;&nbsp;&nbsp;]&nbsp;&nbsp;&nbsp;&nbsp;Fee
paid previously with preliminary materials.</FONT>
<P><FONT
face="CG Times Regular">[&nbsp;&nbsp;&nbsp;]&nbsp;&nbsp;&nbsp;&nbsp;Check box if
any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;identify
the filing for which the offsetting fee was paid previously. Identify the
previous
filing&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;by
registration statement number, or the Form or Schedule and the date of its
filing.</FONT></P>
<P><FONT
face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amount
Previously Paid:</FONT></P>
<P><FONT
face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;____________________________________________</FONT></P>
<P><FONT
face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2)&nbsp;&nbsp;&nbsp;&nbsp;Form,
Schedule or Registration Statement No.:</FONT></P>
<P><FONT
face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;____________________________________________</FONT></P>
<P><FONT
face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3)&nbsp;&nbsp;&nbsp;&nbsp;Filing
Party:</FONT></P>
<P><FONT
face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;____________________________________________</FONT></P>
<P><FONT
face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4)&nbsp;&nbsp;&nbsp;&nbsp;Date
Filed:</FONT></P>
<P><FONT
face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;____________________________________________</FONT></P><BR
WP="BR1">
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center>-2-</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center><FONT size=-1><STRONG>PERMA-FIX ENVIRONMENTAL SERVICES, INC.<BR>
<CENTER>1940 N.W. 67th Place, Suite A<BR>Gainesville, Florida
32653</CENTER></STRONG></FONT>
<P></P><BR WP="BR1"><FONT size=-1><STRONG>
<CENTER>NOTICE OF SPECIAL MEETING<BR>OF STOCKHOLDERS<BR>To Be Held June 14, 2002</CENTER></STRONG></FONT>
<P><FONT size=-1>
<CENTER></CENTER></FONT>
<P></P>
<P><FONT size=-1>To the Stockholders of Perma-Fix Environmental Services,
Inc.:</FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notice is
hereby given that a Special Meeting of Stockholders (the "Meeting") of Perma-Fix
Environmental Services, Inc. (the "Company") will be held at the offices of the
Company, 1940 N.W. 67th Place, Gainesville, Florida 32653, on June</FONT>&nbsp;<FONT
size=-1>14, 2002, at 10:00 a.m. (EST), to
consider and act upon the following matters:</FONT></P>
<TABLE border=0 width=615>
  <TR vAlign=top>
    <TD width=23></TD>
    <TD width=33><FONT size=-1>1.</FONT></TD>
    <TD width=539><FONT size=-1>To approve an amendment to the Company's
      Restated Certificate of Incorporation increasing the authorized shares of
      the Company's common stock from 50,000,000 shares to 75,000,000
      shares;</FONT><FONT face="CG Times Regular" size=-1></FONT></TD></TR>
  <TR vAlign=top>
    <TD width=23></TD>
    <TD width=33><FONT face="CG Times Regular" size=-1>2.</FONT></TD>
    <TD width=539><FONT face="CG Times Regular" size=-1>To approve the future
      issuance of shares of common stock upon the exercise of warrants issued by
      the Company in connection with the Company's private placement completed
      July 30, 2001;</FONT><FONT size=-1> and</FONT><FONT
      face="CG Times Regular" size=-1></FONT></TD></TR>
  <TR vAlign=top>
    <TD width=23></TD>
    <TD width=33><FONT face="CG Times Regular" size=-1>3.</FONT></TD>
    <TD width=539><FONT face="CG Times Regular" size=-1>To transact such other
      business as may properly come before the meeting or any adjournments
      thereof.</FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Only
stockholders of record at the close of business on April 19, 2002, will be entitled to notice of, and
to vote at, the Meeting and at any adjournments thereof.</FONT></P>
<TABLE border=0 width=653>
  <TR vAlign=top>
    <TD width=303></TD>
    <TD width=336><FONT face="CG Times Regular" size=-1></FONT><FONT
      face="CG Times Regular" size=-1>By Order of the Board of
    Directors,</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=303><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD width=336><BR WP="BR1"><BR WP="BR2"><font size="2">/s/ Richard T. Kelecy<BR WP="BR1"></font></TD></TR>
  <TR vAlign=top>
    <TD width=303></TD>
    <TD width=336><FONT face="CG Times Regular" size=-1></FONT><FONT
      face="CG Times Regular" size=-1></FONT><FONT face="CG Times Regular"
      size=-1>Richard T. Kelecy<BR>Secretary</FONT> </TD></TR></TABLE>
<P><FONT face="CG Times Regular" size=-1>Gainesville, Florida<BR>May 9,
2002</FONT></P><BR WP="BR1"><BR WP="BR2"><FONT
face="CG Times Regular"><STRONG>In order to ensure a quorum, it is important
that you complete, date, sign and return the accompanying proxy. The enclosed
return envelope requires no additional postage if mailed in the United
States.</STRONG> <STRONG>You may revoke the proxy by writing prior to the
meeting or if you attend the meeting, you may revoke the proxy and vote your
shares in person.</STRONG></FONT>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular" size=-1>
<CENTER><STRONG>TABLE OF CONTENTS</STRONG></CENTER></FONT>
<p><FONT face="CG Times Regular"
size=-1><BR></FONT>
<TABLE border=0 width="100%">
  <TR>
    <TD colSpan=3 width="177%"><FONT face="CG Times Regular" size=-1>QUESTIONS
      AND ANSWERS ABOUT THE SPECIAL MEETING. . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . .&nbsp; . . . . . . .</FONT></TD>
    <TD width="12%"><FONT size=2>1</FONT></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD width="54%"></TD>
    <TD width="111%"></TD>
    <TD width="12%"></TD></TR>
  <TR>
    <TD colSpan=3 width="177%"><FONT face="CG Times Regular"
      size=2>INFORMATION CONCERNING THE SPECIAL MEETING . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .</FONT></TD>
    <TD width="12%"><FONT face="CG Times Regular" size=2>2</FONT></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD colSpan=2 width="165%"><FONT face="CG Times Regular" size=-1>Date,
      Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . .<BR>Solicitation of Proxies. . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . .&nbsp;<BR>Revocability of Proxy. . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . .<BR>Record Date and Voting
      Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . .</FONT></TD>
    <TD width="12%"><FONT face="CG Times Regular"
      size=-1>2<BR>2<BR>2<BR>2</FONT></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD width="54%"></TD>
    <TD width="111%"></TD>
    <TD width="12%"></TD></TR>
  <TR>
    <TD colSpan=3 width="177%"><FONT face="CG Times Regular" size=-1>PROPOSAL
      1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . &nbsp;</FONT></TD>
    <TD width="12%"><FONT face="CG Times Regular" size=-1>3</FONT></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD colSpan=2 width="165%"><FONT face="CG Times Regular" size=-1>The
      Proposed Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      .<BR>Reasons for Amendment&nbsp; . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . .<BR>Recommendation of Board of Directors . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . .<BR>Vote Required. . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . .&nbsp;</FONT></TD>
    <TD width="12%"><FONT face="CG Times Regular"
      size=-1>3<BR>3<BR>3<BR>4</FONT></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD width="54%"></TD>
    <TD width="111%"></TD>
    <TD width="12%"></TD></TR>
  <TR>
    <TD colSpan=3 width="177%"><FONT face="CG Times Regular" size=-1>PROPOSAL
      2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . &nbsp;</FONT></TD>
    <TD width="12%"><FONT face="CG Times Regular" size=-1>5</FONT></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD colSpan=2 width="165%"><FONT face="CG Times Regular" size=-1>The
      Offering. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . .<BR>Nasdaq Rule 4350 . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . .<BR>The Warrants and Placement Agent
      Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . .<BR>Recommendation of the Board of Directors
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . .<BR>Vote Required . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . .</FONT></TD>
    <TD width="12%"><FONT size=2>5<BR>6<BR>6<BR>7<BR>8</FONT></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD width="54%"></TD>
    <TD width="111%"></TD>
    <TD width="12%"></TD></TR>
  <TR>
    <TD colSpan=3 width="177%"><FONT face="CG Times Regular"
      size=-1>ACQUISITION OF M&amp;EC. . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . .&nbsp;</FONT></TD>
    <TD width="12%"><FONT face="CG Times Regular" size=-1>8</FONT></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD colSpan=2 width="165%"><FONT face="CG Times Regular" size=-1>Questions
      and Answers About the M&amp;EC Acquisition. . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . .<BR>Summary Terms of the
      M&amp;EC Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . .<BR>M&amp;EC Company
      Information&nbsp; . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      .<BR>Certain M&amp;EC Stockholder Matters . . . . . .&nbsp; . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . .</FONT></TD>
    <TD width="12%"><FONT face="CG Times Regular"
      size=-1>8<BR>9<BR>10<BR>10</FONT></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD width="54%"></TD>
    <TD width="111%"></TD>
    <TD width="12%"></TD></TR>
  <TR>
    <TD colSpan=3 width="177%"><FONT face="CG Times Regular" size=-1>SPECIAL
      FACTORS ABOUT THE M&amp;EC ACQUISITION . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . .</FONT></TD>
    <TD width="12%"><FONT face="CG Times Regular" size=-1>10</FONT></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD colSpan=2 width="165%"><FONT face="CG Times Regular"
      size=-1>Background of the M&amp;EC Acquisition&nbsp; . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . .<BR>Purchase Price for M&amp;EC . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . .<BR>M&amp;EC's Series B Preferred Stock . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . .<BR>IRS Installment Agreements . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . .<BR>Payment of Certain M&amp;EC
      Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . .<BR>Benefit Plan Payments
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .<BR>Use of
      Offering Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      .&nbsp;<BR>Purchase Accounting&nbsp; . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . .<BR>Regulatory Approvals. . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . .<BR>No Registration Rights . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . .<BR>Approval of
      M&amp;EC Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .<BR>Risk
      Factors Applicable to M&amp;EC Acquisition&nbsp; . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      .&nbsp;<BR>Changes in Accountants. . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .&nbsp;
      .&nbsp; .&nbsp; . . . . . . . . . . .&nbsp;</FONT></TD>
    <TD width="12%"><FONT face="CG Times Regular"
      size=2>10<BR>11<BR>11<BR>11<BR>12<BR>12<BR>12<BR>12<BR>12<BR>12<BR>13<BR>13<BR>14</FONT></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD width="54%"></TD>
    <TD width="111%"></TD>
    <TD width="12%"></TD></TR>
  <TR>
    <TD colSpan=3 width="177%"><FONT face="CG Times Regular" size=-1>SELECTED
      HISTORICAL FINANCIAL DATA OF THE COMPANY . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . .</FONT></TD>
    <TD width="12%"><FONT face="CG Times Regular" size=-1>15</FONT></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD width="54%"></TD>
    <TD width="111%"></TD>
    <TD width="12%"></TD></TR>
  <TR>
    <TD colSpan=3 width="177%"><FONT face="CG Times Regular" size=-1>SELECTED
      HISTORICAL FINANCIAL DATA OF M&amp;EC . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . .</FONT></TD>
    <TD width="12%"><FONT face="CG Times Regular" size=-1>16</FONT></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD width="54%"></TD>
    <TD width="111%"></TD>
    <TD width="12%"></TD></TR>
  <TR>
    <TD colSpan=3 width="177%"><FONT face="CG Times Regular" size=-1>SELECTED
      UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA . . . . . . . . . .
      . . . . . .</FONT></TD>
    <TD width="12%"><FONT face="CG Times Regular" size=-1>17</FONT></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD width="54%"></TD>
    <TD width="111%"></TD>
    <TD width="12%"></TD></TR>
  <TR>
    <TD colSpan=3 width="177%"><FONT face="CG Times Regular"
      size=-1>COMPARATIVE PER SHARE DATA. . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . .</FONT></TD>
    <TD width="12%"><FONT face="CG Times Regular"
size=-1>&nbsp;18</FONT></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD width="54%">
      <P>&nbsp;</P></TD>
    <TD width="111%"></TD>
    <TD width="12%"></TD></TR>
  <TR>
    <TD width="171%" colspan="3"><FONT face="CG Times Regular"
      size=-1>MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
      CONDITION<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AND
      RESULTS OF OPERATION OF M&amp;EC . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . .</FONT></TD>
    <TD width="12%"><FONT face="CG Times Regular" size=-1><BR>19</FONT></TD></TR>
  <TR>
    <TD align=middle colSpan=4 width="183%">
      <P align=center>&nbsp;i</P>
      <P>
      <P>&nbsp;</P>
      <P>&nbsp;</P></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD width="54%"></TD>
    <TD width="111%"></TD>
    <TD width="12%"></TD></TR>
  <TR>
    <TD colSpan=3 width="177%"><FONT face="CG Times Regular" size=-1>PRINCIPAL
      STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .</FONT></TD>
    <TD width="12%"><FONT face="CG Times Regular" size=-1>24</FONT></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD width="54%"></TD>
    <TD width="111%"></TD>
    <TD width="12%"></TD></TR>
  <TR>
    <TD colSpan=3 width="177%"><FONT face="CG Times Regular" size=-1>POTENTIAL
      CHANGE IN CONTROL. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .</FONT></TD>
    <TD width="12%"><FONT face="CG Times Regular" size=-1>26</FONT></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD width="54%"></TD>
    <TD width="111%"></TD>
    <TD width="12%"></TD></TR>
  <TR>
    <TD colSpan=3 width="177%"><FONT face="CG Times Regular"
      size=-1>STOCKHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING OF STOCKHOLDERS
      . . . . . . . . . . . . . .</FONT></TD>
    <TD width="12%"><FONT face="CG Times Regular" size=-1>27</FONT></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD width="54%"></TD>
    <TD width="111%"></TD>
    <TD width="12%"></TD></TR>
  <TR>
    <TD colSpan=3 width="177%"><FONT face="CG Times Regular" size=-1>OTHER
      MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . .&nbsp;</FONT></TD>
    <TD width="12%"><FONT face="CG Times Regular" size=-1>27</FONT></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD width="54%"></TD>
    <TD width="111%"></TD>
    <TD width="12%"></TD></TR>
  <TR>
    <TD colSpan=3 width="177%"><FONT face="CG Times Regular" size=-1>WHERE YOU
      CAN FIND MORE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . .</FONT></TD>
    <TD width="12%"><FONT face="CG Times Regular" size=-1>27</FONT></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD width="54%"></TD>
    <TD width="111%"></TD>
    <TD width="12%"></TD></TR>
  <TR>
    <TD colSpan=3 width="177%"><font face="CG Times Regular"><FONT
      size=-1>EXHIBIT "A" - Letter of Willard C. Carr, C.P.A. . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . </FONT><FONT color=#ff0000 face="CG Times Regular"
      size=-1> .</FONT></font></TD>
    <TD width="12%"><font face="CG Times Regular" size="-1">29</font></TD></TR>
  <TR>
    <TD colSpan=3 width="177%"></TD>
    <TD width="12%"></TD></TR>
  <TR>
    <TD colSpan=3 width="177%"><FONT face="CG Times Regular" size=-1>APPENDIX
      A - FORM OF WARRANT . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .&nbsp;</FONT></TD>
    <TD width="12%"><FONT size=2>A-1</FONT></TD></TR>
  <TR>
    <TD colSpan=3 width="177%"></TD>
    <TD width="12%"></TD></TR>
  <TR>
    <TD colSpan=3 width="177%"><FONT face="CG Times Regular"
      size=-1>APPENDIX B - M&amp;EC FINANCIAL STATEMENTS . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .&nbsp;</FONT></TD>
    <TD width="12%"><FONT face="CG Times Regular"
      size=-1>B-1</FONT></TD></TR>
  <TR>
    <TD colSpan=3 width="177%"></TD>
    <TD width="12%"></TD></TR>
  <TR>
    <TD colSpan=3 width="177%"><FONT face="CG Times Regular"
      size=-1>APPENDIX C - DSSI FINANCIAL STATEMENTS . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .&nbsp; &nbsp;</FONT></TD>
    <TD width="12%"><FONT face="CG Times Regular"
      size=-1>C-1</FONT></TD></TR>
  <TR>
    <TD width="6%"></TD>
    <TD width="54%"></TD>
    <TD width="111%"></TD>
    <TD width="12%"></TD></TR></TABLE>
<P><B><FONT face="CG Times Regular" size=-1>&nbsp;</FONT></B></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center>ii</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular" size=-1><STRONG>PERMA-FIX
ENVIRONMENTAL SERVICES, INC.<BR>1940 N.W. 67th Place, Suite A<BR>Gainesville,
Florida 32653</STRONG></FONT></P>
<P align=center><BR WP="BR1"><BR WP="BR2"><FONT face="CG Times Regular"
size=-1><STRONG>PROXY STATEMENT<BR><U>SPECIAL MEETING OF
STOCKHOLDERS</U></STRONG></FONT>
<P><FONT face="CG Times Regular" size=-1><STRONG>
<CENTER><BR>QUESTIONS AND ANSWERS ABOUT THE SPECIAL
MEETING</STRONG></CENTER></FONT>
<P><BR WP="BR1"><BR WP="BR2"><FONT face="CG Times Regular"
size=-1><STRONG><EM>Why are we holding a Special Meeting?</EM></STRONG></FONT>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Perma-Fix
Environment Services, Inc. (referred to in this Proxy Statement as "we," "us,"
or the "Company") is holding a Special Meeting of Stockholders to consider and
act upon the following matters:</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
approve an amendment to the Company's Restated Certificate of Incorporation
increasing
the&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;authorized
shares of the Company's common stock from 50,000,000 shares to 75,000,000
shares&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(see
"PROPOSAL 1" beginning on page 3); and</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
approve the future issuance of common stock upon the exercise of warrants issued
by
the&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Company
in connection with the Company's private placement completed July 30, 2001
(see&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"PROPOSAL
2" beginning on page 5).</FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><EM>Why is my vote required to
approve the exercise of the warrants issued in the Company's recent private
placement?</EM> </STRONG></FONT><FONT face="CG Times Regular"
size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
recent private placement was subject to a rule of the National Association of
Securities Dealers, Inc. ("NASD") which requires us to obtain stockholder
approval to issue shares of common stock through a private placement if, among
other things, the number of shares to be issued represents 20% or more of our
outstanding common stock. The number of shares of common stock previously issued
under the private placement represented approximately 19.5% of our outstanding
common stock as of the commencement of the private placement, and therefore, did
not require stockholder approval under the NASD rule. However, the issuance of
additional shares upon the exercise of the warrants issued under the private
placement could cause us to exceed the 20% threshold. By agreement with the
NASD, the NASD listed the shares of common stock issued in the private placement
as long as we agreed to obtain shareholder approval to provide for the issuance
of common stock upon exercise of the warrants issued in the private placement.
(See "PROPOSAL 2" beginning on page 5). </FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><EM>Why is the acquisition of
East Tennessee Materials and Energy Corporation discussed in this Proxy
Statement? </EM></STRONG></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
acquisition of M&amp;EC was completed utilizing a portion of the proceeds from
our recent private offering. Because the future issuance of shares of common
stock upon exercise of the warrants issued under our private offering requires
stockholder approval under our agreement with NASD, the rules and regulations of
the Securities and Exchange Commission require us to include a discussion of the
material terms of our acquisition of M&amp;EC and the business and operations of
M&amp;EC. Because the acquisition of M&amp;EC was completed in June 2001, you
are not voting on the acquisition and your vote will not limit, restrict or
otherwise affect the acquisition. (See "ACQUISITION OF M&amp;EC" beginning on
page 8 and "SPECIAL FACTORS ABOUT THE M&amp;EC ACQUISITION" beginning on page
10). </FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><EM>What do I need to do
now?</EM></STRONG></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After
carefully reading and considering the information contained in this Proxy
Statement, please complete and sign the enclosed Proxy Card and return it in the
enclosed envelope as soon as possible, so that your shares will be represented
at the Special Meeting of Stockholders. If you sign and send in your Proxy Card,
but do not indicate how you want to vote, we will count your Proxy Card as a
vote in favor of the proposals presented at the meeting. (See &quot;INFORMATION CONCERNING THE SPECIAL MEETING" beginning on page
2). </FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular" size=-1><STRONG><EM>Who can help answer my
questions?</EM></STRONG></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you
have any questions about the matters discussed in this Proxy Statement or if you
need additional copies of this Proxy Statement or the enclosed Proxy, you should
write or call Richard T. Kelecy, Chief Financial Officer, at 1940 N.W.
67<SUP>th</SUP> Place, Suite A, Gainesville, Florida 32653, (352) 395-1351. (See
"WHERE YOU CAN FIND MORE INFORMATION" beginning on page 27.)<BR></FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG>
<CENTER>INFORMATION CONCERNING THE SPECIAL MEETING<BR></STRONG></CENTER></FONT>
<P></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>Date, Time and
Place</U></STRONG></FONT><FONT face="CG Times Regular" size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Proxy Statement is furnished to the holders of the common stock of Perma-Fix
Environmental Services, Inc. (the "Company") in connection with the Special
Meeting of Stockholders to be held at the Company's offices, located at
1940&nbsp;N.W.&nbsp;67th&nbsp;Place, Gainesville, Florida 32653 on June 14, 2002, at 10:00 a.m. (EST), and any
adjournments thereof (the "Meeting"). The Notice of Special Meeting, this Proxy
Statement and the accompanying Proxy Card are first being mailed to stockholders
on or about May 9,
2002.</FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>Solicitation of
Proxies</U></STRONG></FONT><FONT face="CG Times Regular" size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors of the Company (the "Board of Directors" or the "Board") is
soliciting proxies to be used in voting at the Meeting. The Company will pay the
cost of preparing, printing, assembling and mailing this Proxy Statement and the
Proxy Card and all of the costs of the solicitation of the proxies. In addition
to solicitation by use of the mail, certain of the Company's officers and
employees may, without receiving additional compensation therefor, solicit the
return of proxies by telephone, telegram or personal interview. The Company has
also retained the services of Georgeson Shareholder Communications, Inc. to aid
in the solicitation of proxies for a fee of $6,000, plus reasonable
out-of-pocket expenses incurred by them. The Company has requested that
brokerage houses and custodians, nominees and fiduciaries forward soliciting
materials to their principals, the beneficial owners of common stock, and has
agreed to reimburse them for reasonable related out-of-pocket
expenses.</FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>Revocability of
Proxy</U></STRONG></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
enclosed proxy is for use at the Meeting if the stockholder will not be able to
attend in person. Any stockholder who executes a proxy may revoke it at any time
before it is voted by delivering to the Company's Secretary either a written
revocation or a duly executed proxy bearing a later date. A stockholder's proxy
may also be revoked if the stockholder attends the Meeting and requests that the
proxy be revoked.</FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>Record Date and Voting
Securities</U></STRONG></FONT><FONT face="CG Times Regular" size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Only
the holders of common stock of record at the close of business on April 19, 2002 (the "Record Date"), will have the
right to receive notice of, and be entitled to vote at, the Meeting. Each
stockholder of record is entitled to one vote for each share of common stock
that the stockholder owned as of the Record Date on each matter to be voted upon
at the Meeting.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the
close of business on the Record Date, 34,178,562 shares of common stock were
issued and outstanding, including the 4,397,566 shares of common stock issued
previously pursuant to the Offering described under Proposal 1, but excluding
988,000 treasury shares. A majority of all of the outstanding shares of common
stock entitled to notice of, and to vote at, the Meeting, represented in person
or by proxy, will constitute a quorum for the holding of the Meeting. If a
quorum is not represented at the Meeting, the Meeting will be adjourned, and the
Company will incur additional expense.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the General Corporation Law of the State of Delaware, only votes cast "FOR" a
matter constitute affirmative votes, except a proxy which is not marked "FOR,"
"AGAINST" or "ABSTAINS" as to a particular matter will also be considered as a
vote "FOR" that matter. Votes will be tabulated by an inspector of election
appointed by the Board of Directors. Votes in which the stockholder marked
"ABSTAINING" are counted for quorum purposes. Abstentions and broker non-votes
are not considered as votes "FOR" a particular matter, but will be counted for
quorum purposes.</FONT></P>
<P align=center><FONT face="CG Times Regular" size=-1>2</FONT></P>
<P><FONT face="CG Times Regular" size=-1>
<CENTER></FONT><FONT size=-1><STRONG>PROPOSAL 1</STRONG></FONT><FONT
face="CG Times Regular" size=-1></CENTER></FONT>
<P align=center><FONT face="CG Times Regular" size=-1><STRONG>AMENDMENT TO
RESTATED CERTIFICATE OF INCORPORATION INCREASING THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK FROM 50,000,000 TO 75,000,000.</STRONG></FONT></P><FONT face="CG Times Regular" size=-1><STRONG><U>The Proposed
Amendment</U></STRONG></FONT><FONT face="CG Times Regular" size=-1></FONT>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company's Restated Certificate of Incorporation, as amended (the "Certificate"),
presently authorizes 52,000,000 shares of capital stock of the Company, of which
50,000,000 shares consist of common stock, par value $.001 per share, and
2,000,000 shares consist of preferred stock, par value $.001 per
share.</FONT><FONT size=-1> The Board of Directors of the Company recommends
that the stockholders approve the amendment to the Certificate to increase the
Company's authorized shares of common stock from 50,000,000 to 75,000,000 (the
"Amendment"). If the Amendment is approved, the additional authorized, but
unissued shares of common stock will be identical in all respects to presently
authorized shares of common stock. </FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Amendment, the first paragraph of Article Fourth of the Certificate would be
amended to read as follows:</FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
total number of shares of capital stock that the Corporation shall have
authority to issue is 77,000,000,&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of which 75,000,000 shall be designated as
common stock, par value $.001 per share ("Common Stock"),&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and 2,000,000 shall be
designated as preferred stock, par value $.001 per share ("Preferred
Stock").</FONT></P>
<P><FONT size=-1><STRONG><U>Reasons for Amendment</U></STRONG></FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Amendment is necessary to allow the issuance of common stock upon the exercise
or conversion of all of the Company's convertible securities and other rights to
acquire common stock. As of April 19, 2002, these are as follows:
</FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
89,500 shares issuable or which could be issuable under the Company's 1991
Performance
Equity&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Plan;
</FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;315,669
shares issuable or which could be issuable under the 1992 Outside Directors
Stock
Option&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and&nbsp;Incentive
Plan; </FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;approximately
3,689,691 shares issuable or which could be issuable under the 1993
Nonqualified&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Stock&nbsp;Option Plan; </FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;approximately
216,190 shares issuable or which could be issuable under the Company's
1996&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Employee&nbsp;Stock
Purchase Plan;</FONT><FONT face="CG Times Regular" size=-1> </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,947,486
shares issuable upon exercise of outstanding warrants granted by the
Company<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
size=-1>(excluding&nbsp;the Warrants and the Placement Agent Warrants issued in
the Offering);</FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,505,566
shares issuable upon exercise of the Warrants and the Placement Agent
Warrants&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;issued&nbsp;in
the Offering, assuming Proposal 1 is approved; and</FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;up
to 1,666,667</FONT><FONT face="CG Times Regular" size=-1> shares issuable upon
conversion of 2,500 outstanding </FONT><FONT size=-1>shares of
the&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Company's&nbsp;Series
17 Class Q Convertible Preferred Stock (the "Series 17 Preferred").</FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company is required to reserve at least 20,430,769 shares of common stock for
these potential issuances of common stock. As of April 19, 2002, 34,178,562 shares of common
stock were issued and outstanding, leaving only 15,821,438 authorized shares
(including 988,000 treasury shares) available to satisfy the Company's existing
reserve obligations. Without approval of the Amendment, the Company's available
common stock is insufficient to cover the</FONT> <FONT
size=-1>Company's existing reserve obligations. Consequently, if the
stockholders do not approve the Amendment increasing the number of authorized
shares of common stock, the Company may be unable to fulfill all its obligations
to issue shares of common stock. If the Company is unable to fulfill such
obligations, the Company could be in default under its various obligations to
issue common stock, and it is possible that certain actions could be taken
against the Company for losses and damages. Such actions could have a material
adverse effect on the Company.</FONT></P>
<P align="center"><font size="-1">3</font></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors believes that increasing the number of authorized shares of
common stock beyond the existing reserve requirement is also necessary in order
to provide the Company with shares which will be available for issuance from
time to time as needed for such proper corporate purposes as may be determined
by the Board of Directors. Such corporate purposes might include the
following:</FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
raising of capital funds through private or public offerings, </FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
acquisition by the Company of other companies, </FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
declaration of stock splits or stock dividends, and </FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
issuance of common stock under warrants, preferred stock, or other rights which
may be granted
by&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
Company from time to time in the future. </FONT></P>
<P><FONT size=-1>The Board may issue authorized common stock without future
stockholder approval, except as may be required by applicable law or rule of the
BSE or Nasdaq (if the Company's securities are then listed on the BSE or the
Nasdaq).</FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
issuance of additional shares of common stock could have a detrimental effect
upon existing holders of the Company's common stock because such issuance may
have a dilutive effect on the earnings per share of common stock and the voting
rights of holders of the common stock. The issuance of additional shares of
common stock could also have a dilutive effect on the voting rights of existing
holders of the preferred stock to the extent the outstanding shares of preferred
stock are converted into common stock.</FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although
authorization of additional shares of common stock is recommended by the Board
of Directors for the reasons stated above, and not because of any possible
anti-takeover effect, such additional authorized shares of common stock could be
used by incumbent management to make more difficult, and thereby discourage, an
attempt to acquire control of the Company, even though stockholders of the
Company may deem such an acquisition desirable. For example, the shares could be
privately placed with purchasers who might support the Board of Directors in
opposing a hostile takeover bid. The issuance of new shares of common stock
could also be used to dilute the stock ownership and voting power of a third
party seeking to remove the directors, replace incumbent directors, accomplish
certain business combinations or alter, amend, or repeal portions of the
Certificate.</FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital
Bank, as agent for certain investors, has the right to acquire 3,515,655 of the
14,453,052 shares of common stock issuable upon exercise of outstanding warrants
and, if Proposal 1 is approved, an additional 842,995 shares under the Warrants.
Capital Bank, as agent for certain investors, also holds the 2,500 shares of
outstanding Series 17 Preferred, which are convertible into up to 1,666,667
shares of common stock. </FONT><FONT face="CG Times Regular" size=-1>See
"POTENTIAL CHANGE IN CONTROL" beginning on page 26 for a discussion of Capital
Bank's ownership of common stock on agent for its various investors. Capital
Bank has advised the Company that it is recommending to its investors that the
shares of common stock held by Capital Bank be voted "For" this Proposal.
</FONT><FONT size=-1></FONT></P>
<P><FONT size=-1><STRONG><U>Recommendation of Board of
Directors</U></STRONG></FONT><FONT size=-1></FONT></P>
<P><FONT size=-1><STRONG>The Board of Directors has Unanimously Approved and
Recommends a Vote "For" the Amendment to the Company's Restated Certificate of
Incorporation Increasing the Number of Authorized Shares of Common Stock From
50,000,000 to 75,000,000.</STRONG></FONT><FONT face="CG Times Regular"
size=-1><STRONG></STRONG></FONT></P>
<P><FONT size=-1><STRONG><U>Vote Required</U></STRONG></FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Amendment to the Certificate to increase the number of shares of the authorized
capital stock of the Company requires the approval of the holders of a majority
of the outstanding common stock.</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT size=2>4</FONT></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P><FONT size=-1>
<CENTER></FONT><FONT face="CG Times Regular" size=-1><STRONG>PROPOSAL
2</STRONG></FONT><FONT size=-1></CENTER></FONT>
<P align=center><FONT face="CG Times Regular" size=-1><STRONG>TO APPROVE THE
FUTURE ISSUANCE OF SHARES OF COMMON STOCK UPON EXERCISE OF THE WARRANTS ISSUED
BY THE COMPANY IN CONNECTION WITH THE COMPANY'S PRIVATE PLACEMENT COMPLETED ON
JULY 30, 2001</STRONG></FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>The
Offering</U></STRONG></FONT><FONT face="CG Times Regular" size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1><STRONG><EM>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General
Terms</EM>.</STRONG></FONT><FONT face="CG Times Regular" size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From April
6, 2001 to July 30, 2001, the Company conducted a private offering (the
"Offering") of a minimum of 1,500,000 units and a maximum of 4,400,000 units, at
a purchase price of $1.75 per unit. Each unit consisted of one share of the
Company's common stock and a warrant for the purchase of one share of common
stock (a "Warrant"). Each Warrant is for a term of five years and has an
exercise price of $1.75 per share of common stock. The price per unit and the
exercise price of each Warrant was based on the Company's decision as to the
value of a unit as of April 6, 2001, the date the Offering commenced, after
consulting with the placement agents utilized by the Company in the Offering and
considering that the closing price of a share of common stock as reported on the
Nasdaq SmallCap Market (the "Nasdaq") on April 6, 2001, was $1.6875. The Company
sold 4,397,566 units in the Offering for a total purchase price of $7,695,740.
</FONT></P>
<P><FONT face="CG Times Regular"
size=-1><STRONG><EM>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Use
of Net Proceeds</EM>. </STRONG></FONT><FONT face="CG Times Regular"
size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company
used approximately $2.5 million of the net proceeds of the Offering to assist in
the consummation of the Company's acquisition of East Tennessee Materials and
Energy Corporation ("M&amp;EC"), a mixed waste processing facility in Oak Ridge,
Tennessee, and the remainder to reduce the short-term debt owing to its lenders
and for general working capital purposes. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
acquisition of M&amp;EC is described under "ACQUISITION OF M&amp;EC" beginning
on page 8, and "SPECIAL FACTORS ABOUT THE M&amp;EC ACQUISITION" beginning on
page 10. Certain financial information relating to M&amp;EC and the Company is
included in this Proxy Statement beginning on page 15.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1><EM><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Placement
Agent Warrants</STRONG></EM></FONT><FONT face="CG Times Regular"
size=-1><STRONG>. </STRONG></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to
the terms of the Offering, the Company appointed placement agents (each, a
"Placement Agent") to place the units as an agent of the Company and to assist
in completing the Offering. The Company paid each Placement Agent a fee equal to
7.5% of the aggregate purchase price for units placed by that particular
Placement Agent. The Company also issued to each Placement Agent warrants to
purchase up to the number of shares of common stock equal to 7% of the aggregate
purchase price for units placed by that particular Placement Agent, divided by
$1.75 (the "Placement Agent Warrants"). The Placement Agent Warrants are for a
term of five years and have an exercise price of $1.75 per share. As a result,
the Company paid the Placement Agents $202,500 in total fees and issued to them
Placement Agent Warrants for the purchase of up to an aggregate of 108,000
shares of common stock.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1><STRONG><EM>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subscribers</EM>.
</STRONG></FONT><FONT face="CG Times Regular" size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Offering
was sold only to accredited investors as that term is defined under Regulation D
of the Securities Act of 1933, as amended (the "Act"). One of the investors in
the Offering was Capital Bank -- Grawe Gruppe AG (f/k/a RBB Bank
Aktiengesellschaft) ("Capital Bank"), which subscribed for 842,995 units under
the Offering. As of April 19, 2002,
Capital Bank owns, as agent for its investors, 9,373,445 shares of common stock,
or 27.43% of the issued and outstanding common stock as of the Record Date
(including the 842,995 shares comprising the Units acquired by Capital Bank in
the Offering). Consequently, Capital Bank may be considered a beneficial owner
of more than 10% of the Company's issued and outstanding common stock. Capital
Bank has advised the Company that it is recommending to its investors that the
shares of common stock held by Capital Bank be voted "For" this Proposal. See
"POTENTIAL CHANGE IN CONTROL" for a discussion of Capital Bank's ownership of
common stock as agent for its various investors.</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular" size=-1>5</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"
size=-1><EM><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Registration
of Common Stock</STRONG></EM></FONT><FONT face="CG Times Regular"
size=-1><STRONG>. </STRONG></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
issuance of the 4,397,566 shares of common stock included in the units sold in
the Offering and up to 4,505,566 shares of common stock underlying the Warrants
included in the units and Placement Agent Warrants does not require registration
under the Act as such issuance is exempt under Rule 506 of Regulation D and/or
Section 4(2) of the Act. However, in accordance with the terms of the Offering,
the Company filed a Form S-3 Registration Statement on October 1, 2001 (the
"Registration Statement"), to register such common stock with the Securities and
Exchange Commission for resale purposes.</FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>Nasdaq Rule
4350</U></STRONG></FONT><FONT face="CG Times Regular" size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the original terms of the Offering, the Company offered to sell a maximum of
5,000,000 units. After the Offering commenced, however, the maximum number of
units offered was reduced to 4,400,000 in order to comply with Rule
4350(i)(1)(D) of the rules of the National Association of Securities Dealers,
Inc. The Company's common stock is listed for trading on the Nasdaq and the
Boston Stock Exchange (the "BSE"). Although the BSE approved the listing of the
shares of common stock to be issued in connection with the Offering and upon the
exercise of the Warrants and the Placement Agent Warrants, the Nasdaq advised
the Company that the Offering could violate Rule 4350(i)(1)(D) governing the
listing of additional securities on the Nasdaq as originally structured.
</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rule
4350(i)(1)(D) provides that a corporation must obtain shareholder approval to
issue, through a private placement such as the Offering, a number of shares of
common stock equal to or greater than 20% of the corporation's outstanding
common stock at a price less than the greater of book or market value of the
common stock. At the time of the discussion with Nasdaq, the Company had
22,896,762 shares of common stock outstanding, and the offering of up to
5,000,000 units could have resulted in up to 10,000,000 shares being issued if
the Warrants were exercised, representing more than 43.67% of the Company's then
issued and outstanding common stock. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of determining whether the Offering complies with Rule 4350(i)(1)(D),
the Nasdaq asserted that the Company cannot use April 6, 2001, the date the
Offering commenced, to determine market value, but must determine market value
as of the date that each subscription agreement for units is executed by the
investor and becomes binding. Because the price of the common stock as reported
on the Nasdaq rose from $1.6875 per share on the date the Offering commenced to
$2.27 on the date the Offering terminated, numerous subscription agreements were
executed at a time when the market value per share of common stock was greater
than the $1.75 purchase price per unit. The Nasdaq claimed that the subscription
agreements executed on a date when the market price was greater than the $1.75
unit purchase price represented sales at less than the greater of book or market
value of the common stock, thereby implicating Rule 4350(i)(1)(D). </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
order to comply with Rule 4350(i)(1)(D), the Company agreed with the Nasdaq to
restructure the Offering so that (a)&nbsp;the maximum number of units offered
was reduced from 5,000,000 to 4,400,000, and (b) the Warrants and the Placement
Agent Warrants could not be exercised until the Company's stockholders approved
the issuance of the shares of common stock upon the exercise of the Warrants and
the Placement Agent Warrants. Prior to the closing of the Offering, the
Placement Agents and the initial investors who subscribed for units agreed to
amend the terms of the Warrants and the Placement Agent Warrants pursuant to the
Company's agreement with the Nasdaq. As a result of these modifications, only
4,397,566 shares of common stock, representing approximately 19.5% of the issued
and outstanding shares of common stock as of the commencement of the Offering,
have been issued under the Offering without stockholder approval. </FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>The Warrants and Placement
Agent Warrants</U></STRONG></FONT><FONT face="CG Times Regular"
size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1><EM><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Summary
of Terms</STRONG></EM></FONT><FONT face="CG Times Regular" size=-1><STRONG>.
</STRONG></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Warrant and Placement Agent Warrant entitles the holder to purchase one share of
common stock at an exercise price of $1.75 per share, subject to the adjustments
in certain cases described below. Each Warrant and Placement Agent Warrant may
be exercised at any time after stockholder approval of Proposal 2 and prior to
the expiration of the fifth anniversary of the date of issuance of the Warrants
and Placement Agent Warrants.</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular" size=-1>6</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"
size=-1><EM><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adjustments
to Exercise Price and Number of Shares Purchasable</STRONG></EM></FONT><FONT
face="CG Times Regular" size=-1><STRONG>. </STRONG></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
exercise price and the number of shares of common stock issuable upon the
exercise of the Warrants and Placement Agent Warrants are subject to adjustment,
from time to time, upon the occurrence of any of the following
events:</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the Company (a) pays a dividend in, or makes a distribution of, shares of
capital stock on
its&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;outstanding
common stock; (b) subdivides its outstanding shares of common stock into a
greater&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;number
of shares; or (c) combines its outstanding shares of common stock into a smaller
number&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
shares; and</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the Company consolidates with, or merges into, another corporation (other than a
consolidation&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;or
merger which does not result in any reclassification or change of the
outstanding common stock).</FONT></P>
<P><FONT face="CG Times Regular"
size=-1><STRONG><EM>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Listing
and Registration</EM>. </STRONG></FONT><FONT face="CG Times Regular"
size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
is no established public trading market for the Warrants and the Placement Agent
Warrants, and the Company does not expect one to emerge. As discussed above, the
BSE has approved the listing of the common stock underlying the Warrants and the
Placement Agent Warrants, and the Nasdaq has approved such listing subject to
stockholder approval of this Proposal 2. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the terms of the Offering and the subscription agreements for units, the
Company filed the Registration Statement under the Act for the resale of the
common stock included in the units and the common stock issuable upon the
exercise of the Warrants and the Placement Agent Warrants. The Company has
received comments from the Securities and Exchange Commission ("SEC") as to the
Registration Statement, but is unable to finalize the Registration Statement in
accordance with the SEC comments until after the meeting. If the stockholders do
not approve this Proposal 1, the Company will withdraw the shares of common
stock issuable upon exercise of the Warrants and the Placement Agent Warrants
from the Registration Statement.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1><EM><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
Effects of Exercise of Warrants and the Placement Agent
Warrants</STRONG></EM></FONT><FONT face="CG Times Regular" size=-1><STRONG>.
</STRONG></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If all
or a portion of the Warrants and the Placement Agent Warrants are exercised, the
number of outstanding shares of common stock will increase. The increased number
of shares of common stock could have a depressive effect on the market price of
the common stock. This depressive effect could encourage short sales which could
place downward pressure on the price of the common stock. If all or a portion of
the Warrants and the Placement Agent Warrants are exercised, the resulting
increase in the number of shares of common stock outstanding will dilute the
ownership interest and proportionate voting power of the existing holders of
common stock. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1><EM><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Principal
Effects of Approval.</STRONG></EM></FONT><FONT face="CG Times Regular"
size=-1><STRONG> </STRONG></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this Proposal 2 is approved by the stockholders and if all Warrants and
Placement Agent Warrants are exercised, the Company would receive $7,884,741 in
proceeds from such exercises. If the stockholders do not approve this Proposal
1, the Company will not be obligated to issue shares pursuant to the exercise of
the Warrants nor the Placement Agent Warrants. Neither the Warrants or the
Placement Agent Warrants provide a penalty if the Company is unable to obtain
such stockholder approval.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Once
the Company stockholders approve Proposal 1 and Proposal 2, the Company will
seek to complete the registration under the Form S-3 Registration Statement
filed October 1, 2001, of the common stock included in the units and the common
stock issuable upon the exercise of the Warrants included in the units and the
Placement Agent Warrants. If such registration is completed, all such common
stock will be freely tradeable under the Federal securities laws.</FONT></P>
<P><FONT face="CG Times Regular" size=-1><U><STRONG>Recommendation of the Board
of Directors</U></STRONG></FONT><FONT face="CG Times Regular"
size=-1><STRONG></STRONG></FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG>The Board of Directors
Unanimously Recommends that the Stockholders Vote "For" the Future Issuance of
Common Stock Upon the Exercise of the Warrants and the Placement Agent Warrants
Issued Pursuant to the Offering.</STRONG></FONT></P>
<P>&nbsp;</P>
<P align=center><FONT size=2>7</FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>Vote
Required</U></STRONG></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to Nasdaq Rule 4350(i)(6), this Proposal 2 requires the affirmative vote of a
majority of the votes cast, in person or by proxy, by the holders of the common
stock.<br>
 </FONT></P>
<P><FONT face="CG Times Regular" size=-1><U>
<CENTER></U><STRONG>ACQUISITION OF M&amp;EC<br>
<br>
</STRONG></CENTER><STRONG><U>Questions and Answers About
the M&amp;EC Acquisition</U></STRONG></FONT>
<FONT face="CG Times Regular"
size=-1></FONT>
<P><FONT face="CG Times Regular"
size=-1><STRONG><EM>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When
was M&amp;EC Acquired?</EM></STRONG></FONT><FONT face="CG Times Regular"
size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
June 27, 2000, the Company entered into a letter of intent to acquire M&amp;EC,
and on January 18, 2001, the Company, all of the shareholders of M&amp;EC, and
Bill Hillis entered into the Stock Purchase Agreement (the "Purchase Agreement")
providing for the Company's acquisition of M&amp;EC (the "M&amp;EC
Acquisition"). The M&amp;EC Acquisition was completed on June 25, 2001, and the
Company now owns all of the issued and outstanding shares of voting stock of
M&amp;EC.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1><EM><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;What
is M&amp;EC?</STRONG></EM></FONT><FONT face="CG Times Regular"
size=-1><STRONG></STRONG></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;East
Tennessee Materials and Energy Corporation is a Tennessee corporation located in
Oak Ridge, Tennessee. M&amp;EC holds both hazardous waste treatment and storage
permits and a license to store and treat low-level radioactive waste.
</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
1998, M&amp;EC began constructing a treatment and processing facility in Oak
Ridge, Tennessee (the "M&amp;EC Facility") to treat and process waste containing
both low-level radioactive and hazardous waste ("Mixed Waste") Oak Ridge,
Tennessee (the "M&amp;EC Facility"). Construction of the M&amp;EC Facility was
still in progress in June 2000, when the Company entered into the letter of
intent to acquire M&amp;EC, and the initial phase of construction of the
M&amp;EC Facility was completed after the Company acquired M&amp;EC. The
M&amp;EC Facility began accepting waste in June 2001 and became operational in
the third quarter of 2001. The 150,000 square-foot facility is located on the
grounds of the U.S. Department of Energy's (the "DOE") Oak Ridge K-25 Weapons
Facility. The M&amp;EC Facility uses the Company's various technologies to treat
Mixed Waste coming from governmental, institutional and commercial generators
nationwide. M&amp;EC is one of only a few such facilities in the country.
