<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): OCTOBER 25, 1996
___________________________________________
NDE ENVIRONMENTAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-10361 95-3634420
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
8900 SHOAL CREEK BOULEVARD, SUITE 200
AUSTIN, TEXAS 78758
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (512) 451-6334
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 25, 1996, NDE Environmental Corporation (the "Company") completed
the acquisition (the "Acquisition") of three underground storage tank service
subsidiaries (collectively, the "Subsidiaries") of Tanknology Environmental,
Inc. ("TEI"). The Subsidiaries acquired are Tanknology Corporation
International, located in Houston, Texas ("TCI"), USTMAN Industries, Inc.,
located in Denver, Colorado, and Tanknology Canada (1988), Inc., located in
Mississauga, Ontario, Canada. Immediately following the Acquisition, the
Company caused its wholly owned subsidiary, NDE Testing & Equipment, Inc., to
merge with and into TCI, which changed its name to Tanknology/NDE Corporation.
The assets acquired by the Company as a result of the Acquisition include
the inventories, equipment and facilities used by the Subsidiaries to service
underground storage tanks. The Company generally expects to continue to use the
assets of the Subsidiaries for such purpose, however, the Company may consider,
from time to time, the disposition of certain of the assets which are not
strategic to the Company's ongoing business.
The Acquisition was accomplished by means of the Company's purchase of all
of the issued and outstanding capital stock of the Subsidiaries. The Company
paid an aggregate purchase price of $12,000,000 in cash for such capital stock.
The Company and TEI reached the purchase price after arm's-length negotiations.
The Stock Purchase Agreement provides that the purchase price shall be adjusted
(i) downward if and to the extent the Company's post-closing audit of the
Subsidiaries reveals that the net assets of the Subsidiaries are less than the
net assets reflected in the August 31, 1996 Balance Sheets of the Subsidiaries
and (ii) upward (A) for interest on the $12,000,000 purchase price from August
31, 1996 through October 25, 1996 at 8% per annum and (B) for certain interim
period tax adjustments. Any upward adjustment and any downward adjustment
would be offset against the other to determine the final purchase price.
In connection with the Acquisition, the Company obtained a total of $19
million of financing from Bank One, Texas, N.A. ("BOT") and Banc One Capital
Partners, L.P. ("BOCP") under two separate financing agreements. The Company's
agreement with BOT provides for a $5 million revolving credit line (of which $2
million was funded at the closing of the Acquisition) at prime plus .75%, and a
$6 million 5-year term note at prime plus 1.5%. The agreement with BOCP is for
$8 million of senior subordinated debt with a 5-year maturity and interest at
13% per annum. The Company pledged substantially all of its assets and the
assets of its subsidiaries as security for the debt. In connection with the
financings, a major stockholder of the Company, Proactive Partners, L.P. of San
Francisco, California, provided a $1 million standby commitment in the event of
a payment default by the Company and, together with its affiliate Lagunitas
L.P., have agreed to convert $1 million of prior indebtedness to an additional
8,000,000 shares of the Company's common stock. BOCP received from the Company
13,022,920 warrants each to purchase one share of the Company's common stock at
an initial exercise price of $.325 per warrant subject to downward adjustment
(but not less than $.125 per warrant) based on the Company's financial
performance during the 12-month period prior to exercise of the warrants. The
Company also used proceeds of the financings to retire indebtedness of
approximately $2.6 million. The retired debt carried interest rates averaging
approximately 18% per annum. The remaining financing proceeds were used for
general working capital and to pay fees and expenses of approximately $800,000
related to the Acquisition and the financings.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
As of the filing date of this Form 8-K, the Company has found it
impracticable to file the required financial statements of the acquired
businesses. The Company intends to file the required financial statements as
soon as they become available but in any event no later than 60 days after the
deadline for filing this report on Form 8-K.
(b) PRO FORMA FINANCIAL INFORMATION.
As of the filing date of this Form 8-K, the Company has found it
impracticable to file the required pro forma financial information for the
Acquisition. The Company intends to file the required pro forma financial
information as soon as it becomes available but in any event no later than 60
days after the deadline for filing this report on Form 8-K.
(c) EXHIBITS.
2.1* Stock Purchase Agreement between NDE Environmental
Corporation and Tanknology Environmental, Inc. dated as of
October 7, 1996.
2.2* First Amendment to Stock Purchase Agreement between NDE
Environmental Corporation and Tanknology Environmental,
Inc. dated as of October 25, 1996.
10.1 Loan Agreement, dated October 25, 1996, between NDE
Environmental Corporation, Tanknology/NDE Corporation,
USTMAN Industries, Inc., ProEco, Inc., Tanknology Canada
(1988) Inc. and Bank One, Texas, N.A. (the "Loan
Agreement").
10.1a Revolving Note dated October 25, 1996 issued pursuant to
the Loan Agreement.
10.1b Term Note dated October 25, 1996 issued pursuant to the
Loan Agreement.
10.2 Note and Warrant Purchase Agreement, dated as of October
25, 1996, between NDE Environmental Corporation,
Tanknology /NDE Corporation, USTMAN Industries, Inc.,
ProEco, Inc. and Tanknology of Canada (1988), Inc. and
Banc One Capital Partners, L.P. (the "Note and Warrant
Purchase Agreement").
10.2a Senior Subordinated Note Due December 31, 2001 dated
October 25, 1996 issued pursuant to the Note and Warrant
Purchase Agreement.
10.2b Warrant Certificate dated October 25, 1996 issued
pursuant to the Note and Warrant Purchase Agreement.
10.3 Security Agreement, dated as of October 25, 1996, among
NDE Environmental Corporation, Tanknology/NDE Corporation,
USTMAN Industries, Inc., ProEco, Inc. and Tanknology
Canada (1988), Inc. and Banc One Capital Partners, L.P.
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<PAGE> 4
10.4 Security Agreement -- Pledge of Subsidiary Stock, dated as
of October 25, 1996, between NDE Environmental Corporation
and Banc One Capital Partners, L.P.
10.5 Put Option Agreement, dated as of October 25, 1996,
between NDE Environmental Corporation and Banc One Capital
Partners, L.P.
10.6 Registration Rights Agreement, dated as of October 25,
1996, between NDE Environmental Corporation and Banc One
Capital Partners, L.P.
10.7 Preemptive Rights Agreement, dated as of October 25, 1996,
between NDE Environmental Corporation and Banc One Capital
Partners, L.P.
10.8 Co-Sale Agreement, dated as of October 25, 1996, among NDE
Environmental Corporation, Proactive Partners, L.P.,
Lagunitas L.P., Jay Allen Chaffee, A. Daniel Sharplin and
Banc One Capital Partners, L.P.
10.9 Standby Commitment, made as of October 25, 1996, among
Proactive Partners, L.P., NDE Environmental Corporation,
Banc One Capital Partners, L.P. and Bank One, Texas, N.A.
10.10 Shareholder Agreement, dated as of October 25, 1996, among
Proactive Partners, L.P. Lagunitas L.P., Jay Allen
Chaffee, A. Daniel Sharplin and Banc One Capital Partners,
L.P.
10.11 Pledge and Security Agreement, dated October 25, 1996,
between NDE Environmental Corporation and Bank One Texas,
N.A.
10.12 Pledge and Security Agreement, dated October 25, 1996,
between Tanknology/NDE Corporation and Bank One Texas,
N.A.
10.13 Pledge and Security Agreement, dated October 25, 1996,
between ProEco, Inc. and Bank One Texas, N.A.
10.14 Pledge and Security Agreement, dated October 25, 1996,
between USTMAN Industries, Inc. and Bank One Texas, N.A.
99 Press Release of NDE Environmental Corporation with
respect to the acquisition of Tanknology Corporation
International, USTMAN Industries, Inc. and Tanknology
Canada (1988), Inc.
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---------------
* SCHEDULES: Pursuant to Item 601(b)(2) of Regulation S-K,
schedules to the Stock Purchase Agreement and the First Amendment to Stock
Purchase Agreement filed as Exhibit 2.1 and Exhibit 2.2, respectively, to this
Form 8-K have been omitted. The Company hereby agrees to furnish such
schedules upon the request of the Securities and Exchange Commission.
SCHEDULES OMITTED
<TABLE>
<CAPTION>
Schedules to Stock
Purchase Agreement Description
------------------ -----------
<S> <C>
Schedule 2.4(d)(iv) Assumed Employees
Schedule 4.1 Foreign Qualifications
Schedule 4.4 Seller Non-Contravention
Schedule 4.7 Seller Litigation
Schedule 4.8 Capitalization
Schedule 4.9 Absence of Certain Changes
Schedule 4.10 Contracts and Commitments
Schedule 4.11 Taxes
Schedule 4.12 Title to Properties
Schedule 4.13 Trademarks, Trade Names and Intellectual Property
Schedule 4.14(A) August 31 Financial Statements
Schedule 4.14(B) Intercompany Transactions between August 31, 1996 and Closing
Schedule 4.16 Liabilities
Schedule 4.20 Tangible Personal Property
Schedule 4.21 Insurance Policies
Schedule 4.23 Distributed Products
Schedule 4.25 Transactions with Certain Persons
Schedule 4.29 Employee Benefit Plans
Schedule 4.30 Environmental Matters
Schedule 5.3 Buyer Non-Contravention
Schedule 5.6 Buyer Litigation
Schedule 6.2 Changes to Employee Benefits
Schedule 6.18 Insurance
Schedules to First
Amendment to Stock
Purchase Agreement Description
------------------ -----------
Schedule 4.7 Seller Litigation
Schedule 4.8 Capitalization
Schedule 4.10 Contracts and Commitments
Schedule 4.11 Taxes
Schedule 6.13 Tax Certificate
</TABLE>
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<PAGE> 6
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NDE ENVIRONMENTAL CORPORATION
Date: November 12, 1996 By: /s/ ERIC J. (RICK) HOPKINS
----------------------------------------
Eric J. (Rick) Hopkins
Vice President and Chief Financial Officer
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<PAGE> 7
EXHIBIT INDEX
2.1* Stock Purchase Agreement between NDE Environmental
Corporation and Tanknology Environmental, Inc. dated as of
October 7, 1996.
2.2* First Amendment to Stock Purchase Agreement between NDE
Environmental Corporation and Tanknology Environmental,
Inc. dated as of October 25, 1996.
10.1 Loan Agreement, dated October 25, 1996, between NDE
Environmental Corporation, Tanknology/NDE Corporation,
USTMAN Industries, Inc., ProEco, Inc., Tanknology Canada
(1988) Inc. and Bank One, Texas, N.A. (the "Loan
Agreement").
10.1a Revolving Note dated October 25, 1996 issued pursuant to
the Loan Agreement.
10.1b Term Note dated October 25, 1996 issued pursuant to the
Loan Agreement.
10.2 Note and Warrant Purchase Agreement, dated as of October
25, 1996, between NDE Environmental Corporation,
Tanknology /NDE Corporation, USTMAN Industries, Inc.,
ProEco, Inc. and Tanknology of Canada (1988), Inc. and
Banc One Capital Partners, L.P. (the "Note and Warrant
Purchase Agreement").
10.2a Senior Subordinated Note Due December 31, 2001 dated
October 25, 1996 issued pursuant to the Note and Warrant
Purchase Agreement.
10.2b Warrant Certificate dated October 25, 1996 issued
pursuant to the Note and Warrant Purchase Agreement.
10.3 Security Agreement, dated as of October 25, 1996, among
NDE Environmental Corporation, Tanknology/NDE Corporation,
USTMAN Industries, Inc., ProEco, Inc. and Tanknology
Canada (1988), Inc. and Banc One Capital Partners, L.P.
10.4 Security Agreement -- Pledge of Subsidiary Stock, dated as
of October 25, 1996, between NDE Environmental Corporation
and Banc One Capital Partners, L.P.
10.5 Put Option Agreement, dated as of October 25, 1996,
between NDE Environmental Corporation and Banc One Capital
Partners, L.P.
10.6 Registration Rights Agreement, dated as of October 25,
1996, between NDE Environmental Corporation and Banc One
Capital Partners, L.P.
10.7 Preemptive Rights Agreement, dated as of October 25, 1996,
between NDE Environmental Corporation and Banc One Capital
Partners, L.P.
10.8 Co-Sale Agreement, dated as of October 25, 1996, among NDE
Environmental Corporation, Proactive Partners, L.P.,
Lagunitas L.P., Jay Allen Chaffee, A. Daniel Sharplin and
Banc One Capital Partners, L.P.
10.9 Standby Commitment, made as of October 25, 1996, among
Proactive Partners, L.P., NDE Environmental Corporation,
Banc One Capital Partners, L.P. and Bank One, Texas, N.A.
10.10 Shareholder Agreement, dated as of October 25, 1996, among
Proactive Partners, L.P. Lagunitas L.P., Jay Allen
Chaffee, A. Daniel Sharplin and Banc One Capital Partners,
L.P.
10.11 Pledge and Security Agreement, dated October 25, 1996,
between NDE Environmental Corporation and Bank One Texas,
N.A.
10.12 Pledge and Security Agreement, dated October 25, 1996,
between Tanknology/NDE Corporation and Bank One Texas,
N.A.
10.13 Pledge and Security Agreement, dated October 25, 1996,
between ProEco, Inc. and Bank One Texas, N.A.
10.14 Pledge and Security Agreement, dated October 25, 1996,
between USTMAN Industries, Inc. and Bank One Texas, N.A.
99 Press Release of NDE Environmental Corporation with
respect to the acquisition of Tanknology Corporation
International, USTMAN Industries, Inc. and Tanknology
Canada (1988), Inc.
---------------
* SCHEDULES: Pursuant to Item 601(b)(2) of Regulation S-K,
schedules to the Stock Purchase Agreement and the First Amendment to Stock
Purchase Agreement filed as Exhibit 2.1 and Exhibit 2.2, respectively, to this
Form 8-K have been omitted. The Company hereby agrees to furnish such
schedules upon the request of the Securities Exchange Commission.
<PAGE> 1
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
NDE ENVIRONMENTAL CORPORATION
AND
TANKNOLOGY ENVIRONMENTAL, INC.
DATED AS OF
OCTOBER 7, 1996
<PAGE> 2
EXHIBIT 2.1
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.1 The Sale . . . . . . . . . . . . . . . . . . . . 6
Section 2.2 Purchase Price . . . . . . . . . . . . . . . . . 6
Section 2.3 Post Closing Adjustment . . . . . . . . . . . . 6
Section 2.4 Transactions Prior to Closing . . . . . . . . . 8
ARTICLE III CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . 9
Section 4.1 Organization and Good Standing of the Company. . 9
Section 4.2 Corporate Records. . . . . . . . . . . . . . . . 9
Section 4.3 Authorization. . . . . . . . . . . . . . . . . . 10
Section 4.4 Non-Contravention. . . . . . . . . . . . . . . . 10
Section 4.5 Validity . . . . . . . . . . . . . . . . . . . . 11
Section 4.6 Broker Involvement . . . . . . . . . . . . . . . 11
Section 4.7 Litigation . . . . . . . . . . . . . . . . . . . 11
Section 4.8 Title to Shares. . . . . . . . . . . . . . . . . 11
Section 4.9 Continuity Prior to Closing Date . . . . . . . . 12
Section 4.10 Contracts and Commitments. . . . . . . . . . . . 13
Section 4.11 Taxes. . . . . . . . . . . . . . . . . . . . . . 14
Section 4.12 Title to Properties. . . . . . . . . . . . . . . 16
Section 4.13 Trademarks, Trade Names and Intellectual
Property . . . . . . . . . . . . . . . . . . . . 16
Section 4.14 Financial Records; Budget. . . . . . . . . . . . 17
Section 4.15 Condition of Assets and Inventory. . . . . . . . 17
Section 4.16 Liabilities. . . . . . . . . . . . . . . . . . . 18
Section 4.17 Employees and Related Matters. . . . . . . . . . 18
Section 4.18 No Material Change . . . . . . . . . . . . . . . 19
Section 4.19 Compliance With Law. . . . . . . . . . . . . . . 19
Section 4.20 Tangible Personal Property . . . . . . . . . . . 19
Section 4.21 Insurance. . . . . . . . . . . . . . . . . . . . 19
Section 4.22 Government Licenses, Permits and Related
Approvals . . . . . . . . . . . . . . . . . . . 20
Section 4.23 Distributed Products . . . . . . . . . . . . . . 20
Section 4.24 Safety Reports . . . . . . . . . . . . . . . . . 20
Section 4.25 Transactions with Certain Persons. . . . . . . . 20
Section 4.26 Accounts Receivable. . . . . . . . . . . . . . . 21
Section 4.27 Studies, Etc.. . . . . . . . . . . . . . . . . . 21
Section 4.28 Disclosure . . . . . . . . . . . . . . . . . . . 21
Section 4.29 Employee Benefits. . . . . . . . . . . . . . . . 22
Section 4.30 Environmental Matters. . . . . . . . . . . . . . 25
</TABLE>
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<TABLE>
<S> <C>
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . 26
Section 5.1 Corporate Status and Good Standing . . . . . . 26
Section 5.2 Authorization . . . . . . . . . . . . . . . . . 27
Section 5.3 Non-Contravention . . . . . . . . . . . . . . . 27
Section 5.4 Validity . . . . . . . . . . . . . . . . . . . 28
Section 5.5 Broker Involvement . . . . . . . . . . . . . . 28
Section 5.6 Litigation . . . . . . . . . . . . . . . . . . 28
Section 5.7 Investment Intention . . . . . . . . . . . . . 28
Section 5.8 Disclosure of Information . . . . . . . . . . . 28
Section 5.9 Financial Condition. . . . . . . . . . . . . . 29
Section 5.10 Restricted Securities . . . . . . . . . . . . . 29
ARTICLE VI ADDITIONAL AGREEMENTS AND COVENANTS . . . . . . . . . . . . . 30
Section 6.1 Other Offers . . . . . . . . . . . . . . . . . 30
Section 6.2 Conduct of the Business Pending the Closing. . . 30
Section 6.3 Public Announcements . . . . . . . . . . . . . 33
Section 6.4 Further Assurances . . . . . . . . . . . . . . 33
Section 6.5 Covenant Against Competition . . . . . . . . . 33
Section 6.6 Governmental Filings . . . . . . . . . . . . . 34
Section 6.7 Access to Information . . . . . . . . . . . . . 35
Section 6.8 Use of Name . . . . . . . . . . . . . . . . . . 35
Section 6.9 Other Action . . . . . . . . . . . . . . . . . 35
Section 6.10 Employee Benefit Matters . . . . . . . . . . . 36
Section 6.11 Cooperation with Financings and Financial . . .
Reporting . . . . . . . . . . . . . . . . . . . 36
Section 6.12 Consents . . . . . . . . . . . . . . . . . . . 36
Section 6.13 Tax Certificate . . . . . . . . . . . . . . . . 36
Section 6.14 Certain Tax Elections . . . . . . . . . . . . . 37
Section 6.15 Liability for Taxes . . . . . . . . . . . . . . 38
Section 6.16 Cooperation and Exchange of Information . . . . 41
Section 6.17 Conflict . . . . . . . . . . . . . . . . . . . 42
Section 6.18 Insurance . . . . . . . . . . . . . . . . . . . 42
ARTICLE VII EXTENT AND SURVIVAL OF REPRESENTATIONS,WARRANTIES, COVENANTS AND
AGREEMENTS; INDEMNIFICATION . . . . . . . . . . . . . . . . . 43
Section 7.1 Indemnification of Buyer . . . . . . . . . . . 43
Section 7.2 Survival; Threshold and Limits of Liability. . . 44
Section 7.3 Indemnification Procedures . . . . . . . . . . 45
Section 7.4 Arbitration of Disputes . . . . . . . . . . . . 48
Section 7.5 General . . . . . . . . . . . . . . . . . . . . 48
Section 7.6 Security . . . . . . . . . . . . . . . . . . . 49
</TABLE>
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<TABLE>
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ARTICLE VIII CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . 49
Section 8.1 Conditions Precedent to Obligations of Buyer . . 49
Section 8.2 Conditions Precedent to Obligations of the
Seller . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE IX ACTIONS TO BE TAKEN AT CLOSING . . . . . . . . . . . . . . . . 52
Section 9.1 Actions to be Taken by Seller at the Closing . . 52
Section 9.2 Actions to be Taken by Buyer at the Closing. . . 52
ARTICLE X GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . 53
Section 10.1 Termination . . . . . . . . . . . . . . . . . . 53
Section 10.2 Confidentiality; Publicity; Books and
Records . . . . . . . . . . . . . . . . . . . . 54
Section 10.3 Expenses . . . . . . . . . . . . . . . . . . . . 56
Section 10.4 Entire Agreement . . . . . . . . . . . . . . . 56
Section 10.5 Waivers and Consents . . . . . . . . . . . . . 56
Section 10.6 Notices . . . . . . . . . . . . . . . . . . . . 57
Section 10.7 Successors and Assigns . . . . . . . . . . . . 57
Section 10.8 Performance . . . . . . . . . . . . . . . . . . 58
Section 10.9 Choice of Law; Section Headings; Table of
Contents . . . . . . . . . . . . . . . . . . . 58
Section 10.10 Counterparts . . . . . . . . . . . . . . . . . 58
Section 10.11 Jurisdiction and Venue . . . . . . . . . . . . 58
Section 10.12 Severability . . . . . . . . . . . . . . . . . 58
Section 10.13 Assignment . . . . . . . . . . . . . . . . . . 58
</TABLE>
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SCHEDULES
<TABLE>
<S> <C>
Schedule 2.4(d)(iv) Assumed Employees
Schedule 4.1 Foreign Qualifications
Schedule 4.4 Seller Non-Contravention
Schedule 4.7 Seller Litigation
Schedule 4.8 Capitalization
Schedule 4.9 Absence of Certain Changes
Schedule 4.10 Contracts and Commitments
Schedule 4.11 Taxes
Schedule 4.12 Title to Properties
Schedule 4.13 Trademarks, Trade Names and Intellectual Property
Schedule 4.14(A) August 31 Financial Statements
Schedule 4.14(B) Intercompany Transactions between August 31, 1996 and Closing
Schedule 4.16 Liabilities
Schedule 4.20 Tangible Personal Property
Schedule 4.21 Insurance Policies
Schedule 4.23 Distributed Products
Schedule 4.25 Transactions with Certain Persons
Schedule 4.29 Employee Benefit Plans
Schedule 4.30 Environmental Matters
Schedule 5.3 Buyer Non-Contravention
Schedule 5.6 Buyer Litigation
Schedule 6.2 Changes to Employee Benefits
Schedule 6.18 Insurance
</TABLE>
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<PAGE> 6
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
October 7, 1996, between NDE Environmental Corporation, a Delaware corporation
("Buyer"), and Tanknology Environmental, Inc., a Texas corporation ("Seller"),
W I T N E S S E T H:
WHEREAS, Seller owns all of the outstanding capital stock (the
"Shares") of (i) Tanknology Corporation International ("Tanknology") including
its cathodic protection division d/b/a Tanknology Cathodic Protection, a
Delaware corporation with its principal place of business at 5225 Hollister,
Houston, Texas 77040, (ii) USTMAN Industries, Inc. ("USTMAN"), a Delaware
corporation with its principal place of business at 12265 W. Bayaud Ave.,
Lakewood, CO 80225, and (iii) Tanknology Canada (1988), Inc. ("Tanknology
Canada"), a Canadian corporation with its principal place of business at 2650
Meadowvale Blvd., Suite 12A, Mississauga, Ontario L5N 6M5 (each of Tanknology,
USTMAN and Tanknology Canada a "Subsidiary" and all three collectively the
"Subsidiaries"); and
WHEREAS, Buyer desires to acquire the Shares from Seller, and
Seller desires to sell the Shares to Buyer, upon the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the
respective representations, warranties, covenants, agreements and conditions
contained herein, the parties hereto hereby agree as follows:
<PAGE> 7
ARTICLE I
DEFINITIONS
The terms set forth below in this Article I shall have the
meanings ascribed to them below:
Affiliate: with respect to any person, means any person that
directly or indirectly controls, is controlled by or is under common control
with such person.
Applicable Law: means any and all federal, national, state,
regional, local, municipal or foreign laws, statutes, rules, regulations,
guidelines, ordinances, licenses, Permits or judicial or administrative
decisions of any country, or any political subdivision, agency, commission,
official or court thereof having jurisdiction over the Seller or any
Subsidiary.
August 31 Financial Statements shall mean the Tanknology UST
Group Combined Balance Sheet, the Tanknology Corporation International Balance
Sheet, the Tanknology Canada Balance Sheet, the Cathodic Protection Balance
Sheet and the USTMAN Industries Balance Sheet, each dated as of August 31, 1996
and each attached hereto in Schedule 4.14(A).
best efforts: means a party's efforts in accordance with
reasonable commercial practice and without the incurrence of unreasonable
expense.
Business: means all of the business and operations conducted by
a Subsidiary, taken as a whole.
Code: means the United States Internal Revenue Code of 1986, as
amended, or any amending or superseding Tax laws of the United States.
Effective Date: means August 31, 1996.
Environmental Law: means any applicable law (including common
law) regulating or prohibiting Releases into any part of the workplace or the
environment, or pertaining to the
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<PAGE> 8
protection or improvement of natural resources or wildlife, the environment or
public and employee health and safety including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA") (42 U.S.C. Section 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. Section 6901 et seq.), the Clean Water Act (33
U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C. Section 7401 et seq.), the
Atomic Energy Act of 1954 (42 U.S.C. Section 2014 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et seq.), the
Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.) ("OSHA") and
the regulations promulgated pursuant thereto, and any such applicable state or
local statutes, and the regulations promulgated pursuant thereto, as such laws
have been and may be amended or supplemented.
Excluded Assets: shall mean (a) all cash of the Subsidiaries
reflected on the August 31 Financial Statements, (b) the real property located
at 5225 Hollister St., Houston, Texas 77040, (c) certain personal property
belonging to the Subsidiaries located at 5225 Hollister St., Houston, Texas
77040, and (d) amounts owed to Subsidiaries by other Affiliates of the Seller,
including the accounts reflected under the item "Investment in Subsidiaries" on
the August 31 Financial Statements.
Forms 8023-A: means IRS Form 8023-A (including the required
schedules thereto) and any other form required to be filed with any
jurisdiction so that such jurisdiction will recognize the Section 338(h)(10)
Election.
Hazardous Material: means any substance, material or waste which
is regulated pursuant to any Environmental Law by any public or governmental
authority in any jurisdiction in which the Seller or any Subsidiary conducts
business, or the United States, including, without
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limitation, any material or substance which is defined as a "hazardous waste,"
"hazardous material," "hazardous substance," "extremely hazardous waste,"
"restricted hazardous waste," "contaminant," "toxic waste," "toxic substance,"
"source material," "special nuclear material," "byproduct material," "high-
level radioactive waste," "low-level radioactive waste" or "spent nuclear
material" under any provision of Environmental Law.
IRS: means the United States Internal Revenue Service.
Lien: means any lien, pledge, claim, charge, security interest,
mortgage or other encumbrance, option or other rights of any third person of
any nature whatsoever.
Permit: means any and all federal, national, state, regional,
local, municipal or foreign licenses, permits, variances, waivers, riders,
registrations or any other governmental authorizations or approvals necessary
or appropriate for any Subsidiary to conduct its Business.
person: means any individual, firm, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization, government or agency or subdivision thereof or any other entity.
Paid Reimbursable Taxes: shall have the meaning set forth at
Section 6.15(e).
Post-Closing Period: shall have the meaning set forth at Section
6.15(b).
Pre-Closing Period: shall have the meaning set forth at Section
6.15(b).
Regulation: means a United States Department of Treasury
regulation issued with respect to the Code.
Release: means any release, spill, effluent, emission, leaking,
pumping, pouring, emptying, escaping, dumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment, or into or out of any property currently or formerly owned,
operated or leased by the Seller or any Subsidiary.
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Remedial Action: means all actions, including, without
limitation, any capital expenditures, required by a governmental entity or
required under any Environmental Law, or voluntarily undertaken to (a) clean
up, remove, treat, or in any other way ameliorate or address any Hazardous
Materials or other substance in the indoor or outdoor environment; (b) prevent
the Release or threat of Release, or minimize the further Release of any
Hazardous Material so it does not endanger or threaten to endanger the public
or employee health or welfare of the indoor or outdoor environment; (c) perform
pre-remedial studies and investigations or post-remedial monitoring and care
pertaining or relating to a Release; or (d) bring the applicable party into
compliance with any Environmental Law.
Section 338(h)(10) Election: shall have the meaning set forth at
Section 6.14.
Straddle Period: shall have the meaning set forth at Section
6.15(a).
Taxes: means all United States federal, state, county and local,
all foreign and all other taxes, charges, fees, levies or other assessments,
including, without limitation, all net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, profit share, license,
lease, service, service use, value added, withholding, payroll, employment,
excise, estimated, severance, stamp, occupation, premium, real and personal
property, windfall profits, gains, capital stock, production, business and
occupation, disability, custom duties or other taxes of any kind whatsoever,
together with any interest, penalties, additions to tax, fines or other
additional amounts imposed thereon or related thereto, and the term "Tax" means
any one of the foregoing Taxes.
Tax Certificate: shall have the meaning set forth at Section
6.13.
Tax Returns: means all United States federal, local and state
and all foreign returns, declarations, reports, estimates, information returns,
statements and other documents of, relating to, or required to be filed in
respect of, any and all Taxes.
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ARTICLE II
PURCHASE AND SALE
Section 2.1 The Sale. Upon the terms and subject to the
conditions of this Agreement, at the Closing, as defined below under Article
III, Seller will sell, assign, transfer and deliver to Buyer, the Shares
(together with a stock power or powers executed in blank), and Buyer will
purchase and acquire the Shares.
Section 2.2 Purchase Price. The purchase price for all the
Shares (the "Purchase Price") shall be $12,000,000. The Purchase Price shall
be subject to adjustment pursuant to Section 2.3 only. The Purchase Price
shall be paid at Closing by wire transfer of $12,000,000 in immediately
available funds to an account or accounts designated in writing by Seller at
least two business days prior to the Closing.
Section 2.3 Post Closing Adjustment.
(a) Within 90 calendar days following the Closing, Buyer shall
prepare and deliver to Seller a combined balance sheet (the "Balance
Sheet") of the Subsidiaries as of the Closing Date, as defined below
under Article III (prior to the effects of the transactions occurring at
the Closing) and a statement (the "Statement"), reflecting the
calculation of the adjustment, if any, to the Purchase Price pursuant to
Section 2.3(b). The Balance Sheet shall be prepared in accordance with
generally accepted accounting principles ("GAAP") consistently applied
in the United States and the financial reporting policies and procedures
utilized by Seller prior to the Closing. Seller shall have a period of
30 calendar days after delivery of the Balance Sheet and the Statement
to review such documents and make any objections it may have in writing
to Buyer. If written objections are delivered to Buyer by Seller within
such 30-day period, then Buyer and Seller shall attempt to resolve the
matter
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or matters in dispute. If no written objections are made by Seller
within such 30-day period, then the Balance Sheet and the Statement
shall be final and binding on the parties hereto. If disputes with
respect to the Balance Sheet or the Statement cannot be resolved by
Buyer and Seller within 30 calendar days after the delivery of the
objections thereto, then, at the request of Buyer or Seller, the
specific matters in dispute shall be submitted to Arthur Andersen & Co.
(the "Auditors") or such other independent accounting firm as may be
approved by Seller and Buyer, which firm shall render its opinion as to
such matters. Based on such opinion, such independent accounting firm
will then send to Seller and Buyer its determination of the specified
matters in dispute, which determination shall be final and binding on
the parties hereto. The fees and expenses of the Auditors shall be
borne one-half by Seller and one-half by Buyer.
(b) The Purchase Price shall be adjusted (i) upward for the
implied interest on $12,000,000 for the period August 31, 1996 through
the Closing Date at an annual rate of 8%, (ii) downward for any
withdrawals of current assets by the Seller or an Affiliate or the
incurrence of any liabilities on behalf of or to the Seller or an
Affiliate other than the transactions provided for in Section 2.4, and
(iii) downward for (A) a decrease in value of total non-current assets,
adjusted for noncurrent Excluded Assets and normal depreciation and
amortization, unless such decrease in non-current assets is covered by
insurance proceeds of comparable amount and (B) an increase in any
liability or in the total liabilities, all as reflected in the August 31
Financial Statements except any such increase offset by a comparable
increase in assets, except any decrease or increase contemplated in this
Section 2.3(b)(iii) due to operations in the normal course of business.
If the aggregate Adjustment is upward, then within five days following
the final determination thereof, Buyer shall pay
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Seller by wire transfer in immediately available funds to the account or
accounts designated by Seller the amount by which the Purchase Price is
adjusted upward. If the aggregate adjustment is downward, then within
five days following the final determination thereof, Seller shall pay
Buyer by wire transfer in immediately available funds to the account or
accounts designated by Buyer the amount by which the Purchase Price is
adjusted downward.
Section 2.4 Transactions Prior to Closing.
(a) Prior to the Closing, the deeds covering the real property
located at 5225 Hollister St., Houston, Texas 77040, and certain
personal property located at 5225 Hollister St., Houston, Texas 77040,
shall be assigned by Tanknology to the Seller.
(b) At or prior to Closing, cash of the Subsidiaries in the
amount of $793,000 as reflected on the August 31 Financial Statements
shall be withdrawn by the Seller.
(c) Prior to Closing, the Seller shall eliminate or cause its
Affiliates to eliminate all intercompany account balances, including the
accounts reflected on each of the August 31 Financial Statements under
the item "Investment in Subsidiaries."
(d) At or prior to Closing, Seller shall execute assumption
agreements reasonably acceptable to Buyer assuming from the Subsidiaries
(i) any and all income Taxes for the period through the Closing Date,
(ii) any and all claims, losses or liabilities arising from or relating
to the real property and improvements and certain personal property
located at 5225 Hollister St., Houston, Texas 77040 and the adjacent
lot owned by Seller, (iii) any obligation of the Subsidiaries relating
to T. G. Bogle under that certain consulting agreement between T. G.
Bogle, Seller and Tanknology dated as of December, 1991, and (iv) any
obligation of the Subsidiaries relating to the employees listed on
Schedule 2.4(d)(iv).
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ARTICLE III
CLOSING
The closing of the transactions contemplated hereby (the
"Closing") shall take place at such time and at such date as are mutually
agreed to by Buyer and Seller at the offices of Baker & Botts, L.L.P., Houston,
Texas, but in no event later than October 15, 1996. The date on which the
Closing is held is referred to in this Agreement as the "Closing Date."
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller represents and warrants to Buyer the following:
Section 4.1 Organization and Good Standing of the Company.
Each of the Seller and its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has full corporate power and authority to own, operate and
lease its assets in the manner currently owned, operated and leased by it and
to carry on its business as now conducted. The Seller and each Subsidiary is
duly qualified to do business as a foreign corporation in all jurisdictions in
which the nature of its business requires such qualification and where the
failure to do so would have a material adverse effect on the Seller or such
Subsidiary. Schedule 4.1 is a complete list of all jurisdictions in which each
Subsidiary is currently licensed or qualified to transact business as a foreign
entity.
Section 4.2 Corporate Records. Copies of the certificate of
incorporation and by-laws of the Seller and each Subsidiary have been delivered
to Buyer and are complete and correct as of the date hereof. The minute book
and stock book of Seller and each Subsidiary have been exhibited to Buyer and
each is a complete and accurate record of the material corporate actions of
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the stockholders and directors (and any committees thereof) of the corporation
through the date hereof and all issuances, cancellations and transfers of the
capital stock thereof.
Section 4.3 Authorization. Each of the Seller and the
Subsidiaries has full corporate power and authority under its certificate or
articles of incorporation and by-laws, and all necessary corporate action has
been taken to authorize it, to execute and deliver this Agreement and the
exhibits and schedules hereto, to consummate the transactions contemplated
herein and to take all actions required to be taken by it pursuant to the
provisions hereof, and each of this Agreement and the exhibits hereto
constitutes the valid and binding obligation of the Seller and each Subsidiary
enforceable against the Seller and each Subsidiary, as the case may be, in
accordance with its terms, except as such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights and general principles of
equity.
Section 4.4 Non-Contravention. Except as set forth in Schedule
4.4, neither the execution and delivery of this Agreement or any documents
executed in connection herewith, nor the consummation of the transactions
contemplated herein or therein, does or will violate, conflict with, result in
breach of or require notice or consent under any Applicable Law, the charter or
by-laws of the Seller or any Subsidiary or any provision of any agreement or
instrument to which the Seller or any Subsidiary is a party or result in the
creation of any Lien upon the capital stock, properties or assets of any
Subsidiary. Except as set forth in Schedule 4.4, no consent, approval,
exemption, authorization or other action of, or notice to or filing with, any
third party, court or administrative or other governmental or regulatory body
is required by Seller or any Subsidiary to execute, deliver or perform this
Agreement and to consummate the transactions contemplated herein and to take
all actions required to be taken by it pursuant to the provisions hereof.
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Section 4.5 Validity. There are no pending or threatened
judicial or administration actions, proceedings or investigations which
question the validity of this Agreement or any action taken or contemplated by
the Seller in connection with this Agreement.
Section 4.6 Broker Involvement. Neither the Seller nor any
Subsidiary thereof has hired, retained or dealt with any broker or finder in
connection with the transactions contemplated by this Agreement other than
Raymond James & Associates.
Section 4.7 Litigation. Except as set forth in Schedule 4.7,
there is no investigation, claim or proceeding or litigation of any type
pending or threatened involving the Seller or any Subsidiary or that would have
an adverse effect on the Seller or any Subsidiary or Buyer, and Seller is
unaware after reasonable investigation of any judgment, order, writ, injunction
or decree of any court, government or governmental agency, or arbitral tribunal
against or involving Seller or any Subsidiary or that would have an adverse
effect on Seller or any Subsidiary or Buyer.
Section 4.8 Title to Shares. The capitalization of the
Subsidiaries is set forth in Schedule 4.8 hereto. All of the outstanding
Shares were duly authorized for issuance and are validly issued, fully paid and
nonassessable and none of such Shares are held in treasury. Seller owns
beneficially and of record the Shares, free and clear of all Liens, and such
Shares are not subject to any agreements or understandings with respect to the
voting or transfer of any of the Shares. There are no outstanding
subscriptions, options, convertible securities, warrants or calls of any kind
issued or granted by, or binding upon, the Seller to purchase or otherwise
acquire or to sell or otherwise dispose of any security of or equity interest
in any Subsidiary. The Seller has the requisite legal right to sell, assign
and transfer the Shares owned by it to Buyer and will, upon delivery of a
certificate or certificates representing such Shares to Buyer pursuant to the
terms hereof, transfer to Buyer title to such Shares, free and clear of any
Liens.
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Section 4.9 Continuity Prior to Closing Date. Except as set
forth in Schedule 4.9, from August 31, 1996 to and including the Closing Date,
the Subsidiaries have not conducted their respective businesses otherwise than
in the usual and customary manner and in the ordinary course of business,
consistent with their historical practice, and there has not been:
(a) any sale, lease, distribution, transfer, mortgage, pledge
or subjection to Lien of assets of a Subsidiary, except sales or
purchases of inventory and obsolete or surplus equipment in the ordinary
and usual course of business;
(b) any material transaction by any Subsidiary not in the
ordinary and usual course of business;
(c) any material damage, destruction or loss to the assets of
any Subsidiary whether or not covered by insurance;
(d) a termination, or a threatened termination, or material
modification, in each case not in the ordinary course of business, of
any material contract or the relationship of any Subsidiary with any
customer or supplier, who in the aggregate accounted for in excess of
$50,000 of gross sales or purchases during the Subsidiary's last two
full fiscal years unless such contract or relationship is lost to Buyer;
(e) any change in accounting methods or principles or the
application thereof, any change in policies or practices with respect to
items affecting working capital or any material change by the Seller and
any of the Subsidiaries in tax methods or principles or the application
thereof;
(f) any delay or reduction in capital expenditures in
contemplation of this Agreement or otherwise, or any failure to continue
to make capital expenditures in the ordinary course of business
consistent with past practice by Seller or a Subsidiary;
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(g) any acceleration of sales or orders or other similar
action in contemplation of this Agreement or otherwise not in the
ordinary course of business consistent with past practice;
(h) any bonus payments, salary increases, commission increases
or modifications, the execution of any employment agreement, severance
arrangement, consulting arrangement, sales agency agreement,
representation agreement or distribution agreement or similar document
or agreement, or other changes in employee benefits or other
compensation affecting any employee, officer, director, representative
or agent of any Subsidiary;
(i) any waiver of any rights that, singly or in the aggregate,
are material to any Subsidiary or the financial condition or results of
operation of any Subsidiary;
(j) any issuance by any of the Subsidiaries of any shares of
capital stock or any repurchase or redemption by any of the Subsidiaries
of any shares of capital stock;
(k) any transaction between Seller or any Affiliate other than
a Subsidiary on the one hand and any of the Subsidiaries on the other
hand;
(l) any declaration or payment of any dividend on, or any
other distribution with respect to, the equity securities of any of the
Subsidiaries; or
(m) any contract or commitment to do or cause to be done any
of the foregoing.
Section 4.10 Contracts and Commitments Schedule 4.10 lists all
agreements, leases, commitments, contracts, undertakings or understandings,
oral or written, to which any of the Subsidiaries is a party as of the date of
execution of this Agreement, including but not limited to trademark, trade name
or patent license agreements, service agreements, lease, purchase or sale
agreements, supply agreements, distribution or distributor agreements, purchase
orders, customer
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orders and equipment rental agreements, that are either material to any of the
Subsidiaries or involve consideration with a value of $50,000 or more. No
Subsidiary is in breach of or default under any agreement, lease, contract or
commitment listed or of a type required to be listed (without regard to the
date thereof) in Schedule 4.10 (collectively, the "Agreements"). Each
Agreement is a valid, binding and enforceable agreement of a Subsidiary and, to
the knowledge of Seller after reasonable investigation, the other parties
thereto, enforceable except as such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights and general principles of equity.
There has not occurred any breach or default under any Agreement on the part of
the other parties thereto, and no event has occurred which with the giving of
notice or the lapse of time, or both, would constitute a default under any
Agreement. There is no dispute between the parties to any Agreement as to the
interpretation thereof or as to whether any party is in breach or default
thereunder, and no party to any Agreement has indicated its intention to, or
suggested it may evaluate whether to, terminate any Agreement. No Subsidiary
is a party to any covenant or obligation of any nature limiting the freedom of
any Subsidiary to compete in any line of business after the Closing. No notice
has been given under any lease to extend the term hereof beyond its current
term.
Section 4.11 Taxes.
(a) Each of the Seller, its Subsidiaries and any affiliated,
combined or unitary group of which any such corporation is or was a
member has (i) timely (taking into account any extensions) filed all Tax
Returns required to be filed or sent by or with respect to it in respect
of any Taxes, (ii) timely paid all Taxes (including estimated Taxes)
that are due and payable for which the Seller or any of its Subsidiaries
may be liable, (iii) established reserves that are adequate for the
payment of all Taxes not yet due and payable with respect to the
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results of operations of the Seller and its Subsidiaries through the
Closing Date and (iv) complied in all respects with all applicable laws,
rules and regulations relating to the payment and withholding of Taxes
and has in all respects timely withheld from employee wages and paid
over to the proper taxing and other governmental authorities all amounts
required to be so withheld and paid over, based on the manner in which
Seller and the Subsidiaries have classified their employees under the
Fair Labor Standards Act and Department of Transportation regulations.
(b) Schedule 4.11 sets forth (i) the last period through which
all Tax Returns of the Seller and any of its Subsidiaries have been
examined by the IRS, Revenue Canada, or any other taxing authority or
otherwise closed and (ii) any affiliated, consolidated, combined,
unitary or similar group Tax Return in which the Seller is or has been a
member or is or has joined in the filing. Except to the extent being
contested in good faith, all deficiencies asserted as a result of such
examinations have been paid, fully settled or adequately provided for in
accordance with generally accepted accounting principles consistently
applied in the United States as reflected in the Seller's most recent
audited financial statements. No Tax audits or other administrative
proceedings or court proceedings are presently pending with regard to
any Taxes for which the Seller or any of its Subsidiaries would be
liable, and no deficiency for any such Taxes has been proposed, asserted
or assessed pursuant to such examination against the Seller or any of
its Subsidiaries by any taxing authority with respect to any period.
(c) Neither the Seller nor any of its Subsidiaries has
executed or entered into with the IRS, Revenue Canada, or any other
taxing authority (i) any agreement or other document extending or having
the effect of extending the period for assessments or collection of any
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Tax for which the Seller or any of its Subsidiaries would be liable or
(ii) a closing agreement pursuant to Section 7121 of the Code that
relates to the assets or operations of the Seller or any of its
Subsidiaries other than the items noted on Schedule 4.11. There are no
Tax liens upon any assets of the Seller or any of its Subsidiaries.
(d) Neither the Seller nor any of its Subsidiaries has made an
election under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code) owned by the
Seller or any of its Subsidiaries.
(e) Neither the Seller nor any of its Subsidiaries is a party
to, is bound by or has any obligation under any Tax sharing agreement or
similar agreement or arrangement.
Section 4.12 Title to Properties. Except as set forth in
Schedule 4.12 hereto, each Subsidiary has good and indefeasible title to all of
its assets, free and clear of all Liens.
Section 4.13 Trademarks, Trade Names and Intellectual Property.
Schedule 4.13 contains an accurate and complete list of (a) all patents,
pending patent applications and invention memoranda owned by any Subsidiary or
relating to the Business of any of them, (b) all registered United States and
foreign trademarks, trade names and logos owned or used by any Subsidiary, and
all registrations thereof, and (c) all unregistered United States and foreign
trademarks, trade names and logos used by any Subsidiary. Such Subsidiary has
the right to use all trademarks, trade names, logos, patents, pending patent
applications and invention memoranda referred to herein. Except as expressly
set forth in Schedule 4.7 hereto, there is no pending or threatened action or
claim that would impair any such right. Except as set forth in Schedule 4.13
hereto, any or all Subsidiaries are the sole and exclusive owners of, with all
right, title and interest in and to, each item described in Schedule 4.13 and
have sole and exclusive rights to the use thereof or the material covered
thereby.
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Section 4.14 Financial Records; Budget. The audited
consolidated financial statements of the Seller and its Subsidiaries as of and
for the years ended December 31, 1993, 1994, 1995, the unaudited consolidated
financial statements for the quarters ended March 31, 1996 and June 30, 1996,
and the unaudited consolidating financial statements of the Subsidiaries as of
and for the years ended December 31, 1993, 1994 and 1995 previously delivered
to Buyer (collectively, the "Financial Statements"), are each accurate,
complete, true and correct in all material respects, were prepared in
accordance with GAAP consistently applied in the United States (except as set
forth therein), and fairly present in all material respects the financial
condition and results of operations of the Seller and its Subsidiaries. The
August 31 Financial Statements, previously delivered to Buyer, are each
accurate, complete, true and correct, were prepared in accordance with GAAP
consistently applied in the United States (except as set forth therein), and
fairly present the financial condition and results of operations of the
Subsidiaries. Schedule 4.14(B) reflects all intercompany transactions between
any Subsidiary and the Seller or any Affiliates of Seller for the period from
August 31, 1996 through the Closing Date.
Section 4.15 Condition of Assets and Inventory. All the assets
of each Subsidiary are in good, serviceable condition and fit for the
particular purposes for which they are used in the business of the owner
thereof, subject only to normal maintenance requirements and normal wear and
tear reasonably expected in the ordinary course of business. All items of
inventory of each Subsidiary are merchantable or (in the case of raw materials,
supplies and work in process) suitable and useable for the production or
completion of merchantable products, for sale in the ordinary course of
business as first quality goods at mark-ups consistent with past practice, none
of such items is below standard quality, obsolete or obsolescent, and each item
is reflected in the Financial Statements and the August 31 Financial Statements
on the basis of a physical count and is valued
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at the lower of cost or market in accordance with GAAP consistently applied in
the United States (including any required reduction for impaired value or slow-
moving inventory). Such inventory includes a sufficient but not an excess
quantity of each type of such inventory to meet the normal requirements of the
Subsidiaries.
Section 4.16 Liabilities. Except as set forth in Schedule 4.16
or in the financial statements and notes thereto referred to in Section 4.14,
there is no existing, contingent or, to Seller's knowledge after reasonable
investigation, threatened liability, obligation, lien or claim of any nature
(absolute, accrued, contingent or otherwise) that relates to or has been or may
be asserted against any Subsidiary.
Section 4.17 Employees and Related Matters.
(a) Seller has heretofore delivered a complete list of all
employees of each Subsidiary, listing the title or position held, base salary,
any commissions or other compensation paid or payable in 1996 as reflected on
such Schedule, all employee benefits received by such employees and any other
terms of any oral or written agreement between any such employee and the
Seller, any Subsidiary or any Affiliate thereof. The Seller has heretofore
delivered to the Buyer true and correct copies of each management or employment
contract or contract for personal services and a complete description of any
other understanding or commitment between any Subsidiary (or the Seller on
behalf of any Subsidiary) and any officer, consultant, director, employee,
independent contractor or other person or entity.
(b) The Seller is not a party to any collective bargaining
agreement or labor contract.
(c) The Seller has taken all necessary actions to comply with
the Worker Adjustment and Retraining Notification Act (the "WARN Act") through
the Closing Date, to the
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extent it is subject to such act, and the Buyer shall not have any disclosure
or announcement obligations under the WARN Act as a result of the transaction
contemplated by this Agreement.
Section 4.18 No Material Change. There has been no material
adverse change in the business, results of operations, assets or financial
position of any Subsidiary from August 31, 1996 to and including the Closing
Date, and no event has occurred which could be expected to lead to or cause
such a material adverse change.
Section 4.19 Compliance With Law. No Subsidiary is in violation
of any provision of Applicable Law, including any Environmental Law, and no
Subsidiary has received any notice of any alleged violation of such Applicable
Law.
Section 4.20 Tangible Personal Property. Except for the
Excluded Assets, all of the fixtures, machinery and equipment reflected in the
August 31 Financial Statements and/or used in connection with the Business of a
Subsidiary are in the possession and under the operating control of such
Subsidiary ("Tangible Personal Property"). Except as set forth in Schedule
4.20 hereto, no item of Tangible Personal Property requires repairs in excess
of $2,500 to be in good, serviceable condition and fit for the particular
purpose for which it is currently used, subject only to normal maintenance
requirements and normal wear and tear reasonably expected in the ordinary
course of business.
Section 4.21 Insurance. Schedule 4.21 contains a list of all
insurance policies of the Seller or any Subsidiary or relating to the conduct
of the Business and the status of prepayments. The Seller has heretofore
delivered to Buyer a copy of all such policies. Such policies are in full
force and effect, and the Seller and the Subsidiaries are not in default under
any of them.
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Section 4.22 Government Licenses, Permits and Related Approvals.
Seller has heretofore provided to Buyer a list of all Permits required for the
conduct of Business by the Subsidiaries, all of which are in full force and
effect and are not being violated.
Section 4.23 Distributed Products. Schedule 4.23 sets forth a
complete listing of all products (a) distributed by any Subsidiary (and the
manufacturer thereof and the person, if different, for whom such Subsidiary
distributes such product) or (b) manufactured or sold by any Subsidiary and
distributed by others (and the name of such distributor). Such Schedule also
sets forth the terms of each such distribution arrangement. Each Subsidiary
has full right to distribute all products referred to in clause (a) of this
Section.
Section 4.24 Safety Reports. Seller has heretofore provided to
Buyer a complete listing of all insurance loss runs, worker's compensation
reports and claims, safety citations and reports, OSHA reports and all
documents relating to any of the foregoing since July 1, 1993.
Section 4.25 Transactions with Certain Persons. Except as set
forth in Schedule 4.25, during the past three years no Subsidiary has, directly
or indirectly, purchased, leased or otherwise acquired any property or obtained
any services from, or sold, leased or otherwise disposed of any property or
furnished any services to, or otherwise dealt with (except with respect to
remuneration for services rendered as a director, officer or employee of any
Subsidiary), in the ordinary course of business or otherwise, with a value of
or in a transaction or series of transactions with a value of $60,000 or more,
(a) any officer, director or shareholder of the Seller or any Affiliate thereof
other than a Subsidiary or (b) any person, firm or corporation which, directly
or indirectly, alone or together with others, controls, is controlled by or is
under common control with the Seller or any shareholder thereof. No Subsidiary
owes any amount to, or has any contract with or commitment to, any of its
shareholders, directors, officers, employees or consultants (other than
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compensation for current services not yet due and payable and reimbursement of
expenses arising in the ordinary course of business not in excess of $1,000 in
the aggregate), and none of such persons owes any amount to any Subsidiary.
Section 4.26 Accounts Receivable. All the accounts receivable
of the Subsidiaries are valid, genuine and subsisting, arise out of bona fide
sales and deliveries of goods, performance of services or other business
transactions in the ordinary course of business, are owned free and clear and
not subject to any Lien, and are current and collectible net of any reserves
shown on the August 31 Financial Statements (which reserves are adequate and
were calculated consistent with past practice).
Section 4.27 Studies, Etc. Seller has heretofore provided to
Buyer a complete list of all studies, reports, plans, analyses or similar
documents of a material nature (whether prepared by employees of the Seller or
any Subsidiary or others) in the possession or control of the Seller or any
Subsidiary thereof relating to safety, the environment, Hazardous Material,
intellectual property, markets, competitors, strategic planning, product
liability, warranties or otherwise relating in any way to a Subsidiary,
excluding any reports prepared by Raymond James & Associates.
Section 4.28 Disclosure. All schedules to this Agreement are
complete and accurate or will be on the Closing Date. No representation or
warranty by Seller in this Agreement or in any schedule or exhibit to this
Agreement, or in any statement or certificate or other document furnished to
Buyer by Seller or any representative of Seller, contains or will contain any
untrue statement of a material fact or omits or will omit a material fact
necessary to make the statements therein not misleading. The information
concerning the Seller in Seller's filings, reports and submissions under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), does not
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements therein not
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misleading. Seller's disclosure on any schedule to this Agreement shall not
affect Buyer's right to indemnification under Article VII hereunder in any way.
Section 4.29 Employee Benefits.
(a) For purposes of Section 4.29, all references to the
Seller shall be deemed to refer to the Seller, any Subsidiary and any
trade or business, whether or not incorporated, that together with the
Seller or any Subsidiary would be deemed or treated as a "single
employer" within the meaning of Section 4001 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or Code Section 414.
The term "Seller Plan" shall mean any stock purchase, stock
option, pension, profit-sharing, retirement, bonus, deferred
compensation, incentive compensation, commission, severance or
termination pay, hospitalization, medical, dental, disability, life or
other insurance, or supplemental unemployment benefits plan or agreement
or policy or contract or other arrangement that is or ever has been
maintained or contributed to by the Seller for the purpose of providing
employment-related compensation or benefits to any current or former
officer, consultant, director, annuitant, employee, retiree or
independent contractor of the Seller or members of their respective
families (other than directors' and officers' liability policies),
whether or not insured, including without limitation "employee benefit
plans" as defined in ERISA and the rules and regulations thereunder.
The term "Subsidiary Plan" shall mean any Seller Plan that
formerly provided, provides or is intended to provide compensation or
benefits to any person or member of a person's family as a consequence
of that person's current or former relationship to a Subsidiary.
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(b) As of the Closing Date, no Seller Plan is or has been (i)
covered by Title IV of ERISA, (ii) subject to the minimum funding
requirements of Section 412 of the Code, (iii) a "multi-employer plan"
as defined in Section 3(37) of ERISA, (iv) subject to Section 4063 or
4064 of ERISA, or (v) a voluntary employees' beneficiary association
within the meaning of Code Section 501(c)(9).
(c) A list of each Subsidiary Plan is listed on Schedule 4.29.
The Seller has no commitment or obligation to establish or adopt any new
or additional plans or other arrangements that would constitute
Subsidiary Plans if adopted, or to increase materially the benefits
under any existing Subsidiary Plan. The Seller has heretofore delivered
to the Buyer true and correct copies of the following:
(i) each written Subsidiary Plan and all amendments
thereto as of the date hereof;
(ii) a complete written description of each other
Subsidiary Plan;
(iii) all current summary plan descriptions provided to
employees regarding the Subsidiary Plans;
(iv) each trust agreement and annuity contract (or any
other funding instruments), and each insurance contract,
pertaining to any of the Subsidiary Plans, including all
amendments to such documents to the date hereof;
(v) the most recent IRS Form 5500 for each Subsidiary
Plan and schedules thereto; and
(vi) the most recent determination letter issued by the
IRS with respect to any Subsidiary Plan qualified under Section
401(a) of the Code.
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(d) Each Subsidiary Plan is in compliance with the
provisions of all applicable laws, rules and regulations, including,
without limitation, ERISA and the Code. No person has engaged in any
prohibited transaction (within the meaning of Section 4975 of the Code
or Section 406 of ERISA) that could subject any Subsidiary to a
liability.
(e) All contributions and premiums required of any Subsidiary
(or of the Seller on behalf of any Subsidiary) by any legal requirement
or by the terms of any Seller Plan or any contract relating thereto have
been timely made (without regard to any waivers granted with respect
thereto) or accrued. All obligations of all Subsidiaries (and of the
Seller on behalf of any Subsidiary) with respect to each Seller Plan
have been paid or performed.
(f) Except as provided in Schedule 4.29, neither the Seller
nor any Subsidiary Plan provides for medical, life insurance or health
benefits or death benefits after an employee's termination of employment
(including retirement) except for continuation coverage required
pursuant to Section 4980B of the Code and Part 6 of Title I of ERISA and
the regulations thereunder.
(g) The Subsidiaries have no obligation to make any payments
that would be "excess parachute payments" under Section 280G of the
Code. The consummation of the transactions contemplated by this
Agreement will not (A) entitle any current or former employee of any
Subsidiary to severance pay, employment compensation or any other
payment, benefit or award (whether under a Subsidiary Plan or otherwise)
or (B) accelerate the time of payment or vesting, or increase the amount
of any benefit, award (including stock options, restricted stock and
similar awards) or compensation due any such employee or former
employee.
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(h) There are no pending, threatened or anticipated claims or
proceedings against any Subsidiary Plan, the assets of any Subsidiary
Plan or any Subsidiary, or the plan administrator or fiduciary of any
Subsidiary Plan with respect to the operation of any such plan (other
than routine, uncontested benefit claims), and there are no facts or
circumstances that could form the basis for any such claim or
proceeding.
Section 4.30 Environmental Matters.
(a) The operations of the Seller and its Subsidiaries have
been and, as of the Closing Date, will be, in compliance with all
Environmental Laws;
(b) The Seller and its Subsidiaries have obtained and will, as
of the Closing Date, maintain all Permits and have made and will, as of
the Closing Date, make all filings, reports and notices required under
applicable Environmental Law in connection with the operations of their
respective businesses;
(c) As of the date hereof, the Seller and its Subsidiaries are
not subject to any outstanding written orders, contracts or agreements
with any governmental entity or other person respecting (i)
Environmental Laws, (ii) Remedial Action, (iii) any Release or
threatened Release of a Hazardous Material, or (iv) an assumption of
responsibility for environmental claims of another entity;
(d) The Seller and its Subsidiaries have not received any
written communication alleging, with respect to any such party, the
violation of or liability under any Environmental Law or requesting,
with respect to any such party, information with respect to an
investigation pursuant to CERCLA or any other Environmental Law;
(e) Neither the Seller nor any of its Subsidiaries has any
contingent liability in connection with the Release of any Hazardous
Material into the indoor or outdoor
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environment (whether on-site or off-site) or employee or third-party
exposure to Hazardous Materials;
(f) The operations of the Seller or its Subsidiaries involving
the generation, transportation, treatment, storage or disposal of
hazardous waste, as defined and regulated under 40 C.F.R. parts 260-270
or any state equivalent, are in compliance with applicable Environmental
Laws;
(g) Except as described on Schedule 4.30, there is not now,
nor, to the best knowledge of the Seller as of the date hereof, or has
there ever been, on or in any property owned, operated, leased or under
option by, the Seller or any Subsidiary or for which the Seller or any
Subsidiary has assumed responsibility for environmental claims, any of
the following: (i) any underground storage tanks or surface
impoundments, (ii) any on-site disposal of solid waste or Hazardous
Materials, (iii) any asbestos-containing materials, or (iv) any
polychlorinated biphenyls; and
(h) Buyer shall have the right to conduct such inspections and
investigations of the properties of any Subsidiary as Buyer deems
necessary or desirable, including, without limitation, the right to
conduct sampling of surface water, groundwater, soil, indoor and outdoor
air quality, and building materials.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller the following:
Section 5.1 Corporate Status and Good Standing. Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware, with full corporate
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power and authority under its certificate of incorporation and by-laws to
conduct its business as the same exists on the date hereof and on the Closing
Date.
Section 5.2 Authorization. Buyer has full corporate power and
authority under its certificate of incorporation and by-laws, and all necessary
corporate action has been taken to authorize it, to execute and deliver this
Agreement and the exhibits and schedules hereto, to consummate the transactions
contemplated herein and to take all actions required to be taken by it pursuant
to the provisions hereof or thereof, and each of this Agreement and the
exhibits hereto constitutes the valid and binding obligation of the Buyer
enforceable against Buyer in accordance with its terms, except as such
enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights and general principles of equity.
Section 5.3 Non-Contravention. Neither the execution and
delivery of this Agreement and the schedules and exhibits hereto, nor the
consummation of the transactions contemplated herein or therein, does or will
violate, conflict with or result in breach of or require notice or consent
under any Applicable Law, the charter or by-laws of Buyer or any provision of
any agreement or instrument to which the Buyer is a party or result in the
creation of any Lien upon the capital stock, property or assets of Buyer, such
that there would be a material adverse effect on any benefit to Seller
hereunder. Except as set forth in Schedule 5.3, no consent, approval,
exemption, authorization or other action of, or notice to or filing with, any
third party, court or administrative or other governmental or regulatory body
is required by Buyer to execute, deliver or perform this Agreement and to
consummate the transactions contemplated herein and to take all actions
required to be taken by it pursuant to the provisions hereof.
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Section 5.4 Validity. There are no pending or threatened
judicial or administrative actions, proceedings or investigations which
question the validity of this Agreement or any action taken or contemplated by
Buyer in connection with this Agreement.
Section 5.5 Broker Involvement. Buyer has not hired, retained
or dealt with any broker or finder in connection with the transactions
contemplated by this Agreement.
Section 5.6 Litigation. Except as set forth in Schedule 5.6,
there is no investigation, claim or proceeding or litigation of any type
pending or threatened involving Buyer and Buyer is unaware of any judgment,
order, writ, injunction or decree of any court, government or governmental
agency or arbitral tribunal against or involving Buyer, that would have a
material adverse effect on any benefit to Seller hereunder.
Section 5.7 Investment Intention. The Shares are being
purchased by Buyer for investment purposes, and not with a view to, or for
resale in connection with, the distribution or other disposition thereof.
Section 5.8 Disclosure of Information. Buyer agrees and
acknowledges that it and its employees, officers and agents have been permitted
full and complete access to the books and records, plants, facilities,
equipment, tax returns, contracts, inventories, and other assets and
information of the Subsidiaries which it and its employees, officers and agents
have desired to review. Buyer further acknowledges that it has conducted such
investigation of the Subsidiaries, their assets, liabilities, operations and
financial conditions, it has deemed necessary and advisable for purposes of
determining to enter into this Agreement. Except to the extent of the express
representations, warranties and agreements contained in this Agreement, Buyer
is purchasing the Subsidiaries in reliance upon its own investigation of the
Subsidiaries. Buyer agrees and acknowledges that it is experienced in the tank
testing services business and has the knowledge and
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ability to conduct a full investigation of the Subsidiaries and to evaluate the
Subsidiaries' business, operations, financial conditions, assets and
liabilities. Buyer expressly represents and warrants that it has not relied on
any projections or representations (oral or written) except as set out herein,
which Buyer has obtained from Seller or the Subsidiaries and/or any of their
respect directors, officers, employees or agents. Notwithstanding the
foregoing, Seller's representations and warranties in this Agreement or Buyer's
right to rely thereon are not limited in any way as a result of Buyer's
investigation as described above.
Section 5.9 Financial Condition. At Closing, Buyer's financial
condition will be adequate to bear the economic risks of this acquisition. At
Closing, the Buyer will be in compliance with all financial and other covenants
related to all of its outstanding credit agreements including the facilities
being utilized to consummate this transaction, and will not be in default on
any credit agreement or facility.
Section 5.10 Restricted Securities. Buyer understands that the
Shares are characterized as "restricted securities" under the United States
federal securities laws and that under such laws and applicable rules and
regulations promulgated thereunder the Shares may be resold without
registration under the Securities Act of 1933, as amended (the "Act") only in
certain circumstances. Buyer understands that the certificates evidencing the
Shares may contain a legend restricting transfer as provided under the Act and
applicable rules and regulations promulgated thereunder.
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ARTICLE VI
ADDITIONAL AGREEMENTS AND COVENANTS
Section 6.1 Other Offers. From and after the date hereof until
Closing, Seller, or each of its officers, directors, stockholders, employees,
affiliates, representatives or agents shall not, directly or indirectly, (a)
solicit, enter into or conduct discussions relating to, initiate or knowingly
encourage any offer or proposal for, or any indication of interest in, directly
or indirectly, a merger or business combination involving a Subsidiary or the
acquisition of an equity interest in, or a substantial portion of the assets
of, a Subsidiary or (b) unless required by law, regulation or judicial
compulsion, disclose any nonpublic information relating to a Subsidiary or the
Business of a Subsidiary, or afford access to the properties, books or records
of a Subsidiary, to any person or entity.
Section 6.2 Conduct of the Business Pending the Closing.
Seller covenants that until the Closing, each of the Subsidiaries shall comply,
and Seller shall cause the Subsidiaries to comply, with the provisions set
forth below:
(a) Each Subsidiary shall operate its respective Business in
the ordinary course;
(b) Seller shall promptly notify Buyer of, and furnish to
Buyer any information that Buyer may reasonably request with respect to,
the occurrence of any event or the existence of any fact that may result
in the representations and warranties of Seller not being true if they
were made at any time prior to or as of the date of the Closing;
(c) Except as set forth in Schedule 6.2, neither the Seller
nor any of its Subsidiaries shall (i) grant or agree to grant any
bonuses to any employee, officer, director, representative or agent of
any Subsidiary, (ii) grant any general increase in the rates of salaries
or compensation of employees, officers, directors, representatives or
agents of any
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of the Subsidiaries or any specific increase to any employee, officer,
director, representative or agent of any of the Subsidiaries, (iii)
provide for any new pension, retirement or other employment benefits to
any employee, officer, director, representative or agent of any of the
Subsidiaries or any increase in any existing benefits, (iv) terminate or
amend in any respect or provide for any material increase in benefits
under any Seller Plan or (v) execute any employment agreement, severance
arrangement, consulting arrangement, sales agency agreement,
representation agreement or distribution agreement with any employee,
officer, director, representative or agent of any Subsidiary;
(d) No Subsidiary shall amend its certificate of incorporation
or by-laws and neither the Seller nor any of the Subsidiaries shall
enter into any merger or consolidation agreement involving any
Subsidiary or its assets;
(e) Neither the Seller nor any of its Subsidiaries shall
authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any capital stock of any class or any other securities or
equity equivalents of any Subsidiary or amend any of the terms of any
such securities or agreements;
(f) Seller shall use best efforts to maintain and preserve the
Business of each Subsidiary intact, to retain each Subsidiary's present
employees so that they will be available after the Closing and to
maintain each Subsidiary's existing relationships with customers,
suppliers and others so that those relationships will be preserved after
the Closing;
(g) None of the Subsidiaries shall sell, assign or dispose of
any of its material assets or properties, tangible or intangible, or
incur or assume any liabilities or enter into any
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sale/leaseback or similar transaction, except for sales and dispositions
made, or liabilities incurred, in the ordinary course of business
consistent with past practices;
(h) None of the Subsidiaries shall assume, guarantee, endorse
or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person or
entity or make any loans, advances or capital contributions to or
investments in any other person or entity;
(i) Seller and its Subsidiaries shall maintain in full force
and effect all insurance currently maintained as set forth in Schedule
4.21;
(j) Neither the Seller nor any of its Subsidiaries shall take,
or agree in writing or otherwise to take, any of the actions described
in this Section 6.2 or any action that would make any representation or
warranty inaccurate or untrue or that would result in any of the
conditions set forth in Article VIII hereof not being satisfied;
(k) Seller and its Subsidiaries shall comply in all material
respects with all Applicable Laws including, without limitation,
Environmental Laws;
(l) Each Subsidiary shall maintain the books of account and
records in the usual, regular and customary manner consistent with
practices employed prior to the date hereof;
(m) Seller and each Subsidiary shall not implement or adopt
(i) any change in its accounting methods or principles or the
application thereof (including depreciation lives) or (ii) any material
change in its tax methods or principles or the application thereof
(including depreciation lives); and
(n) No Subsidiary shall split, combine or reclassify any
shares of its capital stock, declare, set aside or pay any dividends or
other distributions in respect of its capital stock or redeem, purchase
or otherwise acquire any of its capital stock.
