<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
TANKNOLOGY-NDE INTERNATIONAL, INC.
----------------------------------
(Name of Issuer)
COMMON STOCK, $.0001 PAR VALUE
----------------------------------
(Title of Class of Securities)
628882201
---------
(CUSIP Number)
Patrick W. Allender George P. Stamas
Danaher Corporation Wilmer, Cutler & Pickering
1250 24th Street, N.W. 2445 M Street, N.W.
Suite 800 Washington, D.C. 20037
Washington, D.C. 20037 202-663-6000
202-828-0850
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
December 24, 1997
---------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with this statement [_].
(Continued on following pages)
Page 1 of 11 Pages
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SCHEDULE 13D
- ---------------------- ---------------------------
CUSIP No. 628882201 Page 2 of 11 Pages
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- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
DH Holdings Corp.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
None
NUMBER OF -------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 7,500,000
OWNED BY -------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING None
PERSON -------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
7,500,000
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7,500,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES SHARES [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
25.4%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
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<PAGE>
SCHEDULE 13D
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CUSIP No. 628882201 Page 3 of 11 Pages
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- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Danaher Corporation
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
None
NUMBER OF -------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 7,500,000
OWNED BY -------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING None
PERSON -------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
7,500,000
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7,500,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
25.4%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
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<PAGE>
SCHEDULE 13D (Continued) Page 4 of 11 Pages
Item 1. Security and Issuer.
This statement relates to the common stock, $.0001 par value (the "Common
Stock") of Tanknology-NDE International, Inc., a Delaware corporation (the
"Company"). Each Reporting Person holds (i) shares of Series A Redeemable
Convertible Preferred Stock, par value $.0001 per share ("Preferred Stock"), and
(ii) Warrants to purchase shares of Common Stock (the "Warrants," together with
the Preferred Stock, are referred to herein as the "Securities"). The address of
the Company is 8900 Shoal Creek Boulevard, Building 200, Austin, Texas 78758.
Item 2. Identity and Background.
The names of the persons filing this Schedule 13D are (i) Danaher
Corporation, a Delaware corporation ("Danaher") and (ii) DH Holdings Corp., a
Delaware corporation and a wholly-owned subsidiary of Danaher ("DHHC"). Danaher
and DHHC are sometimes referred to a the "Reporting Persons." Each of the
Reporting Persons has its principal office at 1250 24th Street, N.W., Suite 800,
Washington, D.C. 20037. Danaher's principal business is the design, manufacture
and marketing of industrial and consumer products. DHHC holds substantially all
of the stock of the subsidiaries of Danaher.
Set forth in Schedule A, which is attached hereto and incorporated by
reference, are the names and present principal occupations or employments of the
executive officers and directors of the Reporting Persons and each person who
controls the Reporting Persons. Each of such persons is a citizen of the United
States of America and has a business address at the address of Danaher.
During the last five years, neither Reporting Person nor, to the best
knowledge of the Reporting Persons, any executive officer, director or
controlling person of a Reporting Person has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors).
During the last five years, neither Reporting Person nor, to the best
knowledge of the Reporting Persons, any executive officer, director or
controlling person of a Reporting Person has been a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction where the result
of such proceeding was the imposition of a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
Item 3. Source and Amount of Funds or Other Consideration.
Pursuant to the terms and conditions of the Note, Warrant and Preferred
Stock Purchase Agreement dated December 23, 1997 by and among the Company,
ProEco, Inc., a Delaware corporation, Tanknology/NDE Corporation, a Delaware
corporation, 2368692 Canada, Inc., a Canadian Federal corporation, Tanknology-
NDE Construction Services, Inc., a Delaware corporation and DHHC, attached
hereto as Exhibit 1 (the "Purchase Agreement"), DHHC purchased from the Company
(i) 150 shares of Preferred Stock, and (ii) Warrants to purchase 4,500,000
shares of Common Stock, for an aggregate cash purchase price of $1,500,000.
Pursuant to the Purchase Agreement, DHHC also purchased from the Company a
Senior Subordinated Note in the principal amount of $6,500,000, due December
31, 2002, for a cash price of $6,500,000.
The Securities owned by DHHC were purchased by DHHC using funds from
available working capital. No new borrowings were made for the purpose of
acquiring the securities.
Item 4. Purpose of Transaction.
All Securities held by the Reporting Persons are held by the Reporting
Persons for investment purposes. Each Reporting Person may, subject to the
continuing evaluation of the factors discussed herein, acquire from time to time
additional securities (including shares of Common Stock) of the Company in the
open market or in privately negotiated transactions, by exchange offer or
otherwise. Depending on the factors discussed herein,
<PAGE>
SCHEDULE 13D (Continued) Page 5 of 11 Pages
each Reporting Person may, from time to time, retain or sell all or a portion of
its holdings of the Securities in the open market or in privately negotiated
transactions, including the conversion of Preferred Stock into Common Stock or
the exercise of Warrants. Any actions that any Reporting Person might undertake
will depend upon such Person's review of numerous factors, including, among
other things, the availability of Securities of the Company (including Common
Stock) for purchase and the price levels of such shares; general market and
economic conditions; ongoing evaluation of the Company's business operations and
prospects; the relative attractiveness of alternative business and investment
opportunities; the actions of the management and the Board of Directors of the
Company; and other future developments.
Pursuant to the Purchase Agreement, the Reporting Persons acquired 150
shares of newly issued Preferred Stock which are convertible into Common Stock.
The Preferred Stock is convertible at the holder's option at any time after
December 31, 1997 into 3,000,000 shares of Common Stock at an exercise price of
$.50 per share of Common Stock (subject to adjustment). The Preferred Stock is
redeemable at the Company's option at a price of $10,000 per share of Preferred
Stock (the "Redemption Price") after the earlier of (i) June 30, 2001, or (ii)
the date upon which all principal and interest on the $6,500,000 Senior
Subordinated Note payable to DHHC and dated December 23, 1997, is paid in full.
Any shares of Preferred Stock outstanding at December 31, 2004 shall be redeemed
by the Company at the Redemption Price.
Pursuant to the Purchase Agreement, the Reporting Persons also received
Warrants to purchase up to 4,500,000 shares of Common Stock at an exercise price
of $.375 per share of Common Stock (subject to adjustment). The Warrants are
exercisable in a single exercise at the holder's option at any time before
December 31, 2002.
The terms and conditions for the conversion of the Preferred Stock are set
forth in the Certificate of Designation of Preferences and Rights of Series A
Redeemable Convertible Preferred Stock of Tanknology-NDE International, Inc.,
attached hereto as Exhibit 2 (the "Certificate of Designation"), comprising a
portion of the Company's Certificate of Incorporation. The terms and conditions
of the Warrants are set forth in the Tanknology-NDE International, Inc. Warrant
Certificate, which is attached hereto as Exhibit 3.
Under the terms of the Certificate of Designation, the holders of Preferred
Stock, voting as a separate class, shall have the right to elect one director to
the Board of Directors of the Company as long as at least one-half (1/2) of the
originally-issued shares of Preferred Stock remain outstanding. On other matters
subject to a vote of the Company's shareholders, holders of Preferred Stock have
the right to vote their shares of Preferred Stock as one class with the Common
Stock, with each share of Preferred Stock entitling the holder thereof to such
number of votes as shall be equal to the number of shares of Common Stock into
which the such share of Preferred Stock is then convertible into.
The holders of Preferred Stock are entitled to receive annual dividends of
$1,000.00 per share of Preferred Stock payable semi-annually in arrears,
commencing on June 30, 1998. In addition, the holders of Preferred Stock have
the right to participate in any dividends paid with respect to the Common Stock,
on the basis of the number of shares of Common Stock into which the Preferred
Stock may be converted.
Other than as set forth in this statement, the Reporting Persons do not
have any present plans or proposals that relate to or would result in any of the
consequences listed in paragraphs (a)-(j) of Item 4 of Schedule 13D, or any
agreement regarding such matters, although they may in the future take actions
which would have such consequences.
Item 5. Interest in Securities of the Issuer.
(a) As of the close of business on December 24, 1997, the Reporting
Persons beneficially owned 7,500,000 shares of Common Stock. Such Common Stock
constituted approximately 25.4% of the outstanding Common Stock on a fully
diluted basis (based on the number of shares of Common Stock outstanding as of
December 23, 1997). The Reporting Persons have the right to acquire (i)
3,000,000 shares of Common Stock
<PAGE>
SCHEDULE 13D (Continued) Page 6 of 11 Pages
upon conversion of the Preferred Stock (subject to adjustment), and (ii)
4,500,000 shares of Common Stock upon exercise of the Warrants (subject to
adjustment).
(b) The Reporting Persons share the power to vote, or to direct the vote,
and to dispose or direct the disposition of the Common Stock beneficially owned
by the Reporting Persons.
(c) Not applicable.
(d) No person other than the Reporting Persons is known to the Reporting
Persons to have the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the shares of Common Stock of
the Company owned by the Reporting Persons.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
Contemporaneously with the execution and delivery of the Purchase
Agreement, the Company and DHHC entered into a Registration Rights Agreement,
attached hereto as Exhibit 4, that requires the Company, upon the occurrence of
certain events, to register for resale under the Securities Act of 1933, as
amended, the shares of Common Stock owned or to be owned (whether pursuant to
the conversion of some or all of the Preferred Stock or the exercise of some or
all of the Warrants) by DHHC, its affiliates or permitted transferees of the
Preferred Stock, Common Stock or Warrants.
Contemporaneously with the execution and delivery of the Purchase
Agreement, the Company and DHHC entered into a Preemptive Rights Agreement,
attached hereto as Exhibit 5, pursuant to which DHHC has the right to purchase a
certain number of securities of the Company upon certain issuances by the
Company of its securities.
Contemporaneously with the execution and delivery of the Purchase
Agreement, the Company, DHHC, Proactive Partners, L.P., a California limited
partnership ("Proactive"), Lagunitas Partners, L.P., a California limited
partnership ("Lagunitas"), Jay Allen Chaffee ("Chaffee") and A. Daniel Sharplin
("Sharplin" and together with Proactive, Lagunitas and Chaffee, the "Selling
Shareholders") entered into a Co-Sale Agreement, attached hereto as Exhibit 6,
pursuant to which DHHC has the right to (i) purchase a certain number of
securities of the Company upon certain sales of such securities by any of the
Selling Shareholders, and (ii) participate in certain sales of securities of the
Company by any of the Selling Shareholders.
On October 1, 1997, the Company and Veeder-Root, North America, an
affiliate of DHHC ("Veeder-Root"), entered into a Confidentiality Agreement,
attached hereto as Exhibit 7, pursuant to which Veeder-Root agreed that neither
it nor its affiliates would, prior to September 30, 1998, acquire or seek to
acquire any securities of the Company, solicit any proxies with respect to any
voting securities of the Company or enter into certain other transactions with
or affecting the Company without the prior written consent of the Board of
Directors of the Company.
Contemporaneously with the execution and delivery of the Purchase
Agreement, the Company and DHHC entered into a Letter Agreement, attached hereto
as Exhibit 8, pursuant to which the Company agreed to issue DHHC additional
securities, if necessary, to insure that, as a result of the execution and
delivery of the Purchase Agreement and the documents and transactions
contemplated thereby and as of the date thereof, DHHC owned no less than 25.402%
of the equity securities of the Company on a fully diluted basis.
The response to Item 4 is incorporated by reference herein.
Except as set forth above, neither Reporting Person nor, to the knowledge
of the Reporting Persons, any executive officer, director or controlling person
of the Reporting Persons has any contract, arrangement, understanding or
relationship with any person with respect to any securities of the Company.
Item 7. Material to Be Filed as Exhibits
<PAGE>
SCHEDULE 13D (Continued) Page 7 of 11 Pages
Exhibit 1 Note, Preferred Stock and Warrant Purchase Agreement by and among
the Company, ProEco, Inc., Tanknology/NDE Corporation, 2368692
Canada, Inc., Tanknology-NDE Construction Services, Inc. and DHHC
dated December 23, 1997.
Exhibit 2 Warrant Certificate, dated as of December 23, 1997.
Exhibit 3 Certificate of Designation of Preferences and Rights of Series A
Redeemable Convertible Preferred Stock of Tanknology-NDE
International, Inc., dated as of December 23, 1997.
Exhibit 4 Registration Rights Agreement by and between the Company and DHHC,
dated as of December 23, 1997.
Exhibit 5 Preemptive Rights Agreement by and between the Company and DHHC,
dated as of December 23, 1997.
Exhibit 6 Co-Sale Agreement by and among the Company, DHHC, Proactive
Partners, L.P., Lagunitas Partners, L.P., Jay Allen Chaffee and A.
Daniel Sharplin, dated December 23, 1997.
Exhibit 7 Confidentiality Agreement by and between the Company and Veeder-
Root, North America, dated October 1, 1997.
Exhibit 8 Letter Agreement by and between the Company and DHHC, dated
December 23, 1997.
<PAGE>
SCHEDULE 13D (Continued) Page 8 of 11 Pages
SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, complete and correct.
Dated: January 5, 1998
DANAHER CORPORATION
By: /s/ C. Scott Brannan
Name: C. Scott Brannan
Title: Vice President
DH HOLDINGS CORP.
By: /s/ C. Scott Brannan
Name: C. Scott Brannan
Title: Secretary
<PAGE>
SCHEDULE 13D (Continued) Page 9 of 11 Pages
EXHIBIT INDEX
-------------
Exhibit 1 Note, Preferred Stock and Warrant Purchase Agreement by and among
the Company, ProEco, Inc., Tanknology/NDE Corporation, 2368692
Canada, Inc., Tanknology-NDE Construction Services, Inc. and DHHC
dated December 23, 1997.
Exhibit 2 Warrant Certificate, dated as of December 23, 1997.
Exhibit 3 Certificate of Designation of Preferences and Rights of Series A
Redeemable Convertible Preferred Stock of Tanknology-NDE
International, Inc., dated as of December 23, 1997.
Exhibit 4 Registration Rights Agreement by and between the Company and DHHC,
dated as of December 23, 1997.
Exhibit 5 Preemptive Rights Agreement by and between the Company and DHHC,
dated as of December 23, 1997.
Exhibit 6 Co-Sale Agreement by and among the Company, DHHC, Proactive
Partners, L.P., Lagunitas Partners, L.P., Jay Allen Chaffee and A.
Daniel Sharplin, dated December 23, 1997.
Exhibit 7 Confidentiality Agreement by and between the Company and Veeder-
Root, North America, dated October 1, 1997.
Exhibit 8 Letter Agreement by and between The Company and DHHC, dated
December 23, 1997.
<PAGE>
SCHEDULE 13D (Continued) Page 10 of 11 Pages
SCHEDULE A
Directors and Executive Officers of the Reporting Persons
Set forth below are the name, business address and present principal
occupation or employment of each director and executive officer of Danaher
Corporation. Except as otherwise noted, the business address of each such person
is 1250 24th Street, N.W., Suite 800, Washington, D.C. 20037. Each such person
is a United States citizen. Directors of Danaher are indicated with an asterisk.
Present Principal Name
Occupation or Employment
<TABLE>
<S> <C>
Patrick W. Allender......... Mr. Allender is Senior Vice President, Chief
Financial Officer and Secretary of Danaher.
C. Scott Brannan............ Mr. Brannan is Vice President Administration and
Controller of Danaher.
Mortimer M. Caplin*......... Mr. Caplin is a Senior member of Caplin &
Caplin & Drysdale, Drysdale, a law firm in Washington, D.C. He is a
One Thomas Circle, N.W. Director of Fairchild Industries, Inc.
Suite 1100
Washington, D.C. 20005
Dennis D. Claramunt......... Mr. Claramunt is Vice President and Group
Executive of Danaher. He is President of Jacobs
Chuck Manufacturing Company.
Daniel L. Comas............. Mr. Comas is Vice President, Corporate
Development of Danaher.
H. Lawrence Culp, Jr........ Mr. Culp is Vice President and Group Executive of
Danaher. He is President of Veeder-Root Company.
Gregory T.H. Davies......... Mr. Davies is Vice President and Group Executive
of Danaher. He is President of Jacobs Vehicle
Equipment Company.
Marc DeLuzio................ Mr. DeLuzio is Vice-President, Danaher Business
Systems.
James H. Ditkoff............ Mr. Ditkoff is Vice President, Finance/Tax of
Danaher.
Donald J. Ehrlich*.......... Mr. Ehrlich is the Chairman, President, Chief
Wabash National Corporation Executive Officer and a Director of Wabash
1000 Sagamore Parkway National Corporation. He is a Director of Indiana
South Secondary Market for Educational Loans, Inc. and
Lafayette, IN 47905 NBD Bank, N.A., Northwest.
Walter G. Lohr, Jr.*........ Mr. Lohr is a Partner of Hogan & Hartson LLP, a
Hogan & Hartson LLP law firm in Baltimore, Maryland.
111 South Calvert
Street
Suite 1600,
Baltimore, MD
Dennis Longo................ Mr. Longo is Vice President - Human Resources of
Danaher.
</TABLE>
<PAGE>
SCHEDULE 13D (Continued) Page 11 of 11 Pages
<TABLE>
<S> <C>
Mitchell P. Rales*.......... Mr. Rales is Chairman of the Executive Committee
of Danaher. He is a member of Equity Group
Holdings L.L.C. and Equity Holdings II L.L.C.,
limited liability companies located in
Washington, D.C., with interests in manufacturing
companies and publicly traded securities.
Steven M. Rales*........... Mr. Rales is Chairman of the Board of Danaher. He
is a member of Equity Group Holdings L.L.C. and
Equity Holdings II L.L.C., limited liability
companies located in Washington, D.C., with
interests in manufacturing companies and publicly
traded securities.
George M. Sherman*......... Mr. Sherman is President and Chief Executive
Officer of Danaher.
Steven E. Simms............ Mr. Simms is Vice President and Group Executive
of Danaher. He is President of the Professional
Tools Division of the Danaher Tool Group.
A. Emmet Stephenson, Jr.*.. Mr. Stephenson is President of Stephenson &
Stephenson & Company Company, a private investment management firm in
100 Garfield Street Denver, Colorado and Senior Partner of Stephenson
Denver, Colorado 80206 Merchant Banking.
John P. Watson............. Mr. Watson is Vice President and Group Executive
of Danaher.
</TABLE>
The executive officers of DHHC are George M. Sherman, President,
Patrick W. Allender, Treasurer, and C. Scott Brannan, Secretary. Each such
person is a director of DHHC. The name, business address and present principal
occupation or employment of each such person is set forth above.
Approximately 40% of the outstanding common stock of Danaher is
beneficially owned by Steven M. Rales and Mitchell P. Rales. The aggregate
holdings for Steven and Mitchell Rales include shares of Danaher common stock
owned by Equity Group Holdings L.L.C. ("EGH") and Equity Group Holdings II
L.L.C. ("EGH II") of which Steven and Mitchell Rales are the only members, along
with other shares of common stock of Danaher which are directly owned by such
individuals. EGH and EGH II are principally engaged in the business of investing
in the common stock of Danaher. The offices of Steven M. Rales, Mitchell P.
Rales, EGH and EGH II are located at 1250 24th Street, N.W., Suite 800,
Washington, D.C. 20037.
<PAGE>
EXHIBIT 1
------------------------------------------
Note, Preferred Stock and
Warrant Purchase Agreement
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Dated as of December 23, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
Section 1. Defined Terms...................................................................................1
Section 2. Purchase and Sale of the Note..................................................................12
Section 3. Purchase and Sale of Preferred Stock...........................................................12
Section 4. Issuance of Warrants...........................................................................12
Section 5. Conditions to Closings.........................................................................13
Section 6. Representations and Warranties of Sell.........................................................14
Section 7. Representations and Warranties of Purchaser....................................................20
Section 8. Financial Reporting............................................................................22
8.1 Financial Reports............................................................22
8.2 Other Information............................................................23
8.3 Preparation of Annual and Quarterly Financial
Statements in Accordance with GAAP...........................................23
8.4 Changes in GAAP and in Practices, Policies and Procedures....................23
8.5 Notice of Certain Events.....................................................24
8.6 Inspections..................................................................25
Section 9. Affirmative Covenants..........................................................................25
Section 10. Negative Covenants.............................................................................27
Section 11. Financial Tests................................................................................31
Section 12. Events of Default..............................................................................32
Section 13. Miscellaneous..................................................................................32
</TABLE>
EXHIBITS
Exhibit A - Senior Subordinated Note
Exhibit B - Certificate of Designation
Exhibit C - Warrant Certificate
Exhibit D - Certificate of Responsible Party
Exhibit E - Opinion of TNDE Counsel
Exhibit F - Preemption Agreement
Exhibit G - Certificate of Incorporation
SCHEDULES
Schedule 1 - Liens
Schedule 2 - Trade Names
Schedule 3 - Indebtedness
Schedule 4 - Leases
Schedule 5 - Financial Statements
Schedule 6 - Shareholder Information
Schedule 7 - TNDE Obligations
<PAGE>
NOTE, PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
This Note, Preferred Stock and Warrant Purchase Agreement (the
"Agreement"), dated as of December 23, 1997 (the "Effective Date"), is entered
into by and between Tanknology- NDE International, Inc. ("TNDE"), a Delaware
corporation, ProEco, Inc. ("ProEco"), a Delaware corporation, Tanknology/NDE
Corporation ("NDE"), a Delaware corporation, 2368692 Canada, Inc. ("Canada"), a
Canadian Federal corporation and Tanknology-NDE Construction Services, Inc.
("Construction"), a Delaware corporation (collectively referred to herein as
"Sellers"), as sellers, and DH Holdings Corp., a Delaware corporation
("Purchaser"), as purchaser.
WHEREAS, Sellers desire to obtain, and Purchaser is willing to
provide, financing of approximately $8 million through (i) the sale and issuance
by Sellers to Purchaser of a Senior Subordinated Note (the "Note") in the
aggregate principal amount of $6.5 million and (ii) the sale and issuance by
TNDE of 150 shares (the "Preferred Shares") of TNDE's Series A Convertible
Redeemable Preferred Stock (the "Preferred Stock") at a price of $10,000.00 per
share; and
WHEREAS, TNDE has agreed, in partial consideration of the terms of
this Agreement, to issue and sell to Purchaser warrants (the "Warrants") to
purchase 4,500,000 shares (the "Warrant Shares") of common stock of TNDE, par
value $.0001 per share.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties agree as
follows:
Section 1. Defined Terms.
As used herein, the following terms shall have the following
meanings, unless the context otherwise requires, as modified, amended or
restated from time to time as provided for herein.
1.1 "Accountant" means TNDE's current independent public accountant
or such other independent public accountant as may be selected by TNDE.
1.2 "Accountant's Statement" means, with respect to each Annual
Financial Statement, a written statement of such Accountant stating in effect
that in the course of its Audit with respect to such Financial Statement no
Default has come to its attention, or, if a Default has come to its attention,
stating the nature and period of existence of such Default.
1.3 "Accounting Period" means the Fiscal Year, Quarter or Month, as
applicable.
1.4 "Accounting Statements" mean collectively, with respect to any
Accounting Period, the consolidated balance sheet, consolidated statement of
operations, consolidated statement of cash flows and consolidated statement of
stockholders equity of TNDE and the Subsidiaries as of the end of such
Accounting Period.
-1-
<PAGE>
1.5 "Adjusted EBITDA" means with respect to any Accounting Period,
EBITDA for that Accounting Period less the sum of (i) taxes paid in cash with
respect to such Accounting Period, and (ii) the lesser of (A) $750,000.00
(annualized) and (B) actual Capital Expenditures incurred with respect to that
Accounting Period.
1.6 "Affiliate" means any Person directly or indirectly
controlling, controlled by, or under direct or indirect common control with the
specified Person. A Person shall be deemed to control another Person if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.
1.7 "Affirmative Covenants" means the covenants of TNDE set forth
in Section 9.
1.8 "Agreement" means this Note, Preferred Stock and Warrant
Purchase Agreement dated as of December 23, 1997 by and among TNDE, ProEco,
NDE, Canada, Construction and Purchaser.
1.9 "Annual Financial Statements" means, with respect to each
Fiscal Year, the consolidated and consolidating Accounting Statements of TNDE
with respect to such Fiscal Year, presented with corresponding Accounting
Statements for the preceding Fiscal Year, which Accounting Statements shall be
Audited, prepared in accordance with GAAP and presented in reasonable detail
(including appropriate footnotes). Accounting Statements prepared for and
contained in TNDE's Form 10-K filed with the SEC shall be deemed to constitute
the Annual Financial Statement.
1.10 "Audit" or "Audited" means, with respect to the Annual
Financial Statements, an examination without limitation as to scope by the
Accountant in accordance with generally accepted auditing standards for the
purpose of expressing an opinion on such Accounting Statements.
1.11 "Audit Report" means, with respect to the consolidated (but not
the consolidating) Annual Financial Statements, the report of the Accountant
indicating the scope of the Audit with respect to such Annual Financial
Statements and setting forth the opinion of such Accountant with respect to such
Annual Financial Statements as a whole, or an assertion to the effect that an
overall opinion cannot be expressed. The Audit Report shall set forth any
qualification to such opinion and, when such an overall opinion cannot be
expressed, set forth the reasons therefor.
1.12 "Board of Directors" means the board of directors of TNDE and,
as applicable and to the extent permitted by law, any committee of such board of
directors authorized to exercise the powers of the board of directors.
1.13 "BOCP" means Bank One Capital Partners, LLC, a Delaware limited
liability company.
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1.14 "BOCP Agreement" means the Note and Warrant Purchase Agreement,
dated as of October 25, 1996, by and among TNDE, certain other parties and BOCP.
1.15 "Business Day" means any day other than a Saturday, Sunday or
day upon which banking institutions are authorized or required by law or
executive order to be closed in the City of Houston, Texas.
1.16 "Capital Stock" of any Person means, any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock, including each class of common stock and preferred stock of such Person
or partnership interests and any warrants, options or other rights to acquire
such stock or interests.
1.17 "Cash Equivalents" means (i) securities issued or directly and
fully guaranteed or insured by the United States Government or any agency or
instrumentality thereof which mature within 90 days from the date of acquisition
and (ii) time deposits and certificates of deposit, which mature within 90 days
from the date of acquisition, of any domestic commercial bank having capital and
surplus in excess of $200,000,000.00, which has, or the holding company of which
has, a commercial paper rating of at least A-1 or the equivalent thereof by
Standard & Poors Corporation or P-I or the equivalent thereof by Moody's
Investor Service.
1.18 "CFO Certificate" means, with respect to the Quarterly
Financial Statements and the consolidating Annual Financial Statements, a
certificate signed by the Chief Financial Officer of TNDE stating in effect that
such Financial Statements, when delivered, (i) were prepared in accordance with
GAAP and (ii) fairly present the results of operations for the applicable
Accounting Period and the financial condition as of the end of such Accounting
Period. The CFO Certificate shall be presented in a standard form reasonably
satisfactory to Purchaser.
1.19 "Closing Date" means December 23, 1997 or such later date as
the Parties shall mutually agree in writing.
1.20 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
1.21 "Collateral" means the collateral defined in the Pledge
Agreement and in the Subordinated Security Agreement.
1.22 "Common Shares" or "Common Stock" means the shares of common
stock, $0.0001 par value, of TNDE, at any time outstanding.
1.23 "Co-Sale Agreement" means the Co-Sale Agreement dated as of
December 23, 1997 by and among TNDE, Proactive Partners, L.P., a California
limited partnership, Lagunitas Partners, L.P., a California limited partnership,
Jay Allen Chaffee, A. Daniel Sharplin and Purchaser.
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1.24 "Compliance Certificate" means, with respect to each Fiscal
Year and each Quarter, a certificate signed by the Chief Financial Officer of
TNDE (i) stating that no Default has occurred and is continuing, (ii) stating
that, to the best of his knowledge, Sellers are in compliance with each of the
Affirmative Covenants and each of the Negative Covenants and (iii) setting forth
in reasonable detail a computation of each of the Financial Tests as of the end
of the applicable Fiscal Year or Quarter. The Compliance Certificate shall be
presented in a standard form reasonably satisfactory to Purchaser.
1.25 "Debt Service Coverage Ratio" means with respect to any
Accounting Period, the ratio of (i) Adjusted EBITDA for such Accounting Period,
to (ii) the sum of the following for such Accounting Period: (a) all interest
(including interest on the Note); (b) preferred dividends; (c) actual scheduled
principal amortization of the Senior Indebtedness for the applicable period; and
(d) actual scheduled principal amortization of the Note for the applicable
period.
1.26 "Default" is defined in the Note attached hereto as Exhibit A.
1.27 "Disposition" means (i) a merger, consolidation or other
business combination in which TNDE is not the surviving entity and in which
TNDE's stockholders receive cash or non-cash consideration in exchange for or in
respect of their shares of Capital Stock of TNDE or (ii) the sale, lease,
conveyance, transfer or other disposition (other than the grant of a security
interest) in any single transaction or series of related transactions of all or
substantially all of the assets of TNDE.
1.28 "Dividends" in respect of any corporation means:
(i) Cash distributions or any other distributions on, or in
respect of, any class of equity security of such
corporation, except for distributions made solely in
shares of securities of the same class; and
(ii) Any and all funds, cash or other payments made in respect
of the redemption, repurchase or acquisition of such
securities; but shall exclude the exercise of the
Warrants or the conversion or redemption of the Preferred
Shares.
1.29 "EBITDA" means, as determined as of any date, earnings of TNDE
and the Subsidiaries (as reflected on the most recent Financial Statements) for
the applicable period ended immediately prior to any such date of determination
determined by excluding all amounts expensed as reflected on such Financial
Statements during such applicable period with respect to (i) interest expense
with respect to Permitted Indebtedness, (ii) federal and state income tax
expense, (iii) depreciation expense, (iv) accretion expense and (v) amortization
expense.
1.30 "Environmental Law" means any and all laws, statutes,
judgements, ordinances, rules, regulations, orders, determinations,
interpretations or guidance of any governmental authority, whether now existing
or hereafter effected, pertaining to health or the
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environment in effect in any and all jurisdictions in which TNDE or the
Subsidiaries are conducting or at any time have conducted business, or where any
property of TNDE or the Subsidiaries, whether leased or owned, is located, or
where any hazardous substances generated or disposed of by TNDE or the
Subsidiaries are located.
1.31 "ERISA" means the Employee Retirement Security Act of 1974, as
amended from time to time.
1.32 "ERISA Affiliate" means all members of the group of
corporations and trades or businesses (whether or not incorporated) which,
together with TNDE, are treated as a single employer under Section 414 of the
Code.
1.33 "ERISA Plan" means any pension benefit plan subject to Title IV
of ERISA or Section 412 of the Code maintained or contributed to by TNDE or any
ERISA Affiliate with respect to which TNDE has a fixed or contingent liability.
1.34 "Event of Default" is defined in the Note attached hereto as
Exhibit A.
1.35 "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
1.36 "Financial Statements" means the Annual Financial Statements,
Monthly Financial Statements and Quarterly Financial Statements.
1.37 "Financial Tests" means the financial tests with respect to
TNDE and the Subsidiaries set forth in Section 11, which tests are based upon
the Annual Financial Statements and Quarterly Financial Statements and
determined as provided for therein.
1.38 "Fiscal Quarter" means the three-month periods ending on March
31, June 30, September 30 and December 31 of the applicable Fiscal Year.
1.39 "Fiscal Year" means each year ended on December 31, or other
fiscal year of TNDE adopted in the manner provided for in this Agreement. Each
Fiscal Year consists of four Quarters.
1.40 "GAAP" means those generally accepted accounting principles and
practices as in effect from time to time which are recognized as such by the
Financial Accounting Standards Board (or any generally recognized successor).