</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M&amp;EC
has three subcontracts with Bechtel Jacobs Company LLC, DOE's site manager,
which were awarded to M&amp;EC in 1998 (the "DOE subcontracts"). The DOE
Subcontracts cover the treatment of millions of cubic feet of legacy,
operational, and remediation nuclear waste. These subcontracts may be canceled
with 30 days' notice. See "SPECIAL FACTORS ABOUT THE M&amp;EC ACQUISITION - Risk
Factors Applicable to the M&amp;EC Acquisition" on page 13. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M&amp;EC,
together with Diversified Scientific Services, Inc. ("DSSI") and Perma-Fix of
Florida, Inc. ("PFF"), make up our nuclear services segment. The three
facilities perform different treatment functions which, together, are able to
process all aspects of the same waste stream, including solids, liquids, and
high organic elements, as well as large volume waste streams.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1><EM><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Why
did the Company acquire M&amp;EC?</STRONG></EM></FONT><FONT
face="CG Times Regular" size=-1><STRONG></STRONG></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since
1992, the Company has pursued a strategy of acquiring business operations and
facilities that complement the Company's existing businesses. The Company has
particularly focused on acquiring businesses which the Company believes can be
grown by integrating the businesses into the Company's existing operations and
facilities. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company entered into the storage and treatment of low-level radioactive waste
and Mixed Waste in 1994 with the acquisition of Perma-Fix of Florida, Inc. in
Gainesville, Florida. In August 2000, the Company expanded its Mixed Waste
activities by acquiring DSSI, in Kingston, Tennessee, a company that (a)
transports, stores and treats hazardous and Mixed Waste and (b) disposes or
recycles Mixed Waste in a treatment unit located at DSSI's facility.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors identified the Mixed Waste service industry as a potentially
profitable line of business and considered the benefits of expanding the
Company's nuclear waste business through the expansion of Mixed Waste
activities. The Board of Directors determined that the M&amp;EC Acquisition
would further the Company's long-term strategy</FONT></P>
<P align="center"><font size="2">8</font></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"
size=-1>due, in significant respect, to
the fact that M&amp;EC operates under both a hazardous waste treatment and
storage permit, possesses a license to store and treat low-level radioactive
waste, and had obtained the DOE Subcontracts.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1><EM><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Does
my vote affect the M&amp;EC Acquisition?</STRONG></EM></FONT><FONT
face="CG Times Regular" size=-1><STRONG></STRONG></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No,
your vote will not affect the M&amp;EC Acquisition. The M&amp;EC Acquisition did
not require the approval of our stockholders. You are not being asked to vote on
the M&amp;EC Acquisition. However, because the M&amp;EC Acquisition was
completed utilizing a portion of the proceeds of the Offering, the Company has
included certain information about the M&amp;EC Acquisition for your
consideration in determining whether to approve the future issuance of common
stock upon the exercise of the Warrants issued by the Company in connection with
the Offering and to satisfy the requirements of the Securities Exchange Act of
1934, as amended. The Offering is described under Proposal 2 beginning on page 5
of this Proxy Statement. If Proposal 2 is not approved by the stockholders, the
prior completion of the M&amp;EC Acquisition will not be limited, restricted, or
otherwise affected.</FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>Summary Terms of the
M&amp;EC Acquisition</U></STRONG></FONT><FONT face="CG Times Regular"
size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
principal terms of the M&amp;EC Acquisition were as follows:</FONT></P>
<P><FONT face="CG Times Regular"
size=-1><STRONG><EM>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchase
Price for M&amp;EC</EM></STRONG></FONT><FONT face="CG Times Regular"
size=-1><EM> </EM>(see page 11). <STRONG><EM></EM></STRONG></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the terms of the Purchase Agreement, all of the outstanding voting stock of
M&amp;EC was acquired by the Company and M&amp;EC with (a) M&amp;EC redeeming
20% of the outstanding shares of M&amp;EC voting stock, and (b) the Company
acquiring all of the remaining outstanding shares of M&amp;EC voting stock. This
structure resulted in the Company owning all of the outstanding shares of
M&amp;EC common stock. The Company paid approximately $2.5 million for the
M&amp;EC common stock acquired by the Company by issuing 1,597,576 shares of the
Company's common stock to shareholders of M&amp;EC at an agreed value of $1.50
per share.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1><STRONG><EM>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M&amp;EC
Series B Preferred Stock</EM></STRONG></FONT><FONT face="CG Times Regular"
size=-1><EM> </EM>(see page 11). </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the completion of the M&amp;EC Acquisition, M&amp;EC issued to
the M&amp;EC shareholders shares of M&amp;EC's newly created non-voting and
non-convertible Series B Preferred Stock having a stated value of approximately
$1.285 million in redemption of 20% of the M&amp;EC common stock.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1><EM><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IRS
Payments</STRONG></EM></FONT><FONT face="CG Times Regular" size=-1> (see page
11). </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
accordance with the terms of the Purchase Agent, M&amp;EC entered into an
Installment Agreement with the Internal Revenue Service (the "IRS") providing
for the payment over seven years of various withholding taxes owing by M&amp;EC
in the aggregate amount of $923,425.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1><EM><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payment
of Certain M&amp;EC Liabilities</STRONG> </EM></FONT><FONT
face="CG Times Regular" size=-1>(see page 11). </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company issued 346,666 shares of common stock to certain creditors of M&amp;EC
in satisfaction of approximately $520,000 of M&amp;EC's liabilities. In
addition, M&amp;EC issued a $3.7 million promissory note to a former affiliate
of M&amp;EC in payment of amounts advanced, and services provided, to
M&amp;EC.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1><EM><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Benefit
Plan Payments</STRONG> </EM></FONT><FONT face="CG Times Regular" size=-1>(see
page 12). </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company paid $1.77 million in corrective contributions to M&amp;EC's 401(k) Plan
and to the 401(k) Plan of a former affiliate of M&amp;EC.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1><EM><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Regulatory
Approvals</STRONG> </EM></FONT><FONT face="CG Times Regular" size=-1>(see page
12).</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior
to completion of the M&amp;EC acquisition, the Tennessee Department of
Environmental Quality consented to the change in control of M&amp;EC under
M&amp;EC's hazardous waste treatment and storage permits and licenses to store
and treat low-level radioactive waste.</FONT></P>
<P align="center"><font face="CG Times Regular" size="-1">9</font></P>
<P><FONT face="CG Times Regular"
size=-1><EM><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
Registration Rights</STRONG> </EM></FONT><FONT face="CG Times Regular"
size=-1>(see page 12).</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
shareholders and former creditors of M&amp;EC do not have the right to require
the Company to register the shares of Company common stock issued in the
M&amp;EC Acquisition for resale with the SEC.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1><EM><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounting
Treatment</STRONG> </EM></FONT><FONT face="CG Times Regular" size=-1>(see page
12).</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
M&amp;EC Acquisition has been treated as a purchase transaction for accounting
and financial reporting purposes.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1><EM><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Summary
of Common Stock Issued</STRONG></EM></FONT><FONT face="CG Times Regular"
size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company issued a total of 1,944,242 shares of Company common stock in connection
with the M&amp;EC Acquisition, representing approximately 7.5% of the
outstanding shares of common stock on June 25, 2001, the date the M&amp;EC
Acquisition closed, and approximately 5.7% of the outstanding shares of
common stock as of the Record Date.</FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>M&amp;EC Company
Information</U></STRONG></FONT><FONT face="CG Times Regular" size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The name,
address, and telephone number of the principal executive offices of M&amp;EC
are: East Tennessee Materials and Energy Corporation, 2010 Highway 58, Suite
1020, Building - K - 1005, Oak Ridge, Tennessee 37830, (865)
574-0149.</FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>Certain M&amp;EC Stockholder
Matters</U></STRONG></FONT><FONT face="CG Times Regular" size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
acquired the M&amp;EC voting stock from M&amp;EC's 17 stockholders. None of the
former M&amp;EC stockholders own more than 5% of our common stock as a result of
the M&amp;EC Acquisition, and all directors and officers of M&amp;EC, as a
group, own less than 5% of our common stock. At the time of the M&amp;EC
Acquisition, there was no established public trading market for the M&amp;EC
voting stock and M&amp;EC historically paid no dividends on the common stock.<br>
</FONT></P><FONT face="CG Times Regular" size=-1><STRONG>
<CENTER>SPECIAL FACTORS ABOUT THE M&amp;EC ACQUISITION<br>
</CENTER></STRONG></FONT>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>Background of the M&amp;EC
Acquisition</U></STRONG></FONT><FONT face="CG Times Regular" size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May
1998, the Company began providing to M&amp;EC waste treatment, materials
recycling technologies, and research and development services under a
subcontractor agreement with M&amp;EC. The Company and M&amp;EC agreed to act as
a team in the performance of certain contracts that either the Company or
M&amp;EC may obtain from contractors of the DOE regarding treatment and disposal
of certain types of radioactive, hazardous, or Mixed Waste at DOE facilities.
M&amp;EC and the Company made a joint proposal to DOE, with M&amp;EC to act as
the team leader to treat and dispose of Mixed Waste at DOE's Oak Ridge,
Tennessee site (the "Oak Ridge Site"), and throughout the DOE network. In June
1998, M&amp;EC, as the team leader, was awarded the three DOE Subcontracts by
Bechtel Jacobs Company, LLC, the government-appointed manager of the
environmental program for Oak Ridge, to perform certain treatment and disposal
services at the Oak Ridge site and throughout the DOE network. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
June 27, 2000, the Company entered into a letter of intent to acquire M&amp;EC.
In July 2000, the Company's services to M&amp;EC were expanded to include design
and construction management services for the M&amp;EC Facility. On January 18,
2001, the Company, all of the shareholders of M&amp;EC, and Bill Hillis entered
into the Purchase Agreement providing for the M&amp;EC Acquisition. After
entering into the letter of intent and prior to acquiring M&amp;EC, the Company
loaned and/or</FONT> <FONT face="CG Times Regular"
size=-1>advanced to M&amp;EC approximately $2.3
million to provide working capital and billed approximately $9.8 million related
to construction of the M&amp;EC facility. The M&amp;EC Acquisition was completed
on June 25, 2001.</FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>Purchase Price for
M&amp;EC</U></STRONG></FONT><FONT face="CG Times Regular" size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
M&amp;EC acquisition was structured so that the Company acquired all of the
outstanding voting stock of M&amp;EC, with (a) M&amp;EC redeeming 20% of the
outstanding voting stock and (b) the Company acquiring all of the remaining
outstanding shares of the M&amp;EC voting stock. This structure resulted in the
Company owning all of the M&amp;EC voting stock upon completion of the M&amp;EC
acquisition.</FONT></P>
<P align="center"><font face="CG Times Regular" size="-1">10</font></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company paid approximately $2.5 million for the M&amp;EC voting stock acquired
by the Company by issuing 1,597,576 shares of common stock to the shareholders
of M&amp;EC at an agreed value of $1.50 per share, the closing price of the
common stock as reported on the Nasdaq on the date of the initial letter of
intent relating to the M&amp;EC Acquisition. The voting stock acquired by the
Company included shares of M&amp;EC common stock which, as a condition precedent
to the M&amp;EC Acquisition, were issued by M&amp;EC prior to the closing of the
M&amp;EC Acquisition pursuant to the conversion of all of M&amp;EC's Series A
preferred stock.</FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>M&amp;EC's Series B
Preferred Stock</U></STRONG></FONT><FONT face="CG Times Regular"
size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the completion of the M&amp;EC Acquisition, M&amp;EC issued to
the shareholders of M&amp;EC shares of its newly created Series B Preferred
Stock having a stated value of approximately $1.3 million in redemption of the
remaining 20% of M&amp;EC's common stock. The M&amp;EC Series B Preferred Stock
is non-voting and non-convertible and may be redeemed at the option of M&amp;EC
at any time after June 25, 2002 for the per share price of $1.00. After June 25,
2002, the holders of the M&amp;EC Preferred will be entitled to receive, when,
as, and if declared by the Board of Directors of M&amp;EC out of legally
available funds, dividends at the rate of 5% per year per share applied to the
amount of $1.00 per share, which are fully cumulative.</FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>IRS Installment
Agreements</U></STRONG></FONT><FONT face="CG Times Regular" size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a
condition to the closing of the M&amp;EC Acquisition, M&amp;EC entered into an
installment agreement with the Internal Revenue Service (the "IRS") relating to
various withholding taxes owing by M&amp;EC in the aggregate principal amount of
$923,495 payable over seven years (the "M&amp;EC IRS Agreement"). As an
additional condition to such closing, one of M&amp;EC's affiliated shareholders
prior to the acquisition by the Company, Performance Development Corporation, a
Tennessee corporation ("PDC"), and two other corporations affiliated with PDC
(together with PDC, the "PDC Entities") entered into an installment agreement
with the IRS relating to withholding taxes owing by each such corporation ("PDC
IRS Agreement"). The PDC IRS Agreement provides for the payment of annual
installments over a term of seven years in the aggregate amount of $3,713,721.
The installment agreements further provide as follows: </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
Company does not have any liability for any taxes, interest or penalty with
respect to M&amp;EC
or&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;any
PDC Entities; </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>&nbsp;&nbsp;&nbsp;<FONT
face="CG Times Regular" size=-1>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M&amp;EC will
be solely liable for paying the obligations of M&amp;EC; </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
IRS will not assert any liability against the Company, M&amp;EC or any current
or future,
related&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;affiliate
of the Company for any tax, interest or penalty of the PDC Entities; </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;as
long as the payments of M&amp;EC under its installment agreement are timely made
pursuant to
the&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;terms
of the installment agreement, the IRS will not file a notice of federal tax
lien, change or
cancel&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
installment agreement, or take any other type of action against M&amp;EC with
respect to
the&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;withholding
taxes and interest set forth in the installment agreement; and </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
IRS agrees not to assert any liability against M&amp;EC, the Company, or any
current or
future&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;related
affiliate of the Company for any tax, interest or penalty of any of the PDC
Entities. </FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>Payment of Certain M&amp;EC
Liabilities</U></STRONG></FONT><FONT face="CG Times Regular" size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to the
closing of the M&amp;EC Acquisition, PDC had advanced monies to, and performed
certain services for M&amp;EC, totaling approximately $3.7 million. In payment
of such advances and services, M&amp;EC issued a Promissory Note, dated June 7,
2001, to PDC in the principal amount of approximately $3.7 million. The
promissory note is payable over seven years and the payments under the note
correspond to the payments due by PDC to the IRS under the PDC IRS Agreement.
PDC has directed M&amp;EC to make all payments under the promissory note
directly to the IRS to be applied to PDC's obligations under its installment
agreement with the IRS. The Company did not acquire any interest in the PDC
Entities.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As an
additional condition to the closing of the M&amp;EC Acquisition, the Company
issued 346,666 shares of common stock to certain other creditors of M&amp;EC in
satisfaction of approximately $520,000 of M&amp;EC's liabilities.</FONT></P>
<P align="center"><font face="CG Times Regular" size="-1">11</font></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>Benefit Plan Payments</U>
</STRONG></FONT><FONT face="CG Times Regular" size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the closing of the M&amp;EC Acquisition, the Company made $1.77
million in certain corrective contributions to M&amp;EC's 401(k) Plan and to
PDC's 401(k) Plan. </FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>Use of Offering
Proceeds</U></STRONG></FONT><FONT face="CG Times Regular" size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January
2001, when the Company entered into the Purchase Agreement to acquire M&amp;EC,
the Company did not have sufficient funds or financial resources to fully fund
the M&amp;EC Acquisition. In April 2001, the Board of Directors agreed to
undertake the Offering to raise between $2.6 million and $8.75 million to assist
in funding the M&amp;EC Acquisition and for general working capital purposes. As
more fully described beginning on page 5 of this Proxy Statement, the final
terms of the Offering provided for a private offering of between $2.6 million
and $7.7 million, representing a minimum of 1.5 million units and a maximum of
4.4 million units at a purchase price of $1.75 per unit. Each unit consisted of
one share of the Company's common stock and a Warrant for the purchase of one
share of common stock at an exercise price $1.75 per share. The Company sold
4,397,566 units in the Offering for a total purchase price of $7,695,740 and net
proceeds of $6.88 million.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company used approximately $2.1 million of the net proceeds of the Offering to
assist in completing the M&amp;EC Acquisition. Of this amount, $1.77 million was
used to fund the corrective contributions to the M&amp;EC and PDC 401(k) Plans
described above, and $50,000 was used to fund the initial payment to the IRS
under the Installment Agreements described above, and approximately $263,000 was
paid to satisfy certain other liabilities of M&amp;EC. The remaining net
proceeds were added to the Company's working capital.</FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>Purchase
Accounting</U></STRONG></FONT><FONT face="CG Times Regular" size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The M&amp;EC
Acquisition has been treated as a purchase transaction for accounting and
financial reporting purposes.</FONT></P><FONT face="CG Times Regular"
size=-1><STRONG><U>Regulatory Approvals</U> </STRONG></FONT><FONT
face="CG Times Regular" size=-1></FONT>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
closing of the M&amp;EC Acquisition was conditioned upon receipt of all
necessary regulatory approvals. M&amp;EC's hazardous waste treatment and storage
permits and license to store and treat low level radioactive waste are issued by
the Tennessee Department of Environmental Quality, which consented to the
Company's acquisition of M&amp;EC.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the closing of the M&amp;EC Acquisition, the IRS entered into
the M&amp;EC IRS Agreement and the PDC IRS Agreement, and the U.S. Department of
Labor agreed to the amount of the corrective contributions to be made to
M&amp;EC's 401(k) Plan and PDC's 401(k) Plan.</FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>No Registration
Rights</U></STRONG></FONT><FONT face="CG Times Regular" size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
shareholders and former creditors of M&amp;EC do not have the right to require
the Company to register the shares of Company common stock issued in the
M&amp;EC Acquisition for resale with the SEC.</FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>Approval of M&amp;EC
Acquisition</U></STRONG></FONT><FONT face="CG Times Regular" size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company's Board of Directors unanimously approved the M&amp;EC Acquisition upon
the terms and conditions set forth in the Purchase Agreement. The Delaware
General Corporation Law did not require the vote of the Company's stockholders
to complete the M&amp;EC Acquisition. In reaching its conclusion that the
M&amp;EC Acquisition was fair to, and in the best interest of, the Company and
its shareholders, the Company's Board of Directors also considered, among other
factors:</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;its
knowledge of the business operations, properties, assets, and prospects of the
Company and M&amp;EC; </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;current
industry, economic and market conditions; </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
terms of the Purchase Agreement; <STRONG></STRONG></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)<STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</STRONG>the
uniqueness of the M&amp;EC facility;</FONT></P>
<P align="center"><font size="2">12</font></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
value of M&amp;EC's existing licenses and permits and the DOE Subcontracts; and
</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
prospect of integrating M&amp;EC into the Company's existing nuclear services
segment
which&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;would
result in the Company owning three of the five Mixed Waste facilities in the
United States.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
view of the variety of factors considered in connection with its evaluation of
the M&amp;EC Acquisition, the Company's Board did not find it practicable to,
and did not quantify or otherwise assign relative weights to, the specific
factors considered in reaching its determination. In addition, individual
members of the Company's Board may have given different weights to factors in
addition to those above.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
are not being asked to vote on the M&amp;EC Acquisition because the Company has
already completed the M&amp;EC Acquisition. The information regarding M&amp;EC
is being provided only to assist you in your consideration of Proposal 2 and to
satisfy the requirements of the Securities Exchange Act of 1934, as amended. If
Proposal 2 is not approved by the stockholders, the prior completion of the
M&amp;EC Acquisition will not be limited, restricted, or otherwise affected.
</FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>Risk Factors Applicable to
M&amp;EC Acquisition</U></STRONG></FONT><FONT face="CG Times Regular" size=-1>
</FONT></P>
<P><FONT face="CG Times Regular" size=-1></FONT><FONT face="CG Times"
size=-1><STRONG><EM>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M&amp;EC
does not have any operating history.</EM></STRONG></FONT><FONT face="CG Times"
size=-1><EM></EM></FONT></P>
<P><FONT face="CG Times"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because
M&amp;EC's Facility is newly constructed, M&amp;EC has a limited operating
history. If M&amp;EC does not generate sufficient monies we may not be able to
recoup our investment in M&amp;EC, M&amp;EC may not be able to operate
profitably or we may not recoup the amounts advanced to M&amp;EC. If we are
unable to effectively operate M&amp;EC to achieve profitability, the potential
growth of our business will be limited and our business, results of operations,
and financial condition would materially suffer.</FONT><FONT
face="CG Times Regular" size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1><STRONG><EM>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the DOE Subcontracts are canceled, M&amp;EC will lose its primary revenue
source.</EM></STRONG></FONT><FONT face="CG Times Regular" size=-1> </FONT><FONT
face="CG Times" size=-1></FONT></P>
<P><FONT face="CG Times"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most
of M&amp;EC's revenues are expected to be generated pursuant to the DOE
Subcontracts issued to M&amp;EC by Bechtel Jacobs Company LLC under contracts
that Bechtel Jacobs has received with the DOE. Each of these subcontracts
provides that the DOE may terminate the contracts under which the subcontracts
were issued on 30 days' notice. If we fail to maintain, renew, or replace these
contracts, M&amp;EC's revenues will be materially reduced, and your investment
will be materially and adversely affected.</FONT></P>
<P><STRONG><EM><FONT face="CG Times"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M&amp;EC's
substantial debt could reduce
the funds available for our operation and our ability to
obtain<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
additional financing. </FONT></EM> </STRONG></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
December 31, 2001, M&amp;EC's aggregate debt was approximately $5.8 million.
M&amp;EC's leverage could have material adverse consequences on our ability to
operate the business, including the following:</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Funds
available for our operations and general corporate purposes or for capital
expenditures will
be&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;reduced
because a substantial portion of M&amp;EC's cash flow from operations will be
dedicated to
the&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;payment
of the principal and interest on M&amp;EC's indebtedness;</FONT><FONT
color=#ff0000 face="CG Times Regular" size=-1>  </FONT><FONT face="CG Times Regular" size=-1> and</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
ability to obtain financing in the future for refinancing indebtedness, working
capital,
capital&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;expenditures,
or other purposes may be impaired.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M&amp;EC's ability to make
principal and interest payments, or to refinance indebtedness, will depend upon
M&amp;EC's and the Company's future operating performance and cash
flow.&nbsp; An event of default, which is not cured or waived, under financial and operating covenants
contained in M&amp;EC's debt instruments, could result in,</FONT><FONT face="CG Times Regular" size=-1> and have, a material
adverse effect on us.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1><STRONG><EM>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
M&amp;EC cannot maintain its government permits, M&amp;EC will not be able to
continue its operations. </EM></STRONG></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M&amp;EC
is 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, recycling, disposal, and transportation of hazardous and
non-hazardous waste and low-level radioactive waste. M&amp;EC must maintain its
current permits, licenses and/or approvals to conduct such activities in
compliance with such laws and regulations. Failure to maintain such permits,
licenses and/or approvals or to obtain any necessary permits, licenses and/or
approvals in the future would have a material adverse effect on our operations
and financial condition. </FONT></P>
<P align="center"><font face="CG Times Regular" size="-1">13</font></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular" size=-1></FONT><FONT face="CG Times"
size=-1><STRONG><EM>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
environmental regulation or enforcement is relaxed, the demand for M&amp;EC's
services will decrease.</EM></STRONG></FONT></P>
<P><FONT face="CG Times"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
demand for M&amp;EC's services is substantially dependent upon the public's
concern with, and the continuation and proliferation of, the laws and
regulations governing the treatment, storage, recycling, and disposal of
hazardous, and low-level radioactive waste. A decrease in the level of public
concern, the repeal or modification of such laws, or any significant relaxation
of regulations relating to the treatment, storage, recycling, and disposal of
hazardous waste and low-level radioactive waste would significantly reduce the
demand for our services and could have a material adverse effect on M&amp;EC's
operations and financial condition. We are not currently aware of any current
federal or state government or agency efforts in which a moratorium or
limitation has been, or will be, placed upon the creation of new hazardous waste
regulations that would have a material adverse effect on M&amp;EC.</FONT><FONT
face="CG Times Regular" size=-1></FONT></P>
<P><FONT face="CG Times Regular" size=-1></FONT><FONT face="CG Times"
size=-1><STRONG><EM>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M&amp;EC's
nuclear waste management services subject M&amp;EC to potential environmental
liability.</EM></STRONG></FONT></P>
<P><FONT face="CG Times"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
business of rendering services in connection with certain types of hazardous
waste and low-level radioactive waste subjects M&amp;EC to risks of liability
for damages.<STRONG></STRONG></FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>Changes in Accountants</U>
</STRONG></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;</FONT>&nbsp;<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
conjunction with the M&amp;EC Acquisition, on June 25, 2001, M&amp;EC dismissed
Willard L. Carr, CPA, P.C. and retained Gallogly, Fernandez &amp; Riley, LLP to
audit the consolidated financial statements of M&amp;EC for the fiscal years
ended December 31, 2000 and 1999.</font></P>
<P><font face="CG Times Regular"><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="CG Times Regular" size=-1>Willard L. Carr, CPA, P.C. had
audited M&amp;EC's financial statements for the years ended December 31, 1998
and 1997. The reports on such financial statements did not contain an adverse
opinion or disclaimer of opinion, nor were the reports modified as to
uncertainty, audit scope or accounting principles. There were no disagreements
between M&amp;EC and Willard L. Carr, CPA, P.C. on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure.</FONT></font></P>
<P><font face="CG Times Regular"><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="CG Times Regular" size=-1>During the two most recent
fiscal years and the period prior to their appointment, M&amp;EC did not consult
with Gallogly Fernandez &amp; Riley, LLP regarding the application of accounting
principles to a specific transaction or the type of audit opinion that might be
rendered on the financial statements. </FONT></font></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Willard
L. Carr, CPA, P.C. has furnished M&amp;EC with a letter which is filed as an
exhibit to this Proxy Statement.</FONT></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular" size=-1>14</FONT></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular" size=-1><STRONG></STRONG></FONT><FONT
face="CG Times Regular" size=-1><STRONG>
<CENTER>SELECTED HISTORICAL FINANCIAL DATA OF THE
COMPANY</STRONG></CENTER></FONT>
<P><FONT face="CG Times Regular" size=-1>The financial data included in this
table has been derived from our audited consolidated financial statements.
Financial statements for the years ended December 31, 2001, 2000, 1999, 1998,
and 1997 have been audited by BDO Seidman, LLP. When you read this selected
historical financial data, it is important that you also read the historical
financial statements and related notes incorporated by reference in this Proxy
Statement.</FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG>Statement of Operations
Data:</STRONG> </FONT></P>
<TABLE width=653>
  <TR vAlign=top>
    <TD width=230><FONT face="CG Times Regular" size=2>(Amounts in Thousands,
      Except for&nbsp;<BR>Share Amounts)</FONT></TD>
    <TD align=middle width=409>
      <P align=center><FONT size=2><BR>December 31,</FONT></P></TD></TR>
  <TR vAlign=top>
    <TD width=230></TD>
    <TD align=middle width=409>
      <HR color=#000080 noShade SIZE=3>
    </TD></TR></TABLE>
<TABLE width="100%">
  <TR vAlign=top>
    <TD align=left></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom>
      <p align="center"><FONT face="CG Times Regular"
      size=-1>2001<SUP>(4)</SUP></FONT></p>
    </TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom>
      <p align="center"><FONT face="CG Times Regular"
      size=-1>2000<SUP>(3)</SUP></FONT></p>
    </TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom>
      <p align="center"><FONT face="CG Times Regular"
      size=-1>1999<sup>(1)</sup></FONT></p>
    </TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom>
      <p align="center"><FONT face="CG Times Regular"
      size=-1>1998</FONT></p>
    </TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom>
      <p align="center"><FONT face="CG Times Regular"
      size=-1>1997</FONT></p>
    </TD>
    <TD align=middle vAlign=bottom></TD></TR>
  <TR vAlign=top>
    <TD align=left></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=bottom></TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular"
      size=-1>Revenues<SUP>(2)</SUP></FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>$</FONT></TD>
    <TD align=right><font face="CG Times Regular" size="-1">74,492&nbsp;&nbsp;</font></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>$</FONT></TD>
    <TD align=right><font face="CG Times Regular" size="-1">59,139&nbsp;&nbsp;</font></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>$</FONT></TD>
    <TD align=right><font face="CG Times Regular" size="-1">46,464&nbsp;&nbsp;</font></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>$</FONT></TD>
    <TD align=right><font face="CG Times Regular" size="-1">30,551&nbsp;&nbsp;</font></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>$</FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>28,413&nbsp;&nbsp;</FONT></TD>
    <TD align=right></TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular" size=2>Net income (loss)
      from<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;continuing operations</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=2>(602)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><font size="2">(556)</font></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><font size="2">1,570&nbsp;&nbsp;</font></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT size=2>462&nbsp;&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><font size="2">192&nbsp;&nbsp;</font></TD>
    <TD align=right></TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular" size=2>Net loss from
      discontinued<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;operations</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=2>--</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT size=2>--</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT size=2>--&nbsp;&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><font size="2">--&nbsp;&nbsp;</font></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT size=2>(4,101)</FONT></TD>
    <TD align=right></TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular" size=2>Preferred Stock
      dividends</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=2>(145)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=2>(206)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=2>(308)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><font face="CG Times Regular" size="2">(1,160)&nbsp;</font></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=2>(1,260)</FONT></TD>
    <TD align=right></TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular" size=2>Gain on Preferred
      Stock<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;redemption</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=2>--</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><font size="2">--</font></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><font size="2">188&nbsp;&nbsp;</font></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT size=2>--</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT size=2>--</FONT></TD>
    <TD align=right></TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular" size=2>Net income (loss)
      applicable<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to Common Stock
      from<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;continuing operations</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=2>(747)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><font size="2">(762)</font></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><font size="2">1,450&nbsp;&nbsp;</font></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT size=2>(698)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT size=2>(1,068)</FONT></TD>
    <TD align=right></TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular" size=-1>Basic net income
      (loss) per<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common share
      from<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;continuing
      operations<SUP>(1)</SUP></FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=2>(.03)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT size=2>(.04)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT size=2>.08&nbsp;&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT size=2>(.06)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right>
      <P><FONT face="CG Times Regular" size=2>(.10)</FONT></P></TD>
    <TD align=right></TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular" size=-1>Diluted net income
      (loss) per<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common share
      from<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;continuing
      operations<SUP>(1)</SUP></FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=2>(.03)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><font size="2">(.04)</font></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT size=2>.07&nbsp;&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT size=2>(.06)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT size=2>(.10)</FONT></TD>
    <TD align=right></TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular" size=2>Basic number of
      shares<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;used in computing
      net<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;income (loss) per
      share<SUP>(1)</SUP></FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=2>27,235&nbsp;&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><font size="2">21,558&nbsp;&nbsp;</font></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT size=2>17,488&nbsp;&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT size=2>12,028&nbsp;&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT size=2>10,650&nbsp;&nbsp;</FONT></TD>
    <TD align=right></TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular" size=2>Diluted number of
      shares and<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;potential common
      shares<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;used in computing
      net<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;income (loss) per
      share<SUP>(1)</SUP></FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT size=2>27,235&nbsp;&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=2>21,558&nbsp;&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><font face="CG Times Regular" size="2">21,224&nbsp;&nbsp;</font></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT size=2>12,028&nbsp;&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><font size="2">10,650&nbsp;&nbsp;</font></TD>
    <TD align=right></TD></TR>
  <TR vAlign=bottom>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD></TR></TABLE>
<P><FONT face="CG Times Regular" size=-1></FONT><FONT face="CG Times Regular"
size=-1></FONT><FONT face="CG Times Regular" size=-1></FONT><FONT
face="CG Times Regular" size=-1></FONT><FONT face="CG Times Regular"
size=-1><B>Balance Sheet Data:</B></FONT></P>
<TABLE width=653>
  <TR vAlign=top>
    <TD width=205></TD>
    <TD align=middle width=434>
      <P align=center><FONT face="CG Times Regular" size=-1>December
      31,</FONT></P></TD></TR>
  <TR vAlign=top>
    <TD width=205></TD>
    <TD align=middle width=434>
      <HR color=#000080 noShade SIZE=3>
    </TD></TR></TABLE>
<TABLE width=653>
  <TR vAlign=top>
    <TD align=right width=197></TD>
    <TD align=middle vAlign=center width=4></TD>
    <TD align=center vAlign=center width=62><FONT face="CG Times Regular"
      size=-1>2001</FONT></TD>
    <TD align=center vAlign=center width=9></TD>
    <TD align=center vAlign=center width=9></TD>
    <TD align=center vAlign=center width=55><font face="CG Times Regular" size="-1">2000</font></TD>
    <TD align=center vAlign=center width=9></TD>
    <TD align=center vAlign=center width=9></TD>
    <TD align=center vAlign=center width=52><FONT face="CG Times Regular"
      size=-1>1999</FONT></TD>
    <TD align=center vAlign=center width=9></TD>
    <TD align=center vAlign=center width=9></TD>
    <TD align=center vAlign=center width=52><FONT face="CG Times Regular"
      size=-1>1998</FONT></TD>
    <TD align=center vAlign=center width=9></TD>
    <TD align=center vAlign=center width=9></TD>
    <TD align=center vAlign=center width=52><FONT face="CG Times Regular"
      size=-1>1997</FONT></TD>
    <TD align=middle vAlign=bottom width=9></TD></TR>
  <TR vAlign=top>
    <TD align=right width=197></TD>
    <TD align=middle vAlign=center width=4></TD>
    <TD align=middle vAlign=center width=62>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=center width=9></TD>
    <TD align=middle vAlign=center width=9></TD>
    <TD align=middle vAlign=center width=55>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=center width=9></TD>
    <TD align=middle vAlign=center width=9></TD>
    <TD align=middle vAlign=center width=52>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=center width=9></TD>
    <TD align=middle vAlign=center width=9></TD>
    <TD align=middle vAlign=center width=52>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=center width=9></TD>
    <TD align=middle vAlign=center width=9></TD>
    <TD align=middle vAlign=center width=52>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=bottom width=9></TD></TR>
  <TR vAlign=top>
    <TD align=left width=197><FONT face="CG Times Regular" size=-1>Working
      capital (deficit)</FONT></TD>
    <TD align=middle vAlign=bottom width=4></TD>
    <TD align=right width=62><font face="CG Times Regular" size="-1">831</font></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=right width=55><FONT face="CG Times Regular"
      size=-1>(2,829)</FONT></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=right width=52><font face="CG Times Regular" size="-1">(1,400)</font></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=right width=52><font face="CG Times Regular" size="-1">372</font></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=right width=52><font face="CG Times Regular" size="-1">754</font></TD>
    <TD align=middle vAlign=bottom width=9></TD></TR>
  <TR vAlign=top>
    <TD align=left width=197><FONT face="CG Times Regular" size=-1>Total
      assets</FONT></TD>
    <TD align=middle vAlign=bottom width=4></TD>
    <TD align=right width=62><font face="CG Times Regular" size="-1">99,131</font></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=right width=55><font face="CG Times Regular" size="-1">72,771&nbsp;&nbsp;</font></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=right width=52><font face="CG Times Regular" size="-1">54,644&nbsp;&nbsp;</font></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=right width=52><font face="CG Times Regular" size="-1">28,748</font></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=right width=52><FONT face="CG Times Regular"
      size=-1>28,570</FONT></TD>
    <TD align=middle vAlign=bottom width=9></TD></TR>
  <TR vAlign=top>
    <TD align=left width=197><FONT face="CG Times Regular" size=-1>Long-term
      debt</FONT></TD>
    <TD align=middle vAlign=bottom width=4></TD>
    <TD align=right width=62><font face="CG Times Regular" size="-1">31,146</font></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=right width=55><font face="CG Times Regular" size="-1">25,490&nbsp;&nbsp;</font></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=right width=52><font face="CG Times Regular" size="-1">15,302&nbsp;&nbsp;</font></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=right width=52><font face="CG Times Regular" size="-1">3,042</font></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=right width=52><font face="CG Times Regular" size="-1">4,981</font></TD>
    <TD align=middle vAlign=bottom width=9></TD></TR>
  <TR vAlign=top>
    <TD align=left width=197><FONT face="CG Times Regular" size=-1>Total
      liabilities</FONT></TD>
    <TD align=middle vAlign=bottom width=4></TD>
    <TD align=right width=62><font face="CG Times Regular" size="-1">56,011</font></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=right width=55><font face="CG Times Regular" size="-1">50,751&nbsp;&nbsp;</font></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=right width=52><font face="CG Times Regular" size="-1">34,825&nbsp;&nbsp;</font></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=right width=52><font face="CG Times Regular" size="-1">12,795</font></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=right width=52><font face="CG Times Regular" size="-1">16,376</font></TD>
    <TD align=middle vAlign=bottom width=9></TD></TR>
  <TR vAlign=top>
    <TD align=left width=197><FONT face="CG Times Regular"
      size=-1>Stockholders' equity</FONT></TD>
    <TD align=middle vAlign=bottom width=4></TD>
    <TD align=right width=62><font face="CG Times Regular" size="-1">41,841</font></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=right width=55><font face="CG Times Regular" size="-1">22,020&nbsp;&nbsp;</font></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=right width=52><font face="CG Times Regular" size="-1">19,819&nbsp;&nbsp;</font></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=right width=52><FONT face="CG Times Regular"
      size=-1>15,953</FONT></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=middle vAlign=bottom width=9></TD>
    <TD align=right width=52><FONT face="CG Times Regular"
      size=-1>12,194</FONT></TD>
    <TD align=middle vAlign=bottom width=9></TD></TR></TABLE>
<P align=center><FONT size=2>15</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"
size=-1>(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Includes financial data of PFO,
PFSG and PFMI as acquired during 1999 and accounted for using
the&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;purchase
method of accounting from the date of acquisition, June 1, 1999.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Excludes revenues of Perma-Fix of
Memphis, Inc., shown elsewhere as a discontinued operation.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Includes financial data of
DSSI as acquired during 2000 and accounted for using the purchase
method&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
accounting from the date of acquisition, August 31, 2000.<br>
<br>
(4)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Includes financial data of M&amp;EC as
acquired during 2001 and accounted for using the purchase method<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of accounting from
the date of acquisition, June 25, 2001.<BR></FONT></P>
<P><FONT face="CG Times Regular"></FONT><FONT face="CG Times Regular">
<CENTER></FONT><FONT face="CG Times Regular" size=-1><STRONG>SELECTED HISTORICAL
FINANCIAL DATA OF M&amp;EC</STRONG></CENTER></FONT>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
financial data included in this table has been derived from M&amp;EC's audited
consolidated financial statements. Financial statements for the years ended
December 31, 2000 and 1999 have been audited by Gallogly, Fernandez and Riley,
LLP</FONT><font face="CG Times Regular"><FONT
size=-1>, </FONT></font><FONT face="CG Times Regular" size=-1> and the years
ended December 31, 1998 and 1997 are derived from audited financial statements
not presented herein. When you
read this selected historical financial data, it is important that you also read
the historical financial statements and related notes incorporated by reference
in this Proxy Statement. </FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG>Statement of Operations
Data:</STRONG> </FONT></P>
<TABLE width=653>
  <TR vAlign=top>
    <TD width=276><FONT face="CG Times Regular" size=-1>(Amounts in Thousands,
      Except<BR>for Share Amounts)</FONT></TD>
    <TD align=middle width=363>
      <P align=center><BR WP="BR1"><FONT face="CG Times Regular"
      size=-1>December 31,</FONT></P></TD></TR>
  <TR vAlign=top>
    <TD width=276></TD>
    <TD align=middle width=363>
      <HR color=#000080 noShade SIZE=3>
    </TD></TR></TABLE>
<TABLE width="100%">
  <TR vAlign=top>
    <TD align=left></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=center vAlign=bottom><FONT face="CG Times Regular"
      size=-1>2000</FONT></TD>
    <TD align=center vAlign=bottom></TD>
    <TD align=center vAlign=bottom></TD>
    <TD align=center vAlign=bottom><FONT face="CG Times Regular"
      size=-1>1999</FONT></TD>
    <TD align=center vAlign=bottom></TD>
    <TD align=center vAlign=bottom></TD>
    <TD align=center vAlign=bottom><FONT face="CG Times Regular"
      size=-1>1998</FONT></TD>
    <TD align=center vAlign=bottom></TD>
    <TD align=center vAlign=bottom></TD>
    <TD align=center vAlign=bottom><FONT face="CG Times Regular"
      size=-1>1997(1)</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom>
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular" size=-1>Revenues(2)</FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>$</FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>905</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>$</FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>1,208</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>$</FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>175</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>$</FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>-</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular" size=-1>Net loss</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>(1,452)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>(1,962)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>(930)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>(113)</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular" size=-1>Preferred Stock
      dividends</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>(349)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>(282)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>-</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>-</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular" size=-1>Net loss applicable
      to Common Stock</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>(1,801)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>(2,244)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>(930)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>(113)</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular" size=-1>Basic net loss per
      common share:</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>(.87)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>(1.10)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>(.51)</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>(.08)</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular" size=-1>Basic number of
      shares used in<BR>&nbsp;&nbsp;&nbsp;computing net loss per share</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>2,066,700</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>2,047,950</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>1,837,000</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular"
  size=-1>1,500,000</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD></TR></TABLE>
<P><FONT face="CG Times Regular" size=-1><STRONG>Balance Sheet
Data:</STRONG></FONT></P>
<TABLE width=653>
  <TR vAlign=top>
    <TD width=274></TD>
    <TD align=middle width=365>
      <P align=center><FONT face="CG Times Regular" size=-1>December
      31,</FONT></P></TD></TR>
  <TR vAlign=top>
    <TD width=274></TD>
    <TD align=middle width=365>
      <HR color=#000080 noShade SIZE=3>
    </TD></TR></TABLE>
<TABLE width="100%">
  <TR vAlign=top>
    <TD align=left></TD>
    <TD align=middle vAlign=center></TD>
    <TD align=center vAlign=center><FONT face="CG Times Regular"
      size=-1>2000</FONT></TD>
    <TD align=center vAlign=center></TD>
    <TD align=center vAlign=center></TD>
    <TD align=center vAlign=center><FONT face="CG Times Regular"
      size=-1>1999</FONT></TD>
    <TD align=center vAlign=center></TD>
    <TD align=center vAlign=center></TD>
    <TD align=center vAlign=center><FONT face="CG Times Regular"
      size=-1>1998</FONT></TD>
    <TD align=center vAlign=center></TD>
    <TD align=center vAlign=center></TD>
    <TD align=center vAlign=center><FONT face="CG Times Regular"
      size=-1>1997</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left></TD>
    <TD align=middle vAlign=center></TD>
    <TD align=middle vAlign=center>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=center></TD>
    <TD align=middle vAlign=center></TD>
    <TD align=middle vAlign=center>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=center></TD>
    <TD align=middle vAlign=center></TD>
    <TD align=middle vAlign=center>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=center></TD>
    <TD align=middle vAlign=center></TD>
    <TD align=middle vAlign=center>
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT face="CG Times Regular" size=-1>Working capital
      (deficit)</FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>(11,763)</FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>(5,011)</FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>(1,662)</FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>-</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT face="CG Times Regular" size=-1>Total
assets</FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right><FONT face="CG Times Regular"
    size=-1>11,303&nbsp;</FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right><FONT face="CG Times Regular"
size=-1>6,040&nbsp;</FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>3,277</FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>442</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT face="CG Times Regular" size=-1>Long-term
    debt</FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>763&nbsp;</FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>448&nbsp;</FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right><FONT face="CG Times Regular"
size=-1>1,348&nbsp;</FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>-</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT face="CG Times Regular" size=-1>Total
      liabilities</FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right><FONT face="CG Times Regular"
    size=-1>13,108&nbsp;</FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right><FONT face="CG Times Regular"
size=-1>6,469&nbsp;</FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right><FONT face="CG Times Regular"
size=-1>3,091&nbsp;</FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>-</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT face="CG Times Regular" size=-1>Stockholders' equity
      (deficit)</FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>(3,097)</FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>(1,371)</FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>186&nbsp;</FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right><FONT face="CG Times Regular"
  size=-1>442</FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular"
size=-1>(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M&amp;EC was established effective
December 4, 1997.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue during start-up period was due
to engineering services.</FONT></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular" size=-1>16</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular" size=-1>
<CENTER><STRONG>SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
DATA</STRONG></CENTER></FONT>
<P><FONT face="CG Times Regular"
size=-1><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following Selected Unaudited Pro Forma Condensed Combined Financial Data should
be referenced in conjunction with the Selected Historical Financial Information
and separate Historical Financial Statements of the Company and M&amp;EC
included elsewhere or incorporated by reference in this Proxy
Statement.</FONT></P>
<TABLE border=0 cellSpacing=1 width=651>
  <TR>
    <TD colSpan=10 height=21 vAlign=top width=629><B>
      <P align=center><FONT size=2>Unaudited Pro Forma Condensed
      Combined<BR>Statement of Operations<BR>For the Year Ended December 31,
      2001</FONT></B></P></TD></TR>
  <TR>
    <TD height=17 vAlign=top width=27>
      <P></P></TD>
    <TD height=17 vAlign=top width=20>
      <P></P></TD>
    <TD height=17 vAlign=top width=214>
      <P></P></TD>
    <TD height=17 vAlign=top width=72>
      <P></P></TD>
    <TD height=17 vAlign=top width=4>
      <P></P></TD>
    <TD height=17 vAlign=top width=70>
      <P></P></TD>
    <TD height=17 vAlign=top width=2>
      <P></P></TD>
    <TD height=17 vAlign=top width=71>
      <P></P></TD>
    <TD height=17 vAlign=top width=32>
      <P></P></TD>
    <TD height=17 vAlign=top width=65>
      <P></P></TD></TR>
  <TR>
    <TD height=17 vAlign=top width=27>
      <P></P></TD>
    <TD height=17 vAlign=top width=20>
      <P></P></TD>
    <TD height=17 vAlign=top width=214>
      <P></P></TD>
    <TD height=17 vAlign=top width=72>
      <P></P></TD>
    <TD height=17 vAlign=top width=4>
      <P></P></TD>
    <TD height=17 vAlign=top width=70>
      <P></P></TD>
    <TD height=17 vAlign=top width=2>
      <P></P></TD>
    <TD height=17 vAlign=top width=71>
      <P></P></TD>
    <TD height=17 vAlign=top width=32>
      <P></P></TD>
    <TD height=17 vAlign=top width=65>
      <P></P></TD></TR>
  <TR>
    <TD colSpan=3 height=17 vAlign=top width=277><FONT size=2>
      <P>(Amounts in Thousands Except for Per Share Data)</FONT></P></TD>
    <TD height=17 vAlign=top width=72><FONT size=2>
      <P align=center>Perma-Fix</FONT></P></TD>
    <TD height=17 vAlign=top width=4>
      <P></P></TD>
    <TD height=17 vAlign=top width=70><FONT size=2>
      <P align=center>M&amp;EC</FONT></P></TD>
    <TD height=17 vAlign=top width=2>
      <P></P></TD>
    <TD height=17 vAlign=top width=71><FONT size=2>
      <P>Adjustments</FONT></P></TD>
    <TD height=17 vAlign=top width=32>
      <P></P></TD>
    <TD height=17 vAlign=top width=65><FONT size=2>
      <P>Pro Forma</FONT></P></TD></TR>
  <TR>
    <TD colSpan=10 height=17 vAlign=top width=629>
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD colSpan=3 height=28 vAlign=top width=277><FONT size=2>
      <P>Revenues</FONT></P></TD>
    <TD height=28 vAlign=top width=72><FONT size=2>
      <P
      align=right>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;74,492&nbsp;&nbsp;</FONT></P></TD>
    <TD height=28 vAlign=top width=4>
      <P></P></TD>
    <TD height=28 vAlign=top width=70><FONT size=2>
      <P
      align=right>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;167</FONT></P></TD>
    <TD height=28 vAlign=top width=2>
      <P></P></TD>
    <TD height=28 vAlign=top width=71><FONT size=2>
      <P>$</FONT></P></TD>
    <TD height=28 vAlign=top width=32>
      <P></P></TD>
    <TD height=28 vAlign=top width=65><FONT size=2>
      <P
    align=right>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;74,659&nbsp;&nbsp;</FONT></P></TD></TR>
  <TR>
    <TD colSpan=3 height=28 vAlign=top width=277><FONT size=2>
      <P>Cost of goods sold</FONT></P></TD>
    <TD height=28 vAlign=top width=72><P align=right><font size="2">49,719&nbsp;&nbsp;</font></P></TD>
    <TD height=28 vAlign=top width=4>
      <P></P></TD>
    <TD height=28 vAlign=top width=70><FONT size=2>
      <P align=right>127</FONT></P></TD>
    <TD height=28 vAlign=top width=2>
      <P></P></TD>
    <TD height=28 vAlign=top width=71>
      <P></P></TD>
    <TD height=28 vAlign=top width=32>
      <P></P></TD>
    <TD height=28 vAlign=top width=65><P align=right><font size="2">49,846&nbsp;&nbsp;</font></P></TD></TR>
  <TR>
    <TD colSpan=3 height=28 vAlign=top width=277></TD>
    <TD height=28 vAlign=top width=72>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD height=28 vAlign=top width=4></TD>
    <TD height=28 vAlign=top width=70>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD height=28 vAlign=top width=2></TD>
    <TD height=28 vAlign=top width=71></TD>
    <TD height=28 vAlign=top width=32></TD>
    <TD height=28 vAlign=top width=65>
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD height=28 vAlign=top width=27>
      <P></P></TD>
    <TD height=28 vAlign=top width=20>
      <P></P></TD>
    <TD height=28 vAlign=top width=214><FONT size=2>
      <P>Gross profit</FONT></P></TD>
    <TD height=28 vAlign=top width=72><P align=right><font size="2">24,773&nbsp;&nbsp;</font></P></TD>
    <TD height=28 vAlign=top width=4>
      <P></P></TD>
    <TD height=28 vAlign=top width=70><FONT size=2>
      <P align=right>40</FONT></P></TD>
    <TD height=28 vAlign=top width=2>
      <P></P></TD>
    <TD height=28 vAlign=top width=71>
      <P></P></TD>
    <TD height=28 vAlign=top width=32>
      <P></P></TD>
    <TD height=28 vAlign=top width=65>
      <P align=right><font size="2">24,813&nbsp;</font></P></TD></TR>
  <TR>
    <TD colSpan=3 height=28 vAlign=top width=277><FONT size=2>
      <P>Selling, general and administrative</FONT></P></TD>
    <TD height=28 vAlign=top width=72><P align=right><font size="2">14,738&nbsp;&nbsp;</font></P></TD>
    <TD height=28 vAlign=top width=4>
      <P></P></TD>
    <TD height=28 vAlign=top width=70><FONT size=2>
      <P align=right>2,279</FONT></P></TD>
    <TD height=28 vAlign=top width=2>
      <P></P></TD>
    <TD height=28 vAlign=top width=71>
      <P></P></TD>
    <TD height=28 vAlign=top width=32>
      <P></P></TD>
    <TD height=28 vAlign=top width=65><P align=right><font size="2">17,017</font>&nbsp;</P></TD></TR>
  <TR>
    <TD colSpan=3 height=28 vAlign=top width=277><FONT size=2>
      <P>Depreciation and amortization</FONT></P></TD>
    <TD height=28 vAlign=top width=72><P align=right><font size="2">4,616&nbsp;&nbsp;</font></P></TD>
    <TD height=28 vAlign=top width=4>
      <P></P></TD>
    <TD height=28 vAlign=top width=70><FONT size=2>
      <P align=right>130</FONT></P></TD>
    <TD height=28 vAlign=top width=2>
      <P></P></TD>
    <TD height=28 vAlign=top width=71><FONT size=2>
      <P align=right>451</FONT></P></TD>
    <TD height=28 vAlign=top width=32>
      <P><FONT size=2>(a),(b)</FONT></P></TD>
    <TD height=28 vAlign=top width=65><P align=right><font size="2">5,197&nbsp;</font></P></TD></TR>
  <TR>
    <TD colSpan=3 height=28 vAlign=top width=277></TD>
    <TD height=28 vAlign=top width=72>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD height=28 vAlign=top width=4></TD>
    <TD height=28 vAlign=top width=70>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD height=28 vAlign=top width=2></TD>
    <TD height=28 vAlign=top width=71>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD height=28 vAlign=top width=32></TD>
    <TD height=28 vAlign=top width=65>
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD height=28 vAlign=top width=27>
      <P></P></TD>
    <TD height=28 vAlign=top width=20>
      <P></P></TD>
    <TD height=28 vAlign=top width=214><FONT size=2>
      <P>Income (loss) from operations</FONT></P></TD>
    <TD height=28 vAlign=top width=72><P align=right><font size="2">5,419&nbsp;&nbsp;</font></P></TD>
    <TD height=28 vAlign=top width=4>
      <P></P></TD>
    <TD height=28 vAlign=top width=70><FONT size=2>
      <P align=right>(2,369)</FONT></P></TD>
    <TD height=28 vAlign=top width=2>
      <P></P></TD>
    <TD height=28 vAlign=top width=71><FONT size=2>
      <P align=right>(451)</FONT></P></TD>
    <TD height=28 vAlign=top width=32>
      <P></P></TD>
    <TD height=28 vAlign=top width=65>
      <P align=right><font size="2">2,599&nbsp;</font></P></TD></TR>
  <TR>
    <TD colSpan=3 height=28 vAlign=top width=277><FONT size=2>
      <P>Other income (expense):</FONT></P></TD>
    <TD height=28 vAlign=top width=72>
      <P></P></TD>
    <TD height=28 vAlign=top width=4>
      <P></P></TD>
    <TD height=28 vAlign=top width=70>
      <P></P></TD>
    <TD height=28 vAlign=top width=2>
      <P></P></TD>
    <TD height=28 vAlign=top width=71>
      <P></P></TD>
    <TD height=28 vAlign=top width=32>
      <P></P></TD>
    <TD height=28 vAlign=top width=65>
      <P></P></TD></TR>
  <TR>
    <TD height=28 vAlign=top width=27>
      <P></P></TD>
    <TD colSpan=2 height=28 vAlign=top width=242><FONT size=2>
      <P>Interest income</FONT></P></TD>
    <TD height=28 vAlign=top width=72><P align=right><font size="2">29&nbsp;&nbsp;</font></P></TD>
    <TD height=28 vAlign=top width=4>
      <P></P></TD>
    <TD height=28 vAlign=top width=70><FONT size=2>
      <P align=right>-</FONT></P></TD>
    <TD height=28 vAlign=top width=2>
      <P></P></TD>
    <TD height=28 vAlign=top width=71>
      <P></P></TD>
    <TD height=28 vAlign=top width=32>
      <P></P></TD>
    <TD height=28 vAlign=top width=65>
      <P align=right><font size="2">29&nbsp;</font></P></TD></TR>
  <TR>
    <TD height=28 vAlign=top width=27>
      <P></P></TD>
    <TD colSpan=2 height=28 vAlign=top width=242><FONT size=2>
      <P>Interest expense</FONT></P></TD>
    <TD height=28 vAlign=top width=72><FONT size=2>
      <P align=right>(6,004)</FONT></P></TD>
    <TD height=28 vAlign=top width=4>
      <P></P></TD>
    <TD height=28 vAlign=top width=70><FONT size=2>
      <P align=right>(14)</FONT></P></TD>
    <TD height=28 vAlign=top width=2>
      <P></P></TD>
    <TD height=28 vAlign=top width=71><FONT size=2>
      <P align=right>10</FONT></P></TD>
    <TD height=28 vAlign=top width=32>
      <P><FONT size=2>(c)</FONT></P></TD>
    <TD height=28 vAlign=top width=65><FONT size=2>
      <P align=right>(6,008)</FONT></P></TD></TR>
  <TR>
    <TD height=28 vAlign=top width=27>
      <P></P></TD>
    <TD colSpan=2 height=28 vAlign=top width=242><FONT size=2>
      <P>Other income (expense)</FONT></P></TD>
    <TD height=28 vAlign=top width=72><FONT size=2>
      <P align=right>(46)</FONT></P></TD>
    <TD height=28 vAlign=top width=4>
      <P></P></TD>
    <TD height=28 vAlign=top width=70><FONT size=2>
      <P align=right>-</FONT></P></TD>
    <TD height=28 vAlign=top width=2>
      <P></P></TD>
    <TD height=28 vAlign=top width=71>
      <P></P></TD>
    <TD height=28 vAlign=top width=32>
      <P></P></TD>
    <TD height=28 vAlign=top width=65><FONT size=2>
      <P align=right>(46)</FONT></P></TD></TR>
  <TR>
    <TD height=28 vAlign=top width=27></TD>
    <TD colSpan=2 height=28 vAlign=top width=242></TD>
    <TD height=28 vAlign=top width=72>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD height=28 vAlign=top width=4></TD>
    <TD height=28 vAlign=top width=70>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD height=28 vAlign=top width=2></TD>
    <TD height=28 vAlign=top width=71>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD height=28 vAlign=top width=32></TD>
    <TD height=28 vAlign=top width=65>
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD height=28 vAlign=top width=27>
      <P></P></TD>
    <TD height=28 vAlign=top width=20>
      <P></P></TD>
    <TD height=28 vAlign=top width=214><FONT size=2>
      <P>Net loss</FONT></P></TD>
    <TD height=28 vAlign=top width=72><FONT size=2>
      <P align=right>(602)</FONT></P></TD>
    <TD height=28 vAlign=top width=4>
      <P></P></TD>
    <TD height=28 vAlign=top width=70><FONT size=2>
      <P align=right>(2,383)</FONT></P></TD>
    <TD height=28 vAlign=top width=2>
      <P></P></TD>
    <TD height=28 vAlign=top width=71><FONT size=2>
      <P align=right>(441)</FONT></P></TD>
    <TD height=28 vAlign=top width=32>
      <P></P></TD>
    <TD height=28 vAlign=top width=65><FONT size=2>
      <P align=right>(3,426)</FONT></P></TD></TR>
  <TR>
    <TD colSpan=3 height=28 vAlign=top width=277><FONT size=2>
      <P>Preferred stock dividends</FONT></P></TD>
    <TD height=28 vAlign=top width=72><FONT size=2>
      <P align=right>(145)</FONT></P></TD>
    <TD height=28 vAlign=top width=4>
      <P></P></TD>
    <TD height=28 vAlign=top width=70><FONT size=2>
      <P align=right>(1,954)</FONT></P></TD>
    <TD height=28 vAlign=top width=2>
      <P></P></TD>
    <TD height=28 vAlign=top width=71><FONT size=2>
      <P align=right>1,922</FONT></P></TD>
    <TD height=28 vAlign=top width=32>
      <P><FONT size=2>(d)</FONT></P></TD>
    <TD height=28 vAlign=top width=65><FONT size=2>
      <P align=right>(177)</FONT></P></TD></TR>
  <TR>
    <TD colSpan=3 height=28 vAlign=top width=277></TD>
    <TD height=28 vAlign=top width=72>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD height=28 vAlign=top width=4></TD>
    <TD height=28 vAlign=top width=70>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD height=28 vAlign=top width=2></TD>
    <TD height=28 vAlign=top width=71>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD height=28 vAlign=top width=32></TD>
    <TD height=28 vAlign=top width=65>
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD colSpan=3 height=28 vAlign=top width=277><FONT size=2>
      <P>Net loss applicable to Common Stock</FONT></P></TD>
    <TD height=28 vAlign=top width=72><FONT size=2>
      <P
      align=right>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(747)</FONT></P></TD>
    <TD height=28 vAlign=top width=4>
      <P></P></TD>
    <TD height=28 vAlign=top width=70><FONT size=2>
      <P
      align=right>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4,337)</FONT></P></TD>
    <TD height=28 vAlign=top width=2>
      <P></P></TD>
    <TD height=28 vAlign=top width=71><FONT size=2>
      <P
      align=right>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,481</FONT></P></TD>
    <TD height=28 vAlign=top width=32>
      <P></P></TD>
    <TD height=28 vAlign=top width=65><FONT size=2>
      <P
      align=right>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3,603)</FONT></P></TD></TR>
  <TR>
    <TD height=28 vAlign=top width=27>
      <P></P></TD>
    <TD height=28 vAlign=top width=20>
      <P></P></TD>
    <TD height=28 vAlign=top width=214>
      <P></P></TD>
    <TD height=28 vAlign=top width=72>
      <HR color=#000080 noShade SIZE=6>
    </TD>
    <TD height=28 vAlign=top width=4>
      <P></P></TD>
    <TD height=28 vAlign=top width=70>
      <HR color=#000080 noShade SIZE=6>
    </TD>
    <TD height=28 vAlign=top width=2>
      <P></P></TD>
    <TD height=28 vAlign=top width=71>
      <HR color=#000080 noShade SIZE=6>
    </TD>
    <TD height=28 vAlign=top width=32>
      <P></P></TD>
    <TD height=28 vAlign=top width=65>
      <HR color=#000080 noShade SIZE=6>
    </TD></TR>
  <TR>
    <TD colSpan=3 height=28 vAlign=top width=277><FONT size=2>
      <P>Basic and diluted net loss per common share</FONT></P></TD>
    <TD height=28 vAlign=top width=72><FONT size=2>
      <P
      align=right>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.03)</FONT></P></TD>
    <TD height=28 vAlign=top width=4>
      <P></P></TD>
    <TD height=28 vAlign=top width=70>
      <P></P></TD>
    <TD height=28 vAlign=top width=2>
      <P></P></TD>
    <TD height=28 vAlign=top width=71>
      <P></P></TD>
    <TD height=28 vAlign=top width=32>
      <P></P></TD>
    <TD height=28 vAlign=top width=65><FONT size=2>
      <P
      align=right>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(0.13)</FONT></P></TD></TR>
  <TR>
    <TD height=28 vAlign=top width=27>
      <P></P></TD>
    <TD height=28 vAlign=top width=20>
      <P></P></TD>
    <TD height=28 vAlign=top width=214>
      <P></P></TD>
    <TD height=28 vAlign=top width=72>
      <HR color=#000080 noShade SIZE=6>
    </TD>
    <TD height=28 vAlign=top width=4>
      <P></P></TD>
    <TD height=28 vAlign=top width=70>
      <P></P></TD>
    <TD height=28 vAlign=top width=2>
      <P></P></TD>
    <TD height=28 vAlign=top width=71>
      <P></P></TD>
    <TD height=28 vAlign=top width=32>
      <P></P></TD>
    <TD height=28 vAlign=top width=65>
      <HR color=#000080 noShade SIZE=6>
    </TD></TR>
  <TR>
    <TD colSpan=3 height=28 vAlign=top width=277><FONT size=2>
      <P>Weighted average number of common
      shares<BR>&nbsp;&nbsp;&nbsp;outstanding</FONT></P></TD>
    <TD height=28 vAlign=top width=72><FONT size=2>
      <P align=right><BR>27,235&nbsp;&nbsp;</FONT></P></TD>
    <TD height=28 vAlign=top width=4>
      <P></P></TD>
    <TD height=28 vAlign=top width=70>
      <P></P></TD>
    <TD height=28 vAlign=top width=2>
      <P></P></TD>
    <TD height=28 vAlign=top width=71><FONT size=2>
      <P align=right><BR>938</FONT></P></TD>
    <TD height=28 vAlign=top width=32>
      <P><FONT size=2><BR>(e)</FONT></P></TD>
    <TD height=28 vAlign=top width=65><FONT size=2>
      <P align=right><BR>28,173&nbsp;&nbsp;</FONT></P></TD></TR>
  <TR>
    <TD height=18 vAlign=top width=27>
      <P></P></TD>
    <TD height=18 vAlign=top width=20>
      <P></P></TD>
    <TD height=18 vAlign=top width=214>
      <P></P></TD>
    <TD height=18 vAlign=top width=72>
      <HR color=#000080 noShade SIZE=6>
    </TD>
    <TD height=18 vAlign=top width=4>
      <P></P></TD>
    <TD height=18 vAlign=top width=70>
      <P></P></TD>
    <TD height=18 vAlign=top width=2>
      <P></P></TD>
    <TD height=18 vAlign=top width=71>
      <HR color=#000080 noShade SIZE=6>
    </TD>
    <TD height=18 vAlign=top width=32>
      <P></P></TD>
    <TD height=18 vAlign=top width=65>
      <HR color=#000080 noShade SIZE=6>
    </TD></TR>
  <TR>
    <TD height=17 vAlign=top width=27>
      <P></P></TD>
    <TD height=17 vAlign=top width=20>
      <P></P></TD>
    <TD height=17 vAlign=top width=214>
      <P></P></TD>
    <TD height=17 vAlign=top width=72>
      <P></P></TD>
    <TD height=17 vAlign=top width=4>
      <P></P></TD>
    <TD height=17 vAlign=top width=70>
      <P></P></TD>
    <TD height=17 vAlign=top width=2>
      <P></P></TD>
    <TD height=17 vAlign=top width=71>
      <P></P></TD>
    <TD height=17 vAlign=top width=32>
      <P></P></TD>
    <TD height=17 vAlign=top width=65>
      <P></P></TD></TR></TABLE>
<P align=center><FONT size=2>17</FONT></P>
<P align=left>&nbsp;</P>
<P><FONT face="CG Times Regular" size=-1></FONT><FONT face="CG Times Regular"
size=-1></FONT><FONT face="CG Times Regular" size=-1></FONT><FONT
face="CG Times Regular" size=-1></FONT><FONT face="CG Times Regular"
size=-1><B>Notes to Unaudited Pro Forma Condensed Combined Financial
Statements</B></FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG>Note 1 - Basis of
Presentation</STRONG></FONT></P>
<P><FONT size=2><FONT face="CG Times Regular">The unaudited pro forma statements
of operations combine the historical consolidated statements of operations of
Perma-Fix Environmental Services, Inc., for the year ended December 31, 2001, with the historical statements of income for
</FONT><FONT face="CG Times Regular" size=-1>East Tennessee Materials &amp; Energy Corp.