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Section 6.3 Public Announcements. Subject to applicable
securities law, stock exchange requirements or judicial compulsion, neither
Seller or a Subsidiary or another Affiliate of Seller nor Buyer or another
Affiliate of Buyer shall, without the prior approval of Seller or Buyer, as the
case may be, issue, or permit any of their respective directors, officers,
employees, agents to issue, any press release or other public announcement with
respect to this Agreement or the transactions contemplated hereby.
Section 6.4 Further Assurances. The Seller and Buyer each
shall execute, acknowledge and deliver or cause to be executed, acknowledged
and delivered to Buyer or Seller, as the case may be, such assignments or other
instruments of transfer, assignment and conveyance, in form and substance
reasonably satisfactory to counsel of Buyer or counsel of Seller, as the case
may be, as shall be necessary to vest in Buyer all of the right, title and
interest in and to the Shares free and clear of all liens, charges,
encumbrances, rights of others, mortgages, pledges or security interests, and
any other document reasonably requested by Buyer in connection with this
Agreement. Seller and Buyer each agree that, from time to time, whether
before, at or after the Closing Date, it will execute and deliver such further
instruments and take such other action as may be reasonably necessary to carry
out the purposes and intent of this Agreement.
Section 6.5 Covenant Against Competition.
(a) As an essential consideration for the obligations of Buyer
under this Agreement, Seller hereby agrees and covenants that, for a
period of five years following the Closing Date, without Buyer's written
consent,
(i) neither Seller nor any of its Affiliates other than
a current member of the Board of Directors of the Seller shall
engage in any manner in any business in competition with the
Business of any Subsidiary or provide products or services of
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the same general type as those provided by a Subsidiary, in the
geographic areas in which the Subsidiaries have provided products
or services within one year before Closing; and
(ii) neither Seller nor any of its Affiliates other than
a current member of the Board of Directors of the Seller shall
hire, attempt to hire or assist any other person in hiring or
attempting to hire, or discouraging any person from accepting
employment with a Subsidiary, or inducing to leave the employ of
a Subsidiary, any employee or officer of a Subsidiary, or any
person who was an employee or officer of a Subsidiary within one
year prior to the Closing Date.
(b) If Buyer believes Seller or any Affiliate has violated the
provisions of this Section 6.5, Buyer shall have the right to seek
relief from any court of competent jurisdiction. Seller acknowledges
that money damages alone will not adequately compensate Buyer in the
event of a breach of the covenants of this Section. Therefore, Seller
agrees that in addition to all remedies available at law, in equity or
under this Agreement, Buyer shall be entitled to injunctive relief for
the enforcement of this covenant. Seller agrees that the covenants in
this Section are reasonable with respect to their duration, scope and
geographical area. If, at the time of enforcement of this Section, a
court should hold that the restrictions herein are unreasonable under
the circumstances then existing or otherwise, the parties agree that the
maximum duration, scope or geographical area legally permissible under
such circumstances will be substituted for the duration, scope or area
stated herein.
Section 6.6 Governmental Filings. As promptly as practicable
after the execution of this Agreement, each party shall, in cooperation with
the other, file any reports or notifications that may be required to be filed
by it under applicable law and shall furnish to the other all such
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information in its possession as may be necessary for the completion of the
reports or notifications to be filed by the other.
Section 6.7 Access to Information. Prior to Closing, Buyer may
make such investigation of the business and properties of Seller and the
Subsidiaries as Buyer may desire and, upon reasonable notice, Seller and the
Subsidiaries shall give to Buyer and its counsel, accountants and other
representatives reasonable access, during normal business hours throughout the
period prior to the Closing, to the property, books, commitments, agreements,
records, files and personnel of Seller and the Subsidiaries, and Seller shall
furnish to Buyer during that period all copies of documents and information
concerning the Business of Seller and the Subsidiaries as Buyer may reasonably
request, subject to applicable law. Buyer shall hold, and shall cause its
counsel, accountants and other agents and representatives to hold, all such
information and documents in confidence. Seller will cooperate with Buyer's
transition planning for the acquisition by providing access to key executives
of Seller and the Subsidiaries.
Section 6.8 Use of Name. Prior to or at Closing, Seller shall
eliminate, and cease and desist from, any use of the designation "Tanknology,"
"Vacutect," "Vacutest" or any similar name or designation or any designation
indicating an affiliation with a Subsidiary (the "Tanknology Designation") and
shall commence doing business under an assumed name. At the next meeting of
shareholders but in any event no later than June 30, 1997, Seller shall
officially change its name to a name that does not include a Tanknology
Designation.
Section 6.9 Other Action. Each of the parties shall use its
best efforts to cause the fulfillment at the earliest practicable date but, in
any event, prior to the Closing Date of all conditions to their respective
obligations to consummate the transactions under this Agreement.
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Section 6.10 Employee Benefit Matters. Effective as of the
Closing Date, the Seller shall amend all Subsidiary Plans except stock options
plans of the Seller to terminate the participation of the Subsidiaries therein,
and shall further amend the Seller's defined contribution Subsidiary Plans
except stock option plans of the Seller to provide for full vesting of the
accounts of all current and former employees of the Subsidiaries participating
therein.
Section 6.11 Cooperation with Financings and Financial
Reporting. Seller acknowledges and understands that in the event Buyer
conducts certain offerings of its securities or is subject to reporting
requirements under the Exchange Act, Buyer will be required to obtain certain
information relating to the Seller, the Subsidiaries or the Business,
including, but not limited to, audited or unaudited financial statements of
Seller and the Subsidiaries, and disclose such information in registration
statements and other documents filed with the Securities and Exchange
Commission under the federal securities laws or in disclosure documents given
investors in certain securities offerings. Seller agrees to use its best
efforts to cooperate fully and promptly, and shall cause their affiliates,
accountants, counsel and other agents and representatives to cooperate fully
and promptly, with Buyer in connection therewith.
Section 6.12 Consents. Each party will cooperate with the other
and proceed, as promptly as is practicable, to seek to obtain all necessary
consents and approvals set forth in Schedule 4.4 or Schedule 5.3, and to
endeavor to comply with all other legal or contractual requirements for or
preconditions to the execution and consummation of this Agreement.
Section 6.13 Tax Certificate. On or before the Closing Date,
Seller will provide to Buyer a certificate ("Tax Certificate") that sets forth
the following information as of the date for each particular item of
information which is as close to the Closing Date as is reasonably practicable:
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(a) The following information shall be provided in accordance
with the reporting of such information on the most recently filed Tax
Return for each such Tax:
(i) The adjusted basis for Tax purposes of the assets
of each of the Seller and the Subsidiaries, and
(ii) The amounts of the net operating loss, net capital
loss, foreign Tax credit and Tax credit carry forwards, the
overall foreign losses and the foreign Taxes paid or accrued in
excess of the applicable foreign Tax credit limitations of or
allocable to each of the Subsidiaries;
(b) All current consents and elections with respect to Taxes
of or with respect to each of the Subsidiaries that have been filed with
any taxing authority;
(c) All taxable periods for which the income and franchise Tax
Returns of or with respect to each of the Subsidiaries are open; and
(d) All Tax partnerships in which either of the Subsidiaries
is a member.
Section 6.14 Certain Tax Elections. Buyer and Seller shall make
a timely and effective joint election (the "Section 338(h)(10) Election") under
Section 338(h)(10) of the Code for each of Tanknology and USTMAN with respect
to the purchase of the Tanknology Shares and the USTMAN Shares. Moreover,
Buyer shall prepare completed Forms 8023-A for each of Tanknology and USTMAN
providing for the Section 338(h)(10) Elections. If Buyer and Seller disagree
as to any information (including but not limited to the valuation of any asset)
required to be provided on any Form 8023-A (including any schedule attached
thereto), the specific matters in dispute shall be submitted to the Auditors,
or such independent accounting firm as may be approved by Seller and Buyer,
which firm shall render its opinion as to such matters. Based on such opinion,
such independent accounting firm will then send to Seller and Buyer its
determination of the specified
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matters in dispute, which determination shall be final and binding on the
parties hereto. The parties agree to represent such information on Form 8023-A
consistent with such Auditors' opinion. The fees and expenses of the Auditors
shall be borne one-half by Seller and one-half by Buyer. At the Closing Date
or as soon as practicable thereafter, Seller and Buyer will jointly execute
such Forms 8023-A, and thereafter Buyer, on behalf of Buyer and Seller, will
timely file such Forms 8023-A with the relevant taxing authority and will
provide proof of such filing to Seller. Buyer shall have the right, but not
the obligation, to make an election under Section 338(g) of the Code for
Tanknology Canada with respect to the purchase of Tanknology Shares.
Section 6.15 Liability for Taxes.
(a) Seller shall be liable for, and shall defend, indemnify
and hold Buyer harmless against, (i) any Taxes incurred by any of the
Subsidiaries for any taxable period ending on or before the Closing
Date, (ii) a portion, determined in the manner set forth in this Section
6.15, of any Taxes incurred by any of the Subsidiaries for any taxable
period that includes the Closing Date but ends after the Closing Date
("Straddle Period"), (iii) any income Taxes caused by, or arising from,
the Section 338(h)(10) Election, (iv) any transfer or sales Taxes
arising from the transactions contemplated in this Agreement, other than
transfer or sales Taxes that are imposed because of the Section
338(h)(10) Election if such Taxes are in excess of the transfer or sales
Taxes that would have been imposed if the Section 338(h)(10) Election
had not been made, and (v) any Taxes imposed with respect to any payment
from Seller under this sentence. Any Tax refunds received by the Buyer
relating to the Tax liability of a Subsidiary for a period ending on or
before the Closing Date shall be the property of the Seller other than
Tax refunds generated because of a Buyer tax attribute. Seller will
ensure that with respect to any Tax partnership listed on the Tax
Certificate, the
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appropriate party has made or will make a valid election under Section
754 of the Code with respect to each such Tax partnership in the time
and in the manner provided in Regulation Section 1.754-1(b) such that
each such election is in effect for the taxable year of each such Tax
partnership that includes the Closing Date.
(b) If a Straddle Period exists for any of the Subsidiaries
for any Tax purpose, the Buyer, Seller, and such Subsidiary, to the
extent permitted by law, shall elect to treat such period for purposes
of this Agreement as consisting of two periods: (i) a period beginning
with the first day of the Straddle Period and ending on the Closing Date
("Pre-Closing Period") and (ii) a period beginning immediately after the
Closing Date and ending with the last day of the Straddle Period ("Post-
Closing Period"). If applicable law does not permit such an election to
be made, Taxes for the entire Straddle Period shall be apportioned
between the Pre-Closing Period and the Post-Closing Period under the
interim-closing-of-the-books method applied on the Closing Date, except
that exemptions, allowances, deductions, and credits calculated under
Applicable Law on an annual basis shall be apportioned on a per diem
basis between these two periods. Seller shall be liable for the Taxes
apportioned to the Pre-Closing Period.
(c) Seller shall prepare, or cause the Subsidiaries to
prepare, and submit to Buyer all Tax Returns of the Subsidiaries (and
any Tax partnerships in which (i) a Subsidiary owns an interest and (ii)
Seller or a Subsidiary has responsibility for preparing and filing
partnership Tax Returns) for Taxes for any taxable period ending on or
before the Closing Date and for which the due date of any such Tax
Return is subsequent to the Closing Date. Any such Tax Return shall be
prepared on a basis consistent with Tax Returns prepared with respect to
the Subsidiaries for prior taxable periods, unless otherwise required by
law, and
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shall be submitted to Buyer not later than (i) in the case of any United
States federal income or Canadian income Tax Return, 60 days before the
due date of such Tax Return, and (ii) in the case of any other Tax
Return, 30 days before the due date of such Tax Return. Seller is
responsible for filing any such Tax Return and for preparing and filing
any other Tax Return of the Subsidiaries for Taxes for any taxable
period ending on or before the Closing Date.
(d) Buyer and its Affiliates, including the Subsidiaries, are
responsible for preparing and filing with the appropriate taxing
authorities all Tax Returns which relate to the Taxes of the
Subsidiaries other than those described in Section 6.15(c), except that
Tax Returns which relate to a Post-Closing Period shall be completed by
the Buyer. Seller shall cooperate with the Buyer and shall make
available all necessary records and timely take all action necessary to
allow Buyer to file, or prepare and file, as the case may be, the Tax
Returns described in this paragraph (including, without limitation,
providing or causing to be provided to Buyer any powers of attorney
which Buyer shall request for purposes of filing any such Tax Returns).
Such Tax Returns shall be prepared on a basis consistent with those
prepared with respect to the Subsidiaries for taxable periods ending on
or before the Closing Date, unless otherwise required by law.
(e) Notwithstanding any provision in this Section 6.15 to the
contrary, the Buyer shall reimburse the Seller for certain Taxes, if
any, incurred by the Seller in connection with the liability of an
affiliated, combined, or unitary group of corporations with respect to
the income, if any, of the Subsidiaries from the period from August 31,
1996, through the Closing Date in an amount equal to 37% of the net
taxable income, reduced by all appropriate expenses, deductions and
credits, of the Subsidiaries for such period determined in accordance
with United States federal income tax principles ("Reimbursable Taxes").
The
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Buyer has an obligation to reimburse the Seller for such Reimbursable
Taxes only if (i) the Seller submits, on or after the date the Seller
filed all Tax returns relating to the period from August 31, 1996
through the Closing Date, to the Buyer a certificate (and such
supporting documentation as the Buyer may reasonably request) prepared
by the Seller setting forth the amount of such Reimbursable Taxes. If
the Buyer disputes the amount of such Reimbursable Taxes set forth on
such certificate, the parties shall submit the specific matters in
dispute to the Auditors, or such independent accounting firm as may be
approved by Seller and Buyer, which firm shall render its opinion as to
such matters. Based on such opinion, such independent accounting firm
will then send to Seller and Buyer its determination of the specified
matters in dispute, which determination shall be final and binding on
the parties hereto. The fees and expenses of the Auditors shall be
borne one-half by Seller and one-half by Buyer. The Buyer shall make
such reimbursement payment within 60 days of receiving the certificate
and supporting documentation referred to in this Section 6.15(e), unless
a dispute is submitted to the Auditors. If a dispute regarding the
Reimbursable Taxes is submitted to the Auditors, the payment, if any,
shall be made within 15 days of the Auditors' decision.
(f) Any payment made with respect to Taxes pursuant to this
Section 6.15 shall be treated by Seller and Buyer as a nontaxable
adjustment to the Purchase Price for the Shares.
Section 6.16 Cooperation and Exchange of Information. The
parties will provide each other with such cooperation and information as they
may reasonably request of each other in preparing or filing any Tax Return,
amended Tax Return or claim for refund, in determining a liability or a right
to refund or in conducting any audit or other proceeding, in respect of Taxes
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imposed on the parties or their respective Affiliates. The Subsidiaries and
each party will preserve and retain all Tax Returns, schedules, work papers and
other documents relating to any such Tax Returns, claims, audits or other
proceedings until the expiration of the statutory period of limitations
(including extensions) of the taxable periods to which such documents relate
and until the final determination of any payments which may be required with
respect to such periods under this Agreement and shall make such documents
available to representatives of Seller upon reasonable notice and at reasonable
times, it being understood that such representatives shall be entitled to make
copies of any such books and records as they shall deem necessary. Any
information obtained pursuant to this Section 6.16 shall be kept confidential,
except as may be otherwise necessary in connection with the filing of Tax
Returns or claims for refund or in conducting any audit or other proceeding.
Section 6.17 Conflict. In the event of a conflict between the
provisions of Sections 6.13, 6.14, 6.15, or 6.16 and any other provision of
this Agreement, the provisions of this Article VI shall control.
Section 6.18 Insurance. Buyer agrees to procure and maintain
for three years after the Closing Date commercial general liability insurance
and environmental liability insurance covering contractors' legal liability and
professional/errors & omissions liability with no pollution exclusion with
policy terms, conditions, exclusions, limits and deductibles not materially
less favorable than such insurance maintained by Seller, as described in
Schedule 6.18.
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ARTICLE VII
EXTENT AND SURVIVAL OF REPRESENTATIONS,
WARRANTIES, COVENANTS AND AGREEMENTS; INDEMNIFICATION
Section 7.1 Indemnification of Buyer. Seller agrees to defend,
indemnify and hold harmless Buyer (including its officers, directors, employees
and agents and Affiliates) from and against, any and all claims, actions,
causes of action, arbitrations, proceedings, losses, damages, liabilities,
judgments and expenses (including, without limitation, reasonable attorneys'
fees) ("Claim") incurred by Buyer, any Affiliate of Buyer, Seller or any
Subsidiary as a result of (a) any error, inaccuracy, breach or
misrepresentation in any of the representations and warranties made by or on
behalf of Seller in this Agreement or in any certificate or other instrument
delivered by or on behalf of Seller in connection with this Agreement
(including the Schedules hereto), (b) any violation or breach by Seller of or
default by Seller under the terms of this Agreement, (c) any act or omission
occurring, or condition or circumstances existing, prior to the Closing, or any
condition or circumstances caused by any act or omission occurring prior to the
Closing, by Seller or any Subsidiary or otherwise with respect to Seller or any
Subsidiary, (d) the past or present presence, release, remediation or clean-up
of, or exposure to, Hazardous Material relating to or located on, within or
under any assets owned, leased or used by Seller or any Subsidiary, or (e) any
product liability, strict liability or other claims concerning (i) products
sold or services provided by Seller or any Subsidiary prior to the Closing or
(ii) inventory owned by Seller or any Subsidiary at the Closing. Buyer shall
be entitled to recover its reasonable and necessary attorneys' fees and
litigation expenses incurred in connection with successful enforcement of its
rights under this Section.
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Section 7.2 Survival; Threshold and Limits of Liability.
(a) The representations, warranties and covenants in this
Agreement and in any certificate or instrument delivered in connection
herewith shall be continuing and shall survive the Closing until two
years after the Closing Date (the period during which the
representations and warranties shall survive being referred to herein
with respect to such representations and warranties as the "Survival
Period"), but shall thereafter terminate and be of no further force and
effect unless a written notice asserting a claim shall have been made
pursuant to this Article VII within the Survival Period with respect to
such matter. Any claim for indemnification of a Claim of the type set
forth in Section 7.1(a)-(d) of this Agreement (a "Section 7.1 Claim")
made during the Survival Period shall remain in effect for purposes of
such indemnification notwithstanding such claim may not be resolved
within the Survival Period. Seller shall indemnify Buyer for any
Section 7.1 Claim in an aggregate amount up to $1,000,000 in excess of
any estimated liabilities accrued therefore by the Subsidiaries and
transferred to Buyer and any insurance proceeds realized by Buyer in
respect of such Claims net of any insurance premiums that become due as
a result of such Claims.
(b) Any claim for indemnification of Buyer for a Claim of the
type set forth in Section 7.1(e) (a "Section 7.1(e) Claim") must be made
no later than three years after the Closing Date. Any such Claim shall
remain in effect for purposes of such indemnification even if the Claim
is not resolved within three years after the Closing Date. Seller shall
indemnify Buyer for any Section 7.1(e) Claim up to an aggregate amount
of $1,250,000 in excess of $659,650, representing the estimated
liabilities accrued therefore by the Subsidiaries to be transferred to
Buyer, and in excess of any insurance proceeds realized by
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Buyer in respect of Section 7.1(e) Claims net of any insurance premiums
that become due as a result of such Claim.
Section 7.3 Indemnification Procedures. All claims for
indemnification under this Agreement shall be asserted and resolved as follows:
(a) A party claiming indemnification under this Agreement (an
"Indemnified Party") shall with reasonable promptness (i) notify the party from
whom indemnification is sought (the "Indemnifying Party") of any third-party
claim or claims asserted against the Indemnified Party ("Third Party Claim")
for which indemnification is sought and (ii) transmit to the Indemnifying Party
a copy of all papers served with respect to such claim (if any) and a written
notice ("Claim Notice") containing a description in reasonable detail of the
nature of the Third Party Claim, an estimate of the amount of damages
attributable to the Third Party Claim to the extent feasible (which estimate
shall not be conclusive of the final amount of such claim) and the basis of the
Indemnified Party's request for indemnification under this Agreement.
Within 15 days after receipt of any Claim Notice (the "Election
Period"), the Indemnifying Party shall notify the Indemnified Party whether the
Indemnifying Party disputes its potential liability to the Indemnified Party
with respect to such Third Party Claim and, if the Indemnifying Party does not
dispute its potential liability to the Indemnified Party with respect to such
Third Party Claim, whether the Indemnifying Party elects to defend the
Indemnified Party with respect to such Third Party Claim.
If the Indemnifying Party does not dispute its potential
liability to the Indemnified Party within the Election Period and notifies the
Indemnified Party that it elects to defend such Third Party Claim, the
Indemnified Party shall control negotiations toward resolution of such claim
without the necessity of litigation, and if litigation ensues, to defend the
same with counsel
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reasonably acceptable to both parties, at the Indemnifying Party's expense, and
the Indemnified Party shall extend reasonable cooperation in connection with
such defense. The Indemnified Party shall be entitled to elect to participate
in, but not to control, the defense of any Third Party Claim resulting in
litigation, at its own cost and expense; provided, however, that if the parties
to any suit or proceeding shall include the Indemnifying Party as well as the
Indemnified Party and the Indemnified Party shall have been advised by counsel
that one or more legal defenses may be available to it that may not be
available to the Indemnifying Party, then the Indemnified Party shall be
entitled to elect to control such suit or proceeding, but the Indemnifying
Party shall be obligated to bear the fees and expenses of counsel of the
Indemnified Party, which shall be selected by the Indemnified Party in its
complete and sole discretion. If the Indemnifying Party does not dispute its
potential liability to the Indemnified Party within the Election Period and the
Indemnified Party fails to assume control of the negotiations prior to
litigation or to defend such action within a reasonable time, the Indemnifying
Party shall be entitled, but not obligated, to assume control of such
negotiations or defense of such action, and the Indemnifying Party shall be
liable to the Indemnified Party for its expenses reasonably incurred or amounts
paid in connection therewith. If the Indemnifying Party disputes its potential
liability to the Indemnified Party within the Election Period or does not elect
to defend such Third Party Claim, then the Indemnified Party shall be entitled
to assume control of such negotiations or defense of action and the liability
for the expense thereof, as well as any liability with respect to such Third
Party Claim, shall be determined as provided in Section 7.4 below.
If the Indemnifying Party fails to notify the Indemnified Party
within the Election Period that the Indemnifying Party elects to defend the
Indemnified Party pursuant to the preceding paragraph, or if the Indemnifying
Party elects to defend the Indemnified Party but fails to prosecute
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or settle the Third Party Claim as herein provided, then the Indemnified Party
shall have the right to defend, at the sole cost and expense of the
Indemnifying Party (if the Indemnified Party is entitled to indemnification
hereunder), the Third Party Claim by all appropriate proceedings, which
proceedings shall be promptly and vigorously prosecuted by the Indemnified
Party to a final conclusion or settled. The Indemnified Party shall have full
control of such defense and proceedings. Notwithstanding the foregoing, if the
Indemnifying Party has delivered a written notice to the Indemnified Party to
the effect that the Indemnifying Party disputes its potential liability to the
Indemnified Party under this Article VII and if such dispute is resolved in
favor of the Indemnifying Party, the Indemnifying Party shall not be required
to bear the costs and expenses of the Indemnified Party's defense pursuant to
this Section or of the Indemnifying Party's participation therein at the
Indemnified Party's request, and the Indemnified Party shall reimburse the
Indemnifying Party in full for all costs and expenses of such litigation. The
Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this Section, and
the Indemnifying Party shall bear its own costs and expenses with respect to
such participation.
Neither the Indemnifying Party nor the Indemnified Party shall
settle, compromise, or make any other disposition of any Third Party Claim
which would or might result in any liability to the Indemnified Party or the
Indemnifying Party under this Article VII without the written consent of such
other party.
(b) In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder that does not involve a Third Party
Claim, the Indemnified Party shall transmit to the Indemnifying Party a written
notice (the "Indemnity Notice") describing in reasonable detail the nature of
the claim, an estimate of the amount of damages attributable to such claim to
the extent feasible (which estimate shall not be conclusive of the final amount
of such claim) and the
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basis of the Indemnified Party's request for indemnification under this
Agreement. If the Indemnifying Party does not notify the Indemnified Party
within 15 days from its receipt of the Indemnity Notice that the Indemnifying
Party disputes such claim, the claim specified by the Indemnified Party in the
Indemnity Notice shall be deemed a liability of the Indemnifying Party
hereunder.
Section 7.4 Arbitration of Disputes. If the Indemnifying Party
disputes, either as to the amount or liability, that any claim described in a
Claim Notice or an Indemnity Notice, as the case may be, is covered by such
Indemnifying Party's covenant to indemnify contained in this Article VII, then
the Indemnifying Party and the Indemnified Party agree to promptly negotiate in
good faith to resolve their differences and to mutually agree upon an amount,
if any, owed to Indemnified Party by the Indemnifying Party hereunder. If
Indemnifying Party and Indemnified Party fail to agree within 30 days
thereafter, the dispute shall be resolved by binding and final arbitration of a
single arbitrator mutually agreed to by Buyer and Seller conducted in Houston,
Texas in accordance with the rules of commercial arbitration of the American
Arbitration Association. The prevailing party in any such arbitration
proceeding shall be entitled to attorneys' fees and other out-of-pocket
expenses reasonably and necessarily incurred in connection with such
proceeding, the amounts of which shall be contained in the award of the
arbitrator.
Section 7.5 General. THE COVENANTS AND AGREEMENTS ENTERED INTO
PURSUANT TO THIS AGREEMENT TO BE PERFORMED AFTER THE CLOSING SHALL SURVIVE THE
CLOSING WITHOUT LIMITATION. THE INDEMNIFICATION OBLIGATIONS UNDER THIS ARTICLE
VII SHALL APPLY REGARDLESS OF WHETHER ANY CLAIM RESULTS SOLELY OR IN PART FROM
THE ACTIVE, PASSIVE OR CONCURRENT NEGLIGENCE OF THE INDEMNIFIED PARTY OR A
SUBSIDIARY PRIOR TO THE CLOSING DATE. THE PARTIES AGREE THAT THIS ARTICLE VII
DOES NOT ENTITLE
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THE BUYER TO INDEMNIFICATION FOR THE BUYER'S OR A SUBSIDIARY'S ACT OR OMISSION
AFTER THE CLOSING DATE. THE RIGHTS OF THE PARTIES TO INDEMNIFICATION UNDER
THIS ARTICLE VII SHALL NOT BE LIMITED DUE TO ANY INVESTIGATIONS HERETOFORE OR
HEREAFTER MADE BY SUCH PARTIES OR THEIR REPRESENTATIVES, REGARDLESS OF
NEGLIGENCE IN THE CONDUCT OF ANY SUCH INVESTIGATIONS. ALL REPRESENTATIONS,
WARRANTIES AND COVENANTS AND AGREEMENTS MADE BY THE PARTIES SHALL NOT BE DEEMED
MERGED INTO ANY INSTRUMENTS OR AGREEMENTS DELIVERED IN CONNECTION WITH THE
CLOSING OR OTHERWISE IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 7.6 Security. Seller agrees that it shall not effect
its liquidation, dissolution, change of control, merger or sale of all or a
substantial portion of its assets, or any event causing it to cease to exist,
without assigning its obligations under this Section VII to a third party
acceptable to Buyer and/or posting security for such indemnification
obligations, in each case, to Buyer's reasonable satisfaction sufficient to
cover Seller's obligations hereunder throughout the period of time such
obligations exist.
ARTICLE VIII
CONDITIONS TO CLOSING
Section 8.1 Conditions Precedent to Obligations of Buyer. The
obligation of the Buyer to consummate the purchase under this Agreement is
subject to the fulfillment, prior to or at the Closing, of each of the
following conditions (any or all of which may be waived by the Buyer):
(a) all representations and warranties of the Seller contained
in this Agreement including all Schedules to this Agreement shall be
true and correct in all respects at and as of the time of the Closing
with the same effect as though made again at, and as of, that time,
except such as will not have a material adverse effect and except such
as would not
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reasonably be expected to have a material adverse effect on the Seller's
ability to perform its obligations under this Agreement;
(b) Seller shall have performed and complied in all material
respects with all obligations and covenants required by this Agreement
to be performed or complied with by the Seller prior to or at the
Closing;
(c) Buyer shall have been furnished with a certificate, dated
the Closing Date, executed by an officer of the Seller (other than the
Chief Financial Officer) certifying to the fulfillment of the conditions
specified in Sections 8.1(a) and 8.1(b) hereof;
(d) no provision of any Applicable Law shall prohibit, and
there shall not be in effect any injunction, restraining order or decree
issued by a court of competent jurisdiction or any governmental body
that shall prohibit, the consummation of this Agreement and there shall
be no action or proceeding pending or threatened seeking any such
injunction, order or decree;
(e) Buyer shall have received proceeds from loans from one or
more commercial banks and/or commercial lenders totaling at least
$12,000,000 on terms and conditions satisfactory to Buyer in order to
finance the transactions contemplated hereby, related transaction costs
and working capital;
(f) Seller shall have received all consents, approvals and
Permits to execute this Agreement and to consummate the transactions
contemplated hereby; and
(g) Buyer shall be furnished with an opinion of counsel to
Seller and each of the Subsidiaries, as to the due execution and
delivery of this Agreement and the documents delivered by Seller at
Closing and substantially as to the matters set forth in Sections 4.1,
4.3, 4.4, 4.7 and 4.8 hereof and such other matters as Buyer may
reasonably request.
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Section 8.2 Conditions Precedent to Obligations of the Seller.
The obligation of the Seller to consummate the sale under this Agreement is
subject to the fulfillment, prior to or at the Closing, of each of the
following conditions (any or all of which may be waived by the Seller):
(a) all representations and warranties of the Buyer contained
in this Agreement, including all Schedules to this Agreement, shall be
true and correct in all respects at and as of the time of the Closing
with the same effect as though made again at, and as of, that time,
except such as would not reasonably be expected to have a material
adverse effect on the Buyer's ability to perform its obligations under
this Agreement;
(b) Buyer shall have performed and complied in all material
respects with all obligations and covenants required by this Agreement
to be performed or complied with by the Buyer prior to or at the
Closing;
(c) Seller shall have been furnished with a certificate, dated
the Closing Date, executed by an officer of the Buyer certifying to the
fulfillment of the conditions specified in Sections 8.2(a) and 8.2(b)
hereof; and
(d) no provision of any Applicable Law shall prohibit, and
there shall not be in effect any injunction or restraining order issued
by a court of competent jurisdiction in any action or proceeding
against, the consummation of this Agreement.
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ARTICLE IX
ACTIONS TO BE TAKEN AT CLOSING
Section 9.1 Actions to be Taken by Seller at the Closing.
Seller shall take the following actions at the Closing:
(a) Seller shall deliver to Buyer copies certified by its
Secretary of resolutions duly adopted by the boards of directors of
Seller and each Subsidiary authorizing and approving the execution and
delivery of this Agreement, including the exhibits and schedules hereto,
and the consummation of the transactions contemplated herein;
(b) Seller shall execute and deliver to Buyer a bill of sale
and deeds, assignments and any other necessary instruments, satisfactory
in form and content and approved prior to Closing by Buyer, conveying
the Shares and assets of each Subsidiary (other than Excluded Assets) to
Buyer;
(c) Seller shall deliver the officer's certificate referred to
in Section 8.1(c);
(d) Buyer shall have been furnished with a legal opinion as
provided in Section 8.1(g) hereof; and
(e) Seller shall have delivered to Buyer a letter of
resignation from each noncontinuing officer and director of each
Subsidiary.
Section 9.2 Actions to be Taken by Buyer at the Closing. Buyer
shall take the following actions at the Closing:
(a) Buyer shall deliver to Seller a copy certified by its
Secretary of resolutions duly adopted by the board of directors of Buyer
authorizing and approving the execution and
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delivery of this Agreement, including the exhibits and schedules hereto,
and the consummation of the transactions contemplated herein;
(b) Buyer shall make the payment of funds specified for
payment at Closing under Sections 2.2 and 2.3 above; and
(c) Buyer shall deliver the officer's certificate referred to
in Section 8.2(c).
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Termination.
(a) This Agreement may be terminated at any time prior to the
Closing:
(i) by mutual written agreement executed by the Seller
and the Buyer; or
(ii) if the Board of Directors of the Seller in the
exercise of its fiduciary duties under applicable laws as advised
in writing by counsel withdraws or modifies its approval or
recommendation of the proposed acquisition of Shares by the Buyer
on the terms and conditions set forth herein in any manner
adverse to Buyer and recommends or approves a Competing
Transaction, or resolves to do the foregoing. For purposes of
this Agreement, "Competing Transaction" shall mean any merger,
consolidation, share exchange, business combination or similar
transaction involving any of the Subsidiaries, or the acquisition
in any manner, directly or indirectly, of a material interest in
any voting securities of, or a material interest in a substantial
portion of the assets of, any of the Subsidiaries, other than the
transactions contemplated by this Agreement.
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(b) Upon termination of this Agreement, neither of the parties
nor any other person shall have any liability or further obligation
arising out of this Agreement except for any liability resulting from
its breach of this Agreement prior to termination and as stated in
Section 10.1(c) hereof, except that the provisions of Sections 10.2,
10.3, 10.9 and 10.11 shall continue to apply.
(c) In the event Seller terminates this Agreement pursuant to
Section 10.1(a)(ii) hereof and enters into a Competing Transaction on or
before March 31, 1997, Seller shall reimburse Buyer for its reasonable
costs related to Buyer's proposed acquisition of the Shares, not to
exceed $250,000.
Section 10.2 Confidentiality; Publicity; Books and Records.
(a) For three years, neither party nor any Affiliate thereof
will, directly or indirectly, disclose or provide to any other person
any non-public information of a confidential nature concerning the other
party or their business or operations, and neither Seller nor any
Affiliate thereof will directly or indirectly, disclose or provide to
any other person any non-public information of a confidential nature
concerning any Subsidiary or their business or operations, except as is
required in governmental filings or judicial, administrative or
arbitration proceedings. In the event that a party or its Affiliate
becomes legally required to disclose any such information in any
governmental filings or judicial, administrative or arbitration
proceedings, that party shall, and shall cause such Affiliate to,
provide the other party with prompt notice of such requirement so that
the other party may seek a protective order or other appropriate remedy.
In the event that such protective order or other remedy is not obtained,
the disclosing party shall, and shall cause such Affiliate to, furnish
only that portion of the information that the disclosing party or
such Affiliate, as the
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case may be, is advised by its counsel is legally required and such
disclosure shall not result in any liability hereunder unless such
disclosure was caused by or resulted from a previous disclosure by the
other party which was not permitted by this Agreement, by that certain
Confidentiality Agreement between the parties dated as of April 18, 1995
or that certain Confidentiality Agreement between the parties dated as
of January 24, 1996. Subject to applicable securities law or stock
exchange requirements, the parties hereto will promptly advise, and
obtain the approval of, the other parties before issuing any press
release with respect to this Agreement or the transactions contemplated
hereby.
(b) If the parties fail to close the acquisition of
Shares contemplated in this Agreement, each party shall, and shall cause
its officers, directors, employees, representatives and agents (the
"Representatives") to return all copies of the other party's
confidential non-public information in its possession or in the
possession of its Representatives, and destroy all copies of any
analyses, compilations, studies or other documents prepared by that
party or its Representatives or for its use containing or reflecting any
such information.
For purposes of this Agreement, non-public information of a
confidential nature shall not include any information which (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 directly or
indirectly by a party, its Affiliate or its Representatives), (ii) was
available to a party on a nonconfidential basis from a source other than
the other party, its Affiliate or Representatives, provided that such
source is not and was not directly or indirectly bound by a
confidentiality agreement with the nondisclosing party, its Affiliate or
Representatives with respect to that information, or (iii) has been
independently acquired or developed by the other
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<PAGE> 61
party, its Affiliate or Representatives, without violating any
obligations under this agreement, that certain Confidentiality Agreement
between the parties dated as of April 18, 1995 or that certain
Confidentiality Agreement between the parties dated as of January 24,
1996.
(c) For a period of five years after the Closing Date, Buyer
will preserve and retain the books and records of each Subsidiary and
make such books and records available at the then current administrative
headquarters of Buyer to Seller and its officers, employees and agents,
upon reasonable notice and at reasonable times, at Seller's cost and
expense, it being understood that Seller shall be entitled to make
copies of any such books and records as shall be reasonably necessary.
Section 10.3 Expenses. Buyer and Seller shall pay their own
respective expenses, including the fees and disbursements of their respective
counsel in connection with the negotiation, preparation and execution of this
Agreement and the consummation of the transactions contemplated herein. Seller
shall be solely responsible for paying all fees and expenses of Raymond James &
Associates.
Section 10.4 Entire Agreement. This Agreement, including all
schedules and exhibits hereto, constitutes the entire agreement of the parties
and supersedes any prior oral or written agreements with respect to the subject
matter hereof, and may not be modified, amended or terminated except by a
written instrument specifically referring to this Agreement signed by all the
parties hereto.
Section 10.5 Waivers and Consents. All waivers and consents
given hereunder shall be in writing. No waiver by any party hereto of any
breach or anticipated breach of any
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<PAGE> 62
provision hereof by any other party shall be deemed a waiver of any other
contemporaneous, preceding or succeeding breach or anticipated breach, whether
or not similar.
Section 10.6 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been received only if
and when (a) personally delivered (b) if mailed, on the third day after
mailing, by United States mail, first class, postage prepaid, by certified
mail, return receipt requested, addressed in each case as follows (or to such
other address as may be specified by like notice) or (c) delivered by overnight
courier or facsimile:
(i) if to Buyer, to:
NDE Environmental Corporation
8900 Shoal Creek Blvd.
Bldg. 200
Austin, Texas 78758
P.O. Box 140795
Austin, Texas 78714
Facsimile: 512-459-1459
Attention: President
(ii) if to Seller, to:
Tanknology Environmental, Inc.
5225 Hollister Street
Houston, Texas 77040-6294
Facsimile: 713-895-6022
Attention: President
Section 10.7 Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors, legal representatives and assigns. No third party shall
have any rights hereunder. No assignment shall release the assigning party.
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<PAGE> 63
Section 10.8 Performance. Seller agrees to cause each
Subsidiary to perform all its obligations and agreements under this Agreement
and hereby guarantees performance by each Subsidiary of all such obligations
and agreements.
Section 10.9 Choice of Law; Section Headings; Table of Contents.
This Agreement shall be governed by the internal laws of the State of Texas
(without regard to the choice of law provisions thereof). The section headings
and any table of contents contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
Section 10.10 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original and
all of which together shall be deemed to be one and the same instrument.
Section 10.11 Jurisdiction and Venue. Seller and Buyer hereby
consent to personal jurisdiction in any action brought with respect to this
Agreement and the transactions contemplated hereunder in any federal or state
court in Harris County, Texas and agree that service of process may be
accomplished pursuant to Section 10.6 above.
Section 10.12 Severability. The invalidity or unenforceability
of any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement which shall remain in
full force and effect.
Section 10.13 Assignment. This Agreement and each party's rights
hereunder may not be assigned without the prior written consent of the other
parties; provided that no such consent shall be required by Buyer or Seller to
assign all or part of its rights to a subsidiary or Affiliate but no such
assignment shall relieve the assigning party of any of its obligations under
this Agreement.
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<PAGE> 64
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first above written.
NDE ENVIRONMENTAL CORPORATION
By: /s/ JAY ALLEN CHAFFEE
---------------------------------
Name: Jay Allen Chaffee
----------------------------
Title: Chairman of the Board
---------------------------
TANKNOLOGY ENVIRONMENTAL, INC.
By: /s/ DONALD R. CAMPBELL
---------------------------------
Name: Donald R. Campbell
----------------------------
Title: President
---------------------------
-59-
<PAGE> 1
EXHIBIT 2.2
FIRST AMENDMENT TO
STOCK PURCHASE AGREEMENT
This Agreement is the First Amendment to the Stock Purchase
Agreement dated October 7, 1996, by and between NDE Environmental Corporation,
a Delaware corporation ("Buyer"), and Tanknology Environmental, Inc., a Texas
corporation ("Seller") (the "Stock Purchase Agreement") and evidences the
following:
1. Seller confirms that Tanknology Corporation International,
a Delaware corporation, owns all of the issued and outstanding stock of
Tanknology Canada (1988), Inc., a Canadian corporation. It is therefore deemed
advisable by the parties to amend the Stock Purchase Agreement to insert the
phrase ", directly or indirectly," after the third word of the second paragraph
on the first page of the Stock Purchase Agreement and in Section 4.8 of the
Stock Purchase Agreement after the second word of the third sentence. As a
result, in both of those sentences, the phrase "Seller owns" shall hereafter be
modified by the phrase ", directly or indirectly,". Buyer and Seller hereby
reaffirm each and every other provision of the Stock Purchase Agreement, as so
amended.
2. Attached hereto, as of the date hereof, are new Schedules
replacing in their entirety any previous schedules of the same number
delivered at the time of execution and delivery of the original Stock Purchase
Agreement: Schedules 4.7, 4.8, 4.10, 4.11 and 6.13. In addition, attached
hereto is a revised Item 7--Detail of Capitalization of Subsidiaries,
correcting certain errors set out in the original.
EXECUTED as of this 25th day of October, 1996.
NDE ENVIRONMENTAL CORPORATION
By: /s/ JAY ALLEN CHAFFEE
----------------------------------
Name: Jay Allen Chaffee
-----------------------------
Title: Chairman of the Board
----------------------------
TANKNOLOGY ENVIRONMENTAL, INC.
By: /s/ DONALD R. CAMPBELL
----------------------------------
Name: Donald R. Campbell
-----------------------------
Title: President
----------------------------
<PAGE> 1
EXHIBIT 10.1
LOAN AGREEMENT
REVOLVING LINE OF CREDIT
OF UP TO $5,000,000.00
AND
TERM LOAN
OF $6,000,000.00
FROM
BANK ONE, TEXAS, N.A.
TO
NDE ENVIRONMENTAL CORPORATION
TANKNOLOGY/NDE CORPORATION
USTMAN INDUSTRIES, INC.
PROECO, INC.
and
TANKNOLOGY CANADA (1988) INC.
October 25, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.01 Revolving Loan. . . . . . . . . . . . . . . . . . . . . . . . 16
2.02 Advances and Payments Under the Revolving Note . . . . . . . 17
2.03 Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.04 The Term Note . . . . . . . . . . . . . . . . . . . . . . . 17
2.05 Payments of Term Loan Principal . . . . . . . . . . . . . . 17
2.06 Borrowing Base Determination . . . . . . . . . . . . . . . . 17
2.07 Provisions Relating to Interest . . . . . . . . . . . . . . 18
2.08 Mandatory Prepayment of the Revolving Note or the Term
Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.09 Voluntary Prepayment of the Note . . . . . . . . . . . . . . 20
2.10 Advances to Satisfy Obligations of the Borrower . . . . . . 20
2.11 Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . 21
2.13 Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . 21
2.14 Letters of Credit . . . . . . . . . . . . . . . . . . . . . 21
2.15 Repayment of Letters of Credit . . . . . . . . . . . . . . . 22
2.16 Letter of Credit Fee . . . . . . . . . . . . . . . . . . . . 22
ARTICLE III. CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.01 Receipt of Notes, Agreement and Certificate of Compliance . 22
3.02 Receipt of Articles of Incorporation and Bylaws . . . . . . 23
3.03 Receipt of Certified Copy of Corporate Proceedings and
Certificate of Incumbency . . . . . . . . . . . . . . . . . 23
3.04 Receipt of Opinions of Counsel . . . . . . . . . . . . . . . 23
3.05 Accuracy of Representations and Warranties and No Event of
Default . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.06 Legal Matters Satisfactory to Special Counsel to the Bank . 24
3.07 No Material Adverse Change . . . . . . . . . . . . . . . . . 24
3.08 Receipt of Certificates of Authority and Certificates of
Good Standing . . . . . . . . . . . . . . . . . . . . . . . 24
3.09 Receipt of Borrowing Base Certificate . . . . . . . . . . . 24
3.10 Collateral Documents . . . . . . . . . . . . . . . . . . . . 24
3.11 UCC Search . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.12 Bank Fees . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.13 Legal Fees . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.14 Contribution of Subordinated Indebtedness . . . . . . . . . 25
3.15 Cash Liquidity . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 25
4.01 Existence and Good Standing . . . . . . . . . . . . . . . . 25
4.02 Due Authorization . . . . . . . . . . . . . . . . . . . . . 26
4.03 Valid and Binding Obligations . . . . . . . . . . . . . . . 26
4.04 Scope and Accuracy of Financial Statements . . . . . . . . . 27
4.05 Authorizations and Consents . . . . . . . . . . . . . . . . 27
4.06 Environmental Laws . . . . . . . . . . . . . . . . . . . . . 27
4.07 Compliance with Laws, Rules, Regulations and Orders . . . . 28
4.08 Liabilities, Litigation and Restrictions . . . . . . . . . . 29
4.09 Existing Indebtedness . . . . . . . . . . . . . . . . . . . 29
4.10 Material Commitments . . . . . . . . . . . . . . . . . . . . 29
4.11 Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . 30
4.12 Proper Filing of Tax Returns and Payment of Taxes Due . . . 30
4.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.14 Investment Company Act Compliance . . . . . . . . . . . . . 31
4.15 Public Utility Holding Company Act Compliance . . . . . . . 31
4.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.17 Material Misstatements and Omissions . . . . . . . . . . . . 31
5.01 Use of Funds . . . . . . . . . . . . . . . . . . . . . . . . 32
5.02 Maintenance and Access to Records . . . . . . . . . . . . . 32
5.03 Quarterly Unaudited Financial Statements . . . . . . . . . . 32
5.04 Annual Audited Financial Statements . . . . . . . . . . . . 32
5.05 Compliance Certificate . . . . . . . . . . . . . . . . . . . 32
5.06 Monthly Reports . . . . . . . . . . . . . . . . . . . . . . 33
5.07 Statement of Material Adverse Change in Condition and
Notice of Events of Default . . . . . . . . . . . . . . . . 33
5.08 Additional Information . . . . . . . . . . . . . . . . . . . 33
5.09 Compliance with Laws and Payment of Assessments and
Charges . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.10 Maintenance of Corporate Existence and Good Standing . . . . 34
5.11 Further Assurances . . . . . . . . . . . . . . . . . . . . . 34
5.12 Initial Expenses of the Bank . . . . . . . . . . . . . . . . 34
5.13 Subsequent Expenses of the Bank . . . . . . . . . . . . . . 34
5.14 Maintenance of Tangible Property . . . . . . . . . . . . . . 35
5.15 Maintenance of Insurance . . . . . . . . . . . . . . . . . . 35
5.16 Inspection of Tangible Assets/Right of Audit . . . . . . . . 36
5.17 Payment of Revolving Note and Term Note and Performance of
Obligations . . . . . . . . . . . . . . . . . . . . . . . . 36
5.18 Subordinated Indebtedness Reduction Certificate . . . . . . 36
5.19 Adjusted Liabilities to Adjusted Net Worth . . . . . . . . . 36
</TABLE>
iii
<PAGE> 4
<TABLE>
<S> <C>
5.20 Net Worth Requirement . . . . . . . . . . . . . . . . . . . 36
5.21 Debt Service Coverage Ratio . . . . . . . . . . . . . . . . 36
5.22 General and Administrative Expenses . . . . . . . . . . . . 36
5.23 Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . 37
5.24 Compliance with Environmental Laws . . . . . . . . . . . . . 37
5.25 Hazardous Substances Indemnification . . . . . . . . . . . . 37
5.26 Transactions with Affiliates . . . . . . . . . . . . . . . . 38
5.27 Payment of Taxes, Etc . . . . . . . . . . . . . . . . . . . 38
5.28 Notice of Litigation . . . . . . . . . . . . . . . . . . . . 39
5.29 Notices Regarding Account Debtors . . . . . . . . . . . . . 39
5.30 Notice of Change of Principal Offices . . . . . . . . . . . 39
5.31 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 39
5.32 Landlord Waivers . . . . . . . . . . . . . . . . . . . . . . 40
5.33 Annual Collateral Review . . . . . . . . . . . . . . . . . . 40
</TABLE>
iv
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE VI. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . 40
6.01 Other Indebtedness . . . . . . . . . . . . . . . . . . . . . 40
6.02 Mortgages or Pledges of Assets . . . . . . . . . . . . . . . 41
6.03 Sales of Assets . . . . . . . . . . . . . . . . . . . . . . 41
6.04 Nature of Business . . . . . . . . . . . . . . . . . . . . . 41
6.05 Payment of Accounts Payable . . . . . . . . . . . . . . . . 41
6.06 Cancellation of Insurance . . . . . . . . . . . . . . . . . 42
6.07 Investments . . . . . . . . . . . . . . . . . . . . . . . . 42
6.08 Changes in Structure or Business . . . . . . . . . . . . . . 42
6.09 Changes in Management . . . . . . . . . . . . . . . . . . . 42
6.10 Limitation on Leases . . . . . . . . . . . . . . . . . . . . 42
6.11 Restricted Payments . . . . . . . . . . . . . . . . . . . . 42
6.12 Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . 43
6.13 Payment of Subordinated Indebtedness . . . . . . . . . . . . 43
6.14 Capital Expenditures Limitation . . . . . . . . . . . . . . 43
ARTICLE VII. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . 43
7.01 Enumeration of Events of Default . . . . . . . . . . . . . . 43
7.02 Rights Upon Unmatured Event of Default . . . . . . . . . . . 45
7.03 Rights Upon Default . . . . . . . . . . . . . . . . . . . . 46
7.04 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.05 Right of Set-off . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 49
8.01 Security Interests in Deposits and Right of Offset or the
Banker's Lien . . . . . . . . . . . . . . . . . . . . . . . 49
8.02 Survival of Representations, Warranties and Covenants . . . 49
8.03 Waiver of Rights . . . . . . . . . . . . . . . . . . . . . . 49
8.04 Notices and Other Communications . . . . . . . . . . . . . . 50
8.05 Parties in Interest . . . . . . . . . . . . . . . . . . . . 50
8.06 Renewals and Extensions . . . . . . . . . . . . . . . . . . 50
8.07 No Waiver by the Bank . . . . . . . . . . . . . . . . . . . 52
8.08 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 52
8.09 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 52
8.10 Incorporation of Exhibits and Schedules . . . . . . . . . . 53
8.11 Survival Upon Unenforceability . . . . . . . . . . . . . . . 53
8.12 Rights of Third Parties . . . . . . . . . . . . . . . . . . 53
8.13 Amendments or Modifications . . . . . . . . . . . . . . . . 53
8.14 Agreement Construed as an Entirety . . . . . . . . . . . . . 53
8.15 Number and Gender . . . . . . . . . . . . . . . . . . . . . 53
8.16 Agreement Supersedes All Prior Agreements . . . . . . . . . 54
8.17 Controlling Provision Upon Conflict . . . . . . . . . . . . 54
</TABLE>
v
<PAGE> 6
<TABLE>
<S> <C>
8.18 Time, Place and Method of Payments . . . . . . . . . . . . . 54
8.19 Non-Application of Chapter 15 of Texas Credit Code . . . . . 54
8.20 Counterpart Execution . . . . . . . . . . . . . . . . . . . 54
</TABLE>
vi
<PAGE> 7
EXHIBITS
- --------
EXHIBIT "A-1" Revolving Note
EXHIBIT "A-2" Term Note
EXHIBIT "B" Compliance Certificate
EXHIBIT "C" Borrowing Base Certificate
EXHIBIT "D-1" Substance of Opinion of Counsel
Baker & Botts, L.L.P.
EXHIBIT "D-2" Substance of Opinion of Counsel
Banc One Capital Corporation Legal Department
EXHIBIT "E" Monthly Report
EXHIBIT "F" Form of Landlord's Waiver
SCHEDULES
- ---------
Schedule 1.01(a) Collateral
Schedule 1.01(b) Existing Permitted Liens
Schedule 3.10 Collateral Documents
Schedule 3.11 UCC Search Jurisdictions
Schedule 4.01 Information Regarding Jurisdictions in which each Borrower
and its Subsidiaries are Incorporated and in which Each
Does Business and is Qualified as a Foreign Corporation
Schedule 4.09 Existing Indebtedness
Schedule 4.10 Material Commitments
Schedule 4.16 Insurance Certificate
Schedule 5.01 Use of Funds
Schedule 5.26 Transactions with Affiliates
Schedule 6.07 Investments
Schedule 6.11 Restricted Payments
vii
<PAGE> 8
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of the 25th day of October, 1996, made and
entered into by and among NDE ENVIRONMENTAL CORPORATION ("NDE"), a Delaware
corporation, TANKNOLOGY/NDE CORPORATION ("T/NDE"), a Delaware corporation,
USTMAN INDUSTRIES, INC. ("USTMAN"), a Delaware corporation, PROECO, INC.
("PROECO"), a Delaware corporation, and TANKNOLOGY CANADA (1988) INC.
("TANKNOLOGY CANADA"), a Canadian federal corporation (collectively,
"Borrower") and BANK ONE, TEXAS, N.A., a national banking association (the
"Bank"), evidences the arrangements concerning certain loans to the Borrower by
the Bank.
W I T N E S S E T H
WHEREAS, the Borrower desires to obtain a loan from the Bank in
order to: (i) enable NDE to acquire T/NDE, USTMAN, and TANKNOLOGY CANADA from
Tanknology Environmental Inc., (ii) satisfy ongoing working capital and general
corporate requirements of Borrower, including the issuance of letters of
credit, (iii) pay down certain existing outstanding indebtedness of the
Borrower, and (iv) pay certain fees and expenses related to the acquisition and
this financing; and
WHEREAS, the Bank is willing to loan such funds to the Borrower
in accordance with the terms of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the Bank and the Borrower agree as follows:
ARTICLE I.
DEFINITIONS
As used in this Agreement, the following terms shall have the
meanings indicated:
"Accounts," "Chattel Paper," "Contracts," "Documents,"
"Equipment," "Fixtures," "General Intangibles," "Goods," "Instruments," and
"Inventory" shall have the same respective meanings as
<PAGE> 9
are given to those terms in the Uniform Commercial Code as presently adopted
and in effect in the State of Texas.
"Adjusted EBITDA" means EBITDA less (i) cash taxes and (ii) the
lesser of (x) $750,000 or (y) actual Capital Expenditures.
"Adjusted Liabilities" means Total Liabilities less Subordinated
Indebtedness.
"Adjusted Net Worth" means Consolidated Net Worth plus
Subordinated Indebtedness.
"Affiliate" means, as applied to any Person, any other Person,
directly or indirectly, controlling, controlled by, or under common control
with, that Person. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by", and "under
common control with"), as applied to any Person, means either: (a) the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract, or otherwise, or (b) the legal or
beneficial ownership of or voting rights with respect to twenty percent (20%)
or more of the equity interest in such Person.
"Agreement" means this Loan Agreement, as the same may be amended
or supplemented from time to time.
"BANK ONE Base Rate" means, at any time, the rate of interest per
annum then most recently established and published by the Bank as its BANK ONE
Base Rate, which is eight and one-half percent (8.25%) as of the date of this
Agreement.
"Borrowing Base" means, at any time, the lesser of: (a)
$5,000,000.00; or (b) the amount accurately computed on the Borrowing Base
Certificate most recently delivered to, and accepted by, the Bank in accordance
with Section 2.06 and other relevant provisions of this Agreement, and equal to
seventy-five per cent (75%) of Eligible Accounts of the Borrower.
"Borrowing Base Certificate" means a fully completed certificate
in the form of Exhibit "C" to this Agreement, certified by the Chairman of the
Board, President or Chief Financial Officer
2
<PAGE> 10
of the Borrower to be correct and delivered to, and accepted by, the Bank
pursuant to Section 2.06.
"Business Day" means a day other than a Saturday, Sunday or legal
holiday for commercial banks under the laws of the State of Texas.
"Capital Expenditures" means expenditures for business assets
used by Borrower with a useful life in excess of one (1) year, the acquisition
cost of which, in accordance with GAAP, is depreciated over the useful life of
such asset.
"Closing" means the date of the Initial Advance made by the Bank
pursuant to Section 2.01 or 2.03.
"Collateral" means all material assets of Borrower, including,
but not limited to, those described on Schedule 1.01(a) attached hereto and the
Pledged Stock.
"Collateral Documents" means: (a) the instruments described or
referred to in Section 3.10 of this Agreement, and (b) any and all other
instruments or documents hereafter executed in connection with or as security
for the payment of the Revolving Note or the Term Note.
"Compliance Certificate" means the certificate of the Chairman of
the Board, the President or the Chief Financial Officer of the Borrower,
submitted to the Bank from time to time pursuant to this Agreement and
attesting to the financial covenants and stating, to such officer's knowledge,
whether or not an Event of Default or an Unmatured Event of Default has
occurred and is continuing and, if such an event has occurred, the actions
being taken by the Borrower, to remedy such situation and that GAAP has been
used in the preparation of the Financial Statements, which certificate shall be
in the form attached hereto as Exhibit "B."
"Consolidated Liabilities" means all Indebtedness that, in
accordance with GAAP, should be classified as liabilities on a consolidated
balance sheet of the Borrower and its Subsidiaries.
"Consolidated Net Worth" shall mean, at a particular date, the
sum of preferred stock (if any), par value of common stock, capital in excess
of par value of common stock, and retained
3
<PAGE> 11
earnings less treasury stock (if any) determined on a consolidated basis and in
accordance with GAAP.
"Current Assets" and "Current Liabilities" means at any time, all
assets or liabilities, respectively, that should in accordance with GAAP, be
classified as current assets or current liabilities, respectively, on a balance
sheet of the Borrower.
"Debt Service Coverage Ratio" means the ratio of Adjusted EBITDA
to the sum of: (i) all interest (including interest on Subordinated
Indebtedness); (ii) preferred dividends; (iii) actual scheduled principal
amortization of the Term Loan for the upcoming twelve-month period; AND (iv)
actual scheduled principal amortization of the Subordinated Indebtedness for
the upcoming twelve-month period.
"Default Rate" means a per annum interest rate equal to the
Floating Rate in effect from time to time, plus three percent (3%).
"Deposit" means a demand, time, savings, passbook or like
account, or a certificate of deposit maintained with a bank, savings and loan
association, credit union or like organization.
"EBITDA" means after-tax profit plus interest expense, taxes,
depreciation and amortization.
"Eligible Account" means, at any time, an Account that conforms
and continues to conform to the following conditions:
(A) The Account arose from a bona fide outright sale of Goods by the
Borrower or from bona fide services performed by the Borrower, and such
Goods have been shipped to the appropriate account debtors or their
designees (or the sale has otherwise been consummated), or the services
have been performed for the appropriate account debtors;
(B) The Account is based upon an enforceable order or contract,
written or oral, for Goods shipped or held or for services performed,
and the same were shipped, held, or performed in accordance with such
order or contract;
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(C) The title of the Borrower to the Account and, except as to the
account debtor, to any Goods is absolute and is not subject to any prior
assignment, claim, lien, or security interest, except Permitted Liens;
(D) The amount shown on the books of the Borrower and on any invoice
or statement delivered to the Bank is owing to the Borrower, less any
partial payment that has been made thereon by anyone;
(E) The Account shall be eligible only to the extent that it is not
subject to any claim of reduction, counterclaim, set-off, recoupment, or
any claim for credits, allowances, or adjustments by the account debtor
because of returned, inferior, or damaged Goods or unsatisfactory
services, or for any other reason;
(F) The account debtor has not returned or refused to retain, or
otherwise notified the Borrower of any dispute concerning, or claimed
nonconformity of, any of the Goods or services from the sale of which
the Account arose;
(G) The Account is due and payable not more than thirty (30) days
from the date of the invoice therefor;
(H) The Account is not more than ninety (90) days past due nor
outstanding more than one hundred twenty (120) days from the date of the
invoice therefor;
(I) The Account does not arise out of a contract with, or order from,
an account debtor that, by its terms, forbids or makes void or
unenforceable the assignment by the Borrower to the Bank of the Account
arising with respect thereto;
(J) The Borrower has not received any note, trade acceptance, draft,
or other Instrument with respect to, or in payment of, the Account, nor
any Chattel Paper with respect to the Goods giving rise to the Account,
unless, if any such Instrument or Chattel Paper has been received, the
Borrower promptly notifies the Bank and, at the latter's request,
endorses or assigns and delivers the same to the Bank;
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(K) The Borrower has not received any notice of the death of the
account debtor or a partner thereof; nor of the dissolution, termination
of existence, insolvency, business failure, appointment of a receiver
for any part of the property of, assignment for the benefit of creditors
by, or the filing of a petition in bankruptcy or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against, the
account debtor;
(L) The account debtor is not a Subsidiary or other Affiliate of the
Borrower;
(M) The account debtor is not a Person whose principal place of
business is outside of the United States of America, its territories and
possessions;
(N) No more than 15% of account debtor's aggregate account total
fails to satisfy clause (H) of this definition;
(O) The Account shall be eligible only to the extent that it does not
constitute more than twenty-five percent (25%) of the aggregate total of
Accounts otherwise deemed Eligible Accounts hereunder; and
(P) The Bank has not deemed such account ineligible (i) because of a
reasonable uncertainty about the creditworthiness of the account debtor;
or (ii) because the Bank otherwise reasonably considers the collateral
value thereof to the Bank to be impaired or its ability to realize such
value to be insecure.
In the event of any dispute, under the foregoing criteria, about
whether an Account is or has ceased to be an Eligible Account, the decision of
the Bank shall control.
"Environmental Laws" means (a) the following federal laws as they
may be cited, referenced and amended from time to time: the Clean Air Act, the
Clean Water Act, the Safe Drinking Water Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Endangered Species Act, the
Resource Conservation and Recovery Act, the Occupational Safety and Health Act,
the Hazardous Materials Transportation Act, the Superfund Amendments and
Reauthorization Act, the Toxic Substances Control
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<PAGE> 14
Act, and the Oil Pollution Act of 1990; (b) any and all environmental statutes
of any state in which property of the Borrower is situated, as they may be
cited, referenced and amended from time to time; (c) any rules or regulations
promulgated under or adopted pursuant to the above federal and state laws; and
(d) any other federal, state or local statute relating to regulation of the
environment or any requirement, rule, regulation, code, ordinance or order
adopted pursuant thereto, including, without limitation, those relating to the
generation, transportation, treatment, storage, recycling, disposal, handling
or release of Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations and published
interpretations thereof.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which together with the Borrower would be treated as a single
employer under Section 4001 of ERISA.
"Event of Default" means any of the events specified in Section
7.01 of this Agreement.
"Excess Sales Proceeds" shall have the meaning attributed to that
term in Section 2.08(B).
"Existing Indebtedness" means all Indebtedness of the Borrower
and any Subsidiary existing as of the Closing, such Indebtedness being
described in Schedule 4.09.
"Financial Statements" means the statements of the financial
condition of the indicated Person, on a consolidated basis, as at the point in
time and for the period indicated and consisting of at least a balance sheet,
income statement and statement of cash flows, and, when the foregoing are
audited, accompanied by the certification of such Person's independent
certified public accountants and footnotes to any of the foregoing, all of
which shall be prepared in accordance with GAAP applied on a basis consistent
with that of the preceding year.
"Floating Rate" means a per annum interest rate equal to the
Revolving Note Rate with respect to the Indebtedness evidenced
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<PAGE> 15
by the Revolving Note, and equal to the Term Note Rate with respect to the
Indebtedness evidenced by the Term Note.
"GAAP" means generally accepted accounting principles, applied on
a consistent basis, as set forth in Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants and/or in statements
of the Financial Accounting Standards Board and/or their respective successors
and which are applicable in the circumstances as of the date in question.
Accounting principles are applied on a "consistent basis" when the accounting
principles observed in a current period are comparable in all material respects
to those accounting principles applied in a preceding period.
"Good Title" means good and indefeasible ownership, properly
evidenced by appropriate public records or certificates of title with respect
to property to which such public records or certificates of title are
applicable, free and clear of all mortgages, liens and encumbrances, except for
Permitted Liens.
"Hazardous Substances" means flammables, explosives, radioactive
materials, hazardous wastes, asbestos or any material containing asbestos,
polychlorinated biphenyls (PCBs), toxic substances or related materials,
petroleum and petroleum products and associated oil or natural gas exploration,
production and development wastes or any substances defined as "hazardous
substances", "hazardous materials", "hazardous wastes" or "toxic substances"
under the Comprehensive Environmental Response, Compensation and Liability Act,
as amended, the Superfund Amendments and Reauthorization Act, as amended, the
Hazardous Materials Transportation Act, as amended, the Resource Conservation
and Recovery Act, as amended, the Toxic Substances Control Act, as amended, or
any other Environmental Laws now or hereafter enacted or promulgated by any
regulatory authority or governmental body, but only to the extent any such law
is or becomes applicable to the Borrower or any of its property.
"Letter of Credit" means a standby letter of credit issued for
the account of the Borrower on terms and conditions customarily established by
the Bank, in its discretion, from time to time.
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<PAGE> 16
"Indebtedness" means, as to any Person, (a) all items of
indebtedness or liability (other than capital, surplus, deferred credits and
reserves, as such) which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side of a balance sheet
as at the date as of which Indebtedness is to be determined, (b) indebtedness
secured by (or for which the holder of such indebtedness has a right,
contingent or otherwise, to be secured by) any mortgage, deed of trust, pledge,
lien, security interest, or other charge or encumbrance existing on or
encumbering property owned by the Person whose Indebtedness is being
determined, whether or not the indebtedness secured thereby shall have been
assumed, (c) all indebtedness of others which such Person has directly or
indirectly guaranteed, endorsed (otherwise than for collection or deposit in
the ordinary course of business), discounted with recourse, agreed
(contingently or otherwise) to purchase or repurchase or otherwise acquire, or
in respect of which such Person has agreed to supply or advance funds (whether
by way of loan, purchase of securities or capital contribution, through a
commitment to pay for property or services regardless of the nondelivery of
such property or the nonfurnishing of such services or otherwise), or in
respect of which such Person has otherwise become directly or indirectly
liable, contingently or otherwise, whether now existing or hereafter arising,
and (d) all leases that, in accordance with GAAP, should not be reflected on
the Borrower's balance sheet.
"Initial Advance" means the first advance hereunder.
"Interest Expense" means, for any period, total cash interest
expense of the Borrower for such period in connection with the Borrower's
Indebtedness.
"Investment" in any Person means any stock, bond, note or other
evidence of Indebtedness or any other security (other than current trade and
customer accounts) of, or loan to, such Person.
"Laws" means all ordinances, statutes, rules, regulations,
orders, injunctions, writs, or decrees of any government or political
subdivision or agency thereof, or any court or similar entity established by
any thereof.
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<PAGE> 17
"Liabilities" means all Indebtedness that, in accordance with
GAAP, should be classified as liabilities on a balance sheet of the Borrower.
"Limitation Period" means any period while any amount remains
owing on the Revolving Note or the Term Note when interest on such amount,
calculated at the applicable rate prescribed in such Revolving Note or Term
Note, plus any fees payable hereunder and deemed to be interest under
applicable Law, would exceed the Maximum Rate.