1.41 "Indebtedness" means with respect to TNDE, as of any date of
determination, (i) all indebtedness of TNDE and the Subsidiaries for borrowed
money or for the deferred purchase price of property or services or which is
evidenced by a note, bond, debenture, or similar instrument, reflected on the
most recent Financial Statements, (ii) all obligations of TNDE and the
Subsidiaries
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under any financing lease, (iii) all obligations of TNDE and the Subsidiaries in
respect of letters of credit, acceptances, or similar obligations issued or
created for the account of TNDE and the Subsidiaries, (iv) all guaranty
obligations of TNDE and the Subsidiaries, and (v) all liabilities secured by any
lien on any property owned by TNDE or the Subsidiaries, whether or not TNDE or
the Subsidiaries have assumed or otherwise become liable for the payment
thereof; provided that, the term "Indebtedness" shall not include any
obligations incurred with regard to performance bonds and payment bonds relating
to the business of Construction.
1.42 "Interest Rate" is defined in the Note attached hereto as
Exhibit A.
1.43 "Intercreditor Agreement" means the Intercreditor and
Subordination Agreement dated as of December 23, 1997, by and between Purchaser
and the Senior Lender, as modified, amended or restated from time to time.
1.44 "Investment" is defined in Section 10(e) hereof.
1.45 "Lender Reports" means, without duplication of statements,
certificates, notices or reports furnished to Purchaser pursuant to Section 8.1
of this Agreement, copies of all financial statements, certificates, notices,
reports or other information furnished to any bank, financial institution or
note purchaser pursuant to the requirements of any loan or note purchase or
similar agreement with respect to any material Indebtedness of TNDE or any of
the Subsidiaries.
1.46 "Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (whether statutory or otherwise), or
preference, priority or other security agreement or similar preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the uniform commercial code or comparable law
of any jurisdiction in respect of any of the foregoing).
1.47 "Litigation" is defined in the Note attached hereto as Exhibit
A.
1.48 "Management Letters" means any letter or report furnished by
the Accountants to management of TNDE or any Subsidiary in connection with any
Audit or otherwise describing findings or recommendations with respect to the
accounting or management practices or procedures of TNDE and the Subsidiaries
and, including, all reports submitted to TNDE or the Subsidiaries by the
Accountant in connection with any interim or special audit made by the
Accountant.
1.49 "Material Adverse Effect" means a material adverse effect on
the respective Person's business, property, assets, prospects, condition
(financial or otherwise) or results of operations, or on the rights of such
Person hereunder.
1.50 "Maturity Date" is defined in the Note attached hereto as
Exhibit A.
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1.51 "Minutes" means all minutes, minutes of written action or
reports (including schedules and exhibits thereto) of a shareholder's meeting or
actions and all meetings or actions of the Board of Directors or any committee
thereof or appointed thereby of TNDE.
1.52 "Month" means a calendar month, and "Monthly" means each Month.
1.53 "Monthly Financial Statements" means, with respect to each
Month the consolidated Accounting Statements of TNDE and the Subsidiaries with
respect to such Month, which Accounting Statements shall be prepared and
presented in the manner customary for purposes of dissemination for management
of TNDE and the Subsidiaries.
1.54 "Net Worth" means at a particular date, the sum of any warrants
(including the Warrant Shares), preferred stock (including the Preferred
Shares), par value of common stock, capital in excess of par value of common
stock, and retained earnings less treasury stock (if any) determined on a
consolidated basis in accordance with GAAP.
1.55 "Negative Covenants" means the covenants of TNDE set forth in
Section 10.
1.56 "Net Income" means for any period, the net income (or loss) of
TNDE and the Subsidiaries after allowance for taxes for such period, determined
in accordance with GAAP; provided that there shall be excluded from the
calculation of such net income (to the extent otherwise included therein) the
following: (i) the net income of any Person in which TNDE or the Subsidiaries
has an interest (which interest does not cause the net income of such other
Person to be consolidated with the net income of TNDE or the Subsidiaries in
accordance with GAAP), except to the extent of the amount of dividends or
distributions actually paid in such period by such other Person to TNDE or the
Subsidiaries; (ii) the net income (or loss) of any Person acquired in a
pooling-of-interest transaction for any period prior to the date of such
transaction and any expenses incurred by TNDE or the Subsidiaries with respect
to such transaction; (iii) any extraordinary gains or losses, including gains or
losses attributable to property sales not in the ordinary course of business;
(iv) the cumulative effect of a change in accounting principles; (v) any gains
or losses attributable to writeups or write downs of assets, and (vi) any
expenses relating to accretions associated with any warrants, preferred stock,
subordinated debt or other convertible securities.
1.57 "Note" means the $6,500,000.00 aggregate principal amount
Senior Subordinated Note issued and sold by Sellers to Purchaser pursuant to
this Agreement, due December 31, 2002. The Note is in the form of Exhibit A.
1.58 "Notice" means any notice required to be given to any Party
under this Agreement in accordance with Section 13(h).
1.59 "Parties" means TNDE, ProEco, NDE, Canada, Construction and
Purchaser collectively, and "Party" means any one of the Parties.
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1.60 "Permitted Indebtedness" means, as of any date of determination
the aggregate amount of all Indebtedness of TNDE and the Subsidiaries
outstanding as of such date of determination but only to the extent that the
amount of such Indebtedness does not exceed the amounts permitted under this
Agreement.
1.61 "Permitted Liens" means:
(i) Liens incurred pursuant to this Agreement and the
Related Documents;
(ii) Liens securing the Senior Indebtedness as contemplated
in the Intercreditor Agreement;
(iii) Liens securing taxes, assessments or governmental
charges or levies or the claims or demands of
materialmen, mechanics, carriers, warehousemen,
landlords and other like Persons;
(iv) Liens incurred or deposits made in the ordinary course
of business (a) in connection with workers'
compensation, unemployment insurance, social security
and other like laws, or (b) to secure the performance of
letters of credit, bids, tenders, sales contracts,
leases, statutory obligations, surety, appeal and
performance bonds and other similar obligations not
incurred in connection with the borrowing of money, the
obtaining of advances or the payment of the deferred
purchase price of property;
(v) attachment, judgment and other similar Liens arising in
connection with court proceedings, provided the
execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are
being actively contested in good faith and by
appropriate proceedings;
(vi) purchase money security interests granted to secure not
more than 75% of the purchase price of assets, the
purchase of which does not violate this Agreement or any
Related Document;
(vii) Liens securing indebtedness to BOCP which is
extinguished upon the Closing Date;
(viii) Liens specifically identified in Schedule 1; and
(ix) Liens securing performance bonds and payment bonds
relating to the business of Construction.
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1.62 "Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint stock company, trust,
unincorporated organization, governmental authority or any other form of entity.
1.63 "Pledge Agreement" means the Security Interest-Pledge of
Subsidiary Stock Agreement dated as of December 23, 1997 by and between TNDE and
Purchaser.
1.64 "Preemptive Rights Agreement" means the Preemptive Rights
Agreement dated as of December 23, 1997 by and between TNDE and Purchaser.
1.65 "Preferred Shares" or "Preferred Stock" means TNDE's Series A
Redeemable Convertible Preferred Stock, par value $.01 per share, carrying the
rights, characteristics and obligations set forth in the Certificate of
Designation attached hereto as Exhibit B.
1.66 "Proceeds" means proceeds as such term is used in the Uniform
Commercial Code of the State of Delaware, as amended from time to time, together
with any successor law and as contemplated in the Pledge Agreement and in the
Subordinated Security Agreement.
1.67 "Purchaser" means DH Holdings Corp., a Delaware corporation,
together with its successors and assigns.
1.68 "Quarter" means each quarter annual period of the Fiscal Year,
and "Quarterly" means each Quarter. Each Quarter consists of three Months.
1.69 "Quarterly Financial Statements" means, with respect to each
Quarter, the consolidated Accounting Statements of TNDE and the Subsidiaries
with respect to such Quarter and the current Fiscal Year to date, presented with
corresponding Accounting Statements for the same Quarter and Fiscal Year to date
period for the preceding Fiscal Year, which Accounting Statements shall be
prepared in accordance with GAAP (subject to applicable year end adjustments)
and presented in reasonable detail (but omitting footnotes that would
substantially duplicate footnotes contained in the most recent Annual Financial
Statements). Accounting Statements prepared for and contained in TNDE's Form
10-Q filed with the SEC shall be deemed to constitute the Quarterly Financial
Statement.
1.70 "Registration Rights Agreement" means the Registration Rights
Agreement dated as of December 23, 1997 by and between TNDE and Purchaser.
1.71 "Related Documents" means the Note, the Subordinated Security
Agreement, the Pledge Agreement, the Preemptive Rights Agreement, the
Registration Rights Agreement, the Warrant Certificate, the Certificate of
Designation and the Co-Sale Agreement.
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1.72 "Representation(s) and Warranty(ies)" means the representations
and warranties of Sellers set forth in Section 6 and in any certificate of any
of the Sellers delivered pursuant to Section 5.
1.73 "Responsible Officer" means the chairman of the board, chief
executive officer, chief operating officer, chief financial officer or chief
accounting officer of TNDE or any other officer of TNDE involved principally in
its financial administration of its controllership function.
1.74 "Restricted Payments" means any of the following:
(i) any dividend on any class of TNDE's Capital Stock (other
than with respect to Purchaser's Preferred Stock);
(ii) any other distribution on account of any class of TNDE's
Capital Stock;
(iii) any redemption, purchase or other acquisition, direct or
indirect, of any shares of TNDE's Capital Stock (other
than with respect to Purchaser's Preferred Stock); and
(iv) any management, consulting and other fees paid to
Proactive Partners, L.P., Lagunitas Partners, L.P.,
their respective partners and employees and their
successors and assigns (other than as provided for in
this Agreement).
Notwithstanding the foregoing, Restricted Payments shall not include (A)
dividends paid, or distributions made, in Capital Stock of TNDE; or (B)
exchanges of Capital Stock of TNDE for another class of Capital Stock of TNDE,
except to the extent that cash or other non-stock value is involved in such
exchange.
1.75 "SEC" means the United States Securities and Exchange
Commission (or any governmental body or agency succeeding to its functions).
1.76 "Securities Act" means the Securities Act of 1933, as amended
from time to time.
1.77 "Security Agreements" mean collectively, the Senior Security
Agreement, the Subordinated Security Agreement and the Pledge Agreement.
1.78 "Sellers" means TNDE, ProEco, Canada and Construction.
1.79 "Senior Indebtedness" means the Senior Loans and Indebtedness
incurred pursuant to the terms of any agreement between TNDE, any of the
Subsidiaries and any bank or
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financial institution providing for revolving credit loans secured by the
Collateral; provided that, any other agreement shall be consented to in writing
by DH, which consent shall not be unreasonably withheld, and the lender with
respect thereto shall have been granted a first perfected security interest in
the Collateral on terms substantially equivalent to those set forth in the
Senior Security Agreement; further provided that, the term "Senior Indebtedness"
may include up to $11 million of Indebtedness incurred by TNDE or the
Subsidiaries to replace the indebtedness incurred with respect to the Senior
Loan Agreement and such debt replacement need not be consented to by DH;
provided further that, notwithstanding the foregoing, any such replacement of
Indebtedness by the Company on terms materially adverse to DH shall not be
undertaken without the prior written consent of DH.
1.80 "Senior Lender" means Bank One, Texas, N.A., as lender under
the Senior Loan Agreement, together with its successors and assigns in such
capacity or any substitutes or Persons acting in the same or similar capacity
with respect to Senior Indebtedness.
1.81 "Senior Loan Agreement" means the Loan Agreement, dated as of
October 25, 1996, by TNDE, certain other parties and the Senior Lender,
including all extensions, renewals and refinancings thereof.
1.82 "Senior Loans" means the term loan and revolving line of credit
granted by the Senior Lender to TNDE and certain other parties pursuant to the
Senior Loan Agreement, including all extensions, renewals and refinancings
thereof.
1.83 "Senior Security Agreement" means the Security Agreement dated
as of October 25, 1996, by and among TNDE and the Senior Lender, as modified,
amended or restated from time to time, together with any other agreements
securing the payment of the obligations evidenced by the Senior Loans or under
the Senior Loan Agreement.
1.84 "Subordinated Debt" means Indebtedness of TNDE and the
Subsidiaries which is subordinated, in a manner satisfactory to and approved in
writing by Purchaser, to the Indebtedness of Sellers evidenced by the Note.
1.85 "Subordinated Security Agreement" means the Security
Agreement-Personal Property dated as of December 23, 1997 by and between Sellers
and Purchaser, as modified, amended or restated from time to time, together with
any other agreements securing the payment of the obligations evidenced by the
Note or under this Agreement.
1.86 "Subsidiary" or "Subsidiaries" means any corporation 50% or
more of the Capital Stock of which, except directors' qualifying shares, shall
at the time as of which any determination is being made, be owned by TNDE either
directly or through Subsidiaries.
1.87 "Subsidiary Stock" is defined in the Pledge Agreement.
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1.88 "Total Liabilities"of any Person shall mean, as of any date,
all amounts which would be included as liabilities on a balance sheet of such
Person as of such date prepared in accordance with GAAP.
1.89 "Transfer" means, with respect to any item, the sale, exchange,
conveyance, lease, transfer or other disposition of such item.
1.90 "UCC" means the Uniform Commercial Code as in effect in the
State of Delaware.
1.91 "Warrant Certificate" means the Warrant Certificate dated
as of December 23, 1997 issued by TNDE to Purchaser evidencing Warrants to
purchase 4,500,000 Common Shares.
1.92 "Warrant Shares" shall have the meaning set forth in the
recitals to this Agreement.
1.93 "Warrants" shall have the meaning set forth in the
recitals to this Agreement.
Section 2. Purchase and Sale of the Note.
Upon the terms and subject to the conditions set forth in this Agreement,
Sellers shall issue and sell to Purchaser, and Purchaser shall purchase from
Sellers for a purchase price of $6,500,000.00, the Note, due December 31, 2002
and dated as of the Closing Date, made by Sellers to Purchaser in the principal
amount of $6,500,000.00. Such purchase and sale shall be consummated on the
Closing Date as provided for in this Agreement, and on such date Purchaser shall
make payment of the purchase price of the Note by wire transfer of immediately
available funds to an account designated by TNDE. The Note shall be in the form
attached hereto as Exhibit A.
Section 3. Purchase and Sale of Preferred Stock.
Upon the terms and subject to the conditions set forth in this
Agreement, TNDE shall issue and sell to Purchaser, and Purchaser shall purchase
from TNDE, the Preferred Shares for an aggregate purchase price of
$1,500,000.00. Such purchase and sale shall be consummated on the Closing Date
as provided for in this Agreement, and on such date Purchaser shall make payment
of the purchase price of the Preferred Shares by wire transfer of immediately
available funds to an account designated by TNDE. The Preferred Shares shall
have the rights and characteristics set forth in the Certificate of Designation
attached hereto as Exhibit B.
Section 4. Issuance of Warrants.
Upon the terms and subject to the conditions set forth in this Agreement,
TNDE shall issue and sell to Purchaser and Purchaser shall purchase from TNDE,
the Warrants evidenced by the
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Warrant Certificate dated as of the Closing Date in the form attached hereto as
Exhibit C. Such sale and purchase shall be consummated on the Closing Date as
provided for in this Agreement.
Section 5. Conditions to Closings.
The obligations of Purchaser to purchase the Note, the Preferred Shares
and the Warrants on the Closing Date is subject to the fulfillment in a manner
reasonably satisfactory to Purchaser and its counsel of each of the following
conditions precedent.
(a) Senior Loan Agreement. No event of default or event which
---------------------
with notice, lapse of time or both would constitute an event of default under
the Senior Loan Agreement shall have occurred and be continuing and the Senior
Lender and Purchaser shall have executed and delivered the Intercreditor
Agreement, Amendment No. 3 to the Senior Loan, the Termination Agreement (as
defined in (S)9(j)) and the Post-Closing Agreement (as defined in (S)9(j)).
(b) Execution and Delivery of Related Documents. Each of the
-------------------------------------------
Related Documents shall have been duly executed and delivered by all parties
thereto, each dated and effective as of the Closing Date.
(c) Certificates, Opinions, and Other Documents. The following
-------------------------------------------
certificates, opinions and other documents shall be delivered by or on behalf of
Sellers:
(i) a certificate of TNDE executed by a Responsible Officer
of TNDE in the form of Exhibit D certifying compliance
with the closing conditions set forth in this section
and any covenants to be performed by Sellers at or prior
to the Closing Date;
(ii) certified copies of the corporate resolutions of Sellers
authorizing the execution, delivery and performance of
each of Sellers obligations under this Agreement and all
of the Related Documents and any other documents to be
delivered pursuant to this Agreement or any of the
Related Documents;
(iii) certified copies of TNDE's Certificate of Incorporation,
including any and all amendments thereto, and a
certified copy of the bylaws of TNDE as in effect on the
Closing Date;
(iv) a certificate of the Secretary of TNDE certifying the
names of the officers of Sellers authorized to sign this
Agreement, the Related Documents and any other documents
or certificates to be delivered pursuant to this
Agreement or any of the Related Documents by TNDE,
together with the true signatures of such officers;
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(v) an opinion of counsel for TNDE, addressed to Purchaser, in
the form of Exhibit E;
(vi) UCC-ls with respect to the Collateral under the
Subordinated Security Agreement and Pledge Agreement in the
forms and as provided for herein;
(vii) UCC-3s with respect to any financing statements filed
in connection with TNDE's and the Subsidiaries
indebtedness to BOCP;
(viii)the Warrant Certificate;
(ix) certificates evidencing 150 shares of Preferred Stock
issued to Purchaser pursuant to this Agreement; and
(x) such other opinions, certificates, affidavits, documents
and filings, including any and all UCC filings, as
Purchaser may deem reasonably necessary or appropriate.
(d) Disbursements and Deliveries. The following disbursement shall
----------------------------
be made out of the proceeds of the sale of the Note and the Preferred Shares:
$8,000,000 to BOCP to extinguish any and all indebtedness of TNDE
and the Subsidiaries to BOCP.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLERS.
The representations and warranties of Sellers set forth in this Section 6
shall survive the purchase and sale of the Note, Preferred Shares and Warrants,
and any investigation made by Purchaser shall not diminish the right of
Purchaser to rely upon such representations and warranties. Each of the Sellers
jointly and severally represents and warrants to Purchaser as follows:
(a) Organization. TNDE is a corporation duly incorporated and
------------
validly existing under the laws of the State of Delaware. The execution,
delivery and performance of this Agreement, each of the Related Documents and
any instrument or agreement required by this Agreement or any of the Related
Documents are within Sellers' powers, have been duly authorized and are not in
conflict with the terms of the charter, bylaws or other organizational documents
of Sellers.
(b) Subsidiaries. Each Subsidiary is a corporation duly incorporated
------------
and validly existing under the laws of its jurisdiction of incorporation.
Immediately after the date of Closing, neither TNDE nor any of the Subsidiaries
will own any Capital Stock, membership interest or other equity interest in or
of any other Person, other than Subsidiary Stock. As of the date hereof, none
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of the Subsidiaries other than ProEco, NDE, Canada and Construction own or hold
any assets or conduct any business.
(c) Good Standing. TNDE and the Subsidiaries are properly licensed
-------------
and in good standing in each state in which they are doing business, and TNDE
and the Subsidiaries have qualified under and, where required, complied with the
fictitious name statute of each state in which TNDE or any of the Subsidiaries
are doing business.
(d) Information Submitted. The audited consolidated Annual Financial
---------------------
Statements and unaudited Quarterly Financial Statements of TNDE set forth on
Schedule 5 have been prepared in accordance with GAAP consistently applied and
fairly present the financial condition of TNDE and the Subsidiaries as of the
dates thereof and the results of its operations for the periods then ended.
(e) No Material Adverse Change. There has been no material adverse
--------------------------
change in the consolidated financial condition of TNDE since the later of (i)
September 30, 1997 and (ii) the date of the most recent Financial Statements.
(f) Disclosure. Neither this Agreement nor any other document,
----------
opinion, Accounting Statement, certificate or statement by an officer of any of
the Sellers furnished or made by or on behalf of any of the Sellers in
connection with the transactions contemplated in this Agreement, contains any
untrue statement of a material fact or omits to a state a material fact
necessary in order to make the statements contained therein not misleading. To
the best knowledge of Sellers, there is no fact peculiar to TNDE or the
Subsidiaries which materially and adversely affects or in the future may (so far
as Sellers can reasonably foresee) materially and adversely affect the business,
property, assets or financial condition of TNDE or the Subsidiaries which has
not been disclosed to Purchaser in this Agreement or in other documents,
opinions, Accounting Statements, certificates or statements furnished to or made
by or on behalf of Sellers to Purchaser in connection with the transactions
contemplated by this Agreement.
(g) No Conflicts. The execution, delivery and performance of this
------------
Agreement, the Related Documents and any other instrument or agreement required
by this Agreement or any of the Related Documents are not in conflict with any
law or any indenture, agreement or undertaking to which any of the Sellers are a
party or by which any of the Sellers are bound or affected.
(h) Authorization and Consents. No approval, consent, compliance,
--------------------------
exemption, authorization or other action by, or notice to, or filing with, any
governmental authority or any other Person pursuant to applicable law, and no
lapse of the waiting period under the applicable law, is necessary or required
in connection with the execution, delivery and performance by any of the Sellers
or enforcement against any of the Sellers of this Agreement or the Related
Documents or the transactions contemplated hereby and thereby.
(i) Enforceability. This Agreement is a legal, valid and binding
--------------
agreement of each of the Sellers, enforceable against each of the Sellers in
accordance with its terms, and each Related
-15-
<PAGE>
Document, and any instrument or agreement required under this Agreement or any
of the Related Documents, when executed and delivered, will be similarly legal,
valid, binding and enforceable in accordance with their respective terms,
except, in either case, as enforcement thereof may be affected by bankruptcy,
moratorium, insolvency or similar laws affecting creditors' rights generally or
by the application by a court of equitable principles.
(j) Ownership of Collateral. All Collateral is owned, and all
-----------------------
Collateral acquired hereafter will be owned, legally and beneficially, by
Sellers, free and clear of all security interests, liens, encumbrances, adverse
claims and rights of others except for Permitted Liens and those consented to in
writing by the Senior Lender and Purchaser.
(k) Financing Statements. No financing statement, security agreement
--------------------
or other Lien instrument covering all or any part of the Collateral is on file
in any public office, except as may have been filed in favor of the Senior
Lender or Purchaser pursuant to this Agreement and except as related to
Permitted Liens. Neither TNDE nor any of the Subsidiaries do business and none
have done business within the past five years under a trade name or any name
other than its respective legal name set forth at the beginning of this
Agreement, except as specified in Schedule 2.
(l) Perfected Security Interest in Collateral. Except for (i) the
-----------------------------------------
payment of all outstanding indebtedness of TNDE and the Subsidiaries to BOCP
under the BOCP Agreement and the termination of all financing statements and the
return of all Collateral, if any, in the possession of BOCP in connection
therewith and (ii) the filing of financing statements (and continuation
statements, where appropriate) with respect to the Collateral and the delivery
to Purchaser of any Collateral as to which possession is the only method of
perfecting a security interest therein, no further action is necessary in order
to establish and perfect Purchaser's lien on or perfected security interest in
the Collateral, which lien shall be second only to the lien of the Senior Lender
and any Permitted Liens.
(m) Compliance with Laws. To the best knowledge of Sellers, each of
--------------------
the Sellers has complied with all federal, state and local laws, rules and
regulations affecting the business, property or assets of TNDE or the
Subsidiaries.
(n) Environmental Compliance. TNDE and the Subsidiaries and all of
------------------------
their respective properties and facilities have, at all times and in all
respects, complied with all Environmental Laws, except where the failure to
comply would not have a Material Adverse Effect, assuming all such instances of
non-compliance were brought to the attention of appropriate governmental
authorities.
(o) Labor and Employee Relations Matters.
------------------------------------
(i) Neither TNDE nor any of the Subsidiaries is or expects to
be the subject of any union organizing activity or labor
dispute, nor has there been any strike of any kind called
or, to the knowledge of Sellers, threatened to be called
against TNDE or the Subsidiaries and neither
-16-
<PAGE>
TNDE nor any of the Subsidiaries have violated any
applicable federal or state law or regulation relating to
labor or labor practices.
(ii) No present or former employee of TNDE or the Subsidiaries
has advanced claims in writing against TNDE or the
Subsidiaries (whether under any foreign, federal, state or
common law, through a government agency, under an
employment agreement, collective bargaining agreement,
personal service or independent contractor agreement or
otherwise) that are currently pending for (a) overtime pay,
other than overtime pay for the current payroll period; (b)
wages, salaries or profit sharing (excluding wages,
salaries or profit sharing for the current payroll period);
(c) vacations, time off (including, without limitation,
potential sick leave) or pay in lieu of vacation or time
off, other than vacation or time off (or pay in lieu
thereof) earned in respect of the current Fiscal Year; (d)
any violation of any statute, ordinance or regulation
relating to minimum wages or maximum hours of work; (e)
discrimination against employees on any basis; (f) unlawful
employment or termination practices; (g) unfair labor
practices or alleged violations of collective bargaining
agreements; (h) any violation of occupational safety and/or
health standards; (i) benefits under any employee plans or
compensation arrangement; and (j) breach of any employment,
personal service or independent contractor agreement,
except for any such claims referred to in this Paragraph
(a) thru (j) which, in the aggregate, do not exceed
$100,000.00.
(iii) There is not pending against TNDE or any of the
Subsidiaries or, to the knowledge of the Sellers
threatened, any labor dispute, strike or work stoppage that
does or may materially affect or materially interfere with
the operations of TNDE or the Subsidiaries.
(iv) There is not pending or, to the knowledge of Sellers,
threatened any charge or complaint against TNDE or any of
the Subsidiaries by or before the National Labor Relations
Board, any representative thereof, or any comparable
foreign or state agency or authority.
(v) All collective bargaining agreements to which TNDE or the
Subsidiaries is a party have been furnished to Purchaser.
(p) No Event of Default. No event has occurred and is continuing or
-------------------
would result from the transactions described in this Agreement which constitutes
a Default or an Event of Default or which, upon a lapse of time or notice or
both, would become an Event of Default.
-17-
<PAGE>
(q) Litigation. There is no litigation, tax claim, proceeding or
----------
dispute pending, or, to the knowledge of Sellers threatened, against or
affecting TNDE or any of the Subsidiaries or their property, or any officer, key
employee or principal shareholder of TNDE or any of the Subsidiaries, the
adverse determination of which would impair Sellers' ability to perform their
obligations hereunder or under any instrument or agreement required hereunder.
(r) Taxes. All tax returns required to be filed by TNDE and the
-----
Subsidiaries in any jurisdiction have been filed or extended and all taxes,
assessments, fees and other governmental charges upon TNDE or the Subsidiaries
or upon any of their properties, income or franchises have been paid prior to
the time that such taxes could give rise to a lien thereon, unless protested in
good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been established on the books of TNDE or the
Subsidiaries, as applicable. Sellers have no knowledge of any proposed tax
assessment against TNDE or the Subsidiaries.
(s) Securities Act. Neither TNDE nor the Subsidiaries have issued
--------------
any unregistered securities in violation of the registration requirements of the
Securities Act, any applicable state securities law or of any other requirement
of law, and none are violating any rule, regulation or requirement under the
Securities Act or the Exchange Act. TNDE and the Subsidiaries are not required
to qualify an indenture under the Trust Indenture Act of 1939, as amended, in
connection with their execution and delivery of the Note.
(t) Indebtedness. Immediately after the Closing Date, TNDE and the
------------
Subsidiaries will not have any outstanding Indebtedness other than under the
Note, Related Documents, the Senior Loans, accounts payable and other
indebtedness incurred in the ordinary course of business, except as set forth in
Schedule 3.
(u) ERISA Plan. TNDE has no ERISA Affiliates and does not currently
----------
maintain, contribute to, have any requirements to contribute to or have any
liability, whether absolute or contingent, with respect to any ERISA Plan.
(v) Reservation of Conversion Shares. The Common Shares to be issued
---------------------------------
upon the conversion of the Preferred Shares and the exercise of the Warrants
(the "Conversion Shares") have been duly reserved for issuance upon conversion
of the Preferred Shares and/or the exercise of the Warrants and, when so issued,
will be duly authorized, validly issued, fully paid and non-assessable Common
Shares with no personal liability attaching to the ownership thereof, and will
be free and clear of all liens, charges, restrictions, claims and encumbrances
imposed by or through TNDE. Neither the issuance and delivery of the Preferred
Shares or the Conversion Shares is subject to any pre-emptive right of
stockholders of TNDE or to any right of first refusal or other right in favor of
any person.
(w) Authorized Capital Stock. Immediately after the Closing, the
-------------------------
authorized Capital Stock of TNDE will consist of 50,000,000 shares of Common
Stock, of which 15,977,636 shares will be validly issued and outstanding, fully
paid and nonassessable with no personal liability
-18-
<PAGE>
attaching to the ownership thereof and 10,000 shares of preferred stock, of
which 150 shares will be validly issued and outstanding, fully paid and
nonassessable with no personal liability attaching to the ownership thereof. The
holders of record of Capital Stock of TNDE and holders of subscriptions,
warrants, options, convertible securities and other rights (contingent or other)
to purchase or otherwise acquire Capital Stock of TNDE, and the number of shares
of Capital Stock, subscriptions, warrants, options, convertible securities and
other such rights held by each, are as set forth in the attached Schedule 6. The
designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of each class and series of authorized Capital Stock of
TNDE are as set forth in the Certificate of Incorporation ("Certificate"), a
copy of which is attached as Exhibit G, and the Certificate of Designation, and
all such designations, powers, preferences, rights, qualifications, limitations
and restrictions are valid, binding and enforceable and in accordance with all
applicable laws. Except as set forth in the attached Schedule 6, (i) no person
owns of record or is known to TNDE to own beneficially any share of Capital
Stock of TNDE, (ii) no subscription, warrant, option, convertible security, or
other right (contingent or other) to purchase or otherwise acquire Capital Stock
of TNDE is authorized or outstanding and (iii) there is no commitment by TNDE to
issue shares, subscriptions, warrants, options, convertible securities, or other
such rights or to distribute to holders of any of its Capital Stock any evidence
of indebtedness or asset. Except as provided for in the Certificate, the
Certificate of Designation, or as set forth in the attached Schedule 7, TNDE has
no obligation (contingent or other) to purchase, redeem or otherwise acquire any
of its equity securities or any interest therein or to pay any dividend or make
any other distribution in respect thereof. Other than pursuant to this Agreement
and the Related Documents, there are no voting trusts or agreements,
stockholders' agreements, pledge agreements, buy-sell agreements, rights of
first refusal, preemptive rights or proxies relating to any of the Capital Stock
of TNDE. All of the outstanding securities of TNDE were issued in compliance
with all applicable Federal and state securities laws.
(x) SEC Reports. Since January 1, 1994, TNDE has filed all forms,
-----------
reports, statements, and other documents required to be filed with the SEC,
including without limitation (i) all Annual Reports on Form 10-K, (ii) all
Quarterly Reports on Form 10-Q, (iii) all proxy statements relating to meetings
of shareholders (whether annual or special), (iv) all Current Reports on Form 8-
K, and (v) all other reports, schedules, registration statements, or other
documents required to be filed with the SEC (collectively, the "TNDE SEC
Reports"), except where the failure to file any such forms, reports, statements,
or other documents is not likely to have, individually or in the aggregate, a
Material Adverse Effect. The TNDE SEC Reports (a) were prepared in all material
respects in accordance with the requirements of the Securities Act or Exchange
Act, as the case may be, and (b) did not at the time they were filed contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(y) Financial Statements; No Undisclosed Liabilities. The audited
-------------------------------------------------
consolidated financial statements and unaudited consolidated interim financial
statements (including the related notes and schedules) of TNDE included or
incorporated by reference in the TNDE SEC Reports (the "Company Financial
Statements") were prepared in accordance with generally accepted accounting
-19-
<PAGE>
principles applied on a consistent basis (except as may be indicated in the
notes thereto) and fairly present the consolidated results of operations and
cash flows for the periods then ended, subject, in the case of any unaudited
interim financial statements, to normal year-end adjustments, none of which is
likely to have, individually or in the aggregate, a Material Adverse Effect
other than liabilities disclosed in the Schedules hereto or in the TNDE SEC
Reports or for which TNDE has made adequate reserves as reflected in TNDE's
Financial Statements.