("M&amp;EC") for the six months ended
June 25, 2001. The pro forma balance sheet has been omitted as the amounts fo</FONT></FONT><font face="CG Times Regular" size="-1">r
<FONT size=2>M&amp;EC are included in the Company's </FONT></font><font size="2" face="CG Times Regular">annual</font><font face="CG Times Regular" size="-1">
report on Form 10-K
for the year ended December 31, 2001.</font></P>
<P><FONT face="CG Times Regular" size=2>The unaudited pro forma financial
statements exclude the effect of any operating income improvements which may be
achieved upon combining the resources of the companies and exclude costs
associated with the integration and consolidation of the companies.</FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG>Note 2 - Pro Forma
Adjustments</STRONG></FONT></P>
<P><FONT face="CG Times Regular" size=-1>Perma-Fix Environmental Services, Inc.
acquired M&amp;EC on June 25, 2001, in a transaction accounted for as a
purchase. The pro forma adjustments consist of
the following:</FONT></P>
<TABLE width=653>
  <TR vAlign=top>
    <TD width=97></TD>
    <TD width=45><FONT face="CG Times Regular" size=-1>(a)</FONT></TD>
    <TD width=491><FONT face="CG Times Regular" size=-1>The excess of the
      purchase price over the net assets acquired of approximately $9,149,000
      was assigned to permits in accordance with purchase accounting.
      Amortization expense for acquired permits with an estimated useful life of
      ten years was recorded in the annual amount of $915,000.<br>
      <br>
 </FONT></TD></TR>
  <TR vAlign=top>
    <TD width=97></TD>
    <TD width=45><FONT face="CG Times Regular" size=-1>(b)</FONT></TD>
    <TD width=491><FONT face="CG Times Regular" size=-1>Amortization expense
      for goodwill on M&amp;EC's statements in the annual amount of $12,000 is
      reversed as this asset was not recorded in accordance with purchase
      accounting.<br>
      <br>
      </FONT></TD></TR>
  <TR vAlign=top>
    <TD width=97></TD>
    <TD width=45><FONT face="CG Times Regular" size=-1>(c)</FONT></TD>
    <TD width=491><FONT face="CG Times Regular" size=-1>Reduce interest
      expense to reflect elimination of notes payable settled upon acquisition.<br>
      <br>
      </FONT></TD></TR>
  <TR vAlign=top>
    <TD width=97></TD>
    <TD width=45><FONT face="CG Times Regular" size=-1>(d)</FONT></TD>
    <TD width=491><FONT face="CG Times Regular" size=-1>Preferred Stock
      dividends for Series A were eliminated pursuant to the conversion of
      Series A to Common Stock prior to acquisition. Recorded Preferred Stock
      dividends for the six months ended June 30, 2001 on the Preferred Stock
      Series B issued at closing. Dividends accrue at an annual rate of 5%
      beginning one year after acquisition.<br>
      <br>
 </FONT></TD></TR>
  <TR vAlign=top>
    <TD width=97></TD>
    <TD width=45><FONT face="CG Times Regular" size=-1>(e)</FONT></TD>
    <TD width=491><FONT face="CG Times Regular" size=-1>Adjusted weighted
      average shares for the1,944,242 shares of Common Stock issued at closing
      for consideration and extinguishment of certain debt of
  M&amp;EC.</FONT></TD></TR>
  </TABLE>
<P><FONT face="CG Times Regular" size=-1><STRONG>Note 3 - Federal Income Tax
Consequences of the Mergers</STRONG></FONT></P>
<P><FONT face="CG Times Regular" size=-1>The unaudited pro forma financial
statements assume that the mergers qualify as taxable transactions for federal
income tax purposes.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>
<CENTER><STRONG>COMPARATIVE PER SHARE DATA</STRONG></CENTER></FONT></P>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="CG Times Regular" size=-1>The following table presents historical per
share data of M&amp;EC and the Company which is derived from financial
statements, audited and unaudited, appearing elsewhere in this Proxy Statement.
The table also includes unaudited pro forma combined per share data using the
purchase method of accounting, assuming the acquisition had been effective as </FONT><FONT size=-1> <font face="CG Times Regular"> of
the beginning of
</font>
 2000. The unaudited
pro forma combined per share data also assumes the conversion of all outstanding
M&amp;EC Series A preferred stock into common stock and subsequent exchange of
all outstanding M&amp;EC common stock through the issuance of 1,597,576 shares of Perma-Fix Common Stock
as of the beginning of 2000. See "ACQUISITION OF M&amp;EC" beginning on
page 8 for more information on both of these assumptions. Also, included in the table is
unaudited pro forma equivalent per share data for M&amp;EC for the periods
presented. The pro forma equivalent data assumes the same exchange value of
M&amp;EC stock for Perma-Fix stock for all periods.</FONT>
<p>&nbsp;</p>
<p align="center"><font face="CG Times Regular" size="-1">18</font></p>
<p>&nbsp;</p>
<P><FONT face="CG Times Regular" size=-1>The pro forma data presented does not
purport to be indicative of the results of future operations or the results that
would have occurred had the acquisition been consummated at the beginning of
2000. The information set forth below should be read in conjunction with the
historical financial statements and notes thereto of M&amp;EC and the Company
presented elsewhere in this Proxy Statement. Neither M&amp;EC nor Perma-Fix has
paid cash dividends for any of the periods presented.</FONT></P>
<TABLE width="651">
  <TR vAlign=top>
    <TD align=right width="304"></TD>
    <TD align=middle width="64">
      <p align="center"><FONT face="CG Times Regular" size=-1>Six Months
      ended<BR>June 30,</FONT></p>
    </TD>
    <TD align=right width="3"></TD>
    <TD align=right colSpan=9 width="254">
      <P align=center><FONT face="CG Times Regular"
      size=-1>Year ended<BR>December 31,</FONT></P></TD></TR>
  <TR vAlign=top>
    <TD align=right width="304"></TD>
    <TD align=middle width="64">
      <HR align=right color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width="3"></TD>
    <TD align=right colSpan=9 width="254">
      <HR align=right color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD align=left width="304"></TD>
    <TD align=center width="64"></FONT><FONT face="CG Times Regular"
    size=-1>2001</FONT></TD>
    <TD align=center width="3"></TD>
    <TD align=center width="44"><FONT face="CG Times Regular"
      size=-1>2001</FONT></TD>
    <TD align=center width="4"></TD>
    <TD align=center width="40"><font face="CG Times Regular" size="-1">2000</font></TD>
    <TD align=center width="2"></TD>
    <TD align=center width="40"><FONT face="CG Times Regular"
      size=-1>1999</FONT></TD>
    <TD align=center width="2"></TD>
    <TD align=center width="38"><FONT face="CG Times Regular"
      size=-1>1998</FONT></TD>
    <TD align=center width="2"></TD>
    <TD align=center width="34"><FONT face="CG Times Regular"
      size=-1>1997</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width="304"></TD>
    <TD align=center width="64">
      <HR align=right color=#000080 noShade SIZE=3>
    </TD>
    <TD align=center width="3"></TD>
    <TD align=center width="44">
      <HR align=right color=#000080 noShade SIZE=3>
    </TD>
    <TD align=center width="4"></TD>
    <TD align=center width="40">
      <HR align=right color=#000080 noShade SIZE=3>
    </TD>
    <TD align=center width="2"></TD>
    <TD align=center width="40">
      <HR align=right color=#000080 noShade SIZE=3>
    </TD>
    <TD align=center width="2"></TD>
    <TD align=center width="38">
      <HR align=right color=#000080 noShade SIZE=3>
    </TD>
    <TD align=center width="2"></TD>
    <TD align=center width="34">
      <HR align=right color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD align=left width="304"><FONT face="CG Times Regular" size=-1>HISTORICAL - M&amp;EC
      COMMON STOCK:</FONT></TD>
    <TD align=right width="64"></TD>
    <TD align=right width="3"></TD>
    <TD align=middle width="44"></TD>
    <TD align=middle width="4"></TD>
    <TD align=middle width="40"></TD>
    <TD align=middle width="2"></TD>
    <TD align=middle width="40"></TD>
    <TD align=middle width="2"></TD>
    <TD align=middle width="38"></TD>
    <TD align=middle width="2"></TD>
    <TD align=middle width="34"></TD></TR>
  <TR vAlign=top>
    <TD align=left width="304"><FONT face="CG Times Regular"
      size=-1>Diluted loss per share attributable to common
    shareholders</FONT></TD>
    <TD align=right vAlign=bottom width="64"><FONT face="CG Times Regular"
      size=-1>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1.88)</FONT></TD>
    <TD align=right width="3"></TD>
    <TD align=right vAlign=bottom width="44"></TD>
    <TD align=right vAlign=bottom width="4"></TD>
    <TD align=right vAlign=bottom width="40"><FONT face="CG Times Regular"
      size=-1>$&nbsp;(0.87)</FONT></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="40"><FONT face="CG Times Regular"
      size=-1>$&nbsp;(1.10)</FONT></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="38"><FONT face="CG Times Regular"
      size=-1>$(0.51)</FONT></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=middle vAlign=bottom width="34"><font face="CG Times Regular" size="-1">$(0.08)</font></TD></TR>
  <TR vAlign=top>
    <TD align=left width="304"><FONT face="CG Times Regular" size=-1>Book value per share
      (Note 1)</FONT></TD>
    <TD align=right vAlign=bottom width="64"><FONT face="CG Times Regular"
      size=-1>(1.82)</FONT></TD>
    <TD align=right width="3"></TD>
    <TD align=right vAlign=bottom width="44"></TD>
    <TD align=right vAlign=bottom width="4"></TD>
    <TD align=right vAlign=bottom width="40"><FONT face="CG Times Regular"
      size=-1>(1.50)</FONT></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="40"><FONT face="CG Times Regular"
      size=-1>(0.67)</FONT></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="38"><FONT face="CG Times Regular"
      size=-1>(0.10)</FONT></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=middle vAlign=bottom width="34"><font face="CG Times Regular" size="-1">(0.29)</font></TD></TR>
  <TR vAlign=top>
    <TD align=left width="304"></TD>
    <TD align=right vAlign=bottom width="64"></TD>
    <TD align=right width="3"></TD>
    <TD align=right vAlign=bottom width="44"></TD>
    <TD align=right vAlign=bottom width="4"></TD>
    <TD align=right vAlign=bottom width="40"></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="40"></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="38"></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="34"></TD></TR>
  <TR vAlign=top>
    <TD align=left width="304"><FONT face="CG Times Regular"
      size=-1>HISTORICAL - PERMA-FIX COMMON STOCK:</FONT></TD>
    <TD align=right vAlign=bottom width="64"></TD>
    <TD align=right width="3"></TD>
    <TD align=right vAlign=bottom width="44"></TD>
    <TD align=right vAlign=bottom width="4"></TD>
    <TD align=right vAlign=bottom width="40"></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="40"></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="38"></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="34"></TD></TR>
  <TR vAlign=top>
    <TD align=left width="304"><FONT
      face="CG Times Regular" size=-1>Diluted income (loss) per share attributable to common
      shareholders</FONT></TD>
    <TD align=right vAlign=bottom width="64"></TD>
    <TD align=right width="3"></TD>
    <TD align=right vAlign=bottom width="44"><FONT face="CG Times Regular"
      size=-1>$(.03)</FONT></TD>
    <TD align=right vAlign=bottom width="4"></TD>
    <TD align=right vAlign=bottom width="40"><font face="CG Times Regular" size="-1">$(0.04)</font></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="40"><FONT face="CG Times Regular"
      size=-1>$&nbsp; 0.08</FONT></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="38"><FONT face="CG Times Regular"
      size=-1>$(0.06)</FONT></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="34"><FONT face="CG Times Regular"
      size=-1>$(0.10)</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width="304"><FONT face="CG Times Regular" size=-1>Book value per share
      (Note 1)</FONT></TD>
    <TD align=right vAlign=bottom width="64"></TD>
    <TD align=right width="3"></TD>
    <TD align=right vAlign=bottom width="44"><FONT face="CG Times Regular"
      size=-1>1.54&nbsp;&nbsp;</FONT></TD>
    <TD align=right vAlign=bottom width="4"></TD>
    <TD align=right vAlign=bottom width="40"><font face="CG Times Regular" size="-1">1.02</font></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="40"><font face="CG Times Regular" size="-1">0.93</font></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="38"><FONT face="CG Times Regular"
      size=-1>1.33</FONT></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="34"><FONT face="CG Times Regular"
      size=-1>1.14 </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width="304"></TD>
    <TD align=right vAlign=bottom width="64"></TD>
    <TD align=right width="3"></TD>
    <TD align=right vAlign=bottom width="44"></TD>
    <TD align=right vAlign=bottom width="4"></TD>
    <TD align=right vAlign=bottom width="40"></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="40"></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="38"></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="34"></TD></TR>
  <TR vAlign=top>
    <TD align=left width="304"><FONT face="CG Times Regular" size=-1>PRO
      FORMA - PERMA-FIX</FONT></TD>
    <TD align=right vAlign=bottom width="64"></TD>
    <TD align=right width="3"></TD>
    <TD align=right vAlign=bottom width="44"></TD>
    <TD align=right vAlign=bottom width="4"></TD>
    <TD align=right vAlign=bottom width="40"></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="40"></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="38"></TD>
    <TD align=right width="2"></TD>
    <TD align=right width="34"></TD></TR>
  <TR vAlign=top>
    <TD align=left width="304"><FONT face="CG Times Regular"
      size=-1>Diluted loss per share attributable to common
      shareholders</FONT></TD>
    <TD align=right vAlign=bottom width="64"></TD>
    <TD align=right width="3"></TD>
    <TD align=right vAlign=bottom width="44"><FONT face="CG Times Regular"
      size=-1>$(.13)</FONT></TD>
    <TD align=right vAlign=bottom width="4"></TD>
    <TD align=right vAlign=bottom width="40"></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="40"></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="38"></TD>
    <TD align=right width="2"></TD>
    <TD align=right width="34"></TD></TR>
  <TR vAlign=top>
    <TD align=left width="304"><FONT face="CG Times Regular" size=-1>Book
      value per share (Note 2)</FONT></TD>
    <TD align=right vAlign=bottom width="64"></TD>
    <TD align=right width="3"></TD>
    <TD align=right vAlign=bottom width="44"><font face="CG Times Regular" size="-1">1.49&nbsp;&nbsp;</font></TD>
    <TD align=right vAlign=bottom width="4"></TD>
    <TD align=right vAlign=bottom width="40"></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="40"></TD>
    <TD align=right vAlign=bottom width="2"></TD>
    <TD align=right vAlign=bottom width="38"></TD>
    <TD align=right width="2"></TD>
    <TD align=right width="34"></TD></TR></TABLE>
<P><FONT face="CG Times Regular" size=-1></FONT><FONT face="CG Times Regular"
size=-1></FONT><FONT face="CG Times Regular" size=-1></FONT><FONT
face="CG Times Regular" size=-1></FONT><FONT face="CG Times Regular"
size=-1></FONT><FONT face="CG Times Regular" size=-1>Note 1:&nbsp;&nbsp;The
historical book value per share is computed by dividing shareholders' equity by
the number of shares of<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common stock and preferred stock, on an as if converted
basis, outstanding at the end of the period.<br>
<BR>Note 2: &nbsp;The pro forma combined
book value per share is computed by dividing pro forma shareholders' equity by
the<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;pro forma number of shares of common stock outstanding at the end of the
period, which reflects actual book<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;value per share for Perma-Fix.</FONT></P>
<P align=center><FONT face="CG Times Regular" size=-1><STRONG><BR>MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION<BR>AND RESULTS OF OPERATIONS OF
M&amp;EC</STRONG></FONT></P><BR
WP="BR1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="CG Times Regular" size=-1>M&amp;EC's management's discussion and analysis
is based, among other things, upon its audited consolidated financial statements
and includes the accounts of M&amp;EC and its wholly owned subsidiary, after
elimination of all significant inter-company balances and transactions.</FONT>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M&amp;EC was
formed in December 1997, to build and operate a mixed waste (waste containing
both hazardous and low level radioactive waste) treatment facility. During the
period of construction, M&amp;EC provided engineering and consulting</FONT> <FONT face="CG Times Regular" size=2>services to the hazardous mixed waste
storage, analysis, treatment and disposal industry. Primary customers of
M&amp;EC are currently United States Department of Energy ("DOE") contractors.
In June 1999, M&amp;EC obtained the necessary federal and state permits and
licenses to operate a facility to store and treat low-level radioactive and
hazardous waste and mixed waste.</FONT></P>
<P>&nbsp;</P>
<P align="center"><font face="CG Times Regular" size="2">19</font></P>
<P><FONT face="CG Times Regular"
size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M&amp;EC
completed construction of the treatment facility located in Oak Ridge, Tennessee
(the "Oak Ridge Facility") in June 2001, and the Oak Ridge Facility became
operational during the third quarter of 2001. M&amp;EC was acquired by Perma-Fix
Environmental Services, Inc ("the Company") effective June&nbsp;25,
2001.</FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG>Results of
Operations</STRONG></FONT></P>
<P><FONT face="CG Times Regular" size=-1>The following discussion and analysis
should be read in conjunction with M&amp;EC's consolidated financial statements
and the notes thereto incorporated by reference into this Proxy
Statement.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>Below are the results of operations for
M&amp;EC's years ended December 31, 2000, 1999 and 1998:</FONT></P>
<TABLE width="100%">
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular" size=-1>(Consolidated)</FONT></TD>
    <TD align=center><FONT face="CG Times Regular" size=-1>2000</FONT></TD>
    <TD align=center><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=center></FONT><FONT face="CG Times Regular" size=-1>%</FONT></TD>
    <TD align=center><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=center></FONT><FONT face="CG Times Regular"
    size=-1>1999</FONT></TD>
    <TD align=center><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=center></FONT><FONT face="CG Times Regular" size=-1>%</FONT></TD>
    <TD align=center><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=center></FONT><FONT face="CG Times Regular"
    size=-1>1998</FONT></TD>
    <TD align=center><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=center></FONT><FONT face="CG Times Regular"
      size=-1>%</FONT><FONT face="Times New Roman"></FONT></TD></TR>
  <TR vAlign=top>
    <TD></TD>
    <TD align=middle>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD>
    <TD align=middle></TD>
    <TD align=middle>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD>
    <TD align=middle></TD>
    <TD align=middle>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD>
    <TD align=middle></TD>
    <TD align=middle>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD>
    <TD align=middle></TD>
    <TD align=middle>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD>
    <TD align=middle></TD>
    <TD align=middle>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR vAlign=top>
    <TD><FONT face="Times New Roman"></FONT><FONT face="Times New Roman"
      size=-1>Net Revenue</FONT><FONT face="Times New Roman"></FONT></TD>
    <TD align=right><FONT face="Times New Roman"></FONT><FONT
      face="Times New Roman" size=-1>$&nbsp;&nbsp;&nbsp;905,480</FONT></TD>
    <TD align=right><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right></FONT><FONT face="Times New Roman"
size=-1>100.0</FONT></TD>
    <TD align=right><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right><FONT face="Times New Roman"
      size=-1>$&nbsp;&nbsp;1,208,226</FONT></TD>
    <TD align=right><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right></FONT><FONT face="Times New Roman"
size=-1>100.0</FONT></TD>
    <TD align=right><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right><FONT face="Times New Roman"
      size=-1>$&nbsp;&nbsp;175,285</FONT></TD>
    <TD align=right><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right></FONT><FONT face="Times New Roman"
      size=-1>100.0</FONT><FONT face="Times New Roman"></FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="Times New Roman"></FONT><FONT face="Times New Roman"
      size=-1>Cost of goods sold</FONT><FONT face="Times New Roman"></FONT></TD>
    <TD align=right><FONT face="Times New Roman"></FONT><FONT
      face="Times New Roman" size=-1>558,806</FONT></TD>
    <TD align=right><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right></FONT><FONT face="Times New Roman" size=-1>61.7</FONT></TD>
    <TD align=right><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right></FONT><FONT face="Times New Roman"
    size=-1>876,779</FONT></TD>
    <TD align=right><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right></FONT><FONT face="Times New Roman" size=-1>72.6</FONT></TD>
    <TD align=right><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right></FONT><FONT face="Times New Roman"
    size=-1>107,247</FONT></TD>
    <TD align=right><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right></FONT><FONT face="Times New Roman"
      size=-1>61.2</FONT><FONT face="Times New Roman"></FONT></TD></TR>
  <TR vAlign=top>
    <TD></TD>
    <TD align=right>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right></TD>
    <TD align=right>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right></TD>
    <TD align=right>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right></TD>
    <TD align=right>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD></TR></TABLE>
<TABLE width=653>
  <TR vAlign=top>
    <TD width=14></TD>
    <TD width=134><FONT face="Times New Roman"></FONT><FONT
      face="Times New Roman" size=-1></FONT><FONT face="Times New Roman"
      size=-1>Gross Profit</FONT><FONT face="Times New Roman"></FONT></TD>
    <TD align=right width=81><FONT face="Times New Roman"></FONT><FONT
      face="Times New Roman" size=-1>346,674</FONT></TD>
    <TD align=right width=11><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=42></FONT><FONT face="Times New Roman"
      size=-1>38.3</FONT></TD>
    <TD align=right width=10><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=90></FONT><FONT face="Times New Roman"
      size=-1>331,447</FONT></TD>
    <TD align=right width=9><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=43></FONT><FONT face="Times New Roman"
      size=-1>27.4</FONT></TD>
    <TD align=right width=8><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=79></FONT><FONT face="Times New Roman"
      size=-1>68,038</FONT></TD>
    <TD align=right width=9><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=43></FONT><FONT face="Times New Roman"
      size=-1>38.8</FONT><FONT
face="Times New Roman"></FONT></TD></TR></TABLE>
<TABLE width=653>
  <TR vAlign=top>
    <TD width=154><FONT face="Times New Roman"></FONT><FONT
      face="Times New Roman" size=-1>Selling, general and
      administrative</FONT><FONT face="Times New Roman"></FONT></TD>
    <TD align=right width=80><FONT face="Times New Roman"></FONT><FONT
      face="Times New Roman" size=-1>1,290,352</FONT></TD>
    <TD align=right width=11><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=42></FONT><FONT face="Times New Roman"
      size=-1>142.5</FONT></TD>
    <TD align=right width=10><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=92></FONT><FONT face="Times New Roman"
      size=-1>1,725,784</FONT></TD>
    <TD align=right width=8><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=43></FONT><FONT face="Times New Roman"
      size=-1>142.8</FONT></TD>
    <TD align=right width=8><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=79></FONT><FONT face="Times New Roman"
      size=-1>753,287</FONT></TD>
    <TD align=right width=11><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=41></FONT><FONT face="Times New Roman"
      size=-1>429.7</FONT><FONT face="Times New Roman"></FONT></TD></TR>
  <TR vAlign=top>
    <TD width=154><FONT face="Times New Roman"></FONT><FONT
      face="Times New Roman" size=-1>Depreciation and amortization</FONT><FONT
      face="Times New Roman"></FONT></TD>
    <TD align=right width=80><FONT face="Times New Roman"></FONT><FONT
      face="Times New Roman" size=-1>452,345</FONT></TD>
    <TD align=right width=11><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=42></FONT><FONT face="Times New Roman"
      size=-1>50.0</FONT></TD>
    <TD align=right width=10><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=92></FONT><FONT face="Times New Roman"
      size=-1>301,840</FONT></TD>
    <TD align=right width=8><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=43></FONT><FONT face="Times New Roman"
      size=-1>25.0</FONT></TD>
    <TD align=right width=8><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=79></FONT><FONT face="Times New Roman"
      size=-1>156,377</FONT></TD>
    <TD align=right width=11><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=41></FONT><FONT face="Times New Roman"
      size=-1>89.2</FONT><FONT face="Times New Roman"></FONT></TD></TR>
  <TR vAlign=top>
    <TD width=154><FONT face="Times New Roman"></FONT><FONT
      face="Times New Roman" size=-1>Other income (expense):</FONT><FONT
      face="Times New Roman"></FONT></TD>
    <TD align=right width=80><FONT face="Times New Roman"></FONT></TD>
    <TD align=right width=11></TD>
    <TD align=right width=42></TD>
    <TD align=right width=10></TD>
    <TD align=right width=92></TD>
    <TD align=right width=8></TD>
    <TD align=right width=43></TD>
    <TD align=right width=8></TD>
    <TD align=right width=79></TD>
    <TD align=right width=11></TD>
    <TD align=right width=41></TD></TR></TABLE>
<TABLE width=653>
  <TR vAlign=top>
    <TD width=10></TD>
    <TD width=137></FONT><FONT face="Times New Roman" size=-1></FONT><FONT
      face="Times New Roman" size=-1></FONT><FONT face="Times New Roman"
      size=-1></FONT><FONT face="Times New Roman" size=-1></FONT><FONT
      face="Times New Roman" size=-1></FONT><FONT face="Times New Roman"
      size=-1>Other income</FONT><FONT face="Times New Roman"></FONT></TD>
    <TD align=right width=83><FONT face="Times New Roman"></FONT><FONT
      face="Times New Roman" size=-1>119,005</FONT></TD>
    <TD align=right width=10><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=39></FONT><FONT face="Times New Roman"
      size=-1>13.1</FONT></TD>
    <TD align=right width=12><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=87></FONT><FONT face="Times New Roman"
      size=-1>-</FONT></TD>
    <TD align=right width=10><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=46></FONT><FONT face="Times New Roman"
      size=-1>-</FONT></TD>
    <TD align=right width=8><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=77></FONT><FONT face="Times New Roman"
      size=-1>-</FONT></TD>
    <TD align=right width=10><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=44></FONT><FONT face="Times New Roman"
      size=-1>-</FONT><FONT face="CG Times Regular"></FONT></TD></TR>
  <TR vAlign=top>
    <TD width=10><FONT face="CG Times Regular"></FONT></TD>
    <TD width=137></FONT><FONT face="CG Times Regular" size=-1></FONT><FONT
      face="CG Times Regular" size=-1>Interest expense</FONT><FONT
      face="Times New Roman"></FONT></TD>
    <TD align=right width=83><FONT face="Times New Roman"></FONT><FONT
      face="Times New Roman" size=-1>(175,044)</FONT></TD>
    <TD align=right width=10><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=39></FONT><FONT face="Times New Roman"
      size=-1>(19.3)</FONT></TD>
    <TD align=right width=12><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=87></FONT><FONT face="Times New Roman"
      size=-1>(266,171)</FONT></TD>
    <TD align=right width=10><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=46></FONT><FONT face="Times New Roman"
      size=-1>(22.0)</FONT></TD>
    <TD align=right width=8><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=77></FONT><FONT face="Times New Roman"
      size=-1>(88,508)</FONT></TD>
    <TD align=right width=10><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=44></FONT><FONT face="Times New Roman"
      size=-1>(50.5)</FONT><FONT face="Times New Roman"></FONT></TD></TR>
  <TR vAlign=top>
    <TD width=10></TD>
    <TD width=137></TD>
    <TD align=right width=83>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=10></TD>
    <TD align=right width=39>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=12></TD>
    <TD align=right width=87>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=10></TD>
    <TD align=right width=46>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=8></TD>
    <TD align=right width=77>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=10></TD>
    <TD align=right width=44>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD></TR></TABLE>
<TABLE width=653>
  <TR vAlign=top>
    <TD width=151><FONT face="Times New Roman"></FONT><FONT
      face="Times New Roman" size=-1>Net loss</FONT><FONT
      face="Times New Roman"></FONT></TD>
    <TD align=right width=83><FONT face="Times New Roman"></FONT><FONT
      face="Times New Roman" size=-1>(1,452,062)</FONT></TD>
    <TD align=right width=12><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=41></FONT><FONT face="Times New Roman"
      size=-1>(160.4)</FONT></TD>
    <TD align=right width=9><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=91></FONT><FONT face="Times New Roman"
      size=-1>(1,962,348)</FONT></TD>
    <TD align=right width=5><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=48></FONT><FONT face="Times New Roman"
      size=-1>(162.4)</FONT></TD>
    <TD align=right width=8><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=76></FONT><FONT face="Times New Roman"
      size=-1>(930,134)</FONT></TD>
    <TD align=right width=10><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=45></FONT><FONT face="Times New Roman"
      size=-1>(530.6)</FONT><FONT face="CG Times Regular"></FONT></TD></TR>
  <TR vAlign=top>
    <TD width=151><FONT face="CG Times Regular"></FONT><FONT
      face="Times New Roman" size=-1>Preferred Stock dividends </FONT><FONT
      face="Times New Roman"></FONT></TD>
    <TD align=right width=83><FONT face="Times New Roman"></FONT><FONT
      face="Times New Roman" size=-1>(349,341)</FONT></TD>
    <TD align=right width=12><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=41></FONT><FONT face="Times New Roman"
      size=-1>(38.6)</FONT></TD>
    <TD align=right width=9><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=91></FONT><FONT face="Times New Roman"
      size=-1>(281,719)</FONT></TD>
    <TD align=right width=5><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=48></FONT><FONT face="Times New Roman"
      size=-1>(23.3)</FONT></TD>
    <TD align=right width=8><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=76></FONT><FONT face="Times New Roman"
      size=-1>(67,216)</FONT></TD>
    <TD align=right width=10><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=45></FONT><FONT face="Times New Roman"
      size=-1>(38.3)</FONT><FONT face="CG Times Regular"></FONT></TD></TR>
  <TR vAlign=top>
    <TD width=151><FONT face="CG Times Regular"></FONT><FONT
      face="Times New Roman" size=-1>Net loss applicable to common
      stockholders</FONT><FONT face="Times New Roman"></FONT></TD>
    <TD align=right width=83><FONT face="Times New Roman"></FONT><FONT
      face="Times New Roman" size=-1>$(1,801,403)</FONT></TD>
    <TD align=right width=12><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=41></FONT><FONT face="Times New Roman"
      size=-1>(198.9)</FONT></TD>
    <TD align=right width=9><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=91></FONT><FONT face="Times New Roman"
      size=-1>$(2,244,067)</FONT></TD>
    <TD align=right width=5><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=48></FONT><FONT face="Times New Roman"
      size=-1>(185.7)</FONT></TD>
    <TD align=right width=8><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=76></FONT><FONT face="Times New Roman"
      size=-1>$(997,350)</FONT></TD>
    <TD align=right width=10><FONT face="Times New Roman" size=-1></FONT></TD>
    <TD align=right width=45></FONT><FONT face="Times New Roman"
      size=-1>(569.0)</FONT><FONT face="CG Times Regular"></FONT></TD></TR>
  <TR vAlign=top>
    <TD width=151><FONT face="CG Times Regular"></FONT></TD>
    <TD width=83>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD>
    <TD width=12></TD>
    <TD width=41>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD>
    <TD width=9></TD>
    <TD width=91>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD>
    <TD width=5></TD>
    <TD width=48>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD>
    <TD width=8></TD>
    <TD width=76>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD>
    <TD width=10></TD>
    <TD width=45>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD></TR></TABLE>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>Summary - Years Ended
December 31, 2000 and 1999</U></STRONG></FONT><FONT face="CG Times Regular"
size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M&amp;EC's
consolidated revenues decreased $303,000 or 25.1% for the year ended December
31, 2000 as compared to the year ended December 31, 1999. The decrease is due to
several consulting and engineering contracts that were not renewed with M&amp;EC
in 2000, and an emphasis on construction of the Oak Ridge Facility in lieu of
pursuing new consulting and engineering contracts.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of
goods sold decreased $318,000 or 36.3% for the year ended December 31, 2000, as
compared to the corresponding period for 1999. This decrease reflects the
decrease in revenues due to the contract losses and the construction of the Oak
Ridge Facility for the same period.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross
profit for the year ended December 31, 2000, increased to $347,000, which as a
percentage of revenue is 38.3%, reflecting an increase over the 1999 percentage
of revenue of 27.4%. This increase is a result of M&amp;EC retaining higher
margin contracts during 2000. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling,
general and administrative expenses decreased $435,000, or 25.2%, for the year
ended December 31, 2000, as compared to the corresponding period for 1999. This
decrease is due to reduced costs related to certain terminated personnel and to
the construction of the Oak Ridge Facility, as such costs were capitalized to
construction in progress. During 2000 and 1999, general and administrative costs
capitalized to construction in progress were $1,456,000 and $1,120,000,
respectively, which includes payroll, overhead facility costs, procurement costs
and subcontractor costs.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation
and amortization expense reflects an increase for the year ended December 31,
2000, of $151,000, or 49.9%, as compared to the year ended December 31, 1999.
The increase reflects additional amortization expense of approximately $169,000
from the amortization of permits for the treatment of hazardous and low level
radioactive waste. This increase is offset by a decrease of $14,000 for
amortization on lease acquisition costs associated with the operating lease on
the Oak Ridge Facility, and for depreciation expense on capital leases of $4,000
due to the elimination of several leased assets during 2000.</FONT></P>
<P align="center"><font face="CG Times Regular" size="-1">20</font></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
expense decreased $91,000, or 34.2%, for the year ended December 31, 2000, as
compared to the year ended December 31, 1999. This decrease is due to a decrease
of approximately $221,000 due to imputed interest capitalized to the
construction in progress of the Oak Ridge Facility. The decrease was partially
offset by an increase of $130,000 from new notes payable entered into in 2000
and a full year of interest on notes payable entered into during the second half
of 1999.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred
stock dividends for the year ended December 31, 2000, increased $68,000, or
24.0%, as compared to the corresponding period in 1999. This increase is due to
a full year of dividends in 2000, and only six months of dividends from June 30,
1999 to December 31, 1999 (see discussion below on Preferred Stock). </FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>Summary - Years Ended
December 31, 1999 and 1998</U></STRONG></FONT><FONT face="CG Times Regular"
size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M&amp;EC's
consolidated revenues increased $1,033,000, or 589.3%, for the year ended
December 31, 1999, as compared to the year ended December 31, 1998. The increase
in revenues was due to engineering and consulting revenues generated from the
acquisition of First Choice Technical Services, Inc. ("FCTS") effective January
1, 1999 (see below for discussion on FCTS acquisition). </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of
goods sold increased $770,000, or 717.5%, for the year ended December 31, 1999,
as compared to the corresponding period for 1998. This increase is due to direct
costs associated with the additional revenues generated by FCTS, as discussed
above.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross profit
for the year ended December 31, 1999 increased to $331,000, which as a
percentage of revenue is 27.4%, reflecting a decrease over the 1998 percentage
of revenue of 38.8%. This decrease is due to M&amp;EC performing more
engineering jobs, which are lower margin, during 1999 as compared to higher
margin jobs performed in 1998. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling,
general and administrative expenses increased $972,000, or 129.1%, for the year
ended December 31, 1999, as compared to the corresponding period for 1998. This
increase is due to additional expenses related to the FCTS acquisition, and to
the increase in general operating costs associated with a start up business in
it's second year of operations. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation
and amortization expense reflects an increase for the year ended December 31,
1999 of $145,000 or 93.0% as compared to the year ended December 31, 1998. This
increase reflects amortization expense of approximately $170,000 from the
amortization of costs associated with new permits obtained in June 1998 for the
treatment of hazardous and low level radioactive waste and an increase in
depreciation expense of $11,000 on office equipment purchases and newly leased
plant equipment. These increases are offset by a decrease of $36,000 for
amortization on lease acquisition costs associated with the operating lease on
the Oak Ridge Facility.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
expense increased $178,000, or 200.7%, for the year ended December 31, 1999, as
compared to the year ended December 31, 1998. This increase is from interest on
notes payable entered into during 1999 and a full year of interest on notes
payable entered into during the last half of 1998. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred
stock dividends for the year ended December 31, 1999, increased $215,000, or
319.1%, as compared to the corresponding period in 1998. This increase is due to
six months of dividends beginning on June 30, 1999 for the Series A Preferred
Stock of $68,000 and an increase of $107,000 related to the accretion of the of
the redemption value to the Series A Preferred Stock (see discussion below on
Preferred Stock). </FONT></P>
<P><FONT face="CG Times Regular" size=-1><STRONG><U>Liquidity and Capital
Resources of the Company</U></STRONG></FONT><FONT face="CG Times Regular"
size=-1></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December
31, 2000, M&amp;EC had no cash or cash equivalents. This reflects a net increase
in cash and cash equivalents provided by operating activities of $852,000 and an
increase in financing activities of $4,849,000 (principally advances from the
Company of $3,754,000, advances from Performance Development Corporation
("PDC"), an affiliate of M&amp;EC prior to the acquisition, of $607,000 and net
proceeds from notes payable of approximately $488,000). These increases were
offset by cash used in investing activities of $5,701,000 for capital
expenditures in construction of new facility for approximately $5,533,000 and
$168,000 to obtain permits for the Oak Ridge Facility.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts
receivable, net of allowances, totaled approximately $213,000, a decrease of
$52,000 over the December 31, 1999 balance of $265,000. This decrease
corresponds with the decrease in revenues during the year ended December 31,
2000, as discussed above. </FONT></P>
<P align="center"><font face="CG Times Regular" size="-1">21</font></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
size=2><FONT face="CG Times Regular">As of December 31, 2000, accounts payable
was approximately $1,128,000, an increase of $666,000 over the
December</FONT>&nbsp;<FONT face="CG Times Regular" size=-1>31, 1999 balance of
$462,000. This increase is a result of the construction of the Oak Ridge
Facility and a decreased cash inflow from reduced revenues.</FONT></FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
purchases of property and equipment for the twelve months ended December 31,
2000, totaled $5,522,000. These capital expenditures were for construction in
progress related to the construction of the Oak Ridge Facility.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective
January&nbsp;1, 1999, M&amp;EC acquired all of the outstanding common stock of
FCTS in exchange for 50,000 shares of M&amp;EC's common stock valued at $200,000
and the assumption of $39,035 of liabilities. The acquisition was recorded using
the purchase method of accounting. Accordingly, the purchase price was allocated
to the net assets acquired based upon the estimated fair market values. The
excess of the purchase price over the estimated fair value of the net assets
acquired was approximately $120,000, which has been accounted for as goodwill
and is being amortized over its estimated useful life of ten years. The
operating results of FCTS are included in M&amp;EC's results of operations from
the date of acquisition. FCTS is an engineering and consulting firm that
provides services related to hazardous mixed waste storage, analysis, treatment
and disposal.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of
December 31, 2000, there were 270,487 shares of Series A Preferred Stock issued
and outstanding. Dividends on the Series A preferred stock were cumulative. All
outstanding shares of the Series A preferred stock of M&amp;EC were converted to
common stock in March 2001 prior to the acquisition of M&amp;EC by the Company.