"Loan" means, singly, any advance by the Bank to the Borrower
pursuant to this Agreement, and "Loans" means, cumulatively, the aggregate sum
of all money advanced by the Bank to the Borrower pursuant to this Agreement.
"Loan Documents" means this Agreement and all promissory notes,
security agreements, mortgages, deeds of trust, releases, guaranties, and other
instruments, documents, and agreements executed and delivered pursuant to or in
connection with this Agreement, as such instruments, documents, and agreements
may be amended, modified, renewed, extended, or supplemented from time to time.
"Loan Excess" means, at any point in time, the amount, if any, by
which the outstanding balance on the Loans evidenced by the Revolving Note
exceeds the Revolving Commitment then in effect.
"Maximum Commitment Amount" means $5,000,000.00 on the date
hereof.
"Maximum Rate" means the maximum non-usurious interest rate
permissible under applicable Laws of the State of Texas or those of the United
States of America applicable to the Bank.
"Multi-Employer Plan" shall mean a plan described in Section
4001(a)(3) of ERISA which covers employees of the Borrower or any ERISA
Affiliate.
"Notes" means the Revolving Note and the Term Note.
"Net Income" shall mean, for any period, the net income (or loss)
of the Borrower after allowances for taxes for such
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<PAGE> 18
period, determined in accordance with GAAP; provided that there shall be
excluded from such net income (to the extent otherwise included therein) the
following: (i) the net income of any Person in which the Borrower has an
interest (which interest does not cause the net income of such other Person to
be consolidated with the net income of the Borrower 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 the Borrower; (ii) the net income (or
loss) of any Person acquired in a pooling-of-interests transaction for any
period prior to the date of 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, and (v) any gains or losses attributable to writeups or
writedowns of assets.
"Obligations" means all obligations, indebtedness, and
liabilities of the Borrower to the Bank, now existing or hereafter arising,
whether direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several, or joint and several, including, without
limitation, the obligations, indebtedness, and liabilities of the Borrower
under this Agreement and the other Loan Documents, and all interest and fees
accruing thereon and all attorneys' fees and other expenses incurred in the
administration, enforcement or collection thereof.
"Operational Letter of Credit" means a Letter of Credit issued
for the account of the Borrower to satisfy bonding and other regulatory
requirements, or for general working capital purposes, relating to the
Borrower's business operations.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Permitted Liens" means:
(A) Liens for taxes, assessments, or similar charges, incurred in the
ordinary course of business, that are not yet due and payable;
(B) Pledges or deposits made in the ordinary course of business to
secure payment of workers' compensation or to
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<PAGE> 19
participate in any fund in connection with worker's compensation,
unemployment insurance, old-age pensions, or other social security
programs;
(C) Liens of mechanics, materialmen, warehousemen, carriers, or other
like liens, securing obligations incurred in the ordinary course of
business that are not yet due and payable;
(D) Good faith pledges or deposits made in the ordinary course of
business to secure performance of bids, tenders, contracts (other than
for the repayment of borrowed money) or leases, not in excess of ten per
cent (10%) of the aggregate amount due thereunder, or to secure
statutory obligations, or surety, appeal, indemnity, performance, or
other similar bonds required in the ordinary course of business;
(E) Encumbrances consisting of zoning restrictions, easements, or
other restrictions on the use of real property, none of which materially
impairs the use of such property by the Borrower in the operation of its
business, and none of which is violated in any material respect by
existing or proposed structures or land use;
(F) Liens in favor of the Bank;
(G) Existing Liens set forth or described on Schedule 1.01(b),
attached hereto and made a part hereof;
(H) Liens securing the Subordinated Indebtedness, but only to the
extent that such liens have been expressly subordinated to the liens in
favor of the Bank under terms and conditions satisfactory to the Bank in
its sole discretion;
(I) Purchase money security interests granted to secure not more than
seventy-five per cent (75%) of the purchase price of assets, the
purchase of which does not violate this Agreement or any instrument
required hereunder; and
(J) The following, if the validity or amount thereof is being
contested in good faith by appropriate and lawful proceedings, so long
as levy and execution thereon have been stayed and continue to be stayed
and they do not, in the aggregate, materially detract from the value of
the property of the
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<PAGE> 20
Borrower or any Subsidiary, or materially impair the use thereof in the
operation of its business:
(1) Claims or liens for taxes, assessments, or charges due and
payable and subject to interest or penalty;
(2) Claims, liens, and encumbrances upon, and defects of title
to, real or personal property, including any attachment of
personal or real property or other legal process prior to
adjudication of a dispute on the merits;
(3) Claims or liens of mechanics, materialmen, warehousemen,
carriers, or other like liens; and
(4) Adverse judgments on appeal.
"Person" means an individual, company, corporation, partnership,
joint venture, limited liability company, trust, association, unincorporated
organization or a government or any agency or political subdivision thereof.
"Plan" means, at any time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or any ERISA Affiliate is
(or, if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Prohibited Transaction" shall mean any transaction set forth in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended from time to time.
"Pledged Stock" means all of the issued and outstanding shares of
capital stock of T/NDE, USTMAN, PROECO and TANKNOLOGY CANADA, which constitute
part of the Collateral to be covered by the Collateral Documents to be
delivered pursuant to Section 3.10.
"Reportable Event" shall mean any of the events set forth in
Section 4043 of ERISA, excluding, however, such events as to which PBGC has by
regulation waived the requirement of Section 4043(a) of ERISA that it be
notified within 30 days of the occurrence of such event.
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<PAGE> 21
"Request for Advance" means the written or verbal (confirmed in
writing within one (1) Business Day) request by the Borrower for a Loan by the
Bank pursuant to this Agreement, which Request for Advance shall include a
statement of the amount requested to be advanced, the date of the requested
advance and such other information as the Bank in its reasonable discretion
deems necessary.
"Revolving Commitment" means the obligation of the Bank, subject
to the provisions of this Agreement and existing only through the Revolving
Commitment Termination Date, to advance to the Borrower funds in an amount not
to exceed at any one time outstanding the lesser of: (a) the Borrowing Base
then in effect, or (b) the Maximum Commitment Amount.
"Revolving Commitment Termination Date" means December 31, 1999.
"Revolving Loan" means the loan made pursuant to Section 2.01.
"Revolving Note" means that certain promissory note in the
original face amount of $5,000,000.00 dated of even date herewith made by the
Borrower payable to the order of the Bank in the form attached hereto as
Exhibit "A-1," together with all deferrals, renewals, extensions, amendments,
modifications or rearrangements thereof, which promissory note shall evidence
certain advances to the Borrower by the Bank pursuant to Section 2.01 hereof.
"Revolving Note Rate" means a per annum interest rate equal to
the BANK ONE Base Rate in effect from time to time plus three quarters of one
percent (.75%).
"Subordinated Commitment Indebtedness" means the Indebtedness
incurred by Borrower in accordance with that certain Standby Commitment dated
October 25, 1996, by and among Proactive Partners, L.P., NDE Environmental
Corporation, Banc One Capital Partners, L.P., and Bank One, Texas, N.A., the
repayment of which is subordinated to the Loan in a form and manner
satisfactory to the Bank, together with other Indebtedness on similar terms and
of a similar nature, which is subsequently incurred by Borrower with the
consent of the Bank.
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"Subordinated Indebtedness Reduction Certificate" means a fully
completed certificate certified by the Chairman of the Board, President or
Chief Financial Officer of the Borrower to be correct and delivered to the Bank
affirming that Borrower is in compliance with Section 6.13 prior to making any
principal payment of Subordinated Indebtedness.
"Subordinated Indebtedness" means the Indebtedness incurred by
Borrower in accordance with Section 3.14, being the Senior Subordinated Note
due September 30, 2001, between NDE Environmental Corporation, Tanknology/NDE
Corporation, USTMAN Industries, Inc., ProEco, Inc., and Tanknology Canada
(1988) Inc. in the initial principal amount of $8,000,000.00 (which under GAAP
will be treated as an approximately $6,000,000 subordinated note together with
an approximately $2,000,000 allocation for warrants acquired thereby).
"Subsidiary" means, as to any Person, any corporation in which
such Person, directly or indirectly through its Subsidiaries, owns more than
fifty percent (50%) of the stock of any class or classes having by the terms
thereof the ordinary voting power to elect a majority of the directors of such
corporation, and any partnership, association, joint venture, or other entity
in which such Person, directly or indirectly through its Subsidiaries, has more
than a fifty percent (50%) equity interest at the time.
"Term Loan" means the Loan to be made pursuant to Section 2.03.
"Term Loan Maturity Date" means December 31, 2001.
"Term Note" means the promissory note in an original principal
amount of $6,000,000.00, of even date with this Agreement, made by Borrower
payable to the order of Bank in the form attached hereto as Exhibit "A-2,"
together with all deferrals, renewals, extensions, amendments, modifications or
rearrangements thereof, which promissory note shall evidence the advance to the
Borrower by the Bank pursuant to Section 2.03 hereof.
"Term Note Rate" means a per annum interest rate equal to the
BANK ONE Base Rate in effect from time to time plus one and one-half percent
(1.5%).
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"Total Liabilities" means all liabilities that, in accordance
with GAAP, would be included in determining total liabilities as shown on the
liability side of a consolidated balance sheet of the Borrower and its
Subsidiaries.
"Unmatured Event of Default" means any event or occurrence which
solely with the lapse of time or the giving of notice or both will ripen into
an Event of Default.
Undefined Terms. Undefined financial accounting terms used in
this Agreement shall be defined according to GAAP.
ARTICLE II.
THE LOAN
2.01 Revolving Loan.
(A) Upon the terms and conditions (including, without
limitation, the right of the Bank to terminate the Revolving Commitment
hereunder upon an Event of Default or an Unmatured Event of Default) and
relying on the representations and warranties contained in this Agreement, the
Bank agrees, for a period from and after the date hereof through the Revolving
Commitment Termination Date, to make advances to the Borrower from time to time
following receipt of a Request for Advance, in such amounts as the Borrower may
request; provided, however, each such Loan shall be in an amount of not less
than $200,000.00 and in an integral multiple of $100,000.00 (unless the excess
of the Revolving Commitment over the aggregate outstanding principal amount of
all Loans and Operational Letters of Credit is less than $200,000, then such
amount shall be equal to such excess), and the aggregate principal amount of
all Loans made pursuant to this Section 2.01 and at any one time outstanding
shall not exceed the Revolving Commitment.
(B) Through the Revolving Commitment Termination Date, the
Borrower may use this revolving credit by borrowing, prepaying and reborrowing,
all in accordance with the terms and conditions of this Agreement. The
borrowings made by the Borrower pursuant to the Revolving Commitment shall be
made at the principal office of the Bank and shall be evidenced by the
Revolving Note.
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<PAGE> 24
2.02 Advances and Payments Under the Revolving Note. Each time
an advance is made against or payment is made on the Revolving Note, the Bank
is hereby irrevocably authorized by the Borrower to make appropriate entries of
such in its records in accordance with the usual and customary practices of
accounting for advances and payments on notes; provided, however, the failure
of the Bank to do so shall not relieve the Borrower of its correct liability
hereunder or under the Revolving Note.
The aggregate unpaid amount of advances reflected by the
notations by the Bank on its records or the ledger sheets affixed to the
Revolving Note shall be deemed rebuttably presumptive evidence of the principal
amount owing on the Revolving Note. The liability for payment of principal and
interest evidenced by the Revolving Note shall be limited to principal amounts
actually advanced to the Borrower and outstanding under this Agreement and
interest on such amounts calculated in accordance with this Agreement.
Interest provided for in the Revolving Note and herein shall be calculated on
unpaid sums actually advanced and outstanding under the Revolving Note pursuant
to the terms of this Agreement and only for the period from the date or dates
of such advances until repayment.
2.03 Term Loan. Subject to the terms and conditions and
relying on the representations and warranties contained in this Agreement, the
Bank agrees to make the Term Loan to the Borrower in a single advance on or
after October 25, 1996.
2.04 The Term Note. The obligation of the Borrower to repay
the Term Loan shall be evidenced by the Term Note.
2.05 Payments of Term Loan Principal. The principal of the
Loan evidenced by the Term Note will be repaid in sixty (60) equal, consecutive
monthly installments in the amount of $100,000.00 each, beginning on January 1,
1997, and continuing on the first day of each calendar month thereafter until
the Term Loan Maturity Date, when the entire unpaid principal amount of the
Term Note shall be due and payable.
2.06 Borrowing Base Determination. The initial Borrowing Base
shall be established by the calculations submitted at Closing in conformance
with Exhibit "B". Within twenty (20) days after the end of each calendar month
following the date of the Initial
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<PAGE> 25
Advance, Borrower shall deliver to Bank a Borrowing Base Certificate setting
out the calculations necessary to determine the Borrowing Base as of close of
business on the last Business Day of the preceding calendar month. Upon
receipt of such Borrowing Base Certificate, the Bank, acting in the ordinary
course of its business, shall review the calculations thereon to determine
whether it concurs with the Borrowing Base so calculated, and it shall then
notify Borrower of such concurrence or any disagreement with such calculations.
To the extent that the Bank requests reasonable supporting information from the
Borrower relating to the Borrowing Base calculations provided on the Borrowing
Base Certificate, the Borrower shall promptly provide the requested information
to the Bank. The redetermination of the Borrowing Base shall become effective
five (5) days after the Bank's receipt of the Borrowing Base Certificate,
unless the Bank sends written notification to the Borrower that the Bank has
calculated a lower Borrowing Base, whereupon the Borrowing Base so recalculated
by the Bank shall be the Borrowing Base until the effective date of the next
redetermination of the Borrowing Base, as provided herein.
2.07 Provisions Relating to Interest.
(A) Subject to the terms and provisions of this Agreement, the
Loans shall bear interest at a daily rate equal to the applicable Floating Rate
per annum, each change in the rate of interest to become effective without
notice to the Borrower, on the effective date of each change in the BANK ONE
Base Rate.
(B) Subject to the terms and provisions of this Agreement,
interest on the Loans shall be calculated on the basis of a year of three
hundred sixty-five (365) days, or three hundred sixty-six (366) days as the
case may be, from the date of advance to the date of repayment, and shall be
due and payable monthly as it accrues beginning December 1, 1996, and
continuing thereafter on the first day of each succeeding calendar month while
any amount remains owing on the Notes, the interest payment in each instance to
be that which has been earned and remains unpaid.
(C) It is the intention of the parties hereto to comply
strictly with the usury laws of the State of Texas and the United States of
America and, in this connection, there shall never be collected, charged or
received on any sums advanced hereunder interest in excess of the Maximum Rate.
For purposes of Article
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<PAGE> 26
5069-1.04, Vernon's Texas Civil Statutes, as amended, the Borrower agrees that
the maximum rate to be charged shall be the "indicated (weekly) rate ceiling"
as defined in said Article, provided that the Bank may also rely to the extent
permitted by applicable laws of the State of Texas or the United States of
America, on alternative maximum rates of interest under other applicable laws
of the State of Texas or the United States of America applicable to the Bank,
if greater. Interest on past due interest and principal shall be at a daily
rate equal to the lesser of (i) the Maximum Rate per annum or (ii) the Default
Rate; and if no Maximum Rate exists, all past due interest and principal shall
bear interest at a daily rate equal to the Default Rate. Notwithstanding
anything herein or in the Notes to the contrary, during any Limitation Period,
the interest rate to be charged on amounts evidenced by the Revolving Note
shall be the Maximum Rate and the obligation of the Borrower for any fees
payable hereunder and deemed to be interest under applicable law shall be
suspended. During any period or periods of time following a Limitation Period,
to the extent permitted by applicable laws of the State of Texas or the United
States of America, the interest rate to be charged hereunder shall remain at
the Maximum Rate until such time as there has been paid to the Bank (i) the
amount of interest in excess of the Maximum Rate that the Bank would have
received during the Limitation Period had the interest rate remained at the
relevant Floating Rate and (ii) all interest and fees otherwise due to the Bank
but for the effect of such Limitation Period.
If under any circumstances the aggregate amounts paid on the
Revolving Note or the Term Note, as applicable, or under this Agreement include
amounts which by law are deemed interest and which would exceed the amount
permitted if the Maximum Rate were in effect, the Borrower stipulates that such
payment and collection will have been and will be deemed to have been, to the
extent permitted by applicable laws of the State of Texas or the United States
of America, the result of mathematical error on the part of both the Borrower
and the Bank, and the Bank shall promptly refund the amount of such excess (to
the extent only of such interest payments above the Maximum Rate which could
not lawfully have been collected and retained) upon discovery of such error by
the Bank or notice thereof from the Borrower.
2.08 Mandatory Prepayment of the Revolving Note or the Term
Note.
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<PAGE> 27
(A) In the event that the Bank determines that a Loan Excess
exists, the Borrower shall immediately, but in no event later than fifteen (15)
days following any such determination, prepay the principal of the Revolving
Note, in an aggregate amount at least equal to such Loan Excess.
(B) To the extent that Borrower receives aggregate proceeds from
the sale of assets in excess of $250,000.00 ("Excess Sales Proceeds") during
the twelve month period ending on each anniversary of the date of this
Agreement, net of all third party costs, expenses, and fees paid by Borrower
directly in connection with such sale (other than inventory sold in the
ordinary course of business, or any condemnation or casualty proceeds not
reinvested within six (6) months in the maximum amount of $500,000.00 in assets
that may be productively used in Borrower's business), Borrower shall pay such
Excess Sales Proceeds to the Bank within ten Business Days after each
anniversary date of this Agreement to prepay the remaining installments of the
Term Loan, in inverse order of maturity.
2.09 Voluntary Prepayment of the Notes. The Borrower shall
have the right and the option to prepay, at any time upon two (2) Business Days
advance notice with respect to the Revolving Note or five (5) Business Days
advance notice with respect to the Term Note, all or any part of the balance
outstanding on the Revolving Note or the Term Note, as applicable, subject to
the terms and provisions contained in this Section 2.09. All prepayments on
the Revolving Note or the Term Note, as applicable, shall be in the minimum
amount of $500,000.00 or any $100,000.00 increment in addition thereto. Any
such prepayment received by the Bank shall be applied first to the payment of
accrued and unpaid interest and then to the reduction of principal. All
prepayments of principal on the Term Note shall irrevocably reduce the
outstanding principal balance thereof, and Borrower shall not be permitted to
reborrow under the Term Note any amount of principal prepaid thereunder.
2.10 Advances to Satisfy Obligations of the Borrower. The Bank
may, but shall not be obligated to, make advances hereunder and apply same to
the satisfaction of any condition, warranty, representation or covenant of the
Borrower contained in this Agreement, and the funds so advanced and applied
shall be part of the Loan proceeds advanced under this Agreement and evidenced
by
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the Revolving Note or, if subsequent to the Revolving Commitment Termination
Date, the Term Note.
2.11 Commitment Fee. As consideration for the commitment of
the Bank to make Loans to the Borrower through the Revolving Commitment
Termination Date pursuant to this Agreement, the Borrower agrees to pay to the
Bank within five (5) Business Days of receipt of the Bank's statement as to
quarterly periods ending March 31, June 30, September 30 and December 31 of
each year (except the first period shall be for a period of time from the
Closing to December 31, 1996) during the period commencing on the date of this
Agreement to and including the Revolving Commitment Termination Date and at the
Revolving Commitment Termination Date, a fee equal to 1/2 of 1% per annum
(computed on the basis of 365 or 366 days, as the case may be) multiplied by an
amount equal to the daily average excess, if any, of the Revolving Commitment
over the aggregate principal amount outstanding on the Revolving Note plus the
aggregate face amount of all outstanding Operational Letters of Credit, during
the period from the date of this Agreement or previous calculation date
provided above, whichever is later, to the relevant calculation date or the
Revolving Commitment Termination Date, as the case may be.
2.13 Facility Fee. As consideration for the commitment of the
Bank to make Loans to the Borrower pursuant to this Agreement, the Borrower
shall pay to the Bank a facility fee in the amount of $165,000.00
simultaneously with the Initial Advance.
2.14 Letters of Credit. Subject to the terms and conditions of
this Agreement, the Bank agrees to issue one or more Operational Letters of
Credit for the account of Borrower from time to time following receipt of an
application for an Operational Letter of Credit executed by the Borrower on the
Bank's then-current form of application three (3) Business Days prior to the
requested date of the issuance of the requested Operational Letter of Credit in
such amount as the Borrower may request in an aggregate amount not to exceed
(unless otherwise agreed by the Bank) at any time the lesser of (i) the excess
of the Revolving Commitment over the aggregate outstanding principal amount of
all Loans and Operational Letters of Credit and (ii) Two Million Dollars
($2,000,000.00). No Operational Letter of Credit shall expire beyond the
Revolving Commitment Termination Date. The amount of such Operational Letters
of Credit issued under the
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Revolving Commitment, so long as they are outstanding, shall be deemed to
reduce the amount available for Loans, and/or additional Operational Letters of
Credit under the Revolving Commitment. If there is any conflict between the
terms of an Operational Letter of Credit application and the terms of this
Agreement, the terms of this Agreement shall control.
2.15 Repayment of Letters of Credit. If drawn upon by the
beneficiary of an Operational Letter of Credit, all amounts so drawn shall be
due and payable by the Borrower immediately upon receipt of Bank's statement.
2.16 Letter of Credit Fee. As consideration for the issuance
by the Bank of Operational Letters of Credit for the account of the Borrower,
the Borrower agrees to pay to the Bank a fee equal to the greater of: (a)
$500.00, or (b) one percent (1.0%) per annum, pro rata, based on the number of
days outstanding, of the amount of each such Operational Letter of Credit, the
first such per annum fee for each Operational Letter of Credit to be payable in
advance of the issuance of such Operational Letter of Credit, with successive
per annum fees to be paid in advance of the anniversary date of the issuance of
such Operational Letter of Credit if it is to remain in effect beyond such
anniversary date.
ARTICLE III.
CONDITIONS
The obligation of the Bank to make the Advances pursuant to
Sections 2.01 and 2.03 of this Agreement is subject to the prior or
contemporaneous satisfaction of all of the conditions precedent stated in this
Article III. The obligation of the Bank to make subsequent advances pursuant
to this Agreement is subject to the prior or contemporaneous satisfaction of
the conditions precedent stated in Sections 3.05 through 3.07.
3.01 Receipt of Notes, Agreement and Certificate of Compliance.
The Bank shall have received the Notes, multiple counterparts of this
Agreement, as requested by the Bank, and the Compliance Certificate duly
executed by an authorized officer for each Borrower.
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3.02 Receipt of Articles of Incorporation and Bylaws. The Bank
shall have received from each Borrower its Articles of Incorporation certified
by the Secretary of State of the jurisdiction of its incorporation and bylaws
certified by the Secretary or an Assistant Secretary of such entity.
3.03 Receipt of Certified Copy of Corporate Proceedings and
Certificate of Incumbency. The Bank shall have received from each Borrower
copies of all resolutions of its board of directors with respect to the
transactions set forth in this Agreement and the execution of this Agreement,
the Notes, and the Collateral Documents, such copy or copies to be certified by
the Secretary or an Assistant Secretary as being true and correct and in full
force and effect as of the date hereof. In addition, the Bank shall have
received from each Borrower a certificate of incumbency signed by the Secretary
or an Assistant Secretary setting forth (a) the names of the officers executing
this Agreement, the Notes, and the Collateral Documents, (b) the office(s) to
which such Persons have been elected and in which they presently serve and (c)
an original specimen signature of each such person.
3.04 Receipt of Opinions of Counsel. The Bank shall have
received a written opinion of the law firm of Baker & Botts, L.L.P., legal
counsel for each Borrower, dated the date of the Closing and addressed to the
Bank, in form satisfactory to the Bank, regarding the matters set forth on
Exhibit "D-1" attached hereto, and a written opinion of the legal department of
Banc One Capital Corporation, dated the date of the Closing and addressed to
the Bank, in form satisfactory to the Bank, regarding the matters set forth on
Exhibit "D-2" attached hereto, which opinions shall be accompanied by such
supporting documentation as the Bank or its special counsel shall reasonably
require.
3.05 Accuracy of Representations and Warranties and No Event of
Default. The representations and warranties contained in Article IV of this
Agreement shall be true and correct in all material respects on the date of the
making of such Loans or advances with the same effect as though such
representations and warranties had been made on such date; and no Event of
Default shall have occurred and be continuing or will have occurred at the
completion of the making of such Loans or advances, and the Bank shall have
received satisfactory certificates signed by the Chairman of the Board or
President or other authorized officer of
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each Borrower as to all questions of fact involved in this condition,
including, without limitation, a Compliance Certificate.
3.06 Legal Matters Satisfactory to Special Counsel to the Bank.
All legal matters incident to the consummation of the transactions hereby
contemplated shall be satisfactory to the firm of Hutcheson & Grundy, L.L.P.,
special counsel for the Bank.
3.07 No Material Adverse Change. No material adverse change
shall have occurred since the date of this Agreement in the condition,
financial or otherwise, of the Borrower.
3.08 Receipt of Certificates of Authority and Certificates of
Good Standing. The Bank shall have a received certificates, as of the most
recent dates practicable, of the Secretary of State of each jurisdiction in
which the Borrower is qualified as a foreign corporation, and the department of
revenue or taxation of each of the foregoing jurisdictions, as to the good
standing of the Borrower;
3.09 Receipt of Borrowing Base Certificate. The Bank shall
have received a duly executed Borrowing Base Certificate as of a date not more
than one (1) day prior to the Initial Advance, acceptable to the Bank and
certifying a Borrowing Base of not less than $3,500,000.00.
3.10 Collateral Documents. As security for the payment of the
Notes and the performance of the obligations of the Borrower under this
Agreement, the Bank shall have received the duly executed and acknowledged
Collateral Documents described on Schedule 3.10 attached hereto.
3.11 UCC Search. The results of a Uniform Commercial Code
search showing all financing statements and other documents or instruments on
file against Borrower in the offices of the Secretary of State or other central
UCC Financing Statement filing office of each jurisdiction listed on Schedule
3.11 attached hereto and in the respective counties in which Collateral is
located, such searches to be as of a date no more than ten (10) days prior to
the date of the advance of the initial Loan.
3.12 Bank Fees. The Bank shall have received the Facility Fee
specified in Section 2.13 hereof.
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3.13 Legal Fees. All legal fees and disbursements owed to the
Bank's special counsel who provided representation to this Bank in connection
with this Agreement shall have been paid.
3.14 Contribution of Subordinated Indebtedness. The Bank shall
have received evidence satisfactory to the Bank, in its sole discretion, that
Borrower has received advances of at least Eight Million Dollars ($8,000,000)
of Indebtedness on terms and conditions satisfactory to the Bank, in its sole
discretion, and the Bank, Borrower, and third-party lender of such Indebtedness
shall have entered into an Intercreditor and Subordination Agreement (the
"Subordination Agreement") on terms and conditions that are satisfactory to the
Bank, in its sole discretion, such terms and conditions to include, among other
things, provisions prohibiting (i) payments of principal or interest due on the
Subordinated Indebtedness after the occurrence and during the continuation of
an Event of Default or Unmatured Event Default and (ii) payments of
Subordinated Indebtedness principal unless Borrower is in compliance with the
covenants set forth in Section 5.18 (Subordinated Indebtedness Reduction
Certificate) and Section 6.13 (Payment of Subordinated Indebtedness).
3.15 Cash Liquidity. Borrower's available cash Deposits plus
unfunded availability under the Revolving Loan, minus current liabilities that
are not recurring, normal course of business obligations and minus payables
which are more than forty-five (45) days overdue shall total at least
$1,500,000.00 after taking into account the Initial Advance made under Sections
2.01 and 2.03.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement and to make the
Loans hereunder, each Borrower represents and warrants to the Bank that:
4.01 Existence and Good Standing. The Borrower is a
corporation, duly organized, legally existing, and in good standing under the
Laws of its jurisdiction of incorporation; each Subsidiary is a corporation
duly organized, validly existing, and in good standing under the Laws of its
jurisdiction of incorporation; the Borrower and its Subsidiaries have the
lawful
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power to own their properties and to engage in the businesses they conduct, and
each is duly qualified and in good standing as a foreign corporation in the
jurisdictions wherein the nature of the business transacted by it or property
owned by it makes such qualification necessary; the jurisdictions in which the
Borrower and each Subsidiary are incorporated and qualified to do business are
set forth in Schedule 4.01; the addresses of all places of business of the
Borrower and its Subsidiaries are as set forth in Schedule 4.01; neither the
Borrower nor any Subsidiary has changed its name, been the surviving
corporation in a merger, acquired any business, or changed its principal
executive office within five (5) years and one (1) month prior to the date
hereof, except as disclosed on Schedule 4.01; the Borrower has no Subsidiaries
other than the Subsidiaries named in Schedule 4.01; and all of the authorized,
issued and outstanding shares of capital stock of each Subsidiary is owned by
the Borrower.
4.02 Due Authorization. The execution and delivery by the
Borrower of this Agreement and the borrowings hereunder; the execution and
delivery by the Borrower of the Notes and the Collateral Documents; the
acknowledgment by Borrower of the Subordination Agreement; and the repayment by
the Borrower of the Indebtedness evidenced by the Notes and interest and fees
provided in the Notes and this Agreement are (a) within the corporate power of
the Borrower; (b) have been duly authorized by all necessary corporate action,
and (c) do not and will not (i) require the consent of any regulatory authority
or governmental body, (ii) contravene or conflict with any provision of Law or
of the articles or bylaws of the Borrower, (iii) contravene or conflict with
any indenture, instrument or other agreement to which the Borrower is a party
or by which its property may be presently bound or encumbered, or (iv) result
in or require the creation or imposition of any mortgage, lien, pledge,
security interest, charge or other encumbrance in, upon or of any of the
properties or assets of the Borrower under any such indenture, instrument or
other agreement, other than under any of the Collateral Documents.
4.03 Valid and Binding Obligations. This Agreement, the Notes,
and the Collateral Documents, when duly executed and delivered, will be legal,
valid and binding obligations of and enforceable against the Borrower, in
accordance with their respective terms (subject to any applicable bankruptcy,
insolvency or other Laws of general application affecting creditors' rights,
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general equitable principles, whether considered in a proceeding in equity or
at law, and judicial decisions interpreting any of the foregoing).
4.04 Scope and Accuracy of Financial Statements. All Financial
Statements submitted and to be submitted to the Bank hereunder are and will be
complete and correct in all material respects, are and will be prepared in
accordance with GAAP consistently applied, and do and will fairly reflect the
financial condition and the results of the operations of the Borrower in all
material respects as of the dates and for the period stated therein (subject
only to normal year-end audit adjustments with respect to such unaudited
interim statements of the Borrower) and no material adverse change has since
occurred in the condition, financial or otherwise, of the Borrower.
4.05 Authorizations and Consents. Except as has been duly
obtained, no authorization, consent, approval, exemption, franchise, permit or
license of, or filing with, any governmental or public authority or any third
party is required to authorize, or is otherwise required in connection with the
valid execution and delivery by the Borrower of this Agreement, the Notes, the
Collateral Documents, and any other instrument contemplated hereby, the
repayment by the Borrower of advances against the Notes and interest and fees
provided in the Notes and this Agreement, or the performance by the Borrower of
its obligations under any of the foregoing.
4.06 Environmental Laws. The Borrower (A) is and has in the
past been in compliance with all Environmental Laws and all permits, requests
and notifications relating to health, safety or the environment applicable to
the Borrower or any of its properties, assets, operations and businesses; (B)
has obtained and adhered to and currently possesses all necessary permits and
other approvals, including interim status under the federal Resource
Conservation and Recovery Act, necessary to store, dispose of and otherwise
handle Hazardous Substances and to operate its properties, assets and
businesses; (C) has reported, to the extent required by all federal, state and
local statutes, Laws, ordinances, regulations, rules, permits, judgments,
orders and decrees, all past and present sites owned and/or operated by the
Borrower where any Hazardous Substance has been Released, treated, stored or
disposed of and (D) has not used, stored, or Released any
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Hazardous Substance in excess of amounts allowed by Environmental Law. There
is (x) no location on any property currently or previously owned or operated by
the Borrower where Hazardous Substances are known to have entered or are likely
to enter into the soil or groundwater of such property, other than Releases of
Hazardous Substances none of which Releases (i) either individually, or in the
aggregate, has had or may be expected to have material adverse effect on the
Borrower's business or (ii) has violated or may be expected to violate any
Environmental Laws or (iii) be subjected to remedial requirements thereunder,
and (y) no on-site or off-site location to which the Borrower has Released or
transported Hazardous Substances or arranged for the transportation or disposal
of Hazardous Substances, which is or is likely to be the subject of any
federal, state, local or foreign enforcement action or any investigation which
could lead to any material claims against any such entity for any clean-up
cost, remedial work, damage to natural resources, common Law or legal
liability, including, but not limited to, claims under Comprehensive
Environmental Response, Compensation, and Liability Act. For the purposes of
this Section, references to "the Borrower" shall include all predecessors,
successors-in-interest of Affiliates of the Borrower; provided, that the
representations and warranties set forth in this Section shall not be deemed to
have been breached with respect to any matter that would otherwise constitute a
breach of this Section if such matter would not reasonably be expected to
result in liabilities or expenditures by the Borrower in any single year in
excess of: (1) $100,000 as to any one matter; or (2) $200,000 in the aggregate
as to all such matters.
4.07 Compliance with Laws, Rules, Regulations and Orders.
Except to the extent that the failure to comply would not materially interfere
with the conduct of the business of the Borrower or any Subsidiary, each
Borrower and its Subsidiaries have complied with all applicable Laws with
respect to: (1) the conduct of its business; and (2) the use, maintenance, and
operation of the Collateral and personal properties owned or leased by it in
the conduct of its business; the Borrower and its Subsidiaries possess all
licenses, approvals, registrations, permits and other authorizations necessary
to enable it to carry on its business in all material respects as now
conducted, and all such licenses, approvals, registrations, permits and other
authorizations are in full force and effect; and the Borrower has no reason to
believe that the Borrower or any of its Subsidiaries will be unable to
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obtain the renewal of any such licenses, approvals, registrations, permits and
other authorizations.
4.08 Liabilities, Litigation and Restrictions. Except as
disclosed in the June 30, 1996 10-Q Report filed with the Securities and
Exchange Commission or as otherwise described on Schedule 4.09, the Borrower
and its Subsidiaries do not have any liabilities, direct or contingent, which
may materially and adversely affect it, its business or assets. There is no
litigation or other action of any nature pending before any court, governmental
instrumentality, regulatory authority or arbitral body or, to the knowledge of
the Borrower threatened against or affecting the Borrower or its Subsidiaries
which might reasonably be expected to result in any material, adverse change in
the Borrower or its Subsidiaries, or the business or assets of either. To the
knowledge of the Borrower no unusual or unduly burdensome restriction,
restraint or hazard exists by contract, Law, governmental regulation or
otherwise relative to the business or material properties of the Borrower other
than such as relate generally to Persons engaged in the business activities
conducted by the Borrower.
4.09 Existing Indebtedness. All Indebtedness of the Borrower
and any Subsidiary existing as of the Closing is described in Schedule 4.09;
and neither the Borrower nor any Subsidiary is in default with respect to any
of its Existing Indebtedness.
4.10 Material Commitments. Except as described in Schedule
4.10 hereto, (A) neither the Borrower nor any Subsidiary has any material
leases, contracts or commitments of any kind (including, without limitation,
employment agreements; collective bargaining agreements; powers of attorney;
distribution arrangements; patent license agreements; contracts for future
purchase or delivery of goods or rendering of services; bonuses, pension and
retirement plans; or accrued vacation pay, insurance and welfare agreements)
requiring aggregate expenditure by the Borrower in excess of $100,000 per year;
(B) to the best of the Borrower's knowledge, all parties to all such material
leases, contracts, and other commitments to which the Borrower or any
Subsidiary is a party have materially complied with the provisions of such
leases, contracts, and other commitments; and (C) to the best of the Borrower's
knowledge, no party is in material default under any thereof and no event has
occurred that but for the giving
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of notice or the passage of time, or both, would constitute a material default;
4.11 Margin Stock. The Borrower is not engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of
Regulations G, T, U, or X of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of any extension of credit under this
Agreement will be used to purchase or carry any such margin stock or to extend
credit to others for the purpose of purchasing or carrying margin stock.
Neither the Borrower nor any Person acting on its behalf has taken any action
that might cause the transactions contemplated by this Agreement or the Notes
to violate Regulations G, T, U, or X or to violate the Securities Exchange Act
of 1934, as amended.
4.12 Proper Filing of Tax Returns and Payment of Taxes Due.
Except as otherwise permitted herein, the Borrower has filed all federal,
state, and local tax returns and other reports required by any applicable Laws
to have been filed prior to the date hereof, has paid or caused to be paid all
taxes, assessments, and other governmental charges that are due and payable
prior to the date hereof, and has made adequate provision for the payment of
such taxes, assessments, or other charges accruing but not yet payable; the
Borrower has no knowledge of any material deficiency or additional assessment
in connection with any taxes, assessments, or charges not provided for on its
books.
4.13 ERISA. The Borrower is in compliance in all material
respects with all applicable provisions of ERISA. Neither a Reportable Event
nor a Prohibited Transaction has occurred and is continuing with respect to any
plan; no notice of intent to terminate a plan has been filed, nor has any plan
been terminated; no circumstances exist which constitute grounds under Section
4042 of ERISA entitling the PBGC to institute proceedings to terminate, or
appoint a trustee to administrate a plan, nor has the PBGC instituted any such
proceedings; neither the Borrower nor any ERISA Affiliate has completely or
partially withdrawn under Sections 4201 or 4204 of ERISA from a Multi-Employer
Plan; the Borrower and each ERISA Affiliate has met its minimum funding
requirements under ERISA with respect to all of its plans and the present value
of all vested benefits under each plan exceeds the fair market value of
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all plan assets allocable to such benefits, as determined on the most recent
valuation date of the plan and in accordance with the provisions of ERISA and
the regulations thereunder for calculating the potential liability of the
Borrower or any ERISA Affiliate to the PBGC or the plan under Title IV of
ERISA; and neither the Borrower nor any ERISA Affiliate has incurred any
liability to the PBGC under ERISA.
4.14 Investment Company Act Compliance. Neither the Borrower
nor any Subsidiary is directly or indirectly controlled by, or acting on behalf
of, any, Person which is an "Investment Company," within the meaning of the
Investment Company Act of 1940, as amended.
4.15 Public Utility Holding Company Act Compliance. The
Borrower is not a "holding company", or an "affiliate" of a "holding company"
or of a "subsidiary company" of a "holding company", within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
4.16 Insurance. The Borrower maintains insurance with respect
to the properties and business of the Borrower providing coverage for such
liabilities, casualties, risks and contingencies and in such amounts as is
customary in the industry. As of the date hereof, the insurance coverage
reflected on the Certificate(s) of Insurance attached hereto as Schedule 4.16
is in full force and effect, and, except as disclosed on Schedule 4.16, all
premiums due thereon have been paid.
4.17 Material Misstatements and Omissions. No express
representation or warranty by or with respect to the Borrower or any Subsidiary
contained herein or in any certificate or other document required by this
Agreement and furnished by the Borrower or any Subsidiary contains any untrue
statement of a material fact or omits to state a material fact necessary to
make such representation or warranty not misleading in light of the
circumstances under which it was made.
ARTICLE V.
AFFIRMATIVE COVENANTS
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Borrower covenants that so long as any Indebtedness of the
Borrower to the Bank remains unpaid under this Agreement, or any Obligations of
the Borrower to the Bank remain unsatisfied, or the Bank remains obligated to
make advances hereunder, to:
5.01 Use of Funds. Use the proceeds of the Initial Advance
under the Loan and Subordinated Indebtedness referred to in Section 3.14 for
the purposes set forth on Schedule 5.01.
5.02 Maintenance and Access to Records. Keep adequate records
in accordance with good accounting practices, of all of the transactions of the
Borrower so that at any time, and from time to time, the true and complete
financial condition of the Borrower may be readily determined and, at the
Bank's reasonable request, make all financial records and records relating to
the Collateral available for the Bank's inspection during normal business hours
and permit the Bank to make and take away copies thereof.
5.03 Quarterly Unaudited Financial Statements. Deliver to the
Bank, on or before the forty-fifth (45th) day after the end of each of the
first three fiscal quarters of the Borrower, unaudited Financial Statements of
the Borrower, as at the end of such period and from the beginning of such
fiscal year to the end of the respective period, as applicable, which Financial
Statements shall be certified by the president or chief financial officer of
the Borrower, as being true and correct, subject to changes resulting from
year-end audit adjustments.
5.04 Annual Audited Financial Statements. Deliver to the Bank,
on or before the ninetieth (90th) day after the close of each fiscal year of
the Borrower a copy of annual audited Financial Statements of the Borrower,
together with the report and opinion thereon of Ernst & Young, L.L.P., or other
firm of independent certified public accountants acceptable to the Bank at its
reasonable discretion.
5.05 Compliance Certificate. At the time of delivery of the
certified but unaudited Financial Statements pursuant to Section 5.03 above,
and the delivery of the annual audited Financial Statements pursuant to Section
5.04 above, deliver to the Bank a Compliance Certificate.
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5.06 Monthly Reports. Deliver to the Bank, on or before the
thirtieth (30th) day after the end of each calendar month a report in,
substantially the form set forth in Exhibit "E," certified by the Chairman of
the Board, President or Chief Financial Officer of NDE.
5.07 Statement of Material Adverse Change in Condition and
Notice of Events of Default. Deliver to the Bank, promptly upon any officer of
any Borrower having knowledge of any material adverse change in the condition,
financial or otherwise, of the Borrower (or any event or circumstance that
would result in any such material adverse change in condition including, but
not limited to, litigation and changes in business), a statement of the
Chairman of the Board, President or Chief Financial Officer of NDE, setting
forth the change in condition or event or circumstance likely to result in any
such change and the steps being taken by the Borrower with respect to such
change in condition or event or circumstance. In addition to this statement of
material adverse change, the Borrower and its Subsidiaries will each notify the
Bank immediately if it becomes aware of the occurrence of any Event of Default
or of any fact, condition, or event that only with the giving of notice or
passage of time or both, would become an Event of Default or if it becomes
aware of any material adverse change in the business prospects, financial
condition (including, without limitation, proceedings in bankruptcy,
insolvency, reorganization, or the appointment of a receiver or trustee), or
results of operations of the Borrower or any Subsidiary, or of the failure of
the Borrower to observe any of its undertakings hereunder or under the
Collateral Documents.
5.08 Additional Information. Furnish to the Bank all
information, if any, filed with the SEC by the Borrower and all information
routinely provided by the Borrower to its shareholders, generally. Furnish to
the Bank, promptly upon the Bank's reasonable request, such additional
financial or other information concerning the assets, liabilities, operations,
and transactions of the Borrower, including, without limitation, information
concerning title to any of the Collateral.
5.09 Compliance with Laws and Payment of Assessments and
Charges. Comply with all applicable statutes and government regulations,
including, without limitation, ERISA, and pay claims for labor, supplies, rent
and other obligations which, if unpaid,
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might become a lien against its property, except (a) any of the foregoing being
contested in good faith and as to which accruals satisfactory to the Bank, in
its reasonable discretion, have been provided and (b) where failure to do so
would not have a material adverse effect on the Borrower's business.
5.10 Maintenance of Corporate Existence and Good Standing.
Maintain each Borrower's corporate existence and good standing in the
jurisdiction of organization of each, and maintain the Borrower's qualification
and good standing in all other jurisdictions wherein the property now owned or
hereafter acquired or business now or hereafter conducted by each necessitates
same, other than those jurisdictions wherein the failure to so qualify will not
have a material adverse effect on the Borrower.
5.11 Further Assurances. Promptly cure any defects in the
execution and delivery of this Agreement, the Notes, the Collateral Documents,
the Subordination Agreement, or any other instrument referred to herein or
executed in connection with the Notes, and upon the reasonable request of the
Bank, promptly execute and deliver to the Bank all such other and further
instruments and additional documents, and provide such further information as
may be reasonably required or desired by the Bank from time to time to carry
out the terms of this Agreement or to maintain or reinstate compliance with the
covenants and agreements made in this Agreement.
5.12 Initial Expenses of the Bank. Pay all reasonable fees and
expenses of Hutcheson & Grundy, L.L.P., the special legal counsel for the Bank
incurred in connection with the preparation of this Agreement, the Notes, the
Collateral Documents, the Subordination Agreement, and any other instrument
referred to herein or executed in connection with the Notes, the satisfaction
of the conditions precedent set forth in Article III of this Agreement and the
consummation of the transactions contemplated in this Agreement.
5.13 Subsequent Expenses of the Bank. Upon request, promptly
reimburse the Bank for all amounts reasonably expended, advanced or incurred by
the Bank to collect the Notes or to enforce the rights of the Bank under this
Agreement, the Notes, the Collateral Documents, or any other instrument
referred to herein or executed in connection with the Notes, which amounts
shall be
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deemed compensatory in nature and liquidated as to amount upon notice to the
Borrower by the Bank and which amounts will include, but not be limited to, (A)
all court costs, (B) reasonable attorneys' fees, (C) fees of auditors and
accountants, (D) investigation expenses, (E) internal fees of the Bank's
in-house legal counsel, (F) fees and expenses incurred in connection with the
Bank's participation as a member of the creditors committee in a case commenced
under Title 11 of the United States Code or other similar Law of the United
States, the State of Texas or any other jurisdiction, (G) fees and expenses
incurred in connection with lifting the automatic stay prescribed in Section
362 Title 11 of the United States Code, and (H) fees and expenses incurred in
connection with any action pursuant to Section 1129 Title 11 of the United
States Code, reasonably incurred by the Bank in connection with the collection
of any sums due under this Agreement, together with interest at the Floating
Rate per annum, calculated on a basis of a year of three hundred sixty-five
(365) days or three hundred sixty-six (366) days, as the case may be, on each
such amount from the date of notification to the Borrower that the same was
expended, advanced or incurred by the Bank until, but not including, the date
it is repaid to the Bank, with the obligations under this Section 5.13,
surviving the non-assumption of this Agreement in a case commenced under Title
11 of the United States Code or other similar Law of the United States, the
State of Texas or any other jurisdiction and being binding upon the Borrower or
a trustee, receiver or liquidator of any such party appointed in any such case.
5.14 Maintenance of Tangible Property. Maintain all of its
tangible property relating to the Collateral in good repair and condition and
make all necessary replacements thereof and operate such property in a good and
workmanlike manner in accordance with standard industry practices, unless the
failure to do so would not have a material adverse effect on the Borrower or
the value of any Collateral.
5.15 Maintenance of Insurance. Continue to maintain, or cause
to be maintained, insurance with respect to the properties and business of the
Borrower against such liabilities, casualties, risks and contingencies and in
such amounts with such maximum deductibles and minimum limits of liability as
are reasonably acceptable to the Bank and furnish to the Bank annually after
the execution of this Agreement certificates evidencing such insurance.
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5.16 Inspection of Tangible Assets/Right of Audit. Permit any
authorized representative of the Bank to visit and inspect (at the risk of the
Bank and/or such representative) any tangible asset of the Borrower, and/or to
audit the books and records of the Borrower, at the expense of the Bank and
during normal business hours following reasonable advance notice.
5.17 Payment of Revolving Note and Term Note and Performance of
Obligations. Pay the Notes according to the reading, tenor and effect thereof,
as modified hereby, and do and perform in all material respects every act and
discharge in all material respects all of the Obligations provided in this
Agreement to be performed and discharged hereunder.
5.18 Subordinated Indebtedness Reduction Certificate. Borrower
shall deliver a Subordinated Indebtedness Reduction Certificate prior to making
any payments of Subordinated Indebtedness principal.
5.19 Adjusted Liabilities to Adjusted Net Worth. Maintain a
ratio of Adjusted Liabilities to Adjusted Net Worth of not more than 2.25 to
1.0 through December 31, 1996; thereafter 1.75 to 1.0 through December 31,
1997, thereafter 1.25 to 1.0 through December 31, 1998; and thereafter 1.0 to
1.0.
5.20 Net Worth Requirement. Maintain a total Consolidated Net
Worth of not less than 90% of Consolidated Net Worth at the time of the Initial
Advance, plus: (a) 70% of Borrower's Net Income (if positive) subsequent to
Closing, calculated cumulatively as of the end of each fiscal quarter of
Borrower beginning with the quarter ending December 31, 1996, and (b) 100% of
any equity issued.
5.21 Debt Service Coverage Ratio. Maintain a Debt Service
Coverage Ratio (tested quarterly, beginning with the quarter that ends on
December 31, 1997) of not less than 1.5 to 1.0. The initial Debt Service
Coverage Ratio shall be calculated for the twelve-month period ending December
31, 1997, and all subsequent quarterly calculations of the Debt Service
Coverage Ratio shall be calculated on a rolling twelve-month basis.
5.22 General and Administrative Expenses. Maintain general and
administrative expenses at a level that (A) does not
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exceed $3,000,000 for each quarter ending March 31, 1997, through September 30,
1997, and not exceeding 30% of revenues for each twelve month period on a
rolling four quarter basis, beginning with the quarter ending December 31,
1997.
5.23 Borrowing Base. Maintain a Borrowing Base such that the
amount of the Borrower's outstanding Revolving Loan will not, at any time,
exceed the Revolving Commitment.
5.24 Compliance with Environmental Laws. Comply in all
material respects with any and all requirements of Law, including, without
limitation, Environmental Laws, (A) applicable to any natural or environmental
resource or media located on, above, within, in the vicinity of, related to or
affected by any Collateral or any other property of the Borrower, or (B)
applicable to the performance or conduct of is operations, including, without
limitation, all permits, licenses, registrations, approvals and authorizations,
and, in this regard, comply fully and in a timely manner with, and cause all
employees, crew members, agents, contractors, subcontractors and future lessees
(pursuant to appropriate lease provisions) of the Borrower while such Persons
are acting within the scope of their relationship with the Borrower, to so
comply with, all applicable requirements of Law, including, without limitation,
applicable Environmental Laws, and other applicable requirements with respect
to the property of the Borrower, as applicable, and the operation thereof
necessary or appropriate to enable the Borrower, as applicable, to fulfill its
obligations under all applicable requirements of Law, including, without
limitation, Environmental Laws, applicable to the use, generation, handling,
storage, treatment, transport and disposal of any Hazardous Substances now or
hereafter located or present on or under any such property.
5.25 Hazardous Substances Indemnification. Indemnify and hold
the Bank harmless from and against any and all claims, losses, damages,
liabilities, fines, penalties, charges, administrative and judicial proceedings
and orders, judgments, remedial actions, requirements and enforcement actions
of any kind, and all costs and expenses incurred in connection therewith
(including, without limitation, attorneys' fees and expenses), arising directly
or indirectly, in whole or in part, out of (A) the presence of any Hazardous
Substances on, under or from its property, whether prior to or during the term
hereof, or (B) any activity carried on or
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undertaken on or off its property, whether prior to or during the term hereof,
and whether by the Borrower, or any predecessor in title or any employees,
agents, contractors or subcontractors of the Borrower, or any predecessor in
title, or any third Persons at any time occupying or present on such property,
in connection with the handling, treatment, removal, storage, decontamination,
cleanup, transportation or disposal of any Hazardous Substances at any time
located or present on or under such property; with the foregoing indemnity
further applying to any residual contamination on or under the property of the
Borrower, or any property of any other Person, or affecting any natural
resources, and to any contamination of any property or natural resources
arising in connection with the generation, use, handling, storage,
transportation or disposal of any Hazardous Substances, irrespective of whether
any of such activities were or will be undertaken in accordance with applicable
requirements of Law, including, without limitation, Environmental Laws, and
surviving satisfaction of all Indebtedness of the Borrower to the Bank and the
termination of this Agreement, unless all such Indebtedness has been satisfied
wholly in cash from the Borrower and not by way of realization against any
property or the conveyance of any property of the Borrower in lieu thereof,
provided that the claims and other actions of any kind against the Bank which
give rise to such indemnity are not barred by the applicable statute of
limitations at the time such claims or actions are instituted and such
indemnity shall not extend to any act or omission by the Bank with respect to
the relevant property subsequent to the Bank becoming the owner of, taking
possession of to the exclusion of the Borrower or assuming operations of any
property previously owned by the Borrower and with respect to which property
such claim, loss, damage, liability, fine, penalty, charge, proceeding, order,
judgment, action or requirement arises subsequent to the acquisition of title
thereto, taking possession thereof or assumption of operations thereon by the
Bank.
5.26 Transactions with Affiliates. Except as otherwise set
forth in Schedule 5.26, conduct all transactions with any Affiliate of the
Borrower on an arm's-length basis (provided that such transactions are
otherwise permitted by the terms of this Agreement).
5.27 Payment of Taxes, Etc. The Borrower and its Subsidiaries
will each pay or cause to be paid when due, all taxes,
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assessments, and charges or levies imposed upon it or on any of its property or
which it is required to withhold and pay, except where contested in good faith
by appropriate proceedings with adequate reserves therefor having been set
aside on its books, provided, however, that the Borrower and its Subsidiaries
shall each pay or cause to be paid all such taxes, assessments, charges, or
levies forthwith whenever foreclosure on any lien that may have attached (or
security therefor) appears imminent.
5.28 Notice of Litigation. The Borrower and its Subsidiaries
will each give notice to the Bank within ten (10) working days of the
occurrence of: (A) any litigation or proceeding in which it is a party if an
adverse decision therein might require it to pay more than $250,000.00 or
deliver (or lose title to) assets the value of which exceeds such sum (whether
or not the claim is considered to be covered by insurance); and (B) the
institution of any other suit or proceeding involving the Borrower that would
reasonably be expected to materially and adversely affect its operations,
financial condition, property, or business prospects.
5.29 Notices Regarding Account Debtors. Upon the receipt by
the Borrower of any notice of the death of an account debtor or a partner
thereof, or of the dissolution, termination of existence, insolvency, business
failure, appointment of a receiver for any part of the property of, assignment
for the benefit of creditors by, or the filing of a petition in bankruptcy or
the commencement of any proceeding under any bankruptcy or insolvency laws by
or against, an account debtor, Borrower will immediately give the Bank written
advice thereof.
5.30 Notice of Change of Principal Offices. The Borrower and
its Subsidiaries will each notify the Bank thirty (30) days in advance of any
change in the location of their principal offices.
5.31 Employee Benefit Plans. Fund its Plan(s) in accordance
with no less than the minimum funding standards of 29 U.S.C.A. Section 1082
(Section 302 of ERISA); furnish the Bank, promptly after the filing or
receiving of the same, with copies of any reports or other statements filed
with, or notices or other communications received from, the United States
Department of Labor, the PBGC, or the Internal Revenue Service with respect to
any such Plan; promptly advise the Bank of the occurrence of any
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Reportable Event or Prohibited Transaction with respect to any such Plan and
the action the Borrower proposes to take with respect thereto; and promptly
advise the Bank when the Borrower knows or has reason to believe that the PBGC
or the Borrower has instituted or will institute proceedings under Title IV of
ERISA to terminate any such Plan and the action the Borrower proposes to take
with respect thereto.
5.32 Landlord Waivers. Within ninety (90) days of Closing,
Borrower shall deliver to Bank a schedule of all leased buildings or premises
where any Collateral located at or stored which indicates whether the
respective landlord has executed a waiver in the form attached hereto as
Exhibit "F" wherein the respective landlord of such leased building or premise
waives all liens it may have by contract, statute or otherwise, in favor of
Bank, together with all such executed waivers received by Borrower or its
agent. Borrower agrees to use commercially reasonable efforts to secure such
waivers during such ninety (90) day period.
5.33 Annual Collateral Review. Annually, within fifteen (15)
days after the anniversary of Closing, Borrower will deliver to the Bank a list
of (i) patents; (ii) trademarks; and (iii) licensing agreements; together with
an inventory of personal property having an acquisition cost in excess of
$5,000.00; acquired by Borrower during the twelve (12) month period prior to
such anniversary. Borrower covenants and agrees to promptly execute and
deliver to the Bank all such assignments, certificates, supplemental writings
and financing statements, and do all other acts or things, as the Bank may
reasonably request in order to fully evidence and perfect a security interest
in all of such personal property in favor of the Bank.
ARTICLE VI.
NEGATIVE COVENANTS
Without the prior written consent of the Bank and so long as any
part of the principal or interest on the Notes shall remain unpaid or the Bank
remains obligated to make advances hereunder, Borrower covenants, that it will
not:
6.01 Other Indebtedness. Incur, create, assume or suffer to
exist any Indebtedness, whether by way of loan or the issuance
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or sale of securities except (A) Loans hereunder, (B) loans and other
Indebtedness by the Bank under other credit arrangements, (C) accounts payable
incurred in the ordinary course of business which are in compliance with
Section 6.05, (D) loans, advances or extensions of credit from suppliers,
contractors or other nonaffiliated Persons under applicable contracts or
agreements in connection with Borrowers' customary business operations, which
are not overdue or are being contested in good faith, (E) Existing Indebtedness
described on Schedule 4.09, (F) Subordinated Indebtedness, (G) Subordinated
Commitment Indebtedness and (H) other Indebtedness not to exceed the total
aggregate amount of $750,000.00 at any time outstanding, excluding (i) the
$517,000 of Existing Indebtedness as item 2 in Schedule 4.09 and (ii) the
$300,000 Gilbarco Patent Note identified in Schedule 4.09.
6.02 Mortgages or Pledges of Assets. Create, incur, assume or
permit to exist, any mortgage, pledge, security interest, lien or encumbrance
on any of its properties or assets (now owned or hereafter acquired), except
that the foregoing restrictions shall not apply to Permitted Liens.
6.03 Sales of Assets. Without prior written consent of the
Bank, sell, lease, assign, transfer or otherwise dispose of, in one or any
series of related transactions, all or any portion of its material assets in
excess of $1,000,000 per annum, whether now owned or hereafter acquired,
including transfers to Subsidiaries, nor enter into any arrangement, directly
or indirectly, with any Person to sell and rent or lease back as lessee such
property or any part thereof which is intended to be used for substantially the
same purpose or purposes as the property sold or transferred.
6.04 Nature of Business. Permit any material change to be made
in the character of its business as conducted as of the date hereof, or permit
any Subsidiary to permit any material change to be made in the character of
such Subsidiary's business as conducted as of the date hereof.
6.05 Payment of Accounts Payable. Allow any account payable to
remain unpaid more than ninety (90) days after due date, except such as are
being contested in good faith and as to which adequate provision or accrual has
been made.
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6.06 Cancellation of Insurance. Allow any insurance policy
required to be carried hereunder to be terminated or lapse or expire without
provision for adequate renewal or replacement thereof.
6.07 Investments. Except as otherwise set forth on Schedule
6.07, make or permit to remain outstanding any loans or advances to or
Investments in any Person, except that the foregoing restriction shall not
apply to investments in direct obligations of the United States of America or
any agency thereof or certificates of deposit issued by the Bank.
6.08 Changes in Structure or Business. Consolidate or merge
with or purchase (for cash or securities) all or a substantial part of the
assets or capital stock of any corporation, firm, association or enterprise, or
allow any such entity to be merged into the Borrower, or change the basic
business operations of the Borrower.
6.09 Changes in Management. Unless otherwise agreed to in
writing by the Bank, Jay Chaffee shall remain as Chairman of NDE during the
term of this Agreement.
6.10 Limitation on Leases. Incur or otherwise become obligated
to make payments on operating and capital leases not incurred in the ordinary
course of business.
6.11 Restricted Payments. Except as provided on Schedule 6.11,
(A) declare or pay any dividend, (B) issue, purchase, redeem or otherwise
acquire for value any of its outstanding stock, or make any payment on account
of, or set apart assets for a sinking or other analogous fund for the purchase,
redemption, defeasance, retirement or other acquisition of any shares of any
class of capital stock of Borrower, (C) return any capital to its stockholders,
or (D) make any distribution of its assets to its stockholders as such
provided, however, if no Event of Default or Unmatured Event of Default has
occurred, Borrower may permit the accrual of obligations to pay dividends or
other similar distributions to its stockholders, provided such obligations are
fully subordinated to all of Borrower's obligations to the Bank or on terms
acceptable to the Bank.
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6.12 Margin Stock. Neither the Borrower nor any Subsidiary
will directly or indirectly apply any part of the proceeds of the Loans to the
purchasing or carrying of any "margin stock" within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System, or any regulations,
interpretations or rulings thereunder.
6.13 Payment of Subordinated Indebtedness. Make any payment of
Subordinated Indebtedness principal unless Borrower's Consolidated Net Worth
has increased during the period from December 31, 1996 to the end of the fiscal
quarter immediately preceding the quarter in which such payment of Subordinated
Indebtedness is proposed by an amount at least equal to 1.5 times the aggregate
amount of all prior principal payments of Subordinated Indebtedness plus the
amount of the proposed principal payment of Subordinated Indebtedness.
6.14 Capital Expenditures Limitation. Beginning with the
twelve-month period ending December 31, 1997, make Capital Expenditures in
excess of $2,000,000 per calendar year.
ARTICLE VII.
EVENTS OF DEFAULT
7.01 Enumeration of Events of Default. Any of the following
events shall be considered an Event of Default as that term is used herein:
(a) Default shall be made by the Borrower in the payment of
any installment of principal or interest (including, without limitation, any
mandatory prepayment payable pursuant to Section 2.08 of this Agreement) on the
Revolving Note, or Term Note, as applicable, or any other monetary obligation
payable hereunder when due, and such default continues for more than five (5)
days after the date that notice of such default is sent from the Bank to the
Borrower;
(b) Default shall be made by the Borrower in the due
observance or performance of any affirmative covenant required in this
Agreement, the Revolving Note, or Term Note, as applicable, or the Collateral
Documents, or the Subordination Agreement, and such
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default is continuing thirty (30) days after the date that notice of such
default is sent from the Bank to the Borrower;
(c) Default shall be made by the Borrower in the due
observance or performance of any negative covenant required in this Agreement,
the Notes, the Collateral Documents or the Subordination Agreement;
(d) Any representation or warranty herein made by the Borrower
proves to have been untrue when made or deemed made in any respect material to
the Borrower, or any representation, written statement (including Financial
Statements), or certificate furnished or made by the Borrower to the Bank in
connection herewith proves to have been untrue in any respect material to the
Borrower as of the date the facts therein set forth were stated or certified;
(e) Default shall be made by the Borrower (as principal or
other surety) in payment or performance of any other evidence of Indebtedness
for borrowed money owed to the Bank, or under any credit agreement, loan
agreement or indenture, with or benefitting the Bank;
(f) The Borrower (i) discontinues its usual business or
applies for or consents to the appointment of a receiver, trustee or liquidator
of it or all or a substantial part of its assets, or (ii) files a voluntary
petition commencing a case under Title 11 of the United States Code, seeking
liquidation, reorganization or rearrangement or taking advantage of any
bankruptcy, insolvency, debtor's relief or other similar Law of the United
States the State of Texas or any other jurisdiction, or (iii) makes a general
assignment for the benefit of creditors, or (iv) is unable, or admits in
writing its inability to pay its debts generally as they become due, or (v)
files an answer admitting the material allegations of a petition filed against
it in any case commenced under Title 11 of the United States Code or any
reorganization, insolvency, conservatorship or similar proceeding under any
bankruptcy, insolvency, debtor's relief or other similar Law of the United
States, the State of Texas or any other jurisdiction;
(g) An order, judgment or decree shall be entered against the
Borrower by any court of competent jurisdiction or by any other duly authorized
authority, on the petition of a creditor
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or otherwise, granting relief under Title 11 of the United States Code or under
any bankruptcy, insolvency, debtor's relief or other similar Law of the United
States, the Dominion of Canada, the State of Texas, or any other jurisdiction,
approving a petition seeking reorganization or an arrangement of its debts or
appointing a receiver, trustee, conservator, custodian or liquidator of it or
all or any substantial part of its assets, and the failure to have such order,
judgment or decree dismissed within thirty (30) days of its entry;
(h) The Borrower has concealed, removed, or permitted to be
concealed or removed, any part of its property, with intent to hinder, delay or
defraud its creditors or any of them; or has made or suffered a transfer of any
of its property which may be fraudulent under any the Bankruptcy, fraudulent
conveyance or similar Law; or has made any transfer of its property to or for
the benefit of a creditor at a time when other creditors similarly situated
have not been paid; or has suffered or permitted, while insolvent, any creditor
to obtain a lien upon any of its property through legal proceedings or
distraint which is not vacated within thirty (30) days from the date thereof;
(i) The Borrower has failed to provide a certificate affirming
the covenant under Section 6.13 at least five (5) Business Days prior to making
such payment of Subordinated Indebtedness principal and/or has violated the
covenant under Section 6.13;
(j) The Borrower shall default in the payment of any
Indebtedness in excess of $100,000; or
(k) A final judgment shall be entered against Borrower in the
amount of $100,000 or greater, which shall not have been vacated, discharged,
stayed or bonded pending appeal within sixty (60) days of the entry thereof.
7.02 Rights Upon Unmatured Event of Default. At any time that
there exists an Unmatured Event of Default, any obligation of the Bank
hereunder to make advances to or for the benefit of the Borrower shall be
suspended unless and until the Bank shall reinstate the same in writing, the
Unmatured Event of Default shall have been waived by the Bank or the relevant
Unmatured Event of
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Default shall have been remedied prior to ripening into an Event of Default.
7.03 Rights Upon Default. Upon the happening of an Event of
Default specified in Subsections 7.01 (f) or (g), the entire aggregate
principal amount of all Indebtedness then outstanding hereunder and the
interest accrued thereon shall automatically become immediately due and
payable, and upon the happening of any other Event of Default, the Bank may
declare the entire aggregate principal amount of all Indebtedness then
outstanding hereunder and the interest accrued thereon immediately due and
payable. In either case, the entire principal and interest shall thereupon
become immediately due and payable, without notice (including, without
limitation, notice of intent to accelerate maturity or notice of acceleration
of maturity) and without presentment, demand, protest, notice of protest or
other notice of default or dishonor of any kind, except as provided to the
contrary elsewhere herein, all of which are hereby expressly waived by the
Borrower.
Upon the happening of any Event of Default, all obligations (if
any) of the Bank hereunder, including specifically, but without limitation, any
obligation to make Loans hereunder, shall immediately cease and terminate
unless and until the Bank shall reinstate the same in writing.
7.04 Remedies. After any acceleration, as provided for in
Section 7.03, the Bank shall have, in addition to the rights and remedies given
them by this Agreement and the Collateral Documents, all those allowed by all
applicable Laws, including, but without limitation, the Uniform Commercial Code
as enacted in any jurisdiction in which any Collateral may be located. Without
limiting the generality of the foregoing, the Bank may immediately, without
demand of performance and without other notice (except as specifically required
by this Agreement or the Collateral Documents) or demand whatsoever to the
Borrower, all of which are hereby expressly waived, and without advertisement,
sell at public or private sale or otherwise realize upon, in Harris County,
Texas, or in any other place where the Collateral may be located, or in such
other place or places as the Bank may designate, the whole or, from time to
time, any part of the Collateral, or any interest which the Borrower may have
therein. After deducting from the proceeds of sale or other disposition of the
Collateral, all expenses (including all reasonable expenses for legal
services),
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the Bank shall apply such proceeds toward the satisfaction of the Obligations.
Any remainder of the proceeds after satisfaction in full of the Obligations
shall be distributed as required by applicable Laws. Notice of any sale or
other disposition shall be given to the Borrower at least ten (10) Business
Days before the time of any public sale or of the time after which any intended
private sale or other disposition of the Collateral is to be made, which the
Borrower hereby agrees shall be reasonable notice of such sale or other
disposition. The Borrower agrees to assemble, or to cause to be assembled, at
its own expense, the Collateral at such place or places as the Bank shall
designate. At any such sale or other disposition, the Bank may, to the extent
permissible under applicable Laws, purchase the whole or any part of the
Collateral, free from any right of redemption on the part of the Borrower,
which right is hereby waived and released. Without limiting the generality of
any of the rights and remedies conferred upon the Bank under this paragraph,
after any such acceleration the Bank may, to the full extent permitted by the
applicable Laws:
(A) Enter upon the premises of the Borrower (and, to the
extent necessary in the judgment of the Bank, exclude therefrom the Borrower or
any Affiliate thereof) and take immediate possession of the Collateral, either
personally or by means of a receiver appointed by a court of competent
jurisdiction, using all necessary force to do so;
(B) At the Bank's option, use, operate, manage, and control
the Collateral in any lawful manner;
(C) Collect and receive all rents, income, revenue, earnings,
issues, and profits therefrom; and
(D) Maintain, repair, renovate, alter, or remove the
Collateral as the Bank may determine in their discretion.