(z) Securities Act. Neither Sellers, nor anyone acting on their
--------------
behalf has offered any of the Note, the Preferred Shares or the Warrants or
similar securities, or solicited any offers to purchase, or made any attempt by
preliminary conversation or negotiations to dispose of, the Note, the Preferred
Shares or the Warrants or similar securities, to any person other than
Purchaser. Neither Sellers nor anyone acting on their behalf has offered or will
offer to sell the Note, the Preferred Shares or the Warrants or similar
securities to, or solicit offers with respect thereto from, or enter into any
preliminary conversations or negotiations relating hereto with, any Person, so
as to bring the offer, sale or issuance of the Note, the Preferred Shares or the
Warrants to Purchaser within the registration provisions of the Securities Act
of 1933, as amended (the "Securities Act").
(aa) Registration Rights. Except as granted to Purchaser in
-------------------
connection with the transactions contemplated by this Agreement, no Person has
any right to cause TNDE to file any registration statement under the Securities
Act relating to any securities of TNDE or any right to have any securities of
TNDE in any such registration statement.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
The representations and warranties of Purchaser set forth in this Section 7
shall survive the purchase and sale of the Note, Preferred Shares and Warrants,
and any investigation made by Sellers shall not diminish the right of Sellers to
rely upon such representations and warranties; provided that, such
representations and warranties are made only with respect to items and events
which may have a Material Adverse Effect on the rights of Sellers hereunder.
Purchaser represents and warrants to Sellers as follows:
(a) Organization. Purchaser is a corporation duly incorporated and
------------
validly existing under the laws of the state of its formation. The execution,
delivery and performance of this Agreement, each of the Related Documents and
any instrument or agreement required by this Agreement or any of the Related
Documents are within Purchaser's powers, have been duly authorized and are not
in conflict with the terms of the charter, bylaws or other organizational
documents of Purchaser.
(b) No Conflicts. The execution, delivery and performance of this
------------
Agreement, the Related Documents and any other instrument or agreement required
by this Agreement or any of the Related Documents are not in conflict with any
law or any material indenture, agreement or undertaking to which Purchaser is a
party or by which Purchaser is bound or affected.
-20-
<PAGE>
(c) Enforceability. This Agreement is a legal, valid and binding
--------------
agreement of Purchaser, enforceable against Purchaser in accordance with its
terms, and each Related Document, and any instrument or agreement required under
this Agreement or any of the Related Documents, when executed and delivered,
will be similarly legal, valid, binding and enforceable in accordance with their
respective terms, except, in either case, as enforcement thereof may be affected
by bankruptcy, moratorium, insolvency or similar laws affecting creditors'
rights generally or by the application by a court of equitable principles.
(d) Authorization and Consents. No approval, consent, compliance,
--------------------------
exemption, authorization or other action by, or notice to, or filing with, any
governmental authority or any other Person pursuant to applicable law, and no
lapse of the waiting period under the applicable law, is necessary or required
in connection with the execution, delivery and performance by Purchaser or
enforcement against Purchaser of this Agreement or the Related Documents or the
transactions contemplated hereby and thereby.
(e) Experience. Purchaser is an accredited investor within the
----------
meaning of Rule 501(a) of Regulation D promulgated under the Securities Act and
has substantial experience in evaluating and investing in securities of
companies similar to TNDE and the Subsidiaries and has made investments in
securities other than those of TNDE and the Subsidiaries. Purchaser
acknowledges that by reason of its business or financial experience and
financial condition, it has the ability to analyze and bear the entire risk of
its investment pursuant to this Agreement.
(f) Investment Intent. Purchaser is acquiring the Note, Preferred
-----------------
Shares and the Warrants for investment for its own account, not as a nominee or
agent of any other Person and not with a view to, or for resale in connection
with, any distribution thereof. Purchaser understands that the issuance and
sale of such securities purchased by it hereunder (and the issuance to Purchaser
of Warrant Shares upon the conversion of the Warrants and the issuance of shares
of Common Stock upon the conversion of Purchaser's Preferred Shares) have not
been and will not be subject to a registration statement filed under the
Securities Act or any applicable state securities law by reason of a specific
exemption from the registration provisions of the Securities Act and such state
securities laws which depend upon, among other things, the bona fide nature of
the investment intent and the accuracy of Purchaser's representation as
expressed herein.
(g) Rule 144. Purchaser acknowledges that the securities acquired
--------
and which could be acquired hereunder are restricted securities within the
meaning of Rule 144 promulgated under the Securities Act and may not be sold
unless subsequently registered under the Securities Act and applicable state
securities laws or unless an exemption from such registration is available.
Purchaser is aware of the provisions of Rule 144 promulgated under the
Securities Act which permits the limited resale of securities purchased in a
private placement subject to the satisfaction of certain conditions including,
without limitation, the existence of a public market for the securities, the
availability of certain current public information about TNDE and the
Subsidiaries, the resale occurring not less than one year after a party has
purchased and paid for any security to be sold, the sale being effected through
a "broker's transaction" or a transaction directly with a "market maker"
-21-
<PAGE>
as provided by Rule 144(f) and the number of securities being sold during any
three-month period not exceeding specified limitations.
(h) Knowledge of Purchaser. Purchaser is aware of and has
----------------------
investigated the business, management and financial condition of TNDE and the
Subsidiaries, has had the opportunity to inspect their respective facilities and
has had access to such other information about TNDE and the Subsidiaries as
Purchaser has deemed necessary and desirable to reach an informed and
knowledgeable decision to acquire the securities to be purchased by it
hereunder. The purchase of such securities is not a result of an advertisement
or an offering in connection with the sale of such securities.
SECTION 8. FINANCIAL REPORTING.
The obligations and covenants of Sellers set forth in this Section 8 shall
terminate upon the later of (i) the date on which Purchaser is no longer the
holder of the Note and (ii) the date upon which the Purchaser is no longer the
holder of at least 50% of the Preferred Shares issued pursuant to this
Agreement.
8.1 FINANCIAL REPORTS.
Sellers shall deliver, or shall cause to be delivered, to Purchaser
the following financial reports within the applicable time periods.
(a) Annual Financial Statements. The Annual Financial Statements
---------------------------
shall be delivered within 90 days (or 120 days if the filing deadline is
extended by the SEC) after the end of each Fiscal Year and shall be accompanied
by the applicable Audit Report, Accountant's Statement, CFO Certificate and
Compliance Certificate.
(b) Quarterly Financial Statements. The Quarterly Financial
------------------------------
Statements shall be delivered within 45 days (or 60 days if the filing deadline
is extended by the SEC) after the end of each Quarter (other than the fourth
Quarter) of each Fiscal Year and shall be accompanied by the applicable CFO
Certificate and Compliance Certificate.
(c) Monthly Financial Statements. The Monthly Financial
----------------------------
Statements shall be delivered promptly upon their dissemination to management of
TNDE.
(d) Projected Financial Statements. The projected Financial
------------------------------
Statements with respect to each succeeding Fiscal Year shall be delivered within
60 days after the end of the preceding Fiscal Year.
(e) Securities Reports. Any reports required by the Securities
------------------
and Exchange Commission shall be delivered promptly upon their delivery to
shareholders, securities holders or the SEC.
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<PAGE>
(f) Lender Reports and Management Letters. Any Lender Reports and
-------------------------------------
Management Letters shall be delivered promptly upon their delivery to any lender
or note holder.
(g) Notice of Default. As soon as possible and in any event within
-----------------
five (5) days after the occurrence of each Event of Default or each event which,
with the giving of notice or lapse of time or both, would constitute an Event of
Default, the statement of the chief financial officer of TNDE setting forth
details of such Event of Default or event and the action which TNDE proposes to
take with respect thereto.
8.2 OTHER INFORMATION.
Promptly upon reasonable written request therefor, Sellers shall
furnish (or cause to be furnished) to Purchaser other financial information with
respect to TNDE and the Subsidiaries available in the books, records and files
of TNDE and the Subsidiaries; provided, however, that if such information cannot
be furnished without undue expense, Sellers may require Purchaser to reimburse
it for all reasonable out-of-pocket expenses incurred in connection with
furnishing such information.
8.3 PREPARATION OF ANNUAL AND QUARTERLY FINANCIAL STATEMENTS IN
ACCORDANCE WITH GAAP.
TNDE and the Subsidiaries shall maintain adequate books, accounts and
records and shall prepare all Annual Financial Statements, Quarterly Financial
Statements and Monthly Financial Statements required to be delivered to
Purchaser pursuant to this Section in accordance with GAAP applied in a manner
consistent with the practices, policies and procedures applied in connection
with the preparation of the Financial Statements of TNDE initially delivered to
Purchaser, except for any changes in such practices, policies and procedures
permitted or approved in the manner provided for in this Section.
8.4 CHANGES IN GAAP AND IN PRACTICES, POLICIES AND PROCEDURES.
(a) Notice of Proposed Change. In the event that TNDE or the
-------------------------
Subsidiaries proposes to make any material change in any of the practices,
policies or procedures applied in connection with the preparation of its Annual
Financial Statements or Quarterly Financial Statements, Sellers shall:
(i) notify Purchaser in writing of such proposed change at
least 45 days prior to the required delivery date of the
first Annual Financial Statements or Quarterly Financial
Statements that will be effected by such proposed change;
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<PAGE>
(ii) state in reasonable detail in such notice the reason
for such change, including, if applicable, a description of
any change in GAAP that occasions such change;
(iii) submit with such notice a written statement by the Chief
Financial Officer of TNDE and the Accountants describing
the anticipated effect, if any, of the proposed change to
the computation of the Financial Tests, or stating that in
their opinion such proposed change will have no material
effect on the computation of such Financial Tests; and
(iv) in the event such proposed change will have a material
effect on the computation of such Financial Tests, submit
with each Compliance Certificate a written reconciliation
in reasonable detail demonstrating the computation of the
Financial Tests as if such change had not been made.
(b) Consent to Change. Unless such change in practices, policies or
-----------------
procedures is required by a change in GAAP, TNDE or the Subsidiaries shall not
adopt any such proposed change without the written consent of Purchaser, which
consent shall not be unreasonably withheld by Purchaser.
(c) Effect of Change on Financial Tests. In the event that any such
-----------------------------------
change in policies, practices or procedures would materially affect the
computation of any Financial Test, and unless this Agreement is amended to make
appropriate modifications to such Financial Test, compliance with all such
Financial Tests shall be determined on a pro forma basis without giving effect
to any such change.
8.5 NOTICE OF CERTAIN EVENTS.
Sellers shall give prompt written notice to Purchaser of the occurrence of
any of the following events:
(a) a Default;
(b) the occurrence of any event which, with notice, lapse of time
or both, would constitute an event of default under any Senior
Indebtedness;
(c) all litigation affecting TNDE or any of the Subsidiaries
where the amount or equivalent value claimed is equal to
$250,000.00 or more;
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<PAGE>
(d) any substantial dispute which may exist between TNDE or any
of the Subsidiaries and any governmental regulatory body or
law enforcement authority;
(e) the loss or destruction of any asset of TNDE or the
Subsidiaries which loss or destruction would result in a
Material Adverse Effect; and
(f) any other matter which has resulted or is likely to result
in a Material Adverse Effect.
8.6 INSPECTIONS.
(a) Books, Records, Audits and Inspections. TNDE and the
--------------------------------------
Subsidiaries shall (i) maintain adequate books, accounts and records and prepare
all Financial Statements required hereunder in accordance with GAAP consistently
applied, and in compliance with the regulations of any governmental regulatory
body having jurisdiction over TNDE or the Subsidiaries or TNDE's or the
Subsidiaries' business and (ii) permit employees or agents of Purchaser at any
reasonable time upon reasonable notice to inspect TNDE's and the Subsidiaries'
properties and to examine or audit TNDE's and the Subsidiaries' books, accounts
and records and make copies and memoranda thereof. In the event any properties,
books, accounts or records are in the possession of or under the control of a
third party, TNDE shall direct and hereby authorizes such third party to permit
access to Purchaser's employees or agents for the purpose of performing the
inspections, appraisals, examinations or audits permitted under this Section,
and to respond to any reasonable requests from Purchaser for information
concerning the amount, status or condition of any assets in a third party's
possession or control.
SECTION 9. AFFIRMATIVE COVENANTS.
Until payment in full of the Note, TNDE shall and shall cause each of the
Subsidiaries to, unless Purchaser waives compliance therewith in writing:
(a) Insurance. Insure and maintain insurance upon all of its assets
---------
and properties with responsible and reputable insurers of such character and in
such amounts as are usually maintained by companies engaged in like businesses
in the same general area in which TNDE or the Subsidiaries operate.
(b) Payment of Taxes and Claims. Pay (i) all taxes, assessments and
---------------------------
other governmental charges imposed upon any of its properties or assets or in
respect of any of its franchises, business, income or profits before any penalty
or interest accrues thereon, (ii) all claims (including, without limitation,
claims for labor, services, materials and supplies) for sums which have become
due and payable and which by law have or might become due and payable or become
a lien or charge upon any of their properties or assets, and (iii) all lease
obligations, all trade debt, and all other indebtedness incident to the
operations of TNDE or the Subsidiaries, provided that (unless any
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<PAGE>
material item of property would be lost, forfeited or materially damaged as a
result thereof) no such charge, tax, assessment or claim need be paid if the
amount, applicability or validity thereof is currently being contested in good
faith and if a reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor.
(c) Compliance with Laws. Comply in all material respects with all
--------------------
applicable statutes, laws, ordinances and governmental rules, regulations and
orders including, but not limited to, all Environmental Laws, to which it is
subject or which are applicable to its business, properties or assets if
noncompliance therewith could have a Material Adverse Effect.
(d) Preservation of Existence. Except as expressly permitted in
-------------------------
Section 10(f), (g) or (h), preserve and maintain its corporate existence, as the
case may be, and its rights, franchises and privileges in the jurisdiction of
its incorporation and qualify and remain qualified as a foreign corporation in
each jurisdiction in which the failure to do so would have a Material Adverse
Effect. TNDE and the Subsidiaries shall preserve and maintain all licenses and
other rights to use patents, processes, licenses, trademarks, trade names,
inventions, intellectual property rights or copyrights owned or used by and
necessary to the conduct of its business.
(e) Maintenance of Tangible Assets. Maintain its tangible assets and
------------------------------
properties in good condition and repair in accordance with the requirements of
its business and not permit any action or omission which might materially impair
the value thereof, normal wear and tear excepted.
(f) Performance of Contracts. Perform and comply with, in accordance
------------------------
with its terms, all material provisions of each and every contract, agreement or
instrument now or hereafter binding upon it, except to the extent it may contest
the provisions thereof in good faith and by proper proceedings.
(g) Punctual Payment. Sellers shall pay the dividends on the
----------------
Preferred Stock and the principal of and interest on the Note at the times and
place and in the manner provided in the Note and herein.
(h) Access to Information. At any reasonable time and from time to
---------------------
time, TNDE and the Subsidiaries shall permit Purchaser or any representatives
thereof to examine and make copies of and extracts from the records and books of
account of, and visit and inspect the properties of, TNDE and the Subsidiaries,
and to discuss the affairs, finances and accounts of TNDE and the Subsidiaries
with any of their officers or directors and independent accountants.
(i) Compliance. TNDE shall comply, and cause each Subsidiary to
----------
comply, with all applicable laws of the United States and of each other
applicable jurisdiction relating to employee safety and workplace practices
under OSHA, Environmental Laws and equal employment opportunity, and any rules,
regulations, administrative orders and Executive Orders relating thereto and the
applicable terms, of any government contract relating thereto; and keep,
maintain or file all necessary permits, filings, reports, plans and forms
required to be kept, maintained or filed, pursuant
-26-
<PAGE>
to any such applicable law or the terms of any such government contract if the
failure to comply would have a Material Adverse Effect; provided, however, TNDE
shall not be considered to have failed to comply with the foregoing during any
period that any matter relating to TNDE or the Subsidiaries' practices is being
contested by TNDE or the Subsidiaries in appropriate proceedings in good faith,
or thereafter if TNDE and the Subsidiaries comply with any final determination
issued in such proceedings .
(j) Termination and Post-Closing Agreement. Deliver to Purchaser,
--------------------------------------
within five (5) days of TNDE's receipt thereof, notice and a copy of any
proposed modification, amendment, waiver, consent or other change of the rights
of any party under, as well as a copy of any modification, amendment, waiver,
consent or other change of the rights of any party granted under (i) the
Termination Agreement dated December 23, 1997, by and among TNDE, ProEco, NDE,
Canada and BOCP (the "Termination Agreement"), or (ii) the Post-Closing
Agreement dated December 23, 1997, by and between TNDE and BOCP (the "Post-
Closing Agreement").
SECTION 10. NEGATIVE COVENANTS.
Until payment in full of the Note, TNDE shall not and shall not permit any
of the Subsidiaries to, unless the prior written consent of Purchaser is
obtained:
(a) Other Indebtedness. Create or incur, contract, assume, have
------------------
outstanding, guarantee or otherwise be or become directly or indirectly liable
in respect of any Indebtedness; provided however, that this Section shall not be
deemed to prohibit:
(i) The Senior Indebtedness;
(ii) Up to $750,000.00 of Indebtedness (exclusive of
Indebtedness referred to in this Section 10(a)(i), (iii),
(iv), (v), (vi) and (vii) hereof);
(iii) Capitalized lease financing or purchase money for
equipment which is secured by the equipment so leased or
purchased;
(iv) Indebtedness of any Subsidiary to TNDE or another
Subsidiary;
(v) Existing indebtedness identified in Schedule 3;
(vi) Indebtedness incurred with respect to BOCP pursuant to the
BOCP Agreement which is extinguished at Closing;
(vii) Operating leases entered into by TNDE or the Subsidiaries
(to the extent that such leases would otherwise be
included in the definition of "Indebtedness").
-27-
<PAGE>
(b) Prepayments. Pay any Indebtedness prior to its scheduled
-----------
maturity or scheduled payment date other than the Note or the Senior Loans or
indebtedness incurred under the BOCP Agreement which will be extinguished at
Closing.
(c) Liens. Grant, create, incur, assume, permit or suffer to exist
-----
any Lien, upon any of its properties or assets, whether now owned or hereafter
acquired; provided however, that this section shall not be deemed to prohibit:
(i) other Liens incidental to the conduct of its business or
the ownership of its property and assets which do not
secure Indebtedness and which do not in the aggregate
materially detract from the value of its property or
assets or materially impair the use thereof in the
operation of its business;
(ii) Liens on property or assets of a Subsidiary to secure
obligations of such Subsidiary to TNDE or another
Subsidiary; and
(iii) Permitted Liens.
(d) Leases. Enter into or permit to remain in effect any operating
------
lease as lessee, other than operating leases entered into in the ordinary course
of TNDE or the Subsidiaries' business; provided that this section shall not be
deemed to prohibit leases described on Schedule 4 hereof.
(e) Loans, Advances and Investments. Make or have outstanding any
-------------------------------
loan, advance or capital contribution to, or investment in (including any
investment in any Person), or purchase or otherwise acquire any of the Capital
Stock, securities or evidences of indebtedness of any Person (collectively
"Investment"), or otherwise acquire any interest in, or control of, another
Person, except for the following:
(i) Cash Equivalents;
(ii) Any acquisition of securities or evidences of indebtedness
of others when acquired by TNDE or the Subsidiaries in
settlement of accounts receivable or other debts arising
in the ordinary course of its business, so long as the
aggregate amount of any such securities or evidences of
indebtedness is not material to the business or condition
(financial or otherwise) of TNDE and the Subsidiaries;
(iii) Travel and other advances to officers and employees of
TNDE or a Subsidiary in the ordinary course of business;
-28-
<PAGE>
(iv) Other loans, advances and investments, provided that the
aggregate principal and interest amount thereof which is
outstanding at no time exceeds $250,000.00; and
(v) TNDE or Construction may operate a general contracting
service to provide outsourcing and project management
related to construction projects for customers of TNDE or
the Subsidiaries; provided that, the equity investment in,
or loans to Construction may not exceed $250,000.00.
(f) No Acquisition or Merger. Acquire by purchase or otherwise all
------------------------
or substantially all of the assets or Capital Stock of any Person or merge or
consolidate with or into any Person, except that:
(i) Any Subsidiary may merge or consolidate with or into TNDE,
provided that TNDE is the continuing or surviving
corporation;
(ii) Any Subsidiary may merge or consolidate with or into
another Subsidiary; and
(iii) Subject to the provisions of (S)3 of the Warrant
Certificate, TNDE may merge with any other solvent
corporation, provided that (a) TNDE shall be the
continuing or surviving corporation and (b) no Event of
Default then exists or would exist immediately after
giving effect to such merger.
(g) Sale of Stock or Indebtedness of Subsidiaries. Sell or otherwise
---------------------------------------------
dispose of, or part with control of, any shares of Capital Stock or Indebtedness
of any Subsidiary, except to TNDE or another Subsidiary, and except that all
shares of Capital Stock and Indebtedness of any Subsidiary at the time owned by
or owed to TNDE and all Subsidiaries may be sold as an entirety for a cash
consideration which represents the fair value (as determined in good faith by
the Board of Directors of TNDE) at the time of sale of the shares of Capital
Stock and Indebtedness sold; provided that (A) such sale or other disposition,
if treated as a transfer of assets of such Subsidiary, would be permitted by
Section 10(j) and (B) at the time of such sale, such Subsidiary shall not own,
directly or indirectly, any shares of Capital Stock or Indebtedness of any other
Subsidiary (unless all of the shares of stock and Indebtedness of such other
Subsidiary owned directly or indirectly, by TNDE and all Subsidiaries are
simultaneously being sold as permitted by this Section 10(g)).
(h) Sales and Lease Backs. Dispose of any of its assets except for
---------------------
full, fair and reasonable consideration, or enter into any sale and leaseback
agreement covering any of its fixed or capital assets.
-29-
<PAGE>
(i) Restrictions on Dividends. Directly or indirectly declare or make
-------------------------
or incur any liability to make any Dividend other than Dividends with respect to
securities owned by Purchaser.
(j) Transfers, Liquidations and Dispositions of Substantial Assets.
--------------------------------------------------------------
Dissolve or liquidate or sell, transfer, lease or otherwise dispose of any
material portion of its property or assets or business, other than in the
ordinary course of business, except that:
(i) any Subsidiary may Transfer assets to TNDE or another
Subsidiary;
(ii) TNDE or any Subsidiary may sell inventory in the ordinary
course of business; and
(iii) TNDE or any Subsidiary may otherwise Transfer assets,
provided that the aggregate assets Transferred by TNDE and
the Subsidiaries combined shall not exceed $250,000.00 in
any twelve-Month period.
(k) Restricted Payments. Make, pay or declare, or commit to make,
-------------------
pay or declare, any Restricted Payment, other than payments made with respect to
dividends or securities owned by Purchaser, without the prior written consent of
Purchaser except that so long as no Event of Default shall have occurred and be
continuing, or would result therefrom, TNDE may repurchase Common Shares from
employees of TNDE or the Subsidiaries upon termination of employment pursuant to
arrangements approved by the Board of Directors.
(l) Business Activities. Engage in any business activities or
-------------------
operations substantially different from or unrelated to its present business;
provided that TNDE or the Subsidiaries may engage in the operation of a
construction business pursuant to Paragraph 10(e)(v) hereof.
(m) Transactions with Affiliates. Enter into any transaction,
----------------------------
including without limitation, the purchase, sale or exchange of property or the
rendering of any services, with any Affiliate or any partner, officer or
director thereof, enter into, assume or suffer to exist any employment or
consulting contract with any Affiliate or any partner, officer or director
thereof or any former or current officer or director of TNDE, except any
transaction or contract which is in the ordinary course of TNDE's or the
Subsidiaries' business or which is permitted pursuant to Paragraph 10(e)(v)
hereof, and which is upon fair and reasonable terms no less favorable to TNDE or
the Subsidiaries than they would obtain in a comparable arms-length transaction
with a person not an Affiliate.
(n) ERISA Plans. Adopt or agree to maintain or contribute to any
-----------
ERISA Plan without the prior written consent of Purchaser, which consent shall
not be unreasonably withheld. TNDE shall promptly notify Purchaser in writing in
the event an ERISA Affiliate adopts an ERISA Plan.
-30-
<PAGE>
(o) Change in Principal Office. Move its principal office, executive
--------------------------
office or principal place of business without prior written notice to Purchaser.
(p) Termination Agreement and Post-Closing Agreement. Without the
------------------------------------------------
prior written consent of Purchaser, modify, amend, grant any consent or waiver
or otherwise agree to change any party's rights under the Termination Agreement
or the Post-Closing Agreement, which would or may adversely affect the rights or
interests of Purchaser.
SECTION 11. FINANCIAL TESTS.
Until payment in full of the Note, TNDE and the Subsidiaries shall, unless
Purchaser waives compliance therewith in writing, meet the following Financial
Tests.
(a) Total Liabilities to Net Worth Ratio. TNDE and the Subsidiaries
------------------------------------
shall maintain, at all times, a ratio of Total Liabilities less Subordinated
Debt (including any preferred stock, warrants or other subordinated debt) to Net
Worth plus Subordinated Debt (including any preferred stock, warrants or other
subordinated debt) of not greater than the ratio set forth opposite the
applicable period below:
<TABLE>
<CAPTION>
Period Ending Ratio
------------- -----
<S> <C>
Closing Date through December 31, 1997 2.50:1.0
Thereafter through June 30, 1998 2:25:1.0
Thereafter through December 31, 1998 2.00:1.0
Thereafter through December 31, 1999 1.75:1.0
Thereafter through December 31, 2000 1.75:1.0
Thereafter through December 31, 2001 1.75:1.0
Thereafter through the Maturity Date 1.75:1.0
</TABLE>
(b) Net Worth. TNDE and the Subsidiaries shall maintain a total Net
---------
Worth of not less than the Net Worth of TNDE and the Subsidiaries as of December
31, 1997 less $1 Million, calculated cumulatively as of the end of each year
beginning with the year ending December 31, 1998. In addition, TNDE and the
Subsidiaries shall maintain, as of the end of each Fiscal Quarter other than the
Fiscal Quarter ending on December 31 of any fiscal year, a total Net Worth of
not less than the Net Worth of TNDE and the Subsidiaries as of December 31, 1997
less $1.8 Million.
(c) Debt Service Coverage Ratio. TNDE and the Subsidiaries shall
---------------------------
maintain a Debt Service Coverage Ratio of 0.30 to 1.0 for the three (3) months
ending March 31, 1998; 0.60 to 1.0 for the six (6) months ending June 30, 1998;
1.10 to 1.0 for the nine (9) months ending September 30, 1998; 1.35 to 1.0 for
the twelve (12) months ending December 31, 1998; and 1.50 to 1.0 thereafter,
calculated on a rolling four quarter basis.
-31-
<PAGE>
SECTION 12. EVENTS OF DEFAULT.
The Events of Default are as stated in the Note a form of which is attached
as Exhibit A.
SECTION 13. MISCELLANEOUS.
(a) No Implied Rights or Waivers. No notice to or demand on Sellers
----------------------------
shall entitle Sellers to any other or further notice or demand in the same,
similar or other circumstances except as required by this Agreement. Neither
any failure nor any delay on the part of Purchaser in exercising any right,
power or privilege hereunder or under the Note, the Preferred Shares or the
Warrant Certificate shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of the same or
the exercise of any other right, power or privilege.
(b) Modifications, Amendments or Waivers. TNDE and Purchaser may
------------------------------------
from time to time enter into written agreements amending or changing any
provision of this Agreement or the rights hereunder or give waivers or consents
to a departure from the due performance of their obligations hereunder, with
such waivers or consents not to be unreasonably withheld, provided that no
departure from Sellers' due performance of its obligations hereunder shall be
effective unless agreed to in writing by Purchaser; provided further that, the
terms of this Agreement may not be modified or changed except by a writing
executed by both TNDE and the Purchaser.
(c) Accounting Terms. All accounting terms not specifically defined
----------------
herein shall be construed in accordance with GAAP.
(d) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware.
(e) Severability. If any provision of this Agreement is held to be
------------
invalid, void or unenforceable, the remaining provisions of this Agreement shall
nevertheless continue in full force and effect.
(f) Third Party Beneficiaries. The obligations of each Party under
-------------------------
this Agreement shall inure solely to the benefit of the other Parties, and no
other person or entity shall be a third party beneficiary of this Agreement.
(g) Rules of Construction. Unless otherwise specified, the following
---------------------
rules shall be applied in construing the provisions of this Agreement and the
Related Documents:
(i) Terms that imply gender shall be construed to apply to all
genders.
(ii) References to Paragraphs, Sections, Schedules and Exhibits
refer to the numbered Paragraphs of, Sections of, the
Schedules of and the
-32-
<PAGE>
Exhibits attached to this Agreement or any Related
Documents (as applicable).
(iii) Headings to the various Sections of this Agreement or any
Related Documents (as applicable) are included solely for
purposes of reference and shall be ignored in construing
the provisions of this Agreement or any Related Documents
(as applicable).
(iv) The Exhibits and Schedules attached to this Agreement and
the attached Related Documents are incorporated herein by
reference.
(v) "Herein", "hereto", "hereof" and words of similar import
refer to this Agreement.
(vi) The word "and" connotes "each and every", and the word
"or" connotes "any one or more".
(vii) The word "including" connotes "including without
limitation".
(viii) Any reference to any law or regulation refers to that law
or regulation as amended from time-to-time after the date
of this Agreement or any Related Documents (as
applicable) and to the corresponding provision of any
successor law or regulation.
(ix) Any reference to any agreement or other document in this
Agreement or any Related Documents (as applicable) refers
to that agreement or other document as amended from time-
to-time after the date of this Agreement or any Related
Documents (as applicable).
(x) The recitals included in this Agreement or any Related
Documents (as applicable) are the mutual representations
of the Parties and are a part of this Agreement or any
Related Documents (as applicable).
(h) Notices. Any notice or other communication required or permitted
-------
to be made or given under this Agreement shall be in writing and shall be deemed
to have been given to the Party to whom it is addressed: (i) on the date
indicated on the certified mail return receipt if sent by certified mail return
receipt requested; (ii) on the business day actually received if hand delivered
or if transmitted by telefax or if delivered or transmitted on a day that is not
a business day, then the next business day; or (iii) one business day after such
notice was delivered to an overnight delivery service, addressed, delivered or
transmitted in each case as follows:
-33-
<PAGE>
PURCHASER:
DH Holdings Corp.
1250 24th Street, N.W.
Suite 800
Washington, D.C. 20037
ATTENTION: Vice President
Telephone: (202) 828-0850
Telefax: (202) 828-0860
WITH A COURTESY COPY (NOT REQUIRED FOR EFFECTIVE NOTICE) TO:
Veeder-Root Company
125 Powder Forest Drive
Simsbury, Connecticut 06070
ATTENTION: Steven H. Sigmon, President
Telephone: (860) 651-2735
Telefax: (860) 651-2727
IF TO ANY SELLER, A SINGLE NOTICE TO:
Tanknology-NDE International, Inc.
8900 Shoal Creek Blvd.
Building 200
Austin, Texas 78758
ATTENTION: President
Telephone: (512) 451-6334
Telefax: (512) 459-1459
WITH A COURTESY COPY (NOT REQUIRED FOR EFFECTIVE NOTICE) TO:
Tanknology-NDE International, Inc.