</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M&amp;EC
recorded preferred stock dividends of $67,622 and $135,244 during 1999 and 2000,
respectively. These dividends were unpaid at December&nbsp;31, 2000 and are
included in the carrying value of the Series A preferred stock. The excess of
the minimum redemption value of $1,622,922 over the initial carrying value of
$553,435 is being accreted and recorded as preferred stock dividends from the
issuance date to the redemption date (June&nbsp;30, 2003). M&amp;EC recorded
preferred stock dividends related to the accretion of the redemption value of
the Series A preferred stock of $214,097, $214,097 and $107,049 during 2000,
1999 and 1998, respectively.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to
being acquired by the Company, M&amp;EC's liquidity to service its debt
requirements and to make payroll came primarily from loans and advances from the
Company totaling approximately $2.3 million, loans and advances from PDC
totaling $3.7 million and payroll withholdings not paid to the federal
government of $923,425 and monies owed to M&amp;EC's and PDC's 401-K plan
totaling approximately $1.77 million. In addition, prior to the acquisition, the
Company financed the construction of M&amp;EC's Oak Ridge Facility under a
service agreement between the Company and M&amp;EC, and the Company invoiced
M&amp;EC approximately $9.8 million for the cost of the construction prior to
the acquisition. See "Acquisition of M&amp;EC" contained in this Proxy
Statement.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M&amp;EC's
working capital deficit position at December 31, 2000, was $11,763,000, as
compared to a working capital deficit of $5,011,000 at December 31, 1999. The
increase in the deficit position was due partially to additional advances from
PDC and the Company of $4,362,000 and increased current notes payable of
$1,200,000. The remaining increase in the deficit position is from increased
accounts payable and accruals and decreased receivables related to the
construction of the new facility for approximately $1,190,000. </FONT></P>
<P><FONT face="Times New Roman"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Short-term
notes payable of M&amp;EC totaled approximately $928,000 at the end of 2000, and
such notes payable were past due as of December 31, 2000. Approximately $888,000
of these notes payable were settled, prior to or pursuant to the acquisition of
M&amp;EC by the Company as discussed below.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 1998
and 1999 M&amp;EC issued long-term notes payable of $1,573,000 to related
parties. M&amp;EC issued common stock and preferred stock to the unsecured note
payable holders. Common stock issued during 1998 and 1999 totaled 337,000 and
65,500 shares, respectively, valued at $1,610,000, or $4.00 per share. No value
was assigned to the Series A cumulative preferred stock issued in connection
with these notes. The $1,610,000 was recorded as a debt discount and is being
amortized to interest expense over the term of the notes. During 2000 and 1999,
$322,000 and $322,000, respectively, of the debt discount was amortized to
interest expense. As of December&nbsp;31, 2000, the unamortized debt discount
was $831,200. The above unsecured notes payable to stockholders were settled in
June 2001 pursuant to the acquisition of M&amp;EC by the Company.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M&amp;EC
entered into an installment agreement with the IRS relating to the withholding
taxes owing by M&amp;EC in the amount of $923,496 ("Installment Agreement"). The
Installment Agreement provides for the payment of such withholding taxes over a
term of approximately eight years. As a further condition to the closing of the
acquisition, PDC and two corporations affiliated with PDC, entered into an
installment agreement with the IRS relating to their withholding taxes (the "PDC
Installment Agreement"). The PDC Installment Agreement provides for the payment
of semi-annual installments over a term of eight years in the aggregate amount
of approximately $3,714,000.</FONT></P>
<P align="center"><font face="CG Times Regular" size="-1">22</font></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with M&amp;EC's acquisition by the Company, the following occurred
relating to certain of M&amp;EC's liabilities:</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PDC
had advanced monies to, and performed certain services for, M&amp;EC aggregating
approximately&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$3,700,000.
Amounts due to PDC for such advances and services were $4,489,845 and $3,882,567
at&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December&nbsp;31,
2000 and 1999, respectively. In payment of such advances and services, M&amp;EC
issued&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a
promissory note, dated June 7, 2001, to PDC in the principal amount of
approximately
$3,700,000.&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
promissory note is payable over eight years to correspond to payments due to the
IRS
under&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
PDC Installment Agreement. PDC has directed M&amp;EC to make all payments under
the
promissory&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;note
directly to the IRS to be applied to PDC's obligations under the PDC Installment
Agreement.&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PDC
was not acquired by the Company;</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company advanced $1,820,000 to M&amp;EC, which was used by M&amp;EC to pay to
the IRS
$50,000,&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;being
the first installment under the Installment Agreement, $1,336,000 in
contributions required
to&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;be
made to M&amp;EC's 401-K plan and $434,000 to pay certain of M&amp;EC's
long-term debt; and</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$520,000
of M&amp;EC's liabilities were paid by the Company issuing to those creditors,
approximately&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;347,000
shares of the Company's common stock.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;M&amp;EC
recently completed the construction of its Oak Ridge Facility. The 150,000
square-foot facility, located on the grounds of the Oak Ridge K-25 Weapons
Facility of the Department of Energy ("DOE"). M&amp;EC also has three
subcontracts with Bechtel-Jacobs Company, LLC, DOE's site manager, which were
awarded in 1998 and cover the treatment of legacy, operational and remediation
nuclear waste. The facility began accepting waste in June 2001 and became
operational during the third quarter of 2001. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See
"ACQUISITION OF M&amp;EC" beginning on page 8 for further discussion as to the
terms of the acquisition of M&amp;EC by the Company.</FONT></P>&nbsp;
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center><FONT size=2>23</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular" size=-1>
<CENTER><STRONG>PRINCIPAL STOCKHOLDERS</STRONG></CENTER></FONT>
<P><FONT face="CG Times Regular"
size=-1><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth, as of the Record Date, certain information with
respect to the beneficial ownership of the Company's common stock by the
following:</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;each
person known by the Company to beneficially own more than, or own rights to
acquire more
than,&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5%
of all common stock outstanding;</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;each
director;</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
chief executive officer and each other executive officer whose salary and bonus
for the last
fiscal&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;year
exceeds $100,000; and</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;all
directors and executive officers as a group.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as otherwise indicated, the persons named in the table below have sole voting
and investment power with respect to all shares of common stock held by them.
Beneficial ownership is determined in accordance with the rules and regulations
promulgated under Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Shares of common stock which the person has a
right to acquire within 60 days after April 19, 2002, are deemed outstanding for purposes of
computing the percentage of ownership of that particular person and for all
officers and directors as a group, but are not deemed outstanding in computing
the percentage of any other person.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Applicable
percentage ownership in the following table is based on 34,178,562 shares of
common stock outstanding as of April 19, 2002, excluding 988,000 treasury shares. Unless otherwise indicated, the
business address of such person, for the purposes of this Proxy Statement, is
Perma-Fix Environmental Services, Inc., 1940&nbsp;N.W.&nbsp;67th Place,
Gainesville, Florida 32653.</FONT></P>
<TABLE width="100%">
  <TR vAlign=top>
    <TD align=middle>
      <p align="center"><BR WP="BR2"><FONT face="CG Times Regular" size=-1>Beneficial
      Owner</FONT></p>
    </TD>
    <TD align=center><FONT face="CG Times Regular" size=-1>Amount
      and<BR>Nature of Ownership</FONT> </TD>
    <TD align=center><FONT face="CG Times Regular" size=-1>Percent
      of<BR>Common Stock</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle>
      <hr width="30%" noshade size="3" color="#000080">
    </TD>
    <TD align=center>
      <hr noshade size="3" color="#000080">
 </TD>
    <TD align=center>
      <hr noshade size="3" color="#000080">
    </TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular" size=-1>Dr. Louis F.
Centofanti</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"
      size=-1>1,215,434<SUP>(1)</SUP></FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>
      <P align=center>3.52%</FONT></P></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular" size=-1>Thomas P. Sullivan and the Ann
      L. Sullivan Living Trust</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"
      size=-1>1,618,802<SUP>(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>
      <P align=center>4.73%</FONT></P></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular" size=-1>Capital Bank-Grawe Gruppe
      AG</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"
      size=-1>14,555,767<SUP>(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>
      <P align=center>36.98%</FONT></P></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular" size=-1>Mark A. Zwecker</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"
      size=-1>245,003<SUP>(4)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
    <TD><FONT face="CG Times Regular" size=-1>
      <CENTER>*</CENTER></FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular" size=-1>Jon Colin</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"
      size=-1>53,489<SUP>(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
    <TD><FONT face="CG Times Regular" size=-1>
      <CENTER>*</CENTER></FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular" size=-1>Richard T. Kelecy</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"
      size=-1>195,224<SUP>(6)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
    <TD><FONT face="CG Times Regular" size=-1>
      <CENTER>*</CENTER></FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular" size=-1>Roger Randall</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"
      size=-1>162,000<SUP>(7)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
    <TD><FONT face="CG Times Regular" size=-1>
      <CENTER>*</CENTER></FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular" size=-1>Larry McNamara</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"
      size=-1>44,000<SUP>(8)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
    <TD><FONT face="CG Times Regular" size=-1>
      <CENTER>*</CENTER></FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular" size=-1>Jack Lahav</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"
      size=-1>586,597<SUP>(9)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
    <TD><FONT face="CG Times Regular" size=-1>
      <P align=center>&nbsp;&nbsp;1.72%</FONT></P></TD></TR>
  <TR vAlign=top>
    <TD><font face="CG Times Regular" size="-1">Alfred C. Warrington, IV</font></TD>
    <TD align=right><font face="CG Times Regular" size="-1">142,439<sup>(10)</sup></font>&nbsp;&nbsp;</TD>
    <TD>
      <p align="center"><font face="CG Times Regular" size="-1">*</font></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular" size=-1>Directors and Executive
      Officers<BR>as a Group (9 persons)</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"
      size=-1>4,834,417<SUP>(11)&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
    <TD><FONT face="CG Times Regular" size=-1>
      <CENTER><STRONG></STRONG>13.55%</CENTER></FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD></TR></TABLE>
<P></FONT><FONT face="CG Times Regular" size=-1></FONT><FONT
face="CG Times Regular" size=-1></FONT><FONT face="CG Times Regular" size=-1>*
Indicates beneficial ownership of less than one percent (1%).</FONT></P>
<P><FONT face="CG Times Regular" size=-1><SUP>(1)</SUP> This amount includes (a)
541,434 shares held of record by Dr. Centofanti; (b) 70,000 shares issuable
under options granted pursuant to the 1993
Non-qualified Stock Option Plan, which are immediately exercisable; (c) 300,000
shares issuable under options granted pursuant to Dr. Centofanti's Employment
Agreement, which are immediately exercisable; and (d) 304,000 shares held by Dr.
Centofanti's wife. This amount does not include 125,000 shares issuable under
options which are not exercisable within 60 days. Dr. Centofanti shares voting
and investment power over the shares held by his wife.</FONT></P>
<P align=center><FONT face="CG Times Regular" size=-1>24</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular" size=-1><SUP>(2)</SUP> This amount includes (a)
32,898 shares held of record by Mr. Sullivan, (b) 30,000 shares issuable under
options granted pursuant to the 1992 Outside Directors Stock Option and
Incentive Plan, which are immediately exercisable, and (c) 1,555,904 shares held
by the Ann L. Sullivan Living Trust, dated September 6, 1978 ("ALS Trust"). Mr.
Sullivan shares beneficial ownership of the shares held by the ALS Trust with
his wife, Ann L. Sullivan, who is the trustee and primary beneficiary of the ALS
Trust. </FONT></P>
<P><FONT face="CG Times Regular" size=-1><SUP>(3) </SUP>This amount includes
9,373,445 shares that Capital Bank owns of record and 3,515,655 shares that
Capital Bank has the right to acquire within 60 days under certain warrants. The
warrants are exercisable at exercise prices ranging from $1.4219 to $1.9688 per
share of common stock. This amount also includes 1,666,667 shares of common
stock issuable upon the conversion of 2,500 shares of Series 17 Preferred held
by Capital Bank. This amount does not include the shares of common stock which
may be issuable for payment of dividends on the Series 17 Preferred. This amount
also does not include the 842,995 shares which will be issuable upon approval of
Proposal 1 of this Proxy Statement and the exercise of the Warrants acquired by
Capital Bank in the Offering. If Proposal 1 is approved by the stockholders,
then Capital Bank will beneficially own 15,398,762 shares of common stock,
representing 38.3% of the then outstanding common stock, assuming that the
Company does not issue any shares of common stock except to Capital Bank, and
Capital Bank does not sell or otherwise dispose of any shares of common stock.
Capital Bank has also advised the Company that it is holding these warrants,
including the Warrants acquired in the Offering, and shares on behalf of
numerous clients, all of which are accredited investors. </FONT><font face="CG Times Regular"><FONT size=-1>Although Capital Bank is the
record holder of the shares of common stock and warrants described in this note,
Capital Bank has advised the Company that it does not believe it is a beneficial owner of the
common stock or that it is required to file reports under Section 16(a) or
Section 13(d) of the Exchange Act. Because Capital Bank (a) has advised the
Company that it holds the common stock as a nominee only and that it does not
exercise voting or investment power over the common stock held in its name and
that no one investor of Capital Bank for which it holds Company common stock
holds more than 4.9% of the issued and outstanding common stock of the Company;
(b) has no right to, and is not believed to possess the power to, exercise
control over the Company's management or its policies; (c) has not nominated,
and has not sought to nominate, a director to the Company's board; and (d) has
no representative serving as an executive officer of the Company, the Company
does not believe that Capital Bank is an affiliate of the
Company. Capital Bank's address
is Burgring 16, 8010 Graz, Austria. Capital Bank has advised the Company that it
is a banking </FONT><FONT face="CG Times Regular" size=-1> institution regulated by the banking regulations of Austria.
Capital Bank is a wholly owned subsidiary of Grazer Wechselseitige Versicherung
Aktiengesells</FONT><FONT size=-1>chaft </FONT><FONT color=#ff0000 face="CG Times Regular"
size=-1>("Grazer").&nbsp; Capital Bank has advised the Company that Grazer is
wholly owned by GRAWE VERMOGENSVERWALTUNG, a mutual insurance association
("GRAWE").&nbsp; Capital Bank has further advised the Company that the owners of
GRAWE are all insurance holders of Grazer with an insurance agreement for more
than one year.&nbsp; See
"POTENTIAL CHANGE IN CONTROL."</FONT></font></P>
<P><FONT face="CG Times Regular" size=-1><SUP>(4)</SUP> This amount includes (a)
200,003 shares held of record by Mr. Zwecker; (b) 5,000 issuable under options
granted pursuant to the 1993 Non-qualified Stock Option Plan, which are immediately
exercisable; and (c) 40,000 shares granted pursuant to the 1992 Outside Directors Stock Option and
Incentive Plan, which are immediately exercisable.</FONT></P>
<P><FONT face="CG Times Regular" size=-1><SUP>(5)</SUP> This amount includes (a)
13,489 shares held of record by Mr. Colin, and (b) 40,000 shares issuable under
options granted pursuant to the 1992 Outside Directors Stock Option and
Incentive Plan, which are immediately exercisable.</FONT></P>
<P><FONT face="CG Times Regular" size=-1><SUP>(6)</SUP> This amount includes (a)
13,224 shares held of record by Mr. Kelecy and (b) 182,000 shares issuable under
options granted pursuant to the 1993 Non-qualified Stock Option Plan. This
amount does not include 98,000 shares issuable under options granted pursuant
to the 1993 Non-qualified Stock Option Plan, which are not exercisable within 60
days.</FONT></P>
<P><FONT face="CG Times Regular" size=-1><SUP>(7)</SUP> This amount includes (a)
162,000 shares issuable under options granted pursuant to the 1993 Non-qualified
Stock Option Plan, which are immediately exercisable. This amount does not
include 98,000 shares issuable under options granted pursuant to the 1993
Non-qualified Stock Option Plan, which are not exercisable within 60
days.</FONT></P>
<P><FONT face="CG Times Regular" size=-1><SUP>(8)</SUP> This amount includes (a)
44,000 shares issuable under options granted pursuant to the 1993 Non-qualified
Stock Option Plan, which are immediately exercisable. This amount does not
include 126,000 shares issuable under options granted pursuant to the 1993
Non-qualified Stock Option Plan, which are not exercisable within 60 days.
</FONT></P>
<P><FONT face="CG Times Regular" size=-1><SUP>(9)</SUP> This amount includes (a)
571,597 shares held of record by Mr. Lahav and (b) 15,000 shares issuable under
options granted pursuant to the 1992 Outside Directors Stock Option and
Incentive Plan, which are immediately exercisable. This amount does not include
the 571,429 shares issuable upon approval of Proposal 1 of this Proxy Statement
and upon exercise of the Warrants acquired by Mr. Lahav in the Offering. If
Proposal 1 is approved by the stockholders, then Mr. Lahav will beneficially own
1,158,026 shares of common stock, representing 3.33% of the then outstanding
common stock, assuming that the Company does not issue any other shares of
common stock.</FONT></P>
<P align="center"><font face="CG Times Regular" size="-1">25</font></P>
<P>&nbsp;</P>
<P><font size="-1" face="CG Times Regular"><sup>(10)</sup> This amount includes
(a) 112,439 shares held of record by Mr. Warrington and (b) 30,000 shares
issuable under options granted pursuant to the 1992 Outside Directors Stock
Option and Incentive Plan, which are immediately exercisable.&nbsp; This amount
does not include 15,000 shares issuable under options granted pursuant to the
1992 Outside Directors Stock Option and Incentive Plan, which are not
exercisable within 60 days.</font></P>
<P><FONT face="CG Times Regular" size=-1><SUP>(10)</SUP> This amount includes
918,000 shares that executive officers and directors have the right to acquire
within 60 days.<BR></FONT></P>
<P><FONT face="CG Times Regular" size=-1>
<CENTER><STRONG>POTENTIAL CHANGE IN CONTROL</STRONG></CENTER></FONT>
<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="CG Times Regular" size=-1>As of April 19, 2002, Capital Bank owned
of record, as agent for certain accredited investors, 9,373,445 shares of common
stock representing 27.43% of the Company's issued and outstanding common stock.
Capital Bank has rights to acquire an additional 6,025,317 shares of common
stock if Proposal 2 is approved or 5,182,322 shares if Proposal 2 is not
approved. The shares which Capital Bank has the right to acquire are the
following: </FONT>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT><FONT face="CG Times Regular" size=-1>842,995 shares of common stock
issuable upon exercise of the Warrants included in the units
purchased&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in
the Offering by Capital Bank as agent for certain investors assuming the
stockholders
approve&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proposal
2 of this Proxy Statement; </FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
face="CG Times Regular" size=-1>3,515,655 shares of common stock issuable under
various other warrants held by Capital Bank; and</FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
face="CG Times Regular" size=-1>1,666,667 shares of common stock issuable to
Capital Bank upon the conversion of 2,500 shares of
the<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Company's
Series 17 Preferred held by Capital Bank. The Series 17 Preferred is not
entitled to vote
on&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
proposals included in this Proxy Statement. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If Capital
Bank were to acquire all of the shares of common stock issuable upon exercise of
the various warrants held by Capital Bank and the shares of common stock
issuable upon conversion of the Series 17 Preferred, then Capital Bank's record
ownership as of the record date would be as follows:</FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
face="CG Times Regular" size=-1>15,398,762 shares of common stock, representing
38.3% of the issues and outstanding common stock
as&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
the Record Date; or</FONT></P>
<P><FONT
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
face="CG Times Regular" size=-1>14,555,767 shares of common stock if Proposal 2
is <U>not</U> approved, representing 36.98% of the issued
and<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
outstanding common stock as of the Record Date.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>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 Capital Bank does not dispose of any shares of
common stock. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
Capital Bank were to acquire the shares of common stock as described above, the
Company may not be able to avoid an actual change in control of the Company if
Capital Bank seeks such a change in control. Moreover, if such conversion and
exercise results in Capital 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. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If Capital
Bank acquires the shares of common stock described above, Capital Bank may be
able to cause a change in at least 50% of the members of the Company's Board of
Directors. Such a change in Board membership could be an event of default under
the Company's $22 million credit facility (the "Credit Facility") and its $5.6
million outstanding Senior Subordinated Notes due July 31, 2006 (the "Notes").
In addition, if Capital Bank were to acquire such shares and cause Dr. Louis
Centofanti to be removed from the Board of Directors or as the Company's
president and chief executive officer, the removal could be an event of default
under the Credit Facility and the Notes.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital Bank
has advised the Company that it is a banking institution regulated by the
banking regulations of Austria which holds the Company's shares of stock on
behalf of numerous investors. Capital Bank has advised the Company that it is
precluded by Austrian law from disclosing the identities of its investors, but
that all of its investors are accredited investors under Rule 501 of Regulation
D promulgated under the Act. In addition, Capital Bank has advised the Company
that none of its investors beneficially own more than 4.9% of the Company's
common stock. Capital Bank has further </FONT></P>
<P align=center><FONT size=2>26</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular" size=-1>informed the Company that its clients
(and not Capital Bank) maintain full voting and dispositive power over such
shares. Consequently, Capital Bank has advised the Company that it believes it
is not the beneficial owner, as such term is defined in Rule 13d-3 under the
Exchange Act ("Rule 13d-3"), of the shares of stock registered in the name of
Capital Bank because it has neither voting nor investment power, as such terms
are defined in Rule 13d-3, over such shares. As a result, Capital Bank has
informed the Company that it does not believe that it is required to file
reports under Section 16(a) of the Exchange Act or to file either a Schedule 13D
or a Schedule 13G, as required by Rule 13d-1 of the Exchange Act, in connection
with the shares of the Company's common stock registered in the name of Capital
Bank. </FONT></P>
<P><FONT face="CG Times Regular" size=-1>
<CENTER><STRONG><BR>STOCKHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING OF
STOCKHOLDERS</STRONG></CENTER></FONT>
<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="CG Times Regular" size=-1>Any stockholder who wishes to present a proposal
for consideration at the annual meeting of stockholders to be held in 2002 must
submit such proposal in accordance with the rules promulgated by the Securities
and Exchange Commission. In order for a proposal to be included in the Company's
proxy materials relating to the 2002 Annual Meeting of Stockholders, the
stockholder must have submitted such proposal in writing to the Company so that
it was received no later than January 4, 2002. Any stockholder proposal
submitted with respect to the Company's 2002 Annual Meeting of Stockholders and
received by the Company after January 4, 2002, will be considered untimely for
purposes of Rule 14a-4 and 14a-5 under the Exchange Act, and the Company may
vote against such proposal using its discretionary voting authority as
authorized by proxy. Such proposals should be addressed to Richard T. Kelecy,
Perma-Fix Environmental Services, Inc., 1940 N.W. 67th Place, Suite&nbsp;A,
Gainesville, Florida 32653.</FONT>
<P><BR WP="BR1"><FONT face="CG Times Regular" size=-1><STRONG>
<CENTER>OTHER MATTERS</CENTER></STRONG></FONT>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of
Directors has no knowledge of any business to be presented for consideration at
the Meeting other than as described above. Should any such matters properly come
before the Meeting or any adjournment thereof, the persons named in the enclosed
Proxy Card will have discretionary authority to vote such proxy in accordance
with their best judgment on such matters and with respect to matters incident to
the conduct of the Meeting.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional copies
of the Proxy Statement and accompanying Proxy Card may be obtained from the
Company.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BDO Seidman, LLP
("BDO Seidman") is serving as our independent accountants to audit the
consolidated financial statements of the Company for fiscal year 2001. We expect
that representatives of BDO Seidman will be present at the Meeting, will have an
opportunity to make a statement if they desire to do so, and will be available
to answer appropriate questions. </FONT></P><BR WP="BR1"><FONT
face="CG Times Regular" size=-1>
<CENTER><STRONG>WHERE YOU CAN FIND MORE INFORMATION</STRONG></CENTER></FONT>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company
files annual, quarterly and special reports, proxy statements and other
information with the Commission. You may read and copy any reports, statements
or other information we file in the Commission's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the
Commission at (800) SEC-0330 for further information on the public reference
rooms. Our Commission filings are also available to the public from commercial
document retrieval services and at the web site maintained by the Commission at
www.sec.gov.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Commission allows us to incorporate by reference information into this Proxy
Statement which means that we can disclose important information to you by
referring you to another document filed separately with the Commission. The
information incorporated by reference is deemed to be a part of this Proxy
Statement, except for any information superseded by information in this Proxy
Statement. This Proxy Statement incorporates by reference the following
documents that we have previously filed with the Commission: </FONT></P>
<P>&nbsp;</P>
<P align="center"><font face="CG Times Regular" size="-1">27</font></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
annual report on Form 10-K for the fiscal year ended December 31, 2001;</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
quarterly reports on Form 10-Q for the quarter ended March 31, 2001; for the
quarter ended June
30,&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2001;
and for the quarter ended September 30, 2001;</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
current reports on Form 8-K filed on April 6, 2001, May 14, 2001, July 5, 2001,
July 20, 2001,
and&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;August
7, 2001, and the amendments to the current report on Form 8-K/A, filed September
10, 2001,
and&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;January
25, 2002; and</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
definitive Proxy Statement filed on April 30, 2001, pursuant to Section 14 of
the Exchange Act
in&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;connection
with our 2001 Annual Meeting of Stockholders.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are
also incorporating by reference any additional filings we make with the
Commission under Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act
documents between the date of this Proxy Statement and the date of the
Meeting.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you are a
stockholder, we may have sent you some of the documents incorporated by
reference, but you can obtain any of them without charge, excluding all exhibits
unless we have specifically incorporated by reference an exhibit in this Proxy
Statement. Stockholders may obtain documents incorporated by reference in this
Proxy Statement by requesting them in writing or by telephone from the Company
at </FONT><FONT face="Times New Roman" size=-1>Perma-Fix Environmental Services,
Inc., 1940 N.W. 67th Place, Suite&nbsp;A, Gainesville, Florida 32653</FONT><FONT
face="CG Times Regular" size=-1>, (352) 373-4200. If you would like to request
documents from us, please do so by June 7, 2002 to receive them before the
Special Meeting. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should
rely only on the information contained or incorporated by reference in this
Proxy Statement. We have not authorized anyone to provide you with information
that is different from what is contained in this Proxy Statement. This Proxy
Statement is dated May 9, 2002. You should not assume that the information
contained in this Proxy Statement is accurate as of any date other than May 9, 2002, and the mailing of this proxy statement to stockholders shall not
create any implication to the contrary. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
order to assure the presence of the necessary quorum at the Meeting, please sign
and mail the enclosed Proxy Card promptly in the envelope provided. No postage
is required if mailed within the United States. The signing of the Proxy Card
will not prevent your attending the Meeting and voting in
person.</STRONG></FONT></P>
<TABLE width=653>
  <TR vAlign=top>
    <TD width=322></TD>
    <TD width=317><FONT face="CG Times Regular" size=-1>Order of the Board of
      Directors,</FONT> <BR WP="BR1"><BR WP="BR2"><BR WP="BR1"><BR
      WP="BR2"><FONT face="CG Times Regular" size=-1>Richard T. Kelecy,
      Secretary<BR>Gainesville, Florida<BR>May 9,
2002</FONT></TD></TR></TABLE>&nbsp;
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center><FONT size=2>28</FONT></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular" size=-1>
<CENTER>EXHIBIT "A"</CENTER></FONT>
<P></P>
<P><FONT face="CG Times Regular" size=-1>
<CENTER><U>Letter of Willard Carr, CPA, P.C.</U></CENTER></FONT>
<P></P>
<P align=left><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Willard
L. Carr, CPA<BR></FONT><FONT face=Arial
size=+1><STRONG>Willard</STRONG></FONT><FONT face="CG Times Regular"
size=-1><STRONG>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</STRONG>Tracy
J. Larabee, CPA<BR></FONT><FONT face=Arial size=+1><STRONG>L. Carr CPA
pc</STRONG></FONT><FONT face="CG Times Regular" size=-1>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;David
W. Carr, CPA</FONT></P>
<P><FONT face="CG Times Regular" size=-1>Member of<BR>American Institute of
Certified Public
Accountants&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tennessee
Society of Certified Public
Accountants<BR><STRONG>__________________________________________________________________________________________</STRONG></FONT></P><BR
WP="BR1"><BR WP="BR2"><BR WP="BR1"><FONT face="CG Times Regular" size=-1>March
9, 2002</FONT>
<P><BR WP="BR1"><BR WP="BR2"><BR WP="BR1"><FONT face="CG Times Regular"
size=-1>Securities and Exchange Commission<BR>450 5<SUP>th</SUP> Street
N.W.<BR>Washington, D.C. 20549</FONT>
<P><FONT face="CG Times Regular" size=-1>Gentlemen:</FONT></P>
<P><FONT face="CG Times Regular" size=-1>We have been furnished with a copy of
the section "Change in Accountants" in the preliminary proxy statement for
Perma-Fix Environmental Services as it relates to our former client East
Tennessee Materials &amp; Energy Corporation. We agree with the statements made
in response to that section insofar as they relate to our Firm.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>Very truly yours,</FONT></P>
<P><FONT face="CG Times Regular" size=-1><BR>/s/ Willard L. Carr, CPA
PC<BR>Willard L. Carr, CPA PC</FONT></P><BR WP="BR1"><BR WP="BR2"><BR
WP="BR1"><BR WP="BR2"><BR WP="BR1"><BR WP="BR2">
<P><FONT face="CG Times Regular"
size=+1>_________________________________CPA_____________________________<BR></FONT><FONT
face="CG Times Regular" size=-1>570 Oak Ridge Turnpike, P.O. Box
6274&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Phone
(865) 482-2457 * Fax (865) 482-7933<BR>Oak Ridge, Tennessee
37831-6274&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;www.wlccpapc.com</FONT></P>

<P align=center><font size="2">29</font></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular" size=-1>
<CENTER>APPENDIX A</CENTER></FONT>
<P><FONT face="CG Times Regular" size=-1>
<CENTER><U>FORM OF WARRANT</U></CENTER></FONT>
<P></P>
<P><FONT face=Arial size=-1>THIS WARRANT AGREEMENT AND THE SHARES OF COMMON
STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT AGREEMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED
EXCEPT (A) UNDER COVER OF A REGISTRATION STATEMENT UNDER SUCH ACT WHICH IS
EFFECTIVE AND CURRENT WITH RESPECT TO THIS WARRANT AGREEMENT OR SUCH SHARES OF
COMMON STOCK, AS THE CASE MAY BE, OR (B) PURSUANT TO THE WRITTEN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO PERMA-FIX ENVIRONMENTAL SERVICES, INC. TO THE
EFFECT THAT REGISTRATION UNDER SUCH ACT IS NOT REQUIRED WITH RESPECT TO SUCH
SALE OR TRANSFER.</FONT><FONT face="CG Times Regular" size=-1></FONT></P>
<P align=right><FONT face="CG Times Regular" size=-1>____________
Warrants</FONT></P>
<P><FONT face="CG Times Regular" size=-1>
<CENTER><U>WARRANT AGREEMENT</U> </CENTER></FONT>
<P></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This WARRANT
AGREEMENT (the "Agreement") is made effective the 31<SUP>st</SUP> day of July,
2001 (the "Issue Date"), between PERMA-FIX ENVIRONMENTAL SERVICES, INC. a
Delaware corporation (the "Company"), and _____________________, a[n] individual
("Registered Holder").</FONT></P>
<P><FONT face="CG Times Regular" size=-1>
<CENTER><U>WITNESSETH:</U></CENTER></FONT>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
in connection with a private placement (the "Offering") by the Company of a
minimum of 1.5 million and a maximum of 4.4 million units ("Units"), each Unit
consisting of one share of the Company's common stock, par value $.001 per share
("Common Stock"), and one warrant to purchase one share of Common Stock (a
"Warrant") as described in the Confidential Private Placement Memorandum, dated
April 6, 2001, as amended by Amendment No. 1 to the Confidential Private
Placement Memorandum dated June 15, 2001, the Registered Holder has purchased
from the Company the same number of Units as the number of Warrants set forth
above pursuant to the terms and conditions of a Subscription Agreement between
the Registered Holder and the Company (the "Subscription Agreement");
and</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
in reliance upon the representations made by the Registered Holder in (a) this
Agreement, (b) the Subscription Agreement, dated the same date as this
Agreement, between the Company and the Registered Holder (the "Subscription
Agreement"), and (c) the Investor Questionnaire completed by the Registered
Holder and delivered to the Company in connection with the Offering and the
purchase of Units by the Registered Holder (the "Questionnaire"), the offer and
purchase of securities under this Agreement will be exempt from registration
under applicable federal securities laws because this is a private placement and
intended to be a nonpublic offering pursuant to Sections 4(2) and/or 3(b) of the
Securities Act of 1933, as amended (the "Act"), and/or Regulation D promulgated
under the Act;</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, the
Common Stock is listed for trading on the Boston Stock Exchange and the National
Association of Securities Dealers Automated Quotation SmallCap market
("NASDAQ"), and the Company is subject to the reporting requirements of Sections
13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and has been subject to such filing requirements for the past 90 days;
and</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
this Agreement sets forth the terms and conditions of the Warrants included in
the Units purchased by the Registered Holder under the Offering.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW
THEREFORE, in consideration of the mutual promises herein contained and
intending to be legally bound, the parties hereby agree as follows:</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Warrants</U>.&nbsp;&nbsp;The
Company hereby grants to Registered Holder Warrants for the right to purchase up
to an aggregate of _____________ shares of Common Stock (the "Warrant Shares")
at an initial exercise price (subject to adjustment as provided in paragraph 14
below) of $1.75 per share of Common Stock (the "Exercise Price"), subject to the
terms and conditions of this Agreement. Except as set forth herein, the Warrant
Shares issuable upon exercise of the Warrants&nbsp;are in all respects identical to the
shares of Common Stock that have been issued to the public. The Registered
Holder may exercise all or any number of Warrants resulting in the purchase of a
whole number of Warrant Shares.</FONT></P>
<P align="center"><font face="CG Times Regular" size="-1">A-1</font></P>
<P><FONT face="CG Times Regular"
size=-1>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Exercise Period</U>. The Warrants may
be exercised at any time commencing after the date upon which notice is received
by the Registered Holder that the shareholders of the Company have approved the
exercise of the Warrants at the Exercise Price and ending at 5:00 p.m., Eastern
Standard Time, on the fifth anniversary date of the Issue Date, subject to
paragraph 9 of this Agreement. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Warrant Certificates</U>. The warrant
certificates (the "Warrant Certificates") delivered and to be delivered pursuant
to this Agreement will be in the form set forth in Exhibit A, attached hereto
and made a part hereof, with such appropriate insertions, omissions,
substitutions, and other variations as required or permitted by this Agreement.
Warrant Certificates will be manually countersigned by the Company and will not
be valid for any purpose unless so countersigned. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Issuance of New Certificates</U>.
Notwithstanding any of the provisions of this Agreement or any Warrant
Certificate to the contrary, the Company may, at its option, issue one or more
new Warrant Certificates in such form as may be approved by its Board of
Directors to reflect any adjustment or change in the Exercise Price or the
number or kind of shares purchasable under the each Warrant Certificate made in
accordance with the provisions of this Agreement. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Exercise of Warrant</U>. Subject to
the terms of this Agreement, the Warrants initially are exercisable at an
aggregate initial exercise price per share of Common Stock set forth in
paragraph 1 hereof payable by certified or cashier's check in United States
dollars, subject to adjustment as provided in paragraph 14 of this Agreement.
Upon surrender of a Warrant Certificate with the annexed Form of Election to
Purchase duly executed, together with payment in full of the exercise price for
the shares of Common Stock purchased pursuant to the terms of this Agreement, at
the Company's principal offices (presently located at 1940&nbsp;Northwest
67<SUP>th</SUP> Place, Gainesville, Florida 32653), the Registered Holder will
be entitled to receive a certificate or certificates for the shares of Common
Stock so purchased. The purchase rights represented by each Warrant Certificate
are exercisable at the option of the Registered Holder, in whole or in part (but
not as to fractional shares of the Common Stock underlying the Warrants).
Warrants may be exercised to purchase all or part of the Warrant Shares. If less
than all the Warrant Shares are purchased under any Warrant Certificate, the
Company will cancel the Warrant Certificate upon the surrender thereof and will
execute and deliver a new Warrant Certificate of like tenor for the balance of
the Warrant Shares purchasable under the original Warrant Certificate.
</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Issuance of Certificates</U>. Upon
the exercise of all or any portion of the Warrants, the issuance of certificates
for the Warrant Shares underlying the Warrants so exercised, will be made
promptly (and in any event within 10 business days thereafter) without charge to
the Registered Holder exercising such Warrants, including, without limitation,
any tax which may be payable in respect of the issuance thereof, and such
certificates will be issued in the name of the Registered Holder. The Warrants
and the certificates representing the Warrant Shares will be executed on behalf
of the Company by the manual or facsimile signature of the then Chairman or Vice
Chairman of the Board of Directors or President or Vice President of the
Company.</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Restriction on Transfer of Warrants
or Warrant Shares</U>. The Registered Holder, by Registered Holder's acceptance
of this Agreement, covenants and agrees that the Warrants are being acquired as
an investment and not with a view to the distribution thereof. The Registered
Holder, by acceptance of this Agreement, agrees that (a) no public distribution
of Warrants or Warrant Shares will be made in violation of the provisions of the
Act and the Rules and Regulations promulgated thereunder and (b) during such
period as delivery of a prospectus with respect to Warrants or Warrant Shares
may be required by the Act, no public distribution of Warrants or Warrant Shares
will be made in a manner or on terms different from those set forth in, or
without delivery of, a prospectus then meeting the requirements of Section 10 of
the Act and in compliance with all applicable state securities laws. The
Registered Holder and each permitted transferee of the Registered Holder further
agrees that if any transfer or other distribution of any of the Warrants or
Warrant Shares is proposed to be made by them other than by delivery of a
prospectus meeting the requirements of Section 10 of the Act, such action will
be taken only after receipt by the Company of an opinion of its counsel, or an
opinion of counsel reasonably satisfactory to the Company, to the effect that
the proposed transfer or other distribution will not be in violation of the Act
or applicable state law. As a condition to the transfer of the Warrants, any
transferee of the Warrants must deliver to the Company a written agreement to
accept and be bound by all of the terms and conditions contained in this
Agreement. Any Warrant Shares issued upon exercise of the Warrants will bear a
legend to the following effect:</FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The securities represented by this
certificate have not been registered under the Securities Act of 1933, as&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;amended (the "Act"), or qualified under applicable state securities laws, and
are restricted securities within&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the meaning of the Act. Such securities may not
be sold or transferred, except pursuant to a registration&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;statement under such
Act and qualification under applicable state securities laws which are effective
and&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;current with respect to such securities or pursuant to an opinion of counsel
reasonably satisfactory to the&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;issuer of such securities that registration and
qualification are not required under applicable federal or state&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;securities laws
or an exemption is available therefrom. </FONT></P>
<P align="center"><font face="CG Times Regular" size="-1">A-2</font></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular" size=-1>8. <U>Warrant Holder Not
Shareholder</U>. Neither this Agreement nor the Warrant Certificate will be
deemed to confer upon the Registered Holder any right to vote the Warrant Shares
or to consent to or receive notice as a shareholder of the Company as such,
because of this Agreement or the Warrant Certificate, in respect of any matters
whatsoever, or any other rights or liabilities as a shareholder.</FONT></P>
<P><FONT size=2><FONT
face="CG Times Regular">9.</FONT>&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="CG Times Regular" size=-1><U>Taxes</U>. The Company will pay all taxes
attributable to the initial issuance of Warrant Shares upon exercise of
Warrants. The Company will not, however, be required to pay any tax which may be
payable in respect to any transfer involved in any issue of Warrant Certificates
or in the issue of any certificates of Warrant Shares in the name other than
that of the Registered Holder upon the exercise of any Warrant, as the case may
be.</FONT></FONT></P>
<P><FONT face="CG Times Regular" size=-1>10.&nbsp;&nbsp;&nbsp;&nbsp;<U>Mutilated
or Missing Certificates</U>. If any Warrant Certificate is mutilated, lost,
stolen or destroyed, the Company may, on such terms as to indemnity or otherwise
as they it in its discretion impose (which will, in the case of a mutilated
Warrant Certificate, include the surrender thereof), and upon receipt of
evidence satisfactory to the Company of such mutilation, loss, theft or
destruction, issue a substitute Warrant Certificate, respectively, of like
denomination or tenor as the Warrant Certificate so mutilated, lost, stolen or
destroyed. Applicants for substitute Warrant Certificates will comply with such
other reasonable regulations and pay any reasonable charges as the Company may
prescribe. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>11.&nbsp;&nbsp;&nbsp;&nbsp;<U>Subsequent Issue of Certificates</U>.
Subsequent to their original issuance, no Warrant Certificates will be reissued
except (a) such Certificates issued upon transfer thereof in accordance with
paragraph 7 hereof, (b) such Certificates issued upon any combination, split-up
or exchange of Warrant Certificates pursuant to paragraph 14 hereof, (c) such
Certificates issued in replacement of mutilated, destroyed, lost or stolen
Warrant Certificates pursuant to paragraph 10 hereof, (d) Warrant Certificates
issued upon the partial exercise of Warrant Certificates pursuant to paragraph 5
hereof, and (e) Warrant Certificates issued to reflect any adjustment or change
in the Exercise Price or the number or kind of shares purchasable thereunder
pursuant to paragraph 14 hereof. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>12.&nbsp;&nbsp;&nbsp;&nbsp;<U>Reservation of Shares</U>. For the purpose
of enabling the Company to satisfy all obligations to issue Warrant Shares upon
exercise of Warrants, the Company will at all times reserve and keep available
free from preemptive rights, out of the aggregate of its authorized but unissued
shares, the full number of Shares which may be issued upon the exercise of the
Warrants. The Company covenants all shares which will be so issuable upon
exercise of the Warrants, will upon issue be fully paid and nonassessable by the
Company and free from all taxes, liens, charges and security interests with
respect to the issue thereof. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>13.&nbsp;&nbsp;&nbsp;&nbsp;<U>Registration</U>. The Warrant Shares
issuable upon exercise of the Warrants are subject to the registration rights
set forth in the Subscription Agreement. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>14.&nbsp;&nbsp;&nbsp;&nbsp;<U>Adjustments of Number and Kind of Shares
Purchasable and Exercise Price</U>. The number and kind of securities or other
property purchasable upon exercise of a Warrant will be subject to adjustment
from time to time upon the occurrence, after the date hereof, of any of the
following events. </FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Distributions;
Dividends; Subdivisions; Combinations</U>. If the Company (a) pays a dividend
in, or
makes&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a
distribution of, shares of capital stock on its outstanding Common Stock; (b)
subdivide its
outstanding<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
shares of Common Stock into a greater number of shares; or (c) combines its
outstanding shares
of&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common
Stock into a smaller number of shares, then the total number of shares of Common
Stock&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;purchasable
upon the exercise of each Warrant outstanding immediately prior to such event
will
be&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;adjusted
so that the Registered Holder of any Warrant Certificate will be entitled, upon
proper
exercise&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
the Warrants, to receive at the same aggregate Exercise Price the number of
shares of capital
stock&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(of
one or more classes) which the Registered Holder would have owned or have been
entitled
to&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;receive
immediately following the happening of any of the events described above had
such
Warrant&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;been
exercised in full immediately prior to the record date with respect to such
event. Any
adjustment&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;made
pursuant to this paragraph 14.1 will, in the case of a stock dividend or
distribution, become
effective&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;as
of the applicable record date and, in the case of a subdivision or combination,
be made as of
the&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;effective
date of the event. If, as a result of an adjustment made pursuant to this
paragraph,
the&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Registered
Holder of any Warrant Certificate becomes entitled, upon proper exercise of the
Warrants,&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to
receive shares of two or more classes of capital stock of the Company, the Board
of
Directors&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
the Company (whose determination will be conclusive and will be evidenced by a
Board
resolution)&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;will
determine the allocation of the adjusted Exercise Price between or among shares
of such classes
of&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;capital
stock.</FONT></P>
<P>&nbsp;</P>
<P align="center"><font face="CG Times Regular" size="-1">A-3</font></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.2&nbsp;&nbsp;&nbsp;&nbsp;<U>Consolidation;
Merger</U>. If the Company consolidates with, or merges into, another
corporation
(other&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;than
a consolidation or merger which does not result in any reclassification or
change of
the&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;outstanding
Common Stock), or in case of any sale or conveyance to another corporation of
the&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;property
of the Company as an entirety or substantially as an entirety, the corporation
formed by&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;such consolidation or merger or the corporation which will have
acquired such assets, as the case&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;may be, will execute and deliver to the
Registered Holder a supplemental warrant agreement providing&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;that the Registered
Holder will, with respect to each Warrant then outstanding and held by the&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Registered Holder, have the right thereafter (until the expiration of such
Warrant) to receive, upon&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;exercise of such Warrant, solely the kind and amount
of shares of stock and other securities and&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;property (or cash) receivable upon
such consolidation, merger, sale or transfer by a holder of the&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;number of shares
of Common Stock of the Company for which such Warrant might have been&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;exercised
immediately prior to such consolidation, merger, sale or transfer. Such
supplemental&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;warrant agreement will provide for adjustments which will be as
nearly equivalent as may be&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;practicable to the adjustments provided in this
paragraph. The provision of this paragraph will&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;similarly apply to successive
consolidations, mergers, sales or transfers. </FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.3&nbsp;&nbsp;&nbsp;&nbsp;<U>Reorganization;
Reclassification</U>. If any capital reorganization or a reclassification of the
Common&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock (except as provided in paragraphs 14.1 and 14.2 above), will be
effected, then, as a condition&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of such reorganization or reclassification,
lawful and adequate provision will be made whereby the&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Registered Holder, upon
exercise of Warrants, will thereafter have the right to purchase and receive,&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;upon the basis and upon the terms and conditions specified herein and in the
Warrants and, in&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;substitution for the Common Stock to which the Registered
Holder would have become entitled upon&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;exercise immediately prior to such
reorganization or reclassification, the shares (of any class or classes)&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;or
other securities or property of the Company (or cash) that the Registered Holder
would have been&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;entitled to receive at the same aggregate Exercise Price upon
such reorganization or reclassification&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;if the Warrants had been exercised
immediately prior to the record date with respect to such event;&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and in any such
case, appropriate provision (as determined by the Board of Directors of the
Company,&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;whose determination will be conclusive and will be evidenced by a
certified Board resolution filed&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;with the Warrant Agent) will be made for the
application of this paragraph with respect to the rights&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and interests
thereafter of the Registered Holders (including but not limited to the
allocation of the&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exercise Price between or among shares of classes of capital
stock), to the end that this paragraph&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(including the adjustments of the number
of shares of Common Stock or other securities purchasable&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and the Exercise Price
of the Warrants) will thereafter be reflected, as nearly as reasonably
practicable,&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in all subsequent exercises of the Warrants for any shares or
securities or other property (or cash)&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;thereafter deliverable upon the exercise
of the Warrants. </FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Certification of
Adjustment</U>. Whenever the number of shares of Common Stock or other
securities&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;purchasable upon exercise of a Warrant is adjusted as provided in
this paragraph, the Company will&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;provide the Registered Holder a certificate
signed by the Chairman of the Board or the President or&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a Vice President of the
Company setting forth the number and kind of securities or other property&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;purchasable upon exercise of a Warrant, as so adjusted, stating that such
adjustments in the number&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;or kind of shares or other securities or property
conform to the requirements of this paragraph, and&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;setting forth a brief
statement of the facts accounting for such adjustments.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Change of Certificate</U>.