7.05 Right of Set-off. Upon the occurrence of any Event of
Default, the Bank may, and is hereby authorized by the Borrower, at any time
and from time to time, to the fullest extent permitted by applicable Laws,
without advance notice to the Borrower (any such notice being expressly waived
by the Borrower), set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and any other
indebtedness at any time owing by the Bank to or for the credit or the account
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of the Borrower against any or all of the Obligations of the Borrower now or
hereafter existing, whether or not such Obligations have matured and
irrespective of whether the Bank may have exercised any other rights that they
have or may have with respect to such Obligations, including, without
limitation, any acceleration rights. The Bank agrees promptly to notify the
Borrower after any such set-off and application, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of the Bank under this Section 7.05 are in addition to the other
rights and remedies (including, without limitation, other rights of set-off)
which the Bank may have.
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ARTICLE VIII.
MISCELLANEOUS
8.01 Security Interests in Deposits and Right of Offset or the
Banker's Lien. The Borrower hereby transfers, assigns and pledges to the Bank
and/or grants to the Bank a security interest (as security for the payment
and/or performance of the Obligations of the Borrower, with such interest of
the Bank to be retransferred, reassigned and/or released by the Bank at the
expense of the Borrower upon payment in full and/or complete performance by the
Borrower of all such Obligations) and the right, exercisable at such time as
any Obligations hereunder shall mature, whether by acceleration of maturity or
otherwise, of offset or banker's lien against all funds or other property of
the Borrower now or hereafter or from time to time on deposit with or in the
possession of the Bank, including, without limitation, all certificates of
deposit and other depository accounts.
8.02 Survival of Representations, Warranties and Covenants.
All representations and warranties of the Borrower and all covenants and
agreements herein made shall survive the execution and delivery of the Notes
and this Agreement and shall remain in force and effect so long as any debt is
outstanding under the Notes, or any renewal or extension of this Agreement or
the Notes, or the Bank remains obligated to make advances hereunder.
8.03 Waiver of Rights. Borrower hereby expressly waives any
and all rights or privileges of marshalling of assets, sale in inverse order of
alienation, notices, appraisements, redemption and any prerequisite to the full
extent permitted by applicable law, in the event of foreclosure of the lien or
liens and/or security interests created by the Collateral Documents. Bank at
all times shall have the right to release any part of the Collateral now or
hereafter subject to the lien or security interest of any of the Collateral
Documents, any part the proceeds of production or other income assigned or
pledged, or any other security it now has or may hereafter have securing the
Obligations, without releasing any other part of the Collateral, proceeds or
income, and without affecting the liens or security interests described in the
Collateral Documents as to the part or parts thereof not so released, or the
right to receive future proceeds and income.
49
<PAGE> 57
8.04 Notices and Other Communications. Notices, requests and
communications hereunder shall be in writing and shall be sufficient in all
respects if delivered to the relevant address indicated below (including
delivery by registered or certified United States mail, telex, telegram or
hand):
If to the Borrower: NDE ENVIRONMENTAL CORPORATION
8900 Shoal Creek Bldg. 200
Austin, Texas 78757
Attention: President
Facsimile: (512) 459-1459
With a copy to: NDE ENVIRONMENTAL CORPORATION
712 Main Street, Suite 1700
Houston, Texas 77002
Attention: Jay Allen Chaffee
Facsimile: (713) 223-5379
If to the Bank: BANK ONE, TEXAS, N.A.
910 Travis
Houston, Texas 77002
Attention: Charles Kingswell-Smith
Facsimile: (713) 751-7894
With a copy to: HUTCHESON & GRUNDY, L.L.P.
1200 Smith, Suite 3300
Houston, Texas 77002
Attention: Michael L. Grove
Facsimile: (713) 951-2925
Any party may, by proper written notice hereunder to the other,
change the individuals or addresses to which such notices to it shall
thereafter be sent.
8.05 Parties in Interest. All covenants and agreements herein
contained by or on behalf of the Borrower shall be binding upon the Borrower
and its successors and assigns and inure to the benefit of the Bank and its
successors and assigns.
8.06 Renewals and Extensions. All provisions of this Agreement
relating to the Notes shall apply with equal force and effect to each and all
promissory notes hereafter executed which in whole or in part represent a
renewal, extension, amendment,
50
<PAGE> 58
modification or rearrangement of any part of the Indebtedness originally
represented by the Notes.
8.07 No Waiver by the Bank. No course of dealing on the part
of the Bank, its officers or employees, nor any failure or delay by the Bank
with respect to exercising any of its rights, powers or privileges under this
Agreement, the Notes, the Collateral Documents, or any other instrument
referred to herein or executed in connection with the Notes shall operate as a
waiver thereof. The rights and remedies of the Bank under this Agreement, the
Notes, the Collateral Documents, or any other instrument referred to herein or
executed in connection with the Notes shall be cumulative and the exercise or
partial exercise of any such right or remedy shall not preclude the exercise of
any other right or remedy.
No advance of Loan proceeds hereunder shall constitute a waiver
of any of the covenants or warranties of the Borrower contained herein or of
any of the conditions to the Bank's obligation to make further advances
hereunder. In the event that the Borrower is unable to satisfy any such
covenant, warranty or condition, no such advance of Loan proceeds shall have
the effect of precluding the Bank from thereafter declaring such inability to
be an Event of Default as hereinabove provided.
8.08 INDEMNIFICATION. THE BORROWER HEREBY RELEASES AND AGREES
TO INDEMNIFY AND HOLD BANK AND ITS OFFICERS, EMPLOYEES, DIRECTORS AND AGENTS
(COLLECTIVELY THE "BANK PARTIES") HARMLESS, FROM AND AGAINST ALL CLAIMS,
DAMAGES, LIABILITIES AND EXPENSES, KNOWN OR UNKNOWN, ACCRUED AND UNACCRUED,
INCLUDING LIABILITY RELATING TO THE BANK PARTIES' OWN NEGLIGENCE OR STRICT
LIABILITY, UNLESS ATTRIBUTABLE TO THE BANK PARTIES' GROSS NEGLIGENCE OR WILFUL
MISCONDUCT, THAT MAY NOW OR HEREAFTER BE ASSERTED AGAINST ANY OF THE BANK
PARTIES IN CONNECTION WITH OR ARISING OUT OF ANY INVESTIGATION, LITIGATION OR
PROCEEDING DIRECTLY OR INDIRECTLY RELATING TO OR ARISING OUT OF ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
8.09 GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE
DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
51
<PAGE> 59
8.10 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules attached to this Agreement are incorporated herein for all purposes
and shall be considered a part of this Agreement.
8.11 Survival Upon Unenforceability. In the event any one or
more of the provisions contained in this Agreement, the Notes, the Collateral
Documents, or in any other instrument referred to herein or executed in
connection with the Notes shall, for any reason, be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof or of any other
instrument referred to herein or executed in connection herewith.
8.12 Rights of Third Parties. All provisions herein are
imposed solely and exclusively for the benefit of the Bank, the Borrower and no
other Person shall have standing to require satisfaction of such provisions in
accordance with their terms or be entitled to assume that the Bank will refuse
to make advances in the absence of strict compliance with any or all thereof
and any or all of such provisions may be freely waived in whole or in part by
the Bank at any time if in its sole discretion it deems it advisable to do so.
8.13 Amendments or Modifications. Neither this Agreement nor
any provision hereof may be changed, waived, discharged or terminated orally,
but only by an instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination is sought.
8.14 Agreement Construed as an Entirety. This Agreement, for
convenience only, has been divided into Articles and Sections and it is
understood that the rights, powers, privileges, duties and other legal
relations of the parties hereto shall be determined from this Agreement as an
entirety and without regard to the aforesaid division into Articles and
Sections and without regard to headings prefixed to said Articles or Sections.
8.15 Number and Gender. Whenever the context requires,
reference herein made to the single number shall be understood to include the
plural and likewise the plural shall be understood to include the singular.
Words denoting sex shall be construed to include the masculine, feminine, and
neuter, when such construction
52
<PAGE> 60
is appropriate, and specific enumeration shall not exclude the general, but
shall be construed as cumulative.
8.16 AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS. THIS
AGREEMENT, TOGETHER WITH THE NOTES, THE COLLATERAL DOCUMENTS, AND ANY OTHER
WRITTEN INSTRUMENTS EXECUTED PURSUANT TO THIS AGREEMENT REPRESENT,
COLLECTIVELY, THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO
THE SUBJECT HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES AND SHALL
SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER WRITTEN OR
ORAL, RELATING TO THE SUBJECT HEREOF. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
8.17 Controlling Provision Upon Conflict. In the event of a
conflict between the provisions of this Agreement and those of the Notes, the
Collateral Documents or any other instrument referred to herein or executed in
connection with the Notes, the provisions of this Agreement shall control;
provided if any of the Collateral Documents contain any representations,
warranties, or covenants of the Borrower that are in addition to or are more
restrictive on the Borrower than those set forth in this Agreement, such
additional or more restrictive representations, warranties, and covenants shall
control.
8.18 Time, Place and Method of Payments. All payments required
pursuant to this Agreement or the Notes shall be made in immediately available
funds; shall be deemed received by the Bank on the next Business Day following
receipt if such receipt is after 2:00 p.m., on any Business Day, and shall be
made at the principal banking quarters of the Bank.
8.19 Non-Application of Chapter 15 of Texas Credit Code. The
provisions of Chapter 15 of the Texas Credit Code (Vernon's Texas Civil
Statutes, Article 5069-15) are specifically declared by the parties hereto not
to be applicable to this Agreement or any of the other Collateral Documents or
to the transactions contemplated hereby.
8.20 Counterpart Execution. This Agreement may be executed as
one instrument signed by all parties or in separate counterparts hereof, each
of which counterparts shall be considered an original and all of which shall be
deemed to be one instrument,
53
<PAGE> 61
and any signed counterpart shall be deemed delivered by the party signing it if
sent to any other party hereto by electronic facsimile transmission.
[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
54
<PAGE> 62
IN WITNESS WHEREOF, this Agreement is executed as of the date
first above written.
BORROWER:
NDE ENVIRONMENTAL CORPORATION
By: /s/ JAY ALLEN CHAFFEE
----------------------------------
Jay Allen Chaffee
Chairman of the Board
TANKNOLOGY/NDE CORPORATION
By: /s/ JAY ALLEN CHAFFEE
----------------------------------
Jay Allen Chaffee
Chairman of the Board
USTMAN INDUSTRIES, INC.
By: /s/ JAY ALLEN CHAFFEE
----------------------------------
Jay Allen Chaffee
Chairman of the Board
PROECO, INC.
By: /s/ JAY ALLEN CHAFFEE
----------------------------------
Jay Allen Chaffee
Chairman of the Board
TANKNOLOGY CANADA (1988) INC.
By: /s/ JAY ALLEN CHAFFEE
----------------------------------
Jay Allen Chaffee
President
55
<PAGE> 63
BANK:
BANK ONE, TEXAS, N.A.
By: /s/ CHARLES KINGSWELL-SMITH
--------------------------------
Charles Kingswell-Smith
Vice President
56
<PAGE> 64
EXHIBIT "A-1"
REVOLVING NOTE
$5,000,000.00 October 25, 1996
FOR VALUE RECEIVED, NDE ENVIRONMENTAL CORPORATION, a Delaware
corporation, TANKNOLOGY/NDE CORPORATION, a Delaware corporation, PROECO, INC.,
a Delaware corporation, and TANKNOLOGY CANADA (1988) INC., a Canadian federal
corporation, all of the foregoing having an address at 8900 Shoal Creek Bldg.
200, Austin, Texas 78757, and USTMAN INDUSTRIES, INC., a Delaware corporation,
having an address at 12265 Bayaud Avenue, Lakewood, Colorado 80225
(collectively, "Borrower") unconditionally promise to pay to the order of BANK
ONE, TEXAS, NATIONAL ASSOCIATION, (herein called "Bank"), at its offices at 910
Travis, Houston, Texas 77001, the principal sum of FIVE MILLION DOLLARS
($5,000,000.00) or, if less, the aggregate unpaid principal amount of all Loans
(as defined in the Loan Agreement) made by the Bank to the Borrower pursuant to
the Loan Agreement, as shown in the records of the Bank, outstanding on such
date.
The undersigned also promise to pay interest on the unpaid principal
amount hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Loan Agreement; provided,
however, that in no event shall such interest exceed the Maximum Rate (as
hereinafter defined).
"Maximum Rate" means the Maximum Rate of non-usurious interest permitted
from day to day by Applicable Law.
"Applicable Law" means that law in effect from time to time and
applicable to this Note which lawfully permits the charging and collection of
the highest permissible lawful, non-usurious rate of interest on this Note,
including laws of the State of Texas and laws of the United States of America.
It is intended that Article 1.04, Title 79, Revised Civil Statutes of Texas,
1927, as amended (Article 5069-1.04, as amended, Vernon's Texas Civil Statutes)
shall be included in the laws of the State of Texas in determining Applicable
Law; and for the purpose of applying said Article 1.04 to this Note, the
interest ceiling applicable to this Note under
___________________
Borrower's Initials
-1-
<PAGE> 65
said Article 1.04 shall be the indicated weekly rate ceiling from time to time
in effect. The Borrower and the Bank hereby agree that Chapter 15 of Subtitle
3, Title 79, Revised Civil Statutes of Texas, 1925, as amended, shall not apply
to this Note or the loan transaction evidenced by, and referenced in, the Loan
Agreement (hereinafter defined) in any manner, including without limitation, to
any account or arrangement evidenced or created by, or provided for in, this
Note.
In no event shall the aggregate of the interest on this Note, plus any
other amounts paid in connection with the loan evidenced by this Note which
would under Applicable Law be deemed "interest," ever exceed the maximum amount
of interest which, under Applicable Law, could be lawfully charged on this
Note. The Bank and the Borrower specifically intend and agree to limit
contractually the interest payable on this Note to not more than an amount
determined at the Maximum Rate. Therefore, none of the terms of this Note or
any other instruments pertaining to or securing this Note shall ever be
construed to create a contract to pay interest at a rate in excess of the
Maximum Rate, and neither the Borrower nor any other party liable herefor shall
ever be liable for interest in excess of that determined at the Maximum Rate,
and the provisions of this paragraph shall control over all provisions of this
Note or of any other instruments pertaining to or securing this Note. If any
amount of interest taken or received by the Bank shall be in excess of the
maximum amount of interest which, under Applicable Law, could lawfully have
been collected on this Note, then the excess shall be deemed to have been the
result of a mathematical error by the parties hereto and shall be refunded
promptly to the Borrower. All amounts paid or agreed to be paid in connection
with the indebtedness evidenced by this Note which would under Applicable Law
be deemed "interest" shall, to the extent permitted by Applicable Law, be
amortized, prorated, allocated and spread throughout the full term of this
Note.
This Note is the Revolving Note referred to in and is entitled to the
benefits of a certain Loan Agreement, dated as of October 25, 1996 (as the same
may be amended, modified, supplemented, extended, rearranged and/or restated
from time to time, the "Loan Agreement"), entered into by and among NDE
Environmental Corporation, et al., as Borrower, and Bank One, Texas, National
Association and secured by the Collateral Documents (as such term is defined in
the Loan Agreement). Reference is hereby made to the
___________________
Borrower's Initials
-2-
<PAGE> 66
Loan Agreement for a statement of the prepayment rights and penalties and
obligations of the Borrower, a description of the properties and assets
mortgaged, encumbered and assigned, the nature and extent of the security and
the rights of the parties to the Collateral Documents in respect of such
security, and for a statement of the terms and conditions under which the due
date of this Note may be accelerated. Upon the occurrence of any Event of
Default as specified in the Loan Agreement, the principal balance hereof and
the interest accrued hereon may be declared to be forthwith due and payable in
accordance with the Loan Agreement, and any indebtedness of the holder hereof
to the Borrower may be appropriated and applied hereon.
In addition to and not in limitation of the foregoing, the undersigned
further agrees, subject only to any limitation imposed by applicable law, to
pay all reasonable expenses, including reasonable attorneys' fees and legal
expenses, incurred by the holder of this Note in endeavoring to collect any
amounts payable hereunder which are not paid when due, whether by acceleration
or otherwise.
All parties hereto, whether as makers, endorsees, or otherwise,
severally waive presentment for payment, demand, protest, notice of intent to
accelerate, notice of acceleration and notice of dishonor.
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF TEXAS AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
EXECUTED this 25th day of October, 1996.
NDE ENVIRONMENTAL CORPORATION TANKNOLOGY/NDE CORPORATION
By: By:
------------------------------ ----------------------------------
Jay Allen Chaffee Jay Allen Chaffee
Chairman of the Board Chairman of the Board
___________________
Borrower's Initials
-3-
<PAGE> 67
USTMAN INDUSTRIES, INC.
By:
----------------------------------
Jay Allen Chaffee
Chairman of the Board
PROECO, INC.
By:
----------------------------------
Jay Allen Chaffee
Chairman of the Board
TANKNOLOGY CANADA (1988) INC.
By:
----------------------------------
Jay Allen Chaffee
President
-4-
<PAGE> 68
EXHIBIT "A-2"
TERM NOTE
$6,000,000.00 October 25, 1996
FOR VALUE RECEIVED, NDE ENVIRONMENTAL CORPORATION, a Delaware
corporation, TANKNOLOGY/NDE CORPORATION, a Delaware corporation, PROECO, INC.,
a Delaware corporation, and TANKNOLOGY CANADA (1988) INC., a Canadian federal
corporation, all of the foregoing having an address at 8900 Shoal Creek Bldg.
200, Austin, Texas 78757, and USTMAN INDUSTRIES, INC., a Delaware corporation,
having an address at 12265 Bayaud Avenue, Lakewood, Colorado 80225
(collectively, "Borrower") unconditionally promise to pay to the order of BANK
ONE, TEXAS, NATIONAL ASSOCIATION, (herein called "Bank"), at its offices at 910
Travis, Houston, Texas 77001, the principal sum of SIX MILLION DOLLARS
($6,000,000.00).
The undersigned also promise to pay interest on the unpaid principal
amount hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Loan Agreement; provided,
however, that in no event shall such interest exceed the Maximum Rate (as
hereinafter defined).
"Maximum Rate" means the Maximum Rate of non-usurious interest permitted
from day to day by Applicable Law.
"Applicable Law" means that law in effect from time to time and
applicable to this Term Note which lawfully permits the charging and collection
of the highest permissible lawful, non-usurious rate of interest on this Term
Note, including laws of the State of Texas and laws of the United States of
America. It is intended that Article 1.04, Title 79, Revised Civil Statutes of
Texas, 1927, as amended (Article 5069-1.04, as amended, Vernon's Texas Civil
Statutes) shall be included in the laws of the State of Texas in determining
Applicable Law; and for the purpose of applying said Article 1.04 to this Note,
the interest ceiling applicable to this Note under said Article 1.04 shall be
the indicated weekly rate ceiling from time to time in effect. The Borrower
and the Bank hereby agree that Chapter 15 of Subtitle 3, Title 79, Revised
Civil Statutes of Texas, 1925, as amended, shall
___________________
Borrower's Initials
-1-
<PAGE> 69
not apply to this Term Note or the loan transaction evidenced by, and
referenced in, the Loan Agreement (herein defined) in any manner, including
without limitation, to any account or arrangement evidenced or created by, or
provided for in, this Term Note.
In no event shall the aggregate of the interest on this Term Note, plus
any other amounts paid in connection with the loan evidenced by this Term Note
which would under Applicable Law be deemed "interest," ever exceed the maximum
amount of interest which, under Applicable Law, could be lawfully charged on
this Term Note. The Bank and the Borrower specifically intend and agree to
limit contractually the interest payable on this Term Note to not more than an
amount determined at the Maximum Rate. Therefore, none of the terms of this
Term Note or any other instruments pertaining to or securing this Note shall
ever be construed to create a contract to pay interest at a rate in excess of
the Maximum Rate, and neither the Borrower nor any other party liable herefor
shall ever be liable for interest in excess of that determined at the Maximum
Rate, and the provisions of this paragraph shall control over all provisions of
this Term Note or of any other instruments pertaining to or securing this Term
Note. If any amount of interest taken or received by the Bank shall be in
excess of the maximum amount of interest which, under Applicable Law, could
lawfully have been collected on this Note, then the excess shall be deemed to
have been the result of a mathematical error by the parties hereto and shall be
refunded promptly to the Borrower. All amounts paid or agreed to be paid in
connection with the indebtedness evidenced by this Note which would under
Applicable Law be deemed "interest" shall, to the extent permitted by
Applicable Law, be amortized, prorated, allocated and spread throughout the
full term of this Term Note.
This Note is the Term Note referred to in and is entitled to the
benefits of a certain Loan Agreement, dated as of October 25, 1996 (as the same
may be amended, modified, supplemented, extended, rearranged and/or restated
from time to time, the "Loan Agreement"), entered into by and among NDE
Environmental Corporation, et al., as Borrower, and Bank One, Texas, National
Association and secured by the Collateral Documents (as such term is defined in
the Loan Agreement). Reference is hereby made to the Loan Agreement for a
statement of the prepayment rights and penalties and obligations of the
Borrower, a description of the properties and assets mortgaged, encumbered and
assigned, the
___________________
Borrower's Initials
-2-
<PAGE> 70
nature and extent of the security and the rights of the parties to the
Collateral Documents in respect of such security, and for a statement of the
terms and conditions under which the due date of this Term Note may be
accelerated. Upon the occurrence of any Event of Default as specified in the
Loan Agreement, the principal balance hereof and the interest accrued hereon
may be declared to be forthwith due and payable in accordance with the Loan
Agreement, and any indebtedness of the holder hereof to the Borrower may be
appropriated and applied hereon.
In addition to and not in limitation of the foregoing, the undersigned
further agrees, subject only to any limitation imposed by applicable law, to
pay all reasonable expenses, including reasonable attorneys' fees and legal
expenses, incurred by the holder of this Term Note in endeavoring to collect
any amounts payable hereunder which are not paid when due, whether by
acceleration or otherwise.
All parties hereto, whether as makers, endorsees, or otherwise,
severally waive presentment for payment, demand, protest, notice of intent to
accelerate, notice of acceleration and notice of dishonor.
THIS TERM NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF
THE STATE OF TEXAS AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
EXECUTED this 25th day of October, 1996.
NDE ENVIRONMENTAL CORPORATION TANKNOLOGY/NDE CORPORATION
By: By:
------------------------------ ----------------------------------
Jay Allen Chaffee Jay Allen Chaffee
Chairman of the Board Chairman of the Board
USTMAN INDUSTRIES, INC.
By:
----------------------------------
Jay Allen Chaffee
Chairman of the Board
___________________
Borrower's Initials
-3-
<PAGE> 71
PROECO, INC.
By:
----------------------------------
Jay Allen Chaffee
Chairman of the Board
TANKNOLOGY CANADA (1988) INC.
By:
----------------------------------
Jay Allen Chaffee
President
-4-
<PAGE> 72
EXHIBIT "B"
Compliance Certificate
I, the _____________________________ of NDE ENVIRONMENTAL
CORPORATION (the "Company"), pursuant to Section 5.05 of the Loan Agreement
dated as of October 25, 1996, by and among BANK ONE, TEXAS, N.A. ("Bank") and
the Company (the "Agreement") do hereby certify, as of the date hereof, that to
my knowledge:
1. No Event of Default (as defined in the Agreement) has occurred
and is continuing, and no Unmatured Event of Default (as defined
in the Agreement) has occurred and is continuing except for the
following events (include actions taken to cure such situations):
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
;
------------------------------------------------------
2. No material adverse change has occurred in the condition,
financial or otherwise, of the Company since ________________;
3. Except as otherwise stated in the Schedule, if any, attached
hereto, each of the representations and warranties of the Company
contained in Article IV of the Agreement is true and correct in
all respects; and
<PAGE> 73
4. The Company's financial condition for the month ending __________
is as follows:
<TABLE>
<CAPTION>
=====================================================================================================================
Financial Covenant Time Period Required Ratio Actual Ratio
=====================================================================================================================
<S> <C> <C> <C>
(a) Net Worth Term of Loan Not less than 90% of
Consolidated Net Worth
at the time of the
Initial Advance plus 70%
of Borrower's Net Income
(if positive) 100% of
any equity issued
- ---------------------------------------------------------------------------------------------------------------------
(b) Capital Expenditures Term of Loan Not more than $2,000,000
for the current calendar
year
- ---------------------------------------------------------------------------------------------------------------------
(c) Debt Service Coverage Ratio Term of Loan Not less than 1.5 to 1.0
- ---------------------------------------------------------------------------------------------------------------------
(d) Adjusted Liabilities to Term of Loan Through 12/31/96:
Adjusted Net Worth not more than 2.25 to
1.0
1/1/97 - 12/31/97:
not more than 1.75 to
1.0
1/1/98 - 12/31/98:
not more than 1.25 to
1.0
After 12/31/98:
not more than 1.0 to 1.0
=====================================================================================================================
</TABLE>
This certificate is executed this ___ day of ___________ 199__.
NDE ENVIRONMENTAL CORPORATION
---------------------------------------
By:
-----------------------------------
Its:
----------------------------------
-2-
<PAGE> 74
EXHIBIT "C"
BORROWING BASE CERTIFICATE
I, the _____________________________ of NDE ENVIRONMENTAL
CORPORATION (the "Company"), pursuant to Section 2.06 of the Loan Agreement
dated as of October 25, 1996, by and among BANK ONE, TEXAS, N.A. ("Bank"), the
Company (the "Agreement") do hereby certify, as of the date hereof, that to my
knowledge:
1. The Borrowing Base calculated pursuant to the Agreement
effective as of ____________, 199__, is $___________.
2. The Borrowing Base stated in paragraph 1 hereof is the
lesser of (a) $5,000,000.00, or (b) seventy-five per cent (75%) of Eligible
Accounts of the Company.
3. The Eligible Accounts of the Company total $_________,
which is comprised of the following components:
a. Total of Accounts meeting the following criteria:
$___________
(1) The Account arose from a bona fide outright sale of
Goods by the Company or from bona fide services performed by the
Company, and such Goods have been shipped to the appropriate
account debtors or their designees (or the sale has otherwise
been consummated), or the services have been performed for the
appropriate account debtors;
(2) The Account is based upon an enforceable order or
contract, written or oral, for Goods shipped or held or for
services performed, and the same were shipped, held, or performed
in accordance with such order or contract;
(3) The title of the Company to the Account and, except
as to the account debtor, to any Goods is absolute and is not
subject to any prior assignment, claim, lien, or security
interest, except Permitted Liens;
<PAGE> 75
(4) The amount shown on the books of the Company and on
any invoice or statement delivered to the Bank is owing to the
Company; and
(5) The account debtor has not returned or refused to
retain, or otherwise notified the Company of any dispute
concerning, or claimed nonconformity of, any of the Goods or
services from the sale of which the Account arose;
b. Minus the sum of:
(1) $____________ for any claim of reduction,
counterclaim, set-off, recoupment, or any claim for credits,
allowances, or adjustments by the account debtor of any of the
foregoing Accounts, because of returned, inferior, or damaged
Goods or unsatisfactory services, or for any other reason;
(2) $____________ for any partial payment that has been
made on any of the foregoing Accounts by anyone;
(3) $____________ for any part of any of the foregoing
Accounts that is due and payable more than thirty (30) days from
the date of the invoice therefor;
(4) $____________ for any part of any of the foregoing
Accounts is more than ninety (90) days past due or is outstanding
more than one hundred twenty (120) days from the date of the
invoice therefore;
(5) $____________ for any of the foregoing Accounts
that arise out of a contract with, or order from, an account
debtor that, by its terms, forbids or makes void or unenforceable
the assignment by the Company to the Bank of the Account arising
with respect thereto;
(6) $____________ for the amount or value of any note,
trade acceptance, draft, or other Instrument with respect to, or
in payment of, any of the foregoing Accounts, or any Chattel
Paper with respect to the Goods giving rise to any such Account,
unless, if any such Instrument or Chattel Paper has been
received, the
-2-
<PAGE> 76
Company has notified the Bank and, at the Banks's request, has
endorsed or assigned and delivered the same to the Bank;
(7) $____________ for any Account payable by an account
debtor as to which the Company has received any notice of the
death of the account debtor or a partner thereof; or of the
dissolution, termination of existence, insolvency, business
failure, appointment of a receiver for any part of the property
of, assignment for the benefit of creditors by, or the filing of
a petition in bankruptcy or the commencement of any proceeding
under any bankruptcy or insolvency laws by or against, the
account debtor;
(8) $____________ for any Account payable by an account
debtor that is a Subsidiary or other Affiliate of the Company;
(9) $____________ for any Account payable by an account
debtor whose principal place of business is outside of the United
States of America, its territories and possessions;
(10) $____________ for the aggregate amount of all
Accounts owed by any account debtor as to which more than 15% of
such account debtor's aggregate Account total is more than ninety
(90) days past due or is outstanding more than one hundred twenty
(120) days from the date of the invoice therefore;
(11) $____________ for any Account insofar as such
Account constitutes more than twenty-five percent (25%) of the
aggregate total of Eligible Accounts in (a) hereinabove; and
(12) $____________ for any Account that Bank has given
notice to Company that the Bank has deemed such Account
ineligible (i) because of a reasonable uncertainty about the
creditworthiness of the account debtor; or (ii) because the Bank
otherwise reasonably considers the collateral value thereof to
the Bank to be
-3-
<PAGE> 77
impaired or its ability to realize such value to be insecure.
4. The worksheet used to calculate the Borrowing Base is
attached as Exhibit "A".
This certificate is executed this ___ day of ____________ 199__.
NDE ENVIRONMENTAL CORPORATION
By:
----------------------------------
Its:
---------------------------------
-4-
<PAGE> 78
EXHIBIT "D-1"
SUBSTANCE OF OPINION OF COUNSEL
Baker & Botts, L.L.P.
(1) The Borrower and the Subsidiaries are corporations duly
organized, existing, and in good standing under the Laws of their respective
states of incorporation [naming such states] and are qualified to transact
business and are in good standing in those states where the nature of business
or property owned by them requires qualification, as set forth in Schedule
4.01, attached hereto and made a part hereof, and, to the knowledge of such
counsel, are not required to be qualified as a foreign corporation in any other
jurisdiction;
(2) The Borrower has the power to execute and deliver this Agreement,
to borrow money hereunder, to grant the Collateral required hereunder, to
execute and deliver the Note, and Collateral Documents, and to perform its
obligations hereunder and thereunder;
(3) All corporate actions by the Borrower and all consents and
approvals of any Persons necessary to the validity of this Agreement, the Note,
the Collateral Documents, and each other document to be delivered hereunder
have been duly taken or obtained, and this Agreement, Note, and Collateral
Documents, and such other documents do not conflict with any provision of the
charter or by-laws of the Borrower, or of any applicable Laws, or any other
agreement binding the Borrower or its property of which, after reasonable
inquiry, such counsel has knowledge;
(4) This Agreement, the Note, and Collateral Documents to be
delivered hereunder have been duly executed by, and each is a valid and binding
obligation of, the Borrower; each of the foregoing documents is in all respects
sufficient to achieve its purported function and is enforceable in accordance
with its terms, except as limited by bankruptcy, insolvency, reorganization,
moratorium, or other similar laws affecting creditors' rights generally or by
general equitable principles; and
(5) The Pledged Stock constitutes all of the issued and outstanding
capital stock of the respective issuers thereof, and all of the Pledged Stock
has been duly issued and is fully paid and nonassessable.
<PAGE> 79
EXHIBIT "D-2"
SUBSTANCE OF OPINION OF COUNSEL
Banc One Capital Corporation Legal Department
(1) The Subordinated Lender (as identified in the Subordination
Agreement) has the power to execute and deliver the Subordination Agreement,
and to perform its obligations thereunder;
(2) All corporate actions by the Subordinated Lender and all consents
and approvals of any Persons necessary to the validity of the Subordination
Agreement and any document to be delivered thereunder have been duly taken or
obtained, and the Subordination Agreement, and such other documents, do not
conflict with any provision of the charter or by-laws of the Subordinated
Lender, or of any applicable Laws, or any other agreement binding the
Subordinated Lender or its property of which, after reasonable inquiry, such
counsel has knowledge;
(3) The Subordination Agreement to be delivered hereunder has been
duly executed by, and is a valid and binding obligation of, the Subordinated
Lender (as defined therein); is in all respects sufficient to achieve its
purported function; and is enforceable in accordance with its terms, except as
limited by bankruptcy, insolvency, reorganization, moratorium, or other similar
laws affecting creditors' rights generally or by general equitable principles.
<PAGE> 80
EXHIBIT "E"
MONTHLY REPORT
<PAGE> 81
EXHIBIT "F"
FORM OF LANDLORD'S WAIVER
LANDLORD'S WAIVER
STATE OF ______________ )
)
COUNTY OF _____________ )
WHEREAS, ____________________________, a _____________________
("Landlord"), whose address is ___________________________________,
____________________________, is the owner of real property located at
________________________________________________________________ which is more
particularly described on Annex "A" attached hereto (the "Premises").
WHEREAS, Landlord has leased the Premises to _______________, a
_____________________ ("Tenant"), whose address is ______________
__________________________________________________________________.
WHEREAS, Tenant has granted BANK ONE, TEXAS, N.A., ("Lender") a first
priority security interest in certain property that may from time to time be
located in and on the Premises as security for any and all loans and other
extensions of credit that Lender may make to Tenant from time to time.
WHEREAS, Lender is willing to make such loans and extensions of credit
if Landlord waives any and all claims, demands, and rights that Landlord may
have or hereafter acquire with respect to such property.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Landlord agrees as follows:
1. Landlord hereby waives and releases in favor of Lender any and
all liens, security interests, claims, demands, causes of action, actions, and
other rights, however arising, including, without limitation, the right to
levy, distrain, sue, execute, or sell for unpaid rent or other indebtedness of
Tenant to Landlord,
<PAGE> 82
which Landlord now has or may hereafter acquire with respect to property of
Tenant now or hereafter located in or on the Premises (regardless of whether
such property is now owned or hereafter acquired by Tenant), including without
limitation, all of Tenant's machinery, equipment, furniture, fixtures,
inventory, goods, and merchandise and all additions, replacements, and
substitutions therefor, and all proceeds thereof located in or on the Premises
(collectively, the "Property").
2. Landlord agrees that Lender, through its authorized
representatives or agents, may enter upon the Premises at any time and from
time to time for the purpose of inspecting, repairing, removing, or conducting
a sale or sales of any or all of the Property. Landlord further agrees that
Lender shall have no obligation or liability to Landlord except for gross
negligence or willful misconduct on the part of Lender.
3. Landlord represents and warrants to Lender that Tenant has
complied with all obligations owed to Landlord by Tenant, including, without
limitation, the payment of rent. Landlord agrees to give Lender prompt written
notice of the occurrence of any condition or event which, with the giving of
notice or passage of time or both, would permit Landlord to terminate any lease
by Tenant of all or any part of the Premises or accelerate any rent due
thereunder.
4. This Landlord's Waiver shall be governed by and construed in
accordance with the laws of the State of Texas. This Landlord's Waiver shall
be binding upon Landlord and its successors and assigns.
IN WITNESS WHEREOF, Landlord has executed this Landlord's Waiver as of
the ____ day of _________________________, 199_.
LANDLORD
--------
-------------------------------------
By:
---------------------------------
Its:
--------------------------------
<PAGE> 83
AFTER RECORDATION, RETURN TO:
James Lewis Connor, III
Hutcheson & Grundy, L.L.P.
1200 Smith Street, Suite 3300
Houston, Texas 77002
<PAGE> 84
INDIVIDUAL ACKNOWLEDGMENT
STATE OF ______________ )
)
COUNTY OF ______________ )
This instrument was acknowledged before me on the ____ day of
_____________________, 199__, by _________________________________.
-------------------------------------
Printed Name:
-----------------------
Notary Public, State of
-------------
My Commission Expires:
--------------
CORPORATE ACKNOWLEDGMENT
STATE OF ______________ )
)
COUNTY OF ______________ )
This instrument was acknowledged before me on the ____ day of
_____________________, 199__, by _________________________________, the
__________________ of ______________________, on behalf of said corporation.
-------------------------------------
Printed Name:
-----------------------
Notary Public, State of
-------------
My Commission Expires:
--------------
PARTNERSHIP ACKNOWLEDGMENT
STATE OF ______________ )
)
COUNTY OF ______________ )
This instrument was acknowledged before me on the ____ day of
_____________________, 199__, by _________________________________, the
__________________ of ______________________, on behalf of said partnership.
-------------------------------------
Printed Name:
-----------------------
Notary Public, State of
-------------
My Commission Expires:
--------------
<PAGE> 1
EXHIBIT 10.1a
REVOLVING NOTE
$5,000,000.00 October 25, 1996
FOR VALUE RECEIVED, NDE ENVIRONMENTAL CORPORATION, a Delaware
corporation, TANKNOLOGY/NDE CORPORATION, a Delaware corporation, PROECO, INC.,
a Delaware corporation, and TANKNOLOGY CANADA (1988) INC., a Canadian federal
corporation, all of the foregoing having an address at 8900 Shoal Creek Bldg.
200, Austin, Texas 78757, and USTMAN INDUSTRIES, INC., a Delaware corporation,
having an address at 12265 Bayaud Avenue, Lakewood, Colorado 80225
(collectively, "Borrower") unconditionally promise to pay to the order of BANK
ONE, TEXAS, NATIONAL ASSOCIATION, (herein called "Bank"), at its offices at 910
Travis, Houston, Texas 77001, the principal sum of FIVE MILLION DOLLARS
($5,000,000.00) or, if less, the aggregate unpaid principal amount of all Loans
(as defined in the Loan Agreement) made by the Bank to the Borrower pursuant to
the Loan Agreement, as shown in the records of the Bank, outstanding on such
date.
The undersigned also promise to pay interest on the unpaid principal
amount hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Loan Agreement; provided,
however, that in no event shall such interest exceed the Maximum Rate (as
hereinafter defined).
"Maximum Rate" means the Maximum Rate of non-usurious interest permitted
from day to day by Applicable Law.
"Applicable Law" means that law in effect from time to time and
applicable to this Note which lawfully permits the charging and collection of
the highest permissible lawful, non-usurious rate of interest on this Note,
including laws of the State of Texas and laws of the United States of America.
It is intended that Article 1.04, Title 79, Revised Civil Statutes of Texas,
1927, as amended (Article 5069-1.04, as amended, Vernon's Texas Civil Statutes)
shall be included in the laws of the State of Texas in determining Applicable
Law; and for the purpose of applying said Article 1.04 to this Note, the
interest ceiling applicable to this Note under
/s/ JAC
-----------------------------
Borrower's Officer's Initials
-1-
<PAGE> 2
said Article 1.04 shall be the indicated weekly rate ceiling from time to time
in effect. The Borrower and the Bank hereby agree that Chapter 15 of Subtitle
3, Title 79, Revised Civil Statutes of Texas, 1925, as amended, shall not apply
to this Note or the loan transaction evidenced by, and referenced in, the Loan
Agreement (hereinafter defined) in any manner, including without limitation, to
any account or arrangement evidenced or created by, or provided for in, this
Note.
In no event shall the aggregate of the interest on this Note, plus any
other amounts paid in connection with the loan evidenced by this Note which
would under Applicable Law be deemed "interest," ever exceed the maximum amount
of interest which, under Applicable Law, could be lawfully charged on this
Note. The Bank and the Borrower specifically intend and agree to limit
contractually the interest payable on this Note to not more than an amount
determined at the Maximum Rate. Therefore, none of the terms of this Note or
any other instruments pertaining to or securing this Note shall ever be
construed to create a contract to pay interest at a rate in excess of the
Maximum Rate, and neither the Borrower nor any other party liable herefor shall
ever be liable for interest in excess of that determined at the Maximum Rate,
and the provisions of this paragraph shall control over all provisions of this
Note or of any other instruments pertaining to or securing this Note. If any
amount of interest taken or received by the Bank shall be in excess of the
maximum amount of interest which, under Applicable Law, could lawfully have
been collected on this Note, then the excess shall be deemed to have been the
result of a mathematical error by the parties hereto and shall be refunded
promptly to the Borrower. All amounts paid or agreed to be paid in connection
with the indebtedness evidenced by this Note which would under Applicable Law
be deemed "interest" shall, to the extent permitted by Applicable Law, be
amortized, prorated, allocated and spread throughout the full term of this
Note.
This Note is the Revolving Note referred to in and is entitled to the
benefits of a certain Loan Agreement, dated as of October 25, 1996 (as the same
may be amended, modified, supplemented, extended, rearranged and/or restated
from time to time, the "Loan Agreement"), entered into by and among NDE
Environmental Corporation, et al., as Borrower, and Bank One, Texas, National
Association and secured by the Collateral Documents (as such term
/s/ JAC
-----------------------------
Borrower's Officer's Initials
-2-
<PAGE> 3
is defined in the Loan Agreement). Reference is hereby made to the Loan
Agreement for a statement of the prepayment rights and penalties and
obligations of the Borrower, a description of the properties and assets
mortgaged, encumbered and assigned, the nature and extent of the security and
the rights of the parties to the Collateral Documents in respect of such
security, and for a statement of the terms and conditions under which the due
date of this Note may be accelerated. Upon the occurrence of any Event of
Default as specified in the Loan Agreement, the principal balance hereof and
the interest accrued hereon may be declared to be forthwith due and payable in
accordance with the Loan Agreement, and any indebtedness of the holder hereof
to the Borrower may be appropriated and applied hereon.
In addition to and not in limitation of the foregoing, the undersigned
further agrees, subject only to any limitation imposed by applicable law, to
pay all reasonable expenses, including reasonable attorneys' fees and legal
expenses, incurred by the holder of this Note in endeavoring to collect any
amounts payable hereunder which are not paid when due, whether by acceleration
or otherwise.
All parties hereto, whether as makers, endorsees, or otherwise,
severally waive presentment for payment, demand, protest, notice of intent to
accelerate, notice of acceleration and notice of dishonor.
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF TEXAS AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
EXECUTED this 25th day of October, 1996.
NDE ENVIRONMENTAL CORPORATION TANKNOLOGY/NDE CORPORATION
By: /s/ JAY ALLEN CHAFFEE By: /s/ JAY ALLEN CHAFFEE
------------------------------ ----------------------------------
Jay Allen Chaffee Jay Allen Chaffee
Chairman of the Board Chairman of the Board
/s/ JAC
-----------------------------
Borrower's Officer's Initials
-3-
<PAGE> 4
USTMAN INDUSTRIES, INC.
By: /s/ JAY ALLEN CHAFFEE
----------------------------------
Jay Allen Chaffee
Chairman of the Board
PROECO, INC.
By: /s/ JAY ALLEN CHAFFEE
----------------------------------
Jay Allen Chaffee
Chairman of the Board
TANKNOLOGY CANADA (1988) INC.
By: /s/ JAY ALLEN CHAFFEE
----------------------------------
Jay Allen Chaffee
President
/s/ JAC
-----------------------------
Borrower's Officer's Initials
-4-
<PAGE> 1
EXHIBIT 10.1b
TERM NOTE
$6,000,000.00 October 25, 1996
FOR VALUE RECEIVED, NDE ENVIRONMENTAL CORPORATION, a Delaware
corporation, TANKNOLOGY/NDE CORPORATION, a Delaware corporation, PROECO, INC.,
a Delaware corporation, and TANKNOLOGY CANADA (1988) INC., a Canadian federal
corporation, all of the foregoing having an address at 8900 Shoal Creek Bldg.
200, Austin, Texas 78757, and USTMAN INDUSTRIES, INC., a Delaware corporation,
having an address at 12265 Bayaud Avenue, Lakewood, Colorado 80225
(collectively, "Borrower") unconditionally promise to pay to the order of BANK
ONE, TEXAS, NATIONAL ASSOCIATION, (herein called "Bank"), at its offices at 910
Travis, Houston, Texas 77001, the principal sum of SIX MILLION DOLLARS
($6,000,000.00).
The undersigned also promise to pay interest on the unpaid principal
amount hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Loan Agreement; provided,
however, that in no event shall such interest exceed the Maximum Rate (as
hereinafter defined).
"Maximum Rate" means the Maximum Rate of non-usurious interest permitted
from day to day by Applicable Law.
"Applicable Law" means that law in effect from time to time and
applicable to this Term Note which lawfully permits the charging and collection
of the highest permissible lawful, non-usurious rate of interest on this Term
Note, including laws of the State of Texas and laws of the United States of
America. It is intended that Article 1.04, Title 79, Revised Civil Statutes of
Texas, 1927, as amended (Article 5069-1.04, as amended, Vernon's Texas Civil
Statutes) shall be included in the laws of the State of Texas in determining
Applicable Law; and for the purpose of applying said Article 1.04 to this Note,
the interest ceiling applicable to this Note under said Article 1.04 shall be
the indicated weekly rate ceiling from time to time in effect. The Borrower
and the Bank hereby agree that Chapter 15 of Subtitle 3, Title 79, Revised
Civil Statutes of Texas, 1925, as amended, shall
/s/ JAC
_____________________________
Borrower's Officer's Initials
-1-
<PAGE> 2
not apply to this Term Note or the loan transaction evidenced by, and
referenced in, the Loan Agreement (herein defined) in any manner, including
without limitation, to any account or arrangement evidenced or created by, or
provided for in, this Term Note.
In no event shall the aggregate of the interest on this Term Note, plus
any other amounts paid in connection with the loan evidenced by this Term Note
which would under Applicable Law be deemed "interest," ever exceed the maximum
amount of interest which, under Applicable Law, could be lawfully charged on
this Term Note. The Bank and the Borrower specifically intend and agree to
limit contractually the interest payable on this Term Note to not more than an
amount determined at the Maximum Rate. Therefore, none of the terms of this
Term Note or any other instruments pertaining to or securing this Note shall
ever be construed to create a contract to pay interest at a rate in excess of
the Maximum Rate, and neither the Borrower nor any other party liable herefor
shall ever be liable for interest in excess of that determined at the Maximum
Rate, and the provisions of this paragraph shall control over all provisions of
this Term Note or of any other instruments pertaining to or securing this Term
Note. If any amount of interest taken or received by the Bank shall be in
excess of the maximum amount of interest which, under Applicable Law, could
lawfully have been collected on this Note, then the excess shall be deemed to
have been the result of a mathematical error by the parties hereto and shall be
refunded promptly to the Borrower. All amounts paid or agreed to be paid in
connection with the indebtedness evidenced by this Note which would under
Applicable Law be deemed "interest" shall, to the extent permitted by
Applicable Law, be amortized, prorated, allocated and spread throughout the
full term of this Term Note.
This Note is the Term Note referred to in and is entitled to the
benefits of a certain Loan Agreement, dated as of October 25, 1996 (as the same
may be amended, modified, supplemented, extended, rearranged and/or restated
from time to time, the "Loan Agreement"), entered into by and among NDE
Environmental Corporation, et al., as Borrower, and Bank One, Texas, National
Association and secured by the Collateral Documents (as such term is defined in
the Loan Agreement). Reference is hereby made to the Loan Agreement for a
statement of the prepayment rights and penalties and obligations of the
Borrower, a description of the
/s/ JAC
_____________________________
Borrower's Officer's Initials
-2-
<PAGE> 3
properties and assets mortgaged, encumbered and assigned, the nature and extent
of the security and the rights of the parties to the Collateral Documents in
respect of such security, and for a statement of the terms and conditions under
which the due date of this Term Note may be accelerated. Upon the occurrence
of any Event of Default as specified in the Loan Agreement, the principal
balance hereof and the interest accrued hereon may be declared to be forthwith
due and payable in accordance with the Loan Agreement, and any indebtedness of
the holder hereof to the Borrower may be appropriated and applied hereon.
In addition to and not in limitation of the foregoing, the undersigned
further agrees, subject only to any limitation imposed by applicable law, to
pay all reasonable expenses, including reasonable attorneys' fees and legal
expenses, incurred by the holder of this Term Note in endeavoring to collect
any amounts payable hereunder which are not paid when due, whether by
acceleration or otherwise.
All parties hereto, whether as makers, endorsees, or otherwise,
severally waive presentment for payment, demand, protest, notice of intent to
accelerate, notice of acceleration and notice of dishonor.
THIS TERM NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF
THE STATE OF TEXAS AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
EXECUTED this 25th day of October, 1996.
NDE ENVIRONMENTAL CORPORATION TANKNOLOGY/NDE CORPORATION
By: /s/ JAY ALLEN CHAFFEE By: /s/ JAY ALLEN CHAFFEE
------------------------------ ----------------------------------
Jay Allen Chaffee Jay Allen Chaffee
Chairman of the Board Chairman of the Board
/s/ JAC
_____________________________
Borrower's Officer's Initials
-3-
<PAGE> 4
USTMAN INDUSTRIES, INC.
By: /s/ JAY ALLEN CHAFFEE
----------------------------------
Jay Allen Chaffee
Chairman of the Board
PROECO, INC.
By: /s/ JAY ALLEN CHAFFEE
----------------------------------
Jay Allen Chaffee
Chairman of the Board
TANKNOLOGY CANADA (1988) INC.
By: /s/ JAY ALLEN CHAFFEE
----------------------------------
Jay Allen Chaffee
President
/s/ JAC
_____________________________
Borrower's Officer's Initials
-4-
<PAGE> 1
EXHIBIT 10.2
_____________________________________________________
NDE ENVIRONMENTAL CORPORATION
NOTE
AND
WARRANT PURCHASE AGREEMENT
_____________________________________________________
DATED AS OF OCTOBER 25, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
A. SELLERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
B. ACQUISITION TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
C. SENIOR LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
D. PURCHASE AND SALE OF NOTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
E. WARRANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
F. SECURITY FOR PAYMENT OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
STATEMENT OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1. DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2. PURCHASE AND SALE OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3. ISSUANCE OF WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4. CONDITIONS TO CLOSINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . . . . . . . . . . . . . . . . . . 22
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER . . . . . . . . . . . . . . . . . . 25
SECTION 7. FINANCIAL REPORTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 8. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 9. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 10. FINANCIAL TESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 11. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 12. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Form of Note Between Company and Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit A
Form of Warrant Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit B
Certificate of the Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit C
Legal Opinion of Baker & Botts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit D
Schedule 1.114
Schedule 5(j)
Schedule 5(s)
</TABLE>
i
<PAGE> 3
NOTE AND
WARRANT PURCHASE AGREEMENT
This is a NOTE and WARRANT PURCHASE AGREEMENT dated as of October 25, 1996
("Agreement") by and among NDE ENVIRONMENTAL CORPORATION ("NDE"), a Delaware
corporation, TANKNOLOGY/NDE CORPORATION("TCI"), a Delaware corporation, USTMAN
INDUSTRIES, INC. ("USTMAN"), a Delaware corporation, PROECO, INC. ("Proeco"), a
Delaware corporation and TANKNOLOGY OF CANADA (1988), INC. ("Canada"), a
Canadian Federal corporation, as sellers and BANC ONE CAPITAL PARTNERS, L.P.
("Purchaser"), an Ohio limited partnership, as purchaser.
NDE, Testing & Equipment, TCI, USTMAN, Proeco, and Canada are referred to
collectively as the "Sellers" and individually as a "Seller". The Sellers and
the Purchaser are referred to individually as a "Party" and collectively as the
"Parties."
BACKGROUND
A. SELLERS.
The Sellers are engaged in the business of environmental testing. TCI is
the successor by merger to NDE Testing & Equipment, Inc., a Florida
corporation, and was formerly known as Tanknology/NDE Corporation.
B. ACQUISITION TRANSACTION.
NDE is party to a Stock Purchase Agreement dated as of October 7, 1996 (the
"Stock Purchase Agreement"), by and between NDE, as purchaser, and Tanknology
Environmental Inc., ("TEI") as seller. The Stock Purchase Agreement provides
for the acquisition by NDE from TEI of all of the outstanding Capital Stock of
TCI, USTMAN and Canada (the "Acquisition Transaction").
C. SENIOR LOANS.
Pursuant to a Loan Agreement dated as of October 25, 1996 ("Senior Loan
Agreement") by and between Bank One, Texas, N.A. ("Senior Lender") and the
Sellers, the Senior Lender has agreed to make a $6,000,000 aggregate principal
amount term loan to the Sellers, and to provide to the Sellers on a revolving
credit basis up to a maximum aggregate principal amount of $5,000,000 at any
one time outstanding (collectively, the "Senior Loans"). The Senior Loans are
secured by a first priority security interest in the Collateral.
<PAGE> 4
D. PURCHASE AND SALE OF NOTE.
Upon the terms and subject to the conditions set forth in this Agreement,
the Sellers shall issue and sell to Purchaser a Senior Subordinated Note in the
aggregate principal amount of $8,000,000 due December 31, 2001 ("Note").
E. WARRANTS.
Upon the terms and subject to the conditions set forth in this Agreement,
NDE shall issue and sell to Purchaser 13,022,920 warrants ("Warrants"). Each
Warrant, subject to adjustment as provided for in the Warrant Certificates,
evidences the right to purchase one share of NDE common stock, $0.0001 par
value, ("Common Shares"). The Warrants are evidenced by a warrant certificate
"Warrant Certificate".
The Common Shares issuable upon exercise of the Warrants are referred to as
the "Warrant Shares" and represent, as of the date hereof, in the aggregate
approximately 40% of the Outstanding Shares after giving effect to the issuance
of such Warrant Shares.
F. SECURITY FOR PAYMENT OF THE NOTES.
Pursuant to the (i) Subordinated Security Agreement, the Sellers have, as
security for the obligations hereunder, granted to the Purchaser a second
priority security interest in the Collateral, whether now owned or hereafter
acquired, second only to the security interest in such assets of the Senior
Lender, and (ii) Pledge Agreement, NDE has granted to the Purchaser a second
priority security interest in the Subsidiary Stock, second only to the security
interest in such assets of the Senior Lender.
STATEMENT OF AGREEMENT
In consideration of their mutual promises set forth in this Agreement, the
Parties hereby 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 "Accelerated" is defined in the Note.
1.2 "Acceleration Notice" is defined in the Note.
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1.3 "Accredited Institutional Investor" means a financial institution
or other business entity that is an "accredited investor" with the meaning of
clauses (1), (2), (3) or (7) of Rule 501(a) under Regulation D of the Exchange
Act.
1.4 "Accountant" means the Company's independent public accountant
selected and approved in the manner provided for in this Agreement.
1.5 "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 their Audit with respect to such Financial Statement no
Default has come to their attention, or, if a Default has come to their
attention, stating the nature and period of existence of such Default.
1.6 "Accounting Periods" means the Fiscal Year, Quarter or Month, as
applicable.
1.7 "Accounting Statements" means collectively, with respect to any
Accounting Period, statements of income, changes in financial position (cash
flow) and shareholders' equity for such Accounting Period and a statement of
financial condition as at the end of such Accounting Period.
1.8 "Acquisition Transaction" shall have the meaning set forth in
Paragraph B.
1.9 "Additional Common Shares" means all Common Shares issued by NDE
after the Closing Date other than Warrant Shares and shares issued under NDE's
employee and director stock option plans.
1.10 "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
(annualized) and (B) actual Capital Expenditures incurred with respect to that
Accounting Period.
1.11 "Adjusted Exercise Price" is defined in the Warrant Certificate.
1.12 "Adjusted Permitted Indebtedness" means, as determined as of any
date (i) the aggregate principal amount of all Permitted Indebtedness,
excluding (ii) the aggregate principal amount of the Senior Indebtedness
outstanding as of such date of determination.
1.13 "Adjustment Amount" is defined in the Warrant Certificate.
1.14 "Adjustment Event" is defined in the Warrant Certificate.
1.15 "Affiliate" means any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the Company or
another specified Person, except a Subsidiary. A Person shall be deemed to
control a corporation if such Person possesses, directly or
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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.
1.16 "Affirmative Covenants" means the covenants of the Company set
forth in Section 8.
1.17 "Agreement" means this Note and Warrant Purchase Agreement dated
October 25, 1996, by and among the Purchaser and the Sellers.
1.18 "Amortization Commencement Date" is defined in the Note.
1.19 "Annual Financial Statements" means, with respect to each Fiscal
Year, the consolidated and consolidating Accounting Statements of the Company
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) and in a form reasonably satisfactory to the
Purchasers. Accounting Statements prepared for and contained in the NDE's Form
10-K filed with the SEC shall be deemed to constitute the Company's Annual
Financial Statement.
1.20 "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.
1.21 "Appraiser" is defined in the Put Option Agreement.
1.22 "Assessments" is defined in the Note.
1.23 "Assignee" is defined in the Pledge Agreement.
1.24 "Assignor" is defined in the Pledge Agreement.
1.25 "Audit" or "Audited" means, with respect to the consolidated
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 of such Accounting Statements.
1.26 "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 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.
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1.27 "Board of Directors" means the board of directors of NDE 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.
1.28 "BOT" is defined in the Note.
1.29 "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 Columbus, Ohio.
1.30 "Canada" means Tanknology Canada (1988), Inc., a Canadian Federal
corporation, together with its successors and assigns.
1.31 "Capitalized Earnings Amount" is defined in the Put Option
Agreement.
1.32 "Capital Expenditures" means, with respect to the Company,
expenditures for tangible business assets with a useful life in excess of one
year, the acquisition cost of which is, in accordance with GAAP, depreciated
over the useful life of such asset.
1.33 "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.
1.34 "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, 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-1 or the equivalent
thereof by Moody's
1.35 "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 the Company stating in effect that
such Financial Statements, when delivered, (i) were, to the best of his
knowledge, complete and correct in all material respects, (ii) were prepared in
accordance with GAAP, and (iii) fairly present the results of operations for
the applicable Accounting Period and the financial condition as at the end of
such Accounting Period. The CFO Certificate shall be presented in a standard
form reasonably satisfactory to the Purchaser.
1.36 "Change of Control" means (i) an event or series of events by
which any Person or Persons or other entities acting in concert as a
partnership or other group (a "Group of Persons")
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shall, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases, merger, consolidation or otherwise, have become
the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act),
of 50% or more of the Voting Power of the Company, (ii) the Company is merged
with or into another corporation with the effect that immediately after such
transaction the stockholders of the Company immediately prior to such
transaction hold less than a majority of the combined Voting Power of the
Person surviving the transaction, or (iii) the direct or indirect, sale, lease,
exchange or other transfer of all or substantially all of the assets of the
Company to any Person or group of Persons; provided, however, that for purposes
of determining whether or not a "Change of Control" has occurred, (A) the
Warrants shall be deemed to have been fully exercised and all of the Warrant
Shares shall be deemed to be issued and outstanding, (B) the grant and exercise
of the Warrants shall not otherwise be taken into account (C) and Transfers by
the Purchaser shall not otherwise be taken into account.
1.37 "Closing Date" means October 25, 1996, or such later date as the
Parties shall mutually agree.
1.38 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
1.39 "Collateral" is defined in the Pledge Agreement and in the
Subordinated Security Agreement.
1.40 "Commencement Date" is defined in the Warrant Certificate.
1.41 "Commission" is defined in the Registration Rights Agreement.
1.42 "Commitment Letter" means the Commitment Letter dated October 25,
1996, from Proactive Partners, L.P., ("Proactive") a California limited
partnership to NDE, whereby Proactive has agreed to advance to NDE $1,000,000
upon any material default under this Agreement, the Note, or the Senior Loan
Agreement. This Commitment Letter shall be assigned by NDE to the Purchaser as
security for the repayment of the Note and payment of the Repurchase Price of
the Put Option.
1.43 "Common Shares" means the shares of common stock, $0.0001 par
value, of NDE, at any time outstanding.
1.44 "Company" means NDE, together with its Subsidiaries, treated as a
consolidated entity for accounting purposes.
1.45 "Compliance Certificate" means, with respect to each Fiscal Year
and each Quarter, a certificate signed by the chief financial officer of the
Company (i) stating that no Default has occurred and is continuing, (ii)
stating that, to the best of his knowledge, the Company is 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
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applicable Fiscal Year or Quarter. The Compliance Certificate shall be
presented in a standard form reasonably satisfactory to the Purchaser.
1.46 "Consulting Agreement" means the Consulting Agreement dated as of
October 25, 1996, by and between NDE and Bober Markey & Company.
1.47 "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, but excluding the
Common Shares issuable upon exercise of the Warrants.
1.48 "Co-Sale Agreement" means the Co-Sale Agreement dated as of the
date hereof by and among NDE, Proactive Partners, L.P., a California limited
partnership, Lagunitas Parnters, L.P., a California limited partnership, Jay
Allen Chaffee, Dan Sharplin and the Purchaser.
1.49 "Date of Note" is defined in the Note.
1.50 "Debtor(s)" is defined in the Subordinated Security Agreement and
the Pledge Agreement.
1.51 "Debtor Subsidiary(ies)" is defined in the Subordinated Security
Agreement and the Pledge Agreement.
1.52 "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); (iii) preferred dividends; (iv) actual
scheduled principal amortization of the Senior Indebtedness for the upcoming 12
month period; and (v) actual scheduled principal amortization of the Note for
the upcoming 12 month period.
1.53 "Default" is defined in the Note.
1.54 "Default Interest Rate" is defined in the Note.
1.55 "Default Rate Election" is defined in the Note.
1.56 "Discount Rate" is defined in the Note.
1.57 "Disposition" means (i) a merger, consolidation or other business
combination in which NDE is not the surviving entity and the NDE's stockholders
receive cash or non-cash consideration in exchange for or in respect of their
shares of Capital Stock of NDE or (ii) the sale,
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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 the Company.
1.58 "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
(iii) the exercise of the Warrants and the purchase of any
securities by the Sellers pursuant to the Put Option.
1.59 "EBITDA" means, as determined as of any date, earnings of the
Company (as reflected on the most recent Financial Statements) for the twelve-
month period ended immediately prior to any such date of determination
determined excluding all amounts expensed as reflected on such Financial
Statements during such twelve-month period with respect to (i) interest expense
with respect to Permitted Indebtedness, (ii) federal and state income tax
expense, (iii) depreciation expense, and (iv) amortization expense.
1.60 "Environmental Laws" means any and all laws, statutes, judgments,
ordinances, rules, regulations, orders, determinations, interpretations, or
guidance of any governmental authority pertaining to health or the environment
in effect in any and all jurisdictions in which the Company and its
subsidiaries, if any, is conducting or at any time has conducted business, or
where any property of the Company and its subsidiaries, if any, whether leased
or owned, is located, or where any hazardous substances generated or disposed
of by the Company and its subsidiaries, if any, are located, including, without
limitation, the Federal Clean Air Act, as amended, the Comprehensive
Environmental, Response, Compensation and Liability Act of 1980, as amended,
the Federal Clean Water Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Resource Conversion and Recovery Act of 1976, as
amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control
Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Emergency Planning and Community Right-to-Know Act, as amended,
the Oil Pollution Act of 1990, the National Environmental Policy Act, as
amended, the Hazardous Materials Transportation Act, as amended, the Atomic
Energy Act, as amended, the Federal Insecticide, Fungicide and Rodenticide Act,
as amended, and other environmental conservation or protection laws, now
existing or hereafter enacted.
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1.61 "ERISA" means the Employee Retirement Security Act of 1974, as
amended from time to time.
1.62 "ERISA Affiliate" means all members of the group of corporations
and trades or businesses (whether or not incorporated) which, together with the
Company, are treated as a single employer under Section 414 of the Code.
1.63 "ERISA Plan" means any pension benefit plan subject to Title IV of
ERISA or Section 412 of the Code maintained or contributed to by the Company or
any ERISA Affiliate with respect to which the Company has a fixed or contingent
liability.
1.64 "Event of Default" is defined in the Note.
1.65 "Exchange Act" is defined in the Registration Rights Agreement.
1.66 "Exercise Period" is defined in the Warrant Certificate.
1.67 "Exercise Price" is defined in the Warrant Certificate.
1.68 "Expiration Date" is defined in the Warrant Certificate.
1.69 "Fair Market Value Amount" is defined in the Put Option Agreement.
1.70 "Financial Statements" means the Annual Financial Statements,
Monthly Financial Statements and Quarterly Financial Statements of the Company.
1.71 "Financial Tests" means the financial tests with respect to the
Company set forth in Section 10, which tests are based upon the Annual and
Quarterly Financial Statements and determined as provided for therein.
1.72 "Fiscal Year" means each year ended on December 31, or other
fiscal year of the Company adopted in the manner provided for in this
Agreement. Each Fiscal Year consists of four Quarters.
1.73 "GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor).
1.74 "Holder's Prorata Share" is defined in the Preemptive Rights
Agreement.
1.75 "Holder's Shares" is defined in the Preemptive Rights Agreement
and in the Put Option Agreement.
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1.76 "Indebtedness" means with respect to the Company, as of any date
of determination, the sum (without duplication) at such date of (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 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.
1.77 "Indemnified Party" is defined in the Subordinated Security
Agreement.
1.78 "Indemnified Liabilities" is defined in the Subordinated Security
Agreement.
1.79 "Initial Exercise Price" is defined in the Warrant Certificate.
1.80 "Insolvency Law" is defined in the Note.
1.81 "Insolvency Order" is defined in the Note.
1.82 "Insolvency Proceeding" is defined in the Note.
1.83 "Insolvency Relief" is defined in the Note.
1.84 "Interest" is defined in the Note.
1.85 "Interest Rate"is defined in the Note.
1.86 "Intercreditor Agreement" means the Intercreditor Agreement dated
as of October 25, 1996, by and between the Purchaser and the Senior Lender, as
modified, amended or restated from time to time.
1.87 "Investment" means any loan, advance or capital contribution to,
or investment in, or purchase or otherwise acquisition of any Capital Stock,
securities or evidences of indebtedness of any Person.
1.88 "Involuntary Insolvency Default" is defined in the Note.
1.89 "Lender Reports" means, without duplication of statements,
certificates, notices or reports furnished to the Purchaser pursuant to Section
7.1 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 the
Company.
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1.90 "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).
1.91 "Litigation" is defined in the Note.
1.92 "Management Letters" means any letter or report furnished by the
Accountants to management of the Company in connection with any Audit or
otherwise describing findings or recommendations with respect to the accounting
or management practices or procedures of the Company and, including, all
reports submitted to the Company by the Accountant in connection with any
interim or special audit made by the Accountant
1.93 "Market Determined Value Amount" is defined in the Put Option
Agreement.
1.94 "Maturity Date" is defined in the Note.
1.95 "Minimum Exercise Price" is defined in the Warrant Certificate.
1.96 "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 NDE or any Subsidiary.
1.97 "Month" means a calendar month, and "Monthly" means each Month.
1.98 "Monthly Financial Statements" means, with respect to each Month,
the consolidated Accounting Statements of the Company with respect to such
Month, which Accounting Statements shall be prepared and presented in the
manner customary for purposes of dissemination for management of the Company.
1.99 "NDE" means NDE Environmental Corporation, a Delaware corporation,
together with its successors and assigns.
1.100 "Negative Covenants" means the covenants of the Company set forth
in Section 9.
1.101 "Net Income" means, for any period, the net income (or loss) of
the Company after allowance for taxes for such period, determined in accordance
with GAAP; provided that there shall be excluded from such net income (to the
extent otherwise included therein) the following: (i) the net income of any
Person in which the Company has an interest (which interest does not cause the
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net income of such other Person to be consolidated with the net income of the
Company 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
the Company; (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;
(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; and (v) any gains or losses
attributable to writeups or write downs of assets.
1.102 "Non-Surviving Combination" means any merger, consolidation or
other business combination by the Company with one or more other entities in a
transaction in which the Company is not the surviving entity.
1.103 "Note" means the $8,000,000 aggregate principal amount Senior
Subordinated Note issued and sold by the Sellers to the Purchaser pursuant to
this Agreement, due December 31, 2001. The Note is in the form of Exhibit A.
