Document:

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                                                                    EXHIBIT 4.19
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                             Supplemental Indenture

                              ---------------------

                                      DATED

                               -------------------

                          NORTHERN ILLINOIS GAS COMPANY

                                       TO

                            BNY MIDWEST TRUST COMPANY
                      TRUSTEE UNDER INDENTURE DATED AS OF
                        JANUARY 1, 1954 AND SUPPLEMENTAL
                               INDENTURES THERETO

                             ----------------------

                              FIRST MORTGAGE BONDS
                                  % SERIES DUE
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This instrument was prepared by George M. Behrens, 1844 Ferry Road, Naperville,
Illinois 60563-9600.

Return to:        Nicor Gas
                  Attn: Joe Johnson
                  P.O. Box 190
                  Aurora, IL 60507-0190

<PAGE>

THIS SUPPLEMENTAL INDENTURE, dated the     day of     ,     , between NORTHERN
ILLINOIS GAS COMPANY, a corporation organized and existing under the laws of the
State of Illinois (hereinafter called the "Company"), and BNY MIDWEST TRUST
COMPANY, an Illinois trust company, (hereinafter called the "Trustee"), as
successor Trustee under an Indenture dated as of January 1, 1954, as
supplemented by Supplemental Indentures dated, respectively, February 9, 1954,
April 1, 1956, June 1, 1959, July 1, 1960, June 1, 1963, July 1, 1963,
August 1, 1964, August 1, 1965, May 1, 1966, August 1, 1966, July 1, 1967,
June 1, 1968, December 1, 1969, August 1, 1970, June 1, 1971, July 1, 1972,
July 1, 1973, April 1, 1975, April 30, 1976, Apri1 30, 1976, July 1, 1976,
August 1, 1976, December 1, 1977, January 15, 1979, December 1, 1981,
March 1, 1983, October 1, 1984, December 1, 1986, March 15, 1988, July 1, 1988,
July 1, 1989, July 15, 1990, August 15, 1991, July 15, 1992, February 1, 1993,
March 15, 1993, May 1, 1993, July 1, 1993, August 15, 1994, October 15, 1995,
May 10, 1996, August 1,1996, June 1, 1997, October 15, 1997, February 15, 1998,
June 1, 1998, February 1, 1999, February 1, 2001 and May 15, 2001, such
Indenture dated as of January 1, 1954, as so supplemented, being hereinafter
called the "Indenture."

WITNESSETH:

     WHEREAS, the Indenture provides for the issuance from time to time
thereunder, in series, of bonds of the Company for the purposes and subject to
the limitations therein specified; and

     WHEREAS, the Company desires, by this Supplemental Indenture, to create an
additional series of bonds to be issuable under the Indenture, such bonds to be
designated "First Mortgage Bonds, % Series due , " (hereinafter called the
"bonds of this Series"), and the terms and provisions to be contained in the
bonds of this Series or to be otherwise applicable thereto to be as set forth in
this Supplemental Indenture; and

    WHEREAS, the forms, respectively, of the bonds of this Series, and Trustee's
certificate to be endorsed on all bonds of this Series, are to be substantially
as follows:

                                      (FORM OF FACE OF BOND)
NO. RU _____                                                             $______

                          NORTHERN ILLINOIS GAS COMPANY
                       First Mortgage Bond, % Series due ,

     NORTHERN ILLINOIS GAS COMPANY, an Illinois corporation (hereinafter called
the "Company"), for value received, hereby promises to pay to     ,    or
registered assigns, the sum of     Dollars, on the     day of     ,     , and to
pay to the registered owner hereof interest on said sum from the date hereof
until said sum shall be paid, at the rate of     per centum (%) per annum,
payable semiannually on the     day of     and the    day of     in each year.
Both the principal of and the interest on this bond shall be payable at the
office or agency of the Company in the City of Chicago, State of Illinois, or,
at the option of the registered owner, at the office or agency o f the Company
in the Borough of Manhattan, The City and State of New York, in any coin or
currency of the United States of America which at the time of payment is legal
tender for the payment of public and private debts. Any installment of interest
on the bonds may, at the Company's option, be paid by mailing checks for such
interest payable to or upon the written order of the person entitled thereto to
the address of such person as it appears on the registration books.

     So long as there is no existing default in the payment of interest on this
bond, the interest so payable on any interest payment date will be paid to the
person in whose name this bond is registered     on the or the     (whether or
not a business day), as the case may be, next preceding such interest payment
date. If and to the extent that the Company shall default in the payment of
interest due on such interest payment date, such defaulted interest shall be
paid to the person in whose name this bond is registered on the record date
fixed, in advance, by the Company for the payment of such defaulted interest.

     Additional provisions of this bond are set forth on the reverse hereof.

                                       1

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     This bond shall not be entitled to any security or benefit under the
Indenture or be valid or become obligatory for any purpose unless and until it
shall have been authenticated by the execution by the Trustee, or its successor
in trust under the Indenture, of the certificate endorsed hereon.

     IN WITNESS WHEREOF, Northern Illinois Gas Company has caused this bond to
be executed in its name by its Chairman, President, or a Vice President,
manually or by facsimile signature, and has caused its corporate seal to be
impressed hereon or a facsimile thereof to be imprinted hereon and to be
attested by its Secretary or its Assistant Secretary, manually or by facsimile
signature.

Dated

                                          NORTHERN ILLINOIS GAS COMPANY

                                          BY___________________________________
                                                         President

ATTEST:

---------------------------------------
                  Secretary

                    (FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION)

     This bond is one of the bonds of the series designated therein, referred to
and described in the within-mentioned Supplemental Indenture dated

BNY MIDWEST TRUST COMPANY, TRUSTEE

BY _____________________________________
                  Authorized Officer

                         (FORM OF REVERSE SIDE OF BOND)

     This bond is one, of the series hereinafter specified, of the bonds issued
and to be issued in series from time to time under and in accordance with and
secured by an Indenture dated as of January 1, 1954, to BNY Midwest Trust
Company, as Trustee, as supplemented by certain indentures supplemental thereto,
executed and delivered to the Trustee; and this bond is one of a series of such
bonds, designated "Northern Illinois Gas Company First Mortgage Bonds, % Series
due , " (herein called "bonds of this Series"), the issuance of which is
provided for by a Supplemental Indenture dated , (hereinafter called the
"Supplemental Indenture"), executed and delivered by the Company to the Trustee.
The term "Indenture", as hereinafter used, means said Indenture dated as of
January 1, 1954, and all indentures supplemental thereto from time to time in
effect. Reference is made to the Indenture for a description of the property
mortgaged and pledged, the nature and extent of the security, the rights of the
holders and registered owners of said bonds, of the Company and of the Trustee
in respect of the security, and the terms and conditions governing the issuance
and security of said bonds.

     With the consent of the Company and to the extent permitted by and as
provided in the Indenture, modifications or alterations of the Indenture or of
any supplemental indenture and of the rights and obligations of the Company and
of the holders and registered owners of the bonds may be made, and

                                       2

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compliance with any provision of the Indenture or of any supplemental indenture
may be waived, by the affirmative vote of the holders and registered owners of
not less than sixty-six and two-thirds per centum (66 2/3% ) in principal amount
of the bonds then outstanding under the Indenture, and by the affirmative vote
of the holders and registered owners of not less than sixty-six and two-thirds
per centum (662/3%) in principal amount of the bonds of any series then
outstanding under the Indenture and affected by such modification or alteration,
in case one or more but less than all of the series of bonds then outstanding
under the Indenture are so affected, but in any case excluding bonds
disqualified from voting by reason of the Company's interest therein as provided
in the Indenture; subject, however, to the condition, among other conditions
stated in the Indenture, that no such modification or alteration shall be made
which, among other things, will permit the extension of the time or times of
payment of the principal of or the interest or the premium, if any, on this
bond, or the reduction in the principal amount hereof or in the rate of interest
or the amount of any premium hereon, or any other modification in the terms of
payment of such principal, interest or premium, which terms of payment are
unconditional, or, otherwise than as permitted by the Indenture, the creation of
any lien ranking prior to or on a parity with the lien of the Indenture with
respect to any of the mortgaged property, all as more fully provided in the
Indenture.