Irrespective of any adjustments in the number or kind of shares issuable upon&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;exercise of Warrants, Warrant Certificates theretofore or thereafter issued may
continue to express&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the same price and number and kind of shares as are stated
in the similar Warrant Certificates initially&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;issuable pursuant to this
Agreement.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Certification</U>. The Company
may retain a firm of independent public accountants of recognized&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;standing,
which may be the firm regularly retained by the Company, selected by the Board
of Directors&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of the Company or the Executive Committee of the Board, to make any
computation required under&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;this paragraph, and a certificate signed by such firm
will, in the absence of fraud or gross negligence,&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;be conclusive evidence of the
correctness of any computation made under this paragraph. </FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"<U>Common Stock</U>". For the
purpose of this paragraph, the term "Common Stock" will mean (a) the&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common
Stock or (b) any other class of stock resulting from successive changes or
reclassifications&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of such Common Stock consisting solely of changes in par
value, or from par value to no par value,&nbsp;</FONT></P>
<P align="center"><font size="2">A-4</font></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;or from no par value to par value. If,
at any time as a result of an adjustment made pursuant to this&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;paragraph, the
Registered Holder of any Warrant thereafter surrendered for exercise will become&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;entitled to receive any shares of capital stock of the Company other than shares
of Common Stock,&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;thereafter the number of such other shares so receivable upon
exercise of any Warrant will be&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to the provisions with
respect to the Common Stock contained in this paragraph, and all other&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;provisions of this Agreement, with respect to the Common Stock, will apply on
like terms to any&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;such other shares.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.8&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Reduction of Exercise
Price</U>. The Company may, from time to time and to the extent permitted by
law,&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;reduce the exercise price of the Warrants by any amount for a period of not
less than 20 days. If the&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Company so reduces the exercise price of the Warrants,
it will give not less than 15 days notice of&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;such decrease, which notice may be
in the form of a press release, and will take such other steps&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;as may be
required under applicable law in connection with any offers or sales of
securities at the&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;reduced price.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.9&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>No Adjustment of Exercise Price
in Certain Cases</U>. No adjustment of the exercise price will be made&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;if the
amount of the adjustment is less than two cents per Warrant Share, provided,
however, that&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in such case any adjustment that would otherwise be required then
to be made will be carried forward&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and will be made at the time of, and together
with, the next subsequent adjustment which, together&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;with any adjustment so
carried forward, will amount to at least two cents per Warrant Share.
</FONT></P>
<P><FONT face="CG Times Regular" size=-1>15.&nbsp;&nbsp;&nbsp;&nbsp; <U>Reduction of Exercise Price
Below Par Value</U>. Before taking any action that would cause an adjustment
pursuant&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to paragraph 14 of this Agreement reducing the portion of the exercise
price required to purchase one share&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of capital stock below the then par value
(if any) of a share of such capital stock, the Company will use its&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;best efforts
to take any corporate action which, in the opinion of its counsel, may be
necessary in order that&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the Company may validly and legally issue fully paid and
non-assessable shares of such capital stock. </FONT></P>
<P><FONT face="CG Times Regular" size=-1>16.&nbsp;&nbsp;&nbsp;&nbsp;<U>No Fractional Warrants or
Warrant Shares</U>. The Company will not be required to issue fractions of
Warrants&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;upon the reissue of Warrants or any adjustments as described in
paragraph 15, or otherwise; but the Company&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in lieu of issuing any such
fractional interest, will adjust the fractional interest by payment to the
Registered&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holder an amount, in cash, equal to the current market value of any
such fraction or interest. If the total&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warrants surrendered by exercise would
result in the issuance of a fractional share of Common Stock, the&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Company will
not be required to issue a fractional share, but rather the resulting fractional
interest will be&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;adjusted by payment in an amount, in cash, equal to the current
market value of such fractional interest.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>17.&nbsp;&nbsp;&nbsp;&nbsp;<U>Agreement of Registered
Holder</U>. Every Registered Holder by accepting the same consents and agrees
with&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the Company, and with every other holder of a Warrant Certificate,
respectively, that (a) the Warrant Certificates&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;are transferable on the registry
books of the Company only upon the terms and conditions set forth in this<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Agreement; and (b) the Company may deem and treat the person in whose name the
Warrant Certificate is&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;registered as the absolute owner of the Warrant
(notwithstanding any notation of ownership or other writing&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;thereon made by
anyone other than the Company) for all purposes whatsoever, and the Company will
not be&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;affected by any notice to the contrary.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>18.&nbsp;&nbsp;&nbsp;&nbsp;<U>Notices</U>. Any notice or
demand authorized by this Agreement to be given or made by the Registered Holder&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to or on the Company will be sufficiently given or made if sent by mail, first
class, certified or registered,&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;postage prepaid, addressed as follows:
</FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Perma-Fix Environmental Services,
Inc.<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1940 Northwest 67th Place<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gainesville, Florida 32653<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Attention:
Dr. Louis F. Centofanti</FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With a copy to:</FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Irwin H. Steinhorn, Esq.<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Conner
&amp; Winters, A Professional Corporation<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One Leadership Square<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;211 N.
Robinson, Suite 1700<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Oklahoma City, Oklahoma 73102</FONT></P>
<P align="center"><font face="CG Times Regular" size="-1">A-5</font></P>
<P><FONT face="CG Times Regular" size=-1>Any distribution, notice or demand
required or authorized by this Agreement to be given or made by the Company to
or on the Registered Holder will be sufficiently given or made if sent by mail,
first class, certified or registered, postage prepaid, addressed to the
Registered Holder at the last known addresses as it appears on the registration
books for the Warrant Certificates maintained by the Company.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>19.&nbsp;&nbsp;&nbsp;&nbsp;<U>Supplements and Amendments</U>.
The Company may from time to time supplement or amend this Agreement&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;without the
approval of the Registered Holder in order to cure any ambiguity or to correct
or supplement&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;any provision contained herein which may be defective or
inconsistent with any other provision herein, or&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to make any other provisions in
regard to matters or questions arising hereunder which the Company may&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;deem
necessary or desirable, provided that such supplements or amendments do not
substantially alter the&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;rights and obligations of the Registered
Holders.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>20.&nbsp;&nbsp;&nbsp;&nbsp;<U>Successors</U>. All the
covenants and provisions of this Agreement by or for the benefit of the Company
or&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the Registered Holder will bind and inure to the benefit of their respective
successors and assigns hereunder. </FONT></P>
<P><FONT face="CG Times Regular" size=-1>21.&nbsp;&nbsp;&nbsp;&nbsp;<U>Termination</U>. This Agreement
will terminate at the close of business on the Expiration Date or such earlier
date&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;upon which all Warrants have been exercised; provided, however, that if
exercise of the Warrants is&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;suspended pursuant to the terms of this Warrant and
such suspension continues past the Expiration Date,&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;this Agreement will
terminate at the close of business on the business day immediately following the
expiration&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of such suspension. </FONT></P>
<P><FONT face="CG Times Regular" size=-1>22.&nbsp;&nbsp;&nbsp;&nbsp;<U>Governing Law</U>. This
Agreement and each Warrant Certificate issued hereunder will be deemed to be a&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;contract made under the laws of the State of Delaware and for all purposes will
be construed in accordance&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;with the laws of said State without giving effect to
its conflicts of law provisions. The Registered Holder&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;hereby irrevocably
consents to the venue and jurisdiction of the federal courts located in
Wilmington, Delaware. </FONT></P>
<P><FONT face="CG Times Regular" size=-1>23.&nbsp;&nbsp;&nbsp;&nbsp;<U>Benefits of this Agreement</U>.
Nothing in this Agreement will be construed to give any person or corporation&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;other than the Company and the Registered Holder any legal or equitable right,
remedy or claim under this<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Agreement; but this Agreement will be for the sole
and exclusive benefit of the Company and the Registered Holder. </FONT></P>
<P><FONT face="CG Times Regular" size=-1>24.&nbsp;&nbsp;&nbsp;&nbsp;<U>Counterparts</U>. This Agreement
may be executed in any number of counterparts, each of such counterparts&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;will
for all purposes be deemed to be an original and all such counterparts will
together constitute but one&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and the same instrument. </FONT></P>
<P><FONT face="CG Times Regular" size=-1>25.&nbsp;&nbsp;&nbsp;&nbsp;<U>Integration</U>. As of the date
hereof, this Agreement contains the entire and only agreement, understanding,<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;representation, condition, warranty or covenant between the parties hereto with
respect to the matters herein,<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; supersedes any and all other agreements between
the parties hereto relating to such matters, and may be&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;modified or amended only
by a written agreement signed by both parties hereto. </FONT></P>
<P><FONT face="CG Times Regular" size=-1>26.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Descriptive Headings</U>. The
descriptive headings of the paragraphs of this Agreement are inserted for&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;convenience only and will not control or affect the meaning or construction of
any of the provisions hereof. </FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the parties have
executed and delivered this Agreement on the day and year first above
written.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PERMA-FIX ENVIRONMENTAL SERVICES, INC.,
a Delaware&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;corporation</FONT></P><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="CG Times Regular"
size=-1>By:_______________________________________________<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dr. Louis F.
Centofanti,<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;President and Chief Executive Officer</FONT>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(the "Company")<br>
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;__________________________________________________<BR>&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;________________________,
a[n] _____________________</FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(the "Registered
Holder")</FONT></P>
<p align="center"><font size="2">A-6</font>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular" size=-1>
<CENTER><STRONG>EXHIBIT A</STRONG></CENTER></FONT>
<P></P>&nbsp;
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align="center"><font size="2">A-7</font></P>
<P>&nbsp;</P>
<P><FONT face=Arial size=-1>THIS WARRANT CERTIFICATE AND THE SHARES OF COMMON
STOCK ISSUABLE UPON EXERCISE HEREOF THIS WARRANT AGREEMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT (A) UNDER COVER OF A REGISTRATION STATEMENT UNDER SUCH ACT
WHICH IS EFFECTIVE AND CURRENT WITH RESPECT TO THIS WARRANT CERTIFICATE OR SUCH
SHARES OF COMMON STOCK, AS THE CASE MAY BE, OR (B) PURSUANT TO THE WRITTEN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO PERMA-FIX ENVIRONMENTAL SERVICES,
INC. TO THE EFFECT THAT REGISTRATION UNDER SUCH ACT IS NOT REQUIRED WITH RESPECT
TO SUCH SALE OR TRANSFER.</FONT><FONT face="CG Times Regular"
size=-1></FONT></P>
<P><FONT face=Arial size=-1>THIS WARRANT CERTIFICATE AND THE SHARES OF COMMON
STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO THE TERMS AND
CONDITIONS SET FORTH IN THAT CERTAIN WARRANT AGREEMENT BETWEEN THE HOLDER HEREOF
AND THE COMPANY, A COPY OF WHICH IS ON FILE AT THE COMPANY'S PRINCIPAL EXECUTIVE
OFFICE.</FONT><FONT face="CG Times Regular" size=-1></FONT></P>
<TABLE width="100%">
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular" size=-1></FONT><FONT face="CG Times"
      size=-1>Warrant No.: PPM_______</FONT></TD>
    <TD align=right><FONT face="CG Times" size=-1>____________
    Warrants</FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular" size=-1></FONT><FONT face="CG Times Regular"
size=-1>
<CENTER>CERTIFICATE OF<BR>WARRANT TO PURCHASE COMMON STOCK</CENTER></FONT>
<P><FONT face="CG Times Regular" size=-1>
<CENTER><br>
Shares of Perma-Fix Environmental Services, Inc.</CENTER></FONT>
<P><FONT face="CG Times Regular" size=-1>
<CENTER>Common Stock, Par Value $.001 Per Share</CENTER></FONT>
<P><FONT face="CG Times Regular" size=-1>
<CENTER>VOID AFTER 5:00 P.M., EASTERN STANDARD TIME</CENTER></FONT>
<P><FONT face="CG Times Regular" size=-1>
<CENTER>ON</CENTER></FONT>
<P><FONT face="CG Times Regular" size=-1>
<CENTER>JULY 30, 2006</CENTER></FONT>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PERMA-FIX ENVIRONMENTAL SERVICES, INC.,
a Delaware corporation (the "Company"), hereby certifies that
_______________________ and its permissible successors and assigns (the "Warrant
Holder" or "Holder"), for value received, is entitled to purchase from the
Company at any time commencing after the date upon which notice is received by
the Holder that the shareholders of the Company have approved the exercise of
the Warrants at the Per Share Exercise Price (the "Notice Date") until 5:30
p.m., Eastern Standard Time on July 30, 2006, up to an aggregate of
___________________ ______________ (___________) shares (the "Shares" or
"Warrant Shares") of the Company's common stock, par value $.001 per share (the
"Common Stock") at an exercise price equal to $1.75 per share (the "Per Share
Exercise Price"), subject to adjustment as provided in that certain Warrant
Agreement of even date herewith between the Company and the Holder.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Exercise of Warrant</U>. The
Warrants may be exercised at any time commencing after the Notice Date and
ending on July 30, 2006, at 5:00 p.m., Eastern Standard Time, subject to
paragraph 9 of the Warrant Agreement. Upon presentation and surrender of this
Common Stock Purchase Warrant Certificate ("Warrant Certificate" or "this
Certificate"), with the Election to Purchase or Assign form (the "Purchase
Form") duly executed and completed, at the principal office of the Company at
1940 Northwest 67th Place, Gainesville, Florida 32653-1649, together with (a)
cash or a cashier's or certified check payable to the Company in the amount of
the Per Share Exercise Price multiplied by the number of Warrant Shares being
purchased (the "Aggregate Exercise Price"), either the Company, or the Company's
transfer agent, as the case may be, will deliver to the Warrant Holder hereof,
certificates of Common Stock which, in the aggregate, represent the number of
Warrant Shares being purchased. All or less than all of the Warrants represented
by this Certificate may be exercised and, in case of the exercise of less than
all, the Company, upon surrender hereof, will deliver to the Warrant Holder a
new Warrant Certificate or, Certificates of like tenor and dated the date hereof
entitling said Warrant Holder to purchase the number of Warrant Shares
represented by this Certificate which have not been exercised or
surrendered.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Exchange and Transfer</U>. This
Certificate, at any time prior to the exercise hereof, upon presentation and
surrender to the Company, may be exchanged, alone or with other certificates of
like tenor registered in the name of the same Warrant Holder, for another
Warrant Certificate of like tenor in the name of such Warrant Holder exercisable
for the aggregate number of Warrant Shares represented by the certificate(s)
surrendered.</FONT></P>
<P align="center"><font face="CG Times Regular" size="-1">A-8</font></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular" size=-1>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <U>Rights and Obligations of Holder
of this Certificate</U>. The Holder of this Certificate will not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or in equity; provided, however, that if any certificate representing shares of
Common Stock or other securities is issued to the Holder hereof upon exercise of
some or all of the Warrants evidenced by this Warrant Certificate, such Holder
will, for all purposes, be deemed to have become the Holder of record of such
Common Stock on the date on which this Certificate, together with a duly
executed Purchase Form, was surrendered and payment of the Aggregate Exercise
Price was made pursuant to the terms hereof, irrespective of the date of
delivery of such share certificate. The rights of the Holder of this Certificate
are limited to those expressed herein and the Holder of this Certificate, by
acceptance hereof, consents and agrees to be bound by, and to comply with, all
of the provisions of this Certificate, including, without limitation, all of the
obligations imposed upon the Warrant Holder contained in this Warrant
Certificate. In addition, the Warrant Holder of this Certificate, by accepting
the same, agrees that the Company may deem and treat the person in whose name
this Certificate is registered on the books of the Company as the absolute, true
and lawful owner for all purposes whatsoever, and the Company will not be
affected by any notice to the contrary.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Issuance of Certificates</U>. As
soon as practicable after full or partial exercise of this Warrant Certificate,
the Company, at its expense, will cause to be issued in the name of, and
delivered to, the Holder of this Warrant Certificate, a certificate or
certificates for the number of fully paid and nonassessable shares of Common
Stock to which that Holder will be entitled upon such exercise. No fractional
shares will be issued on exercise of this Warrant. If on any exercise of this
Warrant a fraction of a share results, the Company will pay the cash value of
that fractional share, calculated on the basis of the per share exercise price.
All such certificates will bear a restrictive legend to the effect that, subject
to the provisions of Section 7 below, the Shares represented by such certificate
have not been registered under the Securities Act of 1933, as amended (the
"Act"), or qualified under any state securities laws and the Shares may not be
sold or transferred in the absence of such registration, qualification or an
exemption thereof, such legend to be substantially in the form of the legend
appearing on page 1 of this Warrant Certificate.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Disposition of Warrants or
Warrant Shares</U>. </FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Compliance with Securities
Laws</U>. The Holder of this Warrant Certificate, by acceptance hereof, agrees&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;that (a) no public distribution of Warrants or Shares will be made in violation
of the provisions of the&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Act, and (b) during such period as delivery of a
prospectus with respect to Warrants or Shares may&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;be required by the Act, no
public distribution of Warrants or Shares will be made in a manner or on&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;terms
different from those set forth in, or without delivery of, a prospectus then
meeting the require-<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ments of Section 10 of the Act and in compliance with all
applicable state securities laws. The&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;holder this Warrant Certificate and each
transferee hereof further agrees that if any distribution of&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;any of the Warrants
or Shares is proposed to be made by them other than by delivery of a prospectus&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;meeting the requirements of Section 10 of the Act, such action will be taken
only after receipt by the&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Company of an opinion of its counsel, to the effect
that the proposed distribution will not be in&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;violation of the Act or of
applicable state law. Furthermore, it will be a condition to the transfer of the&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warrants that prior written consent to such transfer be obtained from the
Company after delivery&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to the Company of an agreement executed by the transferee
required as defined in the Warrant&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Agreement. </FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Restriction on Transfer</U>. By
acceptance hereof, the Holder represents and warrants that this Warrant&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certificate is being acquired, and all Warrant Shares to be purchased upon the
exercise of this Warrant<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certificate will be acquired, by the Holder solely for
the account of the Holder and not with a view&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to the fractionalization and
distribution thereof, and will not be sold or transferred except in accordance&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;with the applicable provisions of the Act and the rules and regulations
promulgated thereunder, and&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the Holder agrees that neither this Warrant
Certificate nor any of the Warrant Shares may be sold or&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;transferred except
under cover of a registration statement under the Act which is effective and
current&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;with respect to such Warrant Shares or pursuant to an opinion of counsel
reasonably satisfactory to&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the Company that registration under the Act is not
required in connection with such sale or transfer.&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any Warrant Shares issued
upon exercise of this Warrant will bear substantially the following
legend:</FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The securities represented by this
certificate have not been registered under the Securities&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Act of 1933, as
amended (the "Act"), or qualified under applicable state securities laws, and&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;are restricted securities within the meaning of the Act. Such securities may not
be sold or&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;transferred, except pursuant to a registration statement under such
Act and qualification&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;under applicable state securities laws which are effective
and current with respect to such&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;securities or pursuant to an opinion of counsel
reasonably satisfactory to the issuer of such&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;securities that registration and
qualification are not required under applicable federal or state&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;securities laws
or an exemption is available therefrom. </FONT></P>
<P align="center"><font face="CG Times Regular" size="-1">A-9</font></P>
<P><FONT face="CG Times Regular" size=-1>6.&nbsp;&nbsp;&nbsp; <U>Warrant Holder Not
Shareholder</U>. This Warrant Certificate will not be deemed to confer upon the
Holder any right to vote the Warrant Shares or to consent to, or receive notice
as a shareholder of the Company as such, because of this Warrant Certificate, in
respect of any matters whatsoever, or any other rights or liabilities as a
shareholder. </FONT></P>
<P><FONT face="CG Times Regular" size=-1>7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Registration</U>. The Company
agrees that the Warrant Shares will have those registration rights set forth in
the Subscription Agreement between the Company and the Holder. </FONT></P>
<P><FONT face="CG Times Regular" size=-1>8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Notices</U>. All notices,
requests, consents, and other communications hereunder will be in writing and
will be deemed to have been duly made and sent when delivered or mailed by
registered or certified mail, return-receipt requested: </FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If to the Company:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Perma-Fix
Environmental Services, Inc.<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1940 Northwest 67th Place<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gainesville,
Florida 32653<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Attention:&nbsp;&nbsp;Dr. Louis F. Centofanti</FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With a copy to:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Irwin H. Steinhorn,
Esq.<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Conner &amp; Winters, A Professional Corporation<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One Leadership
Square<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;211 N. Robinson, Suite 1700<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Oklahoma City, Oklahoma
73102</FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If to the Holder:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;_______________________________________<br>
</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="CG Times Regular" size=-1>_______________________________________<br>
</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="CG Times Regular" size=-1>_______________________________________</FONT></P>
<P><FONT face="CG Times Regular" size=-1>9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Governing Law</U>. This Warrant
Certificate and all rights and obligations hereunder will be deemed to be made
under, and governed by, the laws of the State of Delaware without giving effect
to such State's conflict of laws provisions. The Holder hereby irrevocably
consents to the venue and jurisdiction of the federal courts located in
Wilmington, Delaware.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>10.&nbsp;&nbsp;&nbsp;&nbsp;<U>Successors and Assigns</U>. This
Warrant Certificate will be binding upon and will inure to the benefit of the
parties hereto and their respective successors and assigns.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>11.&nbsp;&nbsp;&nbsp;&nbsp;<U>Headings</U>. The descriptive
headings of the paragraphs of this Warrant Certificate have been inserted for
reference only and will not be a part of this Warrant Certificate. </FONT></P>
<P><FONT face="CG Times Regular" size=-1>12.&nbsp;&nbsp;&nbsp;&nbsp; <U>Subject to Warrant
Agreement</U>. This Warrant Certificate is subject to the terms and conditions
set forth in the Warrant Agreement. Capitalized terms used in this Warrant
Certificate have the meanings ascribed to them in the Warrant Agreement, unless
the context otherwise requires. In the event of a conflict between this Warrant
and the Warrant Agreement, the Warrant Agreement will control.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the Company has
caused this Warrant Certificate to be duly executed, manually or by one of its
officers thereunto duly authorized.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>Dated as of July 30,
2001.<br>
</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="CG Times Regular" size=-1>PERMA-FIX ENVIRONMENTAL
SERVICES, INC.,<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a Delaware corporation</FONT></P>
<P><BR WP="BR2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="CG Times Regular"
size=-1>By:___________________________________<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dr. Louis F.
Centofanti,<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;President and Chief Executive Officer<br>
</FONT>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(the "Company")</FONT>
<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="CG Times Regular"
size=-1>______________________________________<br>
</FONT>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="CG Times Regular"
size=-1>______________________________________</FONT>
<p align="center"><font size="2">A-10</font>
<p>&nbsp;</p>
<P><FONT face="CG Times Regular" size=-1>
<CENTER>FORM OF ELECTION TO PURCHASE OR ASSIGN</CENTER></FONT>
<P align=center><FONT face="Times New Roman" size=-1><U></U></FONT><FONT
face="Times New Roman" size=-1><STRONG><U>Election to
Purchase</U></STRONG></FONT><FONT face="Times New Roman"
size=-1><U></U></FONT></P>
<P><FONT face="CG Times Regular" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned hereby irrevocably elects to exercise the right,
represented by the foregoing Warrant Certificate, to receive _____________
shares of the Common Stock. In payment of such shares, the undersigned
herewith:</FONT></P>
<P><FONT face="CG Times Regular" size=-1>____&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;tenders payment for such shares to
the order of Perma-Fix Environmental Services, Inc. in the amount of<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$________________ in accordance with the terms of the Warrant
Agreement.</FONT></P>
<P><FONT face="CG Times Regular" size=-1>Dated: _______________
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signature
_____________________________________</FONT></P>
<P><FONT face="CG Times Regular"
size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Address______________________________________</FONT><FONT
face="CG Times" size=-1></FONT></P><BR WP="BR1"><FONT face="CG Times"
size=-1><STRONG>
<CENTER>Assignment</CENTER></STRONG></FONT>
<P><FONT face="CG Times" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR VALUE RECEIVED, the
undersigned hereby sells, assigns and transfers unto _______________________ the
foregoing Warrants and all rights evidenced thereby, and does irrevocably
constitute and appoint _________________, attorney, to transfer said Warrants on
the books of Perma-Fix Environmental Services, Inc.</FONT></P><BR WP="BR1"><FONT
face="CG Times" size=-1>Dated: _______________
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signature
__________________________________</FONT>
<P><FONT face="CG Times" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Address
___________________________________</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times" size=-1><STRONG>
<CENTER>Partial Assignment</CENTER></STRONG></FONT>
<P><FONT face="CG Times" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR VALUE RECEIVED, the undersigned hereby
assigns and transfers _________________ Warrants and all rights evidenced under
such part of the foregoing Warrants unto _____________________________________
and does irrevocably constitute and appoint __________________, attorney, to
transfer said Warrants on the books of Perma-Fix Environmental Services,
Inc.</FONT></P>
<P><FONT face="CG Times" size=-1>Dated: _______________
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Signature
__________________________________</FONT></P>
<P><FONT face="CG Times" size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Address
___________________________________</FONT></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align="center"><font size="2">A-11</font></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular" size=-1>
<CENTER>APPENDIX B<br>
<br>
<U>M&amp;EC FINANCIAL STATEMENTS</U></CENTER></FONT>
<P></P>&nbsp;
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align="center"><font size="2">B-1</font></P>
<P>&nbsp;</P>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P><B><FONT face=Arial size=6>
<P align=right>East Tennessee Materials</P>
<P align=right>and Energy Corporation</P>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P>
<hr align="right" width="60%" noshade size="12" color="#000080">
</FONT>
<P align=right><font face="Arial" size="5">Consolidated Financial Statements<br>
</font><font face="Arial" size="4">Years Ended December 31, 2000 and 1999</font></P>
<FONT face=Arial size=6>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P></FONT></B><FONT face=Arial size=6>
<P align=right>&nbsp;</P></FONT><FONT face=Arial size=5>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P>
</FONT>
<P align=center><font face="Arial" size="2">B-2</font></P>
<FONT face=Arial size=5>
<P align=right>&nbsp;</P></FONT>
<P>&nbsp;</P>
<P align=center><B><FONT face=Arial size=4>East Tennessee Materials and Energy
Corporation</FONT></B></P>
<P>&nbsp;</P>
<P align=right><FONT size=4>Contents</FONT></P>
<HR color=#000080 noShade SIZE=9>

<P align=right>
<DIV align=right>
<TABLE border=0 cellPadding=0 cellSpacing=0 width=523>
  <TR>
    <TD vAlign=top width="83%"><B>
      <P>Independent Auditors' Report</B></P></TD>
    <TD vAlign=top width="9%">&nbsp;</TD>
    <TD vAlign=top width="4%">&nbsp;</TD>
    <TD vAlign=top width="4%">
      <P align=right>3</P></TD></TR>
  <TR>
    <TD vAlign=top width="83%">&nbsp;</TD>
    <TD vAlign=top width="9%">&nbsp;</TD>
    <TD vAlign=top width="4%">&nbsp;</TD>
    <TD vAlign=top width="4%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="83%"><B>
      <P>Consolidated Financial Statements</B></P></TD>
    <TD vAlign=top width="9%">&nbsp;</TD>
    <TD vAlign=top width="4%">&nbsp;</TD>
    <TD vAlign=top width="4%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=top width="83%">
      <DIR>
      <P>Balance sheets<BR>Statements of operations<BR>Statements of
      stockholders' deficit<BR>Statements of cash flows<BR>Notes to consolidated
      financial statements</P></DIR></TD>
    <TD vAlign=top width="9%">
      <P align=right>4<BR><BR><BR><BR>9</P></TD>
    <TD vAlign=top width="4%">
      <P align=center>--<BR><BR><BR><BR>--</P></TD>
    <TD vAlign=top width="4%">
      <P align=right>5<BR>6<BR>7<BR>7<BR>27</P></TD></TR></TABLE></DIV>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align="center">&nbsp;</P>
<P>&nbsp;</P>
<P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">B-3</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2&nbsp;</B></P>
<P align=center><font size="7">G/F/R</font><font size="6"><br>
</font><font size="4" face="Arial"><b>Gallogly, Fernandez &amp; Riley, LLP</b></font><font size="3"><br>
</font><font size="2"><i>Accountants &amp; Consultants</i></font></P>
<P align=center>&nbsp;</P><B><FONT face=Arial size=4>
<P align=justify>Independent Auditors' Report</P>
<P align=justify>&nbsp;</P>
<P align=justify></FONT></B>To the Board of Directors<BR>East Tennessee Materials and
Energy Corporation<BR>Oak Ridge, Tennessee</P>
<P align=justify>We have audited the accompanying consolidated balance sheets of
East Tennessee Materials and Energy Corporation and subsidiary (the "Company")
as of December 31, 2000 and 1999, and the related consolidated statements of
operations, stockholders' deficit and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.</P>
<P align=justify>We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.</P>
<P align=justify>In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
East Tennessee Materials and Energy Corporation and subsidiary at December 31,
2000 and 1999 and the results of their operations and their cash flows for the
years then ended, in conformity with accounting principles generally accepted in
the United States of America.</P>
<P align=justify>Effective June 25, 2001, the Company was acquired by Perma-Fix
Environmental Services, Inc. (see Note 16).</P>
<P
align=justify><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/
Gallogly, Fernandez &amp; Riley,
LLP<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certified
Public Accountants<BR></P>
<P align=justify>Orlando, Florida<BR>July 13, 2001<br>
</P>
<P align=center><font size="2"><b>BDO<br>
SEIDMAN<br>
ALLIANCE</b></font></P>
<P align=right><B>3</B></P>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P>
<P align=center><B><FONT face=Arial size=4>East Tennessee Materials and Energy
Corporation</FONT></B></P>
<P>&nbsp;</P>
<P align=right><FONT size=4>Consolidated Balance Sheets</FONT></P>
<HR color=#000080 noShade SIZE=9>

<TABLE border=0 cellSpacing=2 width=633>
  <TR>
    <TD vAlign=bottom width="69%"><I>
      <P><BR>December&nbsp;31,</I></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>2000</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>1999</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD colSpan=6 vAlign=bottom width="100%">
      <HR color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width="69%"><B>
      <P>Assets</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp;</TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">&nbsp;</TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp;</TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%"><B>
      <P>Current:</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp;</TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom
      width="69%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts
      receivable</TD>
    <TD vAlign=bottom width="3%"><B>$</B></TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>212,693</B></P></TD>
    <TD vAlign=bottom width="3%">
      <P align=right>$</P></TD>
    <TD vAlign=bottom width="11%">
      <P align=right>265,374</P></TD>
    <TD vAlign=bottom width="2%"></TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid
      expenses</P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>14,044</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>4,793</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD colSpan=6 vAlign=bottom width="100%">
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom
      width="69%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Total
      current assets</B></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>226,737</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>270,167</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD colSpan=6 vAlign=bottom width="100%">
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width="69%"><B>
      <P>Plant and equipment,</B> net</P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>9,480,288</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>3,957,845</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD colSpan=6 vAlign=bottom width="100%">
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width="69%"><B>
      <P>Other assets:</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp;</TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">
      <DIR>
      <P>Permits, net of accumulated amortization of $509,094 and
      $170,091</P></DIR></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>1,276,627</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>1,447,466</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">
      <DIR>
      <P>Lease acquisition costs, net of accumulated amortization of $87,536 and
      $53,848</P></DIR></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>213,111</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>246,798</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">
      <DIR>
      <P>Goodwill, net of accumulated amortization of $24,052 and
      $12,026</P></DIR></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>96,213</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>108,238</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">
      <P>Other</P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>9,648</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>9,438</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD colSpan=6 vAlign=bottom width="100%">
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom
      width="69%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Total
      other assets</B></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>1,595,599</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">1,811,940</TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD colSpan=6 vAlign=bottom width="100%">
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width="69%"></TD>
    <TD vAlign=bottom width="3%"><B>
      <P align=right>$</B></P></TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>11,302,624</B></P></TD>
    <TD vAlign=bottom width="3%">
      <P align=right>$</P></TD>
    <TD vAlign=bottom width="11%">
      <P align=right>6,039,952</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD colSpan=6 vAlign=bottom width="100%">
      <HR color=#000080 noShade SIZE=5>
    </TD></TR></TABLE>
<P align=right><I>See accompanying notes to consolidated financial
statements.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></P>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P>
<P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">&nbsp;B-5&nbsp;&nbsp;</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4</B></P>
<P align=right>&nbsp;</P>
<P align=center><B><FONT face=Arial size=4>East Tennessee Materials and Energy
Corporation</FONT></B></P>
<P>&nbsp;</P>
<P align=right><FONT size=4>Consolidated Balance Sheets</FONT></P>
<HR color=#000080 noShade SIZE=9>

<TABLE border=0 cellSpacing=2 width=633>
  <TR>
    <TD vAlign=bottom width="69%"><I>
      <P><BR>December&nbsp;31,</I></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>2000</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>1999</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD colSpan=6 vAlign=bottom width="100%">
      <HR color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width="69%"><B>
      <P>Liabilities and Stockholders' Deficit</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp;</TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">&nbsp;</TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp;</TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%"><B>
      <P>Current liabilities:</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp;</TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable</P></TD>
    <TD vAlign=bottom width="3%"><B>
      <P align=right>$</B></P></TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>1,128,465</B></P></TD>
    <TD vAlign=bottom width="3%"><B>
      <P align=right>$</B></P></TD>
    <TD vAlign=bottom width="11%">
      <P align=right>461,937</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses</P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>920,787</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>460,996</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to related party</P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>4,489,845</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>3,882,567</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to Perma-Fix</P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>3,754,410</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>--</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notes payable</P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>927,600</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>433,400</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current maturities of long-term
    debt</P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>748,750</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>42,764</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current portion of payroll tax
      liability</P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>20,022</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>--</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD colSpan=6 vAlign=bottom width="100%">
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom
      width="69%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Total
      current liabilities</B></TD>
    <TD vAlign=bottom width="3%"></TD>
    <TD vAlign=bottom width="12%"><B>11,989,879</B></TD>
    <TD vAlign=bottom width="3%"></TD>
    <TD vAlign=bottom width="11%">5,281,664</TD>
    <TD vAlign=bottom width="2%"></TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">&nbsp;</TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp;</TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%"><B>
      <P>Long-term debt, </B>less current maturities</P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>14,703</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>405,042</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%"><B>
      <P>Payroll tax liability,</B> less current portion</P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>903,474</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>625,000</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%"><B>
      <P>Other long-term liabilities</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>200,420</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>157,036</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD colSpan=6 vAlign=bottom width="100%">
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom
      width="69%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Total
      liabilities</B></TD>
    <TD vAlign=bottom width="3%"></TD>
    <TD vAlign=bottom width="12%"><B>13,108,476</B></TD>
    <TD vAlign=bottom width="3%"></TD>
    <TD vAlign=bottom width="11%">6,468,742</TD>
    <TD vAlign=bottom width="2%"></TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">&nbsp;</TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp;</TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%"><B>
      <P>Commitments</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%">
      <P align=right><B>--</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>--</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">&nbsp;</TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp;</TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%"><B>
      <P>Redeemable Series A Cumulative Preferred Stock</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>1,291,544</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>942,203</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">&nbsp;</TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp;</TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%"><B>
      <P>Stockholders' deficit:</B></P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%">&nbsp;</TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock;
      no par value; authorized 4,000,000
      shares;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;issued
      2,066,700 and 2,047,950 shares</TD>
    <TD vAlign=bottom width="3%"></TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>1,527,691</B></P></TD>
    <TD vAlign=bottom width="3%"></TD>
    <TD vAlign=bottom width="11%">
      <P align=right>1,802,032</P></TD>
    <TD vAlign=bottom width="2%"></TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated deficit</P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>(4,525,087</B></P></TD>
    <TD vAlign=bottom width="3%"><B>
      <P>)</B></P></TD>
    <TD vAlign=bottom width="11%">
      <P align=right>(3,073,025</P></TD>
    <TD vAlign=bottom width="2%">
      <P>)</P></TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less treasury stock at cost, 25,000
      shares</P></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>(100,000</B></P></TD>
    <TD vAlign=bottom width="3%"><B>
      <P>)</B></P></TD>
    <TD vAlign=bottom width="11%">
      <P align=right>(100,000</P></TD>
    <TD vAlign=bottom width="2%">
      <P>)</P></TD></TR>
  <TR>
    <TD colSpan=6 vAlign=bottom width="100%">
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">
      <DIR>
      <DIR><B>
      <P>Total stockholders' deficit</P></DIR></DIR></B></TD>
    <TD vAlign=bottom width="3%">&nbsp;</TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>(3,097,396</B></P></TD>
    <TD vAlign=bottom width="3%"><B>
      <P>)</B></P></TD>
    <TD vAlign=bottom width="11%">
      <P align=right>(1,370,993</P></TD>
    <TD vAlign=bottom width="2%">
      <P>)</P></TD></TR>
  <TR>
    <TD colSpan=6 vAlign=bottom width="100%">
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width="69%">&nbsp;</TD>
    <TD vAlign=bottom width="3%"><B>
      <P align=right>$</B></P></TD>
    <TD vAlign=bottom width="12%"><B>
      <P align=right>11,302,624</B></P></TD>
    <TD vAlign=bottom width="3%">
      <P align=right>$</P></TD>
    <TD vAlign=bottom width="11%">
      <P align=right>6,039,952</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD colSpan=6 vAlign=bottom width="100%">
      <HR color=#000080 noShade SIZE=5>
    </TD></TR></TABLE>
<P align=right><I>See accompanying notes to consolidated financial
statements.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></P>
<P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">B-6&nbsp;</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5</B></P>
<P align=right>&nbsp;</P>
<P align=center><B><FONT face=Arial size=4>East Tennessee Materials and Energy
Corporation</FONT></B></P>
<P>&nbsp;</P>
<P align=right><FONT size=4>Consolidated Statements of Operations</FONT></P>
<HR color=#000080 noShade SIZE=9>

<TABLE border=0 cellSpacing=2 width=624>
  <TR>
    <TD vAlign=bottom width="64%"><I><FONT size=3>
      <P><BR>Year ended December&nbsp;31,</FONT></I></P></TD>
    <TD vAlign=bottom width="4%">&nbsp;</TD>
    <TD vAlign=bottom width="11%"><B>
      <P align=right>2000</B></P></TD>
    <TD vAlign=bottom width="8%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>1999</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD colSpan=6 vAlign=bottom width="100%">
      <HR color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width="64%"><B>
      <P>Net revenues</B></P></TD>
    <TD vAlign=bottom width="4%"><B>
      <P align=right>$</B></P></TD>
    <TD vAlign=bottom width="11%"><B>
      <P align=right>905,480</B></P></TD>
    <TD vAlign=bottom width="8%">
      <P align=right>$</P></TD>
    <TD vAlign=bottom width="11%">
      <P align=right>1,208,226</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="64%">&nbsp;</TD>
    <TD vAlign=bottom width="4%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="8%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="64%"><B>
      <P>Cost of goods sold</B></P></TD>
    <TD vAlign=bottom width="4%">&nbsp;</TD>
    <TD vAlign=bottom width="11%"><B>
      <P align=right>558,806</B></P></TD>
    <TD vAlign=bottom width="8%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>876,779</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD colSpan=6 vAlign=bottom width="100%">
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom
      width="64%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross
      profit</TD>
    <TD vAlign=bottom width="4%"></TD>
    <TD vAlign=bottom width="11%"><B>
      <P align=right>346,674</B></P></TD>
    <TD vAlign=bottom width="8%"></TD>
    <TD vAlign=bottom width="11%">331,447</TD>
    <TD vAlign=bottom width="2%"></TD></TR>
  <TR>
    <TD vAlign=bottom width="64%">&nbsp;</TD>
    <TD vAlign=bottom width="4%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="8%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="64%"><B>
      <P>Selling, general and administrative expenses</B></P></TD>
    <TD vAlign=bottom width="4%">&nbsp;</TD>
    <TD vAlign=bottom width="11%"><B>
      <P align=right>1,290,352</B></P></TD>
    <TD vAlign=bottom width="8%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>1,725,784</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="64%"><B>
      <P>Depreciation and amortization</B></P></TD>
    <TD vAlign=bottom width="4%">&nbsp;</TD>
    <TD vAlign=bottom width="11%"><B>
      <P align=right>452,345</B></P></TD>
    <TD vAlign=bottom width="8%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>301,840</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD colSpan=6 vAlign=bottom width="100%">
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom
      width="64%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Loss from operations</TD>
    <TD vAlign=bottom width="4%"></TD>
    <TD vAlign=bottom width="11%"><B>(1,396,023</B></TD>
    <TD vAlign=bottom width="8%"><B>)</B></TD>
    <TD vAlign=bottom width="11%">(1,696,177</TD>
    <TD vAlign=bottom width="2%">)</TD></TR>
  <TR>
    <TD vAlign=bottom width="64%"></TD>
    <TD vAlign=bottom width="4%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="8%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="64%"><B>
      <P>Other income (expense):</B></P></TD>
    <TD vAlign=bottom width="4%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="8%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="64%">
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other income</P></TD>
    <TD vAlign=bottom width="4%">&nbsp;</TD>
    <TD vAlign=bottom width="11%"><B>
      <P align=right>119,005</B></P></TD>
    <TD vAlign=bottom width="8%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">
      <P align=right>--</P></TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="64%">
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense</P></TD>
    <TD vAlign=bottom width="4%">&nbsp;</TD>
    <TD vAlign=bottom width="11%"><B>
      <P align=right>(175,044</B></P></TD>
    <TD vAlign=bottom width="8%"><B>
      <P>)</B></P></TD>
    <TD vAlign=bottom width="11%">
      <P align=right>(266,171</P></TD>
    <TD vAlign=bottom width="2%">
      <P>)</P></TD></TR>
  <TR>
    <TD colSpan=6 vAlign=bottom width="100%">
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom
      width="64%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
      other income (expense)</TD>
    <TD vAlign=bottom width="4%"></TD>
    <TD vAlign=bottom width="11%"><B>
      <P align=right>(56,039</B></P></TD>
    <TD vAlign=bottom width="8%"><B>)</B></TD>
    <TD vAlign=bottom width="11%">(266,171</TD>
    <TD vAlign=bottom width="2%">)</TD></TR>
  <TR>
    <TD vAlign=bottom width="64%">&nbsp;</TD>
    <TD vAlign=bottom width="4%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="8%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="64%"><B>
      <P>Net loss</B></P></TD>
    <TD vAlign=bottom width="4%">&nbsp;</TD>
    <TD vAlign=bottom width="11%"><B>
      <P align=right>(1,452,062</B></P></TD>
    <TD vAlign=bottom width="8%"><B>
      <P>)</B></P></TD>
    <TD vAlign=bottom width="11%">
      <P align=right>(1,962,348</P></TD>
    <TD vAlign=bottom width="2%">
      <P>)</P></TD></TR>
  <TR>
    <TD vAlign=bottom width="64%">&nbsp;</TD>
    <TD vAlign=bottom width="4%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="8%">&nbsp;</TD>
    <TD vAlign=bottom width="11%">&nbsp;</TD>
    <TD vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width="64%"><B>
      <P>Preferred stock dividends</B></P></TD>
    <TD vAlign=bottom width="4%">&nbsp;</TD>
    <TD vAlign=bottom width="11%"><B>
      <P align=right>(349,341</B></P></TD>
    <TD vAlign=bottom width="8%"><B>
      <P>)</B></P></TD>
    <TD vAlign=bottom width="11%">
      <P align=right>(281,719</P></TD>
    <TD vAlign=bottom width="2%">
      <P>)</P></TD></TR>
  <TR>
    <TD colSpan=6 vAlign=bottom width="100%">
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width="64%"><B>
      <P>Net loss applicable to common stockholders</B></P></TD>
    <TD vAlign=bottom width="4%"><B>
      <P align=right>$</B></P></TD>
    <TD vAlign=bottom width="11%"><B>
      <P align=right>(1,801,403</B></P></TD>
    <TD vAlign=bottom width="8%"><B>
      <P>)</B> $</P></TD>
    <TD vAlign=bottom width="11%">
      <P align=right>(2,244,067</P></TD>
    <TD vAlign=bottom width="2%">
      <P>)</P></TD></TR>
  <TR>
    <TD colSpan=6 vAlign=bottom width="100%">
      <HR color=#000080 noShade SIZE=5>
    </TD></TR></TABLE>
<P align=right><I>See accompanying notes to consolidated financial
statements.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></P>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P>
<P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">
B-7&nbsp;</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6</B></P>
<P align=right>&nbsp;</P>
<P align=center><B><FONT face=Arial size=4>East Tennessee Materials and Energy
Corporation</FONT></B></P>
<P>&nbsp;</P>
<P align=right><FONT size=4>Consolidated Statements of Stockholders'
Deficit</FONT></P>
<TABLE border=0 cellSpacing=1 width=638>
  <TR>
    <TD vAlign=bottom width=174></TD>
    <TD vAlign=bottom width=17></TD>
    <TD colSpan=3 vAlign=bottom width=127>
      <P align=right><I><FONT
      size=1><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common
      Stock&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></FONT></I></P></TD>
    <TD vAlign=bottom width=72><I><FONT size=1>
      <P align=right>Accumulated</FONT></I></P></TD>
    <TD vAlign=bottom width=16></TD>
    <TD vAlign=bottom width=43><I><FONT size=1>Treasury</FONT></I></TD>
    <TD vAlign=bottom width=16></TD>
    <TD align=middle vAlign=bottom width=67><I><FONT
      size=1>Total<BR>Stockholders'</FONT></I></TD>
    <TD vAlign=bottom width=20></TD></TR>
  <TR>
    <TD vAlign=bottom width=174></TD>
    <TD vAlign=bottom width=17></TD>
    <TD vAlign=bottom width=53>
      <P align=center><I><FONT size=1>Shares</FONT></I></P></TD>
    <TD vAlign=bottom width=20></TD>
    <TD vAlign=bottom width=54>
      <P align=center><I><FONT size=1>Amount</FONT></I></P></TD>
    <TD vAlign=bottom width=72>
      <P align=center><I><FONT size=1>Deficit</FONT></I></P></TD>
    <TD vAlign=bottom width=16></TD>
    <TD vAlign=bottom width=43>
      <P align=center><I><FONT size=1>Stock</FONT></I></P></TD>
    <TD vAlign=bottom width=16></TD>
    <TD align=middle vAlign=bottom width=67><I><FONT
    size=1>Deficit</FONT></I></TD>
    <TD vAlign=bottom width=20></TD></TR>
  <TR>
    <TD colSpan=11 vAlign=bottom width=564>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=174><B><FONT size=1>
      <P>Balance, </FONT></B><FONT size=1>December 31, 1998, as previously
      reported</FONT></P></TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53><FONT size=1>
      <P align=right>1,837,000</FONT></P></TD>
    <TD vAlign=bottom width=20><FONT size=1>
      <P align=right>$</FONT></P></TD>
    <TD vAlign=bottom width=54><FONT size=1>
      <P align=right>1,837&nbsp;</FONT></P></TD>
    <TD vAlign=bottom width=72><FONT size=1>
      <P align=right>$(1,043,461</FONT></P></TD>
    <TD vAlign=bottom width=16><FONT size=1>
      <P>) $</FONT></P></TD>
    <TD vAlign=bottom width=43>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67><FONT size=1>
      <P align=right>$(1,041,624</FONT></P></TD>
    <TD vAlign=bottom width=20><FONT size=1>
      <P>)</FONT></P></TD></TR>
  <TR>
    <TD vAlign=bottom width=174>&nbsp;</TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=72>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=174><FONT size=1>
      <P>Restatement (Note 17)</FONT></P></TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54><FONT size=1>
      <P align=right>1,239,114&nbsp;</FONT></P></TD>
    <TD vAlign=bottom width=72><FONT size=1>
      <P align=right>(67,216</FONT></P></TD>
    <TD vAlign=bottom width=16><FONT size=1>
      <P>)</FONT></P></TD>
    <TD vAlign=bottom width=43>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67><FONT size=1>
      <P align=right>1,171,898</FONT></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD></TR>
  <TR>
    <TD colSpan=11 vAlign=bottom width=564>
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=174><B><FONT size=1>
      <P>Balance, </FONT></B><FONT size=1>December&nbsp;31, 1998, as
      restated</FONT></P></TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53><FONT size=1>
      <P align=right>1,837,000</FONT></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54><FONT size=1>
      <P align=right>1,240,951&nbsp;</FONT></P></TD>
    <TD vAlign=bottom width=72><FONT size=1>
      <P align=right>(1,110,677</FONT></P></TD>
    <TD vAlign=bottom width=16><FONT size=1>
      <P>)</FONT></P></TD>
    <TD vAlign=bottom width=43>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67><FONT size=1>
      <P align=right>130,274</FONT></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=174>&nbsp;</TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=72>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=174><FONT size=1>
      <P>Issuance of common stock for acquisition</FONT></P></TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53><FONT size=1>
      <P align=right>50,000</FONT></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54><FONT size=1>
      <P align=right>200,000&nbsp;</FONT></P></TD>
    <TD vAlign=bottom width=72>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67><FONT size=1>
      <P align=right>200,000</FONT></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=174>&nbsp;</TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=72>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=174><FONT size=1>
      <P>Issuance of common stock to note holders</FONT></P></TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53><FONT size=1>
      <P align=right>65,500</FONT></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54><FONT size=1>
      <P align=right>262,000&nbsp;</FONT></P></TD>
    <TD vAlign=bottom width=72>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67><FONT size=1>
      <P align=right>262,000</FONT></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=174>&nbsp;</TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=72>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=174><FONT size=1>