1.104 "Notice" means any notice required to be given to any Party under
this Agreement or any of the Related Documents pursuant to Section 12(j)
1.105 "Notice of Exercise" is defined in the Warrant Certificate.
1.106 "Number of Warrant Shares" is defined in the Warrant Certificate.
1.107 "Obligations" means (i) all amounts owed by the Sellers to the
Purchaser evidenced by the Note, and (ii) all other present and future
indebtedness and obligations of the Sellers to the Purchaser however created,
arising or evidenced, direct or indirect, absolute or contingent, due or to
become due, now or hereafter existing (other than under the Warrants, Put
Option and Registration Rights Agreement).
1.108 "Outstanding Shares" is defined in the Put Option Agreement and
the Preemptive Rights Agreement.
1.109 "Parties" means the Sellers and the Purchaser collectively, and
"Party" means any one of the Parties.
1.110 "Payment Date" is defined in the Note.
1.111 "Payment Default" is defined in the Note.
1.112 "Pay Off Date" is defined in the Note.
1.113 "Permitted Indebtedness" means, as of any date of determination
the aggregate principal amount of all Indebtedness of the Company outstanding
as of such date of determination,
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but only to the extent that the principal amount of such Indebtedness does not
exceed the amounts permitted under this Agreement.
1.114 "Permitted Liens" means:
(i) Liens incurred pursuant to the Purchase Agreements and
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; and
(vii) Liens specifically identified in Schedule 1.114.
1.115 "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
equity.
1.116 "Pledge Agreement" means the Security Interest-Pledge of
Subsidiary Stock Agreement dated as of the date hereof by and between NDE and
the Purchaser.
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1.117 "Preemption Offering" is defined in the Preemptive Rights
Agreement.
1.118 "Preemptive Rights Agreement" means the Preemptive Rights
Agreement dated as of the date hereof, by and between NDE and the Purchaser.
1.119 "Preemptive Shares" is defined in the Registration Rights
Agreement.
1.120 "Prepayment Premium" is defined in the Note.
1.121 "Principal Amount" is defined in the Note.
1.122 "Proceeds" is defined in the Pledge Agreement and in the
Subordinated Security Agreement.
1.123 "Proeco" means Proeco, Inc., a Delaware corporation, together with
its successors and assigns.
1.124 "Prohibited Transfer" is defined in the Co-Sale Agreement.
1.125 "Purchase Offer" is defined in the Co-Sale Agreement.
1.126 "Purchaser" means Banc One Capital Partners, L.P., an Ohio limited
partnership, together with its successors and assigns.
1.127 "Put Date" is defined in the Put Option Agreement.
1.128 "Put Event" is defined in the Put Option Agreement.
1.129 "Put Option"is defined in the Put Option Agreement.
1.130 "Put Option Agreement" means the Put Option Agreement dated as of
the date hereof by and between NDE and the Purchaser.
1.131 "Put Shares" is defined in the Put Option Agreement.
1.132 "Qualified Public Offering" means the first offer and sale to the
public by NDE or any holders of shares of any class of its Capital Stock, after
the Closing Date, pursuant to a registration statement that has been declared
effective by the SEC; provided, however, that the gross proceeds of the shares
issued and sold by NDE are at least $20,000,000.
1.133 "Quarter" means each quarter annual period of the Fiscal Year, and
"Quarterly" means each Quarter. Each Quarter consists of three Months.
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1.134 "Quarterly Financial Statements" means, with respect to each
Quarter, the consolidated Accounting Statements of the Company 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 the NDE's Form 10-Q filed with the SEC
shall be deemed to constitute the Company's Quarterly Financial Statement.
1.135 "Registrable Securities" is defined in the Registration Rights
Agreement.
1.136 Registration Expenses" is defined in the Registration Rights
Agreement.
1.137 "Registration Rights Agreement" means the Registration Rights
Agreement dated as of the date hereof, by and between NDE and the Purchaser.
1.138 "Related Documents" means the Subordinated Security Agreement, the
Pledge Agreement, the Put Option Agreement, the Preemptive Rights Agreement,
the Registration Rights Agreement, the Co-Sale Agreement and the Warrant
Certificate.
1.139 "Reorganization Event" is defined in the Warrant Certificate.
1.140 "Representation(s) and Warranty(ies)" means the representations
and warranties of the Sellers set forth in Section 5 and in any certificate of
the Sellers delivered pursuant to Section 4.
1.141 "Reporting Covenants" means the covenants of the Company set forth
in Section 7.
1.142 "Repurchase Price" is defined in the Put Option Agreement.
1.143 "Responsible Officer" means the chief executive officer, chief
operating officer, chief financial officer or chief accounting officer of the
Company or any other officer of the Company involved principally in its
financial administration of its controllership function.
1.144 "Restricted Payments" means any of the following:
(i) any dividend on any class of NDE's Capital Stock;
(ii) any other distribution on account of any class of the
Company's Capital Stock;
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(iii) any redemption, purchase or other acquisition, direct or
indirect, of any shares of NDE's Capital Stock (other than
pursuant to the Put Option); and
(iv) any management, consulting and other fees paid to
Proactive, Lagunitas, 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 NDE; or (B)
exchanges of Capital Stock of NDE for another class of Capital Stock of NDE,
except to the extent that cash or other non-stock value is involved in such
exchange.
1.145 "Rights Offering" is defined in the Preemptive Rights Agreement.
1.146 "SEC" means the United States Securities and Exchange Commission
(or any governmental body or agency succeeding to its functions).
1.147 "Secured Obligations" is defined in the Pledge Agreement and in
the Subordinated Security Agreement.
1.148 "Secured Party" is defined in the Subordinated Security Agreement
and the Pledge Agreement.
1.149 "Securities Act" is defined in the Registration Rights Agreement.
1.150 "Security Agreements" means collectively, the Senior Security
Agreement, the Subordinated Security Agreement and the Pledge Agreement.
1.151 "Security Documents" means the Subordinated Security Agreement and
the Pledge Agreement.
1.152 "Security Reports" means all financial statements, proxy
statements, notices and reports furnished to the shareholders or securities
holders of the Company and all registration statements and reports (including
reports on Forms 10-K, 10-Q and 8-K) filed with the SEC.
1.153 "Sellers" means NDE, TCI, USTMAN, Testing & Equipment, Proeco and
Canada.
1.154 "Selling Shareholder" is defined in the Co-Sale Agreement.
1.155 "Senior Lender" means Bank One Texas, N.A. as lender under the
Senior Loan Agreement, together with its successors and assigns in such
capacity.
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1.156 "Senior Loan Agreement" shall have the meaning set forth in
Paragraph C, and including all extensions, renewals and refinancings thereof.
1.157 "Senior Loans" shall have the meaning specified in Paragraph C,
including all extensions, renewals and refinancings thereof.
1.158 "Senior Indebtedness" means the Senior Loans, and Indebtedness
incurred pursuant to the terms of any agreement (other than the Senior Loan
Agreement) between the Sellers and any bank or financial institution providing
for revolving credit loans secured by the Collateral and Mortgage Collateral;
provided, that any such other agreement shall have been consented to by the
Purchaser, 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 Security Agreement.
1.159 Senior Security Agreement" means the Security Agreement dated as
of the date hereof by and among the Sellers 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.
1.160 "Share Interests" is defined in the Pledge Agreement.
1.161 "Stated Interest Rate" is defined in the Note.
1.162 Stock Purchase Agreement" shall have the meaning set forth in
Paragraph B.
1.163 "Subordinated Debt" means Indebtedness of the Company which is
subordinated, in a manner satisfactory to and approved in writing by the
Purchaser, to the Indebtedness of the Company evidenced by the Note.
1.164 "Subordinated Security Agreement" means the Security Agreement-
Personal Property dated as of the date hereof by and among the Sellers and the
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.
1.165 "Subsidiary" means any corporation, all of the stock of every
class of which, except directors' qualifying shares, shall at the time as of
which any determination is being made, be owned by the Company either directly
or through Subsidiaries.
1.166 "Subsidiary Stock" is defined in the Pledge Agreement.
1.167 "Net Worth" means at a particular date, the sum of preferred stock
(if any), 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.
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1.168 "TCI" means Tanknology/NDE Corporation, a Delaware corporation,
together with its successors and assigns.
1.169 "TEI" means Tanknology Environmental, Inc., a Texas corporation,
together with its successors and assigns.
1.170 "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.
1.171 "Transfer" means, with respect to any item, the sale, exchange,
conveyance, lease, transfer or other disposition of such item.
1.172 "Trigger Event" is defined in the Put Option Agreement.
1.173 "UCC" means the Uniform Commercial Code as in effect in the State
of Ohio.
1.174 "USTMAN" means USTMAN Industries, Inc., a Delaware corporation,
together with its successors and assigns.
1.175 "Valuation Amount" is defined in the Put Option Agreement.
1.176 "Voluntary Insolvency Default" is defined in the Note.
1.177 "Voting Power" means with respect to any corporation the power to
vote for or designate members of the board of directors of such corporation,
whether exercised by virtue of the record ownership of stock, under a close
corporation or similar agreement or under an irrevocable proxy.
1.178 "Warrant Certificate" means, the Warrant Certificate dated October
25, 1996 issued by NDE to the Purchaser evidencing 13,022,920 Warrants.
1.179 "Warrant Shares"is defined in the Registration Rights Agreement.
1.180 "Warrants" is defined in the Warrant Certificate.
SECTION 2. PURCHASE AND SALE OF THE NOTES.
Upon the terms and subject to the conditions set forth in this Agreement,
the Sellers shall issue and sell to Purchaser and Purchaser shall purchase from
the Sellers for a purchase price of $8,000,000, a Senior Subordinated Note due
December 31, 2001, and dated as of the Closing Date ("Note") made payable by
the Sellers to the Purchaser in the principal amount of $8,000,000. Such
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purchase and sale shall be consummated on the Closing Date as provided for in
this Agreement, and on such date the Purchaser shall make payment of the
purchase price of the Note being purchased by wire transfer to an account
designated by the Company.
SECTION 3. ISSUANCE OF WARRANTS.
Upon the terms and subject to the conditions set forth in this Agreement,
NDE shall issue and sell to Purchaser and Purchaser shall purchase from NDE for
a purchase price of $100, warrants to purchase Common Shares of NDE evidenced
by the Warrant Certificate dated as of the Closing Date in the form of Exhibit
B. Such sale and purchase shall be consummated on the Closing Date as provided
for in this Agreement.
SECTION 4. CONDITIONS TO CLOSINGS.
The obligations of the Purchaser to purchase the Note and the Warrants on
the Closing Date is subject to the fulfillment in a manner reasonably
satisfactory to the Purchaser and their counsel, of each of the following
conditions precedent.
(a) Senior Loan Agreement. The Senior Loan Agreement shall have been
duly executed and delivered by the Senior Lender and the Sellers and be in full
force and effect, and: (i) the Senior Lender shall have advanced at least
$8,000,000 of the Senior Indebtedness to the Sellers under the Senior Loan
Agreement simultaneously with the payment of the purchase price for the Note;
(ii) 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; (iii) to the best knowledge of the Sellers
each of the representations and warranties of the Sellers set forth in the
Senior Loan Agreement is true and correct as of the Closing Date; (iv) the
Senior Lender has not waived compliance with any covenant set forth in the
Senior Loan Agreement or waived the breach of any representation or warranty
set forth in the Senior Loan Agreement as of the closing Date; and (v) the
Senior Lender and the Purchaser shall have executed and delivered the
Intercreditor Agreement.
(b) Stock Purchase Agreement. The Stock Purchase Agreement shall have
been duly executed and delivered by NDE and TEI, and: (i) the Acquisition
Transaction shall have been consummated upon the terms and subject to the
conditions set forth in the Stock Purchase Agreement; (ii) $8,000,000 of the
proceeds of the Senior Indebtedness shall have been applied to the payment of
the purchase price provided for under the Stock Purchase Agreement; (iii)
$4,000,000 of the proceeds of the sale of the Note shall have been applied to
the payment of the purchase price provided for under the Stock Purchase
Agreement simultaneously with the payment of the purchase price for the Note;
(iv) to the best knowledge of the Sellers after reasonable investigation by NDE
each of the representations and warranties of TEI is true and correct in all
material respects as of the Closing Date; and (v) NDE has not waived compliance
with any covenant set forth in the Stock Purchase Agreement or waived the
breach of any representations or warranty set forth in the Purchase Agreement.
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(c) Execution and Delivery of Related Documents. Each of the
following Related Documents, each dated and effective as of the Closing Date,
shall have been duly executed and delivered by all parties thereto:
(i) the Note;
(ii) the Warrant Certificate;
(iii) the Subordinated Security Agreement;
(iv) the Pledge Agreement;
(v) the Put Option Agreement;
(vi) the Registration Rights Agreement;
(vii) the Co-Sale Agreement;
(viii) the Preemptive Rights Agreement;
(ix) Consulting Agreement; and
(x) the Commitment Letter.
(d) Certificates, Opinions, and Other Documents. The following
certificates, opinions and other documents shall be delivered by or on behalf
of the Sellers:
(i) a certificate of NDE executed by Chairman of the Board of
NDE in the form of Exhibit C certifying compliance with
the closing conditions set forth in this section;
(ii) United States Small Business Administration Size Status
Declaration;
(iii) United States Small Business Administration Use of
Proceeds Declaration;
(iv) certified copies of the corporate resolutions of each
Seller authorizing the execution, delivery and performance
of its obligations under this Agreement, the Note, the
Related Documents and any other documents to be delivered
pursuant to this Agreement;
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(v) certified copies of each Seller's Certificate of
Incorporation, including any and all amendments thereto,
and a certified copy of the bylaws of each Seller as in
effect on the Closing Date;
(vi) a certificate of the Secretary of each Seller certifying
the names of the officers of the Sellers authorized to
sign this Agreement, the Related Documents and any other
documents or certificates to be delivered pursuant to this
Agreement by the Sellers, together with the true
signatures of such officers;
(vii) an opinion of counsel for the Sellers, addressed to the
Purchaser, in the form of Exhibit D;
(viii) certificates evidencing the Subsidiary Stock pledged to
the Purchaser pursuant to the Pledge Agreement, together
with duly executed stock powers delivered to the Senior
Lender;
(ix) UCC-1s with respect to the Collateral under the
Subordinated Security Agreement and Pledge Agreement in
the forms and as provided for herein; and
(x) such other opinions, certificates, affidavits, documents
and filings, including any and all UCC filings, as the
Purchaser may deem reasonably necessary or appropriate.
(e) Disbursements and Deliveries. The following disbursements shall
have been made out of the proceeds of the sale of the Note:
(i) $100 paid to NDE as payment of the purchase price for the
Warrants;
(ii) $160,000 paid to the Purchaser as a closing fee;
(iii) $25,000 paid to the Purchaser as reimbursement of expenses
as provide for in Section 12(c);
(iv) $320,000 to McGettigan & Wick, Inc. as consulting fees;
and
(v) the balance of such proceeds paid to TEI as partial
payment of the purchase price provided for in the Stock
Purchase Agreement.
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SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLERS.
The representations and warranties of the each Seller set forth in this
Section 5 shall survive the purchase and sale of the Note and Warrants, and any
investigation made by the Purchaser shall not diminish the right of the
Purchaser to rely upon such representations and warranties. Each Seller
represents and warrants to the Purchaser as follows.
(a) Organization. Each Seller is a corporation duly organized and
validly existing under the laws of the jurisdiction of its incorporation and
the execution, delivery and performance of this Agreement, each of the Related
Documents and of any instrument or agreement required by this Agreement and
each of the Related Documents are within such Seller's powers, have been duly
authorized, and are not in conflict with the terms of any charter, bylaw or
other organizational documents of the Seller.
(b) Subsidiaries. Immediately after the date of Closing, NDE will not
have any Subsidiaries or own any Capital Stock, other than the Subsidiary
Stock, partnership interest, membership interest or other equity interest in or
of any other entity.
(c) Good Standing. Each Seller is properly licensed and in good
standing in each state in which the Seller is doing business and such Seller
has qualified under, and complied with, where required, the fictitious name
statute of each state in which such Seller is doing business and where the
failure to do so would have a material adverse affect on the Company's
financial condition or operations.
(d) Information Submitted. Any audited consolidated Annual Financial
Statements and unaudited Quarterly Financial Statements of the Company
submitted by the Company to the Purchaser have been prepared in accordance with
GAAP consistently applied and fairly present the financial condition of the
Company as at 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 Company since the later of
(i) August 31, 1996, and (ii) date of the most recent Financial Statements
submitted to the Purchaser.
(f) Disclosure. Neither this Agreement nor any other document,
opinion, Accounting Statement, certificate or statement by an officer of any
Seller furnished or made by or on behalf of the Seller in connection with the
transactions contemplated in this Agreement, including the Acquisition
Transaction, 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 the Sellers, there is no fact
peculiar to any Seller which materially and adversely affects or in the future
may (so far as the Sellers can reasonably foresee) materially and adversely
affects the business, property or assets or financial condition of the Company
which has not been
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disclosed to the Purchaser in this Agreement or in other documents, opinion,
Accounting Statements, certificates or statements furnished to or made by or on
behalf of the Seller to the 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 are not in conflict with any law or any material indenture,
agreement or undertaking to which the Seller is a party or by which any Seller
is bound or affected.
(h) Enforceability. This Agreement is a legal, valid and binding
agreement of the Seller, enforceable against the Seller in accordance with its
terms and each Related Document, and any instrument or agreement required under
this Agreement, 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.
(i) Ownership of Collateral. All Collateral is owned, and all
Collateral acquired hereafter will be owned, legally and beneficially, by the
Sellers free and clear of all security interests, liens, encumbrances, adverse
claims and rights of others except for the rights of the Senior Lender and the
Purchaser under the Security Agreements and those consented to in writing by
the Senior Lender and the Purchaser, except for Permitted Liens.
(j) 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 the Purchaser pursuant to this Agreement. The Seller does not
do business and has not done business within the past five (5) years under a
trade name or any name other than its legal name set forth at the beginning of
this Agreement, except as specified in Schedule 5(j).
(k) Perfected Security Interest in Collateral. Except for the filing
of financing statements (and continuation statements, where appropriate) with
respect to the Collateral and the delivery to the 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 the
Purchaser' lien on or perfected security interest in the Collateral, which lien
shall be second only to the lien of the Senior Lender.
(l) Compliance with Laws. To the best of the knowledge of the Seller,
each Seller has complied with all federal, state and local laws, rules and
regulations affecting the business of such Seller, where the failure to comply
(in any one instance or in the aggregate) would have a material adverse affect
on the business, condition (financial or otherwise) or operations of such
Seller.
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(m) Environmental Compliance. Each Seller and all of its properties
and facilities have, at all time and in all respects, complied with all
Environmental Laws, except where the failure to comply would not have a
material adverse effect on the business, condition (financial or otherwise) or
operations of such Seller, assuming all such instances of non-compliance were
brought to the attention of appropriate governmental authorities.
(n) Labor and Employee Relations Matters.
(i) No Seller is and no Seller 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 the Sellers, threatened to be called against
such Seller; and no Seller has not violated any applicable
federal or state law or regulation relating to labor or
labor practices, where the failure to comply (in any one
instance or in the aggregate) would have a material
adverse affect on the business, condition (financial or
otherwise) or operations of such Seller.
(ii) No present or former employees of any Seller have advanced
claims in writing against the Seller (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 any such claims which, in the
aggregate, do not exceed $100,000.
(iii) There is not pending against any Seller 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 Seller's operations.
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(iv) There is not pending or, to the knowledge of the Sellers
threatened, any charge or complaint against any Seller 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 any Seller
is a party have been furnished to the Purchaser.
(o) 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.
(p) Litigation. There is no litigation, tax claim, proceeding or
dispute pending, or, to the knowledge of any Seller threatened, against or
affecting any Seller or its property, the adverse determination of which will
have a material adverse affect the Company's financial condition or operation
or impair any Seller's ability to perform its obligations hereunder or under
any instrument or agreement required hereunder.
(q) Taxes. All tax returns required to be filed by each Seller in any
jurisdiction have been filed or extended and all taxes, assessments, fees and
other governmental charges upon any Seller or upon any of its 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 such Seller. The Sellers have no knowledge
of any proposed tax assessment against any Seller.
(r) Securities Act. No Seller has 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 is not
violating any rule, regulation, or requirement under the Securities Act or the
Exchange Act, where the failure to comply (in any one instance or in the
aggregate) would have a material adverse affect on the business, condition
(financial or otherwise) or operations of such Seller. No Seller is required
to qualify an indenture under the Trust Indenture Act of 1939, as amended, in
connection with its execution and delivery of the Note.
(s) Indebtedness. Immediately after the date of Closing, the Company
will not have any outstanding Indebtedness other than the Note, the Senior
Loans, accounts payable and other indebtedness incurred in the ordinary course
of business, except as set forth in Schedule 5(s).
(t) ERISA Plan. The Company 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.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
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The representations and warranties of the Purchaser set forth in this
Section 6 shall survive the purchase and sale of the Note and Warrants, and any
investigation made by the Sellers shall not diminish the right of the Sellers
to rely upon such representations and warranties. The Purchaser represents and
warrants to the Sellers as follows.
(a) Organization. The Purchaser represents and warrants that it is a
limited partnership duly organized and validly existing under the laws of the
state of its formation and the execution, delivery and performance of this
Agreement, each of the Related Documents and of any instrument or agreement
required by this Agreement, or each of the Related Documents are within its
powers, have been duly authorized, and are not in conflict with the terms of
any provision of its partnership agreement or other organizational papers.
(b) No Conflicts. The execution, delivery and performance of this
Agreement, the Related Documents and any other instrument or agreement required
by this Agreement are not in conflict with any law or of any material
indenture, agreement or undertaking to which the Purchaser is a party or by
which the Purchaser is bound or affected.
(c) Enforceability. This Agreement is a legal, valid and binding
agreement of the Purchaser, enforceable against the Purchaser in accordance
with its terms, the Related Documents and any other instrument or agreement
required under this Agreement, when executed or delivered, will be legal,
valid, binding and enforceable.
(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 the Purchaser or
enforcement against the Purchaser of this Agreement or the transactions
contemplated hereby.
(e) Experience. The 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 the Sellers and has made investments of securities other
than those of the Sellers. The 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. The Purchaser is acquiring its Note, Warrant
Certificate and Warrant Shares for investment for its own account, not as a
nominee or agent and not with a view to, or for resale in connection with, any
distribution thereof. The Purchaser may sell a beneficial interest (but not of
record) in not more than $350,000 Principal Amount of the Note and a
proportionate share of the Warrants to not more than 10 Accredited Investors
(as defined in the Exchange Act) who are either Affiliates of the Purchaser or
NDE. The Purchaser understands that the issuance and sale of such securities
purchased by it hereunder (and the issuance to the Purchaser of Warrant Shares
upon the conversion of the Warrant Certificate) have not been, and will not be,
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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 the Purchaser's representation as expressed herein.
(g) Rule 144. The Purchaser acknowledges that the securities which
could be acquired hereunder are restricted securities within the meaning of
Rule 144 promulgated under the Securities Act and must be held indefinitely
unless subsequently registered under the Securities Act and applicable state
securities laws or unless an exemption from such registration is available.
The 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 the Sellers, the
resale occurring not less than two years 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" 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. The Purchaser is aware of and has
investigated the Sellers' business, management and financial condition, has had
the opportunity to inspect the Sellers' facilities and has had access to such
other information about the Sellers as the 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 of an offering in connection with the sale of
such securities.
SECTION 7. FINANCIAL REPORTING.
The obligations and covenants of the Sellers set forth in this Section 7
shall terminate upon the later to occur of (i) the exercise or expiration of
the Put Option and (ii) the date upon which the Purchaser is no longer the
holder of any Note, Warrants or Warrant Shares.
7.1 FINANCIAL REPORTS.
The Sellers shall deliver, or shall cause to be delivered to the Purchaser
the following financial reports within the applicable time periods specified in
this Section.
(a) Annual Financial Statements. The Annual Financial Statements
shall be delivered within ninety (90) days 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 forty-five (45) days after the end of each
Quarter (other than the fourth Quarter) of
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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 the
Company.
(d) Projected Financial Statements. The projected Financial
Statements with respect to each succeeding Fiscal Year shall be delivered with
sixty (60) days after the end of the preceding Fiscal Year.
(e) Securities Reports. Any Securities Reports shall be delivered
promptly upon their delivery to shareholders, securities holders or the SEC.
(f) Lender Reports. Any Lender Reports shall be delivered promptly
upon their delivery to any lender or note holder.
(g) Management Letters. Any Management Letters shall be delivered
promptly after receipt thereof.
(h) Minutes. Any Minutes shall be delivered promptly upon the
recording of such Minutes in the records of the Company.
7.2 OTHER INFORMATION.
Promptly upon reasonable written request therefor, the Sellers shall
furnish (or cause to be furnished) to the Purchaser other financial or other
information with respect to the Company available in the books, records and
files of the Company; provided, however, that if such information cannot be
furnished without undue expense, the Sellers may require the Purchaser to
reimburse it for all reasonable out-of-pocket expenses incurred in connection
with furnishing such information.
7.3 RULE 144A.
The Sellers shall upon the reasonable written request of the Purchaser,
furnish to any qualified institutional buyer (as such term is defined in Rule
144A under the Securities Act) designated by the Purchaser, such financial or
other information as the Purchaser reasonably determines is necessary in order
to afford compliance with the applicable information requirements under Rule
144A under the Securities Act in connection with any proposed sale of the
Warrants or Warrant Shares except at such times as the Company is subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act.
7.4 PREPARATION OF ANNUAL AND QUARTERLY FINANCIAL STATEMENTS IN ACCORDANCE
WITH GAAP.
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The Sellers shall maintain adequate books, accounts and records, and
prepare all Annual and Quarterly Financial Statements required to be delivered
to the 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 the Company
initially delivered to the Purchaser, except for any changes in such practices,
policies and procedures permitted or approved in the manner provided for in
this Section.
7.5 CHANGES IN GAAP AND IN PRACTICES, POLICIES AND PROCEDURES.
(a) Notice of Proposed Change. In the event that the Company proposes
to make any material change in any of the practices, policies or procedures
applied in connection with the preparation of its Annual or Quarterly Financial
Statements, the Company shall:
(i) notify the Purchaser in writing of such proposed change at
least forty-five (45) days prior to the required delivery
date of the first Annual or Quarterly Financial Statement
that will be effected by such proposed change;
(ii) state in reasonable detail in such notice the reason for
such change, including, if applicable, a description of
any change in GAAP that occasion such change;
(iii) submit with such notice a written statement by the chief
financial officer of the Company 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, the Company shall not adopt any
such proposed change without the written consent of the Purchaser, which
consent shall not be unreasonably withheld by the Purchaser; provided, however,
that the Company shall not permit the Company to change its Fiscal Year without
the written consent of the Purchaser, which consent may be withheld in the
exercise of its sole discretion.
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<PAGE> 32
(c) Effect of Change on Financial Tests. In the event that any such
change in policies, practice 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 Test shall be determined on a proforma basis without giving effect to
any such change.
7.6 NOTICE OF CERTAIN EVENTS.
The Sellers shall give prompt written notice to the Purchaser of the
occurrence of any of the following events:
(i) a Default;
(ii) the occurrence of any event which with notice, lapse of
time or both would constitute an event of default under
any Senior Indebtedness;
(iii) all litigation affecting the Company where the amount
claimed is Two Hundred Fifty Thousand Dollars ($250,000)
or more;
(iv) any substantial dispute which may exist between the
Company and any governmental regulatory body or law
enforcement authority;
(v) Any other matter which has resulted or is likely to result
in a material adverse change in the Company's financial
condition or operations;
(vi) the loss or destruction of any material asset of the
Company;
(vii) the entering into any agreement or letter of intent with
respect to any Trigger Event;
(viii) the occurrence of any Trigger Event; and
(ix) any change in the Exercise Price.
7.7 INSPECTIONS.
(a) Books, Records, Audits and Inspections. The Sellers shall
maintain adequate books, accounts and records and prepare all Annual, Quarterly
or Monthly Financial Statements required hereunder in accordance with GAAP
consistently applied, and in compliance with the regulations of any
governmental regulatory body having jurisdiction over the Company or the
Company's business and permit employees or agents of the Purchaser at any
reasonable time to inspect Company's properties, and to examine or audit the
Company's books, accounts and records and make copies and memoranda thereof.
In the event any properties, books, accounts or records
30
<PAGE> 33
are in the possession of or under the control of a third party, the Company
shall direct and hereby authorize such third party to permit access to the
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 the Purchaser for information concerning the
amount, status or condition of any assets in a third party's possession or
control.
7.8 LATE DELIVERY OF ACCOUNTING STATEMENTS.
In the event that Sellers fail to deliver to Purchaser any Financial Report
required to be delivered pursuant to clause (a), (b), (c) or (d) of Section 7.1
within 5 Business Days after the required delivery date, the Purchaser may, in
the exercise of its discretion, by Notice to the Sellers, assess a late
delivery fee of $1,000 with respect to each such late delivery plus $100 per
Business Day from the date of such Notice continuing until such Financial
Report has been delivered; provided, however, that the maximum assessment with
respect to the delivery of any one Financial Report shall be $2,500. The
Sellers shall pay any such assessment upon demand. The assessment of any such
late delivery fee shall not constitute a waiver of the associated Default, and
no such Default shall be deemed to have been remedied unless and until any such
assessment has been paid.
SECTION 8. AFFIRMATIVE COVENANTS.
Until the later to occur of (i) the Maturity Date and (ii) the Put Option
is exercised or expires, the Sellers shall, unless the Purchaser waives
compliance therewith in writing:
(a) Insurance. Insure and maintain insurance upon all of its assets
and business properties and public and product liability insurance with
responsible and reputable insurers of such character and in such amounts as are
usually maintained by companies engaged in like business.
(b) Payment of Taxes and Claims. Pay all taxes, assessments and other
governmental charges imposed upon any of their properties or assets or in
respect of any of their franchises, business, income or profits before any
penalty or interest accrues thereon, and 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 any of their properties or
assets, provided that (unless any 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 such 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 and assets if
noncompliance therewith would materially adversely affect such business.
31
<PAGE> 34
(d) Preservation of Existence. Except as expressly permitted in
Section 9(g), (h) or (k), 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
affect on the Company's financial condition or operations.
(e) Maintenance of Tangible Assets. Maintain its tangible assets in
good condition and repair in accordance with the requirements of its business
and shall 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 material 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) Director. A representative chosen by the Purchaser shall be a
member of the Board of Directors of NDE and the number of members of Board of
Directors shall not, without the consent of the Purchaser, exceed seven.
SECTION 9. NEGATIVE COVENANTS.
Until the later to occur of (i) the Maturity Date and (ii) the Put Option
is exercised or expires hereunder, the Sellers shall not, unless the prior
written consent of the 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 of Indebtedness (excluding existing
Indebtedness referred to in (v) below).
(iii) Lease financing or purchase money for equipment which is
secured by the equipment so leased or purchased;
(iv) Indebtedness of any Subsidiary to NDE or another
Subsidiary;
(v) existing Indebtedness identified in Schedule 5(s); and
(vi) Indebtedness incurred under the Commitment Letter up to a
maximum principal amount of $1,000,000.
32
<PAGE> 35
(b) Prepayments. Pay any Indebtedness prior to its scheduled maturity
or scheduled payment date other than the Note or the Senior Loans.
(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, except, to the extent not otherwise prohibited hereunder:
(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 NDE 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 the Company's business.
(e) Loans, Advances and Investments. Make any loan, advance, or
capital contribution to, or investment in (including any investment in any
corporation, joint venture or partnership), 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 the Company 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 the Company;
(iii) Make or permit to remain outstanding travel and other
advances to officers and employees of NDE or a Subsidiary
in the ordinary course of business; and
(iv) other loans, advances and investments (including loans,
advances and investments to or in Subsidiaries), provided
that the aggregate amount thereof, at original cost, at no
time exceeds $100,000.
33
<PAGE> 36
(f) No Acquisition or Merger. Acquire by purchase or otherwise all or
substantially all of the assets or Capital Stock of any Person. Merge or
consolidate with or into any Person, except that:
(i) Any Subsidiary may merge or consolidate with or into NDE,
provided that NDE 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 Section 3 of the Warrant
Certificate, the Company may merge with any other solvent
corporation, provided that (A) the Company shall be the
continuing or surviving corporation and (B) no Event of
Default 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 stock or Indebtedness of any
Subsidiary, except to NDE or another Subsidiary, and except that all shares of
stock and Indebtedness of any Subsidiary at the time owned by or owed to NDE
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 the NDE) at the time of sale of the shares of 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 9(j) and (B) at the time of such sale, such Subsidiary shall not own,
directly or indirectly, any shares of 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 NDE and all Subsidiaries are
simultaneously being sold as permitted by this Section 9(g)).
(h) Sales and Leasebacks. 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.
(i) Restrictions on Dividends. Directly or indirectly declare or
make, or incur any liability to make any Dividend.
(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 NDE or another
Subsidiary;
(ii) NDE or any Subsidiary may sell inventory in the ordinary
course of business; and
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<PAGE> 37
(iii) NDE or any Subsidiary may otherwise Transfer assets,
provided that the assets Transferred shall not exceed
$250,000 in any twelve Month period.
(k) Restricted Payments. Make, pay or declare, or commit to make, pay
or declare, any Restricted Payment without the prior written consent of the
Purchaser except that so long as no Event of Default shall have occurred and be
continuing, or would result therefrom, the Company may repurchase Common Shares
from employees of the Company 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.
(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 the Company, except any
transaction or contract which is in the ordinary course of the Company's
business and which is upon fair and reasonable terms no less favorable to the
Company than it would obtain in a comparable arms-length transaction with a
person not an affiliate.
(n) Change of Control. Without the prior written consent of the
Purchaser, permit any Change of Control.
(o) ERISA Plans. Adopt or agree to maintain or contribute to any
ERISA Plan without the prior written consent of the Purchaser which consent
shall not be unreasonably withheld. The Company shall promptly notify the
Purchaser in writing in the event an ERISA Affiliate adopts and ERISA Plan.
(p) Change in Principal Office. Moves its principal office, executive
office or principal place of business without prior written notice to the
Purchaser.
(q) Termination of Consulting Contract. NDE shall not terminate the
Consulting Contract before its stated termination date without the prior
written consent of the Purchaser.
SECTION 10. FINANCIAL TESTS.
Until payment in full of the Note and the performance by the Sellers of all
its obligations hereunder, the Company shall, unless the Purchaser waives
compliance therewith in writing, meet the following Financial Tests.
35
<PAGE> 38
(a) Total Liabilities to Net Worth Ratio. Maintain, at all times, a
ratio of Total Liabilities less Subordinated Debt to Net Worth plus
Subordinated Debt of not greater than the ratio set forth opposite the
applicable period below:
<TABLE>
<S> <C>
Period Ending Ratio
------------- -----
Closing Date through December 31, 1996 2.50:1.0
Thereafter through December 31, 1997 2.00:1.0
Thereafter through December 31, 1998 1.75:1.0
Thereafter through December 31, 1999 1.50:1.0
Thereafter through December 31, 2000 1.25:1.0
Thereafter through December 31, 2001 1.00:1.0
</TABLE>
(b) Net Worth. Maintain a total Company Net Worth of not less than
90% of Company Net Worth at the Closing Date, plus (i) 60% of the Company's Net
Income (if positive) subsequent to the Closing Date, calculated cumulatively as
of the end of each Quarter beginning with the Quarter ending December 31, 1996,
and (ii) 100% of any equity issued.
(c) Debt Service Coverage Ratio. Maintain, as calculated at the end of
each Quarter beginning December 31, 1997, a Debt Service Coverage Ratio of not
less than 1.25 to 1.0 .
(d) General and Administrative Expenses. Maintain general and
administrative expenses at a level that (i) does not exceed $3,300,000 for each
Quarter ending March 31, 1997, through September 30, 1997, and not exceeding
35% of revenues for each twelve Month period on a rolling four Quarter basis,
beginning with the Quarter ending December 31, 1997.
SECTION 11. EVENTS OF DEFAULT.
The Events of Default shall be stated in the Note a form of which is
attached as Exhibit A.
SECTION 12. MISCELLANEOUS.
(a) No Implied Rights or Waivers. No notice to or demand on the
Sellers in any case shall entitle the Sellers to any other or further notice or
demand in the same, similar and other circumstances. Neither any failure nor
any delay on the part of the Purchaser in exercising any right, power or
privilege hereunder or under the Note or 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.
36
<PAGE> 39
(b) Modifications, Amendments or Waivers. The Sellers and the
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 provided that no departure from the Company's due
performance of its obligations hereunder shall be effective unless agreed to in
writing by the Purchaser.
(c) Expenses. The Sellers shall pay or cause to be paid and save the
Purchaser harmless against liability for the payment of all reasonable
out-of-pocket expenses, including counsel fees (including fees of Purchaser's
outside counsel and Legal Department not to exceed $25,000) and disbursements,
incurred or paid by the Purchaser in connection with (i) the due diligence
inquiries, negotiation, development, preparation, execution and performance of
this Agreement, the Note, the Subordinated Security Agreement, the Warrant
Certificate, the Registration Agreement, the Put Option Agreement, the
Preemptive Rights Agreement, the Co-Sale Agreement, the Pledge Agreement, the
Intercreditor Agreement and the related transactions; (ii) any requested
amendments, waivers or consents pursuant to the provisions hereof and thereof;
and (iii) the enforcement of this Agreement, the Note, the Subordinated
Security Agreement, the Registration Agreement, the Put Option Agreement, the
Preemptive Rights Agreement and the Warrant Certificate, including such
reasonable expenses as may be incurred by the Purchaser in collection of the
Note.
(d) Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP.
(e) Entire Agreement. This Agreement including the Exhibits or
Schedules hereto, constitutes the entire agreement relating to the subject
matter hereof among the Parties hereto. Each Party acknowledges that no
representation, inducement, promise or agreement has been made, orally or
otherwise, by any other Party, or anyone acting on behalf of any other Party,
unless such representation, inducement, promise or agreement is embodied in
this Agreement expressly or by incorporation.
(f) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio.
(g) 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.
(h) 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.
(i) Rules of Construction. Unless otherwise specified, the following
rules shall be applied in construing the provisions of this Agreement and the
Related Documents.
37
<PAGE> 40
(i) Terms that imply gender shall be construed to apply to all
genders.
(ii) References to Sections, Schedules and Exhibits refer to
the numbered Sections of, the Schedules of and the
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 or
any Related Documents (as applicable) are incorporated
herein by reference.
(v) "Herein", "hereto", "hereof" and words of similar import
refer to this Agreement or any Related Documents (as
applicable).
(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).
(j) Notices. Any notice or other communication required or permitted
to be made or given under this Agreement or any Related Documents (as
applicable), shall be in writing and shall be deemed to have been received by
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 date actually received if hand delivered or if transmitted by telefax
(receipt of which is confirmed to
38
<PAGE> 41
sender); 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:
Banc One Capital Partners, L.P.
150 East Gay Street, 24th Floor
Columbus, Ohio 43215
ATTENTION: William Leahy
Telephone: (614) 217-1305
Telefax: (614) 217-0192
WITH A COPY TO:
Banc One Capital Corporation
150 East Gay Street, 24th Floor
Columbus, Ohio 43215
ATTENTION: General Counsel
Telephone: (614) 217-1249
Telefax: (614) 217-1217
SELLERS:
NDE Environmental Corporation
8900 Shoal Creek Blvd.
Building 200
Austin, Texas 78758
ATTENTION: President
Telephone: (512) 451-6334
Telefax: (512) 459-1459
WITH A COPY TO:
NDE Environmental Corporation
712 Main Street, Suite 1700
Houston, Texas 77002
ATTENTION: Jay Allen Chaffee
Telephone: (713) 223-5730
Telefax: (713) 223-5379
39
<PAGE> 42
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.
(a) Assignment. Neither this Agreement nor any of the rights or
duties hereunder may be assigned by any 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.
(b) 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.
(c) 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.
The Parties have caused this Agreement to be executed and delivered
effective as of the date first written above.
SELLERS: PURCHASER:
NDE ENVIRONMENTAL CORPORATION BANC ONE CAPITAL PARTNERS, L.P.
By: BOCP Corporation, General Partner
By: /s/ JAY ALLEN CHAFFEE By: /s/ JAMES H. WOLFE
---------------------------------- -------------------------------
Jay Allen Chaffee, James H. Wolfe
Chairman of the Board
Its: Authorized Signer
------------------------------
TANKNOLOGY/NDE CORPORATION
By: /s/ JAY ALLEN CHAFFEE
-------------------------------
Its: Chairman of the Board
------------------------------
USTMAN INDUSTRIES, INC.
By: /s/ JAY ALLEN CHAFFEE
-------------------------------
Its: Chairman of the Board
------------------------------
PROECO, INC.
By: /s/ JAY ALLEN CHAFFEE
-------------------------------
Its: Chairman of the Board
------------------------------
TANKNOLOGY OF CANADA (1988), INC.
By: /s/ JAY ALLEN CHAFFEE
-------------------------------
Its: President
------------------------------
40
<PAGE> 1
EXHIBIT 10.2a
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
SENIOR SUBORDINATED NOTE
DUE DECEMBER 31, 2001
MAKERS NDE ENVIRONMENTAL CORPORATION ("NDE"),
TANKNOLOGY/NDE CORPORATION ("TCI"), as
successor by merger to NDE Testing &
Equipment, Inc., USTMAN INDUSTRIES, INC.
("USTMAN"), PROECO, INC. ("Proeco"), and
TANKNOLOGY CANADA (1988), INC. ("Canada")
PAYEE BANC ONE CAPITAL PARTNERS, L.P. ("BOCP")
ORIGINAL PRINCIPAL AMOUNT $8,000,000
AMORTIZATION COMMENCEMENT DATE DECEMBER 31, 1997
STATED INTEREST RATE 13% PER ANNUM
DEFAULT INTEREST RATE 18% PER ANNUM
DATE OF NOTE OCTOBER 25, 1996
MADE AT COLUMBUS, OHIO
MATURITY DATE DECEMBER 31, 2001
PAYMENT DATES MARCH 31, JUNE 30,
SEPTEMBER 30, DECEMBER 31
Page 1 of 9
<PAGE> 2
This is the SENIOR SUBORDINATED NOTE DUE DECEMBER 31, 2001 ("Note")
provided for in the NOTE AND WARRANT PURCHASE AGREEMENT DATED AS OF OCTOBER 25,
1996, as amended, restated, supplemented or otherwise modified from time to
time ("Purchase Agreement") by and among BOCP, as purchaser, and NDE, TCI,
USTMAN, PROECO, and CANADA, as Sellers. BOCP, together with its successors and
assigns, is referred to as the "Payee." NDE, International, TCI, USTMAN, Proeco
and Canada, together with their respective successors and assigns, are referred
to collectively as the "Makers" and individually as a "Maker."
FOR VALUE RECEIVED, THE MAKERS HEREBY JOINTLY AND SEVERALLY PROMISE
TO PAY TO THE ORDER OF THE PAYEE THE PRINCIPAL AMOUNT OF EIGHT MILLION DOLLARS
($8,000,000), TOGETHER WITH INTEREST (AS DEFINED HEREIN) AND ASSESSMENTS (AS
DEFINED HEREIN), UPON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THIS
NOTE.
SECTION 1 DEFINITIONS, RULES OF CONSTRUCTION AND NOTICE
All capitalized terms not otherwise defined in this Note shall have
the definitions set forth in the Purchase Agreement. Terms defined in the
Purchase Agreement that are used with such definitions in this Note include:
"Applicable Laws"; "Quarter"; "Business Day"; "Intercreditor Agreement";
"Affirmative Covenant"; "Reporting Covenant"; "Notice"; "Negative Covenant";
"Representation and Warranty"; "Financial Test"; "Lien"; "Related Documents";
"Indebtedness"; "Senior Indebtedness"; "UCC"; and "Security Documents".
The rules of construction set forth in Section 12(i) of the Purchase
Agreement and the notice provisions set forth in Section 12(j) of the Purchase
Agreement shall be applicable to this Note.
SECTION 2 MATURITY AND PAY OFF
The unpaid principal amount of this Note ("Principal Amount"),
together with all accrued but unpaid Interest and Assessments shall be due and
payable in full on the Maturity Date (specified above). Payment of the
Principal Amount and all accrued but unpaid Interest and Assessments may be
accelerated upon the occurrence of an Event of Default as provided for in
Section 9 of this Note.
The date upon which the Principal Amount and all accrued but unpaid
Interest
Page 2 of 9
<PAGE> 3
and Assessments is paid or discharged in full is referred to as the "Pay Off
Date." Upon written Notice by the Makers to the Payee, the Payee will furnish
to the Maker a pay off letter setting forth the amount of the payment of
Principal Amount, Interest and Assessments required to pay this Note in full as
of a specified Pay Off Date.
SECTION 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.
Upon the occurrence of an Event of Default and the election by the
Payee, in the sole exercise of its discretion, to impose the Default Interest
Rate (specified above) by giving Notice of that election to the Makers
("Default Rate Election"), and thereupon 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 earlier of: (i) the
first Payment Date after the Default Rate Election at which such Event of
Default has been remedied or waived and no other Default or Event of Default is
continuing unremedied or unwaived, provided that the Note has not been
Accelerated. At all times that the Default Interest Rate is not in effect, the
"Interest Rate" shall be a fixed rate per annum equal to the Stated Interest
Rate (specified above).
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 the Makers.
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 of 30 days each; and (ii) Quarterly compounding of any Interest
or Assessment accrued but unpaid as of each Payment Date.
Page 3 of 9
<PAGE> 4
SECTION 4 PRINCIPAL AMOUNT
The Principal Amount shall be paid in 16 installments of $500,000 of
Principal Amount each, payable Quarterly on each Payment Date, commencing on
the Amortization Commencement Date 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.
SECTION 5 PREPAYMENTS
The Principal Amount may not be prepaid in whole or in part prior to
the September 30, 1998, Payment Date, without the express prior written consent
of the Payee, which consent may be withheld by the Payee in the sole exercise
of its discretion or be conditioned upon the payment by the Makers of a premium
determined by the Payee in its sole discretion.
On and after the September 30, 1998 Payment Date, the Makers 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 (i) all Interest accrued but unpaid through the date of prepayment
with respect to the Principal Amount prepaid, and (ii) all unpaid Assessments.
SECTION 6 LATE PAYMENTS
A payment of Principal Amount, Interest or Assessment shall be deemed
to be in default if such payment is not made in the manner provided for in
Section 7 of this Note prior to 2:00 p.m. on the fifth day following Notice of
such default. The Payee may, in the sole exercise of its discretion, by Notice
to the Makers, assess a fee of $ 1,000 per Payment Date with respect to which
there is a late payment to reimburse the Payee for the cost of processing such
late payment. Such fee shall be deemed to be an "Assessment" for purposes of
this Note. The Payee may not assess such fee with respect to any Payment
Default after payment of this Note is Accelerated.
Page 4 of 9
<PAGE> 5
SECTION 7 PAYMENTS AND WIRING INSTRUCTIONS
All payments of Principal Amount, Interest or Assessments shall be
made by wire transfer of immediately available funds to the account of the
Payee at or before 2:00 p.m. Columbus, Ohio time on the Business Day that such
payment is due. Any wire transfer received by the Payee after 2:00 p.m.
Columbus, Ohio time on any Business Day shall be deemed to have been received
by the Payee prior to such time on the next Business Day.
Unless otherwise specified in a Notice by the Payee to the Makers, all
such payments shall be wired in accordance with the following instruction:
Bank One, Columbus, OH
ABA #044-000-037
FAO Banc One Capital Corporation
Account #981039134
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.
SECTION 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
Notice by the Payee to the Makers or remedied by
action of the Makers, and, in the case of any Event
of Default requiring Notice by the Payee to the
Makers, until rescission of such Notice by the
further Notice of the Payee to the Makers. 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. The Makers default in the payment
when due of any installment of Principal Amount,
Interest or Assessment, and such default is not
remedied in the manner (including the payment of any
Assessment) and within in the grace period provided
for in Section 6 of this Note ("Payment Default"). A
Payment Default shall be deemed to have occurred
notwithstanding the fact that the default in payment
Page 5 of 9
<PAGE> 6
resulted from compliance with or enforcement of the
Intercreditor Agreement.
(c) Affirmative Covenant Default. The Makers fail to
observe or perform any Affirmative Covenant and such
default is not remedied in the manner (including the
payment of any Assessment) and within the applicable
grace period after Notice of such default provided
for in the Purchase Agreement.
(d) Reporting Covenant Default. The Makers fail to
observe or perform any Reporting Covenant and such
default is not remedied in the manner (including the
payment of any Assessment) and within the applicable
grace period after Notice of such default provided
for in the Purchase Agreement.
(e) Negative Covenant Default. The Makers fail to
observe or perform any Negative Covenant and such
default is not remedied in the manner (including the
payment of any Assessment) and within the applicable
grace period after Notice of such default provided
for in the Purchase Agreement.
(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 remedied
within 30 days after Notice by the Payee to the
Makers of such breach.
(g) Financial Test Default. As of any applicable date
of determination, the Makers fail to satisfy any of
the Financial Tests.
(h) Cross Default. Any of the Makers 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
the Makers (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 any Maker is
accelerated, (iii) the contractual right of any Maker
to borrow
Page 6 of 9
<PAGE> 7
money under any loan, credit or similar agreement or
arrangement is suspended as a result of any default
by any Maker with respect to such agreement or
arrangement or (iv) any action to enforce payment of
any Indebtedness of any Maker is commenced against
any Maker or with respect to any collateral securing
such Indebtedness and such default, acceleration or
action remains unremedied or rescinded for a period
of 10 days.
(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,
any amount previously paid with respect to this Note
are repaid or held in constructive trust by the Payee
due to compliance with or the enforcement of the
Intercreditor Agreement or the Makers seek
forbearance with respect to the payment of any
amounts due under the Senior Indebtedness.
(j) Security Default. The Makers default in the
observance or performance of any covenant or
agreement required under the Security Documents and
such default continues for a period of 30 days after
Notice by the Payee to the Makers of such default.
(k) Voluntary Insolvency Default. Any of the Makers: (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 ("Voluntary Insolvency
Default").
(l) Insolvency Order. Any Insolvency Order is entered
against any Maker and such Insolvency Order is not
dismissed within 30 days of its entry ("Involuntary
Insolvency Default").
(m) Fraudulent Conveyance Default. Any Maker: (i)
conceals, removes or permits to be concealed or
removed all or any part of its property
Page 7 of 9
<PAGE> 8
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 days.
The term, "Insolvency Proceeding" means a proceeding before a court
of competent jurisdiction or other duly authorized authority under any
Insolvency Law seeking Insolvency Relief. The term "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. The term "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. The
term "Insolvency Order" mean any order, judgment or decree entered in any
Insolvency Proceeding granting any Insolvency Relief.
SECTION 9 REMEDIES AND ACCELERATION.
(a) Remedies. After payment of this Note is Accelerated,
the Payee shall have (i) all rights and remedies
granted to it under this Note, the Purchase Agreement
and the Security 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 Involuntary
Insolvency Default, payment of this Note shall be
Accelerated. Upon the occurrence and during the
continuation of any other Event of Default, the Payee
may, in the sole exercise of its discretion, elect to
cause payment of this Note to be Accelerated by
giving Notice of such election to the Makers
("Acceleration Notice"). Once payment of this Note
has been properly Accelerated as provided for in this
section, such
Page 8 of 9
<PAGE> 9
Acceleration may be revoked only by the Payee, in the
sole exercise of its discretion, giving Notice of
revocation to the Makers, regardless whether the
Event of Default giving rise to such Acceleration has
been remedied by action of the Makers.
The term "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 and Assessments, become
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 the Makers.
(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 Notice by the Payee to the
Makers, 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. The Payee may grant or
withhold any such waiver in the sole exercise of its
discretion, which may conditioned upon the payment by
the Makers 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 the Payee or its agents and employees, failure,
forebearance or delay by the Payee in exercising any
of its rights or remedies under this Note, the
Purchase Agreement, the Security Documents or any
other Related Document shall operate as a waiver of
any Default or Event of Default or of any right of
the Payee under this Note.
SECTION 10 WAIVERS BY MAKERS
To the full extent permitted by applicable law, each Maker waives with
respect to this Note: presentment; protest and demand; notice of protest,
demand and dishonor; and diligence in collection. Each Maker agrees that: the
Payee may release all or any part of the collateral securing the payment of
this Note; any guarantor or surety with respect to this Note; or any other
Maker from its obligation with respect to this Note, all without notice to any
Maker and without affecting in any way the obligation of such Maker under this
Note.
Page 9 of 9
<PAGE> 10
SECTION 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 the Payee from obtaining other or additional security for the payment
of this Note, require the 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.
SECTION 12 INTERCREDITOR AGREEMENT
The Payee and Bank One, Texas, N.A. ("BOT") are parties to an
Intercreditor Agreement dated as of October 25, 1996, pursuant to which certain
of the 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 any Maker any rights as a beneficiary
under such Intercreditor Agreement nor any right to enforce against the Payee
any provision of such Intercreditor Agreement.
SECTION 13 COLLECTION AND ASSESSMENT FOR COSTS
The Makers shall reimburse the Payee for all reasonable costs and
expenses (including legal fees and disbursements) incurred by the Payee in
connection with the collection or attempted collection of the payment of this
Note through legal proceedings or otherwise. All such amounts shall be deemed
to be "Assessments" for purposes of this Note.
SECTION 14 AMENDMENT.
This Note may not be amended, restated, supplemented or otherwise
modified except by an express written agreement executed and delivered by the
Makers and the 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 the Payee.
SECTION 15 GOVERNING LAW
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PAYEE AND MAKERS UNDER
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF
OHIO.
Page 10 of 9
<PAGE> 11
SECTION 16 WAIVER OF JURY TRIAL
THE PAYEE AND THE MAKERS, 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 BASED UPON OR ARISING OUT OF THIS NOTE OR ANY RELATED INSTRUMENT OR
AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS NOTE, OR ANY COURSE
OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY OF
THEM ("LITIGATION"). NEITHER THE PAYEE NOR THE MAKERS 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 THE PAYEE OR THE MAKERS EXCEPT BY WRITTEN
INSTRUMENT EXECUTED BY ALL OF THEM.
SECTION 17 CONSENT TO JURISDICTION, VENUE AND SERVICE OF PROCESS
THE PAYEE AND THE MAKERS, 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 COMMON PLEAS COURT
OF FRANKLIN COUNTY, OHIO AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF OHIO, EASTERN DIVISION 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
THE PAYEE OR THE MAKERS EXCEPT BY WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
Page 11 of 9
<PAGE> 12
IN WITNESS WHEREOF, this Note has be executed and delivered by and on
behalf of each Maker by its duly authorized officer, effective as of the Date
of Note (set forth above).
NDE ENVIRONMENTAL TANKNOLOGY/NDE
CORPORATION CORPORATION
By: /s/ JAY ALLEN CHAFFFEE By: /s/ JAY ALLEN CHAFFEE
---------------------------- ----------------------------
Its: Chairman of the Board Its: Chairman of the Board
--------------------------- ---------------------------
PROECO, INC.
USTMAN INDUSTRIES, INC.
By: /s/ JAY ALLEN CHAFFEE By: /s/ JAY ALLEN CHAFFEE
---------------------------- ----------------------------
Its: Chairman of the Board Its: Chairman of the Board
--------------------------- ---------------------------
TANKNOLOGY CANADA (1988), INC.
By: /s/ JAY ALLEN CHAFFEE
----------------------------
Its: President
---------------------------
Page 12 of 9
<PAGE> 1
EXHIBIT 10.2b
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.
_____________________________________________________
NDE ENVIRONMENTAL CORPORATION
WARRANT CERTIFICATE
________________________________________________________
DATED AS OF OCTOBER 25, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
Section 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. TERMS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 NUMBER OF WARRANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 EXERCISE PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 EXERCISE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 DEFINITIONS. As used in this Warrant Certificate: . . . . . . . . . . . . . . . . . 3
2.5 MANNER OF EXERCISE AND EFFECTIVENESS. . . . . . . . . . . . . . . . . . . . . . . . . 4
2.6 PAYMENT OF EXERCISE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.7 DELIVERY OF STOCK CERTIFICATES, ETC. . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3. ANTIDILUTION ADJUSTMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 NUMBER OF WARRANT SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 ADJUSTMENT EVENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 REORGANIZATION EVENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4 OTHER EVENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4. RESTRICTIVE LEGENDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 5. AVAILABILITY OF INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 6. RESERVATION OF COMMON SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 7. DUE ORGANIZATION; NO VIOLATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 8. OWNERSHIP; REGISTRATION OF TRANSFER; EXCHANGE AND SUBSTITUTION OF WARRANT. . . . . . . . . . 7
8.1 OWNERSHIP OF WARRANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
8.2 REGISTRATION OF TRANSFERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
8.3 REPLACEMENT OF WARRANT CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . . . . . 7
8.4 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
Section 9. NO RIGHTS OR LIABILITIES AS STOCKHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 10. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
10.1 AMENDMENTS, MODIFICATIONS AND WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . 8
10.2 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
10.3 RULES OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
10.4 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 11. ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
ii
<PAGE> 4
WARRANT CERTIFICATE
COMPANY NDE ENVIRONMENTAL CORPORATION ("NDE")
HOLDER BANC ONE CAPITAL PARTNERS, L.P. ("BOCP")
WARRANT SHARES COMMON STOCK, $0.0001 PAR VALUE, OF NDE
("COMMON SHARES")
NUMBER OF WARRANTS 13,022,920 (SUBJECT TO ADJUSTMENT)("WARRANTS")
INITIAL EXERCISE PRICE $0.325 PER WARRANT (SUBJECT TO ADJUSTMENT)
MINIMUM EXERCISE PRICE ($0.125) (SUBJECT TO ADJUSTMENT)
COMMENCEMENT DATE OCTOBER 25, 1996
EXPIRATION DATE DECEMBER 31, 2005
DATE OF WARRANT OCTOBER 25, 1996
This is the WARRANT CERTIFICATE ("Warrant Certificate") provided for in the NOTE
AND WARRANT PURCHASE AGREEMENT dated as of October 25, 1996, as amended,
restated, supplemented or otherwise modified from time-to-time ("Purchase
Agreement") by and among BOCP, as purchaser, and, NDE, TANKNOLOGY/NDE
CORPORATION, USTMAN INDUSTRIES, INC, PROECO, INC., and TANKNOLOGY CANADA (1988)
INC., as sellers. BOCP, together with its successors and assigns, is referred
to as the "Holder." NDE 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 Thirteen
Million Twenty-Two Thousand Nine Hundred Twenty (13,022,920) 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> 5
SECTION 1. DEFINITIONS
All capitalized terms not otherwise defined in this Warrant
Certificate shall have the definitions set forth in the Purchase Agreement.
The terms defined in the Purchase Agreement that are used with such definitions
in this Warrant Certificate include:
"Accredited Institutional Investor"
"Affiliates"
"Board of Directors"
"Business Day"
"Capital Stock"
"Commission"
"Common Shares"
"Convertible Securities"
"EBITDA"
"Exchange Act"
"Month"
"Note"
"Notice"
"Outstanding Shares"
"Person"
"Preemption Offering"
"Restricted Securities"
"Securities Act"
SECTION 2. TERMS AND CONDITIONS
2.1 NUMBER OF WARRANTS. The number of Warrants granted
pursuant to this Warrant Certificate is 13,022,920 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 ("Warrant(s)").
2.2 EXERCISE PERIOD. All of the Warrants are exercisable in
a single exercise by the Holder at anytime during the period commencing on the
Commencement Date and ending on the Expiration Date ("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
2
<PAGE> 6
to the Exercise Price, as defined and established pursuant to this Section 2.3
("Exercise Price"), regardless of the number of Warrant Shares issuable upon
exercise of each Warrant.
Initially, the "Exercise Price" per Warrant shall be equal to
the Initial Exercise Price (set forth above). Commencing with the first
quarter after the Date of Warrant, the "Exercise Price" per Warrant shall be
adjusted quarterly to an "Exercise Price" equal to the greater of (i) the
Adjusted Exercise Price (as defined below) and (ii) the Minimum Exercise Price
(set forth above).
2.4 DEFINITIONS. As used in this Warrant Certificate:
(i) the term "Adjusted Exercise Price" means, with
respect to the exercise of the Warrants during any
Month during the term of this Warrant Certificate,
the Initial Exercise Price reduced by the
Adjustment Amount as calculated as of the end on
the immediately preceding Month;
(ii) the term "Adjustment Amount" means, as of each
Month ended during the term of this Warrant
Certificate, (A) if the quantity equal to (x)
$9,261,000, less (y) cumulative EBITDA for the
period of 12 consecutive Months then ended, is a
negative amount, zero, (B) otherwise, the quotient
equal to (x) such quantity, divided by (y)
$108,050;
(iii) the term "Adjustment Event" means any of the
following events (except if such event also
constitutes a Preemption Offering):
(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 shares.
(iv) 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);
(b) any merger or consolidation of the Company
with or into another corporation; or
3
<PAGE> 7
(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 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, 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 Section 4.
Section 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 13,022,920 Common Shares; provided, however, that
such number of shares is subject to adjustment as provided for in this Section
3, which number of Warrant Shares, as so adjusted from time, to time is
referred to as the "Number of Warrant Shares." The Exercise Price is subject
to adjustment as provided for in Section 2.
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, calculated using the Exercise Price as adjusted pursuant to
Section 2.3, immediately prior to such event multiplied by a fraction (i) the
numerator of which is the number of Outstanding Shares immediately after the
record date with respect to such
4
<PAGE> 8
Adjustment Event, and (ii) the denominator of which is the number of
Outstanding Shares 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 (in lieu of the Warrant Shares), as appropriate,
the number of shares of stock, other securities or property to which the Holder
of the number of Common Shares equal to the Number of Warrant Shares at the
date of the Reorganization Event would have been entitled to, calculated using
the Exercise Price as adjusted pursuant to Section 2.2, 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 Section 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 Section 3 are not strictly applicable but the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant 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
Section 3, necessary to preserve, the purchase rights represented by this
Warrant. Upon receipt of such opinion, the Company will promptly mail a copy
thereof to the holder of this Warrant 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. In no event shall any offer, sale or
issuance of securities pursuant to any transaction specifically excluded from
the definition of a Preemption Offering be deemed to require any such
adjustment.
Section 4. RESTRICTIVE LEGENDS.
Except as otherwise permitted by this Section 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 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,
5
<PAGE> 9
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."
Section 5. AVAILABILITY OF INFORMATION.
Within ninety (90) days after a registration statement under the
Securities Act is declared effective with respect to an Qualified Public
Offering, the Company will 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 Holder'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 Affiliates.
Section 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 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. All such
shares shall be duly authorized and, when issued upon such exercise, shall be
validly issued, fully paid and non-assessable with no liability on the part of
the holders thereof.
Section 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 or
by which it is or may become that
6
<PAGE> 10
the Company may exercise in good faith its right to protest and actively pursue
the same diligently and by appropriate proceedings.
7.3 The Articles of Incorporation or by-laws 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
Section 8, (ii) eliminate the right of 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.
Section 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 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 is properly assigned to another
Person, the Company may (but shall not be obligated to) treat such Person as
the owner of this Warrant for all purposes, notwithstanding any notice to the
contrary. Subject to the foregoing provisions and to Section 4, this Warrant,
if properly assigned, may be exercised by the assignee without first having a
new Warrant issued.
8.2 REGISTRATION OF TRANSFERS. Subject to Section 4 hereof,
the Company shall register the transfer of this Warrant permitted under the
terms hereof upon records to be maintained by the Company for that purpose,
upon surrender of this Warrant, 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, in substantially the
form of this Warrant, 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 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 for cancellation at the Company's
principal office, the Company at its expense will promptly execute and deliver,
in lieu thereof, a new Warrant 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 or the Warrant Shares.
SECTION 9. NO RIGHTS OR LIABILITIES AS STOCKHOLDER.
Nothing contained in this Warrant 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
7
<PAGE> 11
securities or as a stockholder of the Company, whether such liabilities are
asserted by the Company or by creditors of the Company.
SECTION 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 Ohio.
10.3 RULES OF CONSTRUCTION. The rules of construction set
forth in Section 12(i) of the Purchase Agreement are applicable to this Warrant
Certificate.
10.4 NOTICES. The notice provisions set forth in Section
12(j) of the Purchase Agreement are applicable to this Warrant Certificate.
SECTION 11. ASSIGNMENT.
The Holder may assign all, but not less than all, of the Warrants
evidenced by this Warrant Certificate to any Accredited Institutional Investor
by delivering to the Company at its address for notice: (i) the Form of
Assignment attached to this Warrant Certificate duly completed and executed;
(ii) this Warrant Certificate surrendered for cancellation; and (iii) evidence
reasonably satisfactory to the Company of the assignee's qualification as an
Accredited Institutional Investor.
NDE ENVIRONMENTAL CORPORATION
By: /s/ JAY ALLEN CHAFFEE
----------------------------------
Jay Allen Chaffee,
Chairman of the Board
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<PAGE> 12
NOTICE OF EXERCISE
NDE ENVIRONMENTAL CORPORATION
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:
---------------------------------
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<PAGE> 13
FORM OF ASSIGNMENT
FOR VALUED 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:)
-------------------------------
10
<PAGE> 1
EXHIBIT 10.3
_______________________________________________________________________________
NDE ENVIRONMENTAL CORPORATION, TANKNOLOGY/NDE CORPORATION,
USTMAN INDUSTRIES, INC., PROECO, INC., AND TANKNOLOGY CANADA (1988), INC.
SECURITY AGREEMENT - PERSONAL PROPERTY
_______________________________________________________________________________
DATED AS OF OCTOBER 25, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1. PURCHASE AGREEMENT DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 GRANT OF SECURITY INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 DEFINITION - SECURED OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 DEFINITION - COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 DEFINITION - PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2. ENFORCEMENT, REMEDIES AND APPLICATION OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 DISCONTINUANCE OF REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 CUMULATIVE REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 POWER OF ATTORNEY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3. COVENANTS, WARRANTIES AND AGREEMENTS OF DEBTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1 RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 ACCOUNTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 COOPERATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4 DISCHARGE TAXES, ASSESSMENTS, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6 LIMITATIONS ON DISPOSITIONS OF ACCOUNTS AND CONTRACTS. . . . . . . . . . . . . . . . . . . . 7
3.7 NEGATIVE PLEDGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.8 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.9 PRESERVATION OF COLLATERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.10 CHIEF EXECUTIVE OFFICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 4. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1 INDEMNIFICATION OF SECURED PARTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 COSTS AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 5. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 6. RECORDATION AND FILING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 7. WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 8. SECURITY INTEREST ABSOLUTE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 9. RELEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 10. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.1 RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
10.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.3 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.4 AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.5 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.6 FURTHER ACTS AND DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.7 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.8 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.9 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.10 CONSENT TO JURISDICTION, VENUE AND SERVICE OF PROCESS. . . . . . . . . . . . . . . . . . . 11
</TABLE>
ii
<PAGE> 4
SECURITY AGREEMENT - PERSONAL PROPERTY
This is the SECURITY AGREEMENT dated as of October 25, 1996
("Agreement") by and between NDE ENVIRONMENTAL CORPORATION ("NDE"), a Delaware
corporation, TANKNOLOGY/NDE CORPORATION ("TCI"), a Delaware corporation, USTMAN
INDUSTRIES, INC. ("USTMAN"), a Delaware corporation, PROECO, INC. ("Proeco"), a
Delaware corporation, and TANKNOLOGY CANADA (1988), INC. ("Canada"), a
Canadian Federal corporation, and BANC ONE CAPITAL PARTNERS, L.P. ("BOCP"), an
Ohio limited partnership, provided for in and entered into pursuant to the NOTE
AND WARRANT PURCHASE AGREEMENT, as amended, restated, supplemented or
otherwise modified from time to time ("Purchase Agreement") by and among BOCP,
as purchaser, and NDE, TCI, USTMAN, PROECO and CANADA, as sellers.