712 Main Street, Suite 1700
Houston, Texas 77002
ATTENTION: Jay Allen Chaffee
Telephone: (713) 223-5730
Telefax: (713) 223-5379
A Party's address for notice may be changed from time-to-time only by
written notice given to each of the other Parties in accordance with this
Section.
(i) Assignment. Except as otherwise provided in this Agreement and
----------
the Related Documents, neither this Agreement nor any of the rights or duties
hereunder may be assigned by any
-34-
<PAGE>
Party without the prior written consent of each of the other Parties, and any
assignment attempted without such prior consent shall be null and void; provided
that the rights and obligations of DH Holdings Corp. under this Agreement and
the Related Documents may be transferred or assigned to Danaher Corporation or
to any Affiliate of Danaher Corporation.
(j) Further Acts and Documents. Each of the parties hereby agrees to
--------------------------
execute and deliver such further instruments and to do such further acts and
things as may be necessary or desirable to carry out the purposes of this
Agreement.
(k) Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same agreement.
(l) Payments. All payments by Seller to Purchaser hereunder or under
--------
the Note should be made to an account in Delaware designated by the Purchaser.
The Parties have caused this Agreement to be executed and delivered
effective as of the date first written above.
SELLERS:
TANKNOLOGY-NDE INTERNATIONAL, INC.
By: /s/ Jay Allen Chaffee
------------------------------
Its: Chairman
-----------------------------
PROECO, INC.
By: /s/ Jay Allen Chaffee
------------------------------
Its: Chairman
-----------------------------
-35-
<PAGE>
TANKNOLOGY/NDE CORPORATION
By: /s/ Jay Allen Chaffee
-----------------------------
Its: Chairman
-----------------------------
2368692 CANADA, INC.
By: /s/ Jay Allen Chaffee
-----------------------------
Its: President
-----------------------------
TANKNOLOGY-NDE CONSTRUCTION
SERVICES, INC.
By: /s/ Jay Allen Chaffee
-----------------------------
Its: Chairman
-----------------------------
PURCHASER:
DH HOLDINGS CORP.
By: /s/ Daniel L. Comas
-----------------------------
Its: Vice President
-36-
<PAGE>
Exhibit A - Senior Subordinated Note
<PAGE>
----------------------------------------------------
SENIOR SUBORDINATED NOTE
----------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
1. Definitions, Rules of Construction and Notice........................2
1.1 "Accelerated................................................2
1.2 "Affiliate..................................................2
1.3 "Affirmative Covenants......................................2
1.4 "Applicable Law.............................................2
1.5 "Business Day...............................................2
1.6 "Collateral.................................................2
1.7 "Company....................................................2
1.8 "Financial Tests............................................2
1.9 "Indebtedness...............................................2
1.10 "Insolvency Proceeding......................................3
1.11 "Insolvency Law.............................................3
1.12 "Insolvency Relief..........................................3
1.13 "Insolvency Order...........................................3
1.14 "Intercreditor Agreement....................................3
1.15 "Interest...................................................3
1.16 "Lien.......................................................3
1.17 "Litigation"................................................3
1.18 "Negative Covenants.........................................3
1.19 "Notice.....................................................4
1.20 "Quarter....................................................4
1.21 "Related Documents..........................................4
1.22 "Reporting Covenants........................................4
1.23 "Representation(s) and Warranty(ies)........................4
1.24 "Security Documents.........................................4
1.25 "Senior Indebtedness........................................4
1.26 "Senior Loans...............................................4
1.27 "Senior Loan Agreement......................................4
1.28 "UCC........................................................4
2. Maturity and Pay Off.................................................5
3. Interest.............................................................5
4. Principal Amount.....................................................6
5. Prepayments..........................................................6
6. Late Payments........................................................6
i
<PAGE>
7. Payments and Wiring Instructions.....................................6
8. Events of Default....................................................7
(a) Enumeration of Defaults.....................................7
(b) Payment Default.............................................7
(c) Affirmative Covenant Default................................7
(d) Reporting Covenant Default..................................7
(e) Negative Covenant Default...................................7
(f) Warranty Default............................................7
(g) Financial Test Default......................................7
(h) Cross Default...............................................8
(i) Subordination Default.......................................8
(j) Security Default............................................8
(k) Voluntary Insolvency Default................................8
(l) Insolvency Order............................................8
(m) Fraudulent Conveyance Default...............................9
9. Remedies and Acceleration............................................9
(a) Remedies....................................................9
(b) Acceleration of Payment.....................................9
(c) Waiver of Default...........................................9
10. Waivers by Maker....................................................10
11. Security for Payment................................................10
12. Intercreditor Agreement.............................................10
13. Collection for Costs................................................10
14. Amendment...........................................................10
15. Governing Law.......................................................11
16. Waiver of Jury Trial................................................11
17. Consent to Jurisdiction, Venue and Service of Process...............11
18. Non Negotiability; Non Assignability; Non-Transferability...........11
ii
<PAGE>
SENIOR SUBORDINATED NOTE
Date December 23, 1997
Maker Tanknology-NDE International, Inc., a Delaware
corporation, ProEco, Inc., a Delaware corporation,
Tanknology/NDE Corporation, a Delaware
corporation, 2368692 Canada, Inc., a Canadian
Federal corporation and Tanknology-NDE
Construction Services, Inc., a Delaware
corporation.
Payee DH Holdings Corp., a Delaware corporation.
Principal Amount $6,500,000
Stated Interest Rate 10% per annum
Default Interest Rate 14% per annum
Payment Date Payments to be made in 12 quarterly installments
commencing on March 31, 2000 with the final
installment due on December 31, 2002.
Maturity Date December 31, 2002
This is the Senior Subordinated Note due December 31, 2002 (the "Note")
provided for in that certain Note, Preferred Stock and Warrant Purchase
Agreement, dated as of December 23, 1997, as amended, restated, supplemented or
otherwise modified from time to time (the "Purchase Agreement") by and among DH
Holdings Corp., a Delaware corporation ("DH"), as Purchaser, and Tanknology-NDE
International, Inc. ("TNDE"), a Delaware corporation, ProEco, Inc. ("ProEco"), a
Delaware corporation, Tanknology/NDE Corporation ("NDE"), a Delaware
corporation, 2368692 Canada, Inc. ("Canada"), a Canadian Federal corporation,
and Tanknology-NDE Construction Services, Inc. ("Construction"), a Delaware
corporation, as Sellers. DH, together with its successors and assigns, is
referred to herein as "Payee". TNDE, ProEco, NDE, Canada and Construction,
together with their respective successors and assigns, are each individually and
collectively referred to herein as "Maker".
FOR VALUE RECEIVED, each Maker hereby jointly and severally PROMISES TO
PAY TO THE ORDER of Payee the principal amount of SIX MILLION FIVE HUNDRED
THOUSAND DOLLARS ($6,500,000), together with Interest (as defined herein), upon
the terms and subject to the conditions set forth in this Note.
<PAGE>
(S)1. Definitions, Rules of Construction and Notice
As used herein, the following terms have the following meaning, unless
the context otherwise requires:
1.1 "Accelerated" (and correlative terms such as "Acceleration,"
"Accelerating" and "Accelerated") means with respect to this Note that the
entire unpaid Principal Amount, together with all accrued but unpaid Interest,
becomes immediately due and payable prior to the Maturity Date, without, except
as expressly provided for in this Note, notice of intent to accelerate, notice
of acceleration of maturity, presentment, demand, protest, notice of protest or
other notice of default or dishonor of any type whatsoever, all of which are
expressly waived by Maker.
1.2 "Affiliate" means any person or entity directly or indirectly
controlling, controlled by or under direct or indirect common control with
respect to the specified person or entity.
1.3 "Affirmative Covenants" means the covenants of TNDE set forth in
Section 9 of the Purchase Agreement.
1.4 "Applicable Law" means, with respect to any person, any and all
federal, national, state, regional, local, municipal or foreign laws, statutes,
rules, regulations, guidelines, ordinances, licenses, permits, judicial or
administrative decisions of any country, or any political subdivision, agency,
commission, official or court thereof having jurisdiction over such person.
1.5 "Business Day" means any day other than a Saturday, Sunday or day
upon which banking institutions are authorized or required by law or executive
order to be closed in the City of Wilmington, Delaware.
1.6 "Collateral" is the collateral defined in the Pledge Agreement by
and between TNDE and DH and the Subordinated Security Agreement by and among
TNDE, ProEco, NDE, Canada, Construction and DH both dated as of December 23,
1997.
1.7 "Company" means Tanknology-NDE International, Inc., a Delaware
corporation, together with its Subsidiaries (as defined in the Purchase
Agreement).
1.8 "Financial Tests" means the financial tests with respect to the
Company set forth in Section 11 of the Purchase Agreement.
1.9 "Indebtedness" means with respect to the Company, as of any date
of determination, (i) all indebtedness of the Company for borrowed money or for
the deferred purchase price of property or services or which is evidenced by a
note, bond, debenture, or similar instrument, reflected on the most recent
financial statements, (ii) all obligations of the Company under any financing
lease, (iii) all obligations of the Company in respect of letters of credit,
acceptances, or similar obligations issued or created for the account of the
Company, (iv) all guaranty obligations
2
<PAGE>
of the Company, and (v) all liabilities secured by any lien on any property
owned by the Company, whether or not the Company has assumed or otherwise become
liable for the payment thereof; provided that, the term "Indebtedness" shall not
include any obligations incurred with regard to obtaining performance bonds and
payment bonds relating to the business of Construction.
1.10 "Insolvency Proceeding" means a proceeding before a court of
competent jurisdiction or other duly authorized authority under any Insolvency
Law seeking Insolvency Relief.
1.11 "Insolvency Law" means Title 11 of the United States Code (or any
successor law) or any similar Applicable Law providing for bankruptcy,
insolvency, conservatorship, receivership or other similar debtor's relief.
1.12 "Insolvency Relief" means discharge of indebtedness, liquidation,
reorganization or arrangement, appointment of a receiver, trustee, conservator,
custodian or liquidator or the granting of any stay or restraining order against
creditors under any Insolvency Law or other similar debtor's relief under any
Insolvency Law.
1.13 "Insolvency Order" means any order, judgment or decree entered in
any Insolvency Proceeding granting any Insolvency Relief.
1.14 "Intercreditor Agreement" means the Intercreditor and
Subordination Agreement dated as of December 23, 1997, by and between DH and
Bank One, Texas, N.A., as modified, amended or restated from time to time.
1.15 "Interest" has the meaning set forth in(S)3 hereof.
1.16 "Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (whether statutory or otherwise), or
preference, priority or other security agreement or similar preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the uniform commercial code or comparable law
of any jurisdiction in respect of any of the foregoing).
1.17 "Litigation" means any litigation based upon or arising out of
this Note or any Related Documents or any related instrument or agreement or any
of the transactions contemplated by the Purchase Agreement, this Note or any
course of conduct, dealing, statements (whether oral or written) or actions of
any of the parties.
1.18 "Negative Covenants" mean the covenants of TNDE set forth in
Section 10 of the Purchase Agreement.
3
<PAGE>
1.19 "Notice" means notice given in accordance with Section 13(h) of
the Purchase Agreement.
1.20 "Quarter" means each quarter annual period of the Fiscal Year,
and "Quarterly" means each Quarter. Each Quarter consists of three Months.
1.21 "Related Documents" means the Purchase Agreement, Note, the
Subordinated Security Agreement, the Pledge Agreement, the Preemptive Rights
Agreement, the Registration Rights Agreement, the Co-Sale Agreement, the
Certificate of Designation and the Warrant Certificate entered into pursuant to
the Purchase Agreement.
1.22 "Reporting Covenants" mean the covenants of Maker set forth in
Section 8 of the Purchase Agreement.
1.23 "Representation(s) and Warranty(ies)" means the representations
and warranties of each Maker set forth in Section 6 of the Purchase Agreement
and in any certificate of Maker delivered pursuant to Section 5 of the Purchase
Agreement.
1.24 "Security Documents" means the Subordinated Security Agreement
between TNDE, ProEco, NDE, Canada, Construction and DH and the Pledge Agreement
between TNDE and DH both dated as of December 23, 1997.
1.25 "Senior Indebtedness" means the Senior Loans and Indebtedness
incurred pursuant to the terms of any agreement between the Company and any bank
or financial institution providing for revolving credit loans secured by the
Collateral; provided that, any other agreement shall be consented to in writing
by DH, which consent shall not be unreasonably withheld, and the lender with
respect thereto shall have been granted a first perfected security interest in
the Collateral on terms substantially equivalent to those set forth in the
Senior Security Agreement (as defined in the Purchase Agreement); further
provided that, the term "Senior Indebtedness" may include up to $11 million of
Indebtedness incurred by the Company to replace the indebtedness incurred with
respect to the Senior Loan Agreement and such debt replacement need not be
consented to by DH; provided further that, notwithstanding the foregoing, any
such replacement of Indebtedness by the Company on terms materially adverse to
DH shall not be undertaken without the prior written consent of DH.
1.26 "Senior Loans" means the term loan and revolving line of credit
granted by Bank One, Texas, N.A. to TNDE and certain of its subsidiaries
pursuant to the Senior Loan Agreement, including all extensions, renewals and
refinancings thereof.
1.27 "Senior Loan Agreement" means the Loan Agreement, dated as of
October 25, 1996, by TNDE, certain of its subsidiaries and Bank One, Texas,
N.A., including all amendments, extensions, renewals and refinancings thereof.
1.28 "UCC" means the Uniform Commercial Code as in effect in the State
of Delaware.
4
<PAGE>
The rules of construction set forth in (S)13(g) of the Purchase
Agreement and the notice provisions set forth in (S)13(h) of the Purchase
Agreement shall be applicable to this Note.
(S)2. Maturity and Pay Off
The unpaid principal amount of this Note (the "Principal Amount"),
together with all accrued but unpaid Interest shall be due and payable in full
on the Maturity Date (specified above). Payment of the Principal Amount and all
accrued but unpaid Interest may be Accelerated upon the occurrence of an Event
of Default as provided for in (S)9 of this Note.
The date upon which the Principal Amount and all accrued but unpaid
Interest is paid or discharged in full is referred to as the "Pay Off Date".
Upon written Notice by Maker to Payee, Payee will furnish to Maker a pay off
letter setting forth the amount of the payment of Principal Amount and Interest
required to pay this Note in full as of a specified Pay Off Date.
(S)3. Interest
Interest shall accrue from the date of this Note through and including
the Pay Off Date on the unpaid Principal Amount at the Interest Rate (defined in
this Section) ("Interest"). All accrued but unpaid Interest shall be paid
Quarterly in arrears on each Payment Date (specified above), commencing with the
first Payment Date after the date of this Note.
The "Interest Rate" shall be a fixed rate per annum equal to the Stated
Interest Rate (specified above) unless the Default Interest Rate (specified
above) is in effect. Upon the occurrence of an Event of Default and the election
by Payee, in the sole exercise of its discretion, to impose the Default Interest
Rate by giving Notice of that election to Maker (the "Default Rate Election"),
the "Interest Rate" shall be a fixed rate per annum equal to the Default
Interest Rate, and the Default Interest Rate shall continue to be the "Interest
Rate" until the first Payment Date after the Default Rate Election at which such
Event of Default has been remedied or waived by Purchaser in writing and no
other Default or Event of Default is continuing unremedied or unwaived, provided
that the Note has not been Accelerated.
Notwithstanding any provision of this Note to the contrary: (i) in no
event shall the Interest Rate be a rate per annum in excess of the maximum
interest rate permissible under Applicable Law and (ii) to the extent that
Interest or other amounts paid with respect to this Note which are deemed to be
interest under Applicable Law result in interest payments in excess of those
permitted under Applicable Law, such excess payments shall be applied to the
payment of the unpaid Principal Amount or, if the Principal Amount has been paid
in full, shall be refunded to Maker.
Interest shall be calculated based upon: (i) the actual number of days
elapsed over each Quarter, including any additional days elapsed because the
scheduled Payment Date fell on a non-Business Day; (ii) Quarters consisting of
three months; and (iii) Quarterly compounding of any Interest accrued but unpaid
as of each Payment Date.
5
<PAGE>
(S)4. Principal Amount
The Principal Amount shall be paid in 12 installments of $541,666.67 of
Principal Amount each, payable Quarterly on each Payment Date, commencing on
March 31, 2000, and continuing until the earlier of the Pay Off Date or the
Maturity Date. In the event of any partial prepayment of Principal Amount, each
such partial prepayment shall be applied to pay the scheduled installments of
Principal Amount in inverse order of the Payment Dates on which such
installments are due and payable.
(S)5. Prepayments
Maker may prepay the Principal Amount in whole at any time or in part
from time to time; provided, that (i) each partial payment of Principal Amount
shall be in an amount equal to $250,000 or an integral multiple thereof and (ii)
each partial prepayment of Principal Amount shall be applied to pay the
scheduled installments of Principal Amount in inverse order of the Payment Dates
on which such installments are due and payable.
All prepayments of Principal Amount shall be accompanied by the payment
of all Interest accrued but unpaid through the date of prepayment with respect
to the Principal Amount prepaid.
(S)6. Late Payments
A payment of Principal Amount or Interest shall be deemed to be in
default if such payment is not made in the manner provided for in (S)7 of this
Note prior to 2:00 p.m. on the fifth calendar day following Notice by Payee to
Maker of such default.
(S)7. Payments and Wiring Instructions
All payments of Principal Amount and Interest shall be made by wire
transfer of immediately available funds to the account of Payee at or before
2:00 p.m. Wilmington, Delaware time on the Business Day that such payment is
due. Any wire transfer received by Payee after 2:00 p.m. Wilmington, Delaware
time on any Business Day shall be deemed to have been received by Payee prior to
such time on the next Business Day.
Unless payment is otherwise specified in a Notice by Payee to Maker to
be made to another account in the State of Delaware, all such payments shall be
wired in accordance with the following instructions:
Wilmington Trust Company
ABA# 031100092
Account No. 2458-6049
Account Name: Danaher Corporation
6
<PAGE>
In the event that any scheduled Payment Date falls on a non-Business
Day, such Payment Date shall be deemed to be the next Business Day following
such scheduled Payment Date, and such additional days shall be deemed to have
elapsed for purposes of computing the accrued Interest payable on such Payment
Date.
(S)8. Events of Default
(a) Enumeration of Defaults. Each of the following events shall be
an "Event of Default" for the purposes of this Note. An Event
of Default shall be deemed to continue until such default is
waived by written Notice by Payee to Maker or remedied by
action of Maker, and, in the case of any Event of Default
requiring Notice by Payee to Maker, if the Default is not
cured within the grace period provided for herein following
such Notice, until rescission of such Notice by the further
written Notice of Payee to Maker. The term "Default" means any
event which is not an Event of Default as of a specified date,
but which with the lapse of time, notice or both would
constitute an Event of Default.
(b) Payment Default. Maker defaults in the payment when due of any
installment of Principal Amount or Interest, and such default
is not remedied in the manner and within the grace period
provided for in (S)6 of this Note (a "Payment Default"). A
Payment Default shall be deemed to have occurred
notwithstanding the fact that the default in payment resulted
from compliance with or enforcement of the Intercreditor
Agreement.
(c) Affirmative Covenant Default. Maker fails to observe or
perform any Affirmative Covenant and such default is not
remedied within 30 calendar days after Notice is given by
Payee to Maker of such default.
(d) Reporting Covenant Default. Maker fails to observe or perform
any Reporting Covenant and such default is not remedied within
30 calendar days after Notice is given by Payee to Maker of
such default.
(e) Negative Covenant Default. Maker fails to observe or perform
any Negative Covenant and such default is not remedied within
30 calendar days after Notice is given by Payee to Maker of
such default.
(f) Warranty Default. Any Representation or Warranty proves to
have been untrue, incomplete or misleading in any material
respect when made or when deemed to have been made and such
breach is not completely remedied within 30 calendar days
after Notice is given by Payee to Maker of such default.
(g) Financial Test Default. As of any applicable date of
determination, Maker fails to satisfy any of the Financial
Tests and such failure remains uncured for a period of 30
7
<PAGE>
consecutive calendar days after Notice is given by Payee to
Maker of such default; provided that, the 30 day cure period
of this Section 8(g) shall not apply to Section 11(c) of the
Purchase Agreement.
(h) Cross Default. Maker defaults in the payment of any
Indebtedness with an unpaid principal amount in excess of
$25,000, but specifically excluding (A) the $300,000 principal
amount Gilbarco Patent Note identified in the Purchase
Agreement, and (B) any purchase money obligation, the payment
of which is being actively contested in good faith by Maker
(as guarantor, surety or principal) regardless of whether (i)
such default is waived by the obligee unless such waiver
constitutes full satisfaction of all amounts then due and
payable, (ii) payment of any Indebtedness of Maker is
accelerated, (iii) the contractual right of Maker to borrow
money under any loan, credit or similar agreement or
arrangement is suspended as a result of any default by Maker
with respect to such agreement or arrangement or (iv) any
action to enforce payment of any Indebtedness of Maker is
commenced against Maker or with respect to any collateral
securing such Indebtedness, unless such default, acceleration
or action is remedied or rescinded within a period of 10 days
after Notice is given by Payee to Maker of such default.
(i) Subordination Default. Any agreement with respect to the
Senior Indebtedness is amended or modified in violation of the
Intercreditor Agreement, the blocking period provided for in
the Intercreditor Agreement is commenced, payment of any
amount due under this Note is prevented due to compliance with
or the enforcement of the Intercreditor Agreement or any
amount previously paid with respect to this Note are repaid or
held in constructive trust by Payee due to compliance with or
the enforcement of the Intercreditor Agreement or Maker seeks
forbearance with respect to the payment of any amounts due
under the Senior Indebtedness.
(j) Security Default. Maker defaults in the observance or
performance of any covenant or agreement required under the
Security Documents and such default continues for a period of
30 calendar days after Notice is given by Payee to Maker of
such default.
(k) Voluntary Insolvency Default. Maker: (i) discontinues the
conduct of its business; (ii) applies for or consents to the
imposition of any Insolvency Relief; (iii) voluntarily
commences or consents to the commencement of an Insolvency
Proceeding; (iv) files an answer admitting the material
allegations of any involuntary commencement of an Insolvency
Proceeding; (v) makes a general assignment for the benefit of
its creditors; or (vi) is unable or admits in writing its
inability to pay its debts as they become due (a "Voluntary
Insolvency Default").
(l) Insolvency Order. Any Insolvency Order is entered against
Maker and such Insolvency Order is not dismissed within 30
calendar days of its entry (an "Involuntary Insolvency
Default").
8
<PAGE>
(m) Fraudulent Conveyance Default. Maker: (i) conceals, removes or
permits to be concealed or removed all or any part of its
property with the intent to hinder, delay or defraud any of
its creditors; (ii) makes or permits any conveyance of its
material properties that would be deemed fraudulent to
creditors under any Insolvency Law or fraudulent conveyance
provision of Applicable Law; (iii) engages in a bulk transfer
of any of its property without complying with the bulk
transfer provisions of Applicable Law; (iv) has, while it is
insolvent, caused or permitted any of its creditors to obtain
a Lien on any of its property by legal proceedings or
otherwise which is not vacated within 30 calendar days.
(S)9. Remedies and Acceleration
(a) Remedies. After payment of this Note is Accelerated, Payee
shall have (i) all rights and remedies granted to it under
this Note, the Purchase Agreement and the Security Documents
and continue to have the rights and remedies granted to it
under the other Related Documents and (ii) all rights of a
creditor under Applicable Law (including the UCC). All such
rights and remedies and the exercise thereof shall be
cumulative. No exercise of any such rights and remedies shall
be deemed to be exclusive or constitute an election of
remedies.
(b) Acceleration of Payment. Upon the occurrence of a Voluntary
Insolvency Default or an Involuntary Insolvency Default,
payment of this Note shall be Accelerated. Upon the occurrence
and during the continuation of any other Event of Default,
Payee may, in the sole exercise of its discretion, elect to
cause payment of this Note to be Accelerated by giving written
Notice of such election to Maker (the "Acceleration Notice").
Once payment of this Note has been properly Accelerated as
provided for in this section, such Acceleration may be revoked
only by Payee, in the sole exercise of its discretion, giving
written Notice of revocation to Maker, regardless of whether
the Event of Default giving rise to such Acceleration has been
remedied by action of Maker.
(c) Waiver of Default. No Default or Event of Default may be
waived nor shall be deemed to have been waived except by an
express written Notice by Payee to Maker, and any such grant
of waiver shall be applicable only to the specific Defaults or
Events of Default expressly identified in such Notice and
shall not be deemed to apply to any other or subsequent
Default or Event of Default. Payee may grant or withhold any
such waiver in the sole exercise of its discretion, which may
be conditioned upon the payment by Maker of a premium, the
grant of additional collateral to secure the payment of this
Note or the acceptance of other terms and conditions under
this Note or the Purchase Agreement. No course of dealing by
Payee or its agents and employees, failure, forbearance or
delay by Payee in exercising any of its rights or remedies
under this Note, the Purchase Agreement, the Security
Documents or any
9
<PAGE>
other Related Documents shall operate as a waiver of any
Default or Event of Default or of any right of Payee under
this Note.
(S)10. Waivers by Maker
To the fullest extent permitted by Applicable Law, Maker waives with
respect to this Note: presentment, protest and demand, notice of protest, demand
and dishonor, and diligence in collection. Maker agrees that: Payee may release
(i) all or any part of the collateral securing the payment of this Note or (ii)
any guarantor or surety with respect to this Note, all without notice to Maker
and without affecting in any way the obligation of Maker under this Note.
(S)11. Security for Payment
Payment of this Note is secured under the terms and subject to the
conditions of the Security Documents. Nothing in this Note shall be deemed to
preclude Payee from obtaining other or additional security for the payment of
this Note or to require Payee to elect remedies or proceed against any
collateral or guarantee before Accelerating payment of this Note or taking any
legal or other action to collect payment of this Note.
(S)12. Intercreditor Agreement
Payee and Bank One, Texas, N.A. ("BOT") are parties to the
Intercreditor Agreement, pursuant to which certain of Payee's rights under this
Note and the Security Documents are subordinated to BOT. Nothing in this Note,
the Purchase Agreement or such Intercreditor Agreement shall grant to Maker any
rights as a beneficiary under such Intercreditor Agreement nor any right to
enforce against Payee any provision of such Intercreditor Agreement.
(S)13. Collection for Costs
Maker shall reimburse Payee for all reasonable costs and expenses
(including legal fees and disbursements) incurred by Payee in connection with
the collection or attempted collection of the payment of this Note through legal
proceedings or otherwise.
(S)14. Amendment
This Note may not be amended, restated, supplemented or otherwise
modified except by an express written agreement executed and delivered by Maker
and Payee. Compliance with the covenants and other provisions of this Note may
not be waived except by an express written waiver signed and delivered by Payee.
10
<PAGE>
(S)15. Governing Law
This Note and the rights and obligations of Payee and Maker under this
Note shall be governed by and construed under the laws of the State of Delaware.
(S)16. Waiver of Jury Trial
Payee and Maker, after consulting or having had the opportunity to
consult with legal counsel, knowingly, voluntarily and intentionally waive any
right any of them may have to a trial by jury in any Litigation. Neither Payee
nor Maker shall seek to consolidate, by counterclaim or otherwise, any action in
which a jury trial has been waived with any other action in which a jury trial
cannot be or has not been waived. These provisions shall not be deemed to have
been modified in any respect or relinquished by either Payee or Maker except by
written instrument executed by both of them.
(S)17. Consent to Jurisdiction, Venue and Service of Process
Payee and Maker, each after having consulted or having had the
opportunity to consult with legal counsel, hereby knowingly, voluntarily and
intentionally: (i) consents to the jurisdiction of the Delaware State Court
sitting in New Castle County, Delaware and the United States District Court with
jurisdiction over New Castle County, Delaware with respect to any Litigation;
(ii) waives any objections to the venue of any Litigation in either such court;
(iii) agrees not to commence any Litigation except in one or the other of such
courts and agrees not to contest the removal of any Litigation commenced in any
other court to one or the other of such courts; (iv) agrees not to seek to
remove, by consolidation or otherwise, any Litigation commenced in either of
such courts to any other court; and (v) waives personal service of process in
connection with any Litigation and consents to service of process by registered
or certified mail in accordance with Applicable Law. These provisions shall not
be deemed to have been modified in any respect or relinquished by either Payee
or Maker except by written instrument executed by all of them.
(S)18. Non Negotiability; Non Assignability; Non-Transferability
This Note shall be non-negotiable, non-assignable and non-transferable
and any attempted negotiation, assignment, or transfer shall be void and of no
effect, without the express written consent of the Maker; provided that DH
Holdings Corp. may negotiate, assign, or transfer this Note without the consent
of the Maker to Danaher Corporation or to any Affiliate of Danaher Corporation.
IN WITNESS WHEREOF, this Note has been executed and delivered by and on
behalf of Maker by its duly authorized officer, effective as of the Date of Note
(set forth above).
11
<PAGE>
TANKNOLOGY-NDE INTERNATIONAL, INC.
By: /s/ Jay Allen Chaffee
-------------------------------
Name: Jay Allen Chaffee
-----------------------------
Title: Chairman
----------------------------
PROECO, INC.
By: /s/ Jay Allen Chaffee
-------------------------------
Name: Jay Allen Chaffee
-----------------------------
Title: Chairman
----------------------------
TANKNOLOGY/NDE CORPORATION
By: /s/ Jay Allen Chaffee
-------------------------------
Name: Jay Allen Chaffee
-----------------------------
Title: Chairman
----------------------------
2368692 CANADA, INC.
By: /s/ Jay Allen Chaffee
-------------------------------
Name: Jay Allen Chaffee
-----------------------------
Title: President
----------------------------
TANKNOLOGY-NDE CONSTRUCTION SERVICES, INC.
By: /s/ Jay Allen Chaffee
-------------------------------
Name: Jay Allen Chaffee
-----------------------------
Title: Chairman
----------------------------
12
<PAGE>
SCHEDULE 1
LIENS
Lien from NDE Environmental Corporation to Trammel Crow Central Texas, Ltd.
secured by all goods, wares, equipment, fixtures, furniture, inventory,
accounts, contract rights, chattel paper, general intangibles, personal property
and proceeds situated at 8900 Shoal Creak, Building 200 -Austin, Texas 78758
<PAGE>
SCHEDULE 2
TRADE NAMES
NDE Environmental Corporation
Tanknology Corporation International
NDE Testing & Equipment, Inc.
Tanknology Canada (1988), Inc.
<PAGE>
SCHEDULE 3
12/19 draft
-----------
INDEBTEDNESS
<TABLE>
<CAPTION>
BALANCE BOT
ITEM 11/30/97 6.01 REFERENCE
- --------------------------------------------------- ---------- ----------------
<S> <C> <C>
Insurance Premium Financing $ 677,057 (H)
Vehicles Financing 164,549 (I)
Subordinated notes to Josephthal, Lyon & Ross and 388,191 (E-4.09)
Riverbank as assignee of Spears, Benzak, Solomon
and Farrell
Leased equipment 39,625 (E-4.09)
Convertible promissory note to John Clare and 257,144 (E-4.09)
Donald Valverde (EcoAm purchase)
Gilbarco Non-recourse Patent Note 300,000 (E-4.09)
Baker & Botts 47,895 (E-4.09)
Total Notes $1,874,461
==========
Letter of Credit--Wright Express (gas credit cards) 60,000 (A)
Letter of Credit--Construction Services Bonding 125,000 (A)
Total Indebtedness $2,059,461
==========
</TABLE>
<PAGE>
SCHEDULE 4
LEASES
TANKNOLOGY-NDE CORPORATION
SCHEDULE OF REAL ESTATE LEASES
<TABLE>
- ----------------------------------------------------------------------------------------
<S> <C>
Corporate Office Arrowsmith Technologies, Inc.