                       (Alternative Redemption Provisions)

     [The bonds of this Series may not be called for redemption by the Company
prior to     On     ,     and thereafter until maturity on     ,     , upon
notice hereinafter stated and in the manner and with the effect provided in the
Indenture, the bonds of this Series are redeemable at the option of the Company,
as a whole at any time or in part from time to time prior to the maturity
thereof, at the applicable redemption price (expressed as a percentage of
principal amount) set forth below under "General Redemption Prices," plus
accrued and unpaid interest to the redemption date:

                            General Redemption Prices

               ---------------------------------------------------
                        If Redeemed During Twelve Months'
                        Period Beginning               :

               ---------------------------------------------------

(The years and the percentages of prinicpal amount set froth under "General
Redemption Prices" in Section 4 of Article I of this Supplemental Indenture are
to be inserted here).]

     [The bonds of this Series may not be called for redemption by the Company
prior to    . On,     and thereafter until maturity on    ,     , the bonds of
this Series, upon the notice hereinafter stated and in the manner and with the
effect provided in the Indenture, will be redeemable at the option of the
Company, as a whole at any time or in part from time to time, at 100% of the
principal amount thereof, plus accrued and unpaid interest to the redemption
date.]

     [The bonds of this Series may be called for redemption by the Company, as a
whole at any time or in part from time to time, at a redemption price equal to
the greater of (i) 100% of the principal amount of the bonds of this Series to
be redeemed or (ii) the sum of the present values of the remaining scheduled
payments of principal and interest thereon (exclusive of interest accrued to the
date of redemption) discounted, at the then current Treasury Rate (as defined in
the Supplemental Indenture) plus     basis points, to the date of redemption on
a semiannual basis (assuming a 360-day year consisting of twelve 30-day months)
plus in each case, accrued and unpaid interest on the principal amount being
redeemed to the date of redemption.]

     Notice of each redemption shall be mailed to all registered owners not less
than thirty nor more than forty-five days before the redemption date.

     In case of certain completed defaults specified in the Indenture, the
principal of this bond may be declared or may become due and payable in the
manner and with the effect provided in the Indenture.

     No recourse shall be had for the payment of the principal of or the
interest or the premium, if any, on this bond, or for any claim based hereon, or
otherwise in respect hereof or of the Indenture, to or against

                                       3

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any incorporator, stockholder, officer or director, past, present or future, of
the Company or of any predecessor or successor corporation, either directly or
through the Company or such predecessor or successor corporation, under any
constitution or statute or rule of law, or by the enforcement of any assessment
or penalty, or otherwise, all such liability of incorporators, stockholders,
directors and officers being waived and released by the registered owner hereof
by the acceptance of this bond and being likewise waived and released by the
terms of the Indenture, all as more fully provided therein.

     This bond is transferable by the registered owner hereof, in person or by
duly authorized attorney, at the office or agency of the Company in the City of
Chicago, State of Illinois, or, at the option of the registered owner, at the
office or agency of the Company in the Borough of Manhattan, The City and State
of New York, upon surrender and cancellation of this bond; and thereupon a new
registered bond or bonds without coupons of the same aggregate principal amount
and series will, upon the payment of any transfer tax or taxes payable, be
issued to the transferee in exchange herefor. The Company shall not be required
to exchange or transfer this bond if this bond or a portion hereof has been
selected for redemption.

                               (END OF BOND FORM)
and

     WHEREAS, all acts and things necessary to make this Supplemental Indenture,
when duly executed and delivered, a valid, binding and legal instrument in
accordance with its terms and for the purposes herein expressed, have been done
and performed, and the execution and delivery of this Supplemental Indenture
have in all respects been duly authorized;

     NOW, THEREFORE, in consideration of the premises and of the sum of one
dollar paid by the Trustee to the Company, and for other good and valuable
considerations, the receipt of which is hereby acknowledged, for the purpose of
securing the due and punctual payment of the principal of and the interest and
premium, if any, on all bonds which shall be issued under the Indenture, and for
the purpose of securing the faithful performance and observance of all the
covenants and conditions set forth in the Indenture and in all indentures
supplemental thereto, the Company by these presents does grant, bargain, sell,
transfer, assign, pledge, mortgage, warrant and convey unto BNY Midwest Trust
Company, as Trustee, and its successor or successors in the trust hereby
created, all property, real and personal (other than property expressly excepted
from the lien and operation of the Indenture), which, at the actual date of
execution and delivery of this Supplemental Indenture, is solely used or held
for use in the operation by the Company of its gas utility system and in the
conduct of its gas utility business and all property, real and personal, used or
useful in the gas utility business (other than property expressly excepted from
the lien and operation of the Indenture) acquired by the Company after the
actual date of execution and delivery of this Supplemental Indenture or (subject
to the provisions of Section 16.03 of the Indenture) by any successor
corporation after such execution and delivery, and it is further agreed by and
between the Company and the Trustee as follows:

                                    ARTICLE I

                              BONDS OF THIS SERIES

     SECTION 1. The bonds of this Series shall, as hereinbefore recited, be
designated as the Company's "First Mortgage Bonds,     % Series due     ,     "
The bonds of this Series which may be issued and outstanding shall not exceed
$  ,000,000 in aggregate principal amount, exclusive of bonds of such series
authenticated and delivered pursuant to the provisions of Section 4.12 of the
Indenture.

     SECTION 2. The bonds of this Series shall be registered bonds without
coupons, and the form of such bonds, and of the Trustee's certificate of
authentication to be endorsed on all bonds of this Series, shall be
substantially as hereinbefore recited, respectively.

     SECTION 3. The bonds of this Series shall be issued in the denomination of
$1,000 each and in such multiple or multiples thereof as shall be determined and
authorized by the Board of Directors of the Company or by any officer or
officers of the Company authorized by the Board of Directors to make such
determination, the authorization of the denomination of any bond to be
conclusively evidenced by the

                                       4

<PAGE>
execution thereof on behalf of the Company. The bonds of this Series shall be
numbered, RU-l and consecutively upwards, or in such other appropriate manner as
shall be determined and authorized by the Board of Directors of the Company.

     All bonds of this Series shall be dated      ,      , except that each bond
issued on or after the first payment of interest thereon shall be dated as of
the date of the interest payment date thereof to which interest shall have been
paid on the bonds of such series next preceding the date of issue, unless issued
on an interest payment date to which interest shall have been so paid, in which
event such bonds shall be dated as of the date of issue; provided, however, that
bonds issued on or after      and before the next succeeding      or on or after
    and before the next succeeding      shall be dated the next succeeding
interest payment date if interest shall have been paid to such date. All bonds
of this Series shall mature     ,      and shall bear interest at the rate of
% per annum until the principal thereof shall be paid. Such interest shall be
calculated on the basis of a 360-day year consisting of twelve 30-day months and
shall be payable semiannually on the     day of     and the    day of      in
each year. So long as there is no existing default in the payment of interest on
the bonds of this Series, such interest shall be payable to the person in whose
name each such bond is registered on the or (whether or not a business day), as
the case may be, next preceding the respective interest payment dates; provided,
however, if and to the extent that the Company shall default in the payment of
interest due on such interest payment date, such defaulted interest shall be
paid to the person in whose name each such bond is registered on the record date
fixed, in advance, by the Company for the payment of such defaulted interest.

     The principal of and interest and premium, if any, on the bonds of this
Series shall be payable in any coin or currency of the United States of America
which at the time of payment is legal tender for the payment of public and
private debts, and shall be payable at the office or agency of the Company in
the City of Chicago, State of Illinois, or, at the option of the registered
owner, at the office or agency of the Company in the Borough of Manhattan, The
City and State of New York. Any installment of interest on the bonds may, at the
Company's option, be paid by mailing checks for such interest payable to or upon
the written order of the person entitled thereto to the address of such person
as it appears on the registration books. The bonds of this Series shall be
registrable, transferable and exchangeable in the manner provided in Sections
4.08 and 4.09 of the Indenture, at either of such offices or agencies.