      <P>Issuance of common stock for consulting services</FONT></P></TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53><FONT size=1>
      <P align=right>50,000</FONT></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54><FONT size=1>
      <P align=right>200,000&nbsp;</FONT></P></TD>
    <TD vAlign=bottom width=72>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67><FONT size=1>
      <P align=right>200,000</FONT></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=174>&nbsp;</TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=72>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=174><FONT size=1>
      <P>Sale of common stock</FONT></P></TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53><FONT size=1>
      <P align=right>45,450</FONT></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54><FONT size=1>
      <P align=right>180,800&nbsp;</FONT></P></TD>
    <TD vAlign=bottom width=72>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67><FONT size=1>
      <P align=right>180,800</FONT></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=174>&nbsp;</TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=72>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=174><FONT size=1>
      <P>Purchase of treasury stock</FONT></P></TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54>
      <P align=right><FONT size=1>--&nbsp;</FONT></P></TD>
    <TD vAlign=bottom width=72>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43><FONT size=1>
      <P align=right>(100,000</FONT></P></TD>
    <TD vAlign=bottom width=16><FONT size=1>
      <P>)</FONT></P></TD>
    <TD vAlign=bottom width=67><FONT size=1>
      <P align=right>(100,000</FONT></P></TD>
    <TD vAlign=bottom width=20><FONT size=1>
      <P>)</FONT></P></TD></TR>
  <TR>
    <TD vAlign=bottom width=174>&nbsp;</TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=72>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=174><FONT size=1>
      <P>Accretion of redemption value of preferred stock</FONT></P></TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54><FONT size=1>
      <P align=right>&nbsp;(214,097)</FONT></P></TD>
    <TD vAlign=bottom width=72>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67><FONT size=1>
      <P align=right>(214,097</FONT></P></TD>
    <TD vAlign=bottom width=20><FONT size=1>
      <P>)</FONT></P></TD></TR>
  <TR>
    <TD vAlign=bottom width=174>&nbsp;</TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=72>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=174><FONT size=1>
      <P>Preferred stock dividends</FONT></P></TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54><FONT size=1>
      <P align=right>(67,622)</FONT></P></TD>
    <TD vAlign=bottom width=72>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67><FONT size=1>
      <P align=right>(67,622</FONT></P></TD>
    <TD vAlign=bottom width=20><FONT size=1>
      <P>)</FONT></P></TD></TR>
  <TR>
    <TD vAlign=bottom width=174>&nbsp;</TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=72>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=174><FONT size=1>
      <P>Net loss</FONT></P></TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54>
      <P align=right><FONT size=1>--&nbsp;</FONT></P></TD>
    <TD vAlign=bottom width=72><FONT size=1>
      <P align=right>(1,962,348</FONT></P></TD>
    <TD vAlign=bottom width=16><FONT size=1>
      <P>)</FONT></P></TD>
    <TD vAlign=bottom width=43>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67><FONT size=1>
      <P align=right>(1,962,348</FONT></P></TD>
    <TD vAlign=bottom width=20><FONT size=1>
      <P>)</FONT></P></TD></TR>
  <TR>
    <TD colSpan=11 vAlign=bottom width=564>
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=174><B><FONT size=1>
      <P>Balance,</FONT></B><FONT size=1> December 31, 1999</FONT></P></TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53><B><FONT size=1>
      <P align=right>2,047,950</FONT></B></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54><B><FONT size=1>
      <P align=right>1,802,032&nbsp;</FONT></B></P></TD>
    <TD vAlign=bottom width=72><B><FONT size=1>
      <P align=right>(3,073,025</FONT></B></P></TD>
    <TD vAlign=bottom width=16><B><FONT size=1>
      <P>)</FONT></B></P></TD>
    <TD vAlign=bottom width=43><B><FONT size=1>
      <P align=right>(100,000</FONT></B></P></TD>
    <TD vAlign=bottom width=16><B><FONT size=1>
      <P>)</FONT></B></P></TD>
    <TD vAlign=bottom width=67><B><FONT size=1>
      <P align=right>(1,370,993</FONT></B></P></TD>
    <TD vAlign=bottom width=20><B><FONT size=1>
      <P>)</FONT></B></P></TD></TR>
  <TR>
    <TD vAlign=bottom width=174>&nbsp;</TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=72>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=174><FONT size=1>
      <P>Issuance of common stock for consulting services</FONT></P></TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53><B><FONT size=1>
      <P align=right>18,750</FONT></B></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54><B><FONT size=1>
      <P align=right>75,000&nbsp;</FONT></B></P></TD>
    <TD vAlign=bottom width=72>
      <P align=right><B><FONT size=1>--</FONT></B></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43></TD>
    <TD vAlign=bottom width=16></TD>
    <TD vAlign=bottom width=67><B><FONT size=1>
      <P align=right>75,000</FONT></B></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=174>&nbsp;</TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=72>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43>
      <P align=right><B><FONT size=1>--</FONT></B></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=174><FONT size=1>
      <P>Accretion of redemption value of preferred stock</FONT></P></TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54><B><FONT size=1>
      <P align=right>(214,097)</FONT></B></P></TD>
    <TD vAlign=bottom width=72>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67><B><FONT size=1>
      <P align=right>(214,097</FONT></B></P></TD>
    <TD vAlign=bottom width=20><B><FONT size=1>
      <P>)</FONT></B></P></TD></TR>
  <TR>
    <TD vAlign=bottom width=174>&nbsp;</TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=72>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=174><FONT size=1>
      <P>Preferred stock dividends</FONT></P></TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54><B><FONT size=1>
      <P align=right>(135,244)</FONT></B></P></TD>
    <TD vAlign=bottom width=72>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67><B><FONT size=1>
      <P align=right>(135,244</FONT></B></P></TD>
    <TD vAlign=bottom width=20><B><FONT size=1>
      <P>)</FONT></B></P></TD></TR>
  <TR>
    <TD vAlign=bottom width=174>&nbsp;</TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=72>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=43>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67>&nbsp;</TD>
    <TD vAlign=bottom width=20>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=174><FONT size=1>
      <P>Net loss</FONT></P></TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53>
      <P align=right><B><FONT size=1>--</FONT></B></P></TD>
    <TD vAlign=bottom width=20>&nbsp;</TD>
    <TD vAlign=bottom width=54>
      <P align=right><B><FONT size=1>--</FONT></B></P></TD>
    <TD vAlign=bottom width=72><B><FONT size=1>
      <P align=right>(1,452,062</FONT></B></P></TD>
    <TD vAlign=bottom width=16><B><FONT size=1>
      <P>)</FONT></B></P></TD>
    <TD vAlign=bottom width=43>
      <P align=right><B><FONT size=1>--</FONT></B></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD>
    <TD vAlign=bottom width=67><B><FONT size=1>
      <P align=right>(1,452,062</FONT></B></P></TD>
    <TD vAlign=bottom width=20><B><FONT size=1>
      <P>)</FONT></B></P></TD></TR>
  <TR>
    <TD colSpan=11 vAlign=bottom width=564>
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=174><B><FONT size=1>
      <P>Balance, </FONT></B><FONT size=1>December 31, 2000</FONT></P></TD>
    <TD vAlign=bottom width=17>&nbsp;</TD>
    <TD vAlign=bottom width=53><B><FONT size=1>
      <P align=right>2,066,700</FONT></B></P></TD>
    <TD vAlign=bottom width=20><B><FONT size=1>
      <P align=right>$</FONT></B></P></TD>
    <TD vAlign=bottom width=54><B><FONT size=1>
      <P align=right>1,527,691</FONT></B></P></TD>
    <TD vAlign=bottom width=72><B><FONT size=1>
      <P align=right>$(4,525,087</FONT></B></P></TD>
    <TD vAlign=bottom width=16><B><FONT size=1>
      <P>) $</FONT></B></P></TD>
    <TD vAlign=bottom width=43><B><FONT size=1>
      <P align=right>(100,000</FONT></B></P></TD>
    <TD vAlign=bottom width=16><B><FONT size=1>
      <P>)</FONT></B></P></TD>
    <TD vAlign=bottom width=67><B><FONT size=1>
      <P align=right>$(3,097,396</FONT></B></P></TD>
    <TD vAlign=bottom width=20><B><FONT size=1>
      <P>)</FONT></B></P></TD></TR>
  <TR>
    <TD colSpan=11 vAlign=bottom width=564>
      <HR color=#000080 noShade SIZE=5>
    </TD></TR></TABLE>
<P align=right><I>See accompanying notes to consolidated financial
statements.&nbsp;&nbsp;&nbsp;&nbsp;</I></P>
<P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">B-8</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7</B></P>
<P align=right>&nbsp;</P>
<P align=center><B><FONT face=Arial size=4>East Tennessee Materials and Energy
Corporation</FONT></B></P>
<P>&nbsp;</P>
<P align=right><FONT size=4>Consolidated Statements of Cash Flows</FONT></P>
<HR color=#000080 noShade SIZE=9>

<TABLE border=0 cellSpacing=2 height=1040 width=625>
  <TR>
    <TD height=40 vAlign=bottom width="64%"><I><FONT size=3>
      <P><BR>Year ended December&nbsp;31,</FONT></I></P></TD>
    <TD height=40 vAlign=bottom width="4%">&nbsp;</TD>
    <TD height=40 vAlign=bottom width="11%"><B><FONT size=3>
      <P align=right>2000</FONT></B></P></TD>
    <TD height=40 vAlign=bottom width="9%">&nbsp;</TD>
    <TD height=40 vAlign=bottom width="11%"><FONT size=3>
      <P align=right>1999</FONT></P></TD>
    <TD height=40 vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD colSpan=6 height=21 vAlign=bottom width="101%">
      <HR color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><B><FONT size=3>
      <P>Cash flows from operating activities:</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="4%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="9%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT size=3>
      <P>Net loss</FONT></P></TD>
    <TD height=21 vAlign=bottom width="4%"><B><FONT size=3>
      <P align=right>$</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="11%"><B><FONT size=3>
      <P align=right>(1,452,062</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%"><B><FONT size=3>
      <P>) </FONT></B><FONT size=3>$</FONT></P></TD>
    <TD height=21 vAlign=bottom width="11%"><FONT size=3>
      <P align=right>(1,962,348</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%"><FONT size=3>
      <P>)</FONT></P></TD></TR>
  <TR>
    <TD height=40 vAlign=bottom width="64%"><FONT
      size=3><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Adjustments to reconcile net
      loss to net cash
      provided<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;by operating
      activities:</FONT></TD>
    <TD height=40 vAlign=bottom width="4%"></TD>
    <TD height=40 vAlign=bottom width="11%"></TD>
    <TD height=40 vAlign=bottom width="9%"></TD>
    <TD height=40 vAlign=bottom width="11%"></TD>
    <TD height=40 vAlign=bottom width="2%"></TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT
      size=3><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Depreciation
      and amortization</FONT></TD>
    <TD height=21 vAlign=bottom width="4%"></TD>
    <TD height=21 vAlign=bottom width="11%">
      <P align=right><B><FONT size=3>452,345</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%"></TD>
    <TD height=21 vAlign=bottom width="11%">
      <P align=right><FONT size=3>301,840</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%"></TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT
      size=3><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Amortization
      of debt discount</FONT></TD>
    <TD height=21 vAlign=bottom width="4%"></TD>
    <TD height=21 vAlign=bottom width="11%"><B><FONT size=3>
      <P align=right>322,000</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%"></TD>
    <TD height=21 vAlign=bottom width="11%"><FONT size=3>
      <P align=right>322,000</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%"></TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT
      size=3><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Issuance
      of common stock for consulting services</FONT></TD>
    <TD height=21 vAlign=bottom width="4%"></TD>
    <TD height=21 vAlign=bottom width="11%"><B><FONT size=3>
      <P align=right>75,000</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%"></TD>
    <TD height=21 vAlign=bottom width="11%">
      <P align=right><FONT size=3>200,000</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%"></TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT
      size=3><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Cash
      provided by (used for):</FONT></TD>
    <TD height=21 vAlign=bottom width="4%"></TD>
    <TD height=21 vAlign=bottom width="11%"></TD>
    <TD height=21 vAlign=bottom width="9%"></TD>
    <TD height=21 vAlign=bottom width="11%"></TD>
    <TD height=21 vAlign=bottom width="2%"></TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT
      size=3><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Accounts
      receivable</FONT></TD>
    <TD height=21 vAlign=bottom width="4%"></TD>
    <TD height=21 vAlign=bottom width="11%"><B><FONT size=3>
      <P align=right>52,681</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%"></TD>
    <TD height=21 vAlign=bottom width="11%"><FONT size=3>
      <P align=right>(77,315</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%"><FONT size=3>)</FONT></TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT
      size=3><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Prepaid
      expenses</FONT></TD>
    <TD height=21 vAlign=bottom width="4%"></TD>
    <TD height=21 vAlign=bottom width="11%"><B><FONT size=3>
      <P align=right>(9,251</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%"><B><FONT size=3>)</FONT></B></TD>
    <TD height=21 vAlign=bottom width="11%">
      <P align=right><FONT size=3>438</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%"><FONT
  size=3>&nbsp;&nbsp;</FONT></TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT
      size=3><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Accounts
      payable</FONT></TD>
    <TD height=21 vAlign=bottom width="4%"></TD>
    <TD height=21 vAlign=bottom width="11%">
      <P align=right><B><FONT size=3>666,528</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%"></TD>
    <TD height=21 vAlign=bottom width="11%">
      <P align=right><FONT size=3>400,230</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%"></TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT
      size=3><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Accrued
      expenses and other liabilities</FONT></TD>
    <TD height=21 vAlign=bottom width="4%"></TD>
    <TD height=21 vAlign=bottom width="11%"><B><FONT size=3>
      <P align=right>744,509</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%"></TD>
    <TD height=21 vAlign=bottom width="11%">
      <P align=right><FONT size=3>833,458</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%"></TD></TR>
  <TR>
    <TD colSpan=6 height=21 vAlign=bottom width="101%">
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT size=3>
      <P>Net cash provided by operating activities</FONT></P></TD>
    <TD height=21 vAlign=bottom width="4%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%"><B><FONT size=3>
      <P align=right>851,750</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%"><FONT size=3>
      <P align=right>18,303</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD colSpan=6 height=21 vAlign=bottom width="101%">
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><B><FONT size=3>
      <P>Cash flows from investing activities:</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="4%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="9%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT size=3>
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital expenditures</FONT></P></TD>
    <TD height=21 vAlign=bottom width="4%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%"><B><FONT size=3>
      <P align=right>(5,532,911</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%"><B><FONT size=3>
      <P>)</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="11%"><FONT size=3>
      <P align=right>(2,724,436</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%"><FONT size=3>
      <P>)</FONT></P></TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT size=3>
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Expenditures obtaining
    permits</FONT></P></TD>
    <TD height=21 vAlign=bottom width="4%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%"><B><FONT size=3>
      <P align=right>(168,164</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%"><B><FONT size=3>
      <P>)</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="11%"><FONT size=3>
      <P align=right>(470,434</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%"><FONT size=3>
      <P>)</FONT></P></TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT size=3>
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in other assets</FONT></P></TD>
    <TD height=21 vAlign=bottom width="4%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%"><B><FONT size=3>
      <P align=right>(210</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%"><B><FONT size=3>
      <P>)</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="11%"><FONT size=3>
      <P align=right>(384</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%"><FONT size=3>
      <P>)</FONT></P></TD></TR>
  <TR>
    <TD colSpan=6 height=21 vAlign=bottom width="101%">
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT size=3>
      <P>Net cash used for investing activities</FONT></P></TD>
    <TD height=21 vAlign=bottom width="4%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%"><B><FONT size=3>
      <P align=right>(5,701,285</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%"><B><FONT size=3>
      <P>)</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="11%"><FONT size=3>
      <P align=right>(3,195,254</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%"><FONT size=3>
      <P>)</FONT></P></TD></TR>
  <TR>
    <TD colSpan=6 height=21 vAlign=bottom width="101%">
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><B><FONT size=3>
      <P>Cash flows from financing activities:</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="4%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="9%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT size=3>
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Billings and advances from related
      party</FONT></P></TD>
    <TD height=21 vAlign=bottom width="4%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%"><B><FONT size=3>
      <P align=right>607,278</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%"><FONT size=3>
      <P align=right>2,482,567</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT size=3>
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from notes payable</FONT></P></TD>
    <TD height=21 vAlign=bottom width="4%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%"><B><FONT size=3>
      <P align=right>495,000</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%"><FONT size=3>
      <P align=right>409,000</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT size=3>
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payments on notes payable</FONT></P></TD>
    <TD height=21 vAlign=bottom width="4%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%"><B><FONT size=3>
      <P align=right>(800</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%"><B><FONT size=3>
      <P>)</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="11%"><FONT size=3>
      <P align=right>(40,600</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%"><FONT size=3>
      <P>)</FONT></P></TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT size=3>
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Billings and advances from
      Perma-Fix</FONT></P></TD>
    <TD height=21 vAlign=bottom width="4%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%"><B><FONT size=3>
      <P align=right>3,754,410</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%">
      <P align=right><FONT size=3>--</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT size=3>
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from long-term
debt</FONT></P></TD>
    <TD height=21 vAlign=bottom width="4%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%">
      <P align=right><B><FONT size=3>--</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%"><FONT size=3>
      <P align=right>150,000</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT size=3>
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payments on long-term debt</FONT></P></TD>
    <TD height=21 vAlign=bottom width="4%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%"><B><FONT size=3>
      <P align=right>(6,353</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%"><B><FONT size=3>
      <P>)</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="11%"><FONT size=3>
      <P align=right>(4,872</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%"><FONT size=3>
      <P>)</FONT></P></TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT size=3>
      <P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sale of common
      stock</FONT></P></TD>
    <TD height=21 vAlign=bottom width="4%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%">
      <P align=right><B><FONT size=3>--</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%"><FONT size=3>
      <P align=right>180,800</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="4%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="9%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><FONT size=3>
      <P>Net cash provided by financing activities</FONT></P></TD>
    <TD height=21 vAlign=bottom width="4%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%"><B><FONT size=3>
      <P align=right>4,849,535</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%"><FONT size=3>
      <P align=right>3,176,895</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD colSpan=6 height=21 vAlign=bottom width="101%">
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><B><FONT size=3>
      <P>Net decrease in cash</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="4%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%">
      <P align=right><B><FONT size=3>--</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%"><FONT size=3>
      <P align=right>(56</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%"><FONT size=3>
      <P>)</FONT></P></TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="4%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="9%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><B><FONT size=3>
      <P>Cash, </FONT></B><FONT size=3>beginning of year</FONT></P></TD>
    <TD height=21 vAlign=bottom width="4%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%">
      <P align=right><B><FONT size=3>--</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%">&nbsp;</TD>
    <TD height=21 vAlign=bottom width="11%"><FONT size=3>
      <P align=right>56</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD colSpan=6 height=23 vAlign=bottom width="101%">
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD height=21 vAlign=bottom width="64%"><B><FONT size=3>
      <P>Cash, </FONT></B><FONT size=3>end of year</FONT></P></TD>
    <TD height=21 vAlign=bottom width="4%"><B><FONT size=3>
      <P align=right>$</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="11%">
      <P align=right><B><FONT size=3>--</FONT></B></P></TD>
    <TD height=21 vAlign=bottom width="9%"><FONT size=3>
      <P align=right>$</FONT></P></TD>
    <TD height=21 vAlign=bottom width="11%">
      <P align=right><FONT size=3>--</FONT></P></TD>
    <TD height=21 vAlign=bottom width="2%">&nbsp;</TD></TR>
  <TR>
    <TD colSpan=6 height=21 vAlign=bottom width="101%">
      <HR color=#000080 noShade SIZE=5>
    </TD></TR></TABLE>
<P align=right><I>See accompanying notes to consolidated financial
statements.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></P>
<P align=right>&nbsp;</P>
<P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">B-9&nbsp;&nbsp;</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8</B></P>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P>
<P align=center><B><FONT face=Arial size=4>East Tennessee Materials and Energy
Corporation</FONT></B></P>
<P>&nbsp;</P>
<P align=right><FONT size=4>Notes to Consolidated Financial
Statements</FONT></P>
<HR color=#000080 noShade SIZE=9>

<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">
      <P><BR><B>1.</B></P></TD>
    <TD vAlign=top width="24%"><B>
      <P><BR>Summary of<BR>Accounting<BR>Policies</B></P></TD>
    <TD vAlign=top width="71%"><U>
      <P align=justify><BR>Nature of Operations<BR><BR></U>East Tennessee
      Materials and Energy Corporation and its wholly-owned subsidiary, First
      Choice Technical Services, Inc., (the "Company") provide engineering and
      consulting services to the hazardous mixed waste storage, analysis,
      treatment and disposal industry. Primary customers of the Company are
      currently United States Department of Energy contractors. In June 1999,
      the Company obtained the necessary federal and state permits to operate a
      facility to treat low-level radioactive and hazardous waste. The Company
      completed construction of the treatment facility located in Oak Ridge,
      Tennessee, in June 2001, and the facility became fully operational during
      the third quarter of 2001. The Company was acquired by Perma-Fix
      Environmental Services, Inc. effective June&nbsp;25, 2001 (see Note
      16).</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">&nbsp;</TD>
    <TD vAlign=top width="24%">&nbsp;</TD>
    <TD vAlign=top width="71%"><U>
      <P align=justify>Principles of Consolidation<BR><BR></U>The consolidated
      financial statements include the accounts of the Company and its
      wholly-owned subsidiary. All significant intercompany transactions have
      been eliminated in consolidation.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="29%">&nbsp;</TD>
    <TD vAlign=top width="71%"><U>
      <P>Plant and Equipment<BR><BR></U>Plant and equipment are stated at cost.
      Depreciation is computed over the estimated useful lives of the assets
      using the straight-line method.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="29%">&nbsp;</TD>
    <TD vAlign=top width="71%"><U>
      <P align=justify>Permits<BR><BR></U>Permits include the costs of obtaining
      permits for the treatment of hazardous and low-level radioactive waste.
      These costs are amortized on a straight-line basis over the life of the
      related permit, which is generally ten years. Amortization expense was
      approximately $339,000 and $170,000 for the years ended December&nbsp;31,
      2000 and 1999, respectively. The Company capitalized $13,367 and $39,393
      of interest expense to permits during 2000 and 1999,
  respectively.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width=27></TD>
    <TD vAlign=top width=134></TD>
    <TD vAlign=top width=433>&nbsp;
      <P>&nbsp;</P>
      <P>&nbsp;</P>
      <P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">B-10</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9</B></P>
      <P>&nbsp;</P></TD></TR>
  <TR>
    <TD vAlign=top width=27></TD>
    <TD vAlign=top width=134></TD>
    <TD vAlign=top width=433></TD></TR>
  <TR>
    <TD colSpan=3 vAlign=top width=594>
      <P align=center><B><FONT face=Arial size=4>East Tennessee Materials and
      Energy Corporation</FONT></B></P>
      <P>&nbsp;</P>
      <P align=right><FONT size=4>Notes to Consolidated Financial
      Statements</FONT></P>
      <HR color=#000080 noShade SIZE=9>
    </TD></TR>
  <TR>
    <TD vAlign=top width=27>&nbsp;<BR><BR></TD>
    <TD vAlign=top width=134><BR><BR>&nbsp;</TD>
    <TD vAlign=top width=433><U>
      <P align=justify><BR><BR>Goodwill<BR><BR></U>Goodwill is stated at cost
      less accumulated amortization. Goodwill is amortized using the
      straight-line method over a period of ten years. Amortization expense was
      approximately $12,000 for each of the years ended December 31, 2000 and
      1999, respectively.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width=27>&nbsp;</TD>
    <TD vAlign=top width=133>&nbsp;</TD>
    <TD vAlign=top width=434><U>
      <P align=justify>Lease Acquisition Costs<BR><BR></U>Lease acquisition
      costs represent the costs incurred to obtain the Company's building lease.
      These costs are being amortized over the life of the related lease, which
      is ten years. Amortization of lease acquisition costs was approximately
      $34,000 and $30,000 for the years ended December&nbsp;31, 2000 and 1999,
      respectively.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width=27>&nbsp;</TD>
    <TD vAlign=top width=133>&nbsp;</TD>
    <TD vAlign=top width=434><U>
      <P align=justify>Impairments<BR><BR></U>Assets are evaluated for
      impairment when events change or changes in circumstances indicate that
      the carrying amounts of the assets may not be recoverable. When any such
      impairment exists, the related assets are written down to fair
    value.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width=27>&nbsp;</TD>
    <TD vAlign=top width=131>&nbsp;</TD>
    <TD vAlign=top width=436><U>
      <P align=justify>Revenue Recognition<BR><BR></U>Revenues are recognized at
      the time services are rendered.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width=168>&nbsp;</TD>
    <TD vAlign=top width=436><U>
      <P align=justify>Income Taxes<BR><BR></U>Deferred income taxes are
      provided for temporary differences in the recognition of income and
      expense for financial reporting and income tax purposes. Deferred income
      tax assets and liabilities are computed for differences between the
      financial statement and tax bases of assets, liabilities and tax
      carryforwards that will result in taxable or deductible amounts in future
      periods based upon enacted tax laws and rates applicable to the periods in
      which the differences are expected to affect&nbsp;</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="29%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD vAlign=top width="29%"></TD>
    <TD vAlign=top width="71%">
      <P align=right>
      <P align=right>
      <P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">B-11</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10</B></P>
      <P align=left>&nbsp;</P></TD></TR>
  <TR>
    <TD vAlign=top width="29%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD colSpan=2 vAlign=top width="100%">
      <P align=center><B><FONT face=Arial size=4>East Tennessee Materials and
      Energy Corporation</FONT></B></P>
      <P>&nbsp;</P>
      <P align=right><FONT size=4>Notes to Consolidated Financial
      Statements</FONT></P>
      <HR color=#000080 noShade SIZE=9>

      <P>&nbsp;</P></TD></TR>
  <TR>
    <TD vAlign=top width="29%"></TD>
    <TD vAlign=top width="71%">taxable income. Deferred tax liabilities are
      recognized when incurred; deferred tax assets, when necessary, are reduced
      by a valuation allowance when it is more likely than not that the asset
      will not be realized.<BR></TD></TR>
  <TR>
    <TD vAlign=top width="29%">&nbsp;</TD>
    <TD vAlign=top width="71%"><U>
      <P>Fair Value of Financial Instruments<BR><BR></U>Fair value estimates
      discussed herein are based upon certain market assumptions and pertinent
      information available to management as of December 31, 2000. The
      respective carrying value of certain on-balance-sheet financial
      instruments approximated their fair values. These financial instruments
      include cash, accounts receivable, accounts payable, accrued expenses and
      due to stockholder. Fair values were assumed to approximate carrying
      values for these financial instruments since they are short term in nature
      and their carrying amounts approximate fair values or they are receivable
      or payable on demand. The fair value of the notes payable and long-term
      debt are estimated based on the current rates available to the Company for
      debt of the same remaining maturities and approximates its carrying
      amount.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="29%">&nbsp;</TD>
    <TD vAlign=top width="71%"><U>
      <P align=justify>Use of Estimates<BR><BR></U>The preparation of financial
      statements in conformity with generally accepted accounting principles
      requires management to make estimates and assumptions that affect the
      reported amounts of assets and liabilities at the date of the financial
      statements and the reported amounts of revenues and expenses during the
      reporting period. Actual results could differ from those
  estimates.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width=27>
      <P><B>2.</B></P></TD>
    <TD vAlign=top width=135><B>
      <P>Acquisition of<BR>First Choice</B></P></TD>
    <TD vAlign=top width=432>
      <P align=justify>Effective January&nbsp;1, 1999, the Company acquired all
      of the outstanding common stock of First Choice Technical Services, Inc.
      ("FCTS") in exchange for 50,000 shares of the Company's common stock
      valued at $200,000 and the assumption of $39,035 of liabilities. The
      acquisition was recorded using the purchase method of accounting.
      Accordingly,&nbsp;</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width=27></TD>
    <TD vAlign=top width=135></TD>
    <TD vAlign=top width=432></TD></TR>
  <TR>
    <TD vAlign=top width=27></TD>
    <TD vAlign=top width=135></TD>
    <TD vAlign=top width=432>
      <P align=right>
      <P align=right>
      <P align=right>
      <P align=right>
      <P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size="2">B-12</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11</B></P></TD></TR>
  <TR>
    <TD colSpan=3 vAlign=top width=594>
      <P align=center><B><FONT face=Arial size=4>East Tennessee Materials and
      Energy Corporation</FONT></B></P>
      <P>&nbsp;</P>
      <P align=right><FONT size=4>Notes to Consolidated Financial
      Statements</FONT></P>
      <HR color=#000080 noShade SIZE=9>
    </TD></TR>
  <TR>
    <TD vAlign=top width=27></TD>
    <TD vAlign=top width=135></TD>
    <TD vAlign=top width=432></TD></TR>
  <TR>
    <TD vAlign=top width=27></TD>
    <TD vAlign=top width=135></TD>
    <TD vAlign=top width=432>the purchase price was allocated to the net
      assets acquired based upon the estimated fair market values. The excess of
      the purchase price over the estimated fair value of the net assets
      acquired was approximately $120,000, which has been accounted for as
      goodwill and is being amortized over its estimated useful life of ten
      years. The operating results of FCTS are included in the Company's results
      of operations from the date of acquisition. FCTS is an engineering and
      consulting firm that provides services related to hazardous mixed waste
      storage, analysis, treatment and disposal.</TD></TR>
  <TR>
    <TD vAlign=top width=27>
      <P><B>3.</B></P></TD>
    <TD vAlign=top width=135><B>
      <P>Recission of ICM<BR>Merger</B></P></TD>
    <TD vAlign=top width=432>
      <P align=justify>In June 1999, the Company's Board approved a merger with
      International Credit &amp; Mercantile, Inc. ("ICM"). The merger was
      rescinded on July&nbsp;20, 2000, and the stock purchase agreement was
      terminated. The acquisition of ICM was not recorded in the Company's
      financial statements as a result of the recission.</P></TD></TR>
  <TR>
    <TD vAlign=top width=27></TD>
    <TD vAlign=top width=135></TD>
    <TD vAlign=top width=432></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width=27>&nbsp;</TD>
    <TD vAlign=top width=135>&nbsp;</TD>
    <TD vAlign=top width=432>
      <P align=justify>In connection with this merger, a consultant was granted
      an option to purchase 125,000 shares of common stock at an exercise price
      of $4 per share. In connection with the recission of the merger, this
      option was canceled.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">
      <P><B>4.</B></P></TD>
    <TD vAlign=top width="24%"><B>
      <P>Plant and Equipment</B></P></TD>
    <TD vAlign=top width="71%">
      <P align=justify>Plant and equipment consist of the
  following:</P></TD></TR></TABLE>
<DIV align=right>
<TABLE border=0 cellSpacing=2 width=502>
  <TR>
    <TD vAlign=bottom width=74>
      <P></P></TD>
    <TD vAlign=bottom width=301><I><FONT
size=2>December&nbsp;31,</FONT></I></TD>
    <TD vAlign=bottom width=83><I><FONT size=2>
      <P align=right>Estimated<BR>Useful Lives</FONT></I></P></TD>
    <TD vAlign=bottom width=24>&nbsp;</TD>
    <TD vAlign=bottom width=78><B><FONT size=2>
      <P align=right>2000</FONT></B></P></TD>
    <TD vAlign=bottom width=28>&nbsp;</TD>
    <TD vAlign=bottom width=61><FONT size=2>
      <P align=right>1999</FONT></P></TD>
    <TD vAlign=bottom width=56>&nbsp;</TD></TR>
  <TR>
    <TD colSpan=8 vAlign=bottom width=705>
      <HR color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=74>
      <P></P></TD>
    <TD vAlign=bottom width=301><FONT size=2>Plant equipment</FONT></TD>
    <TD vAlign=bottom width=83><FONT size=2>
      <P align=right>5 years</FONT></P></TD>
    <TD vAlign=bottom width=24><B><FONT size=2>
      <P align=right>$</FONT></B></P></TD>
    <TD vAlign=bottom width=78><B><FONT size=2>
      <P align=right>22,500</FONT></B></P></TD>
    <TD vAlign=bottom width=28><B><FONT size=2>
      <P align=right>$</FONT></B></P></TD>
    <TD vAlign=bottom width=61><FONT size=2>
      <P align=right>22,500</FONT></P></TD>
    <TD vAlign=bottom width=56>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=74>
      <P></P></TD>
    <TD vAlign=bottom width=301><FONT size=2>Transportation
equipment</FONT></TD>
    <TD vAlign=bottom width=83><FONT size=2>
      <P align=right>5 years</FONT></P></TD>
    <TD vAlign=bottom width=24>&nbsp;</TD>
    <TD vAlign=bottom width=78><B><FONT size=2>
      <P align=right>34,253</FONT></B></P></TD>
    <TD vAlign=bottom width=28>&nbsp;</TD>
    <TD vAlign=bottom width=61><FONT size=2>
      <P align=right>34,253</FONT></P></TD>
    <TD vAlign=bottom width=56>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=74>
      <P></P></TD>
    <TD vAlign=bottom width=301><FONT size=2>Office equipment and
      furniture</FONT></TD>
    <TD vAlign=bottom width=83><FONT size=2>
      <P align=right>3-7 years</FONT></P></TD>
    <TD vAlign=bottom width=24>&nbsp;</TD>
    <TD vAlign=bottom width=78><B><FONT size=2>
      <P align=right>6,436</FONT></B></P></TD>
    <TD vAlign=bottom width=28>&nbsp;</TD>
    <TD vAlign=bottom width=61><FONT size=2>
      <P align=right>19,443</FONT></P></TD>
    <TD vAlign=bottom width=56>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=74>
      <P></P></TD>
    <TD vAlign=bottom width=301><FONT size=2>Construction in
progress</FONT></TD>
    <TD vAlign=bottom width=83>&nbsp;</TD>
    <TD vAlign=bottom width=24>&nbsp;</TD>
    <TD vAlign=bottom width=78><B><FONT size=2>
      <P align=right>9,440,131</FONT></B></P></TD>
    <TD vAlign=bottom width=28>&nbsp;</TD>
    <TD vAlign=bottom width=61><FONT size=2>
      <P align=right>3,898,338</FONT></P></TD>
    <TD vAlign=bottom width=56>&nbsp;</TD></TR>
  <TR>
    <TD colSpan=8 vAlign=bottom width=705>
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=74>&nbsp;</TD>
    <TD vAlign=bottom width=301></TD>
    <TD vAlign=bottom width=83>&nbsp;</TD>
    <TD vAlign=bottom width=24>&nbsp;</TD>
    <TD vAlign=bottom width=78><B><FONT size=2>
      <P align=right>9,503,320</FONT></B></P></TD>
    <TD vAlign=bottom width=28>&nbsp;</TD>
    <TD vAlign=bottom width=61><FONT size=2>
      <P align=right>3,974,534</FONT></P></TD>
    <TD vAlign=bottom width=56>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=74>
      <P></P></TD>
    <TD vAlign=bottom width=301>
      <P align=left><FONT size=2>Less accumulated depreciation</FONT></P></TD>
    <CENTER>
    <TD vAlign=bottom width=83>&nbsp;</TD>
    <TD vAlign=bottom width=24>&nbsp;</TD>
    <TD vAlign=bottom width=78><B><FONT size=2>
      <P align=right>(23,032</FONT></B></P></TD>
    <TD vAlign=bottom width=28><B><FONT size=2>
      <P>)</FONT></B></P></TD>
    <TD vAlign=bottom width=61><FONT size=2>
      <P align=right>(16,689</FONT></P></TD>
    <TD vAlign=bottom width=56><FONT size=2>
      <P>)</FONT></P></TD></TR>
  <TR>
    <TD colSpan=8 vAlign=bottom width=705>
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=74>&nbsp;</TD>
    <TD vAlign=bottom width=301></TD>
    <TD vAlign=bottom width=83>&nbsp;</TD>
    <TD vAlign=bottom width=24><B><FONT size=2>
      <P align=right>$</FONT></B></P></TD>
    <TD vAlign=bottom width=78><B><FONT size=2>
      <P align=right>9,480,288</FONT></B></P></TD>
    <TD vAlign=bottom width=28><FONT size=2>
      <P align=right>$</FONT></P></TD>
    <TD vAlign=bottom width=61><FONT size=2>
      <P align=right>3,957,845</FONT></P></TD>
    <TD vAlign=bottom width=56>&nbsp;</TD></TR>
  <TR>
    <TD colSpan=8 vAlign=bottom width=705>
      <HR color=#000080 noShade SIZE=5>
    </TD></TR></TABLE></CENTER></DIV>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">
      <P align=right>&nbsp;</P>
      <P align=right>&nbsp;</P>
      <P align=right>&nbsp;</P>
      <P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">&nbsp;B-13</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12</B></P></TD></TR>
  <TR>
    <TD vAlign=top width="6%">&nbsp;
      <P>&nbsp;</P></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD colSpan=3 vAlign=top width="101%">
      <P align=center><B><FONT face=Arial size=4>East Tennessee Materials and
      Energy Corporation</FONT></B></P>
      <P>&nbsp;</P>
      <P align=right><FONT size=4>Notes to Consolidated Financial
      Statements</FONT></P>
      <HR color=#000080 noShade SIZE=9>
    </TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD vAlign=top width="6%">&nbsp;</TD>
    <TD vAlign=top width="24%">&nbsp;</TD>
    <TD vAlign=top width="71%">
      <P align=justify>The Company incurred approximately $6.6 million of
      additional costs to complete the construction of its treatment facility.
      The Company capitalized $448,112 and $226,778 of interest expense to
      construction in progress during 2000 and 1999,
  respectively.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">
      <P><B>5.</B></P></TD>
    <TD vAlign=top width="24%"><B>
      <P>Commitments</B></P></TD>
    <TD vAlign=top width="71%"><U>
      <P align=justify>Operating Lease<BR><BR></U>The Company conducts its
      operations from a leased facility. This lease is classified as an
      operating lease and expires in January 2008. As of December&nbsp;31, 2000,
      future minimum rental payments required under this lease are as
      follows:</P></TD></TR></TABLE>
<P align=right>
<DIV align=left>
<TABLE border=0 cellSpacing=2 width=628>
  <TR>
    <TD vAlign=bottom width=184>
      <P></P></TD>
    <TD colSpan=2 vAlign=bottom width=304><I>Year ending
    December&nbsp;31,</I></TD>
    <TD colSpan=2 vAlign=bottom width=79>&nbsp;</TD>
    <TD vAlign=bottom width=33>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=184></TD>
    <TD colSpan=5 vAlign=bottom width=404>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=184></TD>
    <TD vAlign=bottom width=194>2001</TD>
    <TD vAlign=bottom width=104>&nbsp;</TD>
    <TD vAlign=bottom width=10>
      <P align=right>$</P></TD>
    <TD vAlign=bottom width=63>
      <P align=right>24,000</P></TD>
    <TD vAlign=bottom width=33>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=184></TD>
    <TD vAlign=bottom width=194>2002</TD>
    <TD vAlign=bottom width=104>&nbsp;</TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=63>
      <P align=right>48,000</P></TD>
    <TD vAlign=bottom width=33>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=184></TD>
    <TD vAlign=bottom width=194>2003</TD>
    <TD vAlign=bottom width=104>&nbsp;</TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=63>
      <P align=right>119,000</P></TD>
    <TD vAlign=bottom width=33>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=184></TD>
    <TD vAlign=bottom width=194>2004</TD>
    <TD vAlign=bottom width=104>&nbsp;</TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=63>
      <P align=right>125,000</P></TD>
    <TD vAlign=bottom width=33>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=184></TD>
    <TD vAlign=bottom width=194>2005</TD>
    <TD vAlign=bottom width=104>&nbsp;</TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=63>
      <P align=right>125,000</P></TD>
    <TD vAlign=bottom width=33>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=184></TD>
    <TD vAlign=bottom width=194>Thereafter</TD>
    <TD vAlign=bottom width=104>&nbsp;</TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=63>
      <P align=right>260,000</P></TD>
    <TD vAlign=bottom width=33>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=184></TD>
    <TD colSpan=5 vAlign=bottom width=404>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=184></TD>
    <TD vAlign=bottom width=194>Total</TD>
    <TD vAlign=bottom width=104>&nbsp;</TD>
    <TD vAlign=bottom width=10>
      <P align=right>$</P></TD>
    <TD vAlign=bottom width=63>
      <P align=right>701,000</P></TD>
    <TD vAlign=bottom width=33>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=184></TD>
    <TD colSpan=5 vAlign=bottom width=404>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD></TR></TABLE></DIV>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">&nbsp;</TD>
    <TD vAlign=top width="24%">&nbsp;</TD>
    <TD vAlign=top width="71%">
      <P align=justify>Beginning February 2003, the Company will be required to
      pay an additional amount equal to .5% of gross annual sales with a maximum
      combined annual base and percentage of sales lease amount not to exceed
      $200,000. Rent expense for the years ended December&nbsp;31, 2000 and 1999
      was approximately $103,000 and $105,000,
respectively.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">&nbsp;</TD>
    <TD vAlign=top width="24%">&nbsp;</TD>
    <TD vAlign=top width="71%"><U>
      <P align=justify>Permits<BR><BR></U>The Company is subject to various
      regulatory requirements, including the procurement of requisite licenses
      and permits at its treatment facility. These licenses and permits are
      subject to periodic renewal without which the Company would not be able to
      operate its treatment facility. The Company believes that once a license
      or permit is issued,&nbsp;</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">
      <P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">B-14&nbsp;</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13</B></P></TD></TR>
  <TR>
    <TD vAlign=top width="6%">&nbsp;
      <P>&nbsp;</P></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD colSpan=3 vAlign=top width="101%">
      <P align=center><B><FONT face=Arial size=4>East Tennessee Materials and
      Energy Corporation</FONT></B></P>
      <P>&nbsp;</P>
      <P align=right><FONT size=4>Notes to Consolidated Financial
      Statements</FONT></P>
      <HR align=right color=#000080 noShade SIZE=9>
    </TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">it will be renewed at the end of its term if the
      facility operations are in compliance with the applicable regulatory
      requirements.</TD></TR>
  <TR>
    <TD vAlign=top width="6%">&nbsp;</TD>
    <TD vAlign=top width="24%">&nbsp;</TD>
    <TD vAlign=top width="71%"><U>
      <P align=justify>Legal<BR><BR></U>The Company is involved in various
      litigation in the normal course of conducting its business. The Company is
      currently not a party to any litigation or governmental proceeding which
      management believes could have a material adverse affect on their
      financial position or results of operations.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">
      <P><B>6.</B></P></TD>
    <TD vAlign=top width="24%"><B>
      <P>Notes Payable</B></P></TD>
    <TD vAlign=top width="71%">
      <P align=justify>Notes payable consist of notes with maturities of one
      year or less. The majority of the notes shown below are past due as of
      December&nbsp;31, 2000. However, $887,600 of the notes were settled prior
      to or pursuant to the acquisition of the Company by Perma-Fix (see Note
      16).</P></TD></TR></TABLE>
<DIV align=left>
<TABLE border=0 cellSpacing=2 width=624>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275><I><FONT size=1>
      <P>December&nbsp;31,</FONT></I></P></TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=49><B><FONT size=1>
      <P align=right>2000</FONT></B></P></TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=43><FONT size=1>
      <P align=right>1999</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD colSpan=6 vAlign=bottom width=432>
      <HR align=right color=#000080 noShade SIZE=9>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275><FONT size=1>
      <P>Prime + 6% (15.5 % at December 31, 2000) unsecured notes payable to
      stockholders, interest and principal due January 2000, guaranteed by
      certain stockholders and related parties of the Company</FONT></P></TD>
    <TD vAlign=bottom width=9><B><FONT size=1>
      <P align=right>$</FONT></B></P></TD>
    <TD vAlign=bottom width=49><B><FONT size=1>
      <P align=right>50,000</FONT></B></P></TD>
    <TD vAlign=bottom width=10><FONT size=1>
      <P align=right>$</FONT></P></TD>
    <TD vAlign=bottom width=43><FONT size=1>
      <P align=right>50,000</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275>&nbsp;</TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=49>&nbsp;</TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=43>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275><FONT size=1>
      <P>Prime + 4% (13.5% at December 31, 2000) unsecured notes payable to
      stockholders, interest and principal due in January and February of 2000,
      guaranteed by certain stockholders and related parties of the
      Company</FONT></P></TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=49><B><FONT size=1>
      <P align=right>44,000</FONT></B></P></TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=43><FONT size=1>
      <P align=right>44,000</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275>&nbsp;</TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=49>&nbsp;</TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=43>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275><FONT size=1>
      <P>Prime +1% (10.5 % at December 31, 2000) unsecured note payable to a
      bank, interest and principal due January 2000, guaranteed by certain
      stockholders and related parties of the Company</FONT></P></TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=49><B><FONT size=1>
      <P align=right>13,600</FONT></B></P></TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=43><FONT size=1>
      <P align=right>14,400</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275>&nbsp;</TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=49>&nbsp;</TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=43>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275><FONT size=1>
      <P>Unsecured notes payable to stockholders, interest ranging from 12% to
      14% payable monthly, principal and all unpaid accrued interest due January
      2000, guaranteed by certain stockholders and related parties of the
      Company</FONT></P></TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=49><B><FONT size=1>
      <P align=right>100,000</FONT></B></P></TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=43><FONT size=1>
      <P align=right>100,000</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275>&nbsp;</TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=49>&nbsp;</TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=43>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275><FONT size=1>
      <P>10% note payable to stockholder, interest and principal due July 2000,
      secured by the assignment of certain accounts receivable of the Company
      and guaranteed by certain stockholders and related parties of the
      Company</FONT></P></TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=49><B><FONT size=1>
      <P align=right>60,000</FONT></B></P></TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=43><FONT size=1>
      <P align=right>60,000</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275></TD>
    <TD vAlign=bottom width=9></TD>
    <TD vAlign=bottom width=49></TD>
    <TD vAlign=bottom width=10></TD>
    <TD vAlign=bottom width=43></TD>
    <TD vAlign=bottom width=16></TD></TR>
  <TR>
    <TD colSpan=7 vAlign=bottom width=580>
      <P align=right>&nbsp;</P>
      <P align=right>&nbsp;</P>
      <P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">&nbsp;B-15</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14</B></P>
      <P align=right>
      <P align=right>&nbsp;</P></TD></TR>
  <TR>
    <TD colSpan=7 vAlign=bottom width=580>
      <P align=center><B><FONT face=Arial size=4>East Tennessee Materials and
      Energy Corporation</FONT></B></P>
      <P>&nbsp;</P>
      <P align=right><FONT size=4>Notes to Consolidated Financial
      Statements</FONT></P>
      <HR align=right color=#000080 noShade SIZE=9>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275></TD>
    <TD vAlign=bottom width=9></TD>
    <TD vAlign=bottom width=49></TD>
    <TD vAlign=bottom width=10></TD>
    <TD vAlign=bottom width=43></TD>
    <TD vAlign=bottom width=16></TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275><I><FONT
size=1>December&nbsp;31,</FONT></I></TD>
    <TD vAlign=bottom width=9></TD>
    <TD vAlign=bottom width=49><B><FONT size=1>
      <P align=right>2000</FONT></B></P></TD>
    <TD vAlign=bottom width=10></TD>
    <TD vAlign=bottom width=43>
      <P align=right><FONT size=1>1999</FONT></P></TD>
    <TD vAlign=bottom width=16></TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD colSpan=6 vAlign=bottom width=432>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275><FONT size=1>
      <P>10% unsecured note payable to former stockholder, interest and
      principal due March 2000, guaranteed by a stockholder of the
      Company.</FONT></P></TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=49><B><FONT size=1>
      <P align=right>25,000</FONT></B></P></TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=43><FONT size=1>
      <P align=right>25,000</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275>&nbsp;</TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=49>&nbsp;</TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=43>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275><FONT size=1>
      <P>5.18% note payable to a bank, interest payable monthly, principal and
      all unpaid accrued interest due March 2000, secured by a pledge of a
      certificate of deposit belonging to a related party, guaranteed by certain
      stockholders and related parties of the Company.</FONT></P></TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=49><B><FONT size=1>
      <P align=right>100,000</FONT></B></P></TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=43><FONT size=1>
      <P align=right>100,000</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275>&nbsp;</TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=49>&nbsp;</TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=43>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275><FONT size=1>
      <P>10.08% unsecured note payable, interest and principal due October 2000,
      guaranteed by certain stockholders and related parties of the
      Company.</FONT></P></TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=49><B><FONT size=1>
      <P align=right>40,000</FONT></B></P></TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=43><FONT size=1>
      <P align=right>40,000</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275>&nbsp;</TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=49>&nbsp;</TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=43>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275><FONT size=1>
      <P>20% note payable to stockholder, principal and interest due September
      2000, secured by the assignment of certain accounts receivable of the
      Company and guaranteed by certain stockholders and related parties of the
      Company</FONT></P></TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=49><B><FONT size=1>
      <P align=right>145,000</FONT></B></P></TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=43>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275>&nbsp;</TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=49>&nbsp;</TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=43>&nbsp;</TD>
    <TD vAlign=bottom width=16>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275><FONT size=1>
      <P>9.75% unsecured note payable, interest payable quarterly, principal and
      all unpaid accrued interest due March 2001, guaranteed by a stockholder of
      the Company</FONT></P></TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=49><B><FONT size=1>
      <P align=right>350,000</FONT></B></P></TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=43>
      <P align=right><FONT size=1>--</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD colSpan=6 vAlign=bottom width=402>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=275><FONT size=1>
      <P>Total</FONT></P></TD>
    <TD vAlign=bottom width=9><B><FONT size=1>
      <P align=right>$</FONT></B></P></TD>
    <TD vAlign=bottom width=49><B><FONT size=1>
      <P align=right>927,600</FONT></B></P></TD>
    <TD vAlign=bottom width=10><FONT size=1>
      <P align=right>$</FONT></P></TD>
    <TD vAlign=bottom width=43><FONT size=1>
      <P align=right>433,400</FONT></P></TD>
    <TD vAlign=bottom width=16>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD colSpan=6 vAlign=bottom width=402>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD></TR></TABLE></DIV>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">&nbsp;B-16&nbsp;</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15</B></P>
<P align=right>&nbsp;</P>
<P align=right>&nbsp;</P>
<P align=center><B><FONT face=Arial size=4>East Tennessee Materials and Energy
Corporation</FONT></B></P>
<P align=right><FONT size=4>Notes to Consolidated Financial
Statements</FONT></P>
<HR align=right color=#000080 noShade SIZE=9>

<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">
      <P><BR><B>7.</B></P></TD>
    <TD vAlign=top width="24%"><B>
      <P><BR>Long-Term Debt</B></P></TD>
    <TD vAlign=top width="71%">
      <P align=justify><BR>Long-term debt consists of the
  following:</P></TD></TR></TABLE>
<TABLE border=0 cellSpacing=2 width=610>
  <TR>
    <TD vAlign=bottom width=177><BR></TD>
    <TD vAlign=bottom width=231><I><FONT
size=1>December&nbsp;31,</FONT></I></TD>
    <TD vAlign=bottom width=11>&nbsp;</TD>
    <TD vAlign=bottom width=54><B><FONT size=1>
      <P align=center>2000</FONT></B></P></TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=54>
      <P align=center><FONT size=1>1999</FONT></P></TD>
    <TD vAlign=bottom width=30>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=177></TD>
    <TD colSpan=6 vAlign=bottom width=389>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=177></TD>
    <TD vAlign=bottom width=231><FONT size=1>
      <P>Prime + 4% (13.5 % at December 31, 2000) unsecured notes payable to
      stockholders, interest payable monthly, principal and all unpaid accrued
      interest due June 2003, guaranteed by certain stockholders and related
      parties of the Company</FONT></P></TD>
    <TD vAlign=bottom width=11><B><FONT size=1>
      <P align=right>$</FONT></B></P></TD>
    <TD vAlign=bottom width=54><B><FONT size=1>
      <P align=right>1,498,000</FONT></B></P></TD>
    <TD vAlign=bottom width=9><FONT size=1>
      <P align=right>$</FONT></P></TD>
    <TD vAlign=bottom width=54><FONT size=1>
      <P align=right>1,498,000</FONT></P></TD>
    <TD vAlign=bottom width=30>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=177></TD>
    <TD vAlign=bottom width=231>&nbsp;</TD>
    <TD vAlign=bottom width=11>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=30>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=177></TD>
    <TD vAlign=bottom width=231><FONT size=1>
      <P>5.59% unsecured note payable to former stockholder, interest and
      principal of $3,310 due monthly through February 2002, guaranteed by a
      stockholder of the Company</FONT></P></TD>
    <TD vAlign=bottom width=11>&nbsp;</TD>
    <TD vAlign=bottom width=54><B><FONT size=1>
      <P align=right>75,000</FONT></B></P></TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=54><FONT size=1>
      <P align=right>75,000</FONT></P></TD>
    <TD vAlign=bottom width=30>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=177></TD>
    <TD vAlign=bottom width=231>&nbsp;</TD>
    <TD vAlign=bottom width=11>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=30>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=177></TD>
    <TD vAlign=bottom width=231><FONT size=1>
      <P>8.99% note payable to bank, interest and principal of $710 due monthly
      through September 2003, secured by a Company vehicle.</FONT></P></TD>
    <TD vAlign=bottom width=11>&nbsp;</TD>
    <TD vAlign=bottom width=54><B><FONT size=1>
      <P align=right>21,653</FONT></B></P></TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=54><FONT size=1>
      <P align=right>28,006</FONT></P></TD>
    <TD vAlign=bottom width=30>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=177></TD>
    <TD colSpan=6 vAlign=bottom width=389>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=177></TD>
    <TD vAlign=bottom width=231>&nbsp;</TD>
    <TD vAlign=bottom width=11>&nbsp;</TD>
    <TD vAlign=bottom width=54><B><FONT size=1>
      <P align=right>1,594,653</FONT></B></P></TD>
    <TD vAlign=bottom width=9>&nbsp;</TD>
    <TD vAlign=bottom width=54><FONT size=1>
      <P align=right>1,601,006</FONT></P></TD>
    <TD vAlign=bottom width=30>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=177></TD>
    <TD vAlign=bottom width=231><FONT size=1>
      <P>Less unamortized debt discount (see below)</FONT></P></TD>
    <TD vAlign=bottom width=11>&nbsp;</TD>
    <TD vAlign=bottom width=54><B><FONT size=1>
      <P align=right>(831,200</FONT></B></P></TD>
    <TD vAlign=bottom width=9><B><FONT size=1>
      <P>)</FONT></B></P></TD>
    <TD vAlign=bottom width=54><FONT size=1>
      <P align=right>(1,153,200</FONT></P></TD>
    <TD vAlign=bottom width=30><FONT size=1>
      <P>)</FONT></P></TD></TR>
  <TR>
    <TD vAlign=bottom width=177></TD>
    <TD vAlign=bottom width=231><FONT size=1>
      <P>Less current portion</FONT></P></TD>
    <TD vAlign=bottom width=11>&nbsp;</TD>
    <TD vAlign=bottom width=54><B><FONT size=1>
      <P align=right>(748,750</FONT></B></P></TD>
    <TD vAlign=bottom width=9><B><FONT size=1>
      <P>)</FONT></B></P></TD>
    <TD vAlign=bottom width=54><FONT size=1>
      <P align=right>(42,764</FONT></P></TD>
    <TD vAlign=bottom width=30><FONT size=1>
      <P>)</FONT></P></TD></TR>
  <TR>
    <TD vAlign=bottom width=177></TD>
    <TD colSpan=6 vAlign=bottom width=389>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=177></TD>
    <TD vAlign=bottom width=231><FONT size=1>
      <P>Total</FONT></P></TD>
    <TD vAlign=bottom width=11><B><FONT size=1>
      <P align=right>$</FONT></B></P></TD>
    <TD vAlign=bottom width=54><B><FONT size=1>
      <P align=right>14,703</FONT></B></P></TD>
    <TD vAlign=bottom width=9><FONT size=1>
      <P align=right>$</FONT></P></TD>
    <TD vAlign=bottom width=54><FONT size=1>
      <P align=right>405,042</FONT></P></TD>
    <TD vAlign=bottom width=30></TD></TR>
  <TR>
    <TD vAlign=bottom width=177></TD>
    <TD colSpan=6 vAlign=bottom width=389>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">&nbsp;<BR></TD>
    <TD vAlign=top width="24%"><BR>&nbsp;</TD>
    <TD vAlign=top width="71%">
      <P align=justify><BR>The above unsecured notes payable to stockholders
      were settled in June 2001 pursuant to the acquisition of the Company by
      Perma-Fix (see Note 16). Accordingly, this debt has been classified as
      current at December&nbsp;31, 2000. Aggregate maturities of the Company's
      note payable to bank over future years are as follows: 2001 <FONT
      face=Symbol>--</FONT> $6,950; 2002 <FONT face=Symbol>--</FONT> $8,530; and
      2003&nbsp;-- $6,173.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">&nbsp;</TD>
    <TD vAlign=top width="24%">&nbsp;</TD>
    <TD vAlign=top width="71%">
      <P align=justify>The Company issued common stock (see Note 12) and
      preferred stock (see Note 11) to the unsecured note payable holders.