8900 Shoal Creek Blvd., Bldg. #200 8920 Business Park Drive
Austin, TX 78757 Austin, TX 78759
- ----------------------------------------------------------------------------------------
Corporate Office 8900 Shoal Creek, A Texas General Ptnshp.
8900 Shoal Creek Blvd., Bldg. #200 c/o Trammell Crow Central Texas, Ltd.
Austin, TX 78757 301 Congress Ave., Suite 1300
Austin, TX 78701
- ----------------------------------------------------------------------------------------
Previous Corporate Office MV Wall Street Ltd.
8906 Wall Street 5929 Balcones, Suite 100
Suite 306 Austin, TX 78731
Austin, TX 78754
- ----------------------------------------------------------------------------------------
Previous Corporate Office MV Wall Street Ltd.
8906 Wall Street 5929 Balcones, Suite 100
Suites 802 & 803 Austin, TX 78731
Austin, TX 78754
- ----------------------------------------------------------------------------------------
Southwest Office-Phoenix-Old Lease San Lee, Inc.
(Tanknology/NDE Corporation) Helm Drive Corporate Office
7418 East Helm Dr., #263 7418 East Helm Drive
Scottsdale, AZ 85260 Scottsdale, AZ 85260
- ----------------------------------------------------------------------------------------
Southwest Office-Phoenix Eggen Weed Control, Inc.
(Tanknology/NDE Corporation) 7619 E. Greenway, Suite #2
7619 E. Greenway Rd., #5 Scottsdale, AZ 85260
Scottsdale, AZ 85260
- ----------------------------------------------------------------------------------------
Northwest Office-Sacramento Tcherkoyan Family Trust dba Wine Country Plaza
(NDE Environmental Corporation)
1420T Kettleman Lane
Lodi, CA 95242
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------
<S> <C>
Midatlantic Office-Cherry Hill Hillflex Associates
(Tanknology Corporation Int'l.) 510 Heron Drive
100 Dobbs Lane, Suite 207 Bridgeport, NJ 08014
Cherry Hill, NJ 08034
- ----------------------------------------------------------------------------------------
Southern California Office-Temecula Jefferson Court
(Tanknology/NDE Corporation) 24564 Hawthorne, B1
27576 Commerce Center Dr. #109 Torrance, CA 90505
Temecula, CA 92590
- ----------------------------------------------------------------------------------------
Northeast Office-Springfield-Old Lease Fred & Sylvia Wilochka
(Tanknology Corporation Int'l.)
37 St. Jacques Ave.
Agawam, MA 01001
- ----------------------------------------------------------------------------------------
Northeast Office-Springfield Daniel W. Roy
(Tanknology/NDE Corporation) 1011 Liberty Street
39 Sullivan Street Springfield, MA 01104
Springfield, MA 01104
- ----------------------------------------------------------------------------------------
Midwest Office-Kansas City-Old Lease Security Capital Industrial Trust
(Tanknology Corporation Int'l.) 14100 East 35th Place, Suite 100
404 NW Business Park Lane Aurora, CO 80011
Riverside, MO 64150 Attention: Asset Management
- ----------------------------------------------------------------------------------------
Midwest Office-Kansas City SCI Client Services
(Tanknology/NDE Corporation) 224 NW Platte Valley Drive
404 NW Business Park Lane Riverside, MO 64150
Riverside, MO 64150 Attention: Robert Gude
- ----------------------------------------------------------------------------------------
Midwest Office-Columbus Schottenstein Stores Corporation
(Tanknology Corporation Int'l.) 1798 Frebis
470 Schrock Road, Suite L Columbus, OH 43207
Columbus, OH 43229
- ----------------------------------------------------------------------------------------
Southeast Office-Atlanta Watkins Center Joint Venture
(NDE Environmental Corporation) 6270E McDonough Drive
1756 Wilwat Drive, Suite C Norcross, GA 30093
Norcross, GA 30093
- ----------------------------------------------------------------------------------------
Midwest Office-Chicago Church Road Partners
(Tanknology Corporation Int'l.) 1501 Commerce Road
870 Church Road Elgin, IL 60123
Elgin, IL 60123
- ----------------------------------------------------------------------------------------
</TABLE>
-5-
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------
<S> <C>
Construction Services Office-Atlanta Innovest Realty Limited Partnership
(Tanknology/NDE Corporation) DBA Innovest Properties
275 Carpenter Drive, Suite #304 Sandy Springs Professional Building
Atlanta, Georgia 30328 7001 Peachtree Industrial Boulevard, #208
Norcross, GA 30092
- ----------------------------------------------------------------------------------------
Houston Office Weingarten Realty Investors
(Tanknology/NDE Corporation) 2600 Citadel Plaza Drive
600 Kenrick, Suite D-6 Houston, TX 77008
Houston, TX 77060 P.O. Box 924133
Houston, TX 77292-4133
- ----------------------------------------------------------------------------------------
CMS Office-Torrance Espirit Jones Torrance, Inc.
(Tanknology/NDE Corporation) DBA Mini Suites
3655 Torrance Boulevard, #322-324 211 E. Ocean Blvd., Suite #230
Torrance, CA 90503 Long Beach, CA 90802
- ----------------------------------------------------------------------------------------
Virginia Beach Office Barbour Realty
4605 Pembroke Lake Circle 4633 Pembroke Lake Circle
Suite 302A Virginia Beach, VA 23455
Virginia Beach, VA 23455
- ----------------------------------------------------------------------------------------
Austin Warehouse ARVCO Realty
7801 North Lamar
Austin, TX 78752
- ----------------------------------------------------------------------------------------
Austin Warehouse-McPhaul PK & Sheela Vasudev
806 McPhaul (Syndications, Inc. Lease)
Austin, TX P.O. Box 161802
Austin, TX 78716-1802
- ----------------------------------------------------------------------------------------
Safesite, Inc. Safesite, Inc.
4803 Commercial Park Dr.
Austin, TX 78724
- ----------------------------------------------------------------------------------------
Public Storage Public Storage
Austin/Research 24709
9205 Research Blvd.
Austin, TX 78758
- ----------------------------------------------------------------------------------------
Public Storage Public Storage
Fm Pk/17-92 25455
8226 S Hwy 17-92
Fem Park, FL 32730
- ----------------------------------------------------------------------------------------
</TABLE>
-6-
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------
<S> <C>
Public Storage Public Storage
Fmgt/Brdhllow 21409
47 Broad Hollow Rd.
Farmingdale, NY 11735
- ----------------------------------------------------------------------------------------
</TABLE>
-7-
<PAGE>
SCHEDULE 5
FINANCIAL STATEMENTS
See attached Form 10K and 10Q.
-8-
<PAGE>
SCHEDULE 6
SHAREHOLDER INFORMATION
A. Holders of Record of Capital Stock of TNDE and subscriptions, warrants,
-----------------------------------------------------------------------
options, convertible securities and other such rights to purchase or
--------------------------------------------------------------------
acquire Capital Stock of TNDE:
-----------------------------
See attached Exhibit 6A.
B. Non Financing Warrants to purchase Common Stock Outstanding:
-----------------------------------------------------------
<TABLE>
<CAPTION>
NAME NUMBER OF WARRANTS
<S> <C>
Josephthal, Lyon & Ross 7,896
Lagunitas Partners, L.P. 26,914
McGettigan, Wick & Co. 3,010
Proactive Partners, L.P. 330,874
Daniel Purjes 43,338
Daniel Sharplin 26,360
Others 99,661
-------
Total 538,053
</TABLE>
C. Other
-----
A $5,000 contract right convertible into 2,000 shares of Common Stock is
still outstanding from prior private placement of preferred shares. In and
around January 1994, TNDE entered into subscription agreements with several
investors relating to the proposed private placement of preferred shares.
Prior to the closing of such subscription agreements, TNDE and all of the
proposed investors except for Michael Lowe agreed to revise the
subscription agreements to provide for the issuance and sale of Common
Stock of TNDE. Michael Lowe refused to cancel his subscription agreement
which provided for issuance and sale of $5,000 of preferred stock. Michael
Lowe never paid any amount to TNDE or its affiliates for such subscription.
Michael Lowe has not filed a formal or written claim nor have there been
any communications regarding this matter since approximately August 1995.
-9-
<PAGE>
D. Options Outstanding under the Amended and Restated 1989 Stock Option Plan
-------------------------------------------------------------------------
immediately after Closing:
--------------------------
<TABLE>
<CAPTION>
NAME NUMBER OF OPTIONS
<S> <C>
Mark Bober 40,000
William Callaway 40,000
Jay Chaffee 1,290,016/1/
Jerry A. Folsom 100,000
Eric Hopkins 175,556
Kevin Keegan 25,000
Jane Keith 100,000
Dan Kubala 201,000
Richard Lawson 50,000
Charles McGettigan 40,000
Baxter Nairon 384,000
David Osowski 250,000
Russel Reichart 150,000
Carol Rogerson 25,000
Richard Schnabel 90,000
Dan Sharplin 1,890,024/2/
Michael Taylor 40,000
Myron Wick 40,000
Reserved for Issuance 1,069,404
---------
Total 6,000,000
</TABLE>
- ----------------
/1/ Includes 800,016 cash stock appreciation rights convertible into
stock options on or before December 31, 1998 at the option of the Company.
/2/ Includes 1,200,024 cash stock appreciation rights convertible into
stock options on or before December 31, 1998 at the option of the Company.
-10-
<PAGE>
E. Options outstanding under the 1995 Incentive Plan for Nonmanagement
-------------------------------------------------------------------
Employees:
----------
<TABLE>
<CAPTION>
NAME NUMBER OF OPTIONS
<S> <C>
Brad Ballreich 25,000
Jerry Belloli 25,000
Jim Boekker 25,000
Barbara Botts 10,000
Marc Buffkin 25,000
Robert Gattilia 8,000
Joel Hershey 25,000
Brad Hoffman 5,000
Bud Mattox 25,000
Kevin O'Hearn 25,000
Harry Perone Jr. 5,000
Jennifer Ward 25,000
Reserved for Issuance 22,000
------
Total 250,000
</TABLE>
F. Securities Transactions Effective Upon Closing:
----------------------------------------------
1. New Issuance:
a. Redeemable Convertible Preferred (3,000,000 shares Common Stock
equivalent)
b. Danaher Warrants representing 4,500,000 shares of Common Stock
c. Bank One, Texas Warrants representing 350,000 shares of Common
Stock
2. Cancellation: Bank One Capital Partners Warrants representing
13,022,920 shares of Common Stock.
G. Transfer Agent Schedule and Confirmation:
----------------------------------------
See Exhibit 6G.
-11-
<PAGE>
SCHEDULE 7
OWNERSHIP
See Schedule 6.
-12-
<PAGE>
SCHEDULE 7
TNDE OBLIGATIONS
None.
-13-
<PAGE>
EXHIBIT 2
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY
NOT BE DISTRIBUTED, SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR OFFERED UNLESS
THERE IS IN EFFECT A REGISTRATION STATEMENT UNDER SUCH ACT AND LAWS COVERING
SUCH SECURITIES OR THE ISSUER RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF
THESE SECURITIES REASONABLY SATISFACTORY TO THE ISSUER OR A NO-ACTION LETTER
FROM THE COMMISSION STATING THAT SUCH DISTRIBUTION, SALE, TRANSFER, ASSIGNMENT,
HYPOTHECATION OR OFFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT AND LAWS.
----------------------------------------
Tanknology-NDE International, Inc.
Warrant Certificate
----------------------------------------
Dated as of December 23, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
(S)1. Definitions............................................................................2
1.1 Additional Common Shares......................................................2
1.2 Affiliate.....................................................................2
1.3 Board of Directors............................................................2
1.4 Business Day..................................................................2
1.5 Capital Stock.................................................................2
1.6 Commission....................................................................2
1.7 Common Shares.................................................................2
1.8 Convertible Securities........................................................2
1.9 Exchange Act..................................................................3
1.10 Month.........................................................................3
1.11 Note..........................................................................3
1.12 Notice........................................................................3
1.13 Person........................................................................3
1.14 Preferred Stock...............................................................3
1.15 Preemptive Rights Agreement...................................................3
1.16 Qualified Public Offering.....................................................3
1.17 Securities Act................................................................3
1.18 Warrant Shares................................................................3
(S)2. Terms and Conditions...................................................................3
2.1 Number of Warrants............................................................3
2.2 Exercise Period...............................................................4
2.3 Exercise Price................................................................4
2.4 Definitions...................................................................4
2.5 Manner of Exercise and Effectiveness..........................................4
2.6 Payment of Exercise Price.....................................................5
2.7 Delivery of Stock Certificates, etc...........................................5
(S)3. Antidilution Adjustment................................................................5
3.1 Number of Warrant Shares......................................................5
3.2 Adjustment Event..............................................................5
3.3 Reorganization Event..........................................................5
3.4 Other Event...................................................................6
(S) 4. Restrictive Legends....................................................................6
(S) 5. Availability of Information............................................................7
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
(S)6. Reservation of Common Shares...........................................................7
(S)7. Due Organization; No Violation.........................................................7
(S)8. Ownership; Registration of Transfer; Exchange and Substitution of Warrant. ............8
8.1 Ownership of Warrant..........................................................8
8.2 Registration of Transfers.....................................................8
8.3 Replacement of Warrant Certificate............................................8
8.4 Expenses......................................................................8
(S)9. No Rights or Liabilities as Stockholder................................................8
(S)10. Miscellaneous..........................................................................8
10.1 Amendments, Modifications and Waivers.........................................8
10.2 Governing Law.................................................................9
10.3 Rules of Construction.........................................................9
10.4 Notices.......................................................................9
(S) 11. Assignment.............................................................................9
(S) 12. Preemptive Rights......................................................................9
</TABLE>
-ii-
<PAGE>
Warrant Certificate
Company Tanknology-NDE International, Inc., a
Delaware Corporation ("TNDE")
Holder DH Holdings Corp., a Delaware
corporation ("DH")
Warrant Shares Common Stock, $0.0001 par value, of
TNDE ("Common Shares")
Number of Warrants 4,500,000 (subject to adjustment)
("Warrants")
Exercise Price $0.375 per Warrant
Commencement Date December 23, 1997
Expiration Date December 31, 2002
Date of Warrant December 23, 1997
This is the WARRANT CERTIFICATE (the "Warrant Certificate") provided
for in that certain Note, Preferred Stock and Warrant Purchase Agreement dated
as of December 23, 1997, as amended, restated, supplemented or otherwise
modified from time to time (the "Purchase Agreement") by and among DH, as
purchaser, and TNDE, ProEco, Inc. ("ProEco"), a Delaware corporation,
Tanknology/NDE Corporation ("NDE"), a Delaware corporation, 2368692 Canada, Inc.
("Canada"), a Canadian Federal Corporation and Tanknology-NDE Construction
Services, Inc. ("Construction"), a Delaware corporation, as sellers. DH,
together with its successors and assigns, is referred to as the "Holder". TNDE,
together with its successors and assigns, is referred to as the "Company". The
Holder and the Company are referred to collectively as the "Parties" and
individually as a "Party".
This Warrant Certificate is one of the Related Documents referred to in
the Purchase Agreement.
FOR VALUE RECEIVED, the Company hereby grants to the Holder Four
Million Five Hundred Thousand (4,500,000) Warrants, each Warrant to purchase one
Common Share, upon the terms and subject to the conditions set forth in this
Warrant Certificate, which Warrants shall expire and be of no further force and
effect after the Expiration Date (set forth above).
<PAGE>
(S) 1. Definitions
As used herein, the following terms shall have the following meanings,
unless the content otherwise requires:
1.1 "Additional Common Shares" means all Common Shares issued
by the Company after December 23, 1997, other than (a) Warrant Shares, (b)
shares of the Company's Common Stock issued upon the conversion of the preferred
shares issued to DH pursuant to the Purchase Agreement and (c) shares issued
under the Company's employee and director stock option plans.
1.2 "Affiliate" means any Person directly or indirectly
controlling, controlled by, or under direct or indirect common control with, the
Company or another specified Person. A Person shall be deemed to control another
Person if such Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of such corporation, whether
through the ownership of voting securities, by contract or otherwise.
1.3 "Board of Directors" means the board of directors of the
Company and, as applicable and to the extent permitted by law, any committee of
such board of directors authorized to exercise the powers of the board of
directors.
1.4 "Business Day" means any day other than a Saturday, Sunday
or day upon which banking institutions are authorized or required by law or
executive order to be closed in the City of Washington, D.C.
1.5 "Capital Stock" of any Person means, any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock, including each class of common stock and preferred stock of such Person
or partnership interests and any warrants, options or other rights to acquire
such stock or interests.
1.6 "Commission" means the Securities and Exchange Commission
or any other successor federal agency.
1.7 "Common Shares" means the shares of common stock, $0.0001
par value, of the Company, at any time outstanding.
1.8 "Convertible Securities" means evidences of indebtedness,
shares of stock or other securities that are convertible into or exchangeable
for, with or without payment of additional consideration in cash or property, or
options, warrants or other rights that are exercisable for, Common Shares that,
when issued, would constitute Additional Common Shares, either immediately or
upon the occurrence of a specified date or a specified event.
-2-
<PAGE>
1.9 "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time.
1.10 "Month" means a calendar month, and "Monthly" means each
Month.
1.11 "Note" means the $6,500,000 aggregate principal amount
Senior Subordinated Note issued and sold by the Company, ProEco, NDE, Canada and
Construction to DH pursuant to the Purchase Agreement, due December 31, 2002.
1.12 "Notice" means any notice required to be given to any
Party under the Purchase Agreement or any of the Related Documents in accordance
with Section 13(h) of the Purchase Agreement.
1.13 "Person" means any individual, corporation, limited
liability company, partnership, joint venture, association, joint stock company,
trust, unincorporated organization, governmental authority or any other form of
entity.
1.14 "Preferred Stock" means the shares of Series A Redeemable
Convertible Preferred Stock of the Company issued to DH pursuant to the Purchase
Agreement.
1.15 "Preemptive Rights Agreement" means the Preemptive Right
Agreement by and between the Company and DH and dated as of December 23, 1997.
1.16 "Qualified Public Offering" means the first offer and
sale to the public by the Company or any holders of shares of any class of its
Capital Stock, after the Closing Date as defined in the Purchase Agreement,
pursuant to a registration statement that has been declared effective by the
Commission; provided, however, that the gross proceeds of the shares issued and
sold by the Company are at least $10,000,000.
1.17 "Securities Act" means the Securities Act of 1933, as
amended from time to time.
1.18 "Warrant Shares" means shares of the Company's Common
Stock issued upon the exercise of any Warrants.
(S) 2. Terms and Conditions
2.1 Number of Warrants. The number of Warrants granted
pursuant to this Warrant Certificate is 4,500,000 Warrants. Subject to
adjustment as provided for in this Warrant Certificate, each Warrant evidences
the right of the Holder to purchase from the Company one authorized but unissued
Common Share, upon the terms and subject to the conditions set forth in this
Warrant Certificate.
-3-
<PAGE>
2.2 Exercise Period. All of the Warrants are exercisable in a
single exercise by the Holder at any time during the period commencing on the
Commencement Date and ending on the Expiration Date (the "Exercise Period").
2.3 Exercise Price. Upon exercise of each Warrant, the Holder
shall purchase all of the Warrant Shares then issuable upon exercise of such
Warrant for an aggregate amount equal to the Exercise Price regardless of the
number of Warrant Shares issuable upon exercise of each Warrant.
2.4 Definitions. As used in this Warrant Certificate:
(i) the term "Adjustment Event" means any of the
following events (except if such event is with
respect to the Holder's Preferred Stock):
(a) the Company declares a dividend or makes a
distribution on its outstanding shares in Common
Shares or Convertible Securities, or
(b) the Company subdivides or reclassifies any
of its outstanding Common Shares into a
greater number of shares, or
(c) the Company combines or reclassifies any of
its outstanding shares into a smaller number
of Common Shares.
(ii) the term "Reorganization Event" means any of the
following events:
(a) capital reorganization or reclassification
or recapitalization of the Capital Stock of
the Company (other than any Adjustment Event
and other than such events solely with
respect to the Holder's Preferred Stock);
(b) any merger or consolidation of the Company with or
into another corporation; or
(c) the sale or transfer of the property of the
Company as an entirety or substantially as
an entirety.
2.5 Manner of Exercise and Effectiveness. The Holder may
exercise all of the Warrants in a single exercise by delivering to the Company
at its address for Notice: (i) the Notice of Exercise form attached to this
Warrant Certificate duly completed and executed; (ii) this Warrant Certificate
surrendered for cancellation; and (iii) payment or evidence of payment of the
Exercise Price for the Warrants. The exercise of the Warrants shall be deemed to
be effective and the Holder or its designee identified in the Notice of Exercise
shall be deemed to become the registered holder
-4-
<PAGE>
of the Warrant Shares issued upon exercise of the Warrants effective as of the
close of business on the Business Day upon which the foregoing deliveries are
completed.
2.6 Payment of Exercise Price. Upon exercise of the
Warrants, the Holder shall pay the Exercise Price for such Warrants to the
Company by: (i) wire transfer of immediately available funds; (ii) delivery of a
certified or cashiers check; or (iii) reducing the unpaid principal amount of
the Note by an amount equal to the Exercise Price.
2.7 Delivery of Stock Certificates, etc. As soon as
practicable after the exercise of this Warrant Certificate, and in any event
within five Business Days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder or its designee identified in the Notice of
Exercise, a certificate or certificates for the number of Warrant Shares to
which the Holder or such designee shall be entitled upon such exercise, plus, in
lieu of any fractional share to which the Holder would otherwise be entitled,
cash in an amount equal to the same fraction (calculated to the nearest 1/100th
of a share) of the fair market value of a Warrant Share as determined in good
faith by the Board of Directors of the Company for such purpose. Such
certificates shall include all appropriate legends and restrictions including
those provided for in (S)4.
(S) 3. Antidilution Adjustment.
3.1 Number of Warrant Shares. The number of Warrant Shares
that may be purchased by the Holder in consideration of the payment of the
Exercise Price is initially 4,500,000 Common Shares; provided, however, that
such number of shares is subject to adjustment as provided for in this (S)3,
which number of Warrant Shares, as so adjusted from time to time is referred to
as the "Number of Warrant Shares."
3.2 Adjustment Event. Upon the occurrence of any Adjustment
Event, the Number of Warrant Shares shall be adjusted immediately after the
applicable record date with respect to such Adjustment Event as follows. The
adjusted Number of Warrant Shares shall be a number equal to the Number of
Warrant Shares, immediately prior to such event multiplied by a fraction (i) the
numerator of which is the number of outstanding Common Shares (including Common
Shares issuable upon the conversion or exercise of any Convertible Securities)
immediately after the record date with respect to such Adjustment Event, and
(ii) the denominator of which is the number of outstanding Common Shares
(including Common Shares issuable upon the conversion or exercise of any
Convertible Securities) immediately before such record date. Any such adjustment
shall be calculated to the nearest 0.001 Warrant Share.
3.3 Reorganization Event. Upon the occurrence of a
Reorganization Event, there shall thereafter be issuable or deliverable upon the
exercise of this Warrant Certificate (in lieu of the Warrant Shares), as
appropriate, the number of shares of stock, other securities or property to
which a Holder of the number of Common Shares equal to the Number of Warrant
Shares at the date
-5-
<PAGE>
of the Reorganization Event would have been entitled to, calculated using the
Exercise Price, as a result of such Reorganization Event.
Prior to and as a condition of the consummation of any Reorganization
Event, the Company shall cause effective provisions to be made to effect the
purposes of this (S)3.3, including, if appropriate, an agreement among the
Company, any successor to the Company and the Holder.
3.4 Other Event. In case any event shall occur as to which
the other provisions of this (S)3 are not strictly applicable but the failure to
make any adjustment would not fairly protect the purchase rights represented by
this Warrant Certificate in accordance with the essential intent and principles
hereof, then the Holder may request in writing within one hundred twenty (120)
days after the occurrence of such event that the Company examine the propriety
of an adjustment to the Number of Warrant Shares. Unless the Company and the
Holder shall have mutually agreed upon an adjustment, or that no adjustment is
required, within thirty (30) days after the receipt of such request, the Company
shall appoint a firm of independent certified public accountants of recognized
national standing (which may be the regularly engaged accountants of the
Company), to give an opinion upon the adjustment, if any, on a basis consistent
with the essential intent and principles established in this (S)3, necessary to
preserve, the purchase rights represented by this Warrant Certificate. Upon
receipt of such opinion, the Company will promptly mail a copy thereof to the
holder of this Warrant Certificate and shall make the adjustments described
therein. In any event, the Holder and the Company shall each bear one-half of
the cost and expense of such opinion.
(S) 4. Restrictive Legends.
Except as otherwise permitted by this (S)4, this Warrant Certificate
and each Warrant Certificate issued in exchange or substitution for any Warrant
Certificate, and each Warrant Certificate issued upon the registration of
transfer of any Warrant Certificate and each certificate representing Warrant
Shares and each certificate issued upon the registration of transfer of any
Warrant Shares, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE, AND MAY NOT BE DISTRIBUTED, SOLD, TRANSFERRED, ASSIGNED,
HYPOTHECATED OR OFFERED UNLESS THERE IS IN EFFECT A REGISTRATION
STATEMENT UNDER SUCH ACT AND LAWS COVERING SUCH SECURITIES OR THE
ISSUER RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE
SECURITIES REASONABLY SATISFACTORY TO THE ISSUER OR A NO-ACTION LETTER
FROM THE COMMISSION STATING THAT SUCH DISTRIBUTION, SALE, TRANSFER,
ASSIGNMENT, HYPOTHECATION OR OFFER IS EXEMPT FROM THE
-6-
<PAGE>
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND
LAWS."
(S) 5. Availability of Information.
Following the date of this Warrant Certificate, the Company will
continue to comply with the reporting requirements of Sections 13 and 15(d) of
the Exchange Act insofar as they are applicable to the Company and will comply
with all other public information reporting requirements of the Commission
(including the requirements of Rule 144 promulgated by the Commission under the
Securities Act) from time to time in effect and relating to the availability of
an exemption from the Securities Act for the sale of any restricted securities
or the sale of securities by Affiliates. The Company will also cooperate with
the Holder at the Company's expense to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
restricted securities or the sale of securities by any Affiliate.
(S) 6. Reservation of Common Shares.
The Company will at all times reserve and keep available, for issuance
and delivery upon the exercise of this Warrant Certificate and free from
preemptive rights, a sufficient number of Common Shares (and, if applicable,
other securities) to cover the Warrant Shares issuable upon the exercise of this
Warrant Certificate. All such shares shall be duly authorized and, when issued
upon such exercise, shall be validly issued, fully paid and nonassessable with
no liability on the part of the holders thereof.
(S) 7. Due Organization; No Violation.
7.1 The Company shall at all times be a corporation duly
organized and existing and in good standing under the laws of its state of
incorporation.
7.2 The Company shall not be in violation of (i) any
applicable statute, regulation or ordinance (including, without limitation, the
Internal Revenue Code) of any federal, state, local or other jurisdiction, or
any agency thereof, in any respect materially and adversely affecting its
financial or business condition, and (ii) any material indenture, mortgage,
deed, agreement, instrument or document to which it is or may become a party,
provided that, the Company may exercise in good faith its right to protest and
actively pursue the same diligently and by appropriate proceedings.
7.3 The Certificate of Incorporation or bylaws of the Company
shall not, without the prior written consent of the Holder, be amended to (i)
authorize shares of Capital Stock in addition to the shares described in (S)8
(other than shares issuable in respect to the conversion of the Preferred Stock
held by Holder or any of Holder's successors or assigns), (ii) eliminate the
right of
-7-
<PAGE>
the holders of Common Shares to vote cumulatively with respect to the election
of directors, (iii) create a classified board of directors or provide for terms
for directors in excess of one year, or (iv) provide for preemptive rights with
respect to any shares of Capital Stock (other than preemptive rights granted to
Holder pursuant to the Preemptive Rights Agreement).
(S) 8. Ownership; Registration of Transfer; Exchange and Substitution
of Warrant.
8.1 Ownership of Warrant. Until due presentment for
registration, the Company may treat the Person in whose name this Warrant
Certificate is registered on the register kept at the Company's principal office
as the owner and holder thereof for all purposes, notwithstanding any notice to
the contrary, except that, if and when this Warrant Certificate is properly
assigned to another Person, the Company shall treat such Person as the owner of
this Warrant Certificate for all purposes, notwithstanding any notice to the
contrary. Subject to the foregoing provisions and to (S) 4, this Warrant
Certificate, if properly assigned, may be exercised by the assignee without
first having a new Warrant Certificate issued.
8.2 Registration of Transfers. Subject to (S) 4 hereof, the
Company shall register the transfer of this Warrant Certificate permitted under
the terms hereof upon records to be maintained by the Company for that purpose,
upon surrender of this Warrant Certificate, with the Form of Assignment attached
hereto duly completed and signed, to the Company at the Company's principal
office. Upon any such registration of transfer, a new Warrant Certificate, in
substantially the form of this Warrant Certificate, shall be issued to the
transferee.
8.3 Replacement of Warrant Certificate. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant Certificate and upon delivery of indemnity
reasonably satisfactory to the Company in form and amount or, in the case of any
such mutilation, upon surrender of this Warrant Certificate for cancellation at
the Company's principal office, the Company at its expense will promptly execute
and deliver, in lieu thereof, a new Warrant Certificate of like tenor.
8.4 Expenses. The Company will pay all expenses, taxes (other
than transfer and income taxes) and other charges payable by the Holder in
connection with the preparation, issuance and delivery from time to time of this
Warrant Certificate or the Warrant Shares.
(S) 9. No Rights or Liabilities as Stockholder.
Nothing contained in this Warrant Certificate shall be construed as
conferring upon the Holder any rights as a stockholder of the Company or as
imposing any liabilities on the Holder to purchase any securities or as a
stockholder of the Company, whether such liabilities are asserted by the Company
or by creditors of the Company.
-8-
<PAGE>
(S) 10. Miscellaneous.
10.1 Amendments, Modifications and Waivers. This Warrant
Certificate may not be amended, modified, supplemented or otherwise modified
except by an express written agreement executed and delivered by the Company and
the Holder. Compliance by the Company with the covenants set forth in this
Warrant Certificate may be waived only by an express writing executed and
delivered by the Holder.
10.2 Governing Law. This Warrant Certificate shall be
governed by and construed in accordance with the laws of the State of Delaware.
10.3 Rules of Construction. The rules of construction set
forth in (S)13(g) of the Purchase Agreement are applicable to this Warrant
Certificate.
10.4 Notices. The notice provisions set forth in (S)13(h) of
the Purchase Agreement are applicable to this Warrant Certificate.
(S) 11. Assignment.
The Holder may sell, assign or otherwise transfer any of the Warrants
and any Common Shares of the Company which are issued pursuant to the exercise
of the Warrants subject to the restrictions of any applicable securities laws
and further subject to the restrictions stated in Section 4 hereof.
(S) 12. Preemptive Rights. No holder of any Warrant by reason of
holding such Warrant shall have any preemptive right to purchase or subscribe to
any securities of the Company, now or hereafter to be authorized.
TANKNOLOGY - NDE INTERNATIONAL, INC.
By: /s/ Jay Allen Chaffee
Its: Chairman
-9-
<PAGE>
NOTICE OF EXERCISE
Tanknology - NDE International, Inc.
The undersigned hereby elects to exercise the Warrant evidenced by this
Warrant Certificate, and to purchase thereunder, the shares covered by said
Warrant Certificate and herewith makes payment in full therefor [by delivery
herewith of a certified or official bank check payable to the
order of the Company in the amount of $____________]
[by agreeing hereby to reduce the outstanding principal balance of the Company's
Subordinated Secured Note payable to the undersigned by the amount of $_______]
and requests that certificates for such shares be issued in the name of and
delivered to ________, whose address is _____________________.