                       (Alternative Redemption Provisions)

     [SECTION 4. The bonds of this Series may not be called for redemption by
the Company prior to       . On    , and thereafter until maturity on     ,    ,
upon the mailing of notice and in the manner provided in Section 7.01 of the
Indenture (except that no published notice shall be required for the bonds of
this Series), and with the effect provided in Section 7.02 thereof, the bonds of
this Series shall be redeemable at the option of the Company, as a whole at any
time or in part from time to time prior to the maturity thereof, at the
applicable redemption price (expressed as a percentage of principal amount) set
forth below under "General Redemption Prices," plus accrued and unpaid interest
to the redemption date:

                            General Redemption Prices

               ---------------------------------------------------

                        If Redeemed During Twelve Months'
                         Period Beginning              :

               ---------------------------------------------------

       YEAR        PERCENTAGE                      YEAR          PERCENTAGE
       ----        ----------                      ----          ----------
                       %                                             %     ]

     [SECTION 4. The bonds of this Series may not be called for redemption by
the Company prior to      . On     , and thereafter until maturity on      ,
   , the bonds of this Series, upon the mailing of notice and in the manner
provided in Section 7.01 of the Indenture (except that no published notice shall
be required for the bonds of this Series) and with the effect provided in
Section 7.02

                                       5

<PAGE>

thereof, will be redeemable at the option of the Company, as a whole at any time
or in part from time to time, at 100% of the principal amount thereof, plus
accrued and unpaid interest to the redemption date.]

     [SECTION 4. The bonds of this Series, upon the mailing of notice and in the
manner provided in Section 7.01 of the Indenture (except that no published
notice shall be required for the bonds of this Series) and with the effect
provided in Section 7.02 thereof, shall be redeemable at the option of the
Company, as a whole at any time or in part from time to time, at a redemption
price equal to the greater of (i) 100% of the principal amount of the bonds of
this Series to be redeemed or (ii) the sum of the present values of the
remaining scheduled payments of principal and interest thereon (exclusive of
interest accrued to the date of redemption) discounted, at the then current
Treasury Rate plus      basis points, to the date of redemption on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) plus in each
case, accrued and unpaid interest on the principal amount being redeemed to the
date of redemption.

     "Treasury Rate" means, for any redemption date, (i) the yield, under the
heading which represents the average for the immediately preceding week,
appearing in the most recently published statistical release designated
"H.15(519)" or any successor publication which is published weekly by the Board
of Governors of the Federal Reserve System and which establishes yields on
actively traded United States Treasury securities adjusted to constant maturity
under the caption "Treasury Constant Maturities," for the maturity corresponding
to the Comparable Treasury Issue (if no maturity is within three months before
or after the remaining term of the bonds of this Series, yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue
shall be determined and the Treasury Rate shall be interpolated or extrapolated
from such yields on a straight line basis, rounding to the nearest month) or
(ii) if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price. The Treasury Rate shall be calculated on the third Business Day
preceding the redemption date.

     "Business Day" means, for the purpose of this Section 4, any day other than
a Saturday or Sunday and other than a day on which banking institutions in
Chicago, Illinois, or New York, New York, are authorized or obligated by law or
executive order to close.

      "Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the bonds of this Series to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the bonds of this Series.

      "Comparable Treasury Price" means the average of two Reference Treasury
 Dealer Quotations obtained with respect to any redemption date.

      "Independent Investment Banker" means              or one of the Reference
Treasury Dealers appointed by the Trustee after consultation with the Company.

      "Reference Treasury Dealer" means                and their successors;
provided, however, that if any of the foregoing or their successors shall cease
to be a primary United States government securities dealer (a "Primary Treasury
Dealer"), the Company will substitute for it another nationally recognized
investment bank that is a Primary Treasury Dealer.

     "Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Independent Investment Banker, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Independent Investment Banker at 5:00
p.m., New York City time, on the third Business Day preceding such redemption
date.]

                                       6

<PAGE>

SECTION 5. No sinking fund is to be provided for the bonds of this Series.

                                   ARTICLE II
                            MISCELLANEOUS PROVISIONS

     SECTION 1. This Supplemental Indenture is executed by the Company and the
Trustee pursuant to provisions of Section 4.02 of the Indenture and the terms
and conditions hereof shall be deemed to be a part of the terms and conditions
of the Indenture for any and all purposes. The Indenture, as heretofore
supplemented and as supplemented by this Supplemental Indenture, is in all
respects ratified and confirmed.

     SECTION 2. This Supplemental Indenture shall bind and, subject to the
provisions of Article XVI of the Indenture, inure to the benefit of the
respective successors and assigns of the parties hereto.

     SECTION 3. Although this Supplemental Indenture is dated       ,       , it
shall be effective only from and after the actual time of its execution and
delivery by the Company and the Trustee on the date indicated by their
respective acknowledgments hereto annexed.

     SECTION 4. This Supplemental Indenture may be simultaneously executed in
any number of counterparts, and all such counterparts executed and delivered,
each as an original, shall constitute but one and the same instrument.

     IN WITNESS WHEREOF, Northern Illinois Gas Company has caused this
Supplemental Indenture to be executed in its name by its President, a Vice
President, or Treasurer, and its corporate seal to be hereunto affixed and
attested by its Secretary or its Assistant Secretary, and BNY Midwest Trust
Company, as Trustee under the Indenture, has caused this Supplemental Indenture
to be executed in its name by one of its Assistant Vice Presidents, and its seal
to be hereunto affixed and attested by one of its Assistant Secretaries, all as
of the day and year first above written.

NORTHERN ILLINOIS GAS COMPANY

BY
   ------------------------------------
      Vice President and Treasurer

                                           ATTEST:

                                           ----------------------------------

                                              Assistant Secretary

BNY MIDWEST TRUST COMPANY,
  as Trustee

BY
   ------------------------------------
         Assistant Vice President

                                           ATTEST:

                                           ----------------------------------

                                                Assistant Secretary

                                       7

<PAGE>

STATE OF ILLINOIS   }   SS:
COUNTY OF           }

     I            , a Notary Public in the State aforesaid, DO HEREBY CERTIFY
that        , Vice President and Treasurer of Northern Illinois Gas Company, an
Illinois corporation, one of the parties described in and which executed the
foregoing instrument, and            , Assistant Secretary of said corporation,
who are both personally known to me to be the same persons whose names are
subscribed to the foregoing instrument as such Vice President and Treasurer and
Assistant Secretary, respectively, and who are both personally known to me to be
Vice President and Treasurer and the Assistant Secretary, respectively, of said
corporation, appeared before me this day in person and severally acknowledged
that they signed, sealed, executed and delivered said instrument as their free
and voluntary act as such Vice President and Treasurer and Assistant Secretary,
respectively, of said corporation, and as the free and voluntary act of said
corporation, for the uses and purposes therein set forth.

     GIVEN under my hand and notarial seal this      day of           ,     A.D.

                                      ------------------------------------------
                                                     Notary Public

My Commission expires             ,

                                       8

<PAGE>

STATE OF ILLINOIS  }  SS:
COUNTY OF          }

     I,           , a Notary Public in and for the said County, in the State
aforesaid, DO HEREBY CERTIFY that         , Assistant Vice President of BNY
Midwest Trust Company, an Illinois trust company, one of the parties described
in and which executed the foregoing instrument, and         , an Assistant
Secretary of said trust company, who are both personally known to me to be the
same persons whose names are subscribed to the foregoing instrument as such
Assistant Vice President and Assistant Secretary, respectively, and who are both
personally known to me to be an Assistant Vice President and an Assistant
Secretary, respectively, of said trust company, appeared before me this day in
person and severally acknowledged that they signed, sealed, executed and
delivered said instrument as their free and voluntary act as such Assistant Vice
President and Assistant Secretary, respectively, of said trust company, and as
the free and voluntary act of said trust company, for the uses and purposes
therein set forth.

GIVEN under my hand and notarial seal this      day of          ,       A.D.