NDE, TANKNOLOGY, TCI, USTMAN, PROECO and CANADA, together with their
respective successors and assigns, are referred to collectively as the
"Debtors," and individually as a "Debtor." BOCP, together with its successors
and assigns, is referred to as the "Secured Party." The Debtors and the
Secured Party are referred to collectively as the "Parties" and individually as
a "Party."
THIS SECURITY 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. PURCHASE AGREEMENT DEFINITIONS.
All capitalized terms not otherwise defined in this Agreement shall
have the definitions set forth in the Purchase Agreement. The terms defined in
the Purchase Agreement that are used with such definitions in this Agreement
include:
"Acceleration"
"Applicable Law"
"Event of Default"
"Intercreditor Agreement"
"Lien"
"Note"
"Permitted Liens"
"Person"
"Pledge Agreement"
"Related Documents"
"Senior Lender"
<PAGE> 5
SECURITY INTEREST.
1.1 GRANT OF SECURITY INTEREST. As security for the timely
payment of the Secured Obligations (as defined below), the Debtors hereby
jointly and severally grant to the Secured Party a security interest in all of
the Collateral (as defined below) whether now or hereafter owned, acquired,
arising or existing by each of them, whether acquired by contract or operation
of law and wherever located.
1.2 DEFINITION - SECURED OBLIGATIONS. The term "Secured
Obligations" means (i) all obligations of the Debtors evidenced by the Senior
Subordinated Note due December 31, 2001, and dated October 25, 1996, made
payable by the Debtors to the Secured Party in the principal amount of
$8,000,000, which note was purchased by the Secured Party for $8,000,000
pursuant to the Purchase Agreement, together with all extensions, renewals,
amendments, modifications and novations thereof, and (ii) all obligations of
the Debtors to make payments or reimburse costs and expenses under this
Agreement or the Purchase Agreement.
1.3 DEFINITION - COLLATERAL. The term "Collateral" means all
tangible and intangible personal property now or hereafter owned, acquired,
arising or existing by or of each of the Debtors, whether acquired by contract
or operation of law and wherever located, including all of the following types
of personal property:
(i) all Accounts, Chattel Paper, Deposit Accounts,
Documents, Equipment, Fixtures, Goods, Instruments
and Securities (all as defined in the Code);
(ii) all accessions to, substitutions for, replacements
and products of the foregoing;
(iii) all books and records (including customer lists,
credit files, tapes, ledger cards, computer software
and hardware, electronic data processing software,
computer programs, print-outs and other computer
materials and records) of the Debtors evidencing or
containing information regarding or otherwise
pertaining to any of the foregoing; and
(iv) all Proceeds (as defined below) of or from the
foregoing.
1.4 DEFINITION - PROCEEDS. The term "Proceeds" means any
"proceeds" as such term is defined in the Code, including the following at any
time whatsoever arising or receivable: (i) whatever is received upon any
collection, exchange, sale or other disposition, of any of the Collateral, and
any property into which any of the Collateral is converted, whether cash or
non-cash proceeds, (ii) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to any Debtor from time to time with respect to
any of the Collateral, including claims paid and premium
2
<PAGE> 6
refunds, (iii) any and all payments (in any form whatsoever) made or due and
payable to any Debtor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental authority, and (iv) any and all other amounts
from time to time paid or payable under or in connection with any of the
Collateral.
SECTION 2. ENFORCEMENT, REMEDIES AND APPLICATION OF PROCEEDS.
2.1 REMEDIES. The Debtors agree that when an Event of Default has
occurred and is continuing, the Secured Party shall have the rights, options,
duties and remedies of a secured party, and the Debtors shall have the rights
and duties of a debtor, under the Code (regardless of whether such Code or a
law similar thereto has been enacted in a jurisdiction wherein the rights or
remedies are asserted) as applicable, and the Secured Party shall have the
following rights and remedies.
(a) The Secured Party shall have all of the rights and
remedies provided for under the Note and the Purchase Agreement, including the
Acceleration of payment of the Note.
(b) The Secured Party shall have all the rights of a
secured party under the Code or by other provisions of applicable law to
enforce the security interests contained herein, including without limitation,
the right to sell or otherwise dispose of any or all of the Collateral.
(c) The Secured Party personally or by agents or
attorneys, shall have the right (subject to compliance with any applicable
mandatory legal requirements) to take immediate possession of the Collateral,
or any portion thereof, and for that purpose may pursue the same wherever it
may be found, and may enter any of the premises of the Debtors, with or without
notice, demand, process of law or legal procedure, if this can be done without
breach of the peace, and search for, take possession of, remove, keep and store
the Collateral, or use and operate or lease the Collateral until sold.
(d) Any Collateral repossessed by the Secured Party under
or pursuant to this Section 2.1 may be sold, leased or otherwise disposed of
under one or more contracts or as an entirety, and without the necessity of
gathering at the place of sale the property to be sold, and in general in such
manner, at such time or times, at such place or places and on such terms as the
Secured Party may, in compliance with any mandatory requirements of applicable
law, determine to be commercially reasonable. Any of the Collateral may be
sold, leased or otherwise disposed of, in the condition in which the same
existed when taken by the Secured Party or after any repair which the Secured
Party shall determine to be commercially reasonable. Any such disposition
which shall be a public or private sale or other private proceedings permitted
by such requirements shall be made upon not less than 10 business days written
notice to Debtors specifying the times at which such disposition is to be made
and the intended sale price or other consideration therefor. To the extent
permitted by any such requirement of law, the Secured Party may itself bid for
and become the purchaser of the Collateral or any part thereof without
accountability to Debtors. In the payment of the purchase price therefor, the
Secured Party shall be entitled to have credit on account of the purchase price
thereof of amounts owing to the Secured Party on account of the indebtedness
hereby
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<PAGE> 7
secured and the Secured Party may deliver the claims for interest on or
principal of the Note or other indebtedness hereby secured in lieu of cash up
to the amount which would, upon distribution of the net proceeds of such sale,
be payable thereon. If, under mandatory requirements of applicable law, the
Secured Party shall be required to make disposition of the Collateral within a
period of time which does not permit the giving of notice to Debtors as
hereinabove specified, the Secured Party need give Debtors only such notice of
disposition as shall be reasonably practicable in view of such mandatory
requirements of applicable law.
(e) The Secured Party may proceed to protect and enforce
this Agreement by suit or suits or proceedings in equity, at law or in
bankruptcy, and whether for the specific performance of any covenant or
agreement herein contained or in execution or aid of any power herein granted,
or for foreclosure hereunder, or for the appointment of a receiver or receivers
for the Collateral or any part thereof, for the recovery of judgment for the
indebtedness hereby secured or for the enforcement of any other legal or
equitable remedy available under applicable law.
(f) Any sale, whether under any power of sale hereby
given or by virtue of judicial proceedings, shall operate to divest all right,
title, interest, claim and demand whatsoever, either at law or in equity, of
the Debtors in and to the property sold and shall be a perpetual bar, both at
law and in equity, against the Debtors, their successors and assigns, and
against any and all persons claiming the property sold, or any part thereof
under, by or through the Debtors, their successors or assigns.
(g) Nothing hereby contained is intended, nor should it
be construed, to preclude the Secured Party from pursuing any other remedy
provided by law for the collection of the Secured Obligations or any portion
thereof, or for the recovery of any other sums to which the Secured Party may
be or become entitled for the breach of this Agreement by the Debtors.
(h) Until termination of this Agreement, the Secured
Party shall have and may exercise any and all of its rights and remedies given
by this Agreement or under any applicable law. This Agreement and all such
rights and remedies shall inure to the benefit of the Secured Party's
successors and permitted assigns and to any other holder who derives from the
Secured Party title to or an interest in the Note, the Secured Obligations or
any portion thereof or participation therein, and shall bind the Debtors and
the successors and assigns of the Debtors.
(i) Upon the occurrence and during the continuance of an
Event of Default, in the case of any sale or disposition of the Collateral, or
the realization of funds therefrom, the Proceeds thereof shall be applied:
first, to the payment of the reasonable expenses of such sale, reasonable
commissions, reasonable attorneys' fees and all reasonable charges paid or
incurred by the Secured Party pertaining to said sale, including any taxes or
other charges imposed by law upon the Collateral and/or the owning, holding or
transferring thereof; second, to pay, satisfy and discharge the Secured
Obligations; and, third, to pay the surplus, if any, to the Debtors. To the
extent such Proceeds do not satisfy the foregoing items, the Debtors hereby
promise and agree to pay any deficiency.
4
<PAGE> 8
2.2 DISCONTINUANCE OF REMEDIES. In case the Secured Party shall
have proceeded to enforce any right under this Agreement by foreclosure, sale,
entry or otherwise, and such proceedings shall have been discontinued or
abandoned for any reason or shall have been determined adversely, then, and in
every such case, the Debtors and the Secured Party shall be restored to their
former respective positions and rights hereunder with respect to the property
subject to the security interest created under this Agreement.
2.3 CUMULATIVE REMEDIES. No delay or omission of the Secured
Party to exercise any right or power arising from an Event of Default shall
exhaust or impair any such right or power or prevent its exercise during the
continuance of such Event of Default. No waiver by the Secured Party of any
such Event of Default, whether such waiver be full or partial, shall extend to
or be taken to affect any subsequent Event of Default, or to impair the rights
resulting therefrom except as may be otherwise provided herein. The Secured
Party may exercise any one or more or all of the remedies hereunder and no
remedy is intended to be exclusive of any other remedy but each and every
remedy shall be cumulative and in addition to any and every other remedy given
hereunder or otherwise existing now or hereafter at law or in equity; nor shall
the giving, taking or enforcement of any other or additional security,
collateral or guaranty for the payment of the indebtedness secured under this
Agreement operate to prejudice, waive or affect the security of this Agreement
or any rights, powers or remedies hereunder, nor shall the Secured Party be
required to first look to, enforce or exhaust such other additional security,
collateral or guaranties.
2.4 POWER OF ATTORNEY.
(a) The Debtors do hereby irrevocably constitute and
appoint the Secured Party and its successors and assigns and agents, upon the
occurrence and during the continuance of an Event of Default, their true and
lawful attorney with full power of substitution for them and in their name,
place and stead, to ask, demand, collect, receive, receive for and sue for any
and all Proceeds with full power to settle, adjust or compromise any claim
thereunder as fully as the Debtors could themselves do, and to endorse the name
of the Debtors on all instruments or commercial paper given in payment or in
part payment thereof, and in its reasonable discretion to file any claim or
take any other action or proceedings, either in its own name or in the name of
the Debtors or otherwise, which the Secured Party may deem necessary in its
reasonable discretion to perfect, protect and preserve the right, title and
interest of the Secured Party in and to such Proceeds and the security intended
to be afforded hereby. Without limiting the generality of the foregoing,
Secured Party or its agents shall specifically be authorized to do all acts and
things necessary to fulfill Debtor's obligations under the Purchase Agreement.
(b) The Parties acknowledge that the powers conferred on
the Secured Party hereunder are solely to protect its interest in the
Collateral and that anything herein contained to the contrary notwithstanding,
neither the Secured Party nor its successors or assigns or agents shall have
any duty, obligation or liability by reason of or arising out of this Agreement
to make any inquiry as to the nature or sufficiency of, to present or file any
claim with respect to, or to take any action
5
<PAGE> 9
to collect or enforce the payment of, any amounts to which it may be entitled
at any time by virtue of this Agreement.
SECTION 3. COVENANTS, WARRANTIES AND AGREEMENTS OF DEBTORS.
Each Debtor covenants, warrants and agrees with Secured Party
that until the Secured Obligations are paid in full:
3.1 RECORDS. Such Debtor shall keep accurate and complete books
and records of the Collateral in a manner consistent with the reasonable
requirements of the Secured Party and the requirements of any governmental
agency and allow the Secured Party, during regular business hours and upon
reasonable notice, reasonable access to examine, inspect and make abstracts
from, or copy any of such books and records.
3.2 ACCOUNTING. Such Debtor shall at the reasonable request of
the Secured Party, which request shall be made no more frequently than monthly,
deliver to it copies of all accounting and other records pertaining to the
Collateral or any portion thereof.
3.3 COOPERATION. The Debtors will faithfully preserve and protect
the Secured Party's security interest in the Collateral and will, at their own
cost and expense, cause such security interest to be perfected and continued
perfected so long as the Secured Obligations or any portion thereof are
outstanding and unpaid, and for such purpose the Debtors will from time to time
at the reasonable request of the Secured Party file or record, or cause to be
filed or recorded, such instruments, documents and notices, including without
limitation, financing statements and continuation statements, as the Secured
Party may deem reasonably necessary or advisable from time to time in order to
perfect and continue perfected said security interests. The Debtors will do
all such other acts and things and will execute and deliver all such other
instruments and documents, including without limitation further security
agreements, pledges, endorsements, assignments and notices, as the Secured
Party may deem reasonably necessary or advisable from time to time in order to
perfect and preserve the priority of said security interest.
3.4 DISCHARGE TAXES, ASSESSMENTS, ETC. Such Debtor will pay
promptly and within the time that they can be paid without interest or penalty,
all taxes, assessments and similar imposts and charges which are now, or
hereafter during the effective period of this Agreement may become, a Lien,
charge or encumbrance upon any of the Collateral except to the extent contested
in good faith. If such Debtor fails to pay any such taxes, assessments or
other charges as they become due the Secured Party shall have the option to do
so and such Debtor agrees to repay, with interest, at the rate publicly
established by Bank One, Columbus, NA or any successor thereto from time to
time as its prime rate, all amounts so expended by the Secured Party.
3.5 EXPENSES. Such Debtor will reimburse the Secured Party in
accordance with the provisions of the Code for all reasonable expenses,
including reasonable attorney fees and legal
6
<PAGE> 10
expenses incurred by the Secured Party in seeking to collect the Secured
Obligations or any part thereof, or in pursuing any of its rights or remedies
hereunder.
3.6 LIMITATIONS ON DISPOSITIONS OF ACCOUNTS AND CONTRACTS. Such
Debtor will not sell, assign, transfer or otherwise dispose of any material
portion of the Accounts or Contracts, which constitute a part of the
Collateral, or attempt, offer or contract to do so except, so long as no Event
of Default has occurred and is continuing, for the disposition of such Accounts
and Contracts in the ordinary course of business to third party purchasers
without recourse to the Debtor.
3.7 NEGATIVE PLEDGE. Such Debtor will not create or permit to be
created any Lien, encumbrance or security interest of any kind (other than the
Permitted Liens and the Lien in favor of the Senior Lender as provided for in
the Intercreditor Agreement) on any of the Collateral other than for the
benefit of the Secured Party unless authorized by the Secured Party in writing.
3.8 NOTICES.
The Debtors will provide the Secured Party promptly, in reasonable
detail, written notice of:
(i) any material change in the composition of the
Collateral;
(ii) the occurrence of any other event which is
likely to have a materially adverse effect on
the aggregate value of the Collateral or on
the security interests created hereunder; and
(iii) any other notices specifically required to
be given by Debtors under this Agreement.
3.9 PRESERVATION OF COLLATERAL.
(a) The Debtors will warrant and defend the title to the
Collateral against all claims and demands of all Persons except Persons
claiming, by, through or under the Secured Party. Except as otherwise
permitted herein, the Debtors will not assign, sell, lease, or permit any of
the same to occur with respect to the Collateral. The Debtors will not create,
assume or suffer to exist any Lien on the Collateral other than Permitted Liens
(as hereinafter defined) and the Debtors shall pay or discharge, at their own
cost and expense, any and all claims, Liens or charges other than Permitted
Liens and the Lien in favor of the Senior Lender as provided for in the
Intercreditor Agreement. As used herein, "Lien" shall mean any mortgage,
pledge, security interest, encumbrance, lien, assignment or charge of any kind.
(b) Secured Party may, in its sole discretion, discharge
or obtain the release of any security interest, Lien, claim or encumbrance
against the Collateral, other than a Permitted Lien. All sums so paid by the
Secured Party shall be payable, on demand, by Debtors to Secured Party and
shall constitute a part of the Secured Obligations.
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<PAGE> 11
(c) The Debtors shall advise the Secured Party promptly,
in reasonable detail, of any Lien or claim, other than Permitted Liens, made or
asserted against any of the Collateral and of any event affecting the Secured
Party's security interest in the Collateral.
3.10 CHIEF EXECUTIVE OFFICE. The chief executive office of each
Debtor is located at the locations specified in Exhibit A and all its records
related to its Collateral are, and will continue to be, kept in such office.
The Debtors shall give the Secured Party and any collateral agent thirty (30)
days advance written notice of any change of such office address or of any
change in the location of the records concerning the Collateral, and, with
respect to such change, shall take all action as may be necessary to maintain
the security interest granted hereunder at all times fully perfected and in
full force and effect.
SECTION 4. INDEMNIFICATION.
4.1 INDEMNIFICATION OF SECURED PARTY. The Debtors agree to
indemnify, protect and hold harmless the Secured Party and its assigns,
directors, officers, employees, agents or representatives (each an "Indemnified
Party") from and against all losses, damages, injuries, liabilities, claims,
suits, obligations, penalties, actions, judgments, costs, interest and demands
of any kind or nature whatsoever (all the foregoing losses, damages, etc. are
the "Indemnified Liabilities"), and expenses in connection therewith
(including, without limitation, the reasonable fees and disbursements of
counsel for such Indemnified Party in connection with any investigative,
administrative or judicial proceeding, whether or not such Indemnified Party
shall be designated a party thereto) arising out of, in connection with, or as
the result of any claim for injury or damage arising from the operation, use,
condition, possession, storage or repossession of any of the Collateral, or any
claim relating to any laws, rules or regulations, or the entering into or
performance of this Agreement and the Note, the enforcement of any rights
hereunder or thereunder, the retention by the Secured Party of a security
interest in the Collateral, provided, however, that the Debtors shall have no
obligation to so indemnify any Indemnified Party for any indemnified
liabilities arising from its willful misconduct or gross negligence. The
foregoing indemnity shall survive the termination of this Agreement and payment
in full of the Secured Obligations.
4.2 COSTS AND EXPENSES. Subject to Section 12(c) of the Purchase
Agreement, any and all reasonable fees, costs and expenses, of whatever kind or
nature, including the reasonable attorneys' fees and legal expenses incurred by
the Secured Party, in connection with the preparation of this Agreement and all
other documents relating hereto and the consummation of this transaction, the
filing or recording of financing statements and other documents (including all
taxes in connection with the filing and recording of such documents) in public
offices, the payment or discharge of any taxes relating to the Collateral or
imposed upon the Debtors, insurance premiums, encumbrances or otherwise
protecting, maintaining or preserving the Collateral, or the enforcing,
foreclosing, retaking, holding, storing, processing, selling or otherwise
realizing upon the Collateral and the security interest therein, whether
through judicial proceedings or otherwise, or in defending or prosecuting any
actions or proceedings arising out of or related to the transaction to which
this
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<PAGE> 12
Security Agreement relates, shall be borne and paid by the Debtors on demand by
the Secured Party and until so paid shall be added to the principal amount of
the Secured Obligations and shall bear interest commencing five days from the
date Debtors receive demand therefor, at the default rate prescribed in the
Purchase Agreement.
SECTION 5. TERMINATION.
The security interest of Secured Party in the Collateral shall be
deemed to be terminated when the Secured Obligations have been paid in full as
provided for in the Purchase Agreement at which time the Secured Party shall,
at the Debtors' expense, execute and deliver to the Debtors at their expense
all Code termination statements and such similar documents or proper instrument
or instruments which the Debtors shall reasonably request to evidence such
termination and release of Collateral.
SECTION 6. RECORDATION AND FILING.
(a) Each Debtor agrees to execute, deliver and pay the
reasonable costs of filing any financing statement or other notices appropriate
under applicable law in respect of the security interest created pursuant to
this Security Agreement which may at any time be required or be deemed by the
Secured Party to be necessary or desirable and to execute such other documents
as the Secured Party shall reasonably request with respect to the security
interest created hereunder. In the event that any re-recording or refiling
thereof (or the filing of any statements of continuation or assignment of any
financing statement) is required to protect and preserve such Lien or security
interest, each Debtor shall, at its reasonable cost and expense, cause the same
to be re-recorded and/or refiled at the time and in the manner requested by the
Secured Party.
(b) A carbon, photostatic or other reproduction of this
Agreement shall be sufficient as a financing statement even though only the
original hereof contains an original signature.
SECTION 7. WAIVERS.
Each Debtor waives demand, presentment and protest. No delay or
omission or forbearance by the Secured Party in exercising any rights under
this Agreement, the Note or the Purchase Agreement shall operate as a waiver of
the rights of the Secured Party under this Agreement, the Note or the Purchase
Agreement or of any other rights and shall not affect, discharge, diminish or
impair any Debtor's obligations hereunder or the Secured Obligations. Waiver
on any one occasion shall not be construed as a bar to or waiver of any rights
or remedies on any future occasion. All the Secured Party's rights and
remedies, whether evidenced hereby or by any other agreement or note, shall be
cumulative and may be exercised singularly or concurrently.
9
<PAGE> 13
SECTION 8. SECURITY INTEREST ABSOLUTE.
All rights of the Secured Party and all obligations of the
Debtors hereunder shall be absolute and unconditional irrespective of:
8.1 any lack of validity or enforceability of the Note or any
other agreement or instrument governing or evidencing any Secured Obligations;
8.2 any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Secured Obligations; or
8.3 any other circumstance which might otherwise constitute a
defense available to, or a discharge of, any of the Debtors.
SECTION 9. RELEASE.
The Debtors consent and agree that the Secured Party may at any time,
or from time to time, release and/or surrender all or any of the Collateral, or
any part thereof, by whomsoever deposited, which is now or may hereafter be
held by the Secured Party or its agent in connection with all or any of the
Secured Obligations, all in such manner and upon such terms as the Secured
Party may deem proper, and without notice to or further assent from the
Debtors; it being hereby agreed that the Debtors shall be and remain bound upon
this Agreement, irrespective of the existence, value or condition of any of the
Collateral, and notwithstanding any such exchange, surrender or release. The
Debtors hereby waive notice of acceptance of this Agreement, and promptness in
commencing suit against any Party hereto or liable hereon, and in giving any
notice to or of making any claim or demand hereunder upon the Debtors.
SECTION 10. MISCELLANEOUS.
10.1 RULES OF CONSTRUCTION. The rules of construction set forth in
Section 12(i) of the Purchase Agreement are applicable to this Agreement.
10.2 NOTICES. The notice provisions set forth in Section 2(j) of
the Purchase Agreement are applicable to this Agreement.
10.3 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.
10.4 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
10
<PAGE> 14
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.
10.5 SUCCESSORS AND ASSIGNS. Whenever any of the Parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such Party; and all the covenants, promises and agreements in this
Security Agreement contained by or on behalf of the Debtors shall bind and
inure to the benefit of the successors and assigns of such Parties.
10.6 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.
10.7 COUNTERPARTS. This Agreement may be executed, acknowledged
and delivered in any number of counterparts, each of such counterparts
constituting an original but all together constituting only one Agreement.
10.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF OHIO.
10.9 WAIVER OF JURY TRIAL. THE SECURED PARTY AND THE DEBTORS,
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 BASED UPON OR ARISING OUT OF THIS
AGREEMENT, THE PURCHASE AGREEMENT OR THE NOTE OR ANY RELATED INSTRUMENT OR
AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE
PURCHASE AGREEMENT OR THE NOTE, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY OF THEM ("LITIGATION"). NEITHER
THE SECURED PARTY NOR THE DEBTORS 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 THE SECURED PARTY OR THE DEBTORS EXCEPT BY WRITTEN INSTRUMENT EXECUTED
BY ALL OF THEM.
10.10 CONSENT TO JURISDICTION, VENUE AND SERVICE OF PROCESS.
THE SECURED PARTY AND THE DEBTORS, 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 COMMON PLEAS COURT
OF FRANKLIN COUNTY, OHIO AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF OHIO, EASTERN DIVISION 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
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<PAGE> 15
APPLICABLE LAW. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN
ANY RESPECT OR RELINQUISHED BY EITHER THE SECURED PARTY OR THE DEBTORS EXCEPT
BY WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
The parties have executed and delivered this Agreement effective as of
the day and year first above written.
DEBTORS: SECURED PARTY:
NDE ENVIRONMENTAL BANC ONE CAPITAL PARTNERS, L.P.
CORPORATION
By: BOCP Corporation,General Partner
By: /s/ JAY ALLEN CHAFFEE
--------------------------------
Its: Chairman of the Board By: /s/ JAMES H. WOLFE
------------------------------- ------------------------------
Name: James H. Wolfe
--------------------------------
TANKNOLOGY/NDE CORPORATION Its: Authorized Signer
-------------------------------
By: /s/ JAY ALLEN CHAFFEE
--------------------------------
Its: Chairman of the Board
-------------------------------
USTMAN INDUSTRIES, INC.
By: /s/ JAY ALLEN CHAFFEE
--------------------------------
Its: Chairman of the Board
-------------------------------
PROECO, INC.
By: /s/ JAY ALLEN CHAFFEE
--------------------------------
Its: Chairman of the Board
-------------------------------
TANKNOLOGY CANADA (1988), INC.
By: /s/ JAY ALLEN CHAFFEE
--------------------------------
Its: President
-------------------------------
12
<PAGE> 1
EXHIBIT 10.4
_______________________________________________________________________________
NDE ENVIRONMENTAL CORPORATION
SECURITY AGREEMENT - PLEDGE OF SUBSIDIARY STOCK
_______________________________________________________________________________
DATED AS OF OCTOBER 25, 1996
<PAGE> 2
TABLE OF CONTENTS
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2. SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . 3
SECTION 3. PERFECTION OF SECURITY INTEREST . . . . . . . . . . . . . 4
SECTION 4. COVENANTS WITH RESPECT TO COLLATERAL . . . . . . . . . . 4
SECTION 5. RIGHTS WITH RESPECT TO COLLATERAL . . . . . . . . . . . . 5
SECTION 6. DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . 5
SECTION 7. WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 8. SECURITY INTEREST ABSOLUTE . . . . . . . . . . . . . . . 7
SECTION 9. RELEASE . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 10. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . 8
SECTION 11. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 12. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . 8
i
<PAGE> 3
SECURITY AGREEMENT - PLEDGE OF SUBSIDIARY STOCK
This is the SECURITY AGREEMENT - PLEDGE OF SUBSIDIARY STOCK dated as
of October 25, 1996, ("Agreement") by and between NDE ENVIRONMENTAL
CORPORATION ("NDE"), a Delaware corporation and BANC ONE CAPITAL PARTNERS, L.P.
("BOCP"), an Ohio limited partnership, provided for in and entered into
pursuant to the NOTE AND WARRANT PURCHASE AGREEMENT, as amended, restated,
supplemented or otherwise modified from time to time ("Purchase Agreement") by
and among BOCP, as purchaser, and NDE, TANKNOLOGY/NDE CORPORATION ("TCI"),
USTMAN INDUSTRIES, INC. ("USTMAN"), PROECO, INC. ("PROECO"), and TANKNOLOGY
CANADA (1988), INC. ("CANADA").
NDE, TCI, USTMAN, PROECO and CANADA, together with their respective
successors and assigns, are referred to collectively as the "Debtors," and
individually as a "Debtor." NDE, together with its successors and assigns, is
referred to as the "Assignor" and BOCP, together with its successors and
assigns, is referred to as the "Secured Party" or "Assignee." The Assignor and
the Assignee 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
All capitalized terms not otherwise defined in this Agreement shall
have the definitions set forth in the Purchase Agreement. The terms defined in
the Purchase Agreement that are used with such definitions in this Agreement
include:
"Applicable Law"
"Capital Stock"
"Events of Default"
"Intercreditor Agreement"
"Notice"
"Related Documents"
"Security Agreement"
"Senior Lender"
<PAGE> 4
SECTION 2. Security Interest
(a) GRANT OF SECURITY INTEREST. As security for the prompt and
full payment and performance of the Secured Obligations (as defined bel
(i) the Assignor hereby pledges (and
shall cause to be pledged) to the Assignee and
grants (and shall cause to be granted) to the
Assignee a security interest in all of its
right, title and interest in all of the
Subsidiary Stock (as defined below) now or
hereafter owned beneficially or of record by
it, including all right, title and interest in
and to any distributions, dividends, cash,
instruments and other property or proceeds from
time to time received, receivable or otherwise
distributed in respect of or in exchange for
any or all of such Subsidiary Stock, and any
certificates now or hereafter evidencing such
Subsidiary Stock ("Share Interest
(ii) together in each case with
all Proceeds (as defined below). Such Share
Interests and Proceeds are referred to
collectively as "Collateral".
(b) DEFINITION - SECURED OBLIGATIONS. The term
"Secured Obligations" means (i) all obligations of the Debtors evidenced by the
Senior Subordinated Note due December 31, 2001, and dated October 25, 1996
("Note") made payable by the Debtors to the Secured Party in the principal
amount of $8,000,000, which note was purchased by the Secured Party for
$8,000,000 pursuant to the Purchase Agreement, together with all extensions,
renewals, amendments, modifications and notations thereof, and (ii) all
obligations of the Debtors to make payments or reimburse costs and expenses
under this Agreement or the Purchase Agreement.
(c) DEFINITION - SUBSIDIARY STOCK. The term "Subsidiary
Stock" means all of the Capital Stock of TCI, USTMAN, Proeco, and Canada
(collectively the "Debtor Subsidiaries" and individually a "Debtor Subsidiary")
and any other Subsidiary directly or indirectly owned beneficially or of record
by NDE, whether now or hereafter owned, acquired or existing, including those
shares of Capital Stock identified in Exhibit A.
(d) DEFINITION - PROCEEDS. The term "Proceeds" means any
"proceeds" as such term is defined in the Code, including the following at any
time whatsoever arising or receivable: (i) whatever is received upon any
collection, exchange, sale or other disposition, of any of the Collateral, and
any property into which any of the Collateral is converted, whether cash or
non-cash proceeds, (ii) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to any Debtor from time to time with respect to any
of the Collateral, including claims paid and premium refunds, (iii) any and all
payments (in any form whatsoever) made or due and payable to any Debtor from
time to time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by any governmental
authority, and (iv) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
3
<PAGE> 5
(e) DEFINITION - CODE. The term "Code" means the Uniform
Commercial Code of the State of Ohio, as amended from time-to-time, together
with any successor law.
SECTION 3. PERFECTION OF SECURITY INTEREST.
(a) The certificates evidencing the Share Interests have
been pledged and delivered by the Assignor to the Senior Lender pursuant to the
Pledge and Security Agreement dated as of October 25, 1996. Pursuant to the
Intercreditor Agreement, the Senior Lender has agreed to hold such certificates
as agent for the Secured Party and upon its release of its pledge under such
agreement to deliver such certificates to the Secured Party in pledge under
this Agreement. The Assignor hereby consents to such delivery by the Senior
Lender to the Assignee. In addition, with respect to the Share Interests, the
Assignor has (i) caused the security interest created by this Agreement to be
noted on the stock register of each Debtor Subsidiary; and (iii) delivered to
the Assignee, and, upon request of the Assignee, shall deliver to the Assignee,
financing statements (form UCC-1) in proper form for filing under the Code in
each jurisdiction as may be necessary or, in the reasonable opinion of
Assignee, desirable to perfect the security interest created herein. Assignor
hereby authorizes Assignee to file, and appoints Assignee its attorney-in-fact
for the purpose of executing and filing, such financing statements or any
additional financing statement or any continuation statement without the
signature of the Assignor to the extent permitted by Applicable Law.
(b) Any certificates now or hereafter issued to the
Assignor representing or evidencing all or any part of the Collateral, together
with duly executed instruments of transfer or assignment in blank, in a form
reasonably satisfactory to the Assignee, shall be delivered in pledge as
additional Collateral.
SECTION 4. COVENANTS WITH RESPECT TO COLLATERAL.
Assignor covenants to the Assignee as follows.
(a) Without the prior written consent of the Assignee,
the Assignor will not sell, assign, transfer, pledge, or otherwise encumber any
of its rights in or to the Collateral or any distributions or payments with
respect thereto or grant a lien, security interest or encumbrance thereon,
except to the extent permitted by the Purchase Agreement.
(b) The Assignor will, at its expense, promptly execute,
acknowledge and deliver all such instruments and take all such action as the
Assignee from time to time may reasonably request in order to ensure to the
Assignee the benefits of the liens and security interest in and to the
Collateral intended to be created by this Agreement.
(c) The Assignor has and will defend the title to the
Collateral and the liens and security interest of the Assignee thereon against
the claim of any person and will maintain and preserve such
4
<PAGE> 6
liens and security interest until such time as the Secured Obligations have
been paid or performed in full.
(d) The Assignor will not change its name or identity in
any manner which is reasonably likely to make any financing or continuation
statement filed in connection herewith seriously misleading within the meaning
of the Code unless it shall have given the Assignee at least 30 days' prior
written notice thereof and shall have taken all action (or made arrangements to
take such action substantially simultaneously with such change if it is
impossible to take such action in advance) necessary or reasonably requested by
the Assignee to amend such financing statement or continuation statement so
that it is not seriously misleading. The Assignor will not change its
principal place of business unless it shall have given the Assignee prior
written notice of its intent to do so.
SECTION 5. RIGHTS WITH RESPECT TO COLLATERAL.
As long as no Event of Default shall have occurred and be continuing
and until written notice shall be given to the Assignor by the Assignee, the
Assignor shall have the right, from time to time, to receive distributions and
to vote and give consents with respect to the Collateral or any part thereof
for all purposes not inconsistent with the provisions of this Agreement and any
other agreement; provided, however, that no vote shall be cast, and no consent
shall be given or action taken, which would have the effect of materially
impairing the position or interest of the Assignee in respect of the Collateral
(except the declaration and payment of distributions to the Assignor as
contemplated in the Purchase Agreement) or which would authorize or effect
(except as and to the extent expressly consented to by the Assignee or as
contemplated in the Purchase Agreement) (i) the dissolution or liquidation, in
whole or in part, of any Debtor Subsidiary, (ii) the consolidation or merger of
any Debtor Subsidiary with any other entity or person, (iii) the sale,
disposition or encumbrance of all or substantially all of the assets of any
Debtor Subsidiary, or (iv) the issuance of any additional Capital Stock of any
Debtor Subsidiary.
SECTION 6. DEFAULTS AND REMEDIES.
(a) Upon the occurrence of an Event of Default and during the
continuation of such Event of Default, and following ten Business Days written
notice to Assignor, the Assignee may cause the transfer and register in its
name or in the name of its designee the whole or any part of the Collateral,
exercise any voting rights with respect thereto, collect and receive all
distributions made thereon, sell in one or more sales after ten Business Days'
notice of the time and place of any public sale or of the time after which a
private sale is to take place (which notice the Assignor agrees is commercially
reasonable), but without any previous notice or advertisement, the whole or any
part of the Collateral and to otherwise act with respect to the Collateral as
though the Assignee was the outright owner thereof, the Assignor hereby
irrevocably constituting and appointing the Assignee, as the proxy and
attorney-in-fact of the Assignor, with full power of substitution, to sign any
document or take any act in order to do so; provided, however, that the
Assignee shall not have any duty to exercise any such right or to preserve the
same and shall not be liable for any failure to do so or for
5
<PAGE> 7
any delay in doing so. Any sale shall be made at a public or private sale at
the Assignee's place of business, or elsewhere to be named in the notice of
sale, either for cash or upon credit or for future delivery at such price as
the Assignee may deem commercially reasonable, and the Assignee may be the
purchaser of the whole or any part of the Collateral so sold and hold the same
thereafter in its own right free from any claim of the Assignors as applicable.
Each sale shall be made to the highest bidder, but the Assignee reserves the
right to reject any and all bids at such sale which, in its absolute
discretion, it shall deem inadequate. Demands of performance, except as
otherwise herein specifically provided for, notices of sale, (except as
otherwise herein specifically provided for), advertisements and the presence of
property at sale are hereby waived and any sale hereunder may be conducted by
an auctioneer or any officer or agent of the Assignee.
(b) Assignor agrees that following the occurrence and during the
continuance of an Event of Default, (i) it will not at any time plead, claim or
take the benefit of any appraisal, valuation, stay, extension, moratorium or
redemption law now or hereafter in force in order to prevent or delay the
enforcement of this Agreement, or the absolute sale of the whole or any part of
the Collateral or the possession thereof by any purchaser at any sale
hereunder, and Assignor waives the benefit of all such laws to the extent it
lawfully may do so or (ii) it will not interfere with any right, power and
remedy of the Assignee provided for in this Agreement or now or hereafter
existing at law or in equity or by statute or otherwise, or the exercise or
beginning of the exercise by the Assignee of any one or more of such rights,
powers or remedies. No failure or delay on the part of the Assignee to
exercise any such right, power or remedy and no notice or demand which may be
given to or made upon the Assignor by the Assignee with respect to any such
remedies shall operate as a waiver thereof, or limit or impair the Assignee's
right to take any action or to exercise any power or remedy hereunder, without
notice or demand, or prejudice its rights as against the Assignor in any
respect.
(c) Assignor further agrees that a breach of any of the covenants
contained in this Section will cause irreparable injury to the Assignee, that
the Assignee has no adequate remedy at law in respect of such breach and, as a
consequence, agrees that each and every covenant contained in this Section
shall be specifically enforceable against the Assignor and Assignor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that the Secured Obligations
are not then due and payable in accordance with the agreements and instruments
governing and evidencing such obligations.
6
<PAGE> 8
SECTION 7. WAIVER.
Assignor waives demand, presentment and protest. No delay or omission
or forbearance by the Assignee in exercising any rights under this Agreement,
the Note, the Subordinated Security Agreement or the Purchase Agreement shall
operate as a waiver of the rights of the Assignee under this Agreement, the
Note, the Subordinated Security Agreement or the Purchase Agreement or of any
other rights and shall not affect, discharge, diminish or impair the Assignor's
obligations hereunder or the Secured Obligations. Waiver on any one occasion
shall not be construed as a bar to or waiver of any rights or remedy on any
future occasion. All the Assignee's rights and remedies, whether evidenced
hereby or by any other agreement or note, shall be cumulative and may be
exercised singularly or concurrently.
SECTION 8. SECURITY INTEREST ABSOLUTE.
All rights of the Assignee and all obligations of the Assignor
hereunder shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Note, the
Purchase Agreement, the Subordinated Security Agreement or any other agreement
or instrument governing or evidencing any Secured Obligations;
(b) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Secured Obligations; or
(c) any other circumstance which might otherwise constitute a
defense available to, or a discharge of the Assignor or Debtors.
SECTION 9. RELEASE.
Assignor consents and agrees that the Assignee may at any time, or
from time to time, in its discretion exchange, release and/or surrender all of
the Collateral, or any part thereof, by whomsoever deposited, which is now or
may hereafter be held by the Assignee in connection with all or any of the
Secured Obligations, all in such manner and upon such terms as the Assignee may
deem proper, and without notice to or further assent from the Assignor; it
being hereby agreed that the Assignor shall be and remain bound upon this
Agreement, irrespective of the existence, value or condition of any of the
Collateral, and notwithstanding any such exchange, surrender or release.
Assignor hereby waives notice of acceptance of this Agreement, and promptness
in commencing suit hereunder, and in giving any notice to or of making any
claim or demand hereunder upon the Assignor. No act or omission of any kind on
the Assignee's part shall in any event affect or impair this Agreement.
7
<PAGE> 9
SECTION 10. INDEMNIFICATION.
The Assignor agrees to indemnify and hold the Assignee harmless from
and against any taxes, liabilities, claims and damages, including reasonable
attorney's fees and disbursements, and other expenses incurred or arising by
reason of the taking or the failure to take action by the Assignee, in good
faith, in respect of any transaction effected under this Agreement or in
connection with the lien provided for herein, including, without limitation,
any taxes payable in connection with the delivery or registration of any of the
Collateral as provided herein; provided, however, the Assignor shall not be
liable for such indemnification to the Assignee to the extent that such
indemnified liability results from the Assignee's gross negligence or willful
misconduct. The Assignor agrees to pay to the Assignee all reasonable
out-of-pocket costs and expenses, including reasonable fees and disbursements
of counsel, reasonably incurred by the Assignee in connection with the
performance by the Assignee of the provisions of this Agreement and of any
transactions effected pursuant to this Agreement. The obligations of the
Assignor under this Section shall survive the termination of this Agreement.
SECTION 11. TERMINATION.
This Agreement shall be terminated upon the payment in full of the
Note in accordance with its terms. Until terminated, the security interest
created hereby shall continue in full force and effect and shall secure and be
applicable to all advances now or hereafter made by the Secured Party to the
Debtors. Upon termination, the Assignee shall cooperate with the Assignor to
secure the release of the security interest, assignment and pledge created
hereby, including release and return of all pledged items of Collateral and the
execution of any releases of financing statements reasonably requested by the
Assignor.
SECTION 12. MISCELLANEOUS.
(a) RULES OF CONSTRUCTION. The rules of construction set forth in
Section 12(i) of the Purchase Agreement are applicable to this Agreement.
(b) NOTICES. The notice provisions set forth in Section 12(j) of
the Purchase Agreement are applicable to this Agreement.
(c) 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.
8
<PAGE> 10
(d) 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.
(e) SUCCESSORS AND ASSIGNS. Whenever any of the Parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such Party; and all the covenants, promises and agreements in this
Agreement contained by or on behalf of the Assignor shall bind and inure to the
benefit of the successors and assigns of such Parties whether so expressed or
not.
(f) 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
Security Agreement.
(g) COUNTERPARTS. This Agreement may be executed, acknowledged
and delivered in any number of counterparts, each of such counterparts
constituting an original but all together constituting only one Agreement.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF OHIO.
(i) WAIVER OF JURY TRIAL. THE ASSIGNEE AND THE ASSIGNOR, 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 BASED UPON OR ARISING OUT OF THIS
AGREEMENT, THE PURCHASE AGREEMENT OR THE NOTE OR ANY RELATED INSTRUMENT OR
AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE
PURCHASE AGREEMENT OR THE NOTE, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY OF THEM ("LITIGATION"). NEITHER
THE ASSIGNEE NOR THE ASSIGNOR 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 THE ASSIGNEE OR THE ASSIGNOR EXCEPT BY WRITTEN INSTRUMENT EXECUTED BY
BOTH OF THEM.
(j) CONSENT TO JURISDICTION, VENUE AND SERVICE OF PROCESS.
THE ASSIGNEE AND THE ASSIGNOR, 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 COMMON PLEAS COURT OF
FRANKLIN COUNTY, OHIO AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF OHIO, EASTERN DIVISION 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
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<PAGE> 11
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 THE ASSIGNEE OR THE ASSIGNOR EXCEPT BY WRITTEN
INSTRUMENT EXECUTED BY BOTH OF THEM.
THE PARTIES HAVE EXECUTED AND DELIVERED THIS AGREEMENT EFFECTIVE AS OF
THE DAY AND YEAR FIRST ABOVE WRITTEN.
ASSIGNOR: ASSIGNEE:
NDE ENVIRONMENTAL BANC ONE CAPITAL PARTNERS, L.P.
CORPORATION BY: BOCP CORPORATION
GENERAL PARTNER
By: /s/ JAY ALLEN CHAFFEE
--------------------------
Its: Chairman of the Board By: /s/ JAMES H. WOLFE
------------------------- ----------------------------
James H. Wolfe
----------------------,
Authorized Signer
<PAGE> 12
EXHIBIT A
SUBSIDIARY STOCK
<TABLE>
<CAPTION>
Number of
Shares Owned
by NDE Stock
Par Value Environmental Certificate
Name of Corporation Class Per Share Corporation Numbers
- ------------------- ------ --------- ----------- -----------
<S> <C> <C> <C> <C>
ProEco, Inc. Common $0.01 8,850,000 26
Tankology/NDE Corporation* Common $0.01 1,000 001
USTMAN Industries, Inc. Common $0.01 1,000 1
Tankology Canada (1988), Inc. Common $0.10 10,000 1
</TABLE>
- ---------------
* Formerly known as "Tanknology Corporation International."
10
<PAGE> 1
EXHIBIT 10.5
_______________________________________________________________________________
NDE ENVIRONMENTAL CORPORATION
PUT OPTION AGREEMENT
_______________________________________________________________________________
DATED AS OF OCTOBER 25, 1996
<PAGE> 2
TABLE OF CONTENTS
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. PUT OPTION. . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 PUT OPTION EXERCISE PERIOD. . . . . . . . . . . . . 2
2.2 MANNER OF EXERCISE. . . . . . . . . . . . . . . . . 2
2.3 REPURCHASE PRICE. . . . . . . . . . . . . . . . . . . 2
2.4 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 3
2.5 CLOSING AND PAYMENT. . . . . . . . . . . . . . . . 4
SECTION 3. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 RULES OF CONSTRUCTION. . . . . . . . . . . . . . . 4
3.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . 4
3.3 SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . 4
3.4 SEVERABILITY. . . . . . . . . . . . . . . . . . . . 4
3.5 AMENDMENTS. . . . . . . . . . . . . . . . . . . . . 5
3.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . 5
i
<PAGE> 3
PUT OPTION AGREEMENT
This is the PUT OPTION AGREEMENT dated as of October 25, 1996
("Agreement") by and between NDE ENVIRONMENTAL CORPORATION ("NDE"), a Delaware
corporation and BANC ONE CAPITAL PARTNERS, L.P. ("BOCP"), an Ohio limited
partnership, provided for in and entered into pursuant to the NOTE AND WARRANT
PURCHASE AGREEMENT , as amended, restated, supplemented or otherwise modified
from time to time ("Agreement") by and among BOCP, as purchaser, and NDE,
TANKNOLOGY/NDE CORPORATION, USTMAN INDUSTRIES, INC., PROECO, INC., and
TANKNOLOGY CANADA (1988), INC.
NDE, together with its successors and assigns, is referred to as the
"Company" and BOCP, together with its successors and assigns, 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
All capitalized terms not otherwise defined in this Agreement shall have the
definitions set forth in the Purchase Agreement. The terms defined in the
Purchase Agreement that are used with such definitions in this Agreement
include:
"Adjusted Permitted Indebtedness"
"Affiliate"
"Applicable Law"
"Business Days"
"Capital Stock"
"Change of Control"
"Common Shares"
"Convertible Securities"
"Convertible Shares"
"Disposition"
"EBITDA"
"Event of Default"
"Financial Statements"
"Qualified Public Offering"
<PAGE> 4
"Non-Surviving Combination"
"Permitted Indebtedness"
"Warrants"
"Warrant Shares"
SECTION 2. PUT OPTION.
2.1 PUT OPTION EXERCISE PERIOD. Unless and until an
Qualified Public Offering has occurred, the Holder shall have the option (the
"Put Option") to require the Company to purchase all, but not less than all, of
Warrants and Put Shares (as defined in this Agreement), if any, at any time
after the earlier of the following to occur ("Put Event"):
(a) December 31, 2001;
(b) an Event of Default has occurred with respect to the
Note and has not been cured;
(c) a Change of Control; and
(d) a Non-Surviving Combination.
2.2 MANNER OF EXERCISE. The Put Option may be exercised
by the Holder giving Notice to the Company that the Holder elects to sell the
Warrants and Put Shares then held by the Holder to the Company ("Put Date") at
the repurchase price set forth in Section 2.3 (the "Repurchase Price"). Such
Notice of election by the Holder shall be irrevocable. Upon final
determination of the Repurchase Price as set forth in Section 2.3, the Company
shall be required to repurchase all of the Warrants and Put Shares, if any,
then held by the Holder. The Company shall not be obligated to repurchase the
Warrants and Put Shares, if any, if the Company shall be unable to do so
without a breach or violation of the provisions of Applicable Law or any
agreement with respect to its Senior Indebtedness. Notwithstanding the
foregoing, the Company shall use all reasonable efforts to remove all
limitations upon its ability to repurchase the Warrants and Put Shares, if any,
such obligation shall remain a continuing obligation of the Company and the
Company shall repurchase the Warrants and Put Shares, if any, immediately after
all such limitations have been removed.
2.3 REPURCHASE PRICE. The "Repurchase Price" per Put
Share shall be equal to the Valuation Amount per share of Outstanding Shares
determined as of the Put Date. With respect to unexercised Warrants, the
Repurchase Price shall be an amount equal to the Repurchase Price of the Common
Shares ultimately issuable upon the exercise of such Warrants, reduced by the
then applicable Exercise Price of such Warrants. With respect to Convertible
Securities owned by or issuable to the Holder, the Repurchase Price shall an
amount equal to the Repurchase Price of the Common Shares ultimately issuable
upon the exercise or conversion of such Convertible Securities, reduced in each
case by any applicable exercise price or other cost of exercise or conversion
payable by the Holder.
2
<PAGE> 5
2.4 DEFINITIONS. For purposes of this Section the
following terms shall have the following meanings:
"Valuation Amount" means, as of any date of determination, the
Capitalized Earnings Amount, unless a greater Market Determined Value Amount
is determinable with respect to such date of determination, in which case
"Valuation Amount" means the greater amount (if applicable).
"Capitalized Earnings Amount"means, as of any date of determination,
an amount equal to five (5) times EBITDA (i) reduced by an amount sufficient to
pay in full all of the then outstanding Adjusted Permitted Indebtedness
(including all accrued but unpaid interest with respect thereto), and (ii)
increased by the amount of cash and the fair market value of all marketable
securities reflected on the most recent Financial Statements of the Company as
of the date of determination.
"Holder's Shares" means as of any date of determination the sum of (A)
all Common Shares then owned of record by the Holder, which were acquired
pursuant to any Related Document, (B) the maximum number of Common Shares then
issuable to the Holder upon the full exercise of the Warrant, assuming the full
exercisablity of the Warrants as of that date, and (C) the maximum number of
Common Shares then issuable to the Holder upon the full conversion or exercise
of all Convertible Securities then owned by the Holder or issuable to the
Holder upon the full exercise of the Warrants, which were acquired pursuant to
any Related Document, assuming the full convertibility or exercisablity of the
Convertible Securities and Warrants as of that date.
"Market Determined Value Amount" means, with respect to any Put Date,
the fair market value of the then outstanding Capital Stock determined by the
Appraiser based solely upon a Trigger Event the closing of which has occurred
within six (6) months immediately preceding the Put Date or that will occur
pursuant to an agreement or letter of intent in effect as of the Put Date and
assuming the payment in full of all outstanding Permitted Indebtedness, and
determined without giving consideration to the tax consequences of such sale to
the seller.
"Appraiser" means, with respect to any determination of the Market
Determined Value Amount, an independent appraiser (which shall be an
accounting firm or investment banking firm that is not an Affiliate of either
the Company or the Holder) selected in the manner provided for in this
definition. Within ten (10) days after the exercise of the Put Option, the
Company and the Holder shall endeavor in good faith to select a mutually
acceptable Appraiser. If no such Appraiser is mutually selected within such
time period or such longer time period as the Company and the Holder shall
mutually agree upon, then within ten (10) days thereafter, the Company and the
Holder shall each designate an investment banking firm that is not an Affiliate
of either the Company or the Holder, and within ten (10) days thereafter, such
investment banking firms shall mutually select the Appraiser. The Company
shall pay the reasonable fees and expenses of the Appraiser, and, if
applicable, the Company and the Holder shall each pay the fees and expenses of
the investment banking firm designated by each of them for the purpose of
selecting the Appraiser.
3
<PAGE> 6
"Trigger Event" means any of the following events: (i) a Qualified
Public Offering; (ii) a Change of Control; (iii) a Disposition; or (iv) a
Non-Surviving Combination.
"Put Shares" means as of any date of determination the sum of (A) all
Common Shares purchased by the Holder pursuant to any of the Related Documents
and then owned of record by the Holder, (B) the maximum number of Common Shares
then issuable to the Holder upon the full exercise of the Warrants, assuming
the full exercisablity of the Warrant as of that date, and (c) the maximum
number of Common Shares then issuable to the Holder upon the full conversion or
exercise of all Convertible Securities acquired pursuant to any Related
Document then owned by the Holder or issuable to the Holder upon the full
exercise of the Warrants, assuming the full convertibility or exercisablity of
the Convertible Securities and Warrants as of that date.
"Outstanding Shares" means as of any date of determination the sum of
(A) all Common Shares (other than Common Shares then owned by the Holder)
outstanding as of such date, and (B) all Holder's Shares deemed to be
outstanding as of such date
2.5 CLOSING AND PAYMENT. The closing for the repurchase
of the Warrant or Warrant Shares by the Company pursuant to this Section 2
shall occur within five (5) Business Days following the date of the
determination of the Repurchase Price which shall be payable by the Company by
delivery of a certified or cashiers' check to the Holder.
SECTION 3. MISCELLANEOUS.
3.1 RULES OF CONSTRUCTION. The rules of construction set
forth in Section 12(i) of the Purchase Agreement are applicable to this
Agreement.
3.2 NOTICES. The notice provisions set forth in Section
12(j) of the Purchase Agreement are applicable to this Agreement.
3.3 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, assigns and legal representatives.
The rights of the Holder hereunder may not be assigned or otherwise
transferred, except (i) in connection with the assignment of all of the
unexercised Warrants as provided for in the Warrant Certificate, (ii) in
connection with the sale of all, but not less that all of the Warrants and Put
Shares, or (iii) with the express written consent of the Company.
3.4 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.
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3.5 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 of any rights hereunder constitute the waiver of such
rights in any future instance unless the waiver so specifies in writing.
3.6 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Ohio.
The parties have executed and delivered this Agreement effective as of
the day and year first above written.
COMPANY: HOLDER:
NDE ENVIRONMENTAL CORPORATION BANC ONE CAPITAL PARTNERS, L.P.
By: BOCP Corporation, General Partner
By: /s/ JAY ALLEN CHAFFEE
-------------------------- By: /s/ JAMES H. WOLFE
Jay Allen Chaffee, ----------------------------------
Chairman of the Board James H. Wolfe
Its: Authorized Signer
---------------------------------
---------------------------------
---------------------------------
5
<PAGE> 1
EXHIBIT 10.6
_______________________________________________________________________________
NDE ENVIRONMENTAL CORPORATION
REGISTRATION RIGHTS AGREEMENT
_______________________________________________________________________________
DATED AS OF OCTOBER 25, 1996
<PAGE> 2
TABLE OF CONTENTS
SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . 3
2.1. Demand Registration. . . . . . . . . . . . . . . . . . . 3
2.2. "Piggyback" Registration. . . . . . . . . . . . . . . . . 5
2.3. Registration Procedures. . . . . . . . . . . . . . . . 6
2.4. Demand Offerings. . . . . . . . . . . . . . . . . . . . . 9
2.5. Indemnification. . . . . . . . . . . . . . . . . . . . .10
2.6. Adjustments Affecting Registrable Securities. . . . . . 11
2.7. Limitation on Registration Rights . . . . . . . . . . . 11
SECTION 3. RULE 144. . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4. INFORMATION REQUIRED BY RULE 144A. . . . . . . . . . 12
SECTION 5. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . 12
SECTION 6. ADDITIONAL HOLDERS. . . . . . . . . . . . . . . . . . . 12
SECTION 7. ASSIGNMENT. . . . . . . . . . . . . . . . . . . . 12
SECTION 8. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . 12
8.1. Amendments, Modifications and Waivers. . . . . . . . 12
8.2. Governing Law. . . . . . . . . . . . . . . . . . . . . 13
i
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8.3. Rules of Construction. . . . . . . . . . . . . . . . . 13
8.4. Notices. . . . . . . . . . . . . . . . . . . . . . . 13
ii
<PAGE> 4
REGISTRATION RIGHTS AGREEMENT
This is the REGISTRATION RIGHTS AGREEMENT dated as of October 25, 1996
("Agreement") by and between NDE ENVIRONMENTAL CORPORATION ("NDE"), a Delaware
corporation, and BANC ONE CAPITAL PARTNERS, L.P. ("BOCP"), an Ohio limited
partnership, provided for and entered into pursuant to the Note and Warrant
Purchase Agreement dated as of October 25, 1996, as amended, restated,
supplemented or otherwise modified from time-to-time, ("Purchase Agreement") by
and among BOCP, as purchaser, and NDE, TANKNOLOGY/NDE CORPORATION, USTMAN
INDUSTRIES, INC., PROECO, INC., and TANKNOLOGY CANADA (1988), INC., as sellers.
BOCP and each other Person added to this Agreement as provided for in
Section 6 hereof, together with their respective successors and assigns, are
referred to collectively as the "Holders" and individually as a "Holder." NDE,
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 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.
(a) Purchase Agreement Definitions. All capitalized
terms not otherwise defined in this Agreement shall have the definitions set
forth in the Purchase Agreement. The terms defined in the Purchase Agreement
that are used with such definitions in this Agreement include:
"Notice"
"Person"
(b) Other Definitions. As used in this Agreement, the
following terms shall have the specified definitions:
Commission: The Securities and Exchange Commission or any
other federal agency at the time administering the Securities
Act.
Exchange Act: The Securities Exchange Act of 1934, or any
similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at
the time. Reference to a particular section of the Securities
Exchange Act
<PAGE> 5
of 1934 shall include a reference to the comparable section,
if any, of any such similar federal statute.
Preemptive Shares. The Common Shares or Common Shares issued
upon conversion or exercise of Convertible Securities
purchased pursuant to the provisions of the Preemptive Rights
Agreement dated as of October 25, 1996, provided for and
entered into by NDE and BOCP pursuant to the Purchase
Agreement.
Registrable Securities: (a) Any Warrant Shares or Preemptive
Shares, and (b) any securities issued or issuable with
respect to any such Warrant Shares or Preemptive Shares by way
of dividend or distribution or in connection with a
recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable
Securities, once issued such securities shall cease to be
Registrable Securities when (i) a registration statement with
respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall
have been sold in accordance with such registration statement,
(ii) such securities shall have been distributed to the public
pursuant to Rule 144 (or any successor provision) promulgated
under the Securities Act, (iii) such securities shall have
been otherwise transferred, new certificates for them not
bearing a legend restricting further transfer shall have been
delivered by the Company and subsequent disposition of them
shall not require registration or qualification under the
Securities Act or any similar state law then in force, or (iv)
such securities shall have ceased to be outstanding.
Registration Expenses: All expenses incident to The Company's
performance of or compliance with Section 3, including,
without limitation, all registration, filing and National
Association of Securities Dealers fees, all fees and expenses
of complying with securities or blue sky laws, all word
processing, duplicating and printing expenses, messenger and
delivery expenses, the fees and disbursements of counsel for
the Company and of its independent public accountants,
including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and
compliance, premiums and other costs of policies of insurance
against liabilities arising out of the public offering of the
Registrable Securities and any fees and disbursements of
underwriters customarily paid by issuers or sellers of
securities, but excluding underwriting discounts and
commissions and transfer taxes, if any.
Securities Act: The Securities Act of 1933, or any similar
federal statute, and the rules and regulations of the
Commission thereunder, all as of the same shall be in effect
at the time. References to a particular section of the
Securities Act of 1933 shall include a reference to the
comparable section, if any, of any such similar federal
statute.
2
<PAGE> 6
Warrant Share(s). The Common Shares issued upon the exercise
of the Warrants evidenced by the Warrant Certificate dated as
of October 25, 1996 (or any replacement certificates therefor)
issued and provided for in the Purchase Agreement.
Section 2. REGISTRATION RIGHTS.
2.1. Demand Registration.
(a) By notice to the Company, any Holder owning of record
more than 25% of the then outstanding Registrable Securities may request that
the Company effect the registration under the Securities Act of all or any part
of such Holders' Registrable Securities. Such Notice shall specify (i) the
intended method of disposition thereof, and (ii) whether or not such requested
registration is to be an underwritten offering. Upon receipt of such notice,
the Company will promptly give Notice of such requested registration to all
other Holders and thereupon the Company will use all reasonable efforts to
effect the registration under the Securities Act of:
(i) the Registrable Securities which the Company has been
so requested to register by the requesting Holder;
and
(ii) all other Registrable Securities which the Company
has been requested to register by any other Holder by
Notice to the Company within thirty (30) days after
the date of such Notice by the Company (which request
shall specify the intended method of disposition of
such Registrable Securities), all to the extent
necessary to permit the disposition (in accordance
with the intended methods thereof) of the Registrable
Securities to be so registered.
The Company shall not be required to effect more than two
registrations for any or all Holders pursuant to requests made pursuant to this
section.
(b) Registration of Other Securities. Whenever the
Company shall effect a registration pursuant to this section in connection with
an underwritten offering, no securities other than Registrable Securities shall
be included among the securities covered by such registration unless (i) the
managing underwriter of such offering shall have advised each holder of
Registrable Securities to be covered by such registration in writing that the
inclusion of such other securities would not adversely affect such offering or
(ii) the Holders of all Registrable Securities to be covered by such
registration shall have consented in writing to the inclusion of such other
securities.
(c) Postponement of Registration. The Company shall be
entitled to postpone, for a reasonable period of time not in excess of 90 days
after its receipt of a Notice, the filing of any registration statement, if
(i) at any time prior to the filing of such registration statement the Company
determines, in its reasonable business judgment, that such registration and
offering could interfere with or otherwise adversely affect any financing,
acquisition, corporate reorganization, or
3
<PAGE> 7
other material transaction or development involving the Company or any of its
affiliates or require the Company to disclose matters that otherwise would not
be required to be disclosed at such time and (ii) the Company gives the Holders
written notice of such postponement. Any such notice need not specify the
reasons for such postponement if the Company determines, in its reasonable
business judgment, that doing so would interfere with or adverseley affect such
transaction or development or would result in the disclosure of material
non-public information. In the event of such postponement, the Company shall
file such registration statement as soon as practicable after it shall
determine, in its reasonable business judgment, that such registration and
offering will not interfere with the matters described in the first sentence of
this Section 2.1(c). If the Company shall postpone the filing of any
registration, Holders holding in the aggregate 25% or more of the Registrable
Shares requested to be included in such registration statement shall have the
right to withdraw their request for such registration by giving notice to the
Company within 15 days of the notice of postponement. Such withdrawal request
shall be deemed to apply to all Holders who hold Registrable Shares that had
been requested to be included in such registration statement. In the event
that the Holders withdraw their request in the foregoing manner, such request
shall not be counted for purposes of determining the number of registrations to
which Sellers are entitled pursuant to Section 2.1(a) hereof.
(d) Expenses. The Company will pay all Registration
Expenses in connection with any registration requested pursuant to this
section. If a registration begun pursuant to a request made under Section
3.1(a) is withdrawn by the holders of the Registrable Securities making such
request because information concerning the Company is disclosed that is
materially and adversely different from the information known to such holders
at the time such request was made, the Company will pay all Registration
Expenses in connection with such request without reducing the number of
registrations which the Holders have a right to cause the Company to effect
under section hereof; provided, however, that if the Holders withdraw or,
provided, however, that, if such a registration is withdrawn for any other
reason, the Holders will reimburse the Company for such Registration Expenses
(e) Effective Registration Statement. A registration
requested pursuant to this section shall not be deemed to have been effected
(i) unless a registration statement with respect thereto has become effective,
(ii) if after it has become effective, such registration becomes the subject of
any stop order, injunction or other order or requirement of the Commission or
other governmental agency or court for any reason, or (iii) if the conditions
to closing specified in the purchase agreement or underwriting agreement
entered into in connection with such registration are not satisfied.
(f) Selection of Underwriters. If a requested
registration pursuant to this section involves an underwritten offering, the
underwriter or underwriters thereof shall be selected by the Company.
(g) Priority in Requested Registrations. If a requested
registration pursuant to this section involves an underwritten offering, and
the managing underwriter shall advise the Company
4
<PAGE> 8
in writing (with a copy to each Holder) that, in its opinion, the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering within a price range acceptable to the
Holders, the Company will include in such registration the number of
Registrable Securities that the Company is so advised can be sold in such
offering, pro rata among the holders thereof requesting such registration on
the basis of the number of such Registrable Securities requested to be included
by such holders. In connection with any registration as to which the
provisions of this clause (g) apply, no securities other that Registrable
Securities shall be covered by such registration.
2.2. "Piggyback" Registration.
(a) Right to Include Registrable Securities. If the
Company at any time proposes to register any of its securities under the
Securities Act (other than by a registration on Forms S-8 or S-4 or any
successor or similar form and other than pursuant to Section 2.1), whether or
not for sale for its own account, it will each such time give prompt Notice to
the Holders. Upon request of any such Holder to the Company made within 30
days after the receipt of any such Notice (which request shall specify the
Registrable Securities intended to be disposed of by such Holder and the
intended method of disposition thereof), the Company will use all reasonable
efforts to effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the Holders,
to the extent necessary to permit the disposition (in accordance with the
intended methods thereof) of the Registrable Securities to be registered. If,
at any time after giving written Notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any
reason not to register or to delay registration of such securities, the Company
may, as its election, give written notice of such determination to each holder
of Registrable Securities and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligations to register any
Registrable Securities in connection with such registration (but not from its
obligation to pay the Registration Expenses in connection therewith), without
prejudice, however, to the rights of any Holder entitled to request that such
registration be effected as a registration under Section 2.1, and (ii) in the
case of a determination to delay registration, shall be permitted to delay
registering any Registrable Securities for the same period as the delay in
registering such other securities. No registration effected under this section
shall relieve the Company of its obligation to effect any registration under
Section 2.1. the Company will pay all Registration Expenses in connection with
each registration of Registrable Securities requested pursuant to this section.
(b) Priority in Registrations. If (i) a registration
pursuant to this section involves an underwritten offering of the securities,
and (ii) the managing underwriter shall inform the Company and the holders of
the Registrable Securities 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:
5
<PAGE> 9
(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 Securities
requested by the Holders to be included in such
registration, and third, all other securities of the
Company requested to be included in such registration
pro rata on the basis of the number of shares of such
securities so requested to be included;
(ii) if such registration is for other than an offering
described in (i) above, such Registrable Securities
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 on a pro rata on the basis of the number
of shares of such Registrable Securities and such
other securities so proposed to be sold.
2.3. Registration Procedures. If the Company is required to use
all reasonable efforts to effect the registration of any Registrable Securities
as provided in Sections 2.1 and 2.2, the Company will expeditiously as
possible:
(i) prepare and as soon thereafter as possible file with
the Commission the registration statement to effect
such registration and thereafter use all reasonable
efforts to cause such registration statement to
become effective, provided that the Company may
discontinue any registration of its securities which
are not Registrable Securities (and, under the
circumstances specified in Section 2.2(a), its
securities which are Registrable Securities) at any
time prior to the effective date of the registration
statement relating thereto;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and
the prospectus used in connection therewith as may be
necessary to keep such registration statement
effective and to comply with the provisions of the
Securities Act in all material respects with respect
to the disposition of all securities covered by such
registration statement until such time as all of such
securities have been disposed of in accordance with
the intended methods of disposition by the Holders
set forth in such registration statement;
(iii) furnish to each Holder such number of prospectuses
and copies of each such amendment and supplement
thereto and such other documents as such Holder may
reasonably request;
(iv) use all reasonable efforts to register or qualify all
Registrable Securities and other securities covered
by such registration statement under such other
securities or blue sky laws of such jurisdictions as
the Holders shall reasonably request, to keep such
registration or qualification in effect for so
6
<PAGE> 10
long as such registration statement remains in
effect, and take any other action which may be
reasonably necessary or advisable to enable the
Holders to consummate the disposition in such
jurisdictions of the securities owned by the Holders,
except that the Company shall in no event be required
to qualify to do business as a foreign corporation or
as a dealer in any jurisdiction where it is not so
qualified, to conform its capitalization or the
composition of its assets at the time to the
securities or blue sky laws of such jurisdiction, to
execute or file any general consent to service of
process under the laws of such jurisdiction, to
execute or file any general consent to service of
process under the laws of any jurisdiction, to take
any action that would subject it to service of
process in suits other than those arising out of the
offer and sale of the Registrable Shares covered by
such registration statement, or to subject itself to
taxation in any jurisdiction where it has not
theretofore done so; and
(v) use all reasonable efforts to cause all Registrable
Securities 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 Securities;
(vi) furnish to the Holders a signed counterpart,
addressed to the Holders (and underwriters, if any)
of
(x) an opinion of counsel for the Company, dated
the effective date of such registration statement
(and, if such registration includes an underwritten
public offering, dated the date of the closing under
the underwriting agreement), reasonably satisfactory
in form and substance to the Holders, and
(y) a "comfort" letter, dated the effective date
of such registration statement (and, if such
registration includes an underwritten public
offering, dated the date of the closing under the
underwriting agreement), signed by the independent
public accountants who have certified The Company's
financial statements included in such registration
statement,
covering substantially the same matters as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to
the underwriters in underwritten public offerings;
(vii) notify each Holder upon discovery that, or upon the
happening of any event as a result of which, the
prospectus included in such registration statement
includes an untrue statement of a material facts or
omits to state any material fact required to be
stated therein or necessary to make the statements
therein not misleading in the light of the
circumstances under which they were made,
7
<PAGE> 11
and at the reasonable request of any such Holder use
its diligent efforts to promptly prepare and furnish
to such Holder a reasonable number of copies of a
supplement to or an amendment to such prospectus as
may be necessary;
(viii) otherwise use all reasonable efforts to comply with
all applicable rules and regulations of the
Commission, and furnish to each Holder at least two
business days prior to the filing thereof a copy of
any amendment or supplement to such registration
statement or prospectus ;
(ix) provide and cause to be maintained a transfer agent
and registrar for all Registrable Securities covered
by such registration statement from and after a date
not later than the effective date of such
registration statement;
(x) use all reasonable efforts to list all Registrable
Securities covered by such registration statement on
any securities exchange on which any of the
Registrable Securities is then listed; and
(xi) enter into such agreements and take such other
actions as the Holders shall reasonably request in
order to expedite or facilitate the disposition of
such Registrable Securities.