------------------------------
Signature guaranteed:
Dated:
------------------------------
-10-
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, _______________________________ hereby
sells, assigns and transfers to _______________________________ all of the
rights of the undersigned in and to this Warrant, the foregoing Warrant
Certificate with respect to said Warrant, and the Common Shares issuable upon
exercise of said Warrant.
Name of
Holder (Print):
-------------------
Dated:
----------------------------
(By:)
----------------------------
(Title:)
--------------------------
-11-
<PAGE>
EXHIBIT 3
--------------------------------------------------------
CERTIFICATE OF DESIGNATION OF
PREFERENCES AND RIGHTS OF SERIES A
REDEEMABLE CONVERTIBLE PREFERRED STOCK OF
TANKNOLOGY-NDE INTERNATIONAL, INC.
--------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
1. Designation and Amount............................................. 1
2. Dividends.......................................................... 1
3. Preference on Liquidation or Sale.................................. 1
4. Redemption......................................................... 2
5. Conversion Rights.................................................. 3
a. Conversion Right............................................... 3
b. Conversion Price............................................... 3
c. Mechanics of Conversion........................................ 3
d. Fractional Shares.............................................. 4
e. Adjustment For Change in Capital Stock......................... 4
f. Adjustment for Other Distributions............................. 5
g. Preservation of Conversion Rights Upon Reclassification,
Consolidation, etc............................................. 5
h. When Adjustment May Be Deferred................................ 6
i. When Adjustment Is Not Required................................ 6
j. Notice of Adjustments and Certain Transactions................. 6
k. Reservation of Stock Issuable Upon Conversion.................. 7
l. Payment of Taxes............................................... 8
m. No Reissuance of Preferred Stock............................... 8
6. Authorization of Additional Classes of Shares...................... 8
7. Reissuance of Shares............................................... 8
8. Preemptive Rights.................................................. 8
9. Voting Rights...................................................... 8
(a) General.............................................. 8
(b) Class Voting......................................... 9
(c) Removal and Vacancy.................................. 9
10. Sale, Transfer and Assignment...................................... 9
</TABLE>
-i-
<PAGE>
CERTIFICATE OF DESIGNATION OF
PREFERENCES AND RIGHTS OF SERIES A
REDEEMABLE CONVERTIBLE PREFERRED STOCK OF
TANKNOLOGY-NDE INTERNATIONAL, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
We, the undersigned, Jay Allen Chaffee, Chairman of the Board, and
David G. Osowski, Secretary, respectively, of Tanknology-NDE International,
Inc., a Delaware corporation (the "Corporation"), pursuant to the provisions of
Section 151 of the General Corporation Law of the State of Delaware, do hereby
make this Certificate of Designation and do hereby state and certify that,
pursuant to the authority expressly vested in the Board of Directors of the
Corporation by the Certificate of Incorporation of the Corporation, the Board of
Directors at a meeting held on December 22, 1997, unanimously adopted the
following resolutions providing for the issuance of a series of Preferred Stock
designated as the Series A Redeemable Convertible Preferred Stock:
RESOLVED, that the Board of Directors of the Corporation, pursuant to
the authority expressly vested in it by the Certificate of Incorporation, does
hereby provide for the issue of a series of the Corporation's Preferred Stock,
par value of $.0001 per share, and does hereby fix and herein state the
preferences and relative and other special rights and the qualifications,
limitations and restrictions thereof, as follows (all terms used herein that are
defined in the Certificate of Incorporation to have the meanings provided
therein):
1. Designation and Amount. There shall be a series of Preferred
Stock designated as "Series A Redeemable Convertible Preferred Stock" ("Series A
Preferred"), and the number of shares constituting such series shall initially
be 150.
2. Dividends. The holders of shares of Series A Preferred shall be
entitled to receive annual dividends of $1000.00 per share payable beginning on
June 30, 1998, semi-annually in arrears on June 30 and December 31.
3. Preference on Liquidation or Sale. In the event of any
liquidation, dissolution or winding up of the affairs of the Corporation,
whether voluntary or involuntary, after payment or provision for payment of the
debts and other liabilities of the Corporation, the holders of Series A
Preferred shall be entitled to receive, in preference to all shares of any
class, series or issue of capital stock of the Corporation ranking junior to the
Series A Preferred in payments upon liquidation (the "Common Stock"), an amount
in cash for each share of Series A Preferred equal to $10,000.00 (the
"Liquidation Preference), before any distribution shall be made to the holders
of the Common Stock upon the liquidation, dissolution or winding up of the
Corporation. The currently outstanding capital
<PAGE>
stock of the Corporation is junior to the Series A Preferred. If upon any
liquidation, dissolution or winding up of the Corporation, the assets
distributable among the holders of Series A Preferred shall be insufficient to
permit the payment in full of the Liquidation Preference to all the holders of
the then outstanding shares of Series A Preferred, then the entire assets of the
Corporation thus distributable shall be distributed ratably among the holders of
the Series A Preferred in proportion to the respective aggregate amounts
otherwise payable with respect thereto. A consolidation or merger of the
Corporation with or into one or more corporations or the sale or transfer of all
or substantially all of the assets of the Corporation shall not be deemed to be
a liquidation, dissolution or winding up of the Corporation, if, as a result of
such consolidation, merger, sale or transfer, the holders of Series A Preferred
retain the liquidation preference set forth in this Section 3.
4. Redemption. At any time after the later of (i) June 30, 2001
and (ii) the date upon which all principal and interest on the $6,500,000.00
note payable to DH Holdings Corp. and dated December 23, 1997, is paid in full,
the Corporation may redeem either (i) all, or (ii) in any single redemption or
series of redemptions, an aggregate not exceeding 49% of, the outstanding shares
of Series A Preferred at the redemption price per share, payable in cash, of
$10,000.00 (the "Redemption Price"). Any shares of Series A Preferred which are
outstanding at December 31, 2004, shall be redeemed by the Corporation at the
Redemption Price.
Notice of any proposed redemption of shares of Series A Preferred
shall be made by means of certified mail return receipt requested, addressed to
the holders identified in the records of the Corporation (the "Registered
Holders") of the Series A Preferred to be redeemed, at their respective
addresses then appearing on the books of the Corporation, not less than thirty
(30) nor more than sixty (60) days prior to the date fixed for such redemption
(herein referred to as the "Redemption Date"). Each such notice shall specify
(i) the Redemption Date, (ii) the Redemption Price, (iii) the place for payment
and for delivering the stock certificate(s) and transfer instruments(s) in order
to collect the Redemption Price, (iv) the shares of Series A Preferred to be
redeemed and (v) the then effective Conversion Price (as defined below in
Section 5(b)) and that the right of holders of Series A Preferred being redeemed
to exercise their conversion right shall terminate as to such shares at the
close of business on the fifth business day prior to (and exclusive of) the
Redemption Date.
The Registered Holder of any shares of Series A Preferred redeemed
upon any exercise of the Corporation's redemption right shall not be entitled to
receive payment of the Redemption Price until such holder shall cause to be
delivered to the place specified in the notice given with respect to such
redemption (i) the certificate(s) representing such Series A Preferred and (ii)
transfer instrument(s) satisfactory to the Corporation and sufficient to
transfer such Series A Preferred to the Corporation free of any adverse
interest. No interest shall accrue on the Redemption Price of any Series A
Preferred after its Redemption Date. Any redemption of less than all
outstanding shares of Series A Preferred shall be pro rata in proportion to each
Registered Holder's ownership percentage of all outstanding Series A Preferred.
-2-
<PAGE>
At the close of business on the Redemption Date for any Series A
Preferred, such stock shall be deemed to cease to be outstanding and all rights
of any person other than the Corporation in such stock shall be extinguished on
the Redemption Date for such stock except for the right to receive the
Redemption Price, without interest, for such stock in accordance with the
provisions of this Section 4, subject to applicable escheat laws.
In the event that any Series A Preferred shall, pursuant to Section 5,
be converted into Common Stock, (i) the Corporation shall not have the right to
redeem such stock and (ii) any funds which shall have been deposited for the
payment of the Redemption Price for such stock shall be returned to the
Corporation immediately after such conversion.
5. Conversion Rights. Each share of Series A Preferred shall be
convertible into Common Stock as follows:
a. Conversion Right. Subject to, and upon compliance with, the
----------------
provisions of this Section 5, at the option of the registered holder, the
shares of Series A Preferred may be converted into the number of fully paid
and nonassessable shares of Common Stock set forth in paragraph (b) of this
Section 5 at any time after December 31, 1997.
b. Conversion Price. Each share of Series A Preferred may be
----------------
converted into such number of shares of Common Stock as is determined by
dividing the sum of $10,000.00 by the Conversion Price in effect on the
Conversion Date, with the resulting amount rounded to the nearest whole
share. The Conversion Price (the "Conversion Price") at which shares of
Common Stock shall be issuable upon conversion of shares of the Series A
Preferred initially shall be $0.50. The Conversion Price shall be subject
to adjustment as set forth in paragraphs (e) through (g) of this Section 5.
c. Mechanics of Conversion. The holder of any shares of Series
-----------------------
A Preferred may exercise the conversion right specified in paragraph (a) of
this Section 5 as to all or any part thereof by surrendering to the
Corporation or to such other person as the Board of Directors may have
designated, the certificate or certificates for the shares to be converted,
duly endorsed and assigned to the Corporation or in blank, accompanied by
written notice stating that the holder elects to convert all or a specified
portion of the shares represented thereby. Conversion shall be considered
to have been effected at the close of business on the date when delivery of
notice of an election to convert and certificates for the shares to be
converted is made in accordance with this Section 5(c), and such date is
referred to herein as the "Conversion Date." Subject to the provisions of
paragraphs (e) through (g) of this Section 5, as promptly as practicable
thereafter (and after surrender of the certificate or certificates
representing shares of Series A Preferred), the Corporation shall issue and
deliver to a converting holder or, upon the written order of such holder,
to another person so designated, subject to any applicable securities laws,
a certificate or certificates for the number of whole shares of Common
Stock to which such holder is entitled. The person in
-3-
<PAGE>
whose name the certificate or certificates for Common Stock are to be
issued shall be considered to have become a holder of record of such Common
Stock as of the close of business on the applicable Conversion Date. Upon
conversion of only a portion of the number of shares covered by a
certificate representing shares of Series A Preferred surrendered for
conversion, the Corporation shall issue and deliver to the holder, or, upon
the written order of the holder of the certificate so surrendered for
conversion, to another person at the expense of the Corporation, a new
certificate covering the number of shares of Series A Preferred
representing the unconverted portion of the certificate so surrendered.
d. Fractional Shares. The Corporation shall not be required to
-----------------
issue fractional shares of Common Stock on the conversion of the Series A
Preferred. The record holder and any subsequent holder of Series A
Preferred by the acceptance thereof expressly waives his right to receive
any fractional shares upon conversion of any shares of Series A Preferred.
e. Adjustment For Change in Capital Stock. The Conversion Price
--------------------------------------
shall be subject to adjustment from time to time in case the Corporation
shall (i) declare a dividend or make a distribution payable in Common Stock
on any class or series of capital stock of the Corporation other than the
Series A Preferred, (ii) subdivide or reclassify its outstanding shares of
Common Stock into a greater number of shares, (iii) combine its outstanding
shares of Common Stock into a smaller number of shares, (iv) make a
distribution on its Common Stock in shares of its capital stock other than
Common Stock or (v) issue by reclassification of its Common Stock any
shares of its capital stock. The Conversion Price in effect at the time of
the record date for such dividend or distribution or the effective date of
such subdivision, combination or reclassification shall be proportionately
reduced in the case of any increase in the number of shares of Common Stock
outstanding, and increased in the case of any reduction in the number of
shares of Common Stock outstanding, so that the holder of any Series A
Preferred surrendered for conversion after such time shall be entitled to
receive the kind and number of shares of Common Stock that he or she would
have owned or have been entitled to receive had such Series A Preferred
been converted into Common Stock immediately prior to such time and had
such Common Stock received such dividend or other distribution or
participated in such subdivision, combination or reclassification. Such
adjustment shall be effective as of the record date for such dividend or
distribution or the effective date of such combination, subdivision or
reclassification and shall be made successively whenever any event listed
above shall occur.
If after an adjustment a holder of Series A Preferred upon its
conversion may receive shares of two or more classes of capital stock of
the Corporation, the Board of Directors shall determine the allocation of
the adjusted Conversion Price between or among the classes of capital
stock. After such allocation, the Conversion Prices of the classes of
capital stock shall thereafter be subject to adjustment on terms comparable
to those applicable to Common Stock herein in this Section 5.
-4-
<PAGE>
f. Adjustment for Other Distributions. If the Corporation
----------------------------------
distributes to all holders of its Common Stock any of its assets or debt
securities or any rights or warrants to purchase assets, debt securities or
other securities of the Corporation (including, without limitation, by way
of dividend or spin-off, reclassification, recapitalization or similar
rearrangement), the Conversion Price shall be adjusted in accordance with
the following formula:
M - F
C' = C x -------
M
where
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
M = the fair market value (as reasonably determined by the Board of
Directors in good faith) of each share of Common Stock outstanding on
a fully diluted basis on the record date mentioned below.
F = the fair market value on the record date of the assets, securities,
rights or warrants distributed which are applicable to one share of
Common Stock (as reasonably determined by the Board of Directors in
good faith).
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
distribution. This paragraph does not apply to (a) dividends or
distributions in cash or in property paid out of consolidated current or
retained earnings as shown on the books of the Corporation and determined
in accordance with generally accepted accounting principles or (b) any
distributions requiring an adjustment under any other provision of this
Section 5.
g. Preservation of Conversion Rights Upon Reclassification,
--------------------------------------------------------
Consolidation, etc. In case of (i) any reclassification or change of
-------------------
outstanding Common Stock or other securities issuable upon conversion of
the Series A Preferred (other than a change in par value or as a result of
a subdivision or combination of shares of Common Stock), (ii) any
consolidation or merger of the Corporation with another corporation (other
than a consolidation or merger in which the Corporation is the surviving
corporation and which does not result in any reclassification of or change
in the outstanding shares of Common Stock) or (iii) any sale or conveyance
to another corporation of the property of the Corporation, then the
----
Corporation or such successor or purchasing corporation, as the case may
be, shall be required to provide that subject to the obligations and rights
of the
-5-
<PAGE>
Corporation in Sections 3 and 4, (a) a holder of Series A Preferred shall
have the right thereafter to receive upon conversion of the Series A
Preferred the kind and amount of shares and other securities and property
that such holder would have owned or have been entitled to receive after
the happening of such reclassification, consolidation, merger, sale or
conveyance had such Series A Preferred been converted immediately prior to
such action and (b) such right shall be subject to adjustments, which shall
be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 5. The provisions of this Section 5(g) shall similarly
apply to successive reclassifications, consolidations, mergers, sales or
conveyances.
h. When Adjustment May Be Deferred. No adjustment in the
-------------------------------
Conversion Price need be made unless the adjustment would require an
increase or decrease of at least $.02 in the Conversion Price. Any
adjustments which are not made shall be carried forward and taken into
account in any subsequent adjustment. All calculations of the Conversion
Price shall be made to the nearest cent.
i. When Adjustment Is Not Required. Unless this Section 5
-------------------------------
provides otherwise, no adjustment in the Conversion Price shall be made
because the Corporation issues, in exchange for cash, property or services,
Common Stock, or any securities convertible into or exchangeable for Common
Stock, or securities carrying the right to purchase Common Stock or such
convertible or exchangeable securities. Furthermore, no adjustment in the
Conversion Price need be made under this Section 5 in the event the par
value of the Common Stock is changed; provided, however, that in no event
-------- -------
shall the Corporation increase the par value of the Common Stock to an
amount greater than the Conversion Price that would be in effect subsequent
to the transaction in which the par value would be increased.
j. Notice of Adjustments and Certain Transactions.
----------------------------------------------
1. Whenever the number of shares of Common Stock
purchasable upon the conversion of the Series A Preferred or the
Conversion Price of such shares is adjusted, as herein provided, the
Corporation shall within 15 days after the effective date of such
adjustment, notify each record holder of Series A Preferred of such
adjustment or adjustments setting forth the number of shares of Common
Stock purchasable upon the conversion of the Series A Preferred and
the Conversion Price after such adjustment and setting forth the
computation by which such adjustment was made.
2. In case at any time (i) there shall be any capital
reorganization or reclassification of the capital stock of the
Corporation, or a sale of all or substantially all of the assets of
the Corporation, or a consolidation or merger of the Corporation with
another corporation (other than a merger in which the Corporation is
the continuing corporation, and which does not result in any
reclassification or
-6-
<PAGE>
change of the then outstanding shares of Common Stock or other capital
stock issuable upon conversion of the Series A Preferred other than a
change in par value or a subdivision or combination of such shares);
(ii) there shall be a distribution of Corporation non-cash assets to
all of the holders of Common Stock; (iii) there shall be a
subscription offer made to all holders of Common Stock; or (iv) there
shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Corporation; then, in any one or more of said cases,
----
the Corporation shall cause to be sent by certified mail return
receipt requested, facsimile or telex to each of the Registered
Holders, at the earliest practicable time (and in any event not less
than 15 days before any record date or other date set for definitive
action), written notice of the date on which the books of the
Corporation shall close or a record shall be taken or such
distribution, reorganization, reclassification, sale, consolidation,
merger, dissolution, liquidation or winding up shall take place, as
the case may be. Such notice shall also set forth such facts as shall
indicate the effect of such action (to the extent such effect may be
known at the date of such notice) on the kind and amount of the shares
of stock and other securities and property deliverable upon conversion
of the Series A Preferred. Such notice shall also specify the date as
of which the record holders of the shares of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
sale, consolidation, merger, dissolution, liquidation or winding up,
as the case may be (on which date, in the event of voluntary or
involuntary dissolution, liquidation or winding up of the Corporation,
the right to convert the Series A Preferred shall terminate).
3. Without limiting the obligation of the Corporation to
provide notice to the Registered Holders of corporate actions
hereunder, it is agreed that failure of the Corporation to give notice
shall not invalidate such corporate action of the Corporation.
k. Reservation of Stock Issuable Upon Conversion. The
---------------------------------------------
Corporation shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Common Stock, solely
for the purpose of effecting the conversion of the shares of Series A
Preferred, the number of shares of Common Stock then issuable upon the
conversion of all outstanding shares of Series A Preferred. For the
purpose of this Section 5(k), the number of shares of Common Stock issuable
upon the conversion of all outstanding shares of Series A Preferred shall
be computed as if at the time of computation of such number of shares of
Common Stock all outstanding shares of Series A Preferred were held by a
single holder. The Corporation shall from time to time, in accordance with
applicable law, increase the authorized amount of its Common Stock if at
any time the authorized amount of its Common Stock remaining unissued shall
not be sufficient to permit the conversion of all shares of Series A
Preferred at the time outstanding. If any shares of Common Stock required
to be reserved for issuance upon conversion of shares of Series A Preferred
hereunder require registration with or approval of any governmental
authority
-7-
<PAGE>
under any Federal or State law before such shares may be issued upon such
conversion, the Corporation will in good faith and as promptly as
practicable use all reasonable efforts to cause such shares to be so
registered or approved.
l. Payment of Taxes. The Corporation will pay any and all taxes
----------------
that may be payable in respect of the issuance or delivery of shares of
Common Stock on conversion of shares of Series A Preferred pursuant hereto.
The Corporation shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue or transfer and
delivery of shares of Common Stock in a name other than that in which the
shares of Series A Preferred so converted were registered, and no such
issuance or delivery shall be made unless and until the person requesting
such issue has paid to the Corporation the amount of any such tax or has
established to the satisfaction of the Corporation that such tax has been
paid. In no event shall the Corporation be required to pay or reimburse a
Registered Holder for any income tax payable by such holder as a result of
such issuance.
m. No Reissuance of Preferred Stock. Shares of Series A
--------------------------------
Preferred converted as provided herein will be cancelled.
6. Authorization of Additional Classes of Shares. So long as any
shares of Series A Preferred remain outstanding, the Board of Directors shall
not authorize the creation of a new class or series of shares having dividend
rights or liquidation preferences or other rights equal, prior or superior to
the Series A Preferred, or increase the dividend rights or liquidation
preferences of any class or series in such a manner as to make such class or
series become equal, prior or superior to the Series A Preferred, without first
obtaining the written consent of holders holding a majority of the then
outstanding shares of Series A Preferred.
7. Reissuance of Shares. Any shares of the Series A Preferred which
are redeemed or otherwise reacquired by the Corporation shall assume the status
of authorized but unissued Preferred Stock undesignated as to series, subject to
later issuance, and shall not be reissued as shares of Series A Preferred.
8. Preemptive Rights. No holder of shares of Series A Preferred by
reason of holding such shares shall have any preemptive or preferential right to
purchase or subscribe to any securities of the Corporation, now or hereafter to
be authorized.
9. Voting Rights.
(a) General. The holders of the Series A Preferred Stock will be
-------
entitled to 20,000 votes per share of Series A Preferred, subject to adjustment
in accordance with Article 5 hereof, on all matters subject to a vote of
stockholders of the Corporation (except as provided in subsection 9(b) below),
such that holders of the Series A Preferred shall have the same voting rights
-8-
<PAGE>
as they would have if the shares of Series A Preferred held by them had been
converted into Common Stock.
(b) Class Voting. Except as specified herein, the holders of the
------------
Common Stock and the holders of the Series A Preferred shall be entitled to vote
as separate classes only when required by applicable law to do so. So long as
any shares of Series A Preferred remain outstanding, the Corporation shall not,
without the affirmative vote or consent of the holders of at least 66-2/3% of
all outstanding Series A Preferred voting separately as a class, (i) amend,
alter or repeal (by merger or otherwise) any provision of the Certificate of
Incorporation or the Bylaws of the Corporation, as amended, or this Certificate
of Designation, so as to adversely affect the relative rights, preferences,
qualification, limitations or restrictions of the Series A Preferred; (ii)
increase the number of members of the Board of Directors to more than seven (7);
or (iii) effect any reclassification of the Series A Preferred. As long as at
least one-half (1/2) of the originally issued shares of Series A Preferred are
outstanding, the holders of the Series A Preferred shall have the right to elect
one member of the Board of Directors by the affirmative vote of a majority of
the Series A Preferred shares that are then voting.
(c) Removal and Vacancy. Only Holders of the Series A Preferred (to
--------------------
the extent they are entitled to vote thereon) shall be entitled to vote on the
removal, with cause, of any director elected by the holders of Series A
Preferred (to the extent they are entitled to vote thereon). Any vacancy in the
office of a director created by the death, resignation or removal of a director
elected by the holders of the Series A Preferred (to the extent they are
entitled to vote thereon) may be filled only by a vote of holders of the Series
A Preferred. Any director elected by the stockholders to fill a vacancy shall
serve until the annual meeting at which time such director's term expires and
until his or her successor has been elected and has qualified, unless removed
and replaced pursuant to this subsection 9(c).
10. Sale, Transfer and Assignment. Except as otherwise provided in
this Section 10, the Series A Preferred may not be sold, transferred or
assigned, without the express written consent of the Corporation. Any attempted
sale, transfer or assignment shall be null and void without the express written
consent of the Corporation; provided that, the sale, transfer or assignment of
any Common Stock received pursuant to the conversion of the Series A Preferred
shall not be prohibited by this Section 10; further provided that, the Series A
Preferred may be assigned to Danaher Corporation or any affiliate of Danaher
Corporation. For purposes of this Section 10, the term "affiliate" means any
person or entity directly or indirectly controlling, controlled by or under
direct or indirect common control with respect to Danaher Corporation.
RESOLVED FURTHER, that, before the Corporation shall issue any shares of
the Series A Preferred, a certificate pursuant to Section 151 of the General
Corporation Law of the State of Delaware shall be made, executed, acknowledged,
filed and recorded in accordance with the provisions of said Section 151; and
that the proper officers of the Corporation are hereby authorized and directed
to do all acts and things which may be necessary or proper in their opinion to
carry into effect the purposes and intent of this and the foregoing resolutions.
-9-
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designation has been made
under the seal of the Corporation and the hands of the undersigned, said Jay
Allen Chaffee, Chairman of the Board, and Carol Rogerson, Assistant Secretary,
respectively, of the Corporation, this 23rd day of December, 1997.
TANKNOLOGY-NDE INTERNATIONAL, INC.
By: /s/ Jay Allen Chaffee
----------------------
Jay Allen Chaffee
Chairman of the Board
ATTEST:
/s/ Carol Rogerson
- ------------------
Carol Rogerson
Assistant Secretary
-10-
<PAGE>
EXHIBIT 4
================================================================================
REGISTRATION RIGHTS AGREEMENT
================================================================================
<PAGE>
TABLE OF CONTENTS
1. Definitions..................................................... 1
-----------
1.1 Code................................................. 1
----
1.2 Commission........................................... 1
----------
1.3 Demand Registration.................................. 1
-------------------
1.4 Exchange Act......................................... 1
------------
1.5 Exempt Offering...................................... 1
---------------
1.6 Registrable Common................................... 1
------------------
1.7 Registration Notice.................................. 2
-------------------
1.8 Requesting Holders................................... 2
------------------
1.9 Rule 144............................................. 2
--------
1.10 Securities Act....................................... 2
--------------
1.11 Selling Stockholder.................................. 2
-------------------
2. Piggyback Registration Rights................................... 2
-----------------------------
3. Demand Registration Rights...................................... 3
--------------------------
4. Registration Procedures......................................... 4
-----------------------
5. Underwriting Agreement.......................................... 6
----------------------
6. Priority in Registrations....................................... 6
-------------------------
7. Rule 144 Reporting.............................................. 7
------------------
8. Adjustments Affecting Registrable Common........................ 7
----------------------------------------
9. Registration Expenses........................................... 7
---------------------
10. Participation in Underwritten Registrations..................... 8
-------------------------------------------
11. Assignment of Registration Rights............................... 8
---------------------------------
12. Indemnification and Contribution................................ 8
--------------------------------
12.1 Indemnification by the Company....................... 8
------------------------------
12.2 Conduct of Indemnification Proceedings............... 9
--------------------------------------
12.3 Indemnification by Holders of Registrable Common..... 9
------------------------------------------------
12.4 Contribution.........................................10
------------
-i-
<PAGE>
13. Miscellaneous.................................................. 11
-------------
13.1 Amendments.......................................... 11
----------
13.2 Notices............................................. 11
-------
13.3 Successors and Assigns.............................. 12
----------------------
13.4 Counterparts........................................ 12
------------
13.5 Headings............................................ 12
--------
13.6 Governing Law....................................... 12
-------------
13.7 Entire Agreement; Termination....................... 12
-----------------------------
-ii-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of December 23, 1997 by and between Tanknology-NDE International, Inc.,
a Delaware corporation ("TNDE" or the "Company"), and DH Holdings Corp., a
Delaware corporation ("DH").
WHEREAS, pursuant to the Note, Preferred Stock and Warrant Purchase
Agreement entered into between TNDE, ProEco, Inc., a Delaware corporation,
Tanknology/NDE Corporation, a Delaware corporation, 2368642 Canada, Inc., a
Canadian Federal corporation, Tanknology-NDE Construction Services Inc., a
Delaware corporation and DH on December 23, 1997 (the "Purchase Agreement"), DH
has purchased preferred stock of TNDE (the "Preferred Stock") which is initially
convertible into 3,000,000 shares of TNDE's common stock, par value of $.0001
per share (the "Common Stock"), and warrants (the "Warrants") for the purchase
of 4,500,000 shares of Common Stock; and
WHEREAS, in order to induce DH to enter into the Purchase Agreement, TNDE
has agreed to provide registration rights on the terms set forth in this
Agreement for the benefit of DH;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. DEFINITIONS. The following capitalized terms shall have the meanings
-----------
assigned to them in this Section 1 or in the parts of this Agreement referred to
---------
below:
1.1 Code: the Internal Revenue Code of 1986, as amended, and any
----
successor thereto.
1.2 Commission: the Securities and Exchange Commission, and any
----------
successor thereto.
1.3 Demand Registration: as defined in Section 3.
------------------- ---------
1.4 Exchange Act: the Securities Exchange Act of 1934, as amended,
------------
and any successor thereto, and the rules and regulations thereunder.
1.5 Exempt Offering: an offering or issuance of shares in connection
---------------
with (i) employee compensation or benefit plans or (ii) one or more
acquisition transactions under a Registration Statement on either Form S-1
or form S-4 under the Securities Act (or a successor to either Form S-1 or
Form S-4).
-1-
<PAGE>
1.6 Registrable Common: shares of Common Stock that are issuable or
------------------
issued to DH pursuant to the conversion of the Preferred Stock or the
exercise of the Warrants and any additional shares of Common Stock issued
or distributed in respect of any other shares of Common Stock by way of a
stock dividend or distribution or stock split or in connection with a
combination of shares, recapitalization, reorganization, merger,
consolidation or otherwise. For purposes of this Agreement, shares of
Registrable Common will cease to be Registrable Common when and to the
extent that a registration statement covering such shares has been declared
effective under the Securities Act.
1.7 Registration Notice: as defined in Section 2.
------------------- ---------
1.8 Requesting Holders: as defined in Section 3.
------------------ ---------
1.9 Rule 144: Securities Act Rule 144 (or any similar or successor
--------
provision under the Securities Act).
1.1 Securities Act: the Securities Act of 1933, as amended, and any
--------------
successor thereto, and the rules and regulations thereunder.
1.1 Selling Stockholder: as defined in Section 12.
------------------- ----------
2. Piggyback Registration Rights. At any time during the term of this
-----------------------------
Agreement that shares of Registrable Common remain outstanding, if TNDE
proposes to register any Common Stock under the Securities Act for a public
offering for cash, other than a registration relating to an Exempt Offering,
TNDE will give DH prompt written notice of its intent to do so (a "Registration
Notice") at least 45 days prior to the filing of the related registration
statement with the Commission. Such notice shall specify the approximate date on
which TNDE proposes to file such registration statement and shall set forth the
maximum number of shares of Common Stock which TNDE intends to register in the
proposed offering. Upon receipt of a Registration Notice, DH shall be entitled
to participate on the same terms and conditions as TNDE in the public offering
to which such Registration Notice relates and to offer and sell shares of
Registrable Common therein to the extent provided in this Section 2. DH shall
---------
notify TNDE of its desire to participate in such offering no later than thirty
days following the Registration Notice, which notice shall state the aggregate
number of shares of Registrable Common that DH then desires to sell in the
offering. TNDE shall select in its sole discretion, any managing underwriter or
underwriters to administer such offering, and shall determine in its sole
discretion the offering price and underwriting discount or commission. If DH
desires to participate in such public offering, DH may include shares of
Registrable Common in the registration statement relating to the offering to the
extent that the inclusion of such shares shall not reduce the number of shares
of Common Stock to be offered and sold by TNDE to be included therein. If the
lead managing underwriter selected by TNDE for a public offering (or, if the
offering is not underwritten, a financial advisor to TNDE) determines that
marketing factors require a limitation on the number of shares of Registrable
Common to be offered and sold in such
-2-
<PAGE>
offering and notifies DH in writing to that effect, there shall be included in
the offering only that number of shares of Registrable Common, if any, that such
lead managing underwriter or financial advisor, as the case may be, believes
will not jeopardize the success of the offering. In this regard, priority in
registration shall be determined in accordance with Section 6 hereof. No
registration effected under this Section 2 shall relieve TNDE of its obligation
to effect any registration upon request under Section 3, nor shall any
registration under this section 2 be deemed to have been effected under
Section 3.
