Letter Agreement (Escrow), dated October 31, 2011, between the Company, Safety & Ecology Holdings Corporation and Homeland Security Capital Corporation

 

October 31, 2011

 

Perma-Fix Environmental Services, Inc.

8302 Dunwoody Place, Suite 250

Atlanta, Georgia 30350

Attention: Dr. Louis F. Centofanti, Chairman,

President, and Chief Executive Officer

Homeland Security Capital Corporation

4601 North Fairfax Drive

Arlington, Virginia 22203

Attention: C. Thomas McMillen

Chief Executive Officer

Safety & Ecology Holdings Corporation

2800 Solway Road

Knoxville, Tennessee 37931

Attention: Christopher Leichtweis

Chief Executive Officer

Re:

Conditional Waiver of Closing Condition and Partial Release of Escrow Amount Relating to the Renewal of Subcontract Agreement No. 23900-BA-EH492, dated September 9, 2009 (as amended and supplemented, the “Radcon Subcontract”), for the Oak Ridge Reservation, between SEC Radcon Alliance, LLC (“Radcon”) and Bechtel Jacobs Company LLC (“Bechtel”), as assigned by Bechtel to URS-CH2M Hill Oakridge, LLC (“UCOR”).

 

Gentlemen:

With reference to the Stock Purchase Agreement, dated July 15, 2011 (the “Purchase Agreement”), by and among  Perma-Fix Environmental Services, Inc.,  (“PESI”), Homeland Security Capital Corporation (“Parent”), and Safety & Ecology Holdings Corporation (the “Company”), this letter sets forth our agreement regarding the (i) conditional waiver by PESI of a breach of sections 2.12 and 2.13 of the Purchase Agreement by Parent and the Company  relating to the Radcon Subcontract, and (ii) in consideration of PESI agreeing to such conditional waiver and to proceed with the Closing of the Purchase Agreement, the Parent and the Company have agreed to enter into this letter  providing that PESI  shall receive from the Escrow Amount the sum of $1,500,000 in the event the condition set forth the third paragraph of this letter is not met by December 31, 2011.  Unless otherwise defined in this letter, the capitalized terms in this letter shall have the meanings ascribed to them in the Purchase Agreement and Escrow Agreement, as applicable.

 

Radcon is a majority-owned subsidiary of the Company.  The Radcon Subcontract is a Company Material Contract for purposes of Parent’s and the Company’s representations and warranties to PESI contained in Sections 2.12 of the Purchase Agreement and UCOR is a material customer for purposes of Section 2.13 of the Purchase Agreement.  Contrary to the representations and warranties set forth in Sections 2.12 and 2.13 of the Purchase Agreement, Parent and the Company acknowledge and agree that, as of the Closing, the Parent and the Company are in material breach of their representations and warranties contained in Sections 2.12 and 2.13 of the Purchase Agreement due to Radcon being in material breach of its obligations under the Radcon Subcontract and UCOR advising the Company that it is terminating its relationship with Radcon.  Parent and the Company further acknowledge and agree that such material breach of Sections 2.12 or 2.13 of the Purchase Agreement by the Parent and the Company relating to the Radcon Subcontract has or will result in Losses incurred or to be incurred by PESI in the sum of $1,500,000 for which PESI would be entitled to indemnification pursuant to Section 8.1 of the Purchase Agreement (the “Radcon Claim”).

Based on the foregoing, PESI, Parent and the Company agree that, if, for any reason, the Radcon Subcontract has not been renewed by UCOR on or before December 31, 2011, for an additional term of not less than three (3) years and, based upon PESI’s determination, would not generate revenues to Radcon of not less than $6,000,000 each year during the renewal term, or if the Radcon Subcontract has not been renewed by UCOR on or before December 31, 2011, on terms set forth above, and UCOR has not awarded Radcon, for any reason, by December 31, 2011, a new subcontract for the Oak Ridge Reservation having a term of not less than three (3) years that would not, based upon PESI’s determination, generate revenues to Radcon of not less than $6,000,000 each year during the term of such subcontract, then, notwithstanding any limitations, reservations or restrictions contained in the Escrow Agreement or Purchase Agreement, the Escrow Agent shall distribute to PESI the sum of $1,500,000 of the Escrow Amount (“$1,500,000 Distribution”) on January 3, 2012, or such later date as instructed in writing by PESI, as set forth in a written notification by PESI to the Escrow Agent (the “Distribution Notice”) stating that PESI is entitled to the $1,500,000 Distribution from the Escrow Amount pursuant to the terms of this letter.  The Distribution Notice shall include wire instructions for the $1,500,000 Distribution, and a copy of the Distribution Notice shall be sent to Parent at the notice address set forth in the Purchase Agreement.

 

PESI and Parent agree that the Escrow Agent shall rely exclusively and without further inquiry upon the Distribution Notice in making the $1,500,000 Distribution to PESI pursuant to this letter, and the Escrow Agent shall be fully protected in making the $1,500,000 Distribution to PESI.  In order to receive the entire amount of the $1,500,000 Distribution of the Escrow Amount from the Escrow Agent, PESI is required only to deliver the Distribution Notice to the Escrow Agent.  Neither Parent nor any Affiliate of Parent shall contest or dispute, in any manner whatsoever, the Escrow Agent’s payment to PESI of the $1,500,000 Distribution in accordance with the terms of this letter, provided that any such distribution is made in accordance with the terms and conditions agreed in this letter.

PESI and Parent further agree that, in the event the full $1,500,000 Distribution relating to the Radcon Claim is distributed by the Escrow Agent from the Escrow Amount to PESI in accordance with the terms of this letter, such payment shall constitute the full and final settlement of any claim that any PESI Indemnitee may have for Losses against Parent or the Company relating to or in connection with the Radcon Subcontract.

This letter may be executed in counterparts by the parties hereto.

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