                                      ------------------------------------------
                                                     Notary Public

My Commission expires                ,

                                       9

<PAGE>

                                 RECORDING DATA

     This Supplemental Indenture was recorded on      and       ,        , in
the office of the Recorder of Deeds in certain counties in the State of
Illinois, as follows:

   County                 Book               Page                Document No.
   ------                 ----               ----                ------------

Adams
Boone
Bureau
Carroll
Champaign
Cook
DeKalb
DeWitt
DuPage
Ford
Grundy
Hancock
Henderson
Henry
Iroquois
Jo Daviess
Kane
Kankakee
Kendall
Lake
La Salle
Lee
Livingston
McHenry
McLean
Mercer
Ogle
Platt
Pike
Rock Island
Stephenson
Tazewell
Vermillon
Whiteside
Will
Winnebago
Woodford

                                       10

<PAGE>

                                       11Exhibit 10.1 - Debt-for-Stock Exchange Agreement

DEBT-FOR-STOCK EXCHANGE AGREEMENT

     THIS DEBT-FOR-STOCK EXCHANGE AGREEMENT (the "Agreement") is effective as of the 9th day of July 2001, by and between PERMA-FIX ENVIRONMENTAL SERVICES, INC., a Delaware corporation, having offices at 1940
Northwest 67th Place, Gainesville, Florida 32653 (the "Company"), AND CAPITAL BANK
-- GRAWE GRUPPE AG (f/k/a as  RBB BANK AKTIENGESELLSCHAFT), organized under the laws of Austria, and having its principal offices at Burgring 16, 8101 Graz, Austria (the "Lender").

W I T N E S S E T H:

     WHEREAS, the Lender, as agent for certain of its investors, has advanced to the Company a loan in the original principal amount of $3,000,000 pursuant to the loan agreement, dated August 29, 2000, between
the Lender and the Company, as amended December 19, 2000, and clarified January 12, 2001 (the "$3 Million Loan");

     WHEREAS, the Lender has advised the Company that it is prohibited by Austrian law from disclosing the identities of its investors;

     WHEREAS, the $3 Million Loan is evidenced by the Unsecured Promissory Note, dated August 29, 2000, in the original principal amount of $3,000,000 (the A
$3 Million Note");

     WHEREAS, the unpaid principal amount of the $3 Million Note, together with all accrued and unpaid interest thereon, is due and payable on July 1, 2001;

     WHEREAS, as of the date of this Agreement, the unpaid principal amount of the $3 Million Note is $3,000,000 and the accrued and unpaid interest due thereon is $218,958.90;

     WHEREAS, the terms of the $3 Million Loan provide that if the $3 Million Loan is not paid by certain dates, the Company will issue to the Lender a certain number of shares of the Company=s common stock, par value $.001 per share (the "Common Stock") (all of the foregoing payments are collectively, the "Additional Payments");

     WHEREAS, the Company and the Lender have agreed that the Company, in full and complete payment of the $3 Million Loan and the $3 Million Note, including, but not limited to, all accrued and unpaid interest
due thereon and any and all Additional Payments due and payable to the Lender, will issue to the Lender 1,893,505 shares of Common Stock and a warrant to purchase up to 1,839,405 shares of Common Stock at an exercise price of $1.75 per share of Common
Stock, with such warrant being in the form of Exhibit A attached hereto (the "Warrant"), in exchange for the $3 Million  Loan, the $3 Million Note  and any and all Additional Payments due and payable to the Lender (the "Exchange"), subject to and in
accordance with the terms and conditions described in this Agreement;

 

 

 

1

 

     WHEREAS, upon the issuance by the Company of the 1,893,505 shares of Common Stock and the Warrant to the Lender in connection with the Exchange in full and complete payment of the $3 Million Loan and the
$3 Million Note, including, but not limited to, the accrued interest due thereon, and any and all Additional Payments, the $3 Million Loan and the $3 Million Note shall terminate and be null and void in all respects and the Company shall have no
obligations to pay any Additional Payments due thereunder;

     WHEREAS, warrants granted by the Company to the Lender that are issued and outstanding as of the date of this Agreement are not effected by this Agreement and shall remain issued and outstanding pursuant
to the terms, provisions, and conditions of the respective warrants;

     WHEREAS, the Common Stock is listed for trading on the Boston Stock Exchange and the National Association of Securities Dealers Automated Quotation SmallCap Market ("NASDAQ"), and the Company is subject to
the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and has been subject to such filing requirements for the past 90 days;

      WHEREAS, the Lender is an "accredited investor," as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act") and the Lender
received all information as required under Rule 502 of Regulation D;

     WHEREAS, the Lender is not a "U.S. Person," as such term is defined in Regulation S promulgated under the Securities Act; and

     WHEREAS, in reliance upon the representations made by the Lender in this Agreement, the transactions contemplated by this Agreement are such that the offer and exchange of securities by the Company
hereunder will be exempt from registration under applicable federal (U. S.) securities laws since this is a private placement and intended to be a nonpublic offering pursuant to Sections 4(2) of the Securities Act and/or Regulation D promulgated under the
Securities Act.

     NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants, and agreements set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

1.  Exchange.  In full and complete
satisfaction of the $3 Million Loan, the $3 Million Note and any and all
Additional Payment due and owing, and in full and complete release of any and all obligations of the Company under the $3 Million Loan, the $3 Million Note, and any and all Additional Payments due thereunder, at Closing, the Lender will deliver the $3
Million Note to the Company in exchange for 1,893,505 shares of Common Stock and the Warrant subject to and  pursuant to the terms and conditions set forth in this Agreement (the "Exchange").

     1.1  $3 Million Note Paid in Full. 
Simultaneously with the issuance of the 1,893,505 shares 

            of
Common
Stock and the Warrant pursuant to this Section 1, the Lender will mark 

 

 

2

 

            "Paid
in Full" on the face of the $3 Million Note.  If the $3 Million Note is not so marked 

            by the Lender at the time of delivery of the shares of Common Stock and the Warrant, 

            the Lender hereby authorizes and directs the Company to so mark the $3 Million Note 

            immediately upon issuance to the Lender of such shares of Common Stock and Warrant 

            pursuant to Section 1.

     1.2  Delivery of Shares.   At the Closing, the Company will deliver, or cause to be delivered to

            the Lender, a certificate or certificates representing the 1,893,505 shares of Common 

            Stock and the Warrant issued in the name of the Lender, with such shares of Common 

            Stock
to be in such denominations as Lender requests in writing.

     1.3  Satisfaction and Release.  As of the Closing (as defined in paragraph 4 below), (a) the $3 

            Million Loan and the $3 Million Note shall be deemed canceled, paid in full, 

            and satisfied
in all respects, including, but not limited to, all principal and accrued 

            interest due in connection
therewith, (b) all obligations of the Company to Lender under 

            the $3 Million Loan and the $3 Million Note shall terminate and be null and void, and 

            (c) Lender will be deemed to waive all rights to the Additional Payments, and the 

            Company will have no obligation to make any Additional Payment which has not been 

            made prior to the Closing.  From and after the Closing, the Lender releases, acquits 

            and forever discharges the Company, and all of its respective subsidiaries, affiliates, 

            agents, employees, officers, and directors, as well as their respective heirs, 

            successors, legal and personal representatives, and assigns of any and all of them, 

            from and against any and all claims, liabilities, losses, damages, cause or causes of 

            action of any
kind or character whatsoever, whether liquidated, unliquidated or disputed, 

            asserted or assertable, known or unknown, in contract or in tort, at law or in equity, 

            which the Lender might now or hereafter have arising out of, or in connection with, or 

            relating to, the $3 Million Note and $3 Million Loan, including, but not limited to, all 

            obligations of the Company under the $3 Million Loan for the payment of any 

            Additional Payments.

2.  Reporting Company. 
The Company is a reporting company under the Exchange Act and has filed with the United States Securities and Exchange Commission (the "SEC") all reports required to be filed by the Company under Section 13 or 15(d) of the Exchange Act.  The Lender has
had the opportunity to review, and has reviewed, all such reports and information which the Lender deemed material to an investment decision regarding the purchase of the Common Stock.

3.  No Effect on Warrants Issued and Outstanding as of the Date of this Agreement.  Nothing contained in this Agreement shall have any effect on  any of the warrants granted by the Company to the Lender to purchase
Common Stock that are issued and outstanding as of the date of this Agreement, except that the warrants issued to the Lender in connection with the $3 Million Loan shall terminate and be null and void in all respects.
 