      Common stock issued during 1998 and 1999 totaled 337,000 and 65,500
      shares, respectively, valued at $1,610,000, or $4.00 per share. No value
      was assigned to the Series A cumulative preferred stock issued in
      connection with these notes. The $1,610,000 was recorded as a debt
      discount and is being amortized to interest expense over the term of the
      notes. During 2000 and 1999, $322,000 and $322,000,
    respectively,&nbsp;</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">
      <P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">B-17&nbsp;&nbsp;&nbsp;&nbsp;</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16</B></P></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">
      <P>&nbsp;</P>
      <P>&nbsp;</P>
      <P>&nbsp;</P></TD></TR>
  <TR>
    <TD colSpan=3 vAlign=top width="101%">
      <P align=center><B><FONT face=Arial size=4>East Tennessee Materials and
      Energy Corporation</FONT></B></P>
      <P>&nbsp;</P>
      <P align=right><FONT size=4>Notes to Consolidated Financial
      Statements</FONT></P>
      <HR align=right color=#000080 noShade SIZE=9>
    </TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">of the debt discount was amortized to interest
      expense. As of December&nbsp;31, 2000, the unamortized debt discount was
      $831,200.</TD></TR>
  <TR>
    <TD vAlign=top width="6%">
      <P><B>8.</B></P></TD>
    <TD vAlign=top width="24%"><B>
      <P>Employee<BR>Benefit Plan</B></P></TD>
    <TD vAlign=top width="71%">
      <P align=justify>The Company has a defined contribution employee benefit
      plan under the provisions of Section 401(k) of the Internal Revenue Code.
      Prior to January&nbsp;1, 1999, the Company participated in the 401(k) Plan
      of its majority stockholder, Performance Development Corporation ("PDC").
      Effective January&nbsp;1, 1999, the Company adopted its own separate
      401(k) Plan at which time the assets and liabilities associated with its
      employees were transferred from the PDC Plan to the Company's new 401(k)
      Plan (the "Plan"). All employees who have completed one year of service
      and attained age 21 are eligible to participate in the Plan. The Company
      contributes an amount equal to 100% of the employees' salary deferral not
      to exceed 2% of the employees' compensation plus 50% of any deferral above
      2%, but not exceeding 6% of the employees'
compensation.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">&nbsp;</TD>
    <TD vAlign=top width="24%">&nbsp;</TD>
    <TD vAlign=top width="71%">
      <P align=justify>From November 1998 through June 2000, the Company did not
      submit employee or employer matching contributions to the Plan. Amounts
      due to the Plan for employee contributions, employer matching
      contributions and estimated lost earnings on these contributions were
      $302,718 and $202,537 as of December&nbsp;31, 2000 and 1999, respectively,
      and are included in accrued expenses. Included in these amounts are
      employer matching contributions of $46,754 and $11,319 for 2000 and 1999,
      respectively. These delinquent contributions were paid to the Company's
      Plan by Perma-Fix in connection with the closing of the acquisition of the
      Company by Perma-Fix (see Note 16).</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">&nbsp;
      <P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">B-18</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17</B>
      <P align=right>
      <P align=right>
      <P align=right>&nbsp;</P></TD></TR>
  <TR>
    <TD colSpan=3 vAlign=top width="101%">
      <P align=center><B><FONT face=Arial size=4>East Tennessee Materials and
      Energy Corporation</FONT></B></P>
      <P>&nbsp;</P>
      <P align=right><FONT size=4>Notes to Consolidated Financial
      Statements</FONT></P>
      <HR align=right color=#000080 noShade SIZE=9>
    </TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD vAlign=top width="6%">
      <P><B>9.</B></P></TD>
    <TD vAlign=top width="24%"><B>
      <P>Accrued Expenses</B></P></TD>
    <TD vAlign=top width="71%">
      <P align=justify>Accrued expenses consist of the
  following:</P></TD></TR></TABLE>
<TABLE border=0 cellSpacing=2 width=628
  <TR>
    <TD vAlign=bottom width=176></TD>
    <TD vAlign=bottom width=224><I>
      <P>December&nbsp;31,</I></P></TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=63><B>
      <P align=center>2000</B></P></TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=73>
      <P align=center>1999</P></TD>
    <TD vAlign=bottom width=27>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=176></TD>
    <TD colSpan=6 vAlign=bottom width=407>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=176></TD>
    <TD vAlign=bottom width=224>
      <P>Accrued 401(k) plan contributions (see Note 8)</P></TD>
    <TD vAlign=bottom width=10><B>
      <P align=right>$</B></P></TD>
    <TD vAlign=bottom width=63><B>
      <P align=right>352,018</B></P></TD>
    <TD vAlign=bottom width=10>
      <P align=right>$</P></TD>
    <TD vAlign=bottom width=73>
      <P align=right>202,537</P></TD>
    <TD vAlign=bottom width=27>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=176></TD>
    <TD vAlign=bottom width=224>
      <P>Accrued compensation</P></TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=63><B>
      <P align=right>156,332</B></P></TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=73>
      <P align=right>130,365</P></TD>
    <TD vAlign=bottom width=27>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=176></TD>
    <TD vAlign=bottom width=224>
      <P>Accrued interest</P></TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=63><B>
      <P align=right>412,457</B></P></TD>
    <TD vAlign=bottom width=10>&nbsp;</TD>
    <TD vAlign=bottom width=73>
      <P align=right>128,094</P></TD>
    <TD vAlign=bottom width=27>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=176></TD>
    <TD colSpan=6 vAlign=bottom width=407>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=176></TD>
    <TD vAlign=bottom width=224>&nbsp;</TD>
    <TD vAlign=bottom width=10><B>
      <P align=right>$</B></P></TD>
    <TD vAlign=bottom width=63><B>
      <P align=right>920,807</B></P></TD>
    <TD vAlign=bottom width=10>
      <P align=right>$</P></TD>
    <TD vAlign=bottom width=73>
      <P align=right>460,996</P></TD>
    <TD vAlign=bottom width=27>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=176></TD>
    <TD colSpan=6 vAlign=bottom width=407>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">
      <P><B>10.</B></P></TD>
    <TD vAlign=top width="24%"><B>
      <P>Payroll Tax Liability</B></P></TD>
    <TD vAlign=top width="71%">
      <P align=justify>The Company was delinquent in the payment of payroll
      taxes to the Internal Revenue Service ("IRS"). The Company entered into an
      installment agreement with the IRS for the payment of the delinquent
      payroll taxes over a term of approximately eight years. The installment
      agreement was a condition to closing of the acquisition by Perma-Fix
      Environmental Services, Inc. (see Note 16). Amounts due for payroll taxes
      were $923,496 and $625,000 as of December&nbsp;31, 2000 and 1999,
      respectively. Future payments of payroll taxes under the installment
      agreement as of December&nbsp;31, 2000 are as
follows:</P></TD></TR></TABLE>
<P align=right>&nbsp;
<TABLE border=0 cellSpacing=2 width=624>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD colSpan=4 vAlign=bottom width=413>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=327>
      <P>2001</P></TD>
    <TD vAlign=bottom width=19><B>
      <P align=right>$</B></P></TD>
    <TD vAlign=bottom width=55><B>
      <P align=right>20,022</B></P></TD>
    <TD vAlign=bottom width=12>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=327>
      <P>2002</P></TD>
    <TD vAlign=bottom width=19>&nbsp;</TD>
    <TD vAlign=bottom width=55><B>
      <P align=right>10,010</B></P></TD>
    <TD vAlign=bottom width=12>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=327>
      <P>2003</P></TD>
    <TD vAlign=bottom width=19>&nbsp;</TD>
    <TD vAlign=bottom width=55><B>
      <P align=right>60,065</B></P></TD>
    <TD vAlign=bottom width=12>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=327>
      <P>2004</P></TD>
    <TD vAlign=bottom width=19>&nbsp;</TD>
    <TD vAlign=bottom width=55><B>
      <P align=right>80,088</B></P></TD>
    <TD vAlign=bottom width=12>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=327>
      <P>2005</P></TD>
    <TD vAlign=bottom width=19>&nbsp;</TD>
    <TD vAlign=bottom width=55><B>
      <P align=right>200,213</B></P></TD>
    <TD vAlign=bottom width=12>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=327>
      <P>Thereafter</P></TD>
    <TD vAlign=bottom width=19>&nbsp;</TD>
    <TD vAlign=bottom width=55><B>
      <P align=right>553,098</B></P></TD>
    <TD vAlign=bottom width=12>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD colSpan=4 vAlign=bottom width=413>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD vAlign=bottom width=327>&nbsp;</TD>
    <TD vAlign=bottom width=19><B>
      <P align=right>$</B></P></TD>
    <TD vAlign=bottom width=55><B>
      <P align=right>923,496</B></P></TD>
    <TD vAlign=bottom width=12>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD colSpan=4 vAlign=bottom width=413>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD colSpan=4 vAlign=bottom width=413></TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD colSpan=4 vAlign=bottom width=413>
      <P align=right>&nbsp;</P>
      <P align=right>&nbsp;</P>
      <P align=right>&nbsp;</P>
      <P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">B-19</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18</B>
      <P align=right>&nbsp;</P></TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD colSpan=4 vAlign=bottom width=413></TD></TR>
  <TR>
    <TD colSpan=5 vAlign=bottom width=591>
      <P align=center><B><FONT face=Arial size=4>East Tennessee Materials and
      Energy Corporation</FONT></B></P>
      <P>&nbsp;</P>
      <P align=right><FONT size=4>Notes to Consolidated Financial
      Statements</FONT></P>
      <HR align=right color=#000080 noShade SIZE=9>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=178></TD>
    <TD colSpan=4 vAlign=bottom width=413></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">
      <P><B>11.</B></P></TD>
    <TD vAlign=top width="24%"><B>
      <P>Redeemable Series A Cumulative Preferred Stock</B></P></TD>
    <TD vAlign=top width="71%">
      <P align=justify>The Company has authorized 1,000,000 shares of preferred
      stock consisting of 500,000 shares designated as Series A cumulative
      preferred stock which is nonvoting and nonconvertible. The Company issued
      110,687 shares of Series A preferred stock in 1997 in exchange for
      $553,435 of engineering and administrative services provided by its
      majority stockholder, PDC, (see Note 14). During 1998 and 1999, the
      Company issued 134,800 and 25,000 shares of Series A preferred stock,
      respectively, in connection with the issuance of notes payable. No value
      was assigned to this preferred stock (see Note 7). Total Series A
      preferred stock issued and outstanding were 270,487 and 245,487 at
      December&nbsp;31, 2000 and 1999, respectively.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">&nbsp;</TD>
    <TD vAlign=top width="24%">&nbsp;</TD>
    <TD vAlign=top width="71%">
      <P align=justify>Dividends on the Series A preferred stock are cumulative
      and accrue at $.50 per preferred share annually from June&nbsp;30, 1999 to
      June&nbsp;30, 2003 and from June&nbsp;30, 2004 to June&nbsp;30, 2013 at
      the greater of (i) $1.00 per preferred share annually or (ii) one percent
      of the Company's gross revenue for the preceding 12 months divided by
      $100,000. The Company recorded preferred stock dividends of $67,622 and
      $135,244 during 1999 and 2000, respectively. These dividends were unpaid
      at December&nbsp;31, 2000 and are included in the carrying value of the
      Series A preferred stock.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">&nbsp;</TD>
    <TD vAlign=top width="24%">&nbsp;</TD>
    <TD vAlign=top width="71%">
      <P align=justify>The Series A preferred stock is redeemable at the option
      of the holder upon the later of June&nbsp;30, 2003 or the fifth
      anniversary of the issuance of the Series A preferred stock. The Company
      may redeem the Series A preferred stock at any time after June&nbsp;30,
      2003. The Company is required to redeem all Series A preferred stock upon
      a change of control or public offering. All outstanding shares of the
      Series A preferred stock was converted to common stock in March 2001 (see
      Note 16). The redemption price is equal to the liquidation value of $5 per
      preferred share plus the contingent redemption value plus all accrued and
      unpaid dividends. The contingent redemption value is equal to the greater
      of (i) $1.00 per preferred share or (ii) an amount per share equal to one
      percent of the Company's gross revenues for the preceding 12 months
      divided by $100,000. The excess of the
minimum&nbsp;</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">&nbsp;
      <P>&nbsp;</P>
      <P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">B-20</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19</B></P></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">&nbsp;
      <P>&nbsp;</P></TD></TR>
  <TR>
    <TD colSpan=3 vAlign=top width="101%">
      <P align=center><B><FONT face=Arial size=4>East Tennessee Materials and
      Energy Corporation</FONT></B></P>
      <P>&nbsp;</P>
      <P align=right><FONT size=4>Notes to Consolidated Financial
      Statements</FONT></P>
      <HR align=right color=#000080 noShade SIZE=9>
    </TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">redemption value of $1,622,922 over the initial
      carrying value of $553,435 is being accreted and recorded as preferred
      stock dividends from the issuance date to the redemption date
      (June&nbsp;30, 2003). The Company recorded preferred stock dividends
      related to the accretion of the redemption value of the Series A preferred
      stock of $214,097, $214,097 and $107,049 during 2000, 1999 and 1998,
      respectively. The carrying value of the Series A preferred stock was
      $1,291,544 and $942,203 at December&nbsp;31, 2000 and 1999,
    respectively.</TD></TR>
  <TR>
    <TD vAlign=top width="6%">
      <P><B>12.</B></P></TD>
    <TD vAlign=top width="24%"><B>
      <P>Common Stock</B></P></TD>
    <TD vAlign=top width="71%">
      <P align=justify>During 1998 and 1999, the Company issued 337,000 and
      65,500 shares of common stock to note holders valued at $1,348,000 and
      $262,000, respectively. The value of these shares was accounted for as a
      debt discount as more fully described in Note 7. During 1999, the Company
      issued 50,000 shares of common stock in connection with the First Choice
      acquisition valued at $200,000 (see Note 2), 50,000 shares of common stock
      for consulting services valued at $200,000, and sold 45,450 shares of
      common stock for $180,800. During 2000, the Company issued 18,750 shares
      of common stock for consulting services valued at $75,000.<BR><BR>The
      Company recorded dividends in connection with its Series A preferred stock
      as more fully described in Note 11. Dividends and accretion of the
      redemption value of preferred stock recorded in 2000, 1999 and 1998 were
      $349,341, $281,719 and $107,049, respectively, and reduced the amount
      available to common stockholders.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD colSpan=3 vAlign=top width="101%">
      <P align=right>&nbsp;</P>
      <P align=right>&nbsp;</P>
      <P align=right>&nbsp;</P>
      <P align=right>&nbsp;</P>
      <P align=right>&nbsp;</P>
      <P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">B-21</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20</B>
      <P align=right>&nbsp;</P></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">&nbsp;
      <P>&nbsp;</P></TD></TR>
  <TR>
    <TD colSpan=3 vAlign=top width="101%">
      <P align=center><B><FONT face=Arial size=4>East Tennessee Materials and
      Energy Corporation</FONT></B></P>
      <P>&nbsp;</P>
      <P align=right><FONT size=4>Notes to Consolidated Financial
      Statements</FONT></P>
      <HR align=right color=#000080 noShade SIZE=9>
    </TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD vAlign=top width="6%">
      <P><B>13.</B></P></TD>
    <TD vAlign=top width="24%"><B>
      <P>Income Taxes</B></P></TD>
    <TD vAlign=top width="71%">
      <P align=justify>The Company files its tax returns using the cash basis of
      accounting which requires adjustments to the Company's net loss recorded
      using the accrual basis of accounting. The components of deferred tax
      assets and liabilities consist of the following:</P></TD></TR></TABLE>
<TABLE border=0 cellSpacing=2 width=629>
  <TR>
    <TD vAlign=bottom width=179></TD>
    <TD vAlign=bottom width=261><I><FONT size=2>
      <P>December&nbsp;31,</FONT></I></P></TD>
    <TD vAlign=bottom width=14>&nbsp;</TD>
    <TD vAlign=bottom width=54><B><FONT size=2>
      <P align=right>2000</FONT></B></P></TD>
    <TD vAlign=bottom width=8>&nbsp;</TD>
    <TD vAlign=bottom width=54><FONT size=2>
      <P align=right>1999</FONT></P></TD>
    <TD vAlign=bottom width=13>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=179></TD>
    <TD colSpan=6 vAlign=bottom width=404>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=179></TD>
    <TD vAlign=bottom width=261><FONT size=2>
      <P>Deferred tax assets:</FONT></P></TD>
    <TD vAlign=bottom width=14>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=8>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=13>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=179></TD>
    <TD vAlign=bottom width=261>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
      size=2>Depreciation and amortization</FONT></TD>
    <TD vAlign=bottom width=14><FONT size=2>$</FONT></TD>
    <TD vAlign=bottom width=54>
      <P align=right><FONT size=2>6,800</FONT></P></TD>
    <TD vAlign=bottom width=8><FONT size=2>$</FONT></TD>
    <TD vAlign=bottom width=54><FONT size=2>
      <P align=right>2,800</FONT></P></TD>
    <TD vAlign=bottom width=13></TD></TR>
  <TR>
    <TD vAlign=bottom width=179></TD>
    <TD vAlign=bottom width=261>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
      size=2>Accrual to cash conversion</FONT></TD>
    <TD vAlign=bottom width=14></TD>
    <TD vAlign=bottom width=54>
      <P align=right><FONT size=2>1,188,100</FONT></P></TD>
    <TD vAlign=bottom width=8></TD>
    <TD vAlign=bottom width=54>
      <P align=right><FONT size=2>630,300</FONT></P></TD>
    <TD vAlign=bottom width=13></TD></TR>
  <TR>
    <TD vAlign=bottom width=179></TD>
    <TD vAlign=bottom width=261><FONT
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net operating loss
      carryforward</FONT></TD>
    <TD vAlign=bottom width=14></TD>
    <TD vAlign=bottom width=54><FONT size=2>
      <P align=right>863,100</FONT></P></TD>
    <TD vAlign=bottom width=8></TD>
    <TD vAlign=bottom width=54><FONT size=2>
      <P align=right>897,600</FONT></P></TD>
    <TD vAlign=bottom width=13></TD></TR>
  <TR>
    <TD vAlign=bottom width=179></TD>
    <TD vAlign=bottom width=261>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
      size=2>Valuation allowance</FONT></TD>
    <TD vAlign=bottom width=14></TD>
    <TD vAlign=bottom width=54><FONT size=2>
      <P align=right>(1,978,000</FONT></P></TD>
    <TD vAlign=bottom width=8><FONT size=2>)</FONT></TD>
    <TD vAlign=bottom width=54><FONT size=2>(1,430,800</FONT></TD>
    <TD vAlign=bottom width=13><FONT size=2>)</FONT></TD></TR>
  <TR>
    <TD vAlign=bottom width=179></TD>
    <TD colSpan=6 vAlign=bottom width=404>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=179></TD>
    <TD vAlign=bottom width=261><FONT size=2>
      <P>Deferred tax assets</FONT></P></TD>
    <TD vAlign=bottom width=14>&nbsp;</TD>
    <TD vAlign=bottom width=54><FONT size=2>
      <P align=right>80,000</FONT></P></TD>
    <TD vAlign=bottom width=8>&nbsp;</TD>
    <TD vAlign=bottom width=54><FONT size=2>
      <P align=right>99,900</FONT></P></TD>
    <TD vAlign=bottom width=13>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=179></TD>
    <TD vAlign=bottom width=261>&nbsp;</TD>
    <TD vAlign=bottom width=14>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=8>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=13>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=179></TD>
    <TD vAlign=bottom width=261><FONT size=2>
      <P>Deferred tax liabilities:</FONT></P></TD>
    <TD vAlign=bottom width=14>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=8>&nbsp;</TD>
    <TD vAlign=bottom width=54>&nbsp;</TD>
    <TD vAlign=bottom width=13>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=179></TD>
    <TD vAlign=bottom width=261>&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2>Accrual
      to cash conversion</FONT></TD>
    <TD vAlign=bottom width=14></TD>
    <TD vAlign=bottom width=54><FONT size=2>
      <P align=right>(80,000</FONT></P></TD>
    <TD vAlign=bottom width=8><FONT size=2>)</FONT></TD>
    <TD vAlign=bottom width=54><FONT size=2>
      <P align=right>(99,900</FONT></P></TD>
    <TD vAlign=bottom width=13><FONT size=2>)</FONT></TD></TR>
  <TR>
    <TD vAlign=bottom width=179></TD>
    <TD colSpan=6 vAlign=bottom width=404>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=179></TD>
    <TD vAlign=bottom width=261><FONT size=2>
      <P>Net deferred tax assets</FONT></P></TD>
    <TD vAlign=bottom width=14><FONT size=2>
      <P align=right>$</FONT></P></TD>
    <TD vAlign=bottom width=54>
      <P align=right><B>--</B></P></TD>
    <TD vAlign=bottom width=8><FONT size=2>
      <P align=right>$</FONT></P></TD>
    <TD vAlign=bottom width=54>
      <P align=right><B>--</B></P></TD>
    <TD vAlign=bottom width=13>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=179></TD>
    <TD colSpan=6 vAlign=bottom width=404>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">&nbsp;</TD>
    <TD vAlign=top width="24%">&nbsp;</TD>
    <TD vAlign=top width="71%">
      <P align=justify>The net deferred tax asset is reduced by a valuation
      allowance due to the uncertainty associated with the realization of the
      net deferred tax asset. The valuation increased $ 547,200 during 2000 from
      the allowance of $ 1,430,800 at December&nbsp;31,
1999.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">&nbsp;</TD>
    <TD vAlign=top width="24%">&nbsp;</TD>
    <TD vAlign=top width="71%">
      <P align=justify>At December&nbsp;31, 2000, the Company had unused net
      operating loss carryforwards of approximately $ 2,300,000, which expire in
      varying amounts during 2018 through 2019.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">
      <P align=right>&nbsp;</P>
      <P align=right>&nbsp;</P>
      <P align=right>&nbsp;</P>
      <P align=right>&nbsp;</P>
      <P align=right>&nbsp;</P>
      <P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">B-22</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21</B></P></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">&nbsp;
      <P>&nbsp;</P></TD></TR>
  <TR>
    <TD colSpan=3 vAlign=top width="101%">
      <P align=center><B><FONT face=Arial size=4>East Tennessee Materials and
      Energy Corporation</FONT></B></P>
      <P>&nbsp;</P>
      <P align=right><FONT size=4>Notes to Consolidated Financial
      Statements</FONT></P>
      <HR align=right color=#000080 noShade SIZE=9>
    </TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD vAlign=top width="6%">
      <P><B>14.</B></P></TD>
    <TD vAlign=top width="24%"><B>
      <P>Related Party Transactions</B></P></TD>
    <TD vAlign=top width="71%">
      <P align=justify>The Company incurred expenses for engineering and
      administrative services rendered by its majority stockholder, PDC, in the
      approximate amount of $1,188,500 and $2,008,000 during 2000 and 1999,
      respectively. PDC also advanced approximately $436,000 during 1999, which
      was paid back during 2000. Amounts due PDC for services and advances at
      December&nbsp;31, 2000 and 1999 were $4,489,845 and $3,882,567,
      respectively.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">&nbsp;</TD>
    <TD vAlign=top width="24%">&nbsp;</TD>
    <TD vAlign=top width="71%">
      <P align=justify>The Company derived revenue of approximately $69,300 and
      $38,500 during 2000 and 1999, respectively, from providing subcontract
      services to PDC. Accounts receivable from this stockholder at
      December&nbsp;31, 2000 and 1999 were $-0- and $34,557,
  respectively.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">&nbsp;</TD>
    <TD vAlign=top width="24%">&nbsp;</TD>
    <TD vAlign=top width="71%">
      <P align=justify>Notes payable of the Company have been personally
      guaranteed by certain stockholders (see Notes 6 and
7).</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">
      <P><B>15.</B></P></TD>
    <TD vAlign=top width="24%"><B>
      <P>Supplemental Cash Flow Information</B></P></TD>
    <TD vAlign=top width="71%">
      <P align=justify>Supplemental cash flow information is as
  follows:</P></TD></TR></TABLE>
<TABLE border=0 cellSpacing=2 width=631>
  <TR>
    <TD vAlign=bottom width=176></TD>
    <TD vAlign=bottom width=249><I><FONT size=2>
      <P>Year ended December&nbsp;31,</FONT></I></P></TD>
    <TD vAlign=bottom width=32>&nbsp;</TD>
    <TD vAlign=bottom width=47><B><FONT size=2>
      <P align=right>2000</FONT></B></P></TD>
    <TD vAlign=bottom width=14>&nbsp;</TD>
    <TD vAlign=bottom width=50><FONT size=2>
      <P align=right>1999</FONT></P></TD>
    <TD vAlign=bottom width=18>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=176></TD>
    <TD colSpan=6 vAlign=bottom width=410>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=176></TD>
    <TD vAlign=bottom width=249><B><FONT size=2>
      <P>Interest paid</FONT></B></P></TD>
    <TD vAlign=bottom width=32><B><FONT size=2>
      <P align=right>$</FONT></B></P></TD>
    <TD align=right vAlign=bottom width=47><B><FONT size=2>
      <P>30,160</FONT></B></P></TD>
    <TD vAlign=bottom width=14><FONT size=2>
      <P align=right>$</FONT></P></TD>
    <TD vAlign=bottom width=50><FONT size=2>
      <P align=right>147,131</FONT></P></TD>
    <TD vAlign=bottom width=18>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=176></TD>
    <TD colSpan=6 vAlign=bottom width=410>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR>
    <TD vAlign=bottom width=176></TD>
    <TD vAlign=bottom width=249><B><FONT size=2>
      <P>Non-cash investing and financing activities:</FONT></B></P></TD>
    <TD vAlign=bottom width=32>&nbsp;</TD>
    <TD align=right vAlign=bottom width=47>&nbsp;</TD>
    <TD vAlign=bottom width=14>&nbsp;</TD>
    <TD vAlign=bottom width=50>&nbsp;</TD>
    <TD vAlign=bottom width=18>&nbsp;</TD></TR>
  <TR>
    <TD vAlign=bottom width=176></TD>
    <TD vAlign=bottom width=249>&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2>Capital
      lease obligation for equipment</FONT></TD>
    <TD vAlign=bottom width=32><B><FONT size=2>
      <P align=right>$</FONT></B></P></TD>
    <TD align=right vAlign=bottom width=47>
      <P align=right><B><FONT size=2>--</FONT></B></P></TD>
    <TD vAlign=bottom width=14><FONT size=2>
      <P align=right>$</FONT></P></TD>
    <TD vAlign=bottom width=50><FONT size=2>
      <P align=right>22,500</FONT></P></TD>
    <TD vAlign=bottom width=18></TD></TR>
  <TR>
    <TD vAlign=bottom width=176></TD>
    <TD vAlign=bottom width=249><FONT
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issuance of common stock for
      acquisition</FONT></TD>
    <TD vAlign=bottom width=32></TD>
    <TD align=right vAlign=bottom width=47>
      <P align=right><B><FONT size=2>--</FONT></B></P></TD>
    <TD vAlign=bottom width=14></TD>
    <TD align=right vAlign=bottom width=50><FONT size=2>200,000</FONT></TD>
    <TD vAlign=bottom width=18></TD></TR>
  <TR>
    <TD vAlign=bottom width=176></TD>
    <TD vAlign=bottom width=249><FONT
      size=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Note payable issued for
      payment
      of<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;accounts
      payable</FONT></TD>
    <TD vAlign=bottom width=32></TD>
    <TD align=right vAlign=bottom width=47>
      <P align=right><B><FONT size=2>--</FONT></B></P></TD>
    <TD vAlign=bottom width=14></TD>
    <TD align=right vAlign=bottom width=50><FONT size=2>40,000</FONT></TD>
    <TD vAlign=bottom width=18></TD></TR>
  <TR>
    <TD vAlign=bottom width=176></TD>
    <TD vAlign=bottom width=249><FONT
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchase of treasury stock in
      exchange<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for
      note payable</FONT></TD>
    <TD vAlign=bottom width=32></TD>
    <TD align=right vAlign=bottom width=47><B><FONT
size=2><BR>--</FONT></B></TD>
    <TD vAlign=bottom width=14></TD>
    <TD align=right vAlign=bottom width=50><FONT size=2>100,000</FONT></TD>
    <TD vAlign=bottom width=18></TD></TR>
  <TR>
    <TD vAlign=bottom width=176><FONT size=2>&nbsp;</FONT></TD>
    <TD vAlign=bottom width=249><FONT
      size=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Common stock issued for notes
      payable</FONT></TD>
    <TD vAlign=bottom width=32></TD>
    <TD align=right vAlign=bottom width=47><B><FONT size=2>--</FONT></B></TD>
    <TD vAlign=bottom width=14></TD>
    <TD align=right vAlign=bottom width=50><FONT size=2>
      <P align=right>262,000</FONT></P></TD>
    <TD vAlign=bottom width=18></TD></TR>
  <TR>
    <TD vAlign=bottom width=176></TD>
    <TD vAlign=bottom width=249><FONT
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrual of preferred stock
      dividends</FONT></TD>
    <TD vAlign=bottom width=32></TD>
    <TD align=right vAlign=bottom width=47><B><FONT
    size=2>135,244</FONT></B></TD>
    <TD vAlign=bottom width=14></TD>
    <TD align=right vAlign=bottom width=50><FONT size=2>67,622</FONT></TD>
    <TD vAlign=bottom width=18></TD></TR>
  <TR>
    <TD vAlign=bottom width=176></TD>
    <TD vAlign=bottom width=249><FONT
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accretion of redemption value
      of<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;preferred
      stock</FONT></TD>
    <TD vAlign=bottom width=32></TD>
    <TD align=right vAlign=bottom width=47><B><FONT
    size=2>214,097</FONT></B></TD>
    <TD vAlign=bottom width=14></TD>
    <TD align=right vAlign=bottom width=50><FONT size=2>
      <P align=right>214,097</FONT></P></TD>
    <TD vAlign=bottom width=18></TD></TR>
  <TR>
    <TD vAlign=bottom width=176></TD>
    <TD vAlign=bottom width=249><FONT
      size=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Common stock issued for
      consulting<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;services</FONT></TD>
    <TD vAlign=bottom width=32></TD>
    <TD align=right vAlign=bottom width=47><B><FONT
size=2>75,000</FONT></B></TD>
    <TD vAlign=bottom width=14></TD>
    <TD align=right vAlign=bottom width=50><FONT size=2>200,000</FONT></TD>
    <TD vAlign=bottom width=18></TD></TR>
  <TR>
    <TD vAlign=bottom width=176></TD>
    <TD colSpan=6 vAlign=bottom width=410>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">&nbsp;
      <P>&nbsp;</P>
      <P>&nbsp;</P>
      <P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">&nbsp;B-23&nbsp;&nbsp;&nbsp;&nbsp;</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22</B></P></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">&nbsp;
      <P>&nbsp;</P></TD></TR>
  <TR>
    <TD colSpan=3 vAlign=top width="101%">
      <P align=center><B><FONT face=Arial size=4>East Tennessee Materials and
      Energy Corporation</FONT></B></P>
      <P>&nbsp;</P>
      <P align=right><FONT size=4>Notes to Consolidated Financial
      Statements</FONT></P>
      <HR align=right color=#000080 noShade SIZE=9>
    </TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD vAlign=top width="6%">
      <P><B>16.</B></P></TD>
    <TD vAlign=top width="24%"><B>
      <P>Perma-Fix Acquisition</B></P></TD>
    <TD vAlign=top width="71%">
      <P align=justify>On June <I>25, </I>2001, the Company was acquired by
      Perma-Fix Environmental Services, Inc. ("Perma-Fix") pursuant to the terms
      of the Stock Purchase Agreement, dated January 18, 2001, (the "Purchase
      Agreement"). Pursuant to the terms of the Purchase Agreement, all of the
      outstanding voting stock of the Company was acquired by Perma-Fix and the
      Company with (a) the Company acquiring 20% of its own outstanding shares
      of voting common stock (held as treasury stock), and (b) Perma-Fix
      acquiring all of the remaining outstanding shares of the Company's voting
      common stock (the "Acquisition"). As a result, Perma-Fix now owns all of
      the issued and outstanding voting capital stock of the
  Company.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">&nbsp;</TD>
    <TD vAlign=top width="24%">&nbsp;</TD>
    <TD vAlign=top width="71%">
      <P align=justify>In March 2001, in contemplation of the Acquisition, the
      Company's Series A Preferred stockholders converted each preferred share
      into three shares of common stock and the Series A Preferred Stock was
      eliminated. In addition, the Company's Board authorized the issuance of
      1,500,000 shares of preferred stock, of which 1,467,396 were designated as
      Series B Preferred Stock as described below.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">&nbsp;</TD>
    <TD vAlign=top width="24%">&nbsp;</TD>
    <TD vAlign=top width="71%">
      <P align=justify>Perma-Fix issued 1,597,576 shares of its common stock
      valued at $2,396,000, or $1.50 per share, in exchange for all of the
      Company's remaining outstanding common stock. Of the common shares issued,
      947,733 were issued in satisfaction of $357,600 of the Company's notes
      payable and $1,064,000 of long-term debt (see Notes 6 and 7). In addition,
      as partial consideration of the Acquisition, the Company issued shares of
      its newly designated Series B Preferred Stock to former common
      shareholders of the Company having a stated value of approximately
      $1,285,000. The Series B Preferred Stock is non-voting and
      non-convertible, has a $1.00 liquidation preference per share and may be
      redeemed at $1.00 per share at the option of the Company at any time after
      one year from the date of issuance. Following the first 12 months after
      the original issuance of the Series B Preferred Stock, the holders of the
      Series B Preferred Stock will be entitled to
  receive,&nbsp;</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">
      <P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">B-24&nbsp;</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23</B></P></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">&nbsp;
      <P>&nbsp;</P></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">&nbsp;
      <P>&nbsp;</P></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">&nbsp;
      <P>&nbsp;</P></TD></TR>
  <TR>
    <TD colSpan=3 vAlign=top width="101%">
      <P align=center><B><FONT face=Arial size=4>East Tennessee Materials and
      Energy Corporation</FONT></B></P>
      <P>&nbsp;</P>
      <P align=right><FONT size=4>Notes to Consolidated Financial
      Statements</FONT></P>
      <HR align=right color=#000080 noShade SIZE=9>
    </TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">when, as, and if declared by the Board of
      Directors of the Company out of legally available funds, dividends at the
      rate of 5% per year per share applied to the amount of $1.00 per share,
      which shall be fully cumulative. As a condition to the closing of the
      acquisition, Perma-Fix also issued 346,666 shares of the Common Stock to
      certain creditors of the Company in satisfaction of $520,000 of the
      Company's liabilities, of which $350,000 was in satisfaction of an
      unsecured note payable (see Note 6). At the date of closing, Perma-Fix
      advanced funds to the Company to pay certain liabilities to the IRS
      ($50,000), 401(k) plans ($1,336,000) and certain long-term debt holders
      ($434,000), in the aggregate amount of $1,820,000.</TD></TR>
  <TR>
    <TD vAlign=top width="6%">&nbsp;</TD>
    <TD vAlign=top width="24%">&nbsp;</TD>
    <TD vAlign=top width="71%">
      <P align=justify>Prior to the date of acquisition, Perma-Fix provided
      design and construction services under a subcontract agreement with the
      Company. As of the date of acquisition, Perma-Fix had loaned and advanced
      the Company approximately $2.3 million for working capital purposes and
      had billed approximately $9.8 million under the subcontract agreement, of
      which approximately $2,641,000 had been billed during 2000. As of
      December&nbsp;31, 2000, $3,754,410 was due Perma-Fix for billings and
      advances related to the construction of the
facility.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">&nbsp;</TD>
    <TD vAlign=top width="24%">&nbsp;</TD>
    <TD vAlign=top width="71%">
      <P align=justify>As a condition to the closing of the Acquisition, the
      Company entered into an installment agreement with the IRS relating to
      withholding taxes owing by the Company in the amount of $923,496
      ("Installment Agreement") (see Note 10). The Installment Agreement
      provides for the payment of such withholding taxes over a term of
      approximately eight years. In addition, as a condition to such closing,
      one of the Company's shareholders, Performance Development Corporation
      ("PDC"), and two corporations affiliated with PDC, PDC Services
      Corporation ("PDC Services") and Management Technologies, Inc. ("MTI")
      each entered into an installment agreement with the IRS relating to
      withholding taxes owing by each of PDC, PDC Services and MTI ("PDC
      Installment Agreement"). The PDC Installment Agreement provides for the
      payment of semi-annual installments over a term
of&nbsp;</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">
      <P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">&nbsp;B-25</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;24</B></P></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">&nbsp;
      <P>&nbsp;</P></TD></TR>
  <TR>
    <TD colSpan=3 vAlign=top width="101%">
      <P align=center><B><FONT face=Arial size=4>East Tennessee Materials and
      Energy Corporation</FONT></B></P>
      <P>&nbsp;</P>
      <P align=right><FONT size=4>Notes to Consolidated Financial
      Statements</FONT></P>
      <HR align=right color=#000080 noShade SIZE=9>
    </TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">eight years in the aggregate amount of
      approximately $3,714,000. The Installment Agreement and the PDC
      Installment Agreement provide that (a) Perma-Fix does not have any
      liability for any taxes, interest or penalty with respect to the Company,
      PDC, PDC Services or MTI; (b) the Company will be solely liable for paying
      the obligations of the Company under the Installment Agreement; (c) the
      IRS will not assert any liability against Perma-Fix, the Company or any
      current or future related affiliate of Perma-Fix for any tax, interest or
      penalty of PDC, PDC Services or MTI; and (d) as long as the payments by
      the Company under the Installment Agreement are made timely, the IRS will
      not file a notice of a federal tax lien, change or cancel the Installment
      Agreement. Perma-Fix did not acquire any interest in PDC, PDC Services or
      MTI.</TD></TR>
  <TR>
    <TD vAlign=top width="6%">&nbsp;</TD>
    <TD vAlign=top width="24%">&nbsp;</TD>
    <TD vAlign=top width="71%">
      <P align=justify>Prior to the closing of the Acquisition, PDC had advanced
      monies to, and performed certain services for the Company aggregating
      approximately $3,700,000 (see Note 14). Amounts due to PDC for such
      advances and services were $4,489,845 and $3,882,567 at December&nbsp;31,
      2000 and 1999, respectively. In payment of such advances and services and
      as a condition to closing, the Company issued a promissory note, dated
      June 7, 2001, to PDC in the principal amount of approximately $3,700,000.