The Company may require each Holder to furnish the Company such information
regarding such Holder and the distribution of such securities as the Company
may from time to time reasonably request in writing.
The Company's obligations under this Agreement to a Holder shall be
conditioned upon such Holder's compliance with the following:
(a) such Holder shall enter into such agreements with the
Company and any underwriter, broker- dealer or similar securities industry
professional containing representations, warranties, indemnities and agreements
as are in each case customarily entered into and made by selling stockholders,
and will cause its counsel to give any legal opinions customarily given, in
secondary distributions under similar circumstances;
(b) during such time as such Holder may be engaged in a
distribution of the Registrable Securities, such Holder will comply with all
applicable laws including but not limited to Rules 10b-6 and 10b-7 promulgated
under the Exchange Act and pursuant thereto will, among other things: (i) not
engage in any stabilization activity in connection with the securities of the
Company in contravention of such rules; (ii) distribute the Registrable
Securities owned by such Holder solely in the manner described in the
registration statement; (iii) cause to be furnished to each underwriter, agent
or broker-dealer to or through whom the Registrable Securities owned by such
Holder may be offered, or to the offeree if an offer is made directly by the
Holder, such copies of the prospectus (as amended and supplemented to such
date) and documents incorporated by reference
8
<PAGE> 12
therein as may be required by such underwriter, agent, broker-dealer or
offeree; and (iv) not bid for or purchase any securities of the Company or
attempt to induce any person to purchase any securities of the Company other
than as permitted under the Exchange Act;
(c) other than in the case of an underwritten public
offering, at least ten (10) days prior to any distribution of Registrable
Securities, such Holders will advise The Company in writing of the dates on
which the distribution will commence and terminate, the number of the
Registrable Securities to be sold, the terms and the manner of sale (including,
to the extent applicable, the purchase price, the name of any underwriter,
agent or broker-dealer to or through whom such distribution is being made, and
the amount of any selling commissions or other items constituting compensation
to such underwriter, agent or broker-dealer) and the number of Registrable
Securities that will be owned beneficially by such Holder after giving effect
to such sale; and
(d) that upon receipt of any notice from the Company of
the happening of any event of the kind described in the subdivision (vii) of
this section, such Holder will forthwith discontinue the disposition of
Registrable Securities pursuant to the registration statement until such
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by subdivision (vii) of this section and, if so directed by the
Company, will destroy all copies, other than permanent file copies, then in
such Holder's possession of the prospectus relating to such Registrable
Securities.
2.4. Demand Offerings.
(a) Requested Underwritten Offerings. If requested by
the underwriters for any underwritten offering, the Company will enter into an
underwriting agreement with such underwriters, such agreement to be
satisfactory is substance and form to the Company and the underwriters and to
contain such terms as are generally prevailing in agreements of this type. No
Holder shall be required to make any representations and warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such Holder, such Holder's Registrable
Securities and such Holder's intended method of distribution and any other
representation required by law.
(b) Piggyback Underwritten Offerings. If the Company at
any time proposes to register any of its securities as contemplated by Section
2.2 and such securities are to be distributed by or through one or more
underwriters, the Company will, if requested by the Holders, arrange for such
underwriters to include all the Registrable Securities to be offered and sold
by the Holders among the securities to be distributed to such underwriters.
No Holder shall be required to make any representations or warranties to or
agreement with the Company or the underwriters other than representations,
warranties or agreements regarding such Holder, such Holder's Registrable
Securities and such Holder's intended method of distribution and any other
representation required by law.
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<PAGE> 13
2.5. Indemnification.
(a) Indemnification by the Company. In the event of any
registration pursuant to Section 2.1 or 2.2, the Company will, and hereby does,
indemnify and hold harmless the Holders, their directors, partners, members and
officers, each other Person who participates as an underwriter in the offering
on behalf of the Holders and each other Person, if any, who controls such
seller or underwriter within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which any one of
them may become subject under the Securities Act or otherwise, and the Company
will reimburse the Holders and each other Person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; insofar as
such losses, claims, damages or liabilities (or actions in respect thereof) are
based upon any untrue statement or alleged untrue statement of a material fact
contained in the registration statement or the prospectus, or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; and, subject to Section 2.5(c), the
Company will reimburse such indemnified parties for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such losses; provided, however, that the Company will not indemnify or hold
harmless any indemnified party from or against any such losses (i) that arise
out of or are based upon any violation of any federal or state securities laws,
rules or regulations committed by any of the indemnified parties (or any person
who controls any of them or any agent, broker-dealer or underwriter engaged by
them) or in the case of a non-underwritten offering, any failure by such Holder
to give any purchaser of Registrable Securities at or prior to the written
confirmation of such sale, a copy of the most recent prospectus or (ii) if the
untrue statement, omission or allegation thereof upon which such losses or
expenses are based (x) was made in reliance upon and in conformity with the
information provided by or on behalf of any indemnified party specifically for
use or inclusion in the registration statement or any prospectus, or (y) was
made in any prospectus used after such time as the Company advised such Holder
that the filing of a post-effective amendment or supplement thereto was
required, except that prospectus as so amended or supplemented, or (z) was made
in any prospectus used after such time as the obligation of the Company
hereunder to keep the registration statement effective and current has expired
or been suspended hereunder.
(b) Indemnification by the Holders. The Company may
require, as a condition to including any Registrable Securities in any
registration statement filed pursuant to Section 2.1, or 2.2, that the Company
shall have received an undertaking satisfactory to it from the Holders to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this section) the Company, each director and
officer of the Company and each other Person, if any, who controls the Company
within the meaning of the Securities Act, with respect to any statement, or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged
10
<PAGE> 14
omission was made in reliance upon and in conformity with written information
furnished to the Company by the Holders specifically stating that it is for use
in preparation of such registration statement. Such indemnity shall remain in
full force and effect, regardless of any investigation made by or on behalf of
the Company or any such director, officer or controlling Person and shall
survive the transfer of such securities by the Holders. Notwithstanding the
foregoing, the aggregate liability of any Holder for any indemnification under
this section shall be limited to the aggregate net proceeds received by such
Holder from the sale of securities pursuant to such registration statement.
Holders agree to contribution and indemnity in the agreement to the extent
customarily requested by the underwriter.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this section,
such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligation under the preceding subdivisions of this section, except to the
extent that the indemnifying party is actually prejudiced by such failure.
Unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying party may exist in respect of such
claim, the indemnifying party shall be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party, with counsel
reasonably satisfactory to such indemnified party. After notice from the
indemnifying party of its election to assume the defense, the indemnifying
party shall not be liable to such indemnified party for any legal or other
expenses subsequently incurred by the latter in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying party
shall, without the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
2.6. Adjustments Affecting Registrable Securities. The Company
will not effect or permit to occur any combination or subdivision of
Registrable Securities which would adversely affect the ability of the Holders
to include such Registrable Securities in any registration contemplated by
this Section or the marketability of such Registrable Securities under any such
registration.
2.7. Limitations on Registration Rights. Notwithstanding the
provisions of Section 2 hereof, the Company shall not be required to effect or
maintain any registration if the Company, in order to comply with such request,
would be required to undergo a special interim audit or prepare and file with
the Commission sooner than would otherwise be required, pro forma or other
financial statements relating to any proposed or probable transaction.
SECTION 3. RULE 144.
If the Company shall have filed a registration statement, the Company will file
the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations
11
<PAGE> 15
adopted by the Commission thereunder (or, if the Company is not required to
file such reports, will, upon the request of any Holder, make publicly
available other information) and will take such further action as such Holder
may reasonably request, all to the extent required from time to time to enable
such Holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144
under the Securities Act, as such Rule may be amended from time to time or (b)
any similar rule or regulation hereafter adopted by the Commission.
SECTION 4. INFORMATION REQUIRED BY RULE 144A.
The Company covenants that it will, upon the request of any Holder, provide
such Holder, and any institutional investor designated by such Holder, such
financial and other information as such Holder may reasonably determine to be
necessary in order to permit such Holder's compliance with the informational
requirements of Rule 144A under the Securities Act in connection with the
resale of any Registrable Securities, except at such time as the Company is
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act.
SECTION 5. COUNTERPARTS.
This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
SECTION 6. ADDITIONAL HOLDERS.
NDE and BOCP may by written agreement add additional record owners of
Common Shares as "Holders" under this Agreement; provided that each such
additional Holder agrees in writing to be bound by the terms of this Agreement.
SECTION 7. ASSIGNMENT.
BOCP may assign its rights hereunder only (a) in connection with the
sale or other disposition of (i) all of its Registrable Securities, or (ii) all
of its Warrants, or (b) with the express written consent of the Company, which
consent may be withheld by the Company in the exercise of its sole discretion.
SECTION 8. MISCELLANEOUS.
8.1. Amendments, Modifications and Waivers. This Agreement 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 Agreement may be
waived only by an express writing executed and delivered by the Holder.
12
<PAGE> 16
8.2. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio.
8.3. Rules of Construction. The rules of construction set forth in
Section 12(i) of the Purchase Agreement are applicable to this Agreement.
8.4. Notices. The notice provisions set forth in this Section
12(j) of the Purchase Agreement are applicable to this Agreement
The parties have executed and delivered this Agreement effective as of
the day and year first above written.
NDE ENVIRONMENTAL
CORPORATION
By: /s/ JAY ALLEN CHAFFEE
-----------------------------
Its:
-----------------------------
BANC ONE CAPITAL PARTNERS,
L.P.
By: BOCP Corporation,
General Partner
By: /s/ JAMES H. WOLFE
-----------------------------------
Its: James H. Wolfe, Authorized Signer
-----------------------------------
13
<PAGE> 1
EXHIBIT 10.7
_______________________________________________________________________________
NDE ENVIRONMENTAL CORPORATION
PREEMPTIVE RIGHTS AGREEMENT
_______________________________________________________________________________
DATED AS OF OCTOBER 25, 1996
<PAGE> 2
TABLE OF CONTENTS
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. RIGHTS OFFERING . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3. PREEMPTIVE RIGHTS . . . . . . . . . . . . . . . . . . . . 3
3.1 TERMINATION OF PREEMPTIVE RIGHTS. . . . . . . . . 4
SECTION 4. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . 5
4.1 RULES OF CONSTRUCTION . . . . . . . . . . . . . . 5
4.2 NOTICES. . . . . . . . . . . . . . . . . . . . 5
4.3 SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . 5
4.4 SEVERABILITY. . . . . . . . . . . . . . . . . . . 5
4.5 AMENDMENTS. . . . . . . . . . . . . . . . . . . . 5
4.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . 5
i
<PAGE> 3
PREEMPTIVE RIGHTS AGREEMENT
This is the PREEMPTIVE RIGHTS AGREEMENT dated as of October 25, 1996
("Agreement") by and between NDE ENVIRONMENTAL CORPORATION ("NDE"), a Delaware
corporation and BANC ONE CAPITAL PARTNERS, L.P. ("BOCP"), an Ohio limited
partnership, provided for in and entered into pursuant to the NOTE AND WARRANT
PURCHASE AGREEMENT , as amended, restated, supplemented or otherwise modified
from time to time ("Agreement") by and among BOCP, as purchaser, and NDE,
TANKNOLOGY/NDE CORPORATION, USTMAN INDUSTRIES, INC., PROECO, INC., and
TANKNOLOGY CANADA (1988), INC.
NDE, together with its successors and assigns, is referred to as the
"Company" and BOCP, together with its successors and assigns, 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
All capitalized terms not otherwise defined in this Agreement shall
have the definitions set forth in the Purchase Agreement. The terms defined in
the Purchase Agreement that are used with such definitions in this Agreement
include:
"Board of Directors"
"Convertible Securities"
"Exercise Price"
"Involuntary Insolvency Default"
"Notice"
"Person"
"Qualified Public Offering"
"Voluntary Insolvency Default"
<PAGE> 4
SECTION 2. RIGHTS OFFERING
During the term of this Agreement and prior to the exercise of the
Warrants, the Holder shall have the right to participate in any Rights Offering
(as defined herein) upon the terms and subject to the conditions set forth in
this section.
(a) Definitions. As used in this Agreement:
(i) the term "Rights Offering" means any offering of Common
Shares, Convertible Securities or other shares of Capital Stock of the
Company or any distribution of rights to purchase Common Shares or
Convertible Securities by or on behalf of the Company that is made
substantially on a prorata basis among the holders of Common Shares;
(ii) the term "Holder's Shares" means as of any date of
determination the sum of (A) all Common Shares then owned of record by
the Holder, which were acquired pursuant to any Related Document, (B)
the maximum number of Common Shares then issuable to the Holder upon
the full exercise of the Warrant, assuming the full exercisablity of
the Warrant as of that date, and (C) the maximum number of Common
Shares then issuable to the Holder upon the full conversion or
exercise of all Convertible Securities then owned by the Holder or
issuable to the Holder upon the full exercise of the Warrants, which
were acquired pursuant to any Related Document, assuming the full
convertibility or exercisablity of the Convertible Securities and
Warrants as of that date;
(iii) the term "Outstanding Shares" means as of any date of
determination the sum of (A) all Common Shares (other than Common
Share then owned by the Holder) outstanding as of such date, and (B)
all Holder's Shares deemed to be outstanding as of such date; and
(iv) the term "Holder's Prorata Share" means as of any date of
determination the quotient of (A) the Holder's Shares as of such date,
divided by (B) the Outstanding Shares as of such date.
(b) Notice of Rights Offering. The Company shall give the Holder
at least 30 days' prior Notice of each Rights Offering. Such Notice shall set
forth: (i) the proposed commencement date for such Rights Offering; (ii) the
number and description of the securities to be offered pursuant to the Rights
Offering; and (iii) the purchase price for such securities and other material
terms of the Rights Offering.
2
<PAGE> 5
(c) Manner of Exercise. The Holder may, in the sole exercise of
its discretion, elect to participate in any such Rights Offering by giving
Notice of its irrevocable election to participate to the Company at least five
days prior to the proposed commencement date of such Rights Offering.
(d) Participation by Holder. If it elects to participate in such
Rights Offering, the Holder shall, to the exclusion of any other right to
participate that it might have as a holder of Common Shares or otherwise, have
the right to purchase, pursuant to such Rights Offering, securities of each
type issued in such Rights Offering in a maximum number or amount equal to the
Holder's Prorata Share of the total number or amount of each such type of
security offered pursuant to such Rights Offering.
SECTION 3. PREEMPTIVE RIGHTS
During the term of this Agreement and prior to any Qualified Public
Offering (regardless of whether or not the Warrants have been exercised), the
Holder shall have the right to participate in any Preemption Offering (as
defined herein) upon the terms and subject to the conditions set forth in this
section.
(a) Definitions. As used in this Agreement, the term "Preemption
Offering" means any offering of Common Shares, Convertible Securities or other
shares of Capital Stock of the Company by or on behalf of the Company other
than:
(i) the issuance of Warrant Shares pursuant to the exercise of the
Warrants;
(ii) any Rights Offering;
(iii) the issuance or sale of Common Shares pursuant to any employee
or director stock option plan of the Company approved by the
Compensation Committee of the Board of Directors of NDE; provided,
that (A) options are granted only with respect to Common Shares, (B)
the maximum number of Common Shares subject to such options is
1,000,000 shares, (C) the minimum exercise price per Common Share is
not less than the Exercise Price, (D) no options are granted to
Persons other than officers, directors and employees of the Company or
its subsidiaries, (E) no options are granted to any Person who was an
employee of the Company prior to the Closing Date, and (F) the
Compensation Committee consists of three members, at least one of whom
has been designated by BOCP and at least two of whom are not officers
or employees of the Company;
(iv) the sale and issuance of Common Shares or Convertible
Securities pursuant to any Qualified Public Offering; and
3
<PAGE> 6
(v) the sale and issuance of Common Shares of Convertible
Securities in connection with any merger or acquisition transaction
permitted or consented to pursuant to the Purchase Agreement.
(b) 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.
(c) 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 at
least 5 days prior to the proposed commencement date of such Preemption
Offering.
(d) Participation by Holder. If it elects to participate
in such Preemption Offering, the Holder shall have the right to purchase, upon
the same terms and condition as those provided for in such Preemption Offering,
securities of each type issued in such Preemption Offering in a maximum number
or amount equal to the Holder's Prorata Share of the total number or amount of
each such type of security offered pursuant to such Preemption Offering.
(e) Unsold Securities. The Company may for a period of
not more that 60 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.
3.1 TERMINATION OF PREEMPTIVE RIGHTS. The rights of the
Holder under this Agreement and the obligations of the Company hereunder shall
terminate upon the earliest to occur of the following events:
(i) a Voluntary Insolvency Default or Involuntary Insolvency
Default with respect to the Company;
(ii) consummation of a Qualified Public Offering;
(iii) the Holder's Prorata Share equals less than 5.0%; and
(iv) December 31, 2005.
4
<PAGE> 7
SECTION 4. MISCELLANEOUS.
4.1 RULES OF CONSTRUCTION. The rules of construction set
forth in Section 12(i) of the Purchase Agreement are applicable to this
Agreement.
4.2 NOTICES. The notice provisions set forth in Section
12(j)of the Purchase Agreement are applicable to this Agreement.
4.3 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, assigns and legal
representatives. The rights of the Holder hereunder may not be assigned or
otherwise transferred, except (i) in connection with the assignment of all of
the unexercised Warrants as provided for in the Warrant Certificate, (ii) in
connection with the sale of all, but not less that all, of the Holder's Shares
and Warrants, or (iii) with the express written consent of the Company.
4.4 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.
4.5 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 of any rights hereunder constitute the waiver of such
rights in any future instance unless the waiver so specifies in writing.
4.6 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Ohio.
The parties have executed and delivered this Agreement effective as of
the day and year first above written.
5
<PAGE> 8
COMPANY: HOLDER:
NDE ENVIRONMENTAL BANC ONE CAPITAL PARTNERS, L.P.
CORPORATION
By: BOCP Corporation, General Partner
By: /s/ JAY ALLEN CHAFFEE
----------------------- By: /s/ JAMES H. WOLFE
Jay Allen Chaffee, -----------------------------------
Chairman of the Board
Its: James H. Wolfe, Authorized Signer
----------------------------------
----------------------------------
----------------------------------
6
<PAGE> 1
EXHIBIT 10.8
_______________________________________________________________________________
NDE ENVIRONMENTAL CORPORATION
CO-SALE AGREEMENT
_______________________________________________________________________________
DATED AS OF OCTOBER 25, 1996
<PAGE> 2
TABLE OF CONTENTS
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. SALES BY SHAREHOLDER . . . . . . . . . . . . . . . . . . . . 2
2.1 NOTICE OF PURCHASER OFFERS . . . . . . . . . . . . . 2
2.2 RIGHT TO PARTICIPATE . . . . . . . . . . . . . . . . 2
2.3 CONSUMMATION OF SALE . . . . . . . . . . . . . . . . 3
2.4 ONGOING RIGHTS . . . . . . . . . . . . . . . . . . . 3
2.5 PERMITTED EXEMPTIONS . . . . . . . . . . . . . . . . 3
SECTION 3. PROHIBITED TRANSFERS . . . . . . . . . . . . . . . . . . . . 3
3.1 TREATMENT OF PROHIBITED TRANSFERS . . . . . . . . . . 3
3.2 PUT OPTION . . . . . . . . . . . . . . . . . . . . . 3
SECTION 4. LEGENDED CERTIFICATE . . . . . . . . . . . . . . . . . . . . 4
4.1 LEGEND . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 LEGEND REMOVAL . . . . . . . . . . . . . . . . . . . 4
SECTION 5. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . 4
5.1 TERMINATION OF CO-SALE RIGHTS . . . . . . . . . . . . 4
5.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . 5
5.3 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . 7
5.4 SEVERABILITY . . . . . . . . . . . . . . . . . . . . 7
5.5 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . 7
5.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . 7
5.7 OTHER OBLIGATIONS OF COMPANY . . . . . . . . . . . . 7
i
<PAGE> 3
CO-SALE AGREEMENT
This is a CO-SALE AGREEMENT dated as of October 25, 1996 ("Agreement")
by and among NDE ENVIRONMENTAL CORPORATION ("NDE"), a Delaware corporation,
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 BANC ONE CAPITAL PARTNERS, L.P. ("BOCP"),
an Ohio limited partnership, provided for in and entered into pursuant to the
NOTE AND WARRANT PURCHASE AGREEMENT , as amended, restated, supplemented or
otherwise modified from time to time ("Purchase Agreement") by and among BOCP,
as purchaser, and NDE, TANKNOLOGY/NDE CORPORATION, USTMAN INDUSTRIES, INC.,
PROECO, INC., and TANKNOLOGY CANADA (1988), INC.
NDE, together with its successors and assigns, is referred to as the
"Company," Proactive, Lagunitas, and Messrs. Chaffee and Shamplin together with
their respective successors and assigns, are referred to collectively as the
"Shareholders" and individually as a "Shareholder," and BOCP, together with its
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 their mutual promises set forth in this Agreement
and the Purchase Agreement, the Parties hereby agree as follows.
SECTION 1. DEFINITIONS
All capitalized terms not otherwise defined in this Agreement shall have the
definitions set forth in the Purchase Agreement. The terms defined in the
Purchase Agreement that are used with such definitions in this Agreement
include:
"Affiliate"
"Business Days"
"Capital Stock"
"Closing Date"
"Common Shares"
"Convertible Securities"
"Event of Default"
"Notice"
<PAGE> 4
"Purchase Shares"
"Qualified Public Offering"
"Warrants"
"Warrant Certificate"
"Warrant Shares"
SECTION 2. SALES BY SHAREHOLDER.
2.1 NOTICE OF PURCHASER OFFERS. Should any Shareholder
("Selling Shareholder") propose to accept one or more bona fide offers from any
persons to purchase Common Shares or Convertible Securities from such Selling
Shareholder, other than 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 (the "Purchase Offer"), then such Selling Shareholder
shall promptly notify the Holder of the terms and conditions of such Purchase
Offer.
2.2 RIGHT TO PARTICIPATE. The Holder shall have the
right, exercisable upon written notice to such Selling Shareholder within
fifteen (15) Business Days after receipt of the notice of the Purchase Offer,
to participate in such Selling Shareholder's sale of Common Shares on the same
(or, in the case of Convertible Securities, equivalent terms) terms and
conditions. To the extent that the Holder exercises such right of
participation, the number of Common Shares or 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) The Holder may sell all or any part of that number of
Warrant Shares 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 number of Warrant Shares at the time owned by
the 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 Warrant Shares at that time owned by the Holder. For purposes of
making such computation, the Holder shall be deemed to own the number of Common
Shares as if its Warrant had been exercised and any Convertible Securities have
been converted into Common Shares.
(b) 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 that number of Warrant Shares which the Holder elects
to sell pursuant to this Section 2.2. Notwithstanding any provision of the
Warrant Certificate to the contrary (including the fact that the Warrant is not
yet exercisable), the Holder may exercise such Warrant for the number of
Warrant Shares to be purchased and deliver such Warrant Shares as
2
<PAGE> 5
provided in this Section 2.2, and such exercise shall not constitute the single
exercise of the Warrant or otherwise affect any future exercise of the Warrant.
2.3 CONSUMMATION OF SALE. The stock certificate or
certificates which a Holder delivers to the Selling Shareholder pursuant to
Section 2.2 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 Section 2.1 notice to the Holder, 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.
2.4 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 to
participate in subsequent sales by the Selling Shareholder pursuant to Section
2.1 hereof.
2.5 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,
the Holder shall have the right to sell to the Shareholder that number of
shares of Warrant Shares (either directly or through delivery of a Warrant)
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:
(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.
3
<PAGE> 6
(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 BANC ONE CAPITAL
PARTNERS, L.P. 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 termination of this Agreement or the date upon
which the provisions of this Agreement are no longer applicable to such shares
in accordance with the provisions of Section 5.1.
SECTION 5. MISCELLANEOUS PROVISIONS.
5.1 TERMINATION OF CO-SALE RIGHTS. The rights of the
Holder under this Agreement and the obligations of the Shareholder with respect
to the Holder shall terminate at such time as the Warrants have expired in
accordance with their terms and the Holder does not own any Warrant Shares.
Unless sooner terminated in accordance with the preceding sentence, this
Agreement shall terminate upon the occurrence of any one of the following
events:
(a) The liquidation, dissolution or indefinite cessation
of the business operations of the Company;
4
<PAGE> 7
(b) The execution by the Company of a general assignment
for the benefit of creditors or the appointment of a receiver or trustee to
take possession of the property and assets of the Company;
(c) The consummation of an Qualified Public Offering; or
(d) The sixth anniversary of the Closing Date.
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 received by 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 date actually received if
hand delivered or if transmitted by telefax (receipt of which is confirmed to
sender); 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:
Banc One Capital Partners, L.P.
150 East Gay Street, 24th Floor
Columbus, Ohio 43215
ATTENTION: William P. Leahy
Telephone: (614) 217-1290
Telefax: (614) 217-0192
WITH A COPY TO:
Banc One Capital Corporation
150 East Gay Street, 24th Floor
Columbus, Ohio 43215
ATTENTION: Legal Department
Telephone: (614) 217-1100
Telefax: (614) 217-1217
IF TO THE COMPANY:
NDE Environmental Corporation
8900 Shoal Creek Blvd.
Building 200
Austin, TX 78758
ATTENTION: President
Telephone: (512) 451-1334
Telefax: (512) 459-1459
5
<PAGE> 8
WITH COPY TO:
NDE Environmental Corporation
712 Main Street, Suite 1700
Houston, TX 77002
ATTENTION: Jay Allen Chaffee
Telephone:
Telefax:
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
IF TO MR. CHAFFEE:
Jay Allen Chaffee
NDE Environmental Corporation
712 Main Street, Suite 1700
Houston, TX 77002
Telephone: (713) 223-5730
Telefax: (713) 223-5379
IF TO MR. SHARPLIN:
A. Daniel Sharplin
NDE Environmental Corporation
8900 Shoal Creek Blvd.
Building 200
Austin, TX 78758
Telephone: (512) 451-6334
Telefax: (512) 459-1459
6
<PAGE> 9
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, assigns and legal
representatives. The participation rights of the Holder hereunder may not be
assigned or otherwise transferred without the express written consent of the
Company and the Shareholders, which shall not be unreasonably withheld.
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 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 Ohio.
5.7 OTHER OBLIGATIONS OF COMPANY. The Company agrees to
use all 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 Section 3 hereof.
7
<PAGE> 10
The parties have executed and delivered this Agreement effective as
of the day and year first above written.
SHAREHOLDERS: HOLDER:
PROACTIVE PARTNERS, L.P.
BANC ONE CAPITAL PARTNERS, L.P.
By: /s/ CHARLES MCGETTIGAN
-----------------------
LAGUNITAS PARTNERS, L.P. By: /s/ JAMES H. WOLFE
-----------------------------------
By: /s/ JON GRUBER Its: James H. Wolfe, Authorized Signer
----------------------- -----------------------------------
JAY ALLEN CHAFFEE
/s/ JAY ALLEN CHAFFEE
- --------------------------
A. DANIEL SHARPLIN
/s/ A. DANIEL SHARPLIN
- --------------------------
COMPANY:
NDE ENVIRONMENTAL
CORPORATION
By: /s/ JAY ALLEN CHAFFEE
-----------------------
Jay Allen Chaffee,
Chairman of the Board
8
<PAGE> 1
EXHIBIT 10.9
STANDBY COMMITMENT
This STANDBY COMMITMENT (this "Agreement") is made as of this
25th day of October, 1996, by and among Proactive Partners, L.P., a California
limited partnership (the "Stockholder"); NDE Environmental Corporation, a
Delaware corporation (the "Borrower"); Banc One Capital Partners, L.P., a Ohio
limited partnership ("BOCP"); and Bank One, Texas, N.A., a national banking
association ("BOT"; BOCP and BOT, collectively, the "Lenders").
WHEREAS, BOT, the Borrower, and certain of the Borrower's
subsidiaries have entered into that certain Loan Agreement dated as of the date
hereof (the "Loan Agreement") whereby BOT has agreed to make certain loans and
other financial accommodations available to the Borrower upon the terms and
conditions therein contained, such loans and accommodations to be evidenced by
a Revolving Note and a Term Note dated as of the date hereof (the "BOT Notes");
WHEREAS, BOCP, the Borrower, and certain of the Borrower's
subsidiaries have entered into that certain Note and Warrant Purchase Agreement
dated as of the date hereof (the "Note Purchase Agreement"; the Loan Agreement
and the Note Purchase Agreement, collectively, the "Credit Agreements") whereby
BOCP has agreed to make certain loans and other financial accommodations
available to the Borrower upon the terms and conditions therein contained, such
loans and accommodations to be evidenced by a Senior Subordinate Note dated as
of the date hereof (the "BOCP Note"; the BOT Notes and the BOCP Note,
collectively, the "Notes");
WHEREAS, the Borrower, BOCP and BOT have entered into security
agreements of even date herewith (the "Security Agreements");
WHEREAS, after the consummation of the transactions contemplated
by the Credit Agreements the Stockholder will be the owner of approximately
32.7% of the issued and outstanding shares of Common Stock of the Borrower
(assuming that all shares of common stock of Borrower issuable pursuant to
Warrants under the Warrant Certificate, dated the date hereof, issued to BOCP
by the Borrower were outstanding);
WHEREAS, as the owner of such percentage of the issued and
outstanding Common Stock of the Borrower, the Stockholder will benefit by the
making of the loans and other financial accommodations available to the
Borrower pursuant to the terms and conditions of the Credit Agreements;
WHEREAS, the Stockholder wishes to grant further assurance to the
Lenders regarding the ability of the Borrower to pay its Obligations under the
Credit Agreements, and to that effect the Stockholder agrees to perform the
terms of this Agreement; and
WHEREAS, the execution of this Agreement is a condition precedent
to the Lenders' obligation to fund any loans under the Credit Agreements;
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lenders to make the loans to the Borrower under the Credit
Agreements and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Stockholder's Contribution to Borrower.
(a) The Stockholder hereby agrees that if a timely
payment is not made on any of the Notes as required by either of the Credit
Agreements or any of the Notes, the Stockholder will, at the direction of
either BOCP or BOT, invest One Million Dollars ($1,000,000) in the Borrower by
executing and delivering to the Borrower an unsecured subordinate note (the
"Subordinate Note") substantially in the form and substance of Exhibit A
attached hereto.
(b) The Borrower agrees to use any loan made available
to it under paragraph (a) to repay principal and interest on the Notes;
provided, the BOCP Note shall be subordinate to the BOT Notes, as provided for
in the Intercreditor Agreement between BOT and BOCP, dated as of even date
herewith.
2. Representations and Warranties. The Stockholder
represents and warrants to the Lenders that:
(a) The Stockholder is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
California. The Stockholder is qualified to transact business in, and is in
good standing under the laws of, all jurisdictions in which the Stockholder is
required by applicable law to maintain such qualification, except where the
failure to so qualify would not have a material adverse effect on the
Stockholder;
(b) The Stockholder has full power, authority and legal
right to execute this Agreement;
(c) This Agreement has been duly authorized, executed
and delivered by the Stockholder and constitutes the legal, valid and binding
obligation of the Stockholder enforceable against the Stockholder in accordance
with its terms;
(d) No consent, approval or authorization of or
designation or filing with any Person on the part of the Stockholder is
required in connection with the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby;
(e) The execution, delivery and performance of this
Agreement will not violate any provision of any applicable law or regulation or
of any order, judgment, writ, award or decree of any court, arbitrator or
governmental authority, domestic or foreign, or of the Stockholder's
partnership agreement (as amended and supplemented, the "Partnership
Agreement"),
-2-
<PAGE> 3
or of any mortgage, indenture, lease, contract, or other agreement, instrument
or undertaking to which the Stockholder is a party or which purports to be
binding upon the Stockholder or upon any of its assets;
(f) The Stockholder will at all times during the term
of this Agreement possess, or have unrestricted access to, sources of cash
sufficient to carry out its obligations hereunder; and
(g) After giving effect to the transactions
contemplated by the Credit Agreements, the Stockholder will be the beneficial
owner of record of approximately 32.7% of the issued and outstanding Common
Stock of the Borrower (assuming that all shares of common stock of Borrower
issuable pursuant to Warrants under the Warrant Certificate, dated the date
hereof, issued to BOCP by the Borrower were outstanding).
3. Termination. This Agreement shall terminate upon the
payment in full of the Notes.
4. Successors; Applicable Law. This Agreement and all
obligations of the parties hereto shall be binding upon the successors and
assigns of each of them and shall, together with the rights of the Lenders and
the Borrower, inure to the benefit of the Lenders and the Borrower, and their
respective successors and assigns. This Agreement shall be governed by, and be
construed and interpreted in accordance with, the internal laws (as opposed to
conflicts of law provisions) of the State of Ohio.
5. Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and
supersedes all other understandings, oral or written, with respect to the
subject matter hereof.
6. Reliance by Lenders. All covenants, agreements,
representations and warranties made herein shall, notwithstanding any
investigation by the Lenders, be deemed to be material to and to have been
relied upon by the Lenders.
7. Waiver. The Lenders' failure, at any time or times
hereafter, to require strict performance by any party hereto of any provision
of this Agreement shall not waive, affect or diminish any right of the Lenders
thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by the Lenders of a default under this Agreement shall not
suspend, waive or affect any other default under this Agreement whether the
same is prior or subsequent thereto and whether of the same or of a different
kind or character. None of the undertakings, agreements, warranties, covenants
and representations of the parties hereto contained in this Agreement and no
default by the parties under this Agreement shall be deemed to have been
suspended or waived by the Lenders, unless such suspension or waiver is in
writing and signed by an officer of each of BOT and BOCP, and directed to the
other parties hereto, specifying such suspension or waiver. This
-3-
<PAGE> 4
Agreement may not be modified or amended, except in a written agreement signed
by all of the parties hereto.
8. Parties. Whenever in this Agreement reference is made to
any of the parties hereto, such reference shall be deemed to include, wherever
applicable, a reference to the successors and assigns of the parties hereto.
9. Section Titles. The section titles contained in this
Agreement shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties.
10. Notices. Except as otherwise expressly provided herein,
any notice required or desired to be served, given or delivered hereunder shall
be in writing, and shall, if sent by United States mail, certified or
registered mail, return receipt requested, with proper postage prepaid, be
deemed to have been validly served, given or delivered upon receipt by the
sender of such notice of a return receipt or upon delivery by courier or upon
transmission by telex, telecopy or similar electronic medium to the following
addresses:
(i) If to BOCP, at:
Banc One Capital Partners, L.P.
10 West Broad Street, Suite 400
Columbus, Ohio 43215
Attention: _______________________
(ii) If to the Stockholder, at:
Proactive Partners, L.P.
50 Osgood Place, Penthouse
San Francisco, CA 94153
Attention: Charles McGettigan
(iii) If to BOT, at:
Bank One, Texas, N.A.
910 Travis
Houston, Texas 77002
Attention: Charles Kingswell-Smith
-4-
<PAGE> 5
(iv) If to Borrower, at:
NDE Environmental Corporation
8900 Shoal Creek Bldg. 200
Austin, Texas 78757
Attention: Jay Allen Chaffee
or to such other address as each party designates to the other in the manner
herein prescribed.
12. No Fiduciary Relationship. No provision herein or in any
of the other Loan Documents and no course of dealing between the parties shall
be deemed to create any fiduciary duty by the Lenders to the Stockholder or any
partner of the Stockholder.
13. Definition of Stockholder. After completion of the
Stockholder's funding obligations under Section 2, the term "Stockholder" shall
include any assignee of the Stockholder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered on the date first above written.
PROACTIVE PARTNERS, L.P.
By: Proactive Investment Managers, L.P.,
its General Partner
By: /s/ CHARLES C. MCGETTIGAN
------------------------------------
Name: Charles C. McGettigan
----------------------------------
Title: General Partner
---------------------------------
BANC ONE CAPITAL PARTNERS, L.P.
By: BOCP Corporation, its General Partner
By: /s/ JAMES H. WOLFE
------------------------------------
Name: James H. Wolfe
----------------------------------
Title: Authorized Signer
---------------------------------
BANK ONE, TEXAS, N.A.
By: /s/ CHARLES KINGSWELL-SMITH
-----------------------------------------
Name: Charles Kingswell-Smith
---------------------------------------
Title: Vice President
--------------------------------------
-5-
<PAGE> 6
NDE ENVIRONMENTAL CORPORATION
By: /s/ JAY ALLEN CHAFFEE
-----------------------------------------
Name: Jay Allen Chaffee
---------------------------------------
Title: Chairman of the Board
--------------------------------------
-6-
<PAGE> 7
Exhibit "A"
PROMISSORY NOTE
THIS NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY ARE
SUBORDINATE TO: (A) THE PROMISSORY NOTES EXECUTED AND
DELIVERED BY NDE ENVIRONMENTAL CORPORATION (THE "BORROWER") TO
BANK ONE, TEXAS, N.A. ("BOT"), PURSUANT TO THAT CERTAIN LOAN
AGREEMENT DATED AS OF OCTOBER __, 1996, BETWEEN BOT, THE
BORROWER, AND CERTAIN OF THE BORROWER'S SUBSIDIARIES; AND (B)
THE PROMISSORY NOTE EXECUTED AND DELIVERED BY THE BORROWER AND
CERTAIN OF BORROWER'S SUBSIDIARIES TO BANC ONE CAPITAL
PARTNERS, L.P., ("BOCP") PURSUANT TO THAT CERTAIN NOTE AND
WARRANT PURCHASE AGREEMENT DATED AS OF OCTOBER __, 1996,
BETWEEN BOCP, THE BORROWER, AND CERTAIN OF THE BORROWER'S
SUBSIDIARIES, IN THE MANNER AND TO THE EXTENT SET FORTH IN
THAT CERTAIN INTERCREDITOR AGREEMENT, DATED AS OF OCTOBER __,
1996, BETWEEN BOT AND BOCP, AND NO PAYMENTS SHALL BE MADE ON
THIS NOTE OR OF THE INDEBTEDNESS EVIDENCED HEREBY SO LONG AS
ANY INDEBTEDNESS OUTSTANDING UNDER THE NOTES AND AGREEMENTS
REFERRED TO IN (A) OR (B) PRECEDING SHALL BE OUTSTANDING.
THIS NOTE SHALL NOT BE SOLD, ASSIGNED, NEGOTIATED OR CONVEYED,
BY OPERATION OF LAW OR OTHERWISE, WITHOUT THE EXPRESS WRITTEN
CONSENT OF, AND UPON THE TERMS AND CONDITIONS SATISFACTORY TO
BOT AND BOCP.
$1,000,000.00
FOR VALUE RECEIVED, the undersigned, NDE ENVIRONMENTAL
CORPORATION, a Delaware corporation (the "Borrower"), subject to the
limitations and express subordination above, HEREBY PROMISES TO PAY to the
order of PROACTIVE PARTNERS, L.P., a limited partnership organized under the
laws of the State of California (the "Payee"), on or before June 30, 2002 (the
"Maturity Date"), the principal sum of ONE MILLION and No/100 Dollars
($1,000,000.00) together with interest on the unpaid balance thereof from the
date hereof until maturity, at a rate per annum (based on a year of 365 or 366
days, as the case may be) which shall be equal to the lesser of (i) _____% per
annum or (ii) the nonusurious interest rate as in effect from time to time
which may be contracted for, charged, reserved or received by Payee (the
"Highest Lawful Rate").
The outstanding principal balance of this Note, together with
all accrued and unpaid interest thereon, shall be due and payable on the
Maturity Date. The Borrower promises to pay interest on the unpaid principal
balance of this Note from the date hereof until the principal balance thereof
is paid in full.
<PAGE> 8
Payments of principal and interest shall be made in lawful
money of the United States of America in immediately available funds, without
deduction, set-off or counterclaim to the Payee.
All agreements between the Borrower and the Payee, whether now
existing or hereafter arising and whether written or oral, are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
demand being made on this Note or otherwise, shall the amount contracted for,
charged, reserved or received by the Payee for the use, forbearance, or
detention of the money evidenced by this Note or otherwise, exceed the Highest
Lawful Rate. If, as a result of any circumstances whatsoever, fulfillment of
any provision hereof or otherwise, at the time performance of such provision
shall be due, shall involve transcending the limit of validity prescribed by
applicable usury law or result in the Payee having or being deemed to have
contracted for, charged, reserved or received interest (or amounts deemed to be
interest) in excess of the maximum lawful rate or amount of interest allowed by
applicable law to be so contracted for, charged, reserved or received by the
Payee, then, ipso facto, the obligation to be fulfilled by the Borrower shall
be reduced to the limit of such validity, and if, from any such circumstance,
the Payee shall ever receive interest or anything which might be deemed
interest under applicable law which would exceed the Highest Lawful Rate, such
amount which would be excessive interest shall be refunded to the Borrower, or
to the extent (i) permitted by applicable law and (ii) such excessive interest
does not exceed the unpaid principal balance of this Note, applied to the
reduction of the principal amount owing on account of this Note and not to the
payment of interest. In determining whether or not the interest paid or
payable under any specific contingencies exceeds the Highest Lawful Rate, the
Borrower and the Payee shall, to the maximum extent permitted under applicable
law, (a) characterize any nonprincipal payment as an expense, fee or premium
rather than as interest; (b) exclude voluntary prepayments and the effects
thereof; and (c) amortize, prorate, allocate and spread in equal parts during
the period of the full stated term of this Note until payment in full of the
principal thereof (including the period of any renewal or extension thereof),
all interest at any time contracted for, charged, reserved or received in
connection with the indebtedness evidenced by this Note.
If Borrower does not pay when due any principal, interest or
fees, if any, on or with respect to the Indebtedness (as defined below)
evidenced by this Note, then, subject to the terms and conditions of the Loan
Agreement, the holder of this Note may, by notice in writing to Borrower (given
by United States mail, postage prepaid, at any address for Borrower known to
Payee at the time such notice is given) declare the outstanding principal
balance of this Note, together with any other sums that Borrower may owe to
Payee under or in connection with this Note (collectively, the "Indebtedness")
to be, and thereupon the Indebtedness shall forthwith become, due and payable
together with accrued interest thereon without further notice of any kind to
Borrower.
The Borrower and any and all endorsers, guarantors and
sureties severally waive grace, demand, presentment for payment, notice of
dishonor or default, protest, notice of protest, notice of intent to
accelerate, notice of acceleration and diligence in collecting and bringing of
suit against any party hereto, and agree to all renewals, extensions or partial
payments hereon and to
<PAGE> 9
any release or substitution of security hereof, in whole
or in part, with or without notice, before or after maturity.
This Note is unsecured.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF __________ AND APPLICABLE FEDERAL LAW.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Borrower has caused this Note to be
executed and delivered by its officer thereunto duly authorized effective as of
the date first above written.
NDE ENVIRONMENTAL CORPORATION
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE> 1
EXHIBIT 10.10
_______________________________________________________________________________
NDE ENVIRONMENTAL CORPORATION
SHAREHOLDER AGREEMENT
_______________________________________________________________________________
DATED AS OF OCTOBER 25, 1996
<PAGE> 2
TABLE OF CONTENTS
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 2
SECTION 3. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . 2
3.1 TERMINATION OF CO-SALE RIGHTS . . . . . . . . . . 2
3.2 NOTICES . . . . . . . . . . . . . . . . . . . . . 3
3.3 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . 5
3.4 SEVERABILITY . . . . . . . . . . . . . . . . . . . 5
3.5 AMENDMENTS . . . . . . . . . . . . . . . . . . . . 5
3.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . 5
3.7 OTHER OBLIGATIONS OF COMPANY . . . . . . . . . . . 5
i
<PAGE> 3
SHAREHOLDER AGREEMENT
This is a Shareholder Agreement dated as of October 25, 1996
("Agreement") by and among 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 BANC ONE
CAPITAL PARTNERS, L.P. ("BOCP"), an Ohio limited partnership, entered into in
connection with the NOTE AND WARRANT PURCHASE AGREEMENT , as amended, restated,
supplemented or otherwise modified from time to time ("Purchase Agreement") by
and among BOCP, as purchaser, and NDE ENVIRONMENTAL CORPORATION ("NDE"),
TANKNOLOGY/NDE CORPORATION, USTMAN INDUSTRIES, INC., PROECO, INC., and
TANKNOLOGY CANADA (1988), INC.
NDE, together with its successors and assigns, is referred to as the
"Company," Proactive, Lagunitas, and Messrs. Chaffee and Shamplin together with
their respective successors and assigns, are referred to collectively as the
"Shareholders" and individually as a "Shareholder," and BOCP, together with its
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 NOT 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
All capitalized terms not otherwise defined in this Agreement shall have the
definitions set forth in the Purchase Agreement. The terms defined in the
Purchase Agreement that are used with such definitions in this Agreement
include:
"Closing Date"
"Common Shares"
"Notice"
"Qualified Public Offering"
"Warrant Shares"
<PAGE> 4
SECTION 2. BOARD OF DIRECTORS.
The Shareholders shall use all reasonable efforts and shall vote all
Common Shares held by each of them to:
(a) cause the maximum number of directors constituting the
Board of Directors of NDE to be fixed at six directors or, at the
request of BOCP, to be fixed at seven directors;
(b) if the maximum number of directors is fixed at six, cause
one director nominated by BOCP to be elected as a director, or, if the
maximum number of directors is fixed at seven, cause two directors
nominated by BOCP to be elected as directors;
(c) cause the Board of Directors to establish and maintain an
Audit Committee, Compensation Committee and an Executive Committee,
each such committee having three director members, one of whom, in
each case, shall be a director nominated by BOCP; and
(d) permit a representative designated by BOCP to attend as an
observer any meeting of the Board of Directors and any committee
thereof, and furnish to BOCP copies of all notices, agendas,
materials and minutes with respect to such meetings.
SECTION 3. MISCELLANEOUS PROVISIONS.
3.1 TERMINATION OF RIGHTS. The rights of the Holder
under this Agreement and the obligations of the Shareholder with respect to the
Holder shall terminate at such time as the Warrants have expired in accordance
with their terms and the Holder does not own any Warrant Shares. Unless sooner
terminated in accordance with the preceding sentence, this Agreement shall
terminate upon the occurrence of any one of the following events:
(a) The liquidation, dissolution or indefinite cessation
of the business operations of the Company;
(b) The execution by the Company of a general assignment
for the benefit of creditors or the appointment of a receiver or trustee to
take possession of the property and assets of the Company;
(c) The consummation of an Qualified Public Offering; or
(d) The sixth anniversary of the Closing Date.
2
<PAGE> 5
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 received by 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 date actually received if
hand delivered or if transmitted by telefax (receipt of which is confirmed to
sender); 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:
Banc One Capital Partners, L.P.
150 East Gay Street, 24th Floor
Columbus, Ohio 43215
ATTENTION: William P. Leahy
Telephone: (614) 217-1290
Telefax: (614) 217-0192
WITH A COPY TO:
Banc One Capital Corporation
150 East Gay Street, 24th Floor
Columbus, Ohio 43215
ATTENTION: Legal Department
Telephone: (614) 217-1100
Telefax: (614) 217-1217
IF TO THE COMPANY:
NDE Environmental Corporation
8900 Shoal Creek Blvd.
Building 200
Austin, TX 78758
ATTENTION: President
Telephone: (512) 451-1334
Telefax: (512) 459-1459
WITH COPY TO:
NDE Environmental Corporation
712 Main Street, Suite 1700
Houston, TX 77002
ATTENTION: Jay Allen Chaffee
Telephone:
Telefax:
3
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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: Jon D. Gruber
Telephone: (415) 981-2101
Telefax: (415) 521-1744
IF TO MR. CHAFFEE:
Jay Allen Chaffee
NDE Environmental Corporation
712 Main Street, Suite 1700
Houston, TX 77002
Telephone: (713) 223-5730
Telefax: (713) 223-5379
IF TO MR. SHARPLIN:
A. Daniel Sharplin
NDE Environmental Corporation
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.
4
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3.3 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, assigns and legal
representatives. The participation rights of the Holder hereunder may not be
assigned or otherwise transferred without the express written consent of the
Company and the Shareholders, which shall not be unreasonably withheld.
3.4 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.
3.5 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 of any rights hereunder constitute the waiver of such
rights in any future instance unless the waiver so specifies in writing.
3.6 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Ohio.
3.7 OTHER OBLIGATIONS OF COMPANY. The Company agrees to
use all 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 Section 3 hereof.
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The parties have executed and delivered this Agreement effective as of
the day and year first above written.
SHAREHOLDERS: HOLDER:
PROACTIVE PARTNERS, L.P.
BANC ONE CAPITAL PARTNERS, L.P.
By: /s/ CHARLES MCGETTIGAN By: BOCP Corporation,
----------------------- General Partner
By: /s/ JAMES H. WOLFE
LAGUNITAS PARTNERS, L.P. -----------------------------------
Its: James H. Wolfe, Authorized Signer
By: /s/ JON D. GRUBER ----------------------------------
-----------------------
----------------------------------
----------------------------------
JAY ALLEN CHAFFEE
/s/ JAY ALLEN CHAFFEE
- ------------------------
A. DANIEL SHARPLIN
/s/ A. DANIEL SHARPLIN
- ------------------------
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<PAGE> 1
EXHIBIT 10.11
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (this "Security
Agreement"), dated the 25th day of October, 1996, made and entered into by NDE
ENVIRONMENTAL CORPORATION, a Delaware corporation ("Pledgor"), in favor of BANK
ONE, TEXAS, N.A., a national banking association (the "Bank").
W I T N E S S E T H
WHEREAS, Pledgor, Tanknology/NDE Corporation, a Delaware
corporation, USTMAN Industries, Inc., a Delaware corporation, ProEco, Inc., a
Delaware corporation, and Tanknology Canada (1988) Inc., a Canadian federal
corporation (individually, an "NDE Party", and collectively, the "NDE Parties")
and the Bank, have entered into a Loan Agreement dated as of even date herewith
(hereinafter, as the same may from time to time be amended, supplemented,
extended or otherwise modified referred to as the "Loan Agreement"), pursuant
to which the Bank has agreed to make Loans to the NDE Parties, and further,
that pursuant to the Loan Agreement, the NDE Parties have delivered and will
execute and deliver to the Bank, among other documents, Notes and other Loan
Documents (as defined in the Loan Agreement); and
WHEREAS, the obligation of the Bank to make Loans under the
Loan Agreement is conditioned on, among other things, the execution and
delivery of this Security Agreement; and
WHEREAS, the Pledgor has duly authorized the execution,
delivery, and performance of this Security Agreement;
NOW, THEREFORE, in consideration of the Bank's agreement to
make Loans on the terms and conditions of the Loan Agreement, Pledgor hereby
agrees with the Bank as follows:
ARTICLE I.
DEFINITIONS
As used in this Security Agreement, the following terms shall
have the meanings indicated:
Collateral is defined in Article II.
Event of Default is defined in Article XI.
NDE Stock Companies is defined in Article II.
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Secured Obligations is defined in Article III.
Stock is defined in Article II.
Unless otherwise indicated, capitalized terms used and not
defined herein shall have the respective meanings given to them in the Loan
Agreement. Whenever the context requires, reference herein made to the single
number shall be understood to include the plural and likewise the plural shall
be understood to include the singular. Words denoting sex shall be construed
to include the masculine, feminine, and neuter, when such construction is
appropriate, and specific enumeration shall not exclude the general, but shall
be construed as cumulative.
ARTICLE II.
GRANT OF SECURITY INTEREST
To secure the full and punctual payment of the Secured
Obligations, as and when the same become due and payable in accordance with the
tenor and effect thereof, and the performance of all other obligations of the
NDE Parties under the Loan Documents, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged and
confessed by Pledgor, and upon and subject to the terms, provisions and
conditions hereinafter set forth, Pledgor hereby assigns, pledges, transfers
and grants unto the Bank, for the benefit of the Bank, a continuing security
interest in and to the following, whether now or after existing or acquired
(collectively, the "Collateral"):
2.01 Stock Collateral.
(a) All of the issued and outstanding shares of the
common capital stock of: Tanknology/NDE Corporation, being 1,000
shares of common stock, par value $0.01 per share, evidenced by
Certificate No. 001; USTMAN Industries, Inc., being 1,000 shares of
common stock, par value $0.01 per share, evidenced by Certificate No.
1; Tanknology Canada (1988) Inc., being 10,000 shares of common stock,
no par value, evidenced by Certificate No. 1; ProEco, Inc., being
8,850,000 shares of common stock, par value $.01 per share, evidenced
by Certificate No. 26; (collectively, the "Stock"; Tanknology/NDE
Corporation, USTMAN Industries, Inc., Tanknology Canada (1988) Inc.
and ProEco, Inc., being known collectively as the "NDE Stock
Companies"), together with any and all additional shares of stock,
bonds, notes, obligations and other evidences of indebtedness, and
other securities and cash, if any, which may be from time to time
hereafter by the terms of this Security Agreement subjected to the
security interest hereof or required so to be (collectively, the
"Stock Collateral");
(b) All substitutes and replacements for, and all
accessions and other additions to, and all proceeds of, the
above-described Stock Collateral, including,
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without limitation, all income and benefits therefrom, such as
dividends payable or distributable in cash, property or stock;
redemption proceeds and subscription rights; and shares, rights,
options, interests and/or other proceeds of any kind realized from any
dividend, reclassification, subdivision or combination of shares or in
rights, warrants, options or other securities issued with respect
thereto; and
(c) Any and all present and future accounts, general
intangibles, chattel paper, documents, instruments, cash and non-cash
proceeds, and all other rights and interests arising from or by virtue
of or with respect to the above-described Stock Collateral and any
other properties, including, but not limited to, all payments and
distributions (either in money or property) with respect to any of the
foregoing.
Except with respect to Stock made subject to Permitted Liens
(as described in the Loan Agreement), certificates representing the Stock,
accompanied by properly completed stock powers with respect to all of the
Stock, without representation or warranty except as set forth herein, are being
concurrently herewith deposited by Pledgor with the Bank. All other Stock
Collateral shall be immediately delivered to the Bank as and when it is
received by Pledgor, and Pledgor hereby authorizes the Bank to demand and
receive for, in the name and on behalf of Pledgor, all such Collateral directly
from Pledgor or any other party issuing or delivering the same.
2.02 Other Personal Property.
(a) All inventory in all of its forms of the Pledgor,
wherever located, and all accessions thereto, products thereof and
documents therefor;
(b) All accounts, contracts, contract rights, chattel
paper, documents, instruments, and general intangibles of the Pledgor,
whether or not arising out of or in connection with the sale or lease
of goods or the rendering of services, and all rights of the Pledgor
now or hereafter existing in and to all security agreements,
guaranties, leases, letters of credit (including confirmations and
advices of letters of credit) and other contracts securing or
otherwise relating to any such accounts, contracts, contract rights,
chattel paper, documents, instruments, and general intangibles, and
any renewals or extensions of the foregoing;
(c) All General Intangibles of the Pledgor, including
without limitation any patents, trademarks, goodwill, any licenses in
connection therewith or rights thereunder, and any rights under
license agreements;
(d) All proprietary software of the Pledgor, any licenses
in connection therewith and any rights thereunder;
(e) All vehicles, machinery, and goods of Pledgor
wherever located, in which Pledgor has an ownership, leasehold or
other interest, including all accessions thereto;
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<PAGE> 4
(f) All furniture and equipment of the Pledgor, wherever
located;
(g) All books, records, writings, data bases,
information, computer hardware and software (and all documentation
therefor or relating thereto and all licenses relating to or covering
such computer hardware, software and/or documentation), trademarks,
service marks, business names, designs, logos, indicia, and/or other
source and/or business identifiers (and the goodwill of the business
relating thereto) and all registrations which have heretofore been or
may hereafter be issued thereon throughout the world, and other
property applicable to, relating to, used or useful in connection
with, evidencing, embodying, incorporating or referring to, any of the
foregoing in this Article II; and
(h) All products, offspring, rents, issues, profits,
returns, income and proceeds of and from any and all of the foregoing
Collateral (including proceeds which constitute property of the types
described in this Section 2.02, and, to the extent not otherwise
included, all payments under insurance (whether or not the Bank is the
loss payee thereof), or any indemnity, warranty or guaranty, payable
by reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral).
2.03 Bank's Rights in Collateral; Continuing Security
Interest. The Bank is hereby authorized to receive any and all of the
Collateral as and for security for the payment of the Secured Obligations, and
to hold and apply the same in payment of the Secured Obligations. This
Security Agreement shall: (a) remain in full force and effect until payment in
full of all Obligations under the Loan Documents; (b) be binding upon Pledgor,
its successors, transferees and assigns; and (c) inure, together with the
rights and remedies of the Bank hereunder, to the benefit of the Bank.
ARTICLE III.
SECURED OBLIGATIONS
This Security Agreement secures the payment of all obligations
and liabilities of Pledgor to the Bank now or hereafter existing under or in
connection with the Loan Agreement, the Notes and other Loan Documents, whether
in respect of principal, interest, fees, expenses or otherwise, and all
obligations and liabilities of the Pledgor to the Bank now or hereafter
existing under or in connection with this Security Agreement, together with all
renewals, extensions, rearrangements, modifications, refinancings or
replacements of any of the above, (collectively, the "Secured Obligations").
ARTICLE IV.
CUSTODY OF STOCK COLLATERAL
So long as the Secured Obligations, or any portion thereof,
shall remain outstanding and unpaid, the Stock Collateral shall be held by and
in custody of the Bank, and Pledgor shall not
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<PAGE> 5
have the right to procure the release of any of the Stock Collateral from the
security interest hereby created except upon and in compliance with the terms
and conditions herein set forth. To induce the Bank to deliver the Collateral
to the Subordinated Lender (as defined in that certain Subordinated Security
Agreement made by Pledgor in favor of Banc One Capital Partners, L.P., an Ohio
limited partnership, dated as of even date herewith (the "Subordinated Security
Agreement")) when demanded by Subordinate Lender pursuant to the Subordinated
Security Agreement and when Pledgor would otherwise be entitled to demand such
release hereunder, Pledgor expressly waives, and releases the Bank from, and
releases and indemnifies the Bank from and against, any claim, action or
damages arising from or out of any such delivery to Subordinated Lender.
ARTICLE V.
DELIVERY OF STOCK; REGISTRATION AND RIGHT TO VOTE
5.01 All stock certificates and other instruments in
registered form which may constitute at any time or from time to time a part of
the Collateral shall be endorsed in blank, without representation or warranty,
except as set forth herein, for transfer or be accompanied by proper
instruments of assignment and transfer in blank upon delivery to the Bank. All
instruments not registered as to principal which may constitute at any time or
from time to time a part of the Collateral shall be endorsed in blank. Except
as otherwise herein provided, until the happening of an Event of Default
specified in Article XI hereof and its continuation beyond the period of grace,
if any, applicable thereto, all certificates for shares of stock included in
the Collateral shall remain registered in the name of Pledgor.
5.02 Until the occurrence of an Event of Default, Pledgor
shall have the exclusive right to vote any and all shares of stock constituting
a part of the Collateral, at any and all meetings of the shareholders of the
NDE Stock Companies, for any and all purposes not inconsistent with the
covenants of Pledgor contained in this Security Agreement, the Loan Agreement
and the other Loan Documents. Following the occurrence of an Event of Default,
the Bank shall have the right, at its sole discretion and without liability
therefor, to cause the Collateral to be registered in its name or in the name
of any other party, and to exercise all voting privileges and other rights with
respect thereto.
ARTICLE VI.
COVENANTS OF PLEDGOR
Pledgor covenants and agrees that (i) until the Secured
Obligations shall have been either fully paid or shall have been satisfied and
discharged by action under this Security Agreement, whichever shall first
occur, or (ii) unless the prior written consent of the holder of the Notes
shall have been first obtained, Pledgor will not, except as otherwise provided
in the Loan Documents:
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<PAGE> 6
(a) sell, assign, transfer or further encumber any of the
Collateral or any interest therein;
(b) dissolve, liquidate, or consolidate with or merge
into any other corporation, or merge into it; or sell, lease, transfer
or otherwise dispose of any of its properties and assets, whether by a
single or successive transactions; or to make any amendment to its
Articles of Incorporation or By-laws;
(c) make any loan or advances of any kind whatsoever to
any NDE Party, to any subsidiary or affiliate of Pledgor, or to any
other party;
(d) declare or pay any dividends or other distributions,
either in cash or property, on any class of its stock, directly or
indirectly, issue any additional shares of its capital stock or other
securities or options or rights to purchase the same, or purchase,
redeem or retire any of its capital stock or make any other
distribution with respect to its capital stock;
(e) mortgage, pledge or subject to any lien or other
encumbrance, any of its assets, tangible or intangible, or sell or
transfer any of its tangible assets or cancel any debts or claims,
except as permitted by the Loan Documents;
(f) dispose or otherwise divest itself of the ownership,
possession, custody or control of any books and records of any NDE
Party of any nature which, in accordance with prudent and accepted
business practice, are retained for a period of time after their use,
creation or receipt;
(g) make any investments, loans or commitments, or incur
any expenses, except as permitted by the Loan Documents; and
(h) take any action that would result in an Event of
Default hereunder or under the Loan Agreement, or a default under the
other Loan Documents.
ARTICLE VII.
PAYMENT OF SECURED OBLIGATIONS
If the NDE Parties shall pay to the Bank in full all of the
Secured Obligations and sums payable by the NDE Parties, then these presents
and the security interest hereby granted shall cease, terminate and become
void; and immediately thereafter the Bank shall deliver to Pledgor the
Collateral and, on demand of Pledgor, shall also execute, acknowledge, and
deliver to Pledgor at Pledgor's expense such instruments of release and/or
transfer in respect of the Collateral; otherwise, this Security Agreement shall
remain in full force.
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ARTICLE VIII.
REPRESENTATIONS AND WARRANTIES
Pledgor represents and warrants to the Bank that:
(a) Pledgor (a) is a duly organized and validly existing
corporation in good standing under the laws of the State of Delaware,
and (b) has all requisite power and authority to own its properties
and conduct its business as presently conducted and to execute and
deliver, and to perform its obligations under, this Security
Agreement. All of the outstanding stock of the NDE Stock Companies is
owned beneficially and of record by Pledgor and constitutes the Stock.
(b) There is no action, suit, proceeding, or
investigation at law or in equity by or before any court, governmental
body, agency, commission or other tribunal now pending or, to the best
knowledge of Pledgor after due inquiry, threatened which questions or
would question the validity of this Security Agreement to which
Pledgor is a party.
(c) The execution, delivery and performance of this
Security Agreement has been duly authorized by all necessary action of
Pledgor. This Security Agreement has been duly executed and delivered
by Pledgor. This Security Agreement when executed and delivered by
Pledgor will constitute a legal, valid and binding obligation of
Pledgor, enforceable according to its terms, subject, as to
enforceability, to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and to general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law).
(d) All authorizations, consents, approvals,
registrations, filings, exemptions and licenses with or from
governmental or regulatory authorities which are necessary for the
execution and delivery of this Security Agreement or for the
performance by Pledgor of its obligations hereunder have been effected
and obtained are in full force and effect.
(e) Pledgor has good title to the Collateral and is the
sole legal owner thereof, and there are no Liens (other than the
Permitted Liens) existing against any of the Collateral of Pledgor.
(f) The Stock constitutes all of the issued and
outstanding capital stock of the NDE Stock Companies.
(g) This Security Agreement creates a valid security
interest in the Collateral securing the payment of the Secured
Obligations.
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(h) On the date hereof, the Pledgor is "located" (as that
term is defined in Section 9-103(3)(d) of the Uniform Commercial
Code) at 8900 Shoal Creek, Bldg. 200, Austin, Texas 78757.
ARTICLE IX.
FURTHER ASSURANCES
Pledgor covenants and agrees to from time to time promptly
execute and deliver to the Bank all such other assignments, certificates,
supplemental writings and financing statements, and do all other acts or
things, as the Bank may reasonably request in order to more fully evidence and
perfect the security interest herein created.
ARTICLE X.
PRESERVATION OF RIGHTS
The Bank shall have no duty to fix or preserve rights against
prior parties to the Collateral, and shall never be liable for its failure to
use diligence to collect any amount payable in respect of the Collateral, but
shall be liable only to account to Pledgor for what it may actually collect or
receive thereon.
ARTICLE XI.
DEFAULT
The term "Event of Default" as used herein, means the
occurrence of an Event of Default as defined and as provided in the Loan
Agreement.
ARTICLE XII.
REMEDIES
Upon the occurrence of an Event of Default, in addition to any
and all other rights and remedies which the Bank may then have hereunder,
including without limitation the provisions of Article XIV, or under the
Uniform Commercial Code of the State of Texas (hereinafter called "Code"), or
otherwise, the Bank at its option may: (i) declare the entire unpaid balance
of principal of and all accrued interest on the Secured Obligations immediately
due and payable, without notice, demand, presentment or notice of intention to
accelerate, which are hereby expressly waived; (ii) reduce its claim to
judgment, foreclose or otherwise enforce its security interest in all or any
part of the Collateral by any available judicial procedure; (iii) after
notification, if any, provided for in Article XIII hereof, sell or otherwise
dispose of, at its office, or elsewhere, as chosen by the Bank, all or any part
of the Collateral, and any such sale or other disposition may be as a unit or
in parcels,
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at public or private sale, and by way of one or more contracts (it being agreed
that the sale of any part of the Collateral shall not exhaust the Bank's power
of sale, but sales may be made from time to time until all of the Collateral
has been sold or until all sums payable under the Secured Obligations and
hereunder have been paid in full), and at any such sale it shall not be
necessary to exhibit the Collateral; (iv) at its discretion, retain the
Collateral in satisfaction of the unpaid balance of principal of and interest
upon the Secured Obligations whenever the circumstances are such that the Bank
is entitled to do so under the Code; (v) apply by appropriate judicial
proceedings for appointment of a receiver for the Collateral, or any part
thereof, and Pledgor hereby consents to any such appointment; or (vi) buy the
Collateral at any public or private sale. The Bank shall be entitled to apply
the proceeds of any sale or other disposition of the Collateral in the
following order: first, to the payment of all of its reasonable expenses,
including attorneys' fees and other legal expenses, incurred in holding and
preparing the Collateral, or any part thereof, for sale(s) or other
disposition, in arranging for such sale(s) or other disposition, and in
actually selling the same; and next, toward payment of the unpaid balance of
principal of and interest upon the Secured Obligations and other sums secured
hereby in such order and manner as the Bank, in its discretion, may deem
advisable. The Bank shall account to Pledgor for any surplus. If the proceeds
are not sufficient to pay the Secured Obligations in full, Pledgor shall remain
liable for any deficiency.
ARTICLE XIII.
NOTICE OF SALE
Reasonable notification of the time and place of any public
sale of the Collateral, or reasonable notification of the time after which any
private sale or other intended disposition of the Collateral is to be made,
shall be sent to Pledgor and to any other person entitled under the Code to
notice. It is agreed that notice sent or given not less than ten (10) calendar
days prior to the taking of the action to which the notice relates is
reasonable notification and notice for the purpose of this paragraph.