 

 

 

3

 

4.  Closing.  The consummation of this Agreement (the "Closing") will occur two (2) business days after the date that the Company gives written notification to the Lender that the NASDAQ has no objection to
listing the shares of Common Stock issuable as part of the Exchange and issuable upon exercise of the Warrant issued in connection with the Exchange or at such other time as designated by the parties in writing (the "Closing Date").   The consummation of
this Agreement by the parties hereto is conditioned upon and subject to the NASDAQ not objecting to the listing of the shares of the Company's Common Stock issuable pursuant to this Agreement and issuable upon the exercise of the Warrant.

5.  Additional Agreements of the Company.  In consideration for the Lender entering into this Agreement and the Exchange contemplated by this Agreement, the Company agrees that upon the Closing, the Company will pay to
the Lender a closing fee of $325,000.00 (the "Closing Fee"), payable by delivery to the Lender of (a) the sum of $75,000.00 cash and (b) the number of shares of Common Stock equal to the quotient of $250,000 divided by the last closing bid price of the
Common Stock as quoted on the NASDAQ on June 26, 2001.

6.  Representations, Warranties, and Covenants of Lender.  The Lender hereby represents, warrants, and covenants to the Company as follows:

     6.1  Investment Intent.  The Lender represents and warrants that the shares of Common Stock 

            issuable in connection with the Exchange and the underlying Common Stock issuable 

            upon exercise of the Warrant (the "Warrant Shares"), will be, acquired by the Lender 

            for, and on behalf of, itself and as agent for the account of certain of its investors, all 

            of whom are accredited investors (as defined in Rule 501 of Regulation D promulgated 

            under the Securities Act), and the Lender agrees that, and represents that such investors 

            are, acquiring the Common Stock and the Warrant Shares for investment purposes 

            only and not with a view toward the distribution or resale to others.  The Lender 

            acknowledges, understands, and appreciates that the Common Stock issuable 

            hereunder, and the Warrant shares (herewith the "Securities"), have not been 

            registered under the Securities Act by reason of a claimed exemption under the 

            provisions of the Securities Act which depends, in large part, upon the Lender's 

            representations as to investment intention, investor status, and related and other 

            matters set forth herein.  Lender understands that, in the view of the SEC, among 

            other things, a purchase now with an intent to distribute or resell would represent a 

            purchase and acquisition with an intent inconsistent with its representation to the 

            Company, and the SEC might regard such a transfer as a deferred sale for which 

            the registration exemption is not available.  The Lender has advised the Company 

            that it is prohibited by Austrian law from disclosing the identities of its investors.

     6.2  Certain Risk.  The Lender, for and on behalf of itself and as agent for its investors, 

            recognizes that the acquisition of the Common Stock and the Warrant Shares 

            involves a high degree of risk (a) as more fully described in the "Risk Factors" 

            set forth in the Confidential Private Placement Memorandum, dated April 6, 2001, 

 

 

 

4

 

            as
amended by Amendment No. 1, dated June 15, 2001  (together, the "Memorandum"), 

            issued by the Company in connection with a private placement, and the Lender has 

            reviewed in detail the "Risk Factors" contained in the Memorandum; (b) the Company 

            has sustained losses for the year ended December 31, 2000, and the first quarter of 

            2001, from operations; (c) that the Company has a substantial
accumulated deficit; 

            (d) an investment in the Company is highly speculative and only investors who
can

            afford the loss of their entire investment should consider investing in the Company and

            the Common Stock; (e) the Lender may not be able to liquidate its investment in the 

            Common Stock; (f) in the event of a disposition, the Lender could sustain the loss of 

            his entire
investment; (g) no return on investment, whether through distributions, 

            appreciation, transferability or otherwise, and no performance by, through or of the 

            Company, has been promised, assured, represented or warranted by the Company, 

            or by any director, officer, employee, agent or representative thereof; and, (h) while 

            the Common Stock is presently quoted and traded on the Boston Stock Exchange 

            and the NASDAQ and (i) while the
Lender is a beneficiary of certain registration 

            rights provided herein, the Common Stock subscribed for under this Agreement 

            and the Warrant Shares (i) are not registered under applicable federal (U. S.) or 

            state securities laws, and thus may not be sold, conveyed, assigned or transferred 

            unless registered under such laws or unless an exemption from registration is available 

            under such laws, as more fully described herein, and (ii) no assurance
that the 

            Common Stock of the Company will continue to be quoted, traded or listed for 

            trading or quotation on the Boston Stock Exchange or the Nasdaq SmallCap 

            Market or on any other organized market or quotation system.

     6.3  Prior Investment Experience.  The Lender acknowledges that it is, and each of its 

            investors are, "accredited investors" (as that term is defined in Rule 501 promulgated 

            under the Securities Act), and the Lender and each of its investors have, prior 

            investment experience, including investment in non-listed and non-registered securities, 

            or employed the services of an investment advisor, attorney or accountant to read all 

            of the documents furnished
or made available by the Company to it and to evaluate 

            the merits and risks of such an
investment on its behalf, and that it recognizes the 

            highly speculative nature of this investment.

     6.4  No Review by the SEC.  The Lender hereby acknowledges that this offering of the 

            Common Stock has not been reviewed by the SEC because this private placement is 

            intended to be a nonpublic offering pursuant to Section 4(2) of the Securities Act 

            and/or Regulation D promulgated under the Securities Act.

     6.5  Not Registered.  The Lender understands that the Common Stock and the Warrant 

            Shares have not been registered under the Securities Act by reason of a claimed 

            exemption under the provisions of the Securities Act which depends, in part, upon the 

            Lender's and its investors' investment intention.  In this connection, the Lender 

            understands that it is the position of the SEC that the statutory basis for such exemption 

            would not be present if its representation merely meant that its present intention was 

 

 

5

 

            to hold
such securities for a short period, such as the capital gains period of tax statutes, 

            for a deferred sale, for a market rise (assuming that a market develops), or for any other 

            fixed period.

     6.6  No Public Market.  The Lender understands that although there is presently a public 

            market for the Common Stock, including the Warrant Shares, Rule 144 promulgated 

            under the Securities Act requires, among other conditions, a one-year holding period 

            following full payment of the consideration therefor prior to the resale (in limited 

            amounts) of securities acquired in a nonpublic offering without having to satisfy the 

            registration requirements under the Securities Act.  The Lender understands that the 

            Company makes no representation or warranty regarding its fulfillment in the future 

            of any reporting requirements under the
Exchange Act, or its dissemination to the 

            public of any current financial or other information concerning the Company, as is 

            required by Rule 144 as one of the conditions of its availability.  Except as otherwise 

            provided in paragraph 8 hereof, the Lender understands and hereby
acknowledges 

            that the Company is under no obligation to register the Common Stock or the 

            Warrant Shares under the Securities Act.  The Lender agrees to hold the Company 

            and its directors, officers, and controlling persons and their respective heirs, 

            representatives, successors and assigns harmless and to indemnify them against all 

            liabilities, costs, and expenses
incurred by them as a result of any misrepresentation 

            made by the Lender contained herein or any sale or distribution by the Lender in 

            violation of the Securities Act or any applicable state securities or "blue sky" laws 

            (collectively, "Securities Laws").

     6.7  Sophisticated Investor.  That (a) the Lender and each of its investors have adequate 

            means of providing for their current financial needs and possible contingencies and 

            have no need for liquidity of the investment in the Common Stock; (b) the Lender 

            and each of its investors are able to bear the economic risks inherent in an investment 

            in the Common Stock, and that an important consideration bearing on their ability to 

            bear the economic risk of the purchase of Common Stock is whether the Lender 

            and each of its investors can afford a complete loss of the Lender's investment in the 

            Common Stock, and the Lender represents and warrants that the Lender can afford 

            such a complete loss; and (c) the Lender and each of its investors
have such 

            knowledge and experience in business, financial, investment and banking matters 

            (including, but not limited to, investments in restricted, non-listed and non-registered 

            securities) that the Lender, on its own behalf and as agent for its investors, is capable 

            of evaluating the merits, risks, and advisability of an investment in the Common Stock.

     6.8  Tax Consequences.  The Lender acknowledges that the Company has made no 

            representation
regarding the potential or actual tax consequences for the Lender which 

            will result from entering into this Agreement and from consummation of the Exchange. 

            The Lender acknowledges that it bears complete responsibility for obtaining adequate 

            tax advice regarding this Agreement
and the Exchange.