3. Demand Registration Rights. At any time during the period beginning
--------------------------
on the second anniversary of the date of this Agreement and ending on December
31, 2007, DH may request in writing that TNDE file a registration statement
under the Securities Act covering the registration of all or a part of the
shares of Registrable Common then held by DH (a "Demand Registration"). TNDE
shall use its commercially reasonable best efforts to effect as soon as
practicable the registration under the Securities Act in accordance with Section
-------
4 hereof (including without limitation, the execution of an undertaking to file
- -
post-effective amendments) of all shares of Registrable Common which DH requests
be registered within 30 days after the mailing of such notice; provided,
--------
however, that TNDE shall be obligated to effect only two Demand Registrations
- -------
pursuant to this Section 3. In connection with a Demand Registration, DH, in its
---------
sole discretion, shall determine whether (a) to proceed with, withdraw from or
terminate such offering and (b) to take such actions as may be necessary to
close the sale of Registrable Common contemplated by such offering, including,
without limitation, waiving any conditions to closing such sale that may not
have been fulfilled. In the event DH exercises its discretion under this
paragraph to terminate a proposed Demand Registration, the terminated Demand
Registration shall not constitute a Demand Registration under this Section 3
---------
only if the determination to terminate such Demand Registration (i) follows the
exercise by TNDE of any of its rights provided by the last two paragraphs of
this Section 3 or (ii) results from a material adverse change in the condition
---------
(financial or other), results of operations or business of TNDE and its
subsidiaries taken as a whole. TNDE expressly reserves the right to select,
subject to the approval of DH (which approval shall not be unreasonably
withheld), any managing underwriter or underwriters to administer such offering;
and DH shall determine the offering price and underwriting discount or
commission.
Notwithstanding the preceding paragraph, if TNDE shall furnish to DH a
certificate signed by the President of TNDE stating that in the reasonable
judgment of the President, it would be detrimental to TNDE or its stockholders
if such registration statement were to be filed and it is therefore beneficial
to defer the filing of such registration statement, TNDE shall have the right to
defer such filing for a period of not more than 120 days after receipt of the
request of DH. TNDE shall promptly give notice to DH at the end of any delay
period under this paragraph.
Notwithstanding the preceding two paragraphs, if at the time of any request
by DH for a Demand Registration, TNDE has plans to file within 90 days after
such request for the sale of any of its securities in a public offering under
the Securities Act (other than an Exempt Offering), no Demand Registration shall
be initiated under this Section 3 until 90 days after the effective date of
---------
-3-
<PAGE>
such registration unless TNDE is no longer actively employing in good faith all
reasonable efforts to effect such registration; provided that TNDE shall provide
--------
DH the right to participate in such public offering pursuant to, and subject to,
Section 2 hereof.
- ---------
4. Registration Procedures. In connection with registrations under
-----------------------
Sections 2 and 3 hereof, and subject to the terms and conditions contained
- ---------- -
therein, TNDE shall:
(a) use its commercially reasonable best efforts to prepare and file
with the Commission as soon as reasonably practicable, a registration
statement with respect to the Registrable Common and use its commercially
reasonable best efforts to cause such registration to become and remain
effective for a period of at least 120 days (or such shorter period during
which DH shall have sold all Registrable Common which it requested to be
registered);
(b) prepare and file with the Commission such amendments (including
post-effective amendments) to such registration statement and supplements
to the related prospectus to reflect appropriately the plan of distribution
of the securities registered thereunder until the completion of the
distribution contemplated by such registration statement or for so long
thereafter as a dealer is required by law to deliver a prospectus in
connection with the offer and sale of the shares of Registrable Common
covered by such registration statement and/or as shall be necessary so that
neither such registration statement nor the related prospectus shall
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading and so that such registration statement and the
related prospectus will otherwise comply with applicable legal
requirements;
(c) provide to DH's counsel an opportunity to review and provide
comments with respect to such registration statement and each prospectus
included therein (and any post-effective amendment or supplements thereto)
prior to such registration statement (or post-effective amendment or
supplements) becoming effective;
(d) use its commercially reasonable best efforts to register and
qualify the Registrable Common covered by such registration statement under
applicable securities or "Blue Sky" laws of such jurisdictions as DH shall
reasonably request for the distribution of the Registrable Common, and to
keep such registrations or qualifications in effect for as long as the
Securities Act registration of such Registrable Common remains in effect;
(e) take such other actions as are reasonable and necessary to comply
with the requirements of the Securities Act;
(f) furnish such number of prospectuses (including preliminary
prospectuses) and documents incident thereto as DH from time to time may
reasonably request;
-4-
<PAGE>
(g) provide to DH and any managing underwriter participating in any
distribution thereof, and to any attorney, accountant or other agent
retained by DH or managing underwriter, reasonable access to appropriate
officers and directors of TNDE to ask questions and to obtain information
reasonably requested by DH or any managing underwriter, attorney,
accountant or other agent in connection with such registration statement or
any amendment thereto, as shall be necessary to conduct a reasonable
investigation within the meaning of the Securities Act of 1933; provided,
--------
however, that (i) in connection with any such access or request, any such
-------
requesting persons shall cooperate to the extent reasonably practicable to
minimize any disruption to the operation by TNDE of its business and (ii)
any records, information or documents shall be kept confidential by such
requesting persons, unless (A) such records, information or documents are
in the public domain or otherwise publicly available or (B) disclosure of
such records, information or documents is required by court or
administrative order or by applicable law (including, without limitation,
the Securities Act);
(h) notify DH and the managing underwriters participating in the
distribution pursuant to such registration statement promptly (i) when TNDE
is informed that such registration statement or any post-effective
amendment to such registration statement becomes effective, (ii) of any
request by the Commission for an amendment or any supplement to such
registration statement or any related prospectus, (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of such
registration statement or of any order preventing or suspending the use of
any related prospectus or the initiation or threat of any proceeding for
that purpose, (iv) of the suspension of the qualification of any shares of
Registrable Common included in such registration statement for sale in any
jurisdiction or the initiation or threat of a proceeding for that purpose,
(v) of any determination by TNDE that any event has occurred which makes
untrue any statement of a material fact made in such registration statement
or any related prospectus or which requires the making of a change in such
registration statement or any related prospectus in order that the same
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (vi) of the completion of the
distribution contemplated by such registration statement if it relates to
an offering by TNDE and (vii) when the registration statement, the
prospectus or any prospectus supplement related thereto or post-effective-
amendment to the registration statement has been filed;
(i) in the event of the issuance of any stop order suspending the
effectiveness of such registration statement or of any order suspending or
preventing the use of any related prospectus or suspending the
qualification of any shares of Registrable Common included in such
registration statement for sale in any jurisdiction, use its commercially
reasonable best efforts to obtain its withdrawal;
-5-
<PAGE>
(j) otherwise use its commercially reasonable best efforts to comply
with all applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably practicable, but
not later than fifteen months after the effective date of such registration
statement, an earnings statement covering the period of at least twelve
months beginning with the first full fiscal quarter after the effective
date of such registration statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act;
(k) use reasonable diligence to cause all shares of Registrable
Common included in such registration statement to be listed on any
securities exchange (including, for this purpose, the Nasdaq National
Market) on which the Common Stock is then listed at the initiation of TNDE;
(l) use reasonable diligence to obtain an opinion from legal counsel
in customary form and covering such matters of the type customarily covered
by opinions as the underwriters, if any, may reasonably request;
(m) provide a transfer agent and registrar for all such Registrable
Common not later than the effective date of such registration statement;
(n) enter into such customary agreements (including an underwriting
agreement in customary form) as the underwriters, if any, may reasonably
request in order to expedite or facilitate the disposition of such shares
of Registrable Common;
(o) use reasonable diligence to obtain a "comfort letter" from TNDE's
independent public accountants in customary form and covering such matters
of the type customarily covered by comfort letters as the underwriters, if
any, may reasonably request; and
(p) use all reasonable efforts to cause all Registrable Common
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the Holders to consummate the disposition of such Registrable
Common.
As used in this Section 4 and elsewhere herein, the term "underwriters" does not
---------
include DH.
5. Underwriting Agreement. In connection with each registration pursuant
----------------------
to Sections 2 and 3 covering an underwritten registered public offering, TNDE
---------- -
and DH agree to enter into a written agreement with the managing underwriter in
such form and containing such provisions as are customary in the securities
business for such an arrangement between such underwriter and companies of
TNDE's size and investment stature, including provisions for representations,
-6-
<PAGE>
warranties and indemnification by TNDE and each Selling Stockholder which may be
different from those described in Section 12 hereof.
----------
6. Priority in Registrations. If (i) a registration pursuant to Section 2
-------------------------
hereof involves an underwritten offering of securities and (ii) the managing
underwriter shall inform the Company and the holders of the Registrable Common
requesting such registration of its belief that the number of securities
requested to be included in such registration exceeds the number that can be
sold in such offering, then the Company will include in such registration, to
the extent to which the Company is advised can be sold in such offering,
securities as follows:
(i) if such registration is for an offering of securities for the
account of the Company, first, all securities proposed by the Company to be
sold for its own account, second, such Registrable Common requested by the
Selling Stockholders to be included in such registration pursuant to
Section 2 hereof and then all other securities of the Company requested to
be included in such registration;
(ii) if such registration is for other than an offering described in
(i) above, such Registrable Common requested to be included in such
registration and all other securities proposed by the Company to be sold
for its own account shall be included in such registration pro rata on the
basis of the number of shares of such Registrable Common and such other
securities so proposed to be sold.
7. Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may permit the sale of the
shares of Registrable Common held by DH to the public without registration, TNDE
agrees to:
(a) make and keep public information available (as those terms are
understood and defined in Rule 144) at all times from and after one year
after the date hereof until such date as no shares of Registrable Common
remain outstanding;
(b) use its commercially reasonable best efforts to file with the
Commission in a timely manner all reports and other documents required of
TNDE under the Securities Act and the Exchange Act at any time that it is
subject to such reporting requirements until such date as no shares of
Registrable Common remain outstanding; and
(c) if required by the transfer agent and registrar for the Common
Stock, use reasonable diligence to obtain an opinion from legal counsel
addressed to such transfer agent and registrar, with respect to any sale of
shares of Registerable Common pursuant to Rule 144.
-7-
<PAGE>
8. Adjustments Affecting Registrable Common. The Company will not effect
----------------------------------------
or permit to occur any combination or subdivision of Registrable Common for so
long as DH holds shares of Registrable Common, and except as permitted by
Section 2 and 3 hereof, DH will not sell, transfer or otherwise dispose of,
including without limitation through put or short sale arrangements, shares of
Common Stock in the ten days prior to the effectiveness of any registration of
Common Stock for sale to the public and for up to 120 days following the
effectiveness of such registration; provided, that such holdback applies to TNDE
--------
and holders of substantially all other securities of TNDE on terms equal to or
less favorable than the terms applicable to the holders of the Registrable
Common.
9. Registration Expenses. All expenses incurred in connection with any
---------------------
registration, qualification and compliance under Section 2 of this Agreement
---------
(including, without limitation, all registration, filing, qualification,
listing, insurance, legal, printing and accounting fees, but not including,
without limitation, any underwriting fees, discounts or commissions attributable
to the sale of Registrable Common, fees and expenses of counsel and any other
special experts retained by the holders of Registrable Common in connection with
a registration required hereunder, and transfer taxes, if any) shall be borne by
TNDE. All expenses incurred in connection with any registration, qualification
and compliance under Section 3 of this Agreement (including, without limitation,
---------
all registration, filing, qualification, legal, printing and accounting fees of
TNDE) shall be borne by DH. All underwriting commissions and discounts
applicable to shares of Registrable Common included in the registrations under
this Agreement shall be borne by the holders of the securities so registered pro
rata on the basis of the number of shares so registered.
10. Participation in Underwritten Registrations. No holder of Registrable
-------------------------------------------
Common may participate in any underwritten registration hereunder unless such
holder (a) agrees to sell such holder's securities on the same basis provided in
any underwriting arrangements approved by the persons entitled hereunder to
approve such arrangements and (b) completes, executes, and delivers promptly all
questionnaires, powers of attorney, custody agreements, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
11. ASSIGNMENT OF REGISTRATION RIGHTS. DH may assign its rights hereunder
---------------------------------
only (a) in connection with the sale or other disposition of (i) all of its
Registrable Common or (ii) all of its Warrants, (b) with the express written
consent of the Company, which consent may be withheld by the Company in the
exercise of its sole discretion, or (c) to Danaher Corporation or to any person
or entity under direct or indirect control of Danaher Corporation or controlled
by or under direct or indirect common control with Danaher Corporation.
12. Indemnification and Contribution.
--------------------------------
12.1 Indemnification by the Company. To the extent permitted by law,
------------------------------
TNDE agrees to indemnify and hold harmless any stockholder who sells shares of
Registrable
-8-
<PAGE>
Common in a registered offering pursuant to either Section 2 or Section 3
--------- ---------
hereof (a "Selling Stockholder"), from and against any and all losses, claims,
damages, liabilities and expenses (including reasonable legal expenses) arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or prospectus relating to
the Registrable Common or in any amendment or supplement thereto or in any
related preliminary prospectus, or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or expenses arise out of, or are based
upon, any such untrue statement or omission or allegation thereof based upon
information furnished in writing to TNDE by or on behalf of such Selling
Stockholder or an underwriter expressly for use therein. In connection with an
underwritten offering of shares of Registrable Common, TNDE will indemnify any
underwriters of the Registrable Common, their officers and directors and each
person who controls such underwriters (within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act) on substantially the
same basis as that of the indemnification of the Selling Stockholders provided
in this Section 12.1. Notwithstanding the foregoing, TNDE's indemnification
------------
obligations with respect to any preliminary prospectus shall not inure to the
benefit of any Selling Stockholder or underwriter with respect to any loss,
claim, damage, liability (or actions in respect thereof) or expense arising out
of or based on any untrue statement or alleged untrue statement or omission or
alleged omission to state a material fact in such preliminary prospectus, in any
case where (i) a copy of the prospectus used to confirm sales of shares of
Registrable Common was not sent or given to the person asserting such loss,
claim, damage or liability at or prior to the written confirmation of the sale
to such person and (ii) such untrue statement or alleged untrue statement or
omission or alleged omission was corrected in such prospectus.
12.2 Conduct of Indemnification Proceedings. Promptly after receipt
--------------------------------------
by a Selling Stockholder of notice of any claim or the commencement of any
action or proceeding brought or asserted against such Selling Stockholder in
respect of which indemnity may be sought from TNDE, such Selling Stockholder
shall notify TNDE in writing of the claim or the commencement of that action or
proceeding; provided, however, that the failure to so notify TNDE shall not
-------- -------
relieve TNDE from any liability that it may have to the Selling Stockholder
otherwise than pursuant to the indemnification provisions of this Agreement. If
any such claim or action or proceeding shall be brought against a Selling
Stockholder and such Selling Stockholder shall have duly notified TNDE thereof,
TNDE shall have the right to assume the defense thereof, including the
employment of counsel. Such Selling Stockholder shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of such
Selling Stockholder unless (i) TNDE has agreed to pay such fees and expenses or
(ii) the named parties to any such action or proceeding include both such
Selling Stockholder and TNDE, and such Selling Stockholder and TNDE shall have
been advised by Selling Stockholder's counsel in writing that there may be one
or more legal defenses
-9-
<PAGE>
available to such Selling Stockholder which are different from or additional to
those available to TNDE, in which case, if such Selling Stockholder notifies
TNDE in writing that it elects to employ separate counsel, TNDE shall not have
the right to assume the defense of such action or proceeding on behalf of such
Selling Stockholder; it being understood, however, that TNDE shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (together with appropriate
local counsel) at any time for all Selling Stockholders. TNDE shall not be
liable for any settlement of any such action or proceeding effected without
TNDE's prior written consent.
12.3 Indemnification by Holders of Registrable Common. In connection
------------------------------------------------
with any registration in which a Selling Stockholder is participating, such
Selling Stockholder will furnish to TNDE in writing such information and
affidavits as TNDE reasonably requests for use in connection with any related
registration statement or prospectus. To the extent permitted by law, each
Selling Stockholder agrees to indemnify and hold harmless TNDE, its directors
and officers who sign the registration statement relating to shares of
Registrable Common offered by such Selling Stockholder and each person, if any,
who controls TNDE within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from TNDE to such Selling Stockholder, but only with respect to information
concerning such Selling Stockholder furnished in writing by such Selling
Stockholder or on such Selling Stockholder's behalf expressly for use in any
registration statement or prospectus relating to shares of Registrable Common
offered by such Selling Stockholder, or any amendment or supplement thereto, or
any related preliminary prospectus. In case any action or proceeding shall be
brought against TNDE or its directors or officers, or any such controlling
person, in respect of which indemnity may be sought against such Selling
Stockholder, such Selling Stockholder shall have the rights and duties given to
TNDE, and TNDE or its directors or officers or such controlling persons shall
have the rights and duties given to such Selling Stockholder, by the preceding
paragraph. Each Selling Stockholder also agrees to indemnify and hold harmless
any underwriters of the Registrable Common, their partners, officers and
directors and each person who controls such underwriters (within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act) on
substantially the same basis as that of the indemnification of TNDE provided in
this Section 12.3. Notwithstanding the foregoing, the aggregate liability of
------------
any Selling Stockholder for any indemnification under this section shall be
limited to the aggregate net proceeds received by such Selling Stockholder from
the sale of securities pursuant to such registration statement. The Selling
Stockholders agree to contribution and indemnity provisions in the agreement to
the extent customarily requested by the underwriter.
12.4 Contribution. If the indemnification provided for in this
------------
Section 12 is unavailable to any indemnified party in respect of any losses,
- ----------
claims, damages, liabilities or
-10-
<PAGE>
expenses referred to herein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities and expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified parties in
connection with the actions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact relates to information supplied by
such indemnified party or indemnified parties and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. TNDE and the Selling Stockholders agree that it would not be just and
equitable if contribution pursuant to this Section 12.4 were determined by pro
------------
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in this Section 12.4. No person
-------------
guilty of fraudulent (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. If indemnification is available under this
Section 12, the indemnifying parties shall indemnify each indemnified party to
- ----------
the full extent provided in Sections 12.1 and Section 12.3 without regard to the
------------- ------------
relative fault of said indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 12.4.
------------
13. MISCELLANEOUS.
-------------
13.1 Amendments. Except as otherwise provided herein, the provisions
----------
of this Agreement may not be amended, modified or supplemented, except upon the
written consent of both TNDE and DH.
13.2 Notices. Any notice or other communication required or permitted
-------
to be made or given under this Agreement shall be in writing and shall be deemed
to have been given to the Party to whom it is addressed: (i) on the date
indicated on the certified mail return receipt if sent by certified mail return
receipt requested; (ii) on the business day actually received if hand delivered
or if transmitted by telefax or if transmitted or delivered on a day that is not
a business day, the next business day or (iii) one business day after such
notice was delivered to an overnight delivery service, addressed, delivered or
transmitted in each case as follows:
-11-
<PAGE>
PURCHASER:
DH Holdings Corp.
1250 24th Street, N.W.
Suite 800
Washington, D.C. 20037
ATTENTION: Vice President
Telephone: (202) 828-0850
Telefax: (202) 828-0860
WITH A COURTESY COPY (NOT REQUIRED FOR EFFECTIVE NOTICE) TO:
Veeder-Root Company
125 Powder Forest Drive
Simsbury, Connecticut 06070
ATTENTION: Steven H. Sigmon, President
Telephone: (860) 651-2735
Telefax: (860) 651-2727
COMPANY:
Tanknology-NDE International, Inc.
8900 Shoal Creek Blvd.
Building 200
Austin, Texas 78758
ATTENTION: Daniel Sharplin, President
Telephone: (512) 451-6334
Telefax: (512) 459-1459
WITH A COURTESY COPY (NOT REQUIRED FOR EFFECTIVE NOTICE) TO:
Tanknology-NDE International, Inc.
712 Main Street, Suite 1700
Houston, Texas 77002
ATTENTION: Jay Allen Chaffee
Telephone: (713) 223-5730
Telefax: (713) 223-5379
A Party's address for notice may be changed from time to time only by
written notice given to each of the other Parties in accordance with this
Section.
-12-
<PAGE>
13.3 Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the heirs, executors, administrators,
successors and assigns of each of the parties.
13.4 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
13.5 Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
13.6 Governing Law. This agreement shall be governed by and
-------------
construed in accordance with the laws of the state of Delaware applicable
to contracts made and to be performed wholly within that state.
13.7 Entire Agreement; Termination. This Agreement is intended by
-----------------------------
the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter. This Agreement, except the
provisions of Section 12 (which shall survive until the expiration of the
----------
applicable statutes of limitations) and this Section 13, shall commence
----------
on and as of the date hereof and shall terminate and be of no further force
or effect on December 31, 2007.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
TANKNOLOGY-NDE INTERNATIONAL, INC.
By: Jay Allen Chaffee
Its: Chairman
DH HOLDINGS CORP.
By: Daniel L. Comas
Its: Vice President
-13-
<PAGE>
EXHIBIT 5
- --------------------------------------------------------------------------------
PREEMPTIVE RIGHTS AGREEMENT
- --------------------------------------------------------------------------------
DATED AS OF DECEMBER 23, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
Section 1. Definitions......................................................1
Section 2. Preemptive Rights................................................2
2.1 Right of First Refusal......................................2
2.2 Notice of Preemption Offering...............................2
2.3 Manner of Exercise..........................................2
2.4 Participation by Holder.....................................2
2.5 Unsold Securities...........................................4
2.6 Termination of Preemptive Rights............................4
Section 3. Miscellaneous....................................................4
3.1 Rules of Construction.......................................4
3.2 Notices.....................................................4
3.3 Further Acts and Documents..................................6
3.4 Counterparts................................................6
3.5 Assignment..................................................6
3.6 Amendments..................................................6
3.7 Governing Law...............................................6
</TABLE>
<PAGE>
PREEMPTIVE RIGHTS AGREEMENT
This is the PREEMPTIVE RIGHTS AGREEMENT dated as of December 23, 1997
("Agreement") by and between Tanknology-NDE International, Inc. ("TNDE"), a
Delaware corporation, and DH Holdings Corp. ("DH"), a Delaware corporation,
entered into pursuant to the Note, Preferred Stock and Warrant Purchase
Agreement, dated December 23, 1997, as amended, restated, supplemented or
otherwise modified from time to time ("Purchase Agreement") by and between DH,
as purchaser, and TNDE, ProEco, Inc. ("ProEco"), a Delaware corporation,
Tanknology/NDE Corporation ("NDE"), a Delaware corporation, 2368692 Canada, Inc.
("Canada"), a Canadian Federal corporation, and Tanknology-NDE Construction
Services, Inc. ("Construction"), a Delaware corporation, as sellers.
TNDE, together with its successors and assigns, is referred to as the
"Company" and DH, is referred to as the "Holder." The Company and the Holder are
referred to collectively as the "Parties" and individually as a "Party."
This Agreement is one of the "Related Documents" referred to in the
Purchase Agreement.
In consideration of their mutual promises set forth in this Agreement and
the Purchase Agreement, the Parties hereby agree as follows.
SECTION 1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
(a) "Common Stock" means the shares of the Company's Common Stock,
par value $.0001, at any time outstanding.
(b) "GAAP" means generally accepted accounting principles.
(c) "Person" or "Persons" means any individual, corporation,
limited liability company, partnership, joint venture, association, joint
stock company, trust, unincorporated organization, governmental authority
or any other form of entity.
(d) "Preemption Offering" means (i) any Rights Offering, (ii) the
Company's issuance of any warrants, options or rights entitling any person
to purchase Common Stock (or securities convertible into Common Stock) for
cash consideration or non-cash consideration; and (iii) the Company's
issuance of shares of Common Stock for cash consideration or non-cash
consideration, other than (A) issuances of Common Stock pursuant to the
conversion of any preferred stock issued under the Purchase Agreement, or
outstanding as of the date hereof, or (B) the exercise of any warrants or
options issued pursuant to the Purchase Agreement or as reflected on
Schedule 6 of the Purchase
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Agreement. Notwithstanding the foregoing, the term "Preemption Offering"
shall not include (i) the issuance or sale of any options, warrants or
similar instruments which are issued with respect to any employee or
director stock option plan or other employee benefit plan of the Company
which is in effect on the date of this Agreement, or (ii) the issuance or
sale of Common Stock pursuant to the exercise or conversion of any options,
warrants or similar instruments which are issued with respect to any
employee or director stock option plan or other employee benefit plan of
the Company which is in effect on the date of this Agreement; provided that
the maximum number of options, warrants, similar instruments or shares of
Common Stock which is subject to such plans is not greater than the number
of options, warrants, similar instruments or shares of Common Stock,
respectively, subject to such plans on the date of this Agreement.
(e) "Rights Offering" means any offering of Common Stock, Convertible
Securities or other shares of capital stock of the Company or any
distribution of rights to purchase Common Stock or Convertible Securities
by or on behalf of the Company that is made substantially on a prorata
basis among the holders of Common Stock.
SECTION 2. PREEMPTIVE RIGHTS.
2.1 Right of First Refusal. During the term of this Agreement, the Holder
shall have a right of first refusal in any Preemption Offering upon
the terms and subject to the conditions set forth in this Section to
purchase either all or a portion of the securities to be offered in
such Preemption Offering as defined below.
2.2 Notice of Preemption Offering. The Company shall give the Holder at
least 30 days' prior Notice of each Preemption Offering. Such Notice
shall set forth: (i) the proposed commencement date for such
Preemption Offering; (ii) the number and description of the securities
to be offered pursuant to the Preemption Offering; and (iii) the
purchase price for such securities and other material terms of the
Preemption Offering.
2.3 Manner of Exercise. The Holder may, in the sole exercise of its
discretion, elect to participate in any such Preemption Offering by
giving Notice of its election to participate to the Company within 5
business days after being given Notice of such Preemption Offering.
Such Notice shall set forth the number and description of the
securities to be purchased pursuant to Holder's right of first
refusal. If the consideration payable in the Preemption Offering is
not cash, the Board of Directors shall, in good faith determine the
cash equivalent of such non-cash consideration and Holder may
participate in the Preemption Offering on a cash basis.
2.4 Participation by Holder. If Holder elects to exercise its right of
first refusal in such Preemption Offering, the Holder shall have the
right to purchase for cash, upon the same terms and conditions as
those provided for in such Preemption Offering, up to
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a pro rata portion ("Pro Rata Portion") equal to that percentage of
the securities of each type issued in such Preemption Offering not
exceeding the Holder's percentage record ownership of the Company's
Common Stock immediately before the Preemption Offering on a fully
diluted basis adjusted to include in both the numerator and the
denominator any shares of the Company's Common Stock which would be
issuable upon the conversion of preferred stock or warrants issued to
Holder pursuant to the Purchase Agreement and which have not been so
converted; provided that, Holder shall purchase an equal percentage of
the securities of each type to be issued in such Preemption Offering;
provided further that, in the event of a Preemption Offering that
involves the issuance of any Common Stock or securities convertible
into Common Stock or warrants, options or rights ("Options") entitling
any person to purchase Common Stock (or securities convertible into
Common Stock) for cash or cash equivalent consideration which is less
than $0.425 (the "Weighted Average Conversion Price") per share of
Common Stock or per share of Common Stock issuable upon excercise of
such Options and/or conversion of such Convertible Securities, Holder
shall have the right of first refusal to purchase for cash, upon the
same terms and conditions as those provided for in such Preemption
Offering, either up to the Pro Rata Portion or the entire amount of
the securities of each type issued in such Preemption Offering;
provided further that, the Weighted Average Conversion Price shall be
subject to appropriate adjustment from time to time in case the
Corporation shall (i) declare a dividend or make a distribution
payable in Common Stock on any class or series of capital stock of the
Corporation other than the Series A Preferred, (ii) subdivide or
reclassify its outstanding shares of Common Stock into a greater
number of shares, (iii) combine its outstanding shares of Common Stock
into a smaller number of shares, (iv) make a distribution on its
Common Stock in shares of its capital stock other than Common Stock or
(v) issue by reclassification of its Common Stock any shares of its
capital stock in which case, the Weighted Average Conversion Price in
effect at the time of the record date for such dividend or
distribution or the effective date of such subdivision, combination or
reclassification shall be proportionately reduced in the case of any
increase in the number of shares of Common Stock outstanding, and
proportionately increased in the case of any reduction in the number
of shares of Common Stock outstanding.
For purposes of calculating the Weighted Average Conversion Price with
respect to any Options offered in a Preemption Offering, the price per
share of the Common Stock issuable upon the exercise of such Options
or upon the conversion or exchange of the Convertible Securities
issuable upon the exercise of such Option shall be determined by
dividing (i) the total amount, if any, receivable by the Company as
consideration for the granting of such Options, plus the minimum
aggregate amount of additional consideration payable to the Company
upon the exercise of all such Options, plus, in the case of such
Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the
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issue or sale of such Convertible Securities and upon the conversion
or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of all such Options or upon
the conversion or exchange of all such Convertible Securities issuable
upon the exercise of such Options.
For purposes of calculating the Weighted Average Conversion Price with
respect to any Convertible Securities offered in a Preemption
Offering, the price per share for which Common Stock is issuable upon
the conversion or exchange of such Convertible Securities shall be
determined by dividing (i) the total amount received or receivable by
the Corporation as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (ii) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities.
2.5 Unsold Securities. The Company may for a period of not more than 90
days after the commencement date for any Preemption Offering offer and
sell the securities subject to such Preemption Offering which were not
sold to the Holder pursuant to this Agreement to any Person or Persons
upon the terms and subject to the conditions of such Preemption
Offering.
2.6 Termination of Preemptive Rights. The rights of the Holder under this
Agreement and the obligations of the Company hereunder shall terminate
on the earlier of (i) the repayment of the note dated December 23,
1997, in the principal amount of $6,500,000, by and between TNDE,
ProEco, NDE, Canada and Construction, as sellers and DH, as purchaser
including all principal and interest due thereunder and (ii) December
31, 2004.
SECTION 3. MISCELLANEOUS.
3.1 Rules of Construction. Unless otherwise specified, the following
rules shall be applied in construing the provisions of this Agreement:
(a) Headings to the various Sections of this Agreement are included
solely for purposes of reference and shall be ignored in construing the
provisions of this Agreement.
(b) The word "including" connotes "including without limitation".
(c) Any reference to any agreement or other document in this Agreement
refers to that agreement or other document as amended from time to time
after the date of this Agreement.
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<PAGE>
3.2 Notices. Any notice or other communication required or permitted to be
made or given under this Agreement shall be in writing and shall be
deemed to have been given to the Party to whom it is addressed: (i) on
the date indicated on the certified mail return receipt if sent by
certified mail return receipt requested; (ii) on the business day
actually received if hand delivered or if transmitted by telefax or if
delivered or transmitted on a day that is not a business day, the next
business day or (iii) one business day after such notice was delivered
to an overnight delivery service, addressed, delivered or transmitted
in each case as follows:
PURCHASER:
DH Holdings Corporation
1250 24th Street, N.W.
Suite 800
Washington, D.C. 20037
ATTENTION: Vice President
Telephone: (202) 828-0850
Telefax: (202) 828-0860
WITH A COURTESY COPY (NOT REQUIRED FOR EFFECTIVE NOTICE) TO:
Veeder-Root Company
125 Powder Forest Drive
Simsbury, Connecticut 06070
ATTENTION: Steven H. Sigmon, President
Telephone: (860) 651-2735
Telefax: (860) 651-2727
COMPANY:
Tanknology-NDE International, Inc.
8900 Shoal Creek Blvd.
Building 200
Austin, Texas 78758
ATTENTION: Daniel Sharplin, President
Telephone: (512) 451-6334
Telefax: (512) 459-1459
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WITH A COURTESY COPY (NOT REQUIRED FOR EFFECTIVE NOTICE) TO:
Tanknology-NDE International, Inc.
712 Main Street, Suite 1700
Houston, Texas 77002
ATTENTION: Jay Allen Chaffee
Telephone: (713) 223-5730
Telefax: (713) 223-5379
A Party's address for notice may be changed from time to time only by
written notice given to each of the other Parties in accordance with this
Section.