      The promissory note is payable over eight years to correspond to payments
      due to the IRS under the PDC Installment Agreement. PDC has directed the
      Company to make all payments under the promissory note directly to the IRS
      to be applied to PDC's obligations under the PDC Installment
    Agreement.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">&nbsp;</TD>
    <TD vAlign=top width="24%">&nbsp;</TD>
    <TD vAlign=top width="71%">
      <P align=justify>In connection with the closing of the Acquisition,
      Perma-Fix also made corrective contributions to the Company's 401(k) Plan
      and to the PDC 401(k) Plan. The amounts paid to the PDC Plan by Perma-Fix
      reduced the Company's accounts payable to PDC.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">&nbsp;</TD>
    <TD vAlign=top width="24%">&nbsp;</TD>
    <TD vAlign=top width="71%">
      <P align=justify></P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">
      <P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">B-26</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25</B></P></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD colSpan=3 vAlign=top width="101%">
      <P align=center><B><FONT face=Arial size=4>East Tennessee Materials and
      Energy Corporation</FONT></B></P>
      <P>&nbsp;</P>
      <P align=right><FONT size=4>Notes to Consolidated Financial
      Statements</FONT></P>
      <HR align=right color=#000080 noShade SIZE=9>
    </TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%"></TD></TR>
  <TR>
    <TD vAlign=top width="6%"></TD>
    <TD vAlign=top width="24%"></TD>
    <TD vAlign=top width="71%">The Company recently completed the construction of its
      low-level radioactive and hazardous waste ("mixed waste") treatment
      facility in Oak Ridge, Tennessee. The 125,000 square-foot facility,
      located on&nbsp;the grounds of the Oak Ridge K-25 Weapons
      Facility of the Department of Energy ("DOE"), will use Perma-Fix's various
      proprietary technologies to treat mixed waste coming from governmental,
      institutional and commercial generators nationwide. The Company operates
      under both a hazardous waste treatment and storage permit and a license to
      store and treat low-level radioactive waste. The Company also has three
      subcontracts with Bechtel-Jacobs Company, LLC, DOE's site manager, which
      were awarded in 1998 and cover the treatment of legacy, operational and
      remediation nuclear waste. The facility began accepting waste in June 2001
      and became fully operational during the third quarter of 2001.</TD></TR>
  <TR>
    <TD vAlign=top width="6%">&nbsp;</TD>
    <TD vAlign=top width="24%">&nbsp;</TD>
    <TD vAlign=top width="71%">
      <P align=justify>Upon the acquisition of the Company, Perma-Fix accrued
      for the estimated closure costs, determined pursuant to RCRA guidelines,
      for the Company's facility. This accrual, recorded at $2,025,000,
      represents the potential future liability to close and remediate the
      facility, should such a cessation of operations ever occur. No insurance
      or third party recovery was taken into account in determining the cost
      estimates or reserve, nor do the cost estimates or reserve reflect any
      discount for present value purposes. These estimated closure costs were
      not accrued by the Company at December&nbsp;31, 1999 or 2000 since the
      construction of the facility had not been
completed.</P></TD></TR></TABLE>
<TABLE border=0 cellPadding=4 cellSpacing=0 width=624>
  <TR>
    <TD vAlign=top width="6%">
      <P><B>17.</B></P></TD>
    <TD vAlign=top width="24%"><B>
      <P>Restatement</B></P></TD>
    <TD vAlign=top width="71%">
      <P align=justify>The Company's financial statements for the year ended
      December&nbsp;31, 1998 were restated to correct the valuation of common
      and preferred stock issued to certain note holders and to record the
      accretion of the Series A preferred stock redemption value as discussed in
      Note 11. As a result of this restatement, the accumulated deficit at
      December&nbsp;31, 1998 was increased by $67,216. The Company's restated
      net loss applicable to common stockholders for the year ended
      December&nbsp;31, 1998 was increased to $997,350 compared to the amount
      previously reported of $930,134.</P></TD></TR></TABLE>
<P align=justify>&nbsp;</P>
<P align=justify>&nbsp;</P>
<P align=justify>&nbsp;</P>
<P align=justify>&nbsp;</P>
<P align=left><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B><font size="2">B-27&nbsp;</font><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;26</B></P>
<P align=left>&nbsp;</P>
<P align=left>&nbsp;</P>
<P align=left>&nbsp;</P>
<P align=left>&nbsp;</P>
<P align=left>&nbsp;</P>
<P align=left>&nbsp;</P>
<p align="center"><font size="3">CONSENT OF INDEPENDENT<br>
CERTIFIED PUBLIC ACCOUNTANTS</font>
<P align=left>&nbsp;</P>
<P align=left>&nbsp;</P>
<P align=left><font size="3">Perma-Fix Environmental Services, Inc.<br>
Gainesville, Florida</font></P>
<P align=left><font size="3"><br>
We hereby consent to the use in the Proxy Statement of our report dated July 13,
2001, relating to the consolidated financial statements of East Tennessee
Materials and Energy Corporation and subsidiary which is contained in that Proxy
Statement.</font></P>
<P align=left>&nbsp;</P>
<P align=left>/s/ Gallogly, Fernandez &amp; Riley, LLP</P>
<P align=left><font size="3">Gallogly, Fernandez &amp; Riley, LLP<br>
<br>
Orlando, Florida<br>
May 8, 2002</font></P>
<P align=left>&nbsp;</P>
<P align=left>&nbsp;</P>
<P align=left>&nbsp;</P>
<P align=left>&nbsp;</P>
<P align=left>&nbsp;</P>
<P align=left>&nbsp;</P>
<P align=left>&nbsp;</P>
<P align=center><font size="2">B-28</font></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P><FONT face="CG Times" size=-1></FONT><FONT face="CG Times Regular" size=-1>
<CENTER>APPENDIX C<br>
<br>
<U>DSSI FINANCIAL STATEMENTS</U></CENTER></FONT>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align="center"><font size="2">C-1</font></P>
<b><font FACE="Arial">
<p>Diversified Scientific Services, Inc.</p>
</font></b><font FACE="Arial">
<p>Financial Statements<br>
as of December 31, 1997, 1998 and 1999<br>
Together With Report of Independent Public Accountants</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
</font>
<p align="center"><font face="Times New Roman" size="2">C-2</font></p>
<font FACE="Arial">
<p>&nbsp;</p>
<p>&nbsp;</p>
</font>
<p align="center"><font size="3" face="Times New Roman"><b>THIS REPORT IS A COPY
OF A PREVIOUSLY ISSUED ARTHUR ANDERSON, LLP<br>
REPORT AND HAS NOT BEEN RE-ISSUED BY ARTHUR ANDERSON, LLP</b></font></p>
<p align="center">&nbsp;</p>
<font FACE="Arial">
<p align="right"><font size="4"><b>ARTHUR ANDERSEN</b></font></p>
<p align="right">&nbsp;</p>
</font><b><font SIZE="3">
<p ALIGN="JUSTIFY">REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS</p>
</font></b><font SIZE="3">
<p>&nbsp;</p>
<p>To the Stockholder of<br>
Diversified Scientific Services, Inc.:</p>
<p>We have audited the accompanying balance sheets of <b>DIVERSIFIED SCIENTIFIC
SERVICES, INC. </b>(a wholly-owned subsidiary of Waste Management, Inc. and a
Tennessee corporation) as of December&nbsp;31, 1998 and 1999, and the related
statements of operations, stockholder's deficit and cash flows for each of the
periods in the three years ended December&nbsp;31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.</p>
<p>We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.</p>
<p>In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Diversified Scientific
Services, Inc. (a wholly-owned subsidiary of Waste Management, Inc.) as of
December 31, 1998 and 1999, and the results of its operations and its cash flows
for each of the periods in the three years ended December&nbsp;31, 1999 in
conformity with accounting principles generally accepted in the United States.</p>
<p>&nbsp;</p>
<p align="right">/s/ Arthur Andersen LLP&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>
<p>Nashville, Tennessee<br>
August 16, 2000</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
</font>
<p align="center"><font size="2">C-3</font></p>
<font SIZE="3">
<p>&nbsp;</p>
<p>&nbsp;</p>
</font><b><font FACE="Arial" SIZE="3">
<p ALIGN="CENTER">DIVERSIFIED SCIENTIFIC SERVICES, INC.</p>
<p ALIGN="CENTER">(a wholly-owned subsidiary of Waste Management, Inc.)</p>
<p ALIGN="CENTER">BALANCE SHEETS</p>
<p ALIGN="CENTER">DECEMBER 31, 1998 AND 1999</p>
</font></b><font FACE="Arial" SIZE="1">
<p ALIGN="CENTER">&nbsp;</p>
</font>
<table CELLSPACING="0" BORDER="0" CELLPADDING="7" WIDTH="604">
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p ALIGN="CENTER">ASSETS</font></b></td>
    <td WIDTH="14%" VALIGN="TOP"><font FACE="Arial" SIZE="1">
      <p ALIGN="CENTER">1998</font></td>
    <td WIDTH="14%" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p ALIGN="CENTER">1999</font></b></td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="14%" VALIGN="TOP">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="14%" VALIGN="TOP">
      <hr noshade size="5" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p>CURRENT ASSETS:</font></b></td>
    <td WIDTH="14%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><font FACE="Arial" SIZE="1">
      <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>$&nbsp;&nbsp;&nbsp;&nbsp;16,187&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,848</font></b></td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><font FACE="Arial" SIZE="1">
      <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable, net</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>2,282,100&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>4,603,943</font></b></td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><font FACE="Arial" SIZE="1">
      <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories and supplies</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>436,505&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>457,830</font></b></td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><font FACE="Arial" SIZE="1">
      <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>52,275&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>23,224</font></b></td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP" align="right"></td>
    <td WIDTH="14%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="14%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><font FACE="Arial" SIZE="1">
      <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>2,787,067&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>5,088,845</font></b></td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="14%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p>PROPERTY, PLANT AND EQUIPMENT, net</font></b></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>1,734,375&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>1,829,228</font></b></td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="14%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><font FACE="Arial" SIZE="1">
      <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>$ 4,521,442&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>$ 6,918,073</font></b></td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080" align="right">
    </td>
    <td WIDTH="14%" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080" align="right">
    </td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p ALIGN="CENTER">LIABILITIES AND STOCKHOLDER'S EQUITY</font></b></td>
    <td WIDTH="14%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="14%" VALIGN="TOP">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="14%" VALIGN="TOP">
      <hr noshade size="5" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p>CURRENT LIABILITIES:</font></b></td>
    <td WIDTH="14%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><font FACE="Arial" SIZE="1">
      <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>$&nbsp;&nbsp;&nbsp;680,506&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>$&nbsp;&nbsp;&nbsp;424,742&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><font FACE="Arial" SIZE="1">
      <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued payroll</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>84,883&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>127,493&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><font FACE="Arial" SIZE="1">
      <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued transportation</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>1,013,182&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>1,390,063&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><font FACE="Arial" SIZE="1">
      <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other accrued liabilities</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>686,737&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>1,281,387&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"></td>
    <td WIDTH="14%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="14%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><font FACE="Arial" SIZE="1">
      <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>2,465,308&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>3,223,685&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="14%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p>LONG-TERM CLOSURE RESERVE</font></b></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>916,000&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>1,100,000&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p>PAYABLE TO PARENT</font></b></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>19,400,628&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>18,264,584&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"></td>
    <td WIDTH="14%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="14%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p></font></b><font FACE="Arial" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>22,781,936&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>22,588,269&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="14%" VALIGN="TOP">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p>STOCKHOLDER'S DEFICIT:</font></b></td>
    <td WIDTH="14%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="14%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><font FACE="Arial" SIZE="1">
      <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common Stock, no par value; 2,000,000 shares authorized, 1,800,000<br>
      </font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font FACE="Arial" SIZE="1">shares issued and outstanding</font></p>
    </td>
    <td WIDTH="14%" VALIGN="TOP"><font FACE="Arial" SIZE="1">
      <p align="right"><br>
      -&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p align="right"><br>
      -&nbsp;&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><font FACE="Arial" SIZE="1">
      <p>Paid-in capital</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>8,845,590&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>8,845,590&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><font FACE="Arial" SIZE="1">
      <p>Accumulated deficit</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>(27,106,084)</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>(24,515,786)</font></b></td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"></td>
    <td WIDTH="14%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="14%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><font FACE="Arial" SIZE="1">
      <p>Total stockholder's deficit</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>(18,260,494)</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>(15,670,196)</font></b></td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"></td>
    <td WIDTH="14%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="14%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"><font FACE="Arial" SIZE="1">
      <p>Total liabilities and stockholder's deficit</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>$ 4,521,442&nbsp;</font></td>
    <td WIDTH="14%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>$ 6,918,073&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="71%" VALIGN="TOP"></td>
    <td WIDTH="14%" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="14%" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
  </tr>
</table>
<font FACE="Arial" SIZE="1">
<p ALIGN="CENTER">&nbsp;</p>
</font><font FACE="Arial" SIZE="2">
<p>&nbsp;</p>
<p>&nbsp;</p>
</font>
<p ALIGN="CENTER"><font face="Arial" size="2">The accompanying notes to financial statements are an integral
part of these statements.</font></p>
<P align="center"><font size="2">C-4</font></P>
<P>&nbsp;</P>
<b><font FACE="Arial" SIZE="3">
<p ALIGN="CENTER">DIVERSIFIED SCIENTIFIC SERVICES, INC.</p>
<p ALIGN="CENTER">(a wholly-owned subsidiary of Waste Management, Inc.)</p>
<p ALIGN="CENTER">STATEMENTS OF OPERATIONS</p>
<p ALIGN="CENTER">FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999</p>
</font></b>
<table CELLSPACING="0" BORDER="0" CELLPADDING="7" WIDTH="614">
  <tr>
    <td WIDTH="299" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="88" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p ALIGN="CENTER">1997</font></td>
    <td WIDTH="82" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p ALIGN="CENTER">1998</font></td>
    <td WIDTH="81" VALIGN="TOP"><b><font FACE="Arial" SIZE="2">
      <p ALIGN="CENTER">1999</font></b></td>
  </tr>
  <tr>
    <td WIDTH="299" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="88" VALIGN="TOP">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="82" VALIGN="TOP">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="81" VALIGN="TOP">
      <hr noshade size="5" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="299" VALIGN="TOP"><b><font FACE="Arial" SIZE="2">
      <p>REVENUES</font></b></td>
    <td WIDTH="88" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>$ 8,056,073</font></td>
    <td WIDTH="82" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>$ 9,503,337</font></td>
    <td WIDTH="81" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>$ 10,128,971</font></b></td>
  </tr>
  <tr>
    <td WIDTH="299" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="88" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="82" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="81" VALIGN="TOP" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="299" VALIGN="TOP"><b><font FACE="Arial" SIZE="2">
      <p>OPERATING EXPENSES</font></b></td>
    <td WIDTH="88" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>9,601,759</font></td>
    <td WIDTH="82" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>6,916,483</font></td>
    <td WIDTH="81" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>7,301,024</font></b></td>
  </tr>
  <tr>
    <td WIDTH="299" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="88" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="82" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="81" VALIGN="TOP" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="299" VALIGN="TOP"><b><font FACE="Arial" SIZE="2">
      <p>IMPAIRMENT CHARGE</font></b></td>
    <td WIDTH="88" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>24,472,650</font></td>
    <td WIDTH="82" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>-</font></td>
    <td WIDTH="81" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>-</font></b></td>
  </tr>
  <tr>
    <td WIDTH="299" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="88" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="82" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="81" VALIGN="TOP" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="299" VALIGN="TOP"><b><font FACE="Arial" SIZE="2">
      <p>MANAGEMENT FEES</font></b></td>
    <td WIDTH="88" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>834,778</font></td>
    <td WIDTH="82" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>773,111</font></td>
    <td WIDTH="81" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>237,649</font></b></td>
  </tr>
  <tr>
    <td WIDTH="299" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="88" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="82" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="81" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="299" VALIGN="TOP"><b><font FACE="Arial" SIZE="2">
      <p>INCOME (LOSS) BEFORE TAXES</font></b></td>
    <td WIDTH="88" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>(26,853,114)</font></td>
    <td WIDTH="82" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>1,813,743</font></td>
    <td WIDTH="81" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>2,590,298</font></b></td>
  </tr>
  <tr>
    <td WIDTH="299" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="88" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p></font></td>
    <td WIDTH="82" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="81" VALIGN="TOP" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="299" VALIGN="TOP"><b><font FACE="Arial" SIZE="2">
      <p>INCOME TAX PROVISION</font></b></td>
    <td WIDTH="88" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>-</font></td>
    <td WIDTH="82" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>-</font></td>
    <td WIDTH="81" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>-</font></b></td>
  </tr>
  <tr>
    <td WIDTH="299" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="88" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="82" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="81" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="299" VALIGN="TOP"><b><font FACE="Arial" SIZE="2">
      <p>NET INCOME (LOSS)</font></b></td>
    <td WIDTH="88" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>$ (26,853,114)</font></td>
    <td WIDTH="82" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>$ 1,813,743</font></td>
    <td WIDTH="81" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>$ 2,590,298</font></b></td>
  </tr>
  <tr>
    <td WIDTH="299" VALIGN="TOP"></td>
    <td WIDTH="88" VALIGN="TOP">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="82" VALIGN="TOP">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="81" VALIGN="TOP">
      <hr noshade size="5" color="#000080">
    </td>
  </tr>
</table>
<font FACE="Arial" SIZE="2">
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
</font><font FACE="Arial" SIZE="1">
<p>&nbsp;</p>
</font>
<p align="center"><font face="Arial" size="2">The accompanying notes to financial statements are an integral part of these
statements.</font></p>
<p align="center"><font face="Arial" size="2">C-5</font></p>
<b><font FACE="Arial" SIZE="3">
<p ALIGN="left">&nbsp;</p>
<p ALIGN="CENTER">DIVERSIFIED SCIENTIFIC SERVICES, INC.</p>
<p ALIGN="CENTER">(a wholly-owned subsidiary of Waste Management, Inc.)</p>
<p ALIGN="CENTER">STATEMENTS OF STOCKHOLDER'S DEFICIT</p>
<p ALIGN="CENTER">YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999</p>
</font></b>
<P>&nbsp;</P>
<table CELLSPACING="0" BORDER="0" CELLPADDING="7" WIDTH="681">
  <tr>
    <td WIDTH="196" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="166" VALIGN="TOP" COLSPAN="2">&nbsp;</td>
    <td WIDTH="79" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="77" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="83" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p ALIGN="CENTER">Total</font></b></td>
  </tr>
  <tr>
    <td WIDTH="196" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="166" VALIGN="TOP" COLSPAN="2"><b><font FACE="Arial" SIZE="1">
      <p ALIGN="CENTER"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common Stock&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></font></b></td>
    <td WIDTH="79" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p ALIGN="CENTER">Paid-In</font></b></td>
    <td WIDTH="77" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p ALIGN="CENTER">Accumulated</font></b></td>
    <td WIDTH="83" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p ALIGN="CENTER">Stockholder's</font></b></td>
  </tr>
  <tr>
    <td WIDTH="196" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="74" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p ALIGN="CENTER">Shares</font></b></td>
    <td WIDTH="76" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p ALIGN="CENTER">Amount</font></b></td>
    <td WIDTH="79" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p ALIGN="CENTER">Capital</font></b></td>
    <td WIDTH="77" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p ALIGN="CENTER">Deficit</font></b></td>
    <td WIDTH="83" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p ALIGN="CENTER">Deficit</font></b></td>
  </tr>
  <tr>
    <td WIDTH="196" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="74" VALIGN="TOP">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="76" VALIGN="TOP">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="79" VALIGN="TOP">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="77" VALIGN="TOP">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="83" VALIGN="TOP">
      <hr noshade size="5" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="196" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p>BALANCE, December 31, 1996</font></b></td>
    <td WIDTH="74" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>1,800,000&nbsp;</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</font></td>
    <td WIDTH="79" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>$&nbsp;&nbsp;8,845,590&nbsp;</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>$ (2,066,713)</font></td>
    <td WIDTH="83" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>$&nbsp;&nbsp;6,778,877&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="196" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p></font></b></td>
    <td WIDTH="74" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="76" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="79" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="77" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="83" VALIGN="TOP" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="196" VALIGN="TOP">
      <dir>
        <dir>
          <font FACE="Arial" SIZE="1">
          <p>Net loss
          </dir>
        </dir>
      </font></td>
    <td WIDTH="74" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>-&nbsp;</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>-&nbsp;</font></td>
    <td WIDTH="79" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>-&nbsp;</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>(26,853,114)</font></td>
    <td WIDTH="83" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>(26,853,114)</font></td>
  </tr>
  <tr>
    <td WIDTH="196" VALIGN="TOP">
    </td>
    <td WIDTH="74" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="76" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="79" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="77" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="83" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="196" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p>BALANCE, December 31, 1997</font></b></td>
    <td WIDTH="74" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>1,800,000&nbsp;</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>-&nbsp;</font></td>
    <td WIDTH="79" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>8,845,590&nbsp;</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>(28,919,827)</font></td>
    <td WIDTH="83" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>(20,074,237)</font></td>
  </tr>
  <tr>
    <td WIDTH="196" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="74" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="76" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="79" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="77" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="83" VALIGN="TOP" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="196" VALIGN="TOP">
      <dir>
        <dir>
          <font FACE="Arial" SIZE="1">
          <p>Net income
          </dir>
        </dir>
      </font></td>
    <td WIDTH="74" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>-&nbsp;</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>-&nbsp;</font></td>
    <td WIDTH="79" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>-&nbsp;</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>1,813,743&nbsp;</font></td>
    <td WIDTH="83" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>1,813,743&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="196" VALIGN="TOP">
    </td>
    <td WIDTH="74" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="76" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="79" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="77" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="83" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="196" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p>BALANCE, December 31, 1998</font></b></td>
    <td WIDTH="74" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>1,800,000&nbsp;</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>-&nbsp;</font></td>
    <td WIDTH="79" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>8,845,590&nbsp;</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>(27,106,084)</font></td>
    <td WIDTH="83" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="1">
      <p>(18,260,494)</font></td>
  </tr>
  <tr>
    <td WIDTH="196" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="74" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="76" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="79" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="77" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="83" VALIGN="TOP" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="196" VALIGN="TOP">
      <dir>
        <dir>
          <font FACE="Arial" SIZE="1">
          <p>Net income
          </dir>
        </dir>
      </font></td>
    <td WIDTH="74" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>-&nbsp;</font></b></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>-&nbsp;</font></b></td>
    <td WIDTH="79" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>-&nbsp;</font></b></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>2,590,298&nbsp;</font></b></td>
    <td WIDTH="83" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>2,590,298&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="196" VALIGN="TOP">
    </td>
    <td WIDTH="74" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="76" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="79" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="77" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="83" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="196" VALIGN="TOP"><b><font FACE="Arial" SIZE="1">
      <p>BALANCE, December 31, 1999</font></b></td>
    <td WIDTH="74" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>1,800,000&nbsp;</font></b></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</font></b></td>
    <td WIDTH="79" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>$&nbsp;&nbsp;8,845,590&nbsp;</font></b></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>$ (24,515,786)</font></b></td>
    <td WIDTH="83" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="1">
      <p>$ (15,670,196)</font></b></td>
  </tr>
  <tr>
    <td WIDTH="196" VALIGN="TOP"></td>
    <td WIDTH="74" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="76" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="79" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="77" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="83" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
  </tr>
</table>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<p ALIGN="CENTER"><font face="Arial" size="2">The accompanying notes to financial statements are an integral
part of these statements.</font></p>
<p ALIGN="CENTER"><font size="2" face="Times New Roman">C-6</font></p>
<font FACE="Arial" SIZE="1">
<p ALIGN="left">&nbsp;</p>
</font><b><font FACE="Arial" SIZE="3">
<p ALIGN="CENTER">DIVERSIFIED SCIENTIFIC SERVICES, INC.</p>
<p ALIGN="CENTER">(a wholly-owned subsidiary of Waste Management, Inc.)</p>
<p ALIGN="CENTER">STATEMENTS OF CASH FLOWS</p>
<p ALIGN="CENTER">YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999</p>
</font></b>
<table CELLSPACING="0" BORDER="0" CELLPADDING="7" WIDTH="620">
  <tr>
    <td WIDTH="313" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="90" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p ALIGN="CENTER">1997</font></td>
    <td WIDTH="76" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p ALIGN="CENTER">1998</font></td>
    <td WIDTH="77" VALIGN="TOP"><b><font FACE="Arial" SIZE="2">
      <p ALIGN="CENTER">1999</font></b></td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="90" VALIGN="TOP">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="76" VALIGN="TOP">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="77" VALIGN="TOP">
      <hr noshade size="5" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP"><b><font FACE="Arial" SIZE="2">
      <p>CASH FLOWS FROM OPERATING ACTIVITIES:</font></b></td>
    <td WIDTH="90" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="76" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="77" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income (loss)</font></td>
    <td WIDTH="90" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>$ (26,853,114)</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>$ 1,813,743&nbsp;</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>$ 2,590,298&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
          <font FACE="Arial" SIZE="2">
          <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adjustments to reconcile net income (loss) to net<br>
          &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;cash provided by
          operating activities:
      </font></td>
    <td WIDTH="90" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>&nbsp;</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>&nbsp;</p>
      </font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>&nbsp;</p>
      </font></b></td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
          <font FACE="Arial" SIZE="2">
          <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization
      </font></td>
    <td WIDTH="90" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>2,821,758&nbsp;</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>729,991&nbsp;</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>163,268&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
          <font FACE="Arial" SIZE="2">
          <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment charge
      </font></td>
    <td WIDTH="90" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>24,472,650</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>-&nbsp;</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>-&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
            <font FACE="Arial" SIZE="2">
            <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in assets and liabilities:
      </font></td>
    <td WIDTH="90" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="76" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="77" VALIGN="TOP" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
              <font FACE="Arial" SIZE="2">
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease/(increase) in accounts<br>
              &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
              receivable receivable
              receivable
      </font></td>
    <td WIDTH="90" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p><br>
      3,205,217</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p><br>
      (1,020,521)</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p><br>
      (2,321,843)</font></b></td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
              <font FACE="Arial" SIZE="2">
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase in inventories and supplies
      </font></td>
    <td WIDTH="90" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>(61,987)</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>(70,306)</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>(21,325)</font></b></td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
              <font FACE="Arial" SIZE="2">
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increase/(decrease) in prepaid<br>
              &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
              expenses
      </font></td>
    <td WIDTH="90" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p><br>
      31,720&nbsp;</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p><br>
      (36,237)</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p><br>
      29,051&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
              <font FACE="Arial" SIZE="2">
              <p>Increase/(decrease) in accounts payable
      </font></td>
    <td WIDTH="90" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>528,214&nbsp;</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>(323,831)</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>(255,764)</font></b></td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
              <font FACE="Arial" SIZE="2">
              <p>Increase/(decrease) in accrued payroll
      </font></td>
    <td WIDTH="90" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>(44,533)</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>38,092&nbsp;</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>42,610&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
              <font FACE="Arial" SIZE="2">
              <p>Increase/(decrease) in accrued transportation
      </font></td>
    <td WIDTH="90" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>(370,841)</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>(102,575)</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>376,881&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
              <font FACE="Arial" SIZE="2">
              <p>Increase/(decrease) in other accrued liabilities
      </font></td>
    <td WIDTH="90" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>(599,637)</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>137,974&nbsp;</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>594,650&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
              <font FACE="Arial" SIZE="2">
              <p>Increase in long-term closure reserve
      </font></td>
    <td WIDTH="90" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>184,000&nbsp;</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>184,000&nbsp;</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>184,000&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
    </td>
    <td WIDTH="90" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="76" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="77" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
                <font FACE="Arial" SIZE="2">
                <p>Net cash provided by operating activities
      </font></td>
    <td WIDTH="90" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>3,313,447&nbsp;</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>1,350,330&nbsp;</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>1,381,826&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="90" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="76" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="77" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
                <b><font FACE="Arial" SIZE="2">
                <p>CASH FLOWS FROM INVESTING ACTIVITIES:
        </font></b></td>
    <td WIDTH="90" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="76" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="77" VALIGN="TOP" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
                <font FACE="Arial" SIZE="2">
                <p>Capital expenditures, net of dispositions
      </font></td>
    <td WIDTH="90" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>786,604&nbsp;</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>(466,085)</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>(258,121)</font></b></td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="90" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="76" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="77" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
                <b><font FACE="Arial" SIZE="2">
                <p>CASH FLOWS FROM FINANCING ACTIVITIES:
        </font></b></td>
    <td WIDTH="90" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="76" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="77" VALIGN="TOP" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
                <font FACE="Arial" SIZE="2">
                <p>Decrease in payable to Parent
      </font></td>
    <td WIDTH="90" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>(4,097,051)</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>(871,058)</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>(1,136,044)</font></b></td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="90" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="76" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="77" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
        <b><font FACE="Arial" SIZE="2">
        <p>NET INCREASE (DECREASE) IN CASH
        </font></b></td>
    <td WIDTH="90" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>3,000&nbsp;</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>13,187</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>(12,339)</font></b></td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="90" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="76" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="77" VALIGN="TOP" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
        <b><font FACE="Arial" SIZE="2">
        <p>CASH, beginning of year
        </font></b></td>
    <td WIDTH="90" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>-&nbsp;</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>3,000</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>16,187</font></b></td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
    </td>
    <td WIDTH="90" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="76" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="77" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
                  <b><font FACE="Arial" SIZE="2">
                  <p>CASH, end of year
        </font></b></td>
    <td WIDTH="90" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>$ 3,000&nbsp;</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>$ 16,187</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>$ 3,848</font></b></td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="90" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="76" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="77" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
                  <b><font FACE="Arial" SIZE="2">
                  <p>SUPPLEMENTARY INFORMATION:
        </font></b></td>
    <td WIDTH="90" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="76" VALIGN="TOP" align="right">&nbsp;</td>
    <td WIDTH="77" VALIGN="TOP" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
                  <font FACE="Arial" SIZE="2">
                  <p>Cash paid for interest, net of amount capitalized
      </font></td>
    <td WIDTH="90" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -&nbsp;</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
    </td>
    <td WIDTH="90" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="76" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="77" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">
                  <font FACE="Arial" SIZE="2">
                  <p>Cash paid for income taxes
      </font></td>
    <td WIDTH="90" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>$
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</font></td>
    <td WIDTH="76" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -&nbsp;</font></td>
    <td WIDTH="77" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="313" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="90" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="76" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="77" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
  </tr>
</table>
<P>&nbsp;</P>
<p ALIGN="CENTER"><font face="Arial" size="2">The accompanying notes to financial statements are an integral
part of these statements.</font></p>
<p ALIGN="CENTER"><font face="Times New Roman" size="2">C-7</font></p>
  <font SIZE="2">
<p align="center"></font><b><font FACE="Arial" SIZE="3">DIVERSIFIED SCIENTIFIC
SERVICES, INC.</p>
<p ALIGN="CENTER">(a wholly-owned subsidiary of Waste Management, Inc.)</p>
<p align="center">NOTES TO FINANCIAL STATEMENTS</p>
<p align="center">DECEMBER 31, 1999</p>
<p>&nbsp;</p>
<p>1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES</p>
<p>Organization</p>
</font></b><font FACE="Arial" SIZE="2">
<p>Diversified Scientific Services, Inc. (&quot;DSSI&quot; and the
&quot;Company&quot;) is a wholly-owned subsidiary of Waste Management, Inc. (the
&quot;Parent&quot;) and a C Corporation. The Company has historically been
dependent on the Parent to fund its operations and provide accounting and
operations support. The Company operates a licensed boiler facility for the
treatment of both liquid radioactive only waste and liquid mixed waste (as
defined by the Resource Conservation and Recovery Act (&quot;RCRA&quot;) and the
Atomic Energy Act (&quot;AEA&quot;) and their amendments, respectively). The
residue resulting from the treatment process is considered Company generated
waste and is disposed of by the Company at an appropriately licensed and
permitted third-party disposal facility.</p>
</font><b><font FACE="Arial" SIZE="3">
<p>Revenue Recognition</p>
</font></b><font FACE="Arial" SIZE="2">
<p>Revenue, along with the related costs of treatment, disposal and
transportation, is recorded at the time of acceptance of waste at the Company's
treatment facility. The Company generally grants credit to customers on an
unsecured basis. Accounts receivable represent receivables from customers in the
ordinary course of business. The Company is subject to losses from uncollectible
receivables in excess of its allowances. The Company's management believes that
all appropriate allowances have been provided.</p>
</font><b><font FACE="Arial" SIZE="3">
<p>Inventories and Supplies</p>
</font></b><font FACE="Arial" SIZE="2">
<p>Inventories and supplies consist primarily of solvent, oil, supplies and
spare parts which are valued at the lower of cost or market, determined on a
first-in, first-out basis.</p>
</font><b><font FACE="Arial" SIZE="3">
<p>Property, Plant and Equipment</p>
</font></b><font FACE="Arial" SIZE="2">
<p>Property, plant and equipment are recorded at the lower of estimated
realizable value or cost. Depreciation is provided using principally the
straight-line method over the estimated useful lives of the related assets as
follows: buildings and improvements, 15 to 30 years; computers and equipment, 3
to 5 years; furniture and fixtures 3 to 5 years; and vehicles, 3 to 4 years.</p>
</font><font FACE="Arial" SIZE="2">
<p>Expenditures for maintenance and repairs are generally charged to expense as
incurred, whereas expenditures for improvements and replacements are
capitalized.</p>
<p>The cost and accumulated depreciation of assets sold or otherwise disposed of
are removed from the accounts and the resulting gain or loss is reflected in the
consolidated statements of operations.</p>
<p align="left">&nbsp;</p>
</font>
<p align="center"><font face="Times New Roman" SIZE="2">
C-8
</font></p>
<p align="left">&nbsp;</p>
  <font FACE="Arial" SIZE="2">
<p align="center">-2-</p>
</font><b><font FACE="Arial" SIZE="3">
<p>Accrued Transportation Costs</p>
</font></b><font FACE="Arial" SIZE="2">
<p>Accrued transportation costs represent accruals for estimated costs
associated with the transportation and disposal of waste after processing at the
Company's treatment facility. The Company's treatment process results primarily
in the accumulation of treated waste in the form of ash which can be transported
to and disposed of at existing independent waste disposal/storage facilities.
The Company estimates the transportation and disposal costs for ash using actual
levels of unprocessed and processed waste on hand and historical actual costs
for transportation and disposal.</p>
<p>The Company's treatment process also results in the accumulation of certain
legacy wastes, such as Chlorine 36, spent carbon and vermiculite, for which no
regulatory approved treatment or storage process is currently available. The
Company's estimate of the ultimate costs that will be incurred to transport and
dispose of such legacy wastes is based on management's estimates, and as such,
is subject to adjustment as regulatory approved treatments and storage processes
become available. As of December 31, 1998 and 1999, approximately $544,000 and
$675,000, respectively, of the reserve for accrued transportation costs related
to management's estimates of the costs to treat and store such legacy wastes.</p>
</font><b><font FACE="Arial" SIZE="3">
<p>Accrued Closure Costs</p>
</font></b><font FACE="Arial" SIZE="2">
<p>Accrued closure costs represent accruals for the estimated costs associated
with the closure and remediation of its waste processing and treatment facility.
Based on the current market and projections for the demand of future waste
processing, the Company estimates it will operate at its facility for at least
the next 18 years. Accordingly, the Company is accruing for such costs plus an
amount for inflation over such period. Management is unable to estimate the
effects of change in technology, future increases in treatment and burial rates
and the timing of closure and remediation activities on the estimated closure
and remediation costs. Uncertainties related to any of these factors could have
a significant impact on the Company's estimated closure costs. Management
updates the closure costs on an annual basis. Changes in estimated closure costs
are recognized over the remaining facility life.</p>
</font><b><font FACE="Arial" SIZE="3">
<p>Income Taxes</p>
</font></b><font FACE="Arial" SIZE="2">
<p>The Company is included in the consolidated income tax return of its Parent.
Under this intercompany tax sharing arrangement, the Company accounts for income
taxes under Statement of Financial Accounting Standards No. 109,
&quot;Accounting for Income Taxes&quot;, (&quot;SFAS 109&quot;). Under the asset
and liability method of SFAS 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the fiscal years
in which those temporary differences are expected to be recovered or settled.
Under SFAS 109, the effect on the deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
</font>
<p align="center"><font face="Times New Roman" SIZE="2">
C-9
</font></p>
  <font FACE="Arial" SIZE="2">
<p>&nbsp;</p>
<p align="center">-3-</p>
</font><b><font FACE="Arial" SIZE="3">
<p>Long-Lived Assets and Impairment Charge</p>
</font></b><font FACE="Arial" SIZE="2">
<p>In accordance with Statement of Financial Accounting Standards (&quot;SFAS&quot;)
No. 121, &quot;Accounting for the Impairment of Long-Lived Assets&quot;,
management evaluates long-lived assets for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Management utilizes estimated undiscounted future cash flows to
determine when an impairment exists. When this analysis indicates an impairment
exists, the amount of loss is determined based upon a comparison of estimated
fair value with the net book value of the asset. Estimated fair value is based
upon the present value of estimated future cash flows or other objective
criteria.</p>
<p>In 1997, the Company's and its Parent's evaluation of goodwill and other
non-current assets indicated an impairment of approximately $24,473,000 which
was charged to expense in the 1997 statement of operations. As a result of the
review, all of the Company's intangible assets (totaling $11,244,000 and
comprised primarily of goodwill and other intangibles) were reduced to an
estimated fair value of zero and the Company's property, plant and equipment was
reduced from a net book value of $14,414,000 to an estimated fair value of
$1,998,000. The estimated fair values were determined using future cash flow
projections discounted back using discount rates which management and the Parent
considered appropriate for the risks involved with the specific assets.</p>
</font><b><font FACE="Arial" SIZE="3">
<p>Use of Estimates</p>
</font></b><font FACE="Arial" SIZE="2">
<p>The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.</p>
</font><b><font FACE="Arial" SIZE="3">
<p>Recent Accounting Pronouncements</p>
</font></b><font FACE="Arial" SIZE="2">
<p>Effective May 16, 1998, the Company adopted SFAS No. 130, &quot;Reporting
Comprehensive Income&quot;, which establishes standards for reporting and
displaying comprehensive income and its components in a full set of general
purpose financial statements. Comprehensive income encompasses all changes in
stockholder's equity (except those arising from transactions with owners) and
includes net income, net unrealized capital gains or losses on available for
sale securities and foreign currency translation adjustments. Adoption of this
pronouncement has not had a material impact on the Company's results of
operations, as comprehensive income (loss) for 1997, 1998 and 1999 was the same
as net income (loss) for the Company.</p>
<p>In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
&quot;Accounting for Derivative Instruments and Hedging Activities&quot;,
effective, as amended, for fiscal years beginning after June 15, 2000. SFAS No.
133 establishes accounting and reporting standards for derivative instruments
and hedging activities. SFAS No. 133 requires all derivatives to be recognized
in the statement of financial position and to be measured at fair value. The
Company anticipates adopting the provisions of SFAS No. 133 effective January&nbsp;1,
2001. Such adoption is not expected to have a material effect on the Company's
results of operations or financial position.</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
</font>
<p align="center"><font face="Times New Roman" SIZE="2">
C-10
</font></p>
<p align="left">&nbsp;</p>
<p align="center"><font size="2" face="Times New Roman">-4-</font></p>
  <font FACE="Arial" SIZE="2">
<p>In December 1999, the Securities and Exchange Commission (the
&quot;SEC&quot;) issued Staff Accounting Bulletin No. 101, &quot;Revenue
Recognition&quot; (&quot;SAB 101&quot;). SAB 101 summarizes the SEC staff's
views in applying generally accepted accounting principles to revenue
recognition in the financial statements of public companies. The Company will be
required to adopt the provisions of SAB 101 in the quarter ending December&nbsp;31,
2000. Management is in the process of determining the impact, if any, such
adoption will have on the Company's financial statements.</p>
<p>&nbsp;</p>
</font><b><font FACE="Arial" SIZE="3">
<p>2. RECEIVABLES</p>
</font></b><font FACE="Arial" SIZE="2">
<p>Receivables at December 31, 1998 and 1999 are composed of the following:</p>
</font>
<table CELLSPACING="0" BORDER="0" CELLPADDING="7" WIDTH="528">
  <tr>
    <td WIDTH="64%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="18%" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p ALIGN="CENTER">1998</font></td>
    <td WIDTH="18%" VALIGN="TOP"><b><font FACE="Arial" SIZE="2">
      <p ALIGN="CENTER">1999</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p>Trade accounts</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>$&nbsp;&nbsp;&nbsp;&nbsp; 752,818&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>$&nbsp; 3,151,322&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p>Unbilled trade</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>1,589,282&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>1,512,621&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>2,342,100&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>4,663,943&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p>Less allowance for doubtful accounts</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>(60,000)</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>(60,000)</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p>Net receivables</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>$&nbsp; 2,282,100&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>$&nbsp; 4,603,943&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
  </tr>
</table>
<b><font FACE="Arial" SIZE="3">
<p>&nbsp;</p>
<p>3. PROPERTY, PLANT AND EQUIPMENT</p>
</font></b>
<table CELLSPACING="0" BORDER="0" CELLPADDING="7" WIDTH="528">
  <tr>
    <td WIDTH="64%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="18%" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p ALIGN="CENTER">1998</font></td>
    <td WIDTH="18%" VALIGN="TOP"><b><font FACE="Arial" SIZE="2">
      <p ALIGN="CENTER">1999</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p>Land, buildings and improvements</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>$ 1,879,641&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>$ 1,870,747&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p>Construction in progress</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>250,138&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>425,498&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p>Computers and equipment</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>246,319&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>246,319&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p>Furniture and fixtures</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>66,248&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>66,248&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p>Vehicles</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>32,173&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>32,173&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>2,474,519&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>2,640,985&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p>Less accumulated depreciation</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>(740,144)</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>(811,757)</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>$ 1,734,375&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>$ 1,829,228&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
  </tr>
</table>
<font SIZE="2">
</font><b><font FACE="Arial" SIZE="3">
<p>4. INCOME TAXES</p>
</font></b><font FACE="Arial" SIZE="2">
<p>Under its tax sharing arrangement with the Parent, the Company has recorded
the following deferred tax assets and liabilities as of December 31, 1998 and
1999:</p>
</font>
<table CELLSPACING="0" BORDER="0" CELLPADDING="7" WIDTH="528">
  <tr>
    <td WIDTH="64%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="18%" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p ALIGN="CENTER">1998</font></td>
    <td WIDTH="18%" VALIGN="TOP"><b><font FACE="Arial" SIZE="2">
      <p ALIGN="CENTER">1999</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p>Asset reserves</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;93,600&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;93,600&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p>Liabilities not yet deductible for income tax purposes</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>357,240&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>429,000&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p>Excess of tax over book depreciation</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>(4,418,734)</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>(5,122,824)</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p>Asset basis differences</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>7,051,158&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>7,051,158&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>3,083,264&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>2,450,934&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"><font FACE="Arial" SIZE="2">
      <p>Valuation allowance</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>(3,083,264)</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>(2,450,934)</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="3" color="#000080">
    </td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font FACE="Arial" SIZE="2">
      <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><b><font FACE="Arial" SIZE="2">
      <p>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -&nbsp;</font></b></td>
  </tr>
  <tr>
    <td WIDTH="64%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
    <td WIDTH="18%" VALIGN="TOP" align="right">
      <hr noshade size="5" color="#000080">
    </td>
  </tr>
</table>
<p align="center">
<font face="Times New Roman" SIZE="2">
C-11
</font></p>
<font FACE="Arial" SIZE="2">
<p>&nbsp;</p>
<p align="center">-5-</p>
<p>FAS 109 requires the Company to record a valuation allowance when it is
&quot;more likely than not that some portion or all of the deferred tax assets
will not be realized.&quot; It further states that &quot;forming a conclusion
that a valuation allowance is not needed is difficult when there is negative
evidence such as cumulative losses in recent years.&quot; On a standalone basis,
the ultimate realization of the deferred income tax asset presented above
depends on the Company's ability to generate sufficient taxable income in the
future. Through December 31, 1999, the Company has generated cumulative net
operating losses for federal and state income tax purposes which have been
utilized by the Parent in its consolidated return. Accordingly, the Company has
provided a valuation allowance at December 31, 1998 and 1999. If the Company
achieves sufficient profitability to use all of the deferred income tax asset,
the valuation allowance will be reduced through a credit to expense (increasing
stockholder's equity). On the other hand, if the Company is unable to generate
sufficient taxable income in the future through operating results or tax
planning opportunities, increases in the valuation allowance will be required
through a charge to expense (reducing stockholder's equity).</p>
<p></font><b><font FACE="Arial" SIZE="3">5. RELATED PARTY TRANSACTIONS AND PAYABLE TO PARENT</p>
</font></b><font FACE="Arial" SIZE="2">
<p>The Parent and its subsidiaries perform certain of the Company's accounting
functions including the processing of payroll, recording of accounts payable,
processing of cash disbursements, accounting for fixed assets, the allocating of
income taxes and financial reporting and consolidation. The Company is covered
by insurance maintained by the Parent and pays its pro rata share of premiums to
the Parent. In exchange for these financial and support services the Parent and
its subsidiaries charge a management fee to DSSI.</p>
<p>The payable to Parent represents funds advanced to the Company by the Parent
to finance its operations as well as amounts charged to the Company for
administrative and support services provided by the Parent. The Company has
historically been dependent on the Parent to fund its operations and provide
accounting and operations support.</font><font FACE="Arial" SIZE="3"> </font><font FACE="Arial" SIZE="2">The
Parent has represented that it will not require payment of amounts due to it
during 2000. Accordingly, the payable to Parent at December&nbsp;31, 1999, has
been classified as long-term in the accompanying balance sheet.</font></p>
<p><b><font FACE="Arial" SIZE="3">6. BENEFIT PLANS</p>
</font></b><font FACE="Arial" SIZE="2">
<p>Employees of the Company are eligible to participate in the 401k plan of the
Parent after they have been employed for 90 days. The 401k plan is funded by
elective employee contributions of up to 15% of their eligible compensation. The
Company matches 100% of employee contributions up to 3% and matches 50% of the
next 3% of employee contributions. All contributions are immediately vested. The
Company's expense under the 401k plan consists of Company matching contributions
and totaled $42,473 for 1999.</p>
<p>Employees of the Company are also eligible to participate in the Parent's
employee stock purchase plan under which they may contribute up to 10% of their
compensation to purchase stock of the Parent at a 15% discount off of market
price.</p>
<p>&nbsp;</p>
</font>
<p align="center"><font face="Times New Roman" SIZE="2">
C-12
</font></p>
<p align="center">&nbsp;</p>
<p align="center"><font size="2" face="Times New Roman">-6-</font></p>
  <b><font FACE="Arial" SIZE="3">
<p>&nbsp;</p>
<p>7. COMMITMENTS AND CONTINGENCIES</p>
<p>Hazardous Waste</p>
</font></b><font FACE="Arial" SIZE="2">
<p>In connection with waste management services, the Company handles both
hazardous and non-hazardous waste which is transported to third-party facilities
for destruction or disposal. As a result of disposing of hazardous substances,
in the event any cleanup is required, the Company could be a potentially
responsible party for the costs of the cleanup notwithstanding any absence of
fault on its part.</p>
</font><b><font FACE="Arial" SIZE="3">
<p>Permits</p>
</font></b><font FACE="Arial" SIZE="2">
<p>The Company is subject to various regulatory requirements, including the
procurement of requisite licenses and permits at its facilities. These licenses
and permits are subject to periodic renewal without which the Company's
operations would be adversely affected. The Company anticipates 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.</p>
</font><b><font FACE="Arial" SIZE="3">
<p>Accrued Closure Costs and Environmental Liabilities</p>
</font></b><font FACE="Arial" SIZE="2">
<p>In the course of owning and operating an on-site treatment, storage and
disposal facility, the Company is 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. As discussed in Note 1, the
Company has recorded accrued liabilities for estimated closure costs and
identified remediation costs. The Company has a surety bond guaranteed by the
Parent to ensure funding for the closure procedures.</p>
</font><b><font FACE="Arial" SIZE="3">
<p>Operating Leases</p>
</font></b><font FACE="Arial" SIZE="2">
<p>The Company has a non-cancelable operating lease on a certain building. The
remaining future minimum annual rental commitments on this operating lease for
the next two years are approximately $31,000 and $18,000. Rental expense for all
operating leases including month-to-month arrangements, was approximately
$69,000, $74,000 and $42,000 for the years ended December 31, 1997, 1998 and
1999, respectively.</p>
<p></font><b><font FACE="Arial" SIZE="3">8. SUBSEQUENT EVENT</p>
</font></b><font FACE="Arial" SIZE="2">
<p>In May 2000, the Parent entered into an agreement with Perma-Fix
Environmental Services, Inc. (&quot;Perma-Fix&quot;) under the terms of which
the Parent will sell the common stock of the Company and extinguish the
Company's liability under its Payable to Parent in exchange for a purchase price
to be paid by Perma-Fix of approximately $8,500,000.</p>
</font><font SIZE="2">
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align="center">C-13</p>
</font>
<font SIZE="2">
</font>
<P>&nbsp;</P>
<P><FONT size=-1><STRONG>
<CENTER>PERMA-FIX ENVIRONMENTAL SERVICES, INC.<BR></CENTER></STRONG>
<CENTER>PROXY FOR SPECIAL MEETING OF STOCKHOLDERS<BR>To Be Held on June 14, 2002</CENTER></FONT>
<P><FONT size=-2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
undersigned hereby appoints Dr. Louis F. Centofanti and Richard T. Kelecy, and
each of them severally, as the undersigned's proxies, with full power of
substitution, to attend the Special Meeting of the Stockholders of Perma-Fix
Environmental Services, Inc. (the "Company") at the offices of the Company, 1940
N.W. 67th Place, Gainesville, FL 32653, on June 14, 2002, at 10:00 a.m. (EST), and at any adjournment of that
meeting, and to vote the undersigned's shares of common stock, as designated
below.</FONT>
<P><FONT size=-2>1.&nbsp;&nbsp;Approval of the amendment to the Company's
Restated Certificate of Incorporation, as amended, to increase the number
of&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;authorized shares of the Company's
common stock from 50,000,000 shares to 75,000,000 shares.</FONT></P>
<P><FONT
size=-2><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;]FOR</STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>[&nbsp;&nbsp;&nbsp;]</B><STRONG>AGAINST</STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>[&nbsp;&nbsp;&nbsp;]</B><STRONG>ABSTAIN</STRONG></FONT></P>
<P><FONT size=-2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors
unanimously recommends a vote <STRONG>"FOR"</STRONG> the approval of the
amendment to the Company's
Restated&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certificate of Incorporation, as
amended, to increase the number of authorized shares of the Company's common
stock from&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;50,000,000 shares to
75,000,000 shares.</FONT></P>
<P><FONT size=-2>2.&nbsp;&nbsp;Approval of the issuance of shares of common
stock upon the exercise of warrants issued by the Company to investors and
certain<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;placement agents pursuant to the
Company's private placement completed July 30, 2001.</FONT></P>
<P><FONT
size=-2><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;]FOR</STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>[&nbsp;&nbsp;&nbsp;]</B><STRONG>AGAINST</STRONG>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>[&nbsp;&nbsp;&nbsp;]</B><STRONG>ABSTAIN</STRONG></FONT></P>
<P><FONT size=-2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors
unanimously recommends a vote <STRONG>"FOR" </STRONG>the approval of the
issuance of Common Stock upon the
exercise&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of the warrants issued in
connection with the Company's private placement.</FONT></P>
<P><FONT size=-2>3.&nbsp;&nbsp;In their discretion, upon such other matters as
may properly come before the meeting or any adjournments thereof.</FONT></P>
<P><FONT face="Times New Roman" size=-2>
<CENTER>(Please sign on reverse side)</FONT><FONT size=-2></CENTER></FONT>
<P>&nbsp;</P>
<P><FONT face="Times New Roman" size=-2><STRONG>THIS PROXY IS SOLICITED BY THE
BOARD OF DIRECTORS OF PERMA-FIX ENVIRONMENTAL SERVICES, INC.</STRONG></FONT></P>
<P><FONT face="Times New Roman" size=-2>The persons named on the reverse side
will vote the shares of common stock represented by this Proxy Card in
accordance with the specifications made in items 1 and 2. <STRONG>If the
undersigned makes no specification, the persons named will vote "FOR" items 1
and 2.</STRONG></FONT></P>
<P><FONT size=-2><STRONG>THE BOARD OF DIRECTORS KNOWS OF NO OTHER MATTERS THAT
MAY PROPERLY BE, OR WHICH ARE LIKELY TO BE, BROUGHT BEFORE THE MEETING. HOWEVER,
THIS PROXY CONFERS DISCRETIONARY VOTING AUTHORITY AS TO ANY OTHER MATTERS
PROPERLY BROUGHT BEFORE THE MEETING, ALLOWING THE PERSONS NAMED IN THIS PROXY,
OR THEIR SUBSTITUTES, TO VOTE IN ACCORDANCE WITH THEIR BEST JUDGMENT ON SUCH
MATTERS.</STRONG></FONT></P>
<P><FONT face="Times New Roman" size=-2>Please sign exactly as your name appears
below, date and return this Proxy Card promptly, using the self-addressed,
prepaid envelope enclosed for your convenience. Please correct your address
before returning this Proxy Card. Persons signing in a fiduciary capacity should
indicate that fact and give their full title. If a corporation, please sign in
the full corporate name by the president or other authorized officer. If a
partnership, please sign in the partnership name by an authorized person. If
joint tenants, both should sign.</FONT></P>
<P><FONT face="Times New Roman"
size=-2><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;_______________________________________________________________<BR></FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="Times New Roman" size=-2>Name of Shareholder (Please
Print)</FONT></P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="Times New Roman"
size=-2>_______________________________________________________________<BR></FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="Times New Roman" size=-2>New Address (Street, City, State, Zip)</FONT>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="Times New Roman"
size=-2>_______________________________________________________________<BR></FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="Times New Roman" size=-2>Signature and Title</FONT>
<P><FONT face="Times New Roman"
size=-2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;_______________________________________________________________<BR></FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="Times New Roman" size=-2>Signature and Title</FONT></P>
<P><FONT face="Times New Roman"
size=-2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;_______________________________________________________________<BR></FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
face="Times New Roman" size=-2>Date</FONT></P></BODY></HTML>

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