 

 

 

6

 

     6.9  SEC Filing.  The Lender acknowledges that it has been previously furnished with true 

            and complete copies of the following documents which have been filed with the SEC 

            pursuant to Sections 13(a), 14(a), 14(c) or 15(d) of the Exchange Act, and that such

            have been furnished to the Lender a reasonable time prior to the date hereof: (a) Annual 

            Report on Form 10-K,
for the year ended December 31, 2000 (the "Form 10-K"); 

            (b) Quarterly Report on Form 10-Q for the quarter ended March 31, 2001; (c) Current 

            Reports on Form 8-K, date of earliest event reported January 31, 2001, March 21, 

            2001, and  April 6, 2001, and (d) the information contained in any reports or documents 

            required to be filed by the Company under Sections 13(a), 14(a), 14(c) or 15(d) of the 

            Exchange Act since the distribution of the Form 10-K.

    6.10 Documents, Information and Access.  The Lender's decision to acquire for, and on its 

            own behalf, and on behalf of its investors, the Common Stock is not based on any 

            promotional, marketing, or sales materials, and the Lender and its representatives have 

            been afforded,
prior to purchase thereof, the opportunity to ask questions of, and to 

            receive answers from, the Company and its management, and has had access to all 

            documents and information which Lender deems material to an investment decision 

            with respect to the purchase of Common Stock hereunder.

    6.11 No Registration, Review or Approval.  The Lender acknowledges and understands 

            that the private offering and sale of securities pursuant to this Agreement has not been 

            reviewed or approved by the SEC or by any state securities commission, authority or 

            agency, and is not registered under the Securities Laws.  The Lender acknowledges, 

            understands, and agrees that the shares of Common Stock are being exchanged 

            hereunder pursuant to a private placement exemption to the registration provisions 

            of the Securities Act pursuant to Section 4(2) of such Securities Act and/or 

            Regulation D promulgated under the Securities Act) and
a similar exemption to the 

            registration provisions of applicable state securities laws.

    6.12 Transfer Restrictions.  The Lender will not, and will not allow any of its investors to, 

            transfer any Common Stock exchanged under this Agreement or any Warrant Shares 

            unless such are registered under the Securities Laws, or unless an exemption is available 

            under such Securities Laws, and the Company may, if it chooses, where an exemption 

            from registration is claimed by such Lender, condition any transfer of Common Stock 

            or Warrant Shares out of the Lender's name on receipt of an opinion of the Company's 

            counsel, to the effect that the proposed transfer is being effected in accordance with, 

            and does not violate, an applicable exemption from registration under the Securities 

            Laws, or an opinion of counsel to the Lender, which opinion is satisfactory to the 

            Company, to the effect that registration
under the Securities Act is not required in 

            connection with such sale or transfer and the
reasons therefor.

 

 

 

 

7

 

    6.13 Reliance.  The Lender understands and acknowledges that the Company is relying 

            upon all of the representations, warranties, covenants, understandings, 

            acknowledgments, and agreements contained in this Agreement in determining 

            whether to accept this subscription and to sell and issue the Common Stock to 

            the Lender.

    6.14 Accuracy or Representations and Warranties.  All of the representations, warranties, 

            understandings, and acknowledgments that Lender has made herein are true and 

            correct in all material respects as of the date of execution hereof.  The Lender will 

            perform and comply fully in all material respects with all covenants and agreements 

            set forth herein, and the Lender covenants and agrees that until the acceptance of this 

            Agreement by the Company,
the Lender shall inform the Company immediately in 

            writing of any changes in any of the representations or warranties provided or 

            contained herein.

    6.15 Indemnity.  The Lender hereby agrees to indemnify and hold harmless the Company,

            and the Company's successors and assigns, from, against, and in all respects of any 

            demands, claims, actions or causes of action, assessments, liabilities, losses, costs, 

            damages, penalties, charges, fines or expenses (including, without limitation, interest, 

            penalties, and attorney and accountants' fees, disbursements and expenses), arising 

            out of, or relating to, any breach by Lender of any representations, warranties, 

            covenants or agreements made by Lender in this
Agreement.  Such right to 

            indemnification shall be in addition to any and all other rights of the Company under 

            this Agreement or otherwise, at law or in equity.

    6.16 Survival.  The Lender expressly acknowledges and agrees that all of its representations, 

            warranties, agreements, and covenants set forth in this Agreement shall be of the essence 

            hereof and shall survive the execution, delivery, and Closing of this Agreement, the 

            Conversion and Exchange of the Common Stock and the sale of the Warrant Shares.

    6.17 Authority; Title.  The Lender has full power and authority to tender, sell, assign, 

            and transfer the $3 Million Loan and the $3 Million Note to the Company pursuant 

            to the terms of this Agreement, and that, when accepted for exchange, the Company 

            will acquire good, marketable, and unencumbered title to the $3 Million Loan and 

            the $3 Million Note, free and clear of all liens, restrictions, charges and encumbrances, 

            and that the$3 Million Loan and the $3 Million Note are not subject to any adverse 

            claims.

7.  Representations, Warranties and Covenants of the Company.  In order to induce Lender to enter into this Agreement and to consummate the Exchange, the Company hereby represents, warrants, and covenants to Lender as
follows:

      7.1  Organization, Authority, Qualification.  The Company is a corporation duly incorporated, 

             validly
existing, and in good standing under the laws of the State of Delaware.  The 

 

 

8

 

             Company
has
full corporate power and authority to own and operate its properties and 

             assets and to conduct and carry on its business as it is now being conducted and 

             operated.

     7.2  Authorization.  The Company has full power and authority to execute and deliver this 

            Agreement
and to perform its obligations under and consummate the transactions 

            contemplated by this Agreement.  Upon the execution of this Agreement by the Company 

            and delivery of the Securities, this Agreement shall have been duly and validly executed 

            and delivered by the Company and shall constitute the legal, valid and binding obligation 

            of the Company, enforceable
against the Company in accordance with its terms.

     7.3  Ownership of, and Title to, Securities.  The shares of Common Stock to be exchanged 

            in full and
complete satisfaction and payment of all of the Company's obligations under 

            the $3 Million Loan and the $3 Million Note pursuant to this Agreement and all Warrant 

            Shares, when issued pursuant to the terms of the Warrant, will be, duly authorized, 

            validly issued, fully paid, and
nonassessable shares of the capital stock of the Company, 

            free of personal liability.  Upon
consummation of the Exchange pursuant to this Agree-

            ment (and upon exercise of the Warrant, in whole or in part), the Lender will own and 

            acquire title to the Common Stock (and the Warrant Shares, as the case may be) free 

            and clear of any and all proxies, voting trusts, pledges,
options, restrictions, or other 

            legal or equitable encumbrance of any nature whatsoever (other than the restrictions 

            on transfer due to Securities Laws or as otherwise provided for in this Agreement or 

            the Warrants).

     7.4  Exemption from Registration.  The Exchange in accordance with the terms and
pro-

            visions of this
Agreement is being affected in accordance with the Securities Act, 

            pursuant to the private placement exemption to the registration provisions of the 

            Securities Act pursuant to Section 4(2) and/or Regulation D promulgated under 

            the Securities Act, based on the representations,
warranties, and covenants made 

            by the Lender contained in this Agreement.

8.Registration Rights.  To induce the Lender to enter into this Agreement and the Exchange, the Company hereby covenants and agrees to grant to the Lender the rights set forth in this paragraph 8 with respect to the
registration of the Common Stock to be issued under this Agreement and the Warrant Shares.

     8.1  Registration.  Subject to the terms of this paragraph 8, the Company agrees that after the 

            Closing, it shall use its reasonable efforts to prepare and file with the SEC a registration 

            statement on Form S-3 or equivalent form (the "Registration Statement") and such other 

            documents, including a prospectus, as may be necessary in the opinion of counsel for the 

            Company to comply with the
provisions of the Securities Act, so as to permit a public 

            offering and sale by the Lender of the
Common Stock acquired by Lender upon  

  

  

  

9 

  

            consummation
of the Exchange and the Warrant Shares (together, the "Registrable 

            Securities").  The Company shall use its reasonable efforts to cause such
Registration

            Statement to become effective within 180 days after the Closing.  In connection with 

            the offering of such  Registrable Securities registered pursuant to this Section 8, the 

            Company shall take such reasonable actions, as it deems necessary, to qualify the 

            Registrable Securities
covered by such Registration Statement under such "blue sky" 

            or other state securities laws for offer and sale as shall be reasonably necessary to 

            permit the public offering and sale of such shares of the Registrable Securities 

            covered by such Registration Statement; provided, however,  that the Company 

            shall not be required (a) to qualify generally to do business in any jurisdiction where 

            it would not otherwise be required to qualify but for this subparagraph (b) to subject 

            itself to taxation in any such jurisdiction, or (c) to consent to general service of 

            process in any such jurisdiction. 