3.3 Further Acts and Documents. Each of the parties hereby agrees to
execute and deliver such further instruments and to do such further
acts and things as may be necessary or desirable to carry out the
purposes of this Agreement.
3.4 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed to be an original and all of which shall
constitute one in the same agreement.
3.5 Assignment. The rights of the Holder hereunder may not be sold,
assigned or otherwise transferred, except with the express written
consent of the Company; provided that, this Section 3.5 shall not
prohibit the assignment or transfer of such rights to Danaher
Corporation or to any affiliate of Danaher Corporation. For purposes
of this Section 3.5, the term "affiliate" shall mean any person or
entity directly or indirectly controlling, controlled by, or under
direct or indirect common control with, the Danaher Corporation.
3.6 Amendments. Any amendment or modification of this Agreement shall be
effective only if evidenced by a written instrument executed by duly
authorized representatives of the Parties hereto. Any waiver by a
Party of its rights hereunder shall be effective only if evidenced by
a written instrument executed by a duly authorized representative of
such Party. In no event shall such waiver of any rights hereunder
constitute the waiver of such rights in any future instance unless the
waiver so specifies in writing.
3.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware.
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The parties have executed and delivered this Agreement effective as of the
day and year first above written.
COMPANY:
TANKNOLOGY-NDE INTERNATIONAL, INC.
By: /s/ Jay Allen Chaffee
Its: Chairman
HOLDER:
DH HOLDINGS CORPORATION
By: Daniel L Comas
Its: Vice President
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EXHIBIT 6
CO-SALE AGREEMENT
This CO-SALE AGREEMENT dated as of December 23, 1997 ("Agreement") by and
between Tanknology-NDE International, Inc., a Delaware corporation ("TNDE"),
Proactive Partners, L.P., a California limited partnership ("Proactive"),
Lagunitas Partners, L.P., a California limited partnership ("Lagunitas"), Jay
Allen Chaffee, A. Daniel Sharplin and DH HOLDINGS CORP., a Delaware corporation
("DH"), is entered into pursuant to the Note, Preferred Stock and Warrant
Purchase Agreement, as amended, restated, supplemented or otherwise modified
from time to time ("Purchase Agreement") by and between DH, as purchaser, and
TNDE, ProEco, Inc., a Delaware corporation, Tanknology/NDE Corporation, a
Delaware corporation, 2368692 Canada, Inc., a Canadian Federal corporation, and
Tanknology-NDE Construction Services, Inc., a Delaware corporation, as sellers,
and dated as of December 23, 1997.
TNDE, together with its successors and assigns, is referred to as the
"Company." Proactive, Lagunitas, and Messrs. Chaffee and Sharplin together with
their respective, bound successors and assigns, are referred to collectively as
the "Shareholders" and individually as a "Shareholder." DH, together with its
permitted successors and assigns, is referred to as the "Holder." The Company,
the Shareholders and the Holder are referred to collectively as the "Parties"
and individually as a "Party."
THIS AGREEMENT IS ONE OF THE "RELATED DOCUMENTS" REFERRED TO IN THE
PURCHASE AGREEMENT.
In consideration of the mutual promises set forth in this Agreement and the
Purchase Agreement, the Parties hereby agree as follows.
Section 1. Definitions.
As used herein, the following terms shall have the following meanings:
1.1 "Business Days" means any days other than Saturday, Sunday or any days
upon which banking institutions are authorized or required by law or executive
order to be closed in the City of Washington, D.C.
1.2 "Common Share Equivalent" means an equivalent number of Common Shares
which would be issuable upon either the conversion or exercise of Convertible
Securities.
1.3 "Common Shares" means the shares of common stock, $0.0001 par value,
of the Company, at any time outstanding.
1.4 "Convertible Securities" means any securities which are convertible
into Common Shares of the Company and including any options, warrants or other
rights for which Common Shares of the Company are issuable upon their exercise.
<PAGE>
1.5 "Fiscal Year" means the fiscal year ending on December 31 of the
applicable year.
1.6 "Notice" means notice given in accordance with Section 5.2 hereof.
1.7 "Warrant Certificate" means the Warrant Certificate dated December 23,
1997 and issued by the Company to DH evidencing Warrants to purchase 4,500,000
Common Shares.
1.8 "Warrant Shares" means the Common Shares which are issuable upon the
exercise of the Warrants.
1.9 "Warrant(s)" means the right to purchase Common Shares of the Company
pursuant to the Warrant Certificate.
Section 2. Sales by Shareholders.
2.1 NOTICE OF PURCHASE OFFERS. Should any Shareholder ("Selling
Shareholder") propose to accept one or more binding, written bona fide offers
from any persons to purchase Common Shares or Convertible Securities from such
Selling Shareholder other than (i) an offer from the Company to purchase such
Common Shares or Convertible Securities pursuant to an existing agreement, plan
or policy by reason of such Selling Shareholder's death, disability, retirement
or termination of employment or (ii) in the event of such an offer to Lagunitas,
any one or more bona fide offers which would not result in the sale by Lagunitas
during any Fiscal Year of Common Shares (including, Common Shares which would be
issuable upon the conversion or exercise of Convertible Securities) in excess of
3% of the total Common Shares (including, Common Shares which would be issuable
upon the conversion or exercise of Convertible Securities) held by Lagunitas as
of the beginning of such Fiscal Year or (iii) in the event of such an offer to
Proactive, any one or more bona fide offers which would not result in the sale
by Proactive during any Fiscal Year of Common Shares (including, Common Shares
which would be issuable upon the conversion or exercise of Convertible
Securities) in excess of 3% of the total Common Shares (including, Common Shares
which would be issuable upon the conversion or exercise of Convertible
Securities) held by Proactive as of the beginning of such Fiscal Year or (iv) in
the event of such an offer to a Selling Shareholder other than Lagunitas and
Proactive, any one or more bona fide offers which would not result in the sale
by such other Selling Shareholder during any Fiscal Year of Common Shares
(including, Common Shares which would be issuable upon the conversion or
exercise of Convertible Securities) in excess of 5% of the total Common Shares
(including, Common Shares which would be issuable upon the conversion or
exercise of Convertible Securities) held by such other Selling Shareholder as of
the beginning of such Fiscal Year (the "Purchase Offer"), then such Selling
Shareholder shall promptly give Notice to the Holder of the terms and conditions
of, and a copy of, each such Purchase Offer. In addition, the Selling
Shareholder shall give Notice to the Holder of any bona fide purchase offer
received which falls within the exceptions enumerated in this Section 2.1(i),
(ii), (iii) and (iv). Such notice shall include a copy of the purchase offer
and the terms and conditions thereof.
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2.2 RIGHT OF FIRST REFUSAL. Subject to the terms and conditions of this
Agreement, the Holder shall have a limited right of first refusal with respect
to any Purchase Offer; provided that, if the Holder does not exercise its
limited right of first refusal, Holder shall have a limited right to participate
in the Purchase Offer as specified in Paragraph 2.3. Holder's limited right of
first refusal shall be subject to the following terms:
(a) Holder must agree to purchase all (but not less than all) of the
Common Shares and Convertible Securities which are offered for sale
pursuant to the Purchase Offer upon the same terms and conditions as those
contained in the Purchase Offer, provided that, Holder may substitute an
equivalent amount of cash for the fair market value of any non-cash
consideration offered pursuant to the Purchase Offer; and
(b) Holder must give Notice to the Selling Shareholder of its intent
to exercise its right of first refusal within five Business Days after
being given Notice of the Purchase Offer by the Selling Shareholder.
2.3 RIGHT TO PARTICIPATE. In the event that the Holder does not exercise
its right of first refusal with respect to a Purchase Offer, Holder shall have a
limited right to participation in such Selling Shareholder's proposed sale of
Common Shares and/or Convertible Securities on the same (or, in the case of
Convertible Securities, equivalent) terms and conditions. To the extent that
the Holder exercises such right of participation, the number of Common Shares
and Convertible Securities which such Selling Shareholder may sell pursuant to
such Purchase Offer shall be correspondingly reduced. The right of
participation of the Holder shall be subject to the following terms and
conditions:
(a) Holder must give Notice to the Selling Shareholder of its intent
to exercise its right of participation within fifteen Business Days after
being given Notice of the Purchase Offer by the Selling Shareholder.
(b) The Holder may sell all or any part of its Warrant Shares and/or
Common Shares owned of record by Holder up to a number equal to the product
obtained by multiplying (i) the aggregate number of Common Shares
(including the Common Share Equivalent of any Convertible Securities)
covered by the Purchase Offer by (ii) a fraction (A) the numerator of which
is the aggregate number of Common Shares (including the Common Share
Equivalent of Convertible Securities) owned of record by Holder, and (B)
the denominator of which is the sum of (x) the combined number of such
Common Shares (including the Common Share Equivalent of Convertible
Securities) at the time owned by all of the Shareholders, and (y) the
number of Common Shares (including the Common Share Equivalent of
Convertible Securities) at that time owned of record by the Holder.
(c) The Holder may participate in the sale by delivering to the
Selling Shareholder for transfer to the purchase offeror one or more
certificates, properly endorsed for transfer, free and clear of all adverse
claims, which represent the number of currently
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exercisable Warrant Shares and/or Common Shares which the Holder elects to
sell pursuant to this Section 2.3. Notwithstanding any provision of the
Warrant Certificate to the contrary, the Holder may exercise such Warrant
for the number of Warrant Shares to be purchased and deliver such Warrant
Shares as provided in this Section 2.3, and such exercise shall not
constitute the single exercise of the Warrant or otherwise affect any
future exercise of the Warrant.
2.4 CONSUMMATION OF SALE. The stock certificate or certificates which a
Holder delivers to the Selling Shareholder pursuant to Section 2.3 shall be
transferred by the Selling Shareholder to the purchase offeror in consummation
of the sale pursuant to the terms and conditions specified in the Notice
delivered pursuant to Section 2.1, and such Selling Shareholder shall promptly
thereafter remit to the Holder that portion of the sale proceeds to which the
Holder is entitled by reason of its participation in such sale; provided,
however, that if the Holder has delivered a Warrant to be transferred to the
purchase offeror, the Holder shall receive for such Warrant only the difference
between the purchase price set forth in the Purchase Offer and the exercise
price set forth in the Warrant and the Company shall receive the balance.
Notwithstanding the foregoing, the Selling Shareholder shall not be responsible
or liable to the Holder in the event of non-performance by the purchaser unless
such non-performance is caused by the wrongful conduct of the Selling
Shareholder.
2.5 ONGOING RIGHTS. The exercise or non-exercise of the rights of the
Holder hereunder to participate in one or more sales made by the Selling
Shareholder shall not adversely affect the Holder's right with regard to
subsequent sales by a Selling Shareholder pursuant to Section 2 hereof.
2.6 PERMITTED EXEMPTIONS. The participation rights of the Holder shall
not apply to any bona fide gift; provided that a Shareholder shall inform the
Holder of such gift prior to effecting it and the donee shall furnish the Holder
with a written agreement to be bound by, and comply with, all provisions of this
Agreement applicable to such Shareholder.
Section 3. Prohibited Transfers.
3.1 TREATMENT OF PROHIBITED TRANSFERS. In the event a Shareholder should
sell any Common Shares or Convertible Securities in contravention of the
participation rights of the Holder under this Agreement (a "Prohibited
Transfer"), the Holder, in addition to such other remedies as may be available
at law, in equity or hereunder, shall have the put option provided in Section
3.2 and such Shareholder shall be bound by the applicable provisions of such put
option.
3.2 PUT OPTION. In the event of a Prohibited Transfer by any Shareholder,
the Holder shall have the right to sell to such Shareholder that number of
shares of Common Shares (including the Common Share Equivalent of Convertible
Securities) (either directly or through delivery of such Common Shares and the
Common Share Equivalent of Convertible Securities) equal to the number of shares
the Holder would have been entitled to transfer to the purchaser in the
Prohibited Transfer pursuant to the terms hereof. Such sale shall be made on
the following terms and conditions:
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(a) The price per share at which such shares are to be sold to the
Shareholder shall be equal or equivalent to the price per share paid by the
purchaser to the Shareholder in the Prohibited Transfer. The Shareholder
shall also reimburse the Holder for any and all reasonable fees and
expenses, including legal fees and expenses, incurred pursuant to the
exercise or the attempted exercise of the Holder's rights under this
Article 3.
(b) Within thirty (30) days after the earlier of the date on which
the Holder (i) receives notice from a Shareholder of the Prohibited
Transfer, or (ii) otherwise becomes aware of the Prohibited Transfer, the
Holder shall, if exercising the put option created hereby, deliver to such
Shareholder the certificate or certificates representing shares to be sold,
each certificate to be properly endorsed for transfer.
(c) A Shareholder shall, upon receipt of the certificate or
certificates for the shares to be sold by a Holder, pursuant to Section
3.2(b), free and clear of all adverse claims, pay the aggregate purchase
price therefor and the amount of reimbursable fees and expenses, as
specified in Section 3.2(a), by certified or cashier's check made payable
to the order of the Holder.
(d) Notwithstanding the foregoing, any attempt to transfer shares of
the Company in violation of the terms of this Agreement shall be void and
the Company agrees it will not effect such a transfer nor will it treat any
alleged transferee as the holder of such shares without the written consent
of the Holder.
Section 4. Legended Certificate.
4.1 LEGEND. Each certificate representing Common Shares now or hereafter
owned by any Shareholder shall be endorsed with the following legend:
THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN CO-SALE AGREEMENT BY AND
AMONG CERTAIN SHAREHOLDERS, THE COMPANY AND DH HOLDINGS CORP. COPIES OF
SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
COMPANY.
4.2 LEGEND REMOVAL. The Section 4.1 legend shall be removed upon the
earlier of the date upon which the provisions of this Agreement are no longer
applicable to such securities in accordance with the provisions of Section 5.1,
or the date on which the shares represented by such certificate are no longer
owned of record beneficially by a Shareholder, pursuant to a transfer
consummated in compliance with this Agreement.
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Section 5. Miscellaneous Provisions.
5.1 TERMINATION OF CO-SALE RIGHTS. The rights of the Holder under this
Agreement and the obligations of the Shareholders with respect to the Holder
shall terminate on the earlier of (i) December 31, 2004, (ii) the liquidation,
dissolution or indefinite cessation of the business operations of the Company;
or (iii) the first date on which the Holder is no longer the record and
beneficial owner of at least 1,500,000 Common Shares (including the Common Share
Equivalent of Convertible Securities).
5.2 NOTICES. Any notice or other communication required or permitted to
be made or given under this Agreement shall be in writing and shall be deemed to
have been given to the Party to whom it is addressed: (i) on the date indicated
on the certified mail return receipt if sent by certified mail return receipt
requested; (ii) on the business day actually received if hand delivered or if
transmitted by telefax or if delivered or transmitted on a day that is not a
business day, then the next business day, or (iii) one business day after such
notice was delivered to an overnight delivery service, addressed, delivered or
transmitted in each case as follows:
IF TO THE HOLDER:
DH HOLDINGS CORP.
1250 24th Street, N.W.
Suite 800
Washington, D.C. 20037
ATTENTION: Vice President
Telephone: (202) 828-0850
Telefax: (202) 828-0860
WITH A COURTESY COPY (NOT REQUIRED FOR EFFECTIVE NOTICE) TO:
Veeder-Root Company
125 Powder Forest Drive
Simsbury, Connecticut 06070
ATTENTION: Steven H. Sigmon
Telephone: (860) 651-2735
Telefax: (860) 651-2727
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<PAGE>
IF TO THE COMPANY:
Tanknology-NDE International, Inc.
8900 Shoal Creek Blvd.
Building 200
Austin, Texas 78758
ATTENTION: Daniel Sharplin, President
Telephone: (512) 451-6334
Telefax: (512) 459-1459
WITH A COURTESY COPY (NOT REQUIRED FOR EFFECTIVE NOTICE) TO:
Tanknology-NDE International, Inc.
712 Main Street, Suite 1700
Houston, Texas 77002
ATTENTION: Jay Allen Chaffee
Telephone: (713) 223-5730
Telefax: (713) 223-5379
IF TO PROACTIVE:
Proactive Partners, L.P.
50 Osgood Place, Penthouse
San Francisco, CA 94153
ATTENTION: Charles McGettigan
Telephone: (415) 986-4433
Telefax: (415) 986-3617
IF TO LAGUNITAS:
Lagunitas Partners, L.P.
50 Osgood Place, Penthouse
San Francisco, CA 94153
ATTENTION: Patrick McBane
Telephone: (415) 981-2101
Telefax: (415) 521-1744
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IF TO MR. CHAFFEE:
Jay Allen Chaffee
Tanknology-NDE International, Inc.
712 Main Street, Suite 1700
Houston, TX 77002
Telephone: (713) 223-5730
Telefax: (713) 223-5379
IF TO MR. SHARPLIN:
A. Daniel Sharplin
Tanknology-NDE International, Inc.
8900 Shoal Creek Blvd.
Building 200
Austin, TX 78758
Telephone: (512) 451-6334
Telefax: (512) 459-1459
A Party's address for notice may be changed from time to time only by
written notice given to each of the other Parties in accordance with this
Section.
5.3 SUCCESSORS AND ASSIGNS. This Agreement and the rights and obligations
of the parties hereunder shall inure to the benefit of, and be binding upon,
their respective successors, permitted assigns and legal representatives;
provided that, the rights of the Holder hereunder may not be sold, assigned or
otherwise transferred without the prior, express written consent of the Company
and all of the Shareholders; provided further that DH Holdings Corp. may
negotiate, assign, or transfer its rights and obligations hereunder without the
consent of the Company or the Shareholders to Danaher Corporation or to any
person or entity under direct or indirect control of Danaher Corporation or
controlled by or under direct or indirect common control with Danaher
Corporation.
5.4 SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
5.5 AMENDMENTS. Any amendment or modification of this Agreement shall be
effective only if evidenced by a written instrument executed by duly authorized
representatives of the Parties hereto. Any waiver by a Party of its rights
hereunder shall be effective only if evidenced by a written instrument executed
by a duly authorized representative of such Party. In no event shall such
waiver
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of any rights hereunder constitute the waiver of such rights in any future
instance unless the waiver so specifies in writing.
5.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware.
5.7 OTHER OBLIGATIONS OF COMPANY. The Company agrees to use all
commercially reasonable efforts to enforce the terms of this Agreement, to
inform the Holder of any breach hereof and to assist the Holder in the exercise
of its rights and performance of its obligations under Sections 4 and 5 hereof.
The parties have executed and delivered this Agreement effective as of the
day and year first above written.
SHAREHOLDERS: HOLDER:
PROACTIVE PARTNERS, L.P.
DH HOLDINGS CORP.
By: /s/ Charles McGettigan
------------------------------
Its: General Partner
-----------------------------
LAGUNITAS PARTNERS, L.P.
By: /s/ Daniel L. Comas
-------------------
By: /s/ Jim B. Gruhen
------------------------------
Its: Its: Vice President
----------------------------- --------------
/s/ Jay Allen Chaffee
- ---------------------
JAY ALLEN CHAFFEE
/s/ A. Daniel Sharplin
- ----------------------
A. DANIEL SHARPLIN
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COMPANY:
TANKNOLOGY-NDE INTERNATIONAL, INC.
By:/s/ Jay Allen Chaffee
Its: Chairman
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EXHIBIT 7
October 1, 1997
Mr. Steven H. Sigmon
President
Veeder Root, North America
125 Powder Forest Drive
Simsbury, Connecticut 06070
Dear Mr. Sigmon:
In connection with your analysis of a proposed negotiated transaction with
Tanknology-NDE International, Inc. (the "Company") as set forth in the letter of
intent between you and the Company dated of even date herewith (the "Letter of
Intent"), you have been or will be furnished certain information that is
proprietary, non-public or confidential concerning the Company from the Company
or its representatives (collectively, and together with the Company, the
"Disclosing Parties"). In connection with such analysis, you hereby agree to
the following (it being understood that you are also agreeing to cause your
affiliates, including but not limited to Danaher Corporation, to comply with the
applicable provisions hereof):
1. Use of Evaluation Material. The Evaluation Material (as defined below)
will be used solely for the purpose of evaluating the proposed negotiated
business transaction between you and the Company and not in a manner detrimental
to the Company. All the Evaluation Material will be kept confidential by you
and will not be disclosed to any other persons in any manner; provided that you
may disclose the Evaluation Material or portions thereof to those of your
representatives who need to know such information for the purpose of evaluating
the proposed negotiated transaction involving you and the Company (it being
understood that such representatives shall be informed by you of the
confidential nature of such information and shall agree to treat such
information confidentially in accordance with this letter). You agree to be
responsible for compliance with this agreement by any of your representatives.
2. Legally Required Disclosures. In the event that you or any of your
representatives are requested or required (by deposition, interrogatory, request
for documents, subpoena, civil investigative demand or similar process) to
disclose any of the Evaluation Material, you shall provide the Company with
prompt prior written notice of such request or requirement, and you shall
cooperate with the Company so that the Company may seek a protective order or
other appropriate remedy or, if it so elects, waive compliance with the terms of
this agreement. In the event that such protective order or other remedy is not
obtained, or the Company waives compliance with the provisions hereof, you or
such representative, as the case may be, may disclose only that portion of the
Evaluation Material that you are advised by counsel is legally
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required to be disclosed and shall exercise all reasonable efforts to obtain
assurance that confidential treatment will be accorded such Evaluation Material.
3. Definition of Evaluation Material. The term "Evaluation Material" as
used in this agreement shall mean all information and documents which any
Disclosing Party furnishes or otherwise discloses to you or any of your
representatives, together with all analyses, compilations, studies or other
documents, records or data (in whatever form maintained, whether documentary,
computer storage or otherwise) prepared by you or any of your representatives
which contain or otherwise reflect or are generated from such information and
documents. The term "Evaluation Material" does not include any information that
(i) at the time of disclosure or thereafter is generally available to and known
by the public (other than as a result of a disclosure by you or any of your
representatives), or (ii) is or was available to you on a nonconfidential basis
from a source other than the Disclosing Parties, who, insofar as is known to you
after reasonable inquiry, is not prohibited from transmitting the information to
you by a contractual, legal or fiduciary obligation to the Company.
4. Return or Destruction of Materials. Upon request of the Company you
will return promptly to the Company all copies of the Evaluation Material then
in your possession or in the possession of any of your representatives, and any
copies, notes or extracts thereof, without retaining any copy thereof, except
that you may destroy promptly (in lieu of returning) all copies of any analyses,
compilations, studies or other documents, records or data prepared by you or
your representatives which contain or otherwise reflect or are generated from
the Evaluation Material, and you will certify to the Company that such
destruction has been accomplished.
5. Nondisclosure of Proposed Transaction. Without the prior written
consent of the Company, and except as required by law or stock exchange rule,
you will not, and will direct and cause your representatives not to, disclose to
any person (i) that the Evaluation Material has been made available to you, (ii)
that discussions or negotiations are taking place concerning a possible
transaction between the Company and you or any of your affiliates, (iii) that
you or any of your affiliates are considering or reviewing a transaction
involving or relating to the Company or taking any of the actions described in
paragraph 8 or (iv) the terms, conditions or other facts with respect to any
such possible transaction or actions, including that status thereof. Your
obligations in the preceding sentence shall survive until September 30, 1998,
regardless of any return or destruction of the Evaluation Material pursuant to
paragraph 4.
6. No Solicitation of Company Personnel. You agree that for a period of
three years from the date hereof, you will not solicit for employment any
officer, director or key employee of the Company or its subsidiaries; provided
that this prohibition shall not apply to solicitations made by you to the public
or the industry generally and that you shall not be prohibited from employing
any such person who contacts you on his or her own initiative without any
prohibited solicitation.
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7. No Representation or Warranty. Although the Company has endeavored or
will endeavor to include in the Evaluation Material information known to it
which it believes to be relevant for the purpose of your investigation, you
understand that neither the Company nor any of its representatives have made or
make any representation or warranty as to the accuracy or completeness of the
Evaluation Material. You agree that neither the Company mor its representatives
shall have any liability to you or any of your representatives resulting from
the use of the Evaluation Material. Only those representations or warranties
that are made in a Definitive Agreement (as defined below) when, as and if
executed, and subject to such limitations and restrictions as may be specified
in such Definitive Agreement, will have any legal effect.
8. Other Restrictions. Until September 30, 1998, neither you nor an of
your affiliates nor any of your representatives shall, without the prior written
consent of the Board of Directors of the Company, directly or indirectly:
(a) effect or seek, offer or propose (whether publicly or otherwise)
to effect, or cause or participate in or in any way assist any other person to
effect or seek, offer or propose (whether publicly or otherwise) to effect or
participate in, (i) any acquisition of any securities, debts or rights to
acquire any securities (or any other beneficial ownership thereof), debts,
assets of the Company or any of its subsidiaries; (ii) any merger or other
business combination or tender or exchange offer involving the Company or any of
its subsidiaries; (iii) any recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction with respect to the Company or
any of its subsidiaries; or (iv) any "solicitation" of "proxies" (as such terms
are used in the proxy rules of the Securities and Exchange Commission) or
consents to vote or otherwise with respect to any voting securities of the
Company, or make any communication exempted from the definition of
"solicitation" by Rule 14a-1(1)(2)(iv) under the Securities Exchange Act of
1934;
(b) form, join or in any way participate in a "group" (as defined
under the Securities Exchange Act of 1934) with respect to the Company;
(c) otherwise act, alone or in concert with others to seek to control
or influence the management, Board of Directors or policies of the Company;
(d) take any action which might cause or require the Company or you to
make a public announcement regarding any of the types of matters set fort in (a)
through (c) above;
(e) disclose any information, plan or arrangement inconsistent with
the foregoing; or
(f) enter into any discussions or arrangements with any third party
with respect to any of the foregoing. You agree during such period not to
request the Company (or its
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Representatives), directly or indirectly to amend or waive any provision of this
paragraph (including this sentence).
9. No Shop. Until December 1, 1997, neither the Company nor any of its
affiliates, officers, directors or agents will solicit, negotiate, encourage
(including furnishing any nonpublic information concerning the Company's
business, properties or assets) or accept any proposal for, a business
transaction involving the Company that would preclude or preempt the proposed
transaction between you and the Company referred to herein.
10. Company Contacts. You agree that, until September 30, 1998, neither
you nor any of your representatives will contact any officer, director,
employee, agent, creditor or shareholder of the Company other than Jay Allen
Chaffee or A. Daniel Sharplin (the "Company Contacts") concerning the subject
matter of this letter agreement or to gather any Evaluation Material or other
information. The Company Contacts will, in their sole discretion, decide
whether to permit or deny access to and make any and all arrangements for all
contacts by you and your representatives with, any of the foregoing.
11. Definitive Agreement. You also understand and agree that no contract
or agreement providing for a business transaction between the Company and you or
your affiliates shall be deemed to exist unless and until a definitive agreement
has been executed and delivered by you and each of the other parties thereto (a
"Definitive Agreement"), and you hereby waive, in advance, any claims
(including, without limitation, a breach of contract) in connection with such a
transaction unless and until a Definitive Agreement has been executed and
delivered by you and each of the other parties thereto. It is also agreed that
unless and until a Definitive Agreement between the Company and you with respect
to a business combination involving the Company has been executed and delivered,
neither you nor the Company nor its stockholders has any legal obligation of any
kind whatsoever with respect to any such transaction. For purposes of this
paragraph, the term "Definitive Agreement" does not include the Letter of Intent
or any other preliminary written agreement nor does it include any written or
oral acceptance of an offer or bid on your part. Neither this paragraph nor any
other provision in this agreement can be waived or amended except by written
consent of the Company, which consent shall specifically refer to this paragraph
(or such other provision) and explicitly make such waiver or amendment.
12. Securities Laws. You hereby acknowledge that you are aware and that
you will advise your representatives who are informed as to the matters that are
the subject of this agreement that the United States securities laws prohibit
any person who has material, non-public information concerning the matters which
are the subject of this agreement from purchasing or selling securities of the
Company or from communicating such information to any other person under
circumstances in which it is reasonably foreseeable that such person is likely
to purchase or sell such securities.
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13. Remedies. You agree that money damages would not be a sufficient
remedy for any breach of this agreement and that the Company shall be entitled
to equitable relief, including injunction and specific performance, in the event
of any breach of the provisions of this agreement, in addition to all other
remedies available to the Company at law or in equity. You also agree to
reimburse the Company for all costs and expense, including reasonable attorneys'
fees, incurred by it in enforcing your obligations hereunder.
14. Access In the event you desire physical access to any of the
Company's properties, you agree to indemnify, defend and hold harmless the
Company, its affiliates and subsidiaries from and against any and all
liabilities, claims and causes of action for personal injury, death or property
damage occurring on or to such property as a result of your entry onto the
premises. You agree to comply fully with all rules, regulations and
instructions issued by the Company regarding your actions while upon, entering
or leaving the property of the Company.
15. No Waiver. It is further understood and agreed that no failure or
delay in exercising any right, power or privilege hereunder will operate as a
waiver thereof, nor will any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege hereunder.
16. Person; Representatives. As used in this agreement, (i) the term
"person" will be interpreted broadly to include, without limitation, any
corporation, company, group, partnership, limited liability company, other
entity or individual, and (ii) the term "representatives" used with respect to a
person, shall include the directors, offices, employees, representatives,
agents, attorneys, consultants, accountants, financial and other advisors of or
to such person.
This agreement is for the benefit of the Company and you and will be
governed by and construed in accordance with the laws of the State of Delaware,
without giving effect to the choice of law rules thereof.
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If you agree with the foregoing, please sign both copies of this agreement
and return one to the Company, which will construe our agreement with respect to
the subject matter of this letter.
Very truly yours,
TANKNOLOGY-NDE INTERNATIONAL, INC.
By: /s/ A. Daniel Sharplin
------------------------------
A. Daniel Sharplin
President
CONFIRMED AND AGREED
as of the date written above
VEEDER-ROOT, NORTH AMERICA
By: /s/ Steven H. Sigmon
------------------------------
Steven H. Sigmon
President
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EXHIBIT 8
TANKNOLOGY-NDE INTERNATIONAL, INC.
DH HOLDINGS CORP. DECEMBER 23, 1997
1250 24th Street NW
Suite 800
Washington DC 20037
Ladies and Gentlemen:
In consideration of your entering into the Note, Preferred Stock and
Warrant Purchase Agreement between Technology-NDE International, Inc. ("TNDE")
and you dated of even date herewith (the "Purchase Agreement"), we hereby agree
that, for the shorter of (a) five years from the date hereof or (b) while you
are the holder of shares of or securities exercisable for or convertible into
common stock of TNDE acquired under the Purchase Agreement, in the event that
the net number of shares of common stock of TNDE and warrants, options or
convertible securities of TNDE exercisable for or convertible into shares of
common stock of TNDE that were outstanding on the date hereof change from that
reflected on Schedule 6 to the Purchase Agreement, TNDE will promptly increase
(but not decrease) the number of Warrants issued to you for the purchase of
shares of common stock of TNDE on the same terms and conditions so that you
would have been able to exercise and acquire, as of the date hereof, 25.402% of
the shares of common stock of TNDE on a basis consistent with the "Schedule II-
Revised" table contained in such Schedule 6.
In addition, TNDE shall promptly engage Baker & Botts L.L.P. as its counsel
to prepare an analysis of the documentation of the capital structure of and for
a list and description of all equity and convertible debt securities of TNDE and
thereafter TNDE shall adapt such curative measures as it deems appropriate, on
advice of counsel, and to report to you thereon on or before March 30, 1998.
Very truly yours,
TANKNOLOGY-NDE INTERNATIONAL, INC.
By: //s//
---------------------------------------
Jay Allen Chaffee
Chairman of the Board
AGREED AND ACKNOWLEDGED
DH HOLDINGS CORP.
By: //s//
------------------------------
Daniel L. Comas
Vice President