     8.2  Current Registration Statement.  Once effective, the Company shall use its reasonable 

            efforts to cause such Registration Statement filed hereunder to remain   effective until the 

            earlier of: all of the
shares of Common Stock received by the Lender under this Agree-

            ment and issueable upon exercise of the Warrant are sold or transferred by the Lender 

            or the Company and the Lender receives an opinion from counsel for the Company that 

            the Lender may sell all such shares of Common Stock under Rule 144 promulgated 

            under the Securities Act (or equivalent exception from registration) without limitation as 

            to the amount of such shares of Common Stock that may be sold.   The Lender shall 

            promptly provide all such information and materials and take all such action as may be 

            required to permit the Company to comply with all applicable requirements of the SEC 

            and to obtain any desired acceleration of the effective date of such Registration 

            Statement.

     8.3  Other Provisions.  In connection with the offering of any Registrable Securities   registered 

            pursuant to this paragraph 8, the Company shall furnish to the Lender such number of 

            copies of any final prospectus as it may reasonably request to effect the offering and 

            sale of the Registrable Securities to be offered and sold under such Registration 

            Statement.  In connection with any offering of Registrable Securities registered pursuant 

            to this paragraph 8, the Company shall (a) furnish to the underwriters (if any), at the 

            Company's expense, unlegended certificates representing ownership of the Registrable 

            Securities sold under such Registration Statement in such denominations as requested 

            and (b) instruct any transfer agent and registrar of the Registrable Securities sold under 

            such Registration Statement to release immediately any stop transfer order, and to 

            remove any restrictive legend, with respect to such Registrable
Securities included in 

            any registration becoming effective pursuant to this Agreement upon the sale of such 

            shares by the Lender.

     8.4  Costs.  Subject to the immediately following sentence, the Company shall in all 

            events pay, and be responsible for, all filing fees, costs and disbursements of counsel, 

            accountants, and other consultants representing the Company in connection the 

 

10

 

            Registration
Statement relating to the Registrable Securities under this paragraph 8. 

            Notwithstanding anything set forth herein to the contrary, Lender shall pay, and be 

            responsible for, any and all underwriting discounts and commissions in connection 

            with the sale of the Registrable Securities pursuant hereto or the Registration 

            Statement and all fees of its legal counsel and other advisors retained by the Lender 

            in connection with reviewing such Registration Statement.

     8.5  Successors.  The Company will require any successor (whether direct or indirect, by 

            purchase, merger, consolidation or otherwise) to all or substantially all of the business, 

            properties, stock or assets of the Company, to expressly assume and agree to perform 

            its obligations under this paragraph 8 in the same manner and to the same extent that 

            the Company would be required to perform if no such succession had taken place.

9.  Indemnification.

     9.1  By the Company.  Subject to the terms of this paragraph 9, the Company will indemnify 

            and hold
harmless the Lender, its directors, officers, and any underwriter (as defined 

            in the Securities Act) for the Lender and each person, if any, who controls the Lender 

            or such underwriter within the meaning of the Act, from and against, and will reimburse 

            the Lender and each such underwriter and controlling person with respect to, any and 

            all loss, damage, liability, cost, and expense to which such holder or any such 

            underwriter or controlling person may become subject under the Act or otherwise, 

            insofar as such losses, damages, liabilities, costs or expenses are caused by any untrue 

            statement or alleged untrue statement of any material fact contained in the Registration 

            Statement filed with the SEC in connection with the Registrable Securities, any 

            prospectus contained therein or any amendment or supplement thereto, or arise out of, 

            or are based upon, the omission or alleged omission to state therein a material fact 

            required to be stated therein or necessary to make the statements therein, in light of 

            the circumstances in which they were made not misleading; provided, however, that the 

            Company will not be liable in any such case to the extent that any such loss, damage, 

            liability, cost or expense arises out of, or is based upon, an untrue statement or alleged 

            untrue statement or omission or alleged omission so made in conformity with 

            information furnished by the Lender, such
underwriter or such controlling person in 

            writing specifically for use in the preparation thereof.

     9.2  By the Lender.  Subject to the terms of this paragraph 9, the Lender will indemnify 

            and hold harmless the Company, its directors, officers, any controlling person, and 

            any underwriter from and against, and will reimburse the Company, its directors, 

            officers, any controlling person, and any underwriter with respect to, any and all loss, 

            damage, liability, cost or expense to which the Company or any controlling person 

            and/or any underwriter may become subject under the Securities Act or otherwise, 

            insofar as such losses, damages, liabilities, costs
or expenses are caused by any 

 

 

 

11

 

            untrue
statement or alleged untrue statement of
any material fact contained in a 

            Registration
Statement filed with the SEC in connection to the Registrable Securities, 

            any prospectus
contained therein or any amendment or supplement thereto, or arise 

            out of, or are based upon, the omission or alleged omission to state therein a material 

            fact required to be stated therein or necessary to make the statements therein, in 

            light of the circumstances in which they were made, not misleading, in each case to the 

            extent, but only to the extent, that such untrue statement or alleged untrue statement 

            or omission or alleged omission was so made in reliance upon, and in strict conformity 

            with, written information furnished by, or on behalf of, the Lender specifically for use 

            in the preparation thereof.

    9.3  Procedure.  Promptly after receipt by an indemnified party, pursuant to the provisions of 

           paragraph 9.1 or 9.2, of notice of the commencement of any action involving the subject 

           matter of the foregoing indemnity provisions, such indemnified party will, if a claim 

           thereof is to be made against the indemnifying party pursuant to the provisions of
para-

           graph 9.1 or 9.2, promptly notify the indemnifying party of the commencement thereof; 

           but the omission to so notify the indemnifying party will not relieve the indemnifying 

           party from any liability which it may have to any indemnified party otherwise than
here-

           under.  In case such action is brought against any indemnified party and the indemnified 

           party notifies the indemnifying party of the
commencement thereof, the indemnifying 

           party shall have the right to participate in, and, to the extent that it may wish, assume the 

           defense thereof.  If there is a conflict of interest which would prevent counsel for the 

           indemnifying party from also representing the indemnified party, the indemnified parties 

           have the right to select only one separate counsel to participate in the defense of such 

           action on behalf of all such indemnified parties.  After notice from the indemnifying 

           parties to such indemnified party of the indemnifying parties' election so to assume the 

           defense thereof, the indemnifying parties will not be liable to such indemnified parties 

           pursuant to the provisions of paragraph 9.1 or 9.2 for any legal or other expense 

           subsequently incurred by such indemnified parties in connection with the defense 

           thereof, other than reasonable costs of investigation, unless (a) the indemnified parties 

           shall have employed counsel in accordance with the provisions of the preceding 

           sentence; (b) the indemnifying parties shall not have employed counsel satisfactory 

           to the indemnified parties to represent the indemnified parties within a reasonable 

           time after the notice of the commencement of the action or (c) the indemnifying 

           party has authorized the employment of counsel for the indemnified party at the 

           expense of the indemnifying parties.

10. Securities Legends and Notices.  Lender represents and warrants that it has read, considered and understood the following legends, and agrees that such legends, substantially in the form and substance set forth below, shall
be placed on all of the certificates representing the Common Stock and the Warrant Shares:

The shares of common stock represented by this certificate have not been registered 

 under the Securities Act of 1933, as amended (the "Securities Act") or qualified under 

 

 

12

 

 applicable state securities laws.  This common stock may not be offered, sold, pledged,

hypothecated or otherwise transferred in the absence of an effective registration 

 statement and qualification in effect with respect thereto under the Securities Act and 

 under any applicable state securities law or without the prior written consent of 

Perma-Fix Environmental Services, Inc. and an opinion of Perma-Fix Environmental 

 Services, Inc.'s counsel, or an opinion from counsel for the holder hereof, which 

 opinion is satisfactory to the Company, that such registration and qualification is 

 not required under applicable federal and state securities laws or an exemption 

therefrom.

11.  Miscellaneous.

      11.1  Assignment and Power of Attorney.  For purposes of affecting the Exchange in
accord-

               ance with the terms of this Agreement, at the Closing the Lender does hereby
irrevoc-

               ably make, constitute and appoint the Company as the true and lawful agents and 

               attorneys-in-fact of the Lender ("Attorney-In-Fact") with full power and authority 

               (except as provided below) to act hereunder individually, or through duly appointed 

               successor attorneys-in-fact, in its sole discretion, all as hereinafter provided, in the 

               name of, for, and on behalf of, the Lender, as fully as could the Lender if present 

               and acting in person, with the cancellation of the $3 Million Note.

      11.2  Amendment; Waiver.  This Agreement shall not be changed, modified, or amended 

               in any respect except by the mutual written agreement of the parties hereto.  Any 

               provision of this
Agreement may be waived in writing by the party which is entitled 

               to the benefits thereof. No waiver of any provision of this Agreement shall be 

              
deemed to, or shall constitute a waiver of, any other provision hereof or thereof 

               (whether or not similar), nor shall nay such waiver constitute a continuing waiver.

      11.3  Binding Effect; Assignment.  Neither this Agreement nor any rights or obligations
here-

               under
or thereunder are assignable by the Lender.

      11.4  Governing Law; Litigation Costs.  This Agreement and its validity, construction, and 

               performance
shall be governed in all respects by the internal laws of the State of 

               Delaware without giving effect to such State's conflicts of laws provisions.  Each of the 

               Company and the Lender expressly and irrevocably consent to the jurisdiction and 

               venue of the federal courts located in Wilmington, Delaware.  Each of the parties 

               agrees that in the event either party brings an action to enforce any of the provisions 

               of this Agreement or to recover for an alleged breach of any of the provisions of this 

               Agreement, each party shall be responsible for its own legal costs and disbursements 

               during
the pendency of any such action; provided, however, that after any such 

               action has been reduced to a final, unappealable judgment, the prevailing party shall 

               be entitled to recover from the other party all reasonable, documented attorneys' 

               fees and
disbursements and court costs from the other party.

 

 

 

13

 

      11.5  Severability.  Any term or provision of this Agreement which is prohibited or
unenforce-

               able in any jurisdiction shall, as to such jurisdiction only, be ineffective only to the 

               extent of such prohibition or unenforceability without invalidating the remaining 

               provisions hereof or thereof affecting the validity or enforceability of such provision 

               in any other jurisdiction.

     11.6  Headings.  The captions, headings, and titles preceding the text of each or any section, 

              subsection, or paragraph hereof are for convenience of reference only and shall not 

              affect the construction, meaning, or interpretation of this Agreement or the Warrants 

              or any terms or provisions hereof or thereof.

     11.7  Counterparts.  This Agreement may be executed in one or more original or facsimile 

              counterparts, each of which shall be deemed an original and all of which shall be 

              considered one and the same agreement, binding on all of the parties hereto,
not-

              withstanding that all parties are not signatories to the same counterpart.  Upon delivery 

              of an executed counterpart by the
undersigned Lender to the Company, which in 

              turn is executed and delivered by the Company, this Agreement shall be binding as 

              one original agreement between Lender and the Company.

     11.8  Transfer Taxes.  Each party hereto shall pay all such sales, transfer, use, gross receipts, 

              registration, and similar taxes arising out of, or in connection with, the transactions 

              contemplated by this Agreement (collectively, the "Transfer Taxes") as are payable by 

              such party under applicable law, and the Company shall pay the cost of any
docu-

              mentary stock transfer stamps, if any, to be affixed to the certificates representing the 

              Common Stock to be sold.

     11.9  Entire Agreement.  This Agreement and the Common Stock Certificate of Designations 

              merges and supersedes any and all prior agreements, understandings, discussions, 

              assurances, promises,
representations, or warranties among the parties with respect to 

              the subject matter hereof, and
contains the entire agreement among the parties with 

              respect to the subject matter set forth herein
and therein.

    11.10 Authority; Enforceability.  The Lender is duly authorized to enter into this Agreement 

              and to perform all of its obligations hereunder.  Upon the execution and delivery of this 

              Agreement by the Lender, this Agreement shall be enforceable against the Lender in 

              accordance with its terms.

    11.11 Notices.  Except as otherwise specified herein to the contrary, all notices, requests, 

              demands, and other communications required or desired to be given hereunder shall 

              only be effective if given in writing, by hand, by fax, by certified or registered mail, 

              return-receipt
requested, postage prepaid, by U. S. Express Mail service, by private 

              overnight mail service (e.g., Federal Express) or by e-mail.  Any such notice shall be

 

 

 

14

 

              deemed
to have been given (a) on the business day actually received if given by hand, 

              by fax, or e-mail, (b) on the business
day immediately subsequent to mailing, if sent by 

              U.S. Express Mail service or private overnight mail service, or (c) five business days 

              following the mailing thereof, if mailed by certified or registered mail, postage prepaid, 

              return-receipt requested, and all such notices shall be sent to the following addresses 

              (or to such other address or addresses as a party may have advised the other in the 

              manner provided in this Section 11.11:

              If to the Company:                Dr. Louis F. Centofanti

                                         
                      Perma-Fix Environmental Services, Inc.

                                          
             1940 Northwest 67th Place

                                          
             Gainesville, Florida  32653

                                          
              Fax No.: (352) 373-0040

                                          
              E-Mail:
loucento@bellsouth.net

            with copies simultaneously      Irwin H. Steinhorn, Esquire

             by like means to:                   Conner &
Winters, A Professional Corporation

                                         
                    One Leadership Square, Suite 1700

                                         
                    211 North Robinson

                                         
                    Oklahoma City, Oklahoma  73102

                                         
                    Fax No.: (405) 232-2695

                                         
                    E-Mail:
isteinhorn@cwlaw.com

             If
to the Lender:
                  Mr. Herbert Strauss

                                         
                    Capital Bank - Grawe Gruppe AG

                                         
                    Burgring 16, 8010 Graz, Austria

                                         
                    Fax No.: 011-43-316-8072 ext. 392

                                         
                    E-Mail:
herbert.strauss@capitalbank.at

    11.12 No Third Party Beneficiaries.  This Agreement and the rights, benefits, privileges, 

              interests, duties, and obligations contained or referenced herein shall be solely for the 

              benefit of the parties hereto, and no third party shall have any rights or benefits 

              hereunder as a third party
beneficiary or otherwise hereunder.  Nothing contained in 

              this paragraph 11.12 shall prohibit the Lender from entering into this Agreement as 

              agent for, and on behalf of, certain of its investors.

    11.13 Public Announcements.  Neither Lender nor any officer, director, stockholder, 

              employee, affiliate, or affiliated person or entity of Lender, shall make or issue any 

              press releases or otherwise make any public statements or make any disclosures to 

              any third person or entity with respect to the transactions contemplated herein and 

              will not make or issue any press releases or otherwise make any public statements 

              of any nature whatsoever with respect to the Company without the express prior 

              approval of the Company.

 

 

 

15

 

    11.14 Conflicts with Subscription Agreement.  In the event of a conflict between the terms 

             of the
Subscription Agreement and the terms of this Agreement, this Agreement shall 

             control in all respects.

     IN WITNESS WHEREOF, the Company and the undersigned Lender have each duly executed this Agreement effective as of July 9, 2001.

                                       
                             PERMA-FIX ENVIRONMENTAL

                                         
                                   SERVICES, INC.

                                          
                           By   /s/
Louis Centofanti                            

                                         
                                Dr. Louis F. Centofanti

                                         
                                          Chief Executive Officer

                                          
                           CAPITAL BANK - GRAWE GRUPP AG

                                          
                            By   /s/
Herbert
Strauss                           

                                         
                                 Herbert Strauss

                                         
                                           
;Headtrader

 

 

 

 

 

K:\PESI\RBB Restructure\Debt Exchange.Ag10 - FINAL.doc

 

 

 

 

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