ARTICLE XIV.
SECURITIES LAWS LIMITATIONS
It is provided in this Security Agreement that upon Event of
Default the Bank may sell the Collateral (including any additions thereto or
substitutions therefor) at public or private sale. Pledgor acknowledges that
because of present or future circumstances, a question may arise under the
Securities Act of 1933, as amended, in connection with such a sale. In that
connection, compliance with that Act may impose limitations on the Bank if it
were to attempt to dispose of certain portions of the Collateral. Similarly,
because of the Pledgor's position as a stockholder of the NDE Stock Companies
or because of other circumstances, there may be other legal restrictions or
limitations affecting the Bank in any attempts to dispose of the Collateral.
For these reasons the Bank is hereby authorized by Pledgor, in the event of any
Event of Default giving rise to the Bank's rights to sell or otherwise dispose
of the Collateral, to sell all or any part of the Collateral at private
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sale, subject to investment letters from the purchasers of the Collateral or in
any other manner which will not require the Collateral, or any part thereof, to
be registered in accordance with the Securities Act of 1933, as amended, or the
rules and regulations promulgated thereunder, at the best price reasonably
obtainable by the Bank at any such private sale or other disposition in the
manner mentioned above. Pledgor clearly understands that the Bank may approach
a restricted number of potential purchasers and that a sale under such
circumstances may yield a lower price for the Collateral, or any part or parts
thereof, than would otherwise be obtainable if the same were registered and
sold in the open market. Pledgor agrees that in the event the Bank shall, upon
a default under the Notes or hereunder sell the Collateral, or any portion
thereof, at such private sale or sales, the Bank shall have the right, but
shall not be obligated, to rely upon the advice and opinion of any national
brokerage firm having a seat on the New York Stock Exchange as to the best
price reasonably obtainable upon such a private sale thereof.
ARTICLE XV.
BANK APPOINTED ATTORNEY-IN-FACT
Pledgor hereby irrevocably appoints the Bank as Pledgor's
attorney-in-fact, with full authority in the place and stead of Pledgor and in
the name of Pledgor or otherwise, from time to time after the occurrence of an
Event of Default, to take any action, to execute any instruments and to
exercise any rights, privileges, options, elections or powers of Pledgor
pertaining or relating to the Collateral which the Bank may reasonably deem
necessary or desirable to preserve and enforce its security interest in the
Collateral and otherwise to accomplish the purposes of this Security Agreement.
The Bank shall not have any duty to take any such action, to execute any such
instrument, to exercise any such rights, privileges, options, elections or
powers or to sell or otherwise to realize upon any of the Collateral, as
hereinafter authorized, and the Bank shall not be responsible for any failure
to do so or delay in so doing.
ARTICLE XVI.
BANK MAY PERFORM
If Pledgor fails to perform any agreement contained herein,
the Bank may (but shall not be obligated to) perform, or cause performance of,
such agreement. Pledgor shall reimburse the Bank on demand for any amounts
paid or any expenses incurred by the Bank in connection therewith.
ARTICLE XVII.
BANK'S DUTIES
The powers conferred on the Bank hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. The Bank shall have
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no duty whatsoever to (i) take any steps to preserve the security interest
granted hereby, or (ii) preserve or protect or take any action whatsoever with
respect to, any of the Collateral.
ARTICLE XVIII.
AMENDMENTS, ETC.
No amendment or waiver of any provision of this Security
Agreement, nor consent to any departure by Pledgor therefrom, shall in any
event be effective unless the same shall be in writing and signed by the Bank,
and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
ARTICLE XIX.
CUMULATIVE RIGHTS
All rights and remedies of the Bank are cumulative of each
other and of every other right or remedy which the Bank may otherwise have at
law or in equity or under any other contract or other writing for the
enforcement of the security interest herein or the collection of the
indebtedness evidenced by the Secured Obligations, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies.
ARTICLE XX.
ASSIGNABILITY
The rights, powers and interests held by the Bank hereunder,
together with the Collateral, may be transferred and assigned by the Bank, in
whole or in part, at such time and upon such terms as it may deem advisable;
and the term "Bank" shall be deemed to refer to and include such transferees
and assignees and the holder or holders from time to time of the Secured
Obligations.
ARTICLE XXI.
NO WAIVER
The acceptance by the Bank at any time and from time to time
of part payment of the aggregate amount of the Secured Obligations then matured
shall not be deemed to be a waiver of any default then existing. No waiver by
the Bank of any default shall be deemed to be a waiver of any subsequent
default, nor shall any such waiver by the Bank be deemed to be a continuing
waiver. No delay or omission by the Bank in exercising any right or power
hereunder, or under any other writings executed by Pledgor as security for or
in connection with the Secured Obligations, shall impair any such right or
power or be construed as a waiver thereof or any acquiescence therein, nor
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<PAGE> 12
shall any single or partial exercise of any such right or power preclude other
or further exercise of any other right or power of the Bank hereunder.
ARTICLE XXII.
GOVERNING LAW; SEVERABILITY
THIS SECURITY AGREEMENT IS EXECUTED UNDER AND SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AND THIS SECURITY
AGREEMENT IS PERFORMABLE IN TEXAS, AND PLEDGOR WAIVES THE RIGHT TO BE SUED
ELSEWHERE. Any provision of this Security Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
ARTICLE XXIII.
BINDING EFFECT
This Security Agreement shall be binding on Pledgor and
Pledgor's successors and assigns and shall inure to the benefit of the Bank and
the Bank's successors and assigns.
ARTICLE XXIV.
NOTICES
Unless otherwise specified herein all notices, requests and
other communications to any party hereunder shall be in writing (including
telex, facsimile or similar writing) and shall be given to such party at its
address or telex or facsimile number set forth below or such other address or
telex or facsimile number as such party may hereafter specify by notice to the
other party. Each such notice, request or other communication shall be
effective (i) if given by telex, when such telex is transmitted to the telex
number specified in this Article XXIV and the appropriate answerback is
received, (ii) if given by facsimile or other form of facsimile transmission,
when the recipient confirms legible transmission thereof, or (iii) if given by
any other means, when delivered at the address specified in this Article:
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<PAGE> 13
(a) If to Pledgor:
NDE ENVIRONMENTAL CORPORATION
8900 Shoal Creek, Bldg. 200
Austin, Texas 78757
Attention: President
Telephone: (512) 451-6334
Facsimile: (512) 459-1459
With a copy to:
NDE ENVIRONMENTAL CORPORATION
712 Main Street, Suite 1700
Houston, Texas 77002
Attention: Jay Allen Chaffee
Telephone: (713) 223-5730
Facsimile: (713) 223-5379
(b) If to the Bank:
BANK ONE, TEXAS, N.A.
910 Travis
Houston, Texas 77002
Attention: Charles Kingswell-Smith
Telephone: (713) 751-7803
Facsimile: (713) 751-7894
Any party hereto may at any time, by giving five (5) days written notice to the
other parties hereto, designate any other address in substitution of the
foregoing address to which such notice shall be given.
ARTICLE XXV.
HEADINGS
The article and section headings contained in this Security
Agreement are for reference purposes only and shall have no effect upon the
meaning or interpretation of any provision hereof.
ARTICLE XXVI.
MISCELLANEOUS
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<PAGE> 14
26.01 The principal office of the Pledgor is in Austin,
Texas.
26.02 Pledgor shall, at its expense, make, procure, execute
and deliver such financing statement or amendments thereof or supplements
thereto, or other instruments, certificates and supplemental writings, and do
and deliver all acts, things, writings and assurances as the Bank may from time
to time reasonably require in order to comply with the Code, or any other
applicable law, and to preserve and protect the security interest hereby
granted. In the event, for any reason, that the law of any jurisdiction other
than the State of Texas becomes or is applicable to the Collateral, or any part
thereof, or to any of the Obligation, Pledgor agrees to execute and deliver all
such instruments and do all such other things as may be necessary or
appropriate to preserve, protect and enforce the security interests or liens of
the Bank, under the law of such other jurisdiction, to at least the same extent
as such security interests would be protected under the Code.
26.03 Pledgor shall perform, at its sole cost and expense,
any and all steps, and shall pay the amount of all expenses necessary to
obtain, preserve, perfect, defend and enforce the security interest in any of
the Collateral, the collection of the Obligation, and preserve, defend, enforce
and collect the Collateral.
26.04 Should the Collateral or any part thereof, ever be in
any manner converted into another type of property or any money or other
proceeds ever be paid or delivered to the Pledgor as a result of Pledgor's
rights in the Collateral, then, in any such event, all such property, money or
other proceeds shall become part of the Collateral, and Pledgor covenants to
forthwith pay and deliver to the Bank all of the same, which are acceptable of
delivery, and, at the same time Pledgor will properly endorse or assign the
same.
26.05 THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[THE REST OF THIS PAGE LEFT INTENTIONALLY BLANK.]
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<PAGE> 15
EXECUTED as of the day and year first above written.
PLEDGOR:
NDE ENVIRONMENTAL CORPORATION,
a Delaware corporation
By: /s/ JAY ALLEN CHAFFEE
------------------------------------------
Jay Allen Chaffee
Chairman of the Board
BANK:
BANK ONE, TEXAS, N.A.
By: /s/ CHARLES KINGSWELL-SMITH
------------------------------------------
Charles Kingswell-Smith
Vice President
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<PAGE> 1
EXHIBIT 10.12
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (this "Security
Agreement"), dated the 25th day of October, 1996, made and entered into by
TANKNOLOGY/NDE CORPORATION, a Delaware corporation ("Pledgor"), in favor of
BANK ONE, TEXAS, N.A., a national banking association (the "Bank").
W I T N E S S E T H
WHEREAS, Pledgor, NDE Environmental Corporation, a Delaware
corporation, USTMAN Industries, Inc., a Delaware corporation, ProEco, Inc., a
Delaware corporation, and Tanknology Canada (1988) Inc., a Canadian federal
corporation (individually, an "NDE Party", and collectively, the "NDE Parties")
and the Bank, have entered into a Loan Agreement dated as of even date herewith
(hereinafter, as the same may from time to time be amended, supplemented,
extended or otherwise modified referred to as the "Loan Agreement"), pursuant
to which the Bank has agreed to make Loans to the NDE Parties, and further,
that pursuant to the Loan Agreement, the NDE Parties have delivered and will
execute and deliver to the Bank, among other documents, Notes and other Loan
Documents (as defined in the Loan Agreement); and
WHEREAS, the obligation of the Bank to make Loans under the
Loan Agreement is conditioned on, among other things, the execution and
delivery of this Security Agreement; and
WHEREAS, the Pledgor has duly authorized the execution,
delivery, and performance of this Security Agreement;
NOW, THEREFORE, in consideration of the Bank's agreement to
make Loans on the terms and conditions of the Loan Agreement, Pledgor hereby
agrees with the Bank as follows:
ARTICLE I.
DEFINITIONS
As used in this Security Agreement, the following terms shall
have the meanings indicated:
Collateral is defined in Article II.
Event of Default is defined in Article IX.
Secured Obligations is defined in Article III.
<PAGE> 2
Unless otherwise indicated, capitalized terms used and not
defined herein shall have the respective meanings given to them in the Loan
Agreement. Whenever the context requires, reference herein made to the single
number shall be understood to include the plural and likewise the plural shall
be understood to include the singular. Words denoting sex shall be construed
to include the masculine, feminine, and neuter, when such construction is
appropriate, and specific enumeration shall not exclude the general, but shall
be construed as cumulative.
ARTICLE II.
GRANT OF SECURITY INTEREST
To secure the full and punctual payment of the Secured
Obligations, as and when the same become due and payable in accordance with the
tenor and effect thereof, and the performance of all other obligations of the
NDE Parties under the Loan Documents, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged and
confessed by Pledgor, and upon and subject to the terms, provisions and
conditions hereinafter set forth, Pledgor hereby assigns, pledges, transfers
and grants unto the Bank, for the benefit of the Bank, a continuing security
interest in and to the following, whether now or after existing or acquired
(collectively, the "Collateral"):
(a) All inventory in all of its forms of the Pledgor,
wherever located, and all accessions thereto, products thereof and
documents therefor;
(b) All accounts, contracts, contract rights, chattel
paper, documents, instruments, and general intangibles of the Pledgor,
whether or not arising out of or in connection with the sale or lease
of goods or the rendering of services, and all rights of the Pledgor
now or hereafter existing in and to all security agreements,
guaranties, leases, letters of credit (including confirmations and
advices of letters of credit) and other contracts securing or
otherwise relating to any such accounts, contracts, contract rights,
chattel paper, documents, instruments, and general intangibles, and
any renewals or extensions of the foregoing;
(c) All General Intangibles of the Pledgor, including
without limitation any patents, trademarks, goodwill, any licenses in
connection therewith or rights thereunder, and any rights under
license agreements, and including specifically the patents and
trademarks detailed on Exhibit "A" hereto, and related rights under
licensing agreements;
(d) All proprietary software of the Pledgor, any licenses
in connection therewith and any rights thereunder;
(e) All vehicles, machinery, and goods of Pledgor
wherever located, in which Pledgor has an ownership, leasehold or
other interest, including all accessions thereto;
(f) All furniture and equipment of the Pledgor, wherever
located;
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<PAGE> 3
(g) All books, records, writings, data bases,
information, computer hardware and software (and all documentation
therefor or relating thereto and all licenses relating to or covering
such computer hardware, software and/or documentation), trademarks,
service marks, business names, designs, logos, indicia, and/or other
source and/or business identifiers (and the goodwill of the business
relating thereto) and all registrations which have heretofore been or
may hereafter be issued thereon throughout the world, and other
property applicable to, relating to, used or useful in connection
with, evidencing, embodying, incorporating or referring to, any of the
foregoing in this Article II; and
(h) All products, offspring, rents, issues, profits,
returns, income and proceeds of and from any and all of the foregoing
Collateral (including proceeds which constitute property of the types
described in this Article, and, to the extent not otherwise included,
all payments under insurance (whether or not the Bank is the loss
payee thereof), or any indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral).
The Bank is hereby authorized to receive any and all of the
Collateral as and for security for the payment of the Secured Obligations, and
to hold and apply the same in payment of the Secured Obligations. This
Security Agreement shall: (a) remain in full force and effect until payment in
full of all Obligations under the Loan Documents; (b) be binding upon Pledgor,
its successors, transferees and assigns; and (c) inure, together with the
rights and remedies of the Bank hereunder, to the benefit of the Bank.
ARTICLE III.
SECURED OBLIGATIONS
This Security Agreement secures the payment of all obligations
and liabilities of Pledgor to the Bank now or hereafter existing under or in
connection with the Loan Agreement, the Notes and other Loan Documents, whether
in respect of principal, interest, fees, expenses or otherwise, and all
obligations and liabilities of the Pledgor to the Bank now or hereafter
existing under or in connection with this Security Agreement, together with all
renewals, extensions, rearrangements, modifications, refinancings or
replacements of any of the above, (collectively, the "Secured Obligations").
ARTICLE IV.
COVENANTS OF PLEDGOR
Pledgor covenants and agrees that (i) until the Secured
Obligations shall have been either fully paid or shall have been satisfied and
discharged by action under this Security Agreement,
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<PAGE> 4
whichever shall first occur, or (ii) unless the prior written consent of the
holder of the Notes shall have been first obtained, Pledgor will not, except as
otherwise provided in the Loan Documents:
(a) sell, assign, transfer or further encumber any of the
Collateral or any interest therein;
(b) dissolve, liquidate, or consolidate with or merge
into any other corporation, or merge into it; or sell, lease, transfer
or otherwise dispose of any of its properties and assets, whether by a
single or successive transactions; or to make any amendment to its
Articles of Incorporation or By-laws;
(c) make any loan or advances of any kind whatsoever to
any NDE Party, to any subsidiary or affiliate of Pledgor, or to any
other party;
(d) declare or pay any dividends or other distributions,
either in cash or property, on any class of its stock, directly or
indirectly, issue any additional shares of its capital stock or other
securities or options or rights to purchase the same, or purchase,
redeem or retire any of its capital stock or make any other
distribution with respect to its capital stock;
(e) mortgage, pledge or subject to any lien or other
encumbrance, any of its assets, tangible or intangible, or sell or
transfer any of its tangible assets or cancel any debts or claims,
except as permitted by the Loan Documents;
(f) dispose or otherwise divest itself of the ownership,
possession, custody or control of any books and records of any NDE
Party of any nature which, in accordance with prudent and accepted
business practice, are retained for a period of time after their use,
creation or receipt;
(g) make any investments, loans or commitments, or incur
any expenses, except as permitted by the Loan Documents; and
(h) take any action that would result in an Event of
Default hereunder or under the Loan Agreement, or a default under the
other Loan Documents.
ARTICLE V.
PAYMENT OF SECURED OBLIGATIONS
If the NDE Parties shall pay to the Bank in full all of the
Secured Obligations and sums payable by the NDE Parties, then these presents
and the security interest hereby granted shall cease, terminate and become
void; and immediately thereafter the Bank shall deliver to Pledgor the
Collateral and, on demand of Pledgor, shall also execute, acknowledge, and
deliver to Pledgor at
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<PAGE> 5
Pledgor's expense such instruments of release and/or transfer in respect of the
Collateral; otherwise, this Security Agreement shall remain in full force.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES
Pledgor represents and warrants to the Bank that:
(a) Pledgor (a) is a duly organized and validly existing
corporation in good standing under the laws of the State of Delaware,
and (b) has all requisite power and authority to own its properties
and conduct its business as presently conducted and to execute and
deliver, and to perform its obligations under, this Security
Agreement.
(b) There is no action, suit, proceeding, or
investigation at law or in equity by or before any court, governmental
body, agency, commission or other tribunal now pending or, to the best
knowledge of Pledgor after due inquiry, threatened which questions or
would question the validity of this Security Agreement to which
Pledgor is a party.
(c) The execution, delivery and performance of this
Security Agreement has been duly authorized by all necessary action of
Pledgor. This Security Agreement has been duly executed and delivered
by Pledgor. This Security Agreement when executed and delivered by
Pledgor will constitute a legal, valid and binding obligation of
Pledgor, enforceable according to its terms, subject, as to
enforceability, to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and to general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law).
(d) All authorizations, consents, approvals,
registrations, filings, exemptions and licenses with or from
governmental or regulatory authorities which are necessary for the
execution and delivery of this Security Agreement or for the
performance by Pledgor of its obligations hereunder have been effected
and obtained are in full force and effect.
(e) Pledgor has good title to the Collateral and is the
sole legal owner thereof, and there are no Liens (other than the
Permitted Liens) existing against any of the Collateral of Pledgor.
(f) This Security Agreement creates a valid security
interest in the Collateral securing the payment of the Secured
Obligations.
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<PAGE> 6
(g) On the date hereof, the Pledgor is "located" (as that
term is defined in Section 9-103(3)(d) of the Uniform Commercial
Code) at 8900 Shoal Creek, Bldg. 200, Austin, Texas 78757.
ARTICLE VII.
FURTHER ASSURANCES
Pledgor covenants and agrees to from time to time promptly
execute and deliver to the Bank all such other assignments, certificates,
supplemental writings and financing statements, and do all other acts or
things, as the Bank may reasonably request in order to more fully evidence and
perfect the security interest herein created.
ARTICLE VIII.
PRESERVATION OF RIGHTS
The Bank shall have no duty to fix or preserve rights against
prior parties to the Collateral, and shall never be liable for its failure to
use diligence to collect any amount payable in respect of the Collateral, but
shall be liable only to account to Pledgor for what it may actually collect or
receive thereon.
ARTICLE IX.
DEFAULT
The term "Event of Default" as used herein, means the
occurrence of an Event of Default as defined and as provided in the Loan
Agreement.
ARTICLE X.
REMEDIES
Upon the occurrence of an Event of Default, in addition to any
and all other rights and remedies which the Bank may then have hereunder, or
under the Uniform Commercial Code of the State of Texas (hereinafter called
"Code"), or otherwise, the Bank at its option may: (i) declare the entire
unpaid balance of principal of and all accrued interest on the Secured
Obligations immediately due and payable, without notice, demand, presentment or
notice of intention to accelerate, which are hereby expressly waived; (ii)
reduce its claim to judgment, foreclose or otherwise enforce its security
interest in all or any part of the Collateral by any available judicial
procedure; (iii) after notification, if any, provided for in Article XI hereof,
sell or otherwise dispose of, at its office, or elsewhere, as chosen by the
Bank, all or any part of the Collateral, and any such sale or other disposition
may be as a unit or in parcels, at public or private sale, and by way of one
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<PAGE> 7
or more contracts (it being agreed that the sale of any part of the Collateral
shall not exhaust the Bank's power of sale, but sales may be made from time to
time until all of the Collateral has been sold or until all sums payable under
the Secured Obligations and hereunder have been paid in full), and at any such
sale it shall not be necessary to exhibit the Collateral; (iv) at its
discretion, retain the Collateral in satisfaction of the unpaid balance of
principal of and interest upon the Secured Obligations whenever the
circumstances are such that the Bank is entitled to do so under the Code; (v)
apply by appropriate judicial proceedings for appointment of a receiver for the
Collateral, or any part thereof, and Pledgor hereby consents to any such
appointment; or (vi) buy the Collateral at any public or private sale. The
Bank shall be entitled to apply the proceeds of any sale or other disposition
of the Collateral in the following order: first, to the payment of all of its
reasonable expenses, including attorneys' fees and other legal expenses,
incurred in holding and preparing the Collateral, or any part thereof, for
sale(s) or other disposition, in arranging for such sale(s) or other
disposition, and in actually selling the same; and next, toward payment of the
unpaid balance of principal of and interest upon the Secured Obligations and
other sums secured hereby in such order and manner as the Bank, in its
discretion, may deem advisable. The Bank shall account to Pledgor for any
surplus. If the proceeds are not sufficient to pay the Secured Obligations in
full, Pledgor shall remain liable for any deficiency.
ARTICLE XI.
NOTICE OF SALE
Reasonable notification of the time and place of any public
sale of the Collateral, or reasonable notification of the time after which any
private sale or other intended disposition of the Collateral is to be made,
shall be sent to Pledgor and to any other person entitled under the Code to
notice. It is agreed that notice sent or given not less than ten (10) calendar
days prior to the taking of the action to which the notice relates is
reasonable notification and notice for the purpose of this paragraph.
ARTICLE XII.
BANK APPOINTED ATTORNEY-IN-FACT
Pledgor hereby irrevocably appoints the Bank as Pledgor's
attorney-in-fact, with full authority in the place and stead of Pledgor and in
the name of Pledgor or otherwise, from time to time after the occurrence of an
Event of Default, to take any action, to execute any instruments and to
exercise any rights, privileges, options, elections or powers of Pledgor
pertaining or relating to the Collateral which the Bank may reasonably deem
necessary or desirable to preserve and enforce its security interest in the
Collateral and otherwise to accomplish the purposes of this Security Agreement.
The Bank shall not have any duty to take any such action, to execute any such
instrument, to exercise any such rights, privileges, options, elections or
powers or to sell or otherwise
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<PAGE> 8
to realize upon any of the Collateral, as hereinafter authorized, and the Bank
shall not be responsible for any failure to do so or delay in so doing.
ARTICLE XIII.
BANK MAY PERFORM
If Pledgor fails to perform any agreement contained herein,
the Bank may (but shall not be obligated to) perform, or cause performance of,
such agreement. Pledgor shall reimburse the Bank on demand for any amounts
paid or any expenses incurred by the Bank in connection therewith.
ARTICLE XIV.
BANK'S DUTIES
The powers conferred on the Bank hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. The Bank shall have no duty whatsoever to (i) take
any steps to preserve the security interest granted hereby, or (ii) preserve or
protect or take any action whatsoever with respect to, any of the Collateral.
ARTICLE XV.
AMENDMENTS, ETC.
No amendment or waiver of any provision of this Security
Agreement, nor consent to any departure by Pledgor therefrom, shall in any
event be effective unless the same shall be in writing and signed by the Bank,
and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
ARTICLE XVI.
CUMULATIVE RIGHTS
All rights and remedies of the Bank are cumulative of each
other and of every other right or remedy which the Bank may otherwise have at
law or in equity or under any other contract or other writing for the
enforcement of the security interest herein or the collection of the
indebtedness evidenced by the Secured Obligations, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies.
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<PAGE> 9
ARTICLE XVII.
ASSIGNABILITY
The rights, powers and interests held by the Bank hereunder,
together with the Collateral, may be transferred and assigned by the Bank, in
whole or in part, at such time and upon such terms as it may deem advisable;
and the term "Bank" shall be deemed to refer to and include such transferees
and assignees and the holder or holders from time to time of the Secured
Obligations.
ARTICLE XVIII.
NO WAIVER
The acceptance by the Bank at any time and from time to time
of part payment of the aggregate amount of the Secured Obligations then matured
shall not be deemed to be a waiver of any default then existing. No waiver by
the Bank of any default shall be deemed to be a waiver of any subsequent
default, nor shall any such waiver by the Bank be deemed to be a continuing
waiver. No delay or omission by the Bank in exercising any right or power
hereunder, or under any other writings executed by Pledgor as security for or
in connection with the Secured Obligations, shall impair any such right or
power or be construed as a waiver thereof or any acquiescence therein, nor
shall any single or partial exercise of any such right or power preclude other
or further exercise of any other right or power of the Bank hereunder.
ARTICLE XIX.
GOVERNING LAW; SEVERABILITY
THIS SECURITY AGREEMENT IS EXECUTED UNDER AND SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AND THIS SECURITY
AGREEMENT IS PERFORMABLE IN TEXAS, AND PLEDGOR WAIVES THE RIGHT TO BE SUED
ELSEWHERE. Any provision of this Security Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
ARTICLE XX.
BINDING EFFECT
This Security Agreement shall be binding on Pledgor and
Pledgor's successors and assigns and shall inure to the benefit of the Bank and
the Bank's successors and assigns.
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<PAGE> 10
ARTICLE XXI.
NOTICES
Unless otherwise specified herein all notices, requests and
other communications to any party hereunder shall be in writing (including
telex, facsimile or similar writing) and shall be given to such party at its
address or telex or facsimile number set forth below or such other address or
telex or facsimile number as such party may hereafter specify by notice to the
other party. Each such notice, request or other communication shall be
effective (i) if given by telex, when such telex is transmitted to the telex
number specified in this Article XXI and the appropriate answerback is
received, (ii) if given by facsimile or other form of facsimile transmission,
when the recipient confirms legible transmission thereof, or (iii) if given by
any other means, when delivered at the address specified in this Article:
(a) If to Pledgor:
TANKNOLOGY/NDE CORPORATION
8900 Shoal Creek, Bldg. 200
Austin, Texas 78757
Attention: President
Telephone: (512) 451-6334
Facsimile: (512) 459-1459
With a copy to:
TANKNOLOGY/NDE CORPORATION
8900 Shoal Creek, Bldg. 200
Austin, Texas 78757
Attention: Jay Allen Chaffee
Telephone: (512) 451-6334
Facsimile: (512) 459-1459
(b) If to the Bank:
BANK ONE, TEXAS, N.A.
910 Travis
Houston, Texas 77002
Attention: Charles Kingswell-Smith
Telephone: (713) 751-7803
Facsimile: (713) 751-7894
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<PAGE> 11
Any party hereto may at any time, by giving five (5) days written notice to the
other parties hereto, designate any other address in substitution of the
foregoing address to which such notice shall be given.
ARTICLE XXII.
HEADINGS
The article and section headings contained in this Security
Agreement are for reference purposes only and shall have no effect upon the
meaning or interpretation of any provision hereof.
ARTICLE XXIII.
MISCELLANEOUS
23.01 The principal office of the Pledgor is in Austin,
Texas.
23.02 Pledgor shall, at its expense, make, procure, execute
and deliver such financing statement or amendments thereof or supplements
thereto, or other instruments, certificates and supplemental writings, and do
and deliver all acts, things, writings and assurances as the Bank may from time
to time reasonably require in order to comply with the Code, or any other
applicable law, and to preserve and protect the security interest hereby
granted. In the event, for any reason, that the law of any jurisdiction other
than the State of Texas becomes or is applicable to the Collateral, or any part
thereof, or to any of the Obligation, Pledgor agrees to execute and deliver all
such instruments and do all such other things as may be necessary or
appropriate to preserve, protect and enforce the security interests or liens of
the Bank, under the law of such other jurisdiction, to at least the same extent
as such security interests would be protected under the Code.
23.03 Pledgor shall perform, at its sole cost and expense,
any and all steps, and shall pay the amount of all expenses necessary to
obtain, preserve, perfect, defend and enforce the security interest in any of
the Collateral, the collection of the Obligation, and preserve, defend, enforce
and collect the Collateral.
23.04 Should the Collateral or any part thereof, ever be in
any manner converted into another type of property or any money or other
proceeds ever be paid or delivered to the Pledgor as a result of Pledgor's
rights in the Collateral, then, in any such event, all such property, money or
other proceeds shall become part of the Collateral, and Pledgor covenants to
forthwith pay and deliver to the Bank all of the same, which are acceptable of
delivery, and, at the same time Pledgor will properly endorse or assign the
same.
23.05 THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
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<PAGE> 12
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the day and year first above written.
[THE REST OF THIS PAGE LEFT INTENTIONALLY BLANK.]
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<PAGE> 13
PLEDGOR:
TANKNOLOGY/NDE CORPORATION,
a Delaware corporation
By: /s/ JAY ALLEN CHAFFEE
------------------------------------------
Jay Allen Chaffee
Chairman of the Board
BANK:
BANK ONE, TEXAS, N.A.
By: /s/ CHARLES KINGSWELL-SMITH
------------------------------------------
Charles Kingswell-Smith
Vice President
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<PAGE> 14
EXHIBIT "A"
Patents:
U.S. Patents
US 5,092,158 APPARATUS FOR TESTING LEAK DETECTORS
US 5,140,753 INCLINOMETER FOR UNDERGROUND STORAGE TANKS
US 5,156,047 WATER SENSOR THAT DETECTS TANKS OR VESSEL LEAKAGE
US 5,201,212 LINE LEAK DETECTOR AND METHOD
US 5,220,822 METHOD FOR TESTING VAPRO RECOVERY LINES
US 5,293,681 ROLL-UP STRIKER PLATE FOR UNDERGROUND STORAGE TANKS
US 5,319,956 METHOD OF CONFIRMING THE PRESENCE OF A LEAK IN A LIQUID
STORAGE TANK
US 5,340,238 METHOD AND APPARATUS FOR TESTING ABOVE GROUND LIQUID STORAGE
TANKS
US 5,347,849 WATER SENSOR THAT DETECTS TANKS OR VESSEL LEAKAGE
US 5,347,850 METHOD FOR DETECTING AND LOCALIZING LEAKS IN ABOVE GROUND
STORAGE TANKS
US 5,363,093 METHOD AND APPARATUS FOR CONTINUOUS TANK MONITORING
US 5,461,906 APPARATUS FOR CONFIRMING THE PRESENCE OF A LEAK IN A LIQUID
STORAGE TANK
US 5,471,867 INVENTORY RECONCILIATION FOR ABOVE GROUND STORAGE TANKS
Foreign Patents
European Patent No. 0536987, entitled "METHOD OF CONFIRMING THE PRESENCE OF A
LEAK IN A LIQUID STORAGE TANK."
Australian Patent No. 659051, entitled "METHOD OF CONFIRMING THE PRESENCE OF A
LEAK IN A LIQUID STORAGE TANK."
Canadian Patent No. 2079928, entitled "METHOD OF CONFIRMING THE PRESENCE OF A
LEAK IN A LIQUID STORAGE TANK."
Mexican Patent Application No. 92 5731, entitled "METHOD OF CONFIRMING THE
PRESENCE OF A LEAK IN A LIQUID STORAGE TANK," (PENDING).
New Zealand Patent No. 244641, entitled "METHOD OF CONFIRMING THE PRESENCE OF A
LEAK IN A LIQUID STORAGE TANK."
-14-
<PAGE> 15
<TABLE>
<CAPTION>
Trademarks:
- ----------
<S> <C> <C>
U.S. Registered Marks
---------------------
US Reg. No. 1,565,593 TANKNOLOGY(R) (Cl: 9 & 37)
US Reg. No. 1,543,075 VACUTECT(R) (Cl: 42)
US Reg. No. 1,713,295 VACUTECT(R) (Cl: 9)
US Reg. No. 1,702,652 VACUTEST(R) (Cl: 42)
US Reg. No. 1,890,268 TANKNOLOGY and Design(R) (Cl: 9 & 37)
US Reg. No. 1,970,300 SIRPLUS(R) (Cl: 35)
Foreign Registered Marks
------------------------
Argentina Reg. No. 1,495,696 TANKNOLOGY(Cl: 42)
Australia Reg. No. 151,744 TANKNOLOGY(Cl: 9 & 42)
Australia Reg. No. A561,784 TANKNOLOGY(Cl: 9)
Australia Reg. No. A561,785 TANKNOLOGY(Cl: 37)
Benelux Reg. No. 544,709 TANKNOLOGY(Cl: 9 & 37)
Brazil Reg. No. 815,487,088 TANKNOLOGY(Cl: 9)
Brazil Reg. No. 815,487,096 TANKNOLOGY(Cl: 37 & 42)
Canada Reg. No. 378,752 TANKNOLOGY(Cl: 9 & 37)
Denmark Reg. No. 2150/94 TANKNOLOGY(Cl: 9 & 37)
France Reg. No. 93,498,317 TANKNOLOGY(Cl: 42)
Germany Reg. No. 2,080,032 TANKNOLOGY(Cl: 9 & 42)
Great Britain Reg. No. 1,468,995 TANKNOLOGY(Cl: 9)
Great Britain Reg. No. 1,468,983 TANKNOLOGY(Cl: 42)
Greece* App. No. 119,195 TANKNOLOGY(Cl: 9 & 37)
Ireland Reg. No. 145,617 TANKNOLOGY(Cl: 9)
Italy Reg. No. 624,586 TANKNOLOGY(Cl: 9,37,42)
New Zealand Reg. No. 212,320 TANKNOLOGY(Cl: 9)
New Zealand Reg. No. 212,321 TANKNOLOGY(Cl: 37)
Portugal* App. No. 297,752 TANKNOLOGY(Cl: 37)
Spain Reg. No. 1,797,603 TANKNOLOGY(Cl: 37)
Switzerland Reg. No. 420,712 TANKNOLOGY(Cl: 9 & 42)
Australia Reg. No. A561,786 VACUTECT(Cl: 9)
Australia Reg. No. A561,787 VACUTECT(Cl: 37)
Brazil Reg. No. 815,487,100 VACUTECT(Cl: 37)
*PENDING
Foreign Registered Marks
------------------------
Canada Reg. No. 372,866 VACUTECT(Cl: 9)
Great Britain Reg. No. 1,470,139 VACUTECT(Cl: 9)
Great Britain Reg. No. 1,468,978 VACUTECT(Cl: 37)
Ireland Reg. No. 149,285 VACUTECT(Cl: 9)
Italy Reg. No. 624,587 VACUTECT(Cl: 37 & 42)
</TABLE>
-15-
<PAGE> 16
<TABLE>
<S> <C> <C>
New Zealand Reg. No. 212,322 VACUTECT(Cl: 9)
New Zealand Reg. No. 212,323 VACUTECT(Cl: 37)
Australia Reg. No. A568,539 VACUTEST(Cl: 9)
Australia Reg. No. A568,540 VACUTEST(Cl: 37)
Great Britain Reg. No. 1,468,974 VACUTEST(Cl: 37)
Italy Reg. No. 624,588 VACUTEST(Cl: 37 & 42)
New Zealand Reg. No. 214,949 VACUTEST(Cl: 9)
New Zealand Reg. No. 214,948 VACUTEST(Cl: 37)
</TABLE>
Unregistered Marks
PETROSCOPE(TM)
STIK-STOP(TM)
VAPORTECT(TM)
-16-
<PAGE> 1
EXHIBIT 10.13
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (this "Security
Agreement"), dated the 25th day of October, 1996, made and entered into by
PROECO, INC., a Delaware corporation ("Pledgor"), in favor of BANK ONE, TEXAS,
N.A., a national banking association (the "Bank").
W I T N E S S E T H
WHEREAS, Pledgor, NDE Environmental Corporation, a Delaware
corporation, USTMAN Industries, Inc., a Delaware corporation, Tanknology/NDE
Corporation, a Delaware corporation, and Tanknology Canada (1988) Inc., a
Canadian federal corporation (individually, an "NDE Party", and collectively,
the "NDE Parties") and the Bank, have entered into a Loan Agreement dated as of
even date herewith (hereinafter, as the same may from time to time be amended,
supplemented, extended or otherwise modified referred to as the "Loan
Agreement"), pursuant to which the Bank has agreed to make Loans to the NDE
Parties, and further, that pursuant to the Loan Agreement, the NDE Parties have
delivered and will execute and deliver to the Bank, among other documents,
Notes and other Loan Documents (as defined in the Loan Agreement); and
WHEREAS, the obligation of the Bank to make Loans under the
Loan Agreement is conditioned on, among other things, the execution and
delivery of this Security Agreement; and
WHEREAS, the Pledgor has duly authorized the execution,
delivery, and performance of this Security Agreement;
NOW, THEREFORE, in consideration of the Bank's agreement to
make Loans on the terms and conditions of the Loan Agreement, Pledgor hereby
agrees with the Bank as follows:
ARTICLE I.
DEFINITIONS
As used in this Security Agreement, the following terms shall
have the meanings indicated:
Collateral is defined in Article II.
Event of Default is defined in Article IX.
Secured Obligations is defined in Article III.
<PAGE> 2
Unless otherwise indicated, capitalized terms used and not
defined herein shall have the respective meanings given to them in the Loan
Agreement. Whenever the context requires, reference herein made to the single
number shall be understood to include the plural and likewise the plural shall
be understood to include the singular. Words denoting sex shall be construed
to include the masculine, feminine, and neuter, when such construction is
appropriate, and specific enumeration shall not exclude the general, but shall
be construed as cumulative.
ARTICLE II.
GRANT OF SECURITY INTEREST
To secure the full and punctual payment of the Secured
Obligations, as and when the same become due and payable in accordance with the
tenor and effect thereof, and the performance of all other obligations of the
NDE Parties under the Loan Documents, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged and
confessed by Pledgor, and upon and subject to the terms, provisions and
conditions hereinafter set forth, Pledgor hereby assigns, pledges, transfers
and grants unto the Bank, for the benefit of the Bank, a continuing security
interest in and to the following, whether now or after existing or acquired
(collectively, the "Collateral"):
(a) All accounts, contracts, contract rights, chattel
paper, documents, instruments, and general intangibles of the Pledgor,
whether or not arising out of or in connection with the sale or lease
of goods or the rendering of services, and all rights of the Pledgor
now or hereafter existing in and to all security agreements,
guaranties, leases, letters of credit (including confirmations and
advices of letters of credit) and other contracts securing or
otherwise relating to any such accounts, contracts, contract rights,
chattel paper, documents, instruments, and general intangibles, and
any renewals or extensions of the foregoing;
(b) All General Intangibles of the Pledgor, including
without limitation any patents, trademarks, goodwill, any licenses in
connection therewith or rights thereunder, and any rights under
license agreements, and including specifically the patents detailed on
Exhibit "A" hereto, and related rights under licensing agreements;
(c) All furniture and equipment of the Pledgor, wherever
located;
(d) All books, records, writings, data bases,
information, computer hardware and software (and all documentation
therefor or relating thereto and all licenses relating to or covering
such computer hardware, software and/or documentation), trademarks,
service marks, business names, designs, logos, indicia, and/or other
source and/or business identifiers (and the goodwill of the business
relating thereto) and all registrations which have heretofore been or
may hereafter be issued thereon throughout the world, and other
property applicable to, relating to, used or useful in connection
with, evidencing, embodying, incorporating or referring to, any of the
foregoing in this Article II; and
-2-
<PAGE> 3
(e) All products, offspring, rents, issues, profits,
returns, income and proceeds of and from any and all of the foregoing
Collateral (including proceeds which constitute property of the types
described in this Article, and, to the extent not otherwise included,
all payments under insurance (whether or not the Bank is the loss
payee thereof), or any indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral).
The Bank is hereby authorized to receive any and all of the
Collateral as and for security for the payment of the Secured Obligations, and
to hold and apply the same in payment of the Secured Obligations. This
Security Agreement shall: (a) remain in full force and effect until payment in
full of all Obligations under the Loan Documents; (b) be binding upon Pledgor,
its successors, transferees and assigns; and (c) inure, together with the
rights and remedies of the Bank hereunder, to the benefit of the Bank.
ARTICLE III.
SECURED OBLIGATIONS
This Security Agreement secures the payment of all obligations
and liabilities of Pledgor to the Bank now or hereafter existing under or in
connection with the Loan Agreement, the Notes and other Loan Documents, whether
in respect of principal, interest, fees, expenses or otherwise, and all
obligations and liabilities of the Pledgor to the Bank now or hereafter
existing under or in connection with this Security Agreement, together with all
renewals, extensions, rearrangements, modifications, refinancings or
replacements of any of the above, (collectively, the "Secured Obligations").
ARTICLE IV.
COVENANTS OF PLEDGOR
Pledgor covenants and agrees that (i) until the Secured
Obligations shall have been either fully paid or shall have been satisfied and
discharged by action under this Security Agreement, whichever shall first
occur, or (ii) unless the prior written consent of the holder of the Notes
shall have been first obtained, Pledgor will not, except as otherwise provided
in the Loan Documents:
(a) sell, assign, transfer or further encumber any of the
Collateral or any interest therein;
(b) dissolve, liquidate, or consolidate with or merge
into any other corporation, or merge into it; or sell, lease, transfer
or otherwise dispose of any of its properties and assets, whether by a
single or successive transactions; or to make any amendment to its
Articles of Incorporation or By-laws;
-3-
<PAGE> 4
(c) make any loan or advances of any kind whatsoever to
any NDE Party, to any subsidiary or affiliate of Pledgor, or to any
other party;
(d) declare or pay any dividends or other distributions,
either in cash or property, on any class of its stock, directly or
indirectly, issue any additional shares of its capital stock or other
securities or options or rights to purchase the same, or purchase,
redeem or retire any of its capital stock or make any other
distribution with respect to its capital stock;
(e) mortgage, pledge or subject to any lien or other
encumbrance, any of its assets, tangible or intangible, or sell or
transfer any of its tangible assets or cancel any debts or claims,
except as permitted by the Loan Documents;
(f) dispose or otherwise divest itself of the ownership,
possession, custody or control of any books and records of any NDE
Party of any nature which, in accordance with prudent and accepted
business practice, are retained for a period of time after their use,
creation or receipt;
(g) make any investments, loans or commitments, or incur
any expenses, except as permitted by the Loan Documents; and
(h) take any action that would result in an Event of
Default hereunder or under the Loan Agreement, or a default under the
other Loan Documents.
ARTICLE V.
PAYMENT OF SECURED OBLIGATIONS
If the NDE Parties shall pay to the Bank in full all of the
Secured Obligations and sums payable by the NDE Parties, then these presents
and the security interest hereby granted shall cease, terminate and become
void; and immediately thereafter the Bank shall deliver to Pledgor the
Collateral and, on demand of Pledgor, shall also execute, acknowledge, and
deliver to Pledgor at Pledgor's expense such instruments of release and/or
transfer in respect of the Collateral; otherwise, this Security Agreement shall
remain in full force.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES
Pledgor represents and warrants to the Bank that:
(a) Pledgor (a) is a duly organized and validly existing
corporation in good standing under the laws of the State of Delaware,
and (b) has all requisite power
-4-
<PAGE> 5
and authority to own its properties and conduct its business as
presently conducted and to execute and deliver, and to perform its
obligations under, this Security Agreement.
(b) There is no action, suit, proceeding, or
investigation at law or in equity by or before any court, governmental
body, agency, commission or other tribunal now pending or, to the best
knowledge of Pledgor after due inquiry, threatened which questions or
would question the validity of this Security Agreement to which
Pledgor is a party.
(c) The execution, delivery and performance of this
Security Agreement has been duly authorized by all necessary action of
Pledgor. This Security Agreement has been duly executed and delivered
by Pledgor. This Security Agreement when executed and delivered by
Pledgor will constitute a legal, valid and binding obligation of
Pledgor, enforceable according to its terms, subject, as to
enforceability, to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and to general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law).
(d) All authorizations, consents, approvals,
registrations, filings, exemptions and licenses with or from
governmental or regulatory authorities which are necessary for the
execution and delivery of this Security Agreement or for the
performance by Pledgor of its obligations hereunder have been effected
and obtained are in full force and effect.
(e) Pledgor has good title to the Collateral and is the
sole legal owner thereof, and there are no Liens (other than the
Permitted Liens) existing against any of the Collateral of Pledgor.
(f) This Security Agreement creates a valid security
interest in the Collateral securing the payment of the Secured
Obligations.
(f) On the date hereof, the Pledgor is "located" (as that
term is defined in Section 9-103(3)(d) of the Uniform Commercial
Code) at 8900 Shoal Creek, Bldg. 200, Austin, Texas 78757.
ARTICLE VII.
FURTHER ASSURANCES
Pledgor covenants and agrees to from time to time promptly
execute and deliver to the Bank all such other assignments, certificates,
supplemental writings and financing statements,
-5-
<PAGE> 6
and do all other acts or things, as the Bank may reasonably request in order to
more fully evidence and perfect the security interest herein created.
ARTICLE VIII.
PRESERVATION OF RIGHTS
The Bank shall have no duty to fix or preserve rights against
prior parties to the Collateral, and shall never be liable for its failure to
use diligence to collect any amount payable in respect of the Collateral, but
shall be liable only to account to Pledgor for what it may actually collect or
receive thereon.
ARTICLE IX.
DEFAULT
The term "Event of Default" as used herein, means the
occurrence of an Event of Default as defined and as provided in the Loan
Agreement.
ARTICLE X.
REMEDIES
Upon the occurrence of an Event of Default, in addition to any
and all other rights and remedies which the Bank may then have hereunder, or
under the Uniform Commercial Code of the State of Texas (hereinafter called
"Code"), or otherwise, the Bank at its option may: (i) declare the entire
unpaid balance of principal of and all accrued interest on the Secured
Obligations immediately due and payable, without notice, demand, presentment or
notice of intention to accelerate, which are hereby expressly waived; (ii)
reduce its claim to judgment, foreclose or otherwise enforce its security
interest in all or any part of the Collateral by any available judicial
procedure; (iii) after notification, if any, provided for in Article XI hereof,
sell or otherwise dispose of, at its office, or elsewhere, as chosen by the
Bank, all or any part of the Collateral, and any such sale or other disposition
may be as a unit or in parcels, at public or private sale, and by way of one or
more contracts (it being agreed that the sale of any part of the Collateral
shall not exhaust the Bank's power of sale, but sales may be made from time to
time until all of the Collateral has been sold or until all sums payable under
the Secured Obligations and hereunder have been paid in full), and at any such
sale it shall not be necessary to exhibit the Collateral; (iv) at its
discretion, retain the Collateral in satisfaction of the unpaid balance of
principal of and interest upon the Secured Obligations whenever the
circumstances are such that the Bank is entitled to do so under the Code; (v)
apply by appropriate judicial proceedings for appointment of a receiver for the
Collateral, or any part thereof, and Pledgor hereby consents to any such
appointment; or (vi) buy the Collateral at any public or private sale. The
Bank shall be entitled to apply the proceeds of any sale or other disposition
of the Collateral in the following order: first, to the payment of all of its
reasonable
-6-
<PAGE> 7
expenses, including attorneys' fees and other legal expenses, incurred in
holding and preparing the Collateral, or any part thereof, for sale(s) or other
disposition, in arranging for such sale(s) or other disposition, and in
actually selling the same; and next, toward payment of the unpaid balance of
principal of and interest upon the Secured Obligations and other sums secured
hereby in such order and manner as the Bank, in its discretion, may deem
advisable. The Bank shall account to Pledgor for any surplus. If the proceeds
are not sufficient to pay the Secured Obligations in full, Pledgor shall remain
liable for any deficiency.
ARTICLE XI.
NOTICE OF SALE
Reasonable notification of the time and place of any public
sale of the Collateral, or reasonable notification of the time after which any
private sale or other intended disposition of the Collateral is to be made,
shall be sent to Pledgor and to any other person entitled under the Code to
notice. It is agreed that notice sent or given not less than ten (10) calendar
days prior to the taking of the action to which the notice relates is
reasonable notification and notice for the purpose of this paragraph.
ARTICLE XII.
BANK APPOINTED ATTORNEY-IN-FACT
Pledgor hereby irrevocably appoints the Bank as Pledgor's
attorney-in-fact, with full authority in the place and stead of Pledgor and in
the name of Pledgor or otherwise, from time to time after the occurrence of an
Event of Default, to take any action, to execute any instruments and to
exercise any rights, privileges, options, elections or powers of Pledgor
pertaining or relating to the Collateral which the Bank may reasonably deem
necessary or desirable to preserve and enforce its security interest in the
Collateral and otherwise to accomplish the purposes of this Security Agreement.
The Bank shall not have any duty to take any such action, to execute any such
instrument, to exercise any such rights, privileges, options, elections or
powers or to sell or otherwise to realize upon any of the Collateral, as
hereinafter authorized, and the Bank shall not be responsible for any failure
to do so or delay in so doing.
ARTICLE XIII.
BANK MAY PERFORM
If Pledgor fails to perform any agreement contained herein,
the Bank may (but shall not be obligated to) perform, or cause performance of,
such agreement. Pledgor shall reimburse the Bank on demand for any amounts
paid or any expenses incurred by the Bank in connection therewith.
-7-
<PAGE> 8
ARTICLE XIV.
BANK'S DUTIES
The powers conferred on the Bank hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. The Bank shall have no duty whatsoever to (i) take
any steps to preserve the security interest granted hereby, or (ii) preserve or
protect or take any action whatsoever with respect to, any of the Collateral.
ARTICLE XV.
AMENDMENTS, ETC.
No amendment or waiver of any provision of this Security
Agreement, nor consent to any departure by Pledgor therefrom, shall in any
event be effective unless the same shall be in writing and signed by the Bank,
and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
ARTICLE XVI.
CUMULATIVE RIGHTS
All rights and remedies of the Bank are cumulative of each
other and of every other right or remedy which the Bank may otherwise have at
law or in equity or under any other contract or other writing for the
enforcement of the security interest herein or the collection of the
indebtedness evidenced by the Secured Obligations, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies.
ARTICLE XVII.
ASSIGNABILITY
The rights, powers and interests held by the Bank hereunder,
together with the Collateral, may be transferred and assigned by the Bank, in
whole or in part, at such time and upon such terms as it may deem advisable;
and the term "Bank" shall be deemed to refer to and include such transferees
and assignees and the holder or holders from time to time of the Secured
Obligations.
ARTICLE XVIII.
NO WAIVER
-8-
<PAGE> 9
The acceptance by the Bank at any time and from time to time
of part payment of the aggregate amount of the Secured Obligations then matured
shall not be deemed to be a waiver of any default then existing. No waiver by
the Bank of any default shall be deemed to be a waiver of any subsequent
default, nor shall any such waiver by the Bank be deemed to be a continuing
waiver. No delay or omission by the Bank in exercising any right or power
hereunder, or under any other writings executed by Pledgor as security for or
in connection with the Secured Obligations, shall impair any such right or
power or be construed as a waiver thereof or any acquiescence therein, nor
shall any single or partial exercise of any such right or power preclude other
or further exercise of any other right or power of the Bank hereunder.
ARTICLE XIX.
GOVERNING LAW; SEVERABILITY
THIS SECURITY AGREEMENT IS EXECUTED UNDER AND SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AND THIS SECURITY
AGREEMENT IS PERFORMABLE IN TEXAS, AND PLEDGOR WAIVES THE RIGHT TO BE SUED
ELSEWHERE. Any provision of this Security Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
ARTICLE XX.
BINDING EFFECT
This Security Agreement shall be binding on Pledgor and
Pledgor's successors and assigns and shall inure to the benefit of the Bank and
the Bank's successors and assigns.
ARTICLE XXI.
NOTICES
Unless otherwise specified herein all notices, requests and
other communications to any party hereunder shall be in writing (including
telex, facsimile or similar writing) and shall be given to such party at its
address or telex or facsimile number set forth below or such other address or
telex or facsimile number as such party may hereafter specify by notice to the
other party. Each such notice, request or other communication shall be
effective (i) if given by telex, when such telex is transmitted to the telex
number specified in this Article XXI and the appropriate answerback is
received, (ii) if given by facsimile or other form of facsimile transmission,
when the recipient confirms legible transmission thereof, or (iii) if given by
any other means, when delivered at the address specified in this Article:
-9-
<PAGE> 10
(a) If to Pledgor:
PROECO, INC.
8900 Shoal Creek, Bldg. 200
Austin, Texas 78757
Attention: President
Telephone: (512) 451-6334
Facsimile: (512) 459-1459
With a copy to:
PROECO, INC.
712 Main Street, Suite 1700
Houston, Texas 77002
Attention: Jay Allen Chaffee
Telephone: (713) 223-5730
Facsimile: (713) 223-5379
(b) If to the Bank:
BANK ONE, TEXAS, N.A.
910 Travis
Houston, Texas 77002
Attention: Charles Kingswell-Smith
Telephone: (713) 751-7803
Facsimile: (713) 751-7894
Any party hereto may at any time, by giving five (5) days written notice to the
other parties hereto, designate any other address in substitution of the
foregoing address to which such notice shall be given.
ARTICLE XXII.
HEADINGS
The article and section headings contained in this Security
Agreement are for reference purposes only and shall have no effect upon the
meaning or interpretation of any provision hereof.
ARTICLE XXIII.
MISCELLANEOUS
-10-
<PAGE> 11
23.01 The principal office of the Pledgor is in Austin,
Texas.
23.02 Pledgor shall, at its expense, make, procure, execute
and deliver such financing statement or amendments thereof or supplements
thereto, or other instruments, certificates and supplemental writings, and do
and deliver all acts, things, writings and assurances as the Bank may from time
to time reasonably require in order to comply with the Code, or any other
applicable law, and to preserve and protect the security interest hereby
granted. In the event, for any reason, that the law of any jurisdiction other
than the State of Texas becomes or is applicable to the Collateral, or any part
thereof, or to any of the Obligation, Pledgor agrees to execute and deliver all
such instruments and do all such other things as may be necessary or
appropriate to preserve, protect and enforce the security interests or liens of
the Bank, under the law of such other jurisdiction, to at least the same extent
as such security interests would be protected under the Code.
23.03 Pledgor shall perform, at its sole cost and expense,
any and all steps, and shall pay the amount of all expenses necessary to
obtain, preserve, perfect, defend and enforce the security interest in any of
the Collateral, the collection of the Obligation, and preserve, defend, enforce
and collect the Collateral.
23.04 Should the Collateral or any part thereof, ever be in
any manner converted into another type of property or any money or other
proceeds ever be paid or delivered to the Pledgor as a result of Pledgor's
rights in the Collateral, then, in any such event, all such property, money or
other proceeds shall become part of the Collateral, and Pledgor covenants to
forthwith pay and deliver to the Bank all of the same, which are acceptable of
delivery, and, at the same time Pledgor will properly endorse or assign the
same.
23.05 THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
-11-
<PAGE> 12
EXECUTED as of the day and year first above written.
PLEDGOR:
PROECO, INC., a Delaware corporation
By: /s/ JAY ALLEN CHAFFEE
------------------------------------------
Jay Allen Chaffee
Chairman of the Board
BANK:
BANK ONE, TEXAS, N.A.
By: /s/ CHARLES KINGSWELL-SMITH
------------------------------------------
Charles Kingswell-Smith
Vice President
-12-
<PAGE> 13
EXHIBIT "A"
Patents:
US 5,156,042.00 APPARATUS FOR DETECTING LEAKS IN FUEL STORAGE TANKS
US 4,850,223.00 APPARATUS FOR DETECTING LEAKS IN FUEL STORAGE TANKS
-13-
<PAGE> 1
EXHIBIT 10.14
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (this "Security
Agreement"), dated the 25th day of October, 1996, made and entered into by
USTMAN INDUSTRIES, INC., a Delaware corporation ("Pledgor"), in favor of BANK
ONE, TEXAS, N.A., a national banking association (the "Bank").
W I T N E S S E T H
WHEREAS, Pledgor, NDE Environmental Corporation, a Delaware
corporation, Tanknology/NDE Corporation, a Delaware corporation, ProEco, Inc.,
a Delaware corporation, and Tanknology Canada (1988) Inc., a Canadian federal
corporation (individually, an "NDE Party", and collectively, the "NDE Parties")
and the Bank, have entered into a Loan Agreement dated as of even date herewith
(hereinafter, as the same may from time to time be amended, supplemented,
extended or otherwise modified referred to as the "Loan Agreement"), pursuant
to which the Bank has agreed to make Loans to the NDE Parties, and further,
that pursuant to the Loan Agreement, the NDE Parties have delivered and will
execute and deliver to the Bank, among other documents, Notes and other Loan
Documents (as defined in the Loan Agreement); and
WHEREAS, the obligation of the Bank to make Loans under the
Loan Agreement is conditioned on, among other things, the execution and
delivery of this Security Agreement; and
WHEREAS, the Pledgor has duly authorized the execution,
delivery, and performance of this Security Agreement;
NOW, THEREFORE, in consideration of the Bank's agreement to
make Loans on the terms and conditions of the Loan Agreement, Pledgor hereby
agrees with the Bank as follows:
ARTICLE I.
DEFINITIONS
As used in this Security Agreement, the following terms shall
have the meanings indicated:
Collateral is defined in Article II.
Event of Default is defined in Article IX.
Secured Obligations is defined in Article III.
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Unless otherwise indicated, capitalized terms used and not
defined herein shall have the respective meanings given to them in the Loan
Agreement. Whenever the context requires, reference herein made to the single
number shall be understood to include the plural and likewise the plural shall
be understood to include the singular. Words denoting sex shall be construed
to include the masculine, feminine, and neuter, when such construction is
appropriate, and specific enumeration shall not exclude the general, but shall
be construed as cumulative.
ARTICLE II.
GRANT OF SECURITY INTEREST
To secure the full and punctual payment of the Secured
Obligations, as and when the same become due and payable in accordance with the
tenor and effect thereof, and the performance of all other obligations of the
NDE Parties under the Loan Documents, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged and
confessed by Pledgor, and upon and subject to the terms, provisions and
conditions hereinafter set forth, Pledgor hereby assigns, pledges, transfers
and grants unto the Bank, for the benefit of the Bank, a continuing security
interest in and to the following, whether now or after existing or acquired
(collectively, the "Collateral"):
(a) All inventory in all of its forms of the Pledgor,
wherever located, and all accessions thereto, products thereof and
documents therefor;
(b) All accounts, contracts, contract rights, chattel
paper, documents, instruments, and general intangibles of the Pledgor,
whether or not arising out of or in connection with the sale or lease
of goods or the rendering of services, and all rights of the Pledgor
now or hereafter existing in and to all security agreements,
guaranties, leases, letters of credit (including confirmations and
advices of letters of credit) and other contracts securing or
otherwise relating to any such accounts, contracts, contract rights,
chattel paper, documents, instruments, and general intangibles, and
any renewals or extensions of the foregoing;
(c) All General Intangibles of the Pledgor, including
without limitation any patents, trademarks, goodwill, any licenses in
connection therewith or rights thereunder, and any rights under
license agreements;
(d) All proprietary software of the Pledgor, any licenses
in connection therewith and any rights thereunder, including without
limitation the SIR computer system;
(e) All furniture and equipment of the Pledgor, wherever
located;
(f) All books, records, writings, data bases,
information, computer hardware and software (and all documentation
therefor or relating thereto and all licenses relating to or covering
such computer hardware, software and/or documentation), trademarks,
service
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marks, business names, designs, logos, indicia, and/or other source
and/or business identifiers (and the goodwill of the business relating
thereto) and all registrations which have heretofore been or may
hereafter be issued thereon throughout the world, and other property
applicable to, relating to, used or useful in connection with,
evidencing, embodying, incorporating or referring to, any of the
foregoing in this Article II; and
(g) All products, offspring, rents, issues, profits,
returns, income and proceeds of and from any and all of the foregoing
Collateral (including proceeds which constitute property of the types
described in this Article, and, to the extent not otherwise included,
all payments under insurance (whether or not the Bank is the loss
payee thereof), or any indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral).
The Bank is hereby authorized to receive any and all of the
Collateral as and for security for the payment of the Secured Obligations, and
to hold and apply the same in payment of the Secured Obligations. This
Security Agreement shall: (a) remain in full force and effect until payment in
full of all Obligations under the Loan Documents; (b) be binding upon Pledgor,
its successors, transferees and assigns; and (c) inure, together with the
rights and remedies of the Bank hereunder, to the benefit of the Bank.
ARTICLE III.
SECURED OBLIGATIONS
This Security Agreement secures the payment of all obligations
and liabilities of Pledgor to the Bank now or hereafter existing under or in
connection with the Loan Agreement, the Notes and other Loan Documents, whether
in respect of principal, interest, fees, expenses or otherwise, and all
obligations and liabilities of the Pledgor to the Bank now or hereafter
existing under or in connection with this Security Agreement, together with all
renewals, extensions, rearrangements, modifications, refinancings or
replacements of any of the above, (collectively, the "Secured Obligations").
ARTICLE IV.
COVENANTS OF PLEDGOR
Pledgor covenants and agrees that (i) until the Secured
Obligations shall have been either fully paid or shall have been satisfied and
discharged by action under this Security Agreement, whichever shall first
occur, or (ii) unless the prior written consent of the holder of the Notes
shall have been first obtained, Pledgor will not, except as otherwise provided
in the Loan Documents:
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(a) sell, assign, transfer or further encumber any of the
Collateral or any interest therein;
(b) dissolve, liquidate, or consolidate with or merge
into any other corporation, or merge into it; or sell, lease, transfer
or otherwise dispose of any of its properties and assets, whether by a
single or successive transactions; or to make any amendment to its
Articles of Incorporation or By-laws;
(c) make any loan or advances of any kind whatsoever to
any NDE Party, to any subsidiary or affiliate of Pledgor, or to any
other party;
(d) declare or pay any dividends or other distributions,
either in cash or property, on any class of its stock, directly or
indirectly, issue any additional shares of its capital stock or other
securities or options or rights to purchase the same, or purchase,
redeem or retire any of its capital stock or make any other
distribution with respect to its capital stock;
(e) mortgage, pledge or subject to any lien or other
encumbrance, any of its assets, tangible or intangible, or sell or
transfer any of its tangible assets or cancel any debts or claims,
except as permitted by the Loan Documents;
(f) dispose or otherwise divest itself of the ownership,
possession, custody or control of any books and records of any NDE
Party of any nature which, in accordance with prudent and accepted
business practice, are retained for a period of time after their use,
creation or receipt;
(g) make any investments, loans or commitments, or incur
any expenses, except as permitted by the Loan Documents; and
(h) take any action that would result in an Event of
Default hereunder or under the Loan Agreement, or a default under the
other Loan Documents.
ARTICLE V.
PAYMENT OF SECURED OBLIGATIONS
If the NDE Parties shall pay to the Bank in full all of the
Secured Obligations and sums payable by the NDE Parties, then these presents
and the security interest hereby granted shall cease, terminate and become
void; and immediately thereafter the Bank shall deliver to Pledgor the
Collateral and, on demand of Pledgor, shall also execute, acknowledge, and
deliver to Pledgor at Pledgor's expense such instruments of release and/or
transfer in respect of the Collateral; otherwise, this Security Agreement shall
remain in full force.
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ARTICLE VI.
REPRESENTATIONS AND WARRANTIES
Pledgor represents and warrants to the Bank that:
(a) Pledgor (a) is a duly organized and validly existing
corporation in good standing under the laws of the State of Delaware,
and (b) has all requisite power and authority to own its properties
and conduct its business as presently conducted and to execute and
deliver, and to perform its obligations under, this Security
Agreement.
(b) There is no action, suit, proceeding, or
investigation at law or in equity by or before any court, governmental
body, agency, commission or other tribunal now pending or, to the best
knowledge of Pledgor after due inquiry, threatened which questions or
would question the validity of this Security Agreement to which
Pledgor is a party.
(c) The execution, delivery and performance of this
Security Agreement has been duly authorized by all necessary action of
Pledgor. This Security Agreement has been duly executed and delivered
by Pledgor. This Security Agreement when executed and delivered by
Pledgor will constitute a legal, valid and binding obligation of
Pledgor, enforceable according to its terms, subject, as to
enforceability, to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and to general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law).
(d) All authorizations, consents, approvals,
registrations, filings, exemptions and licenses with or from
governmental or regulatory authorities which are necessary for the
execution and delivery of this Security Agreement or for the
performance by Pledgor of its obligations hereunder have been effected
and obtained are in full force and effect.
(e) Pledgor has good title to the Collateral and is the
sole legal owner thereof, and there are no Liens (other than the
Permitted Liens) existing against any of the Collateral of Pledgor.
(f) This Security Agreement creates a valid security
interest in the Collateral securing the payment of the Secured
Obligations.
(g) On the date hereof, the Pledgor is "located" (as that
term is defined in Section 9-103(3)(d) of the Uniform Commercial
Code) at 12265 Bayaud Ave., Lakewood, Colorado 80225.
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ARTICLE VII.
FURTHER ASSURANCES
Pledgor covenants and agrees to from time to time promptly
execute and deliver to the Bank all such other assignments, certificates,
supplemental writings and financing statements, and do all other acts or
things, as the Bank may reasonably request in order to more fully evidence and
perfect the security interest herein created.
ARTICLE VIII.
PRESERVATION OF RIGHTS
The Bank shall have no duty to fix or preserve rights against
prior parties to the Collateral, and shall never be liable for its failure to
use diligence to collect any amount payable in respect of the Collateral, but
shall be liable only to account to Pledgor for what it may actually collect or
receive thereon.
ARTICLE IX.
DEFAULT
The term "Event of Default" as used herein, means the
occurrence of an Event of Default as defined and as provided in the Loan
Agreement.
ARTICLE X.
REMEDIES
Upon the occurrence of an Event of Default, in addition to any
and all other rights and remedies which the Bank may then have hereunder, or
under the Uniform Commercial Code of the State of Texas (hereinafter called
"Code"), or otherwise, the Bank at its option may: (i) declare the entire
unpaid balance of principal of and all accrued interest on the Secured
Obligations immediately due and payable, without notice, demand, presentment or
notice of intention to accelerate, which are hereby expressly waived; (ii)
reduce its claim to judgment, foreclose or otherwise enforce its security
interest in all or any part of the Collateral by any available judicial
procedure; (iii) after notification, if any, provided for in Article XI hereof,
sell or otherwise dispose of, at its office, or elsewhere, as chosen by the
Bank, all or any part of the Collateral, and any such sale or other disposition
may be as a unit or in parcels, at public or private sale, and by way of one or
more contracts (it being agreed that the sale of any part of the Collateral
shall not exhaust the Bank's power of sale, but sales may be made from time to
time until all of the Collateral has been sold or until all sums payable under
the Secured Obligations and hereunder have been paid in full), and at any such
sale it shall not be necessary to exhibit the Collateral; (iv) at its
discretion, retain the
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Collateral in satisfaction of the unpaid balance of principal of and interest
upon the Secured Obligations whenever the circumstances are such that the Bank
is entitled to do so under the Code; (v) apply by appropriate judicial
proceedings for appointment of a receiver for the Collateral, or any part
thereof, and Pledgor hereby consents to any such appointment; or (vi) buy the
Collateral at any public or private sale. The Bank shall be entitled to apply
the proceeds of any sale or other disposition of the Collateral in the
following order: first, to the payment of all of its reasonable expenses,
including attorneys' fees and other legal expenses, incurred in holding and
preparing the Collateral, or any part thereof, for sale(s) or other
disposition, in arranging for such sale(s) or other disposition, and in
actually selling the same; and next, toward payment of the unpaid balance of
principal of and interest upon the Secured Obligations and other sums secured
hereby in such order and manner as the Bank, in its discretion, may deem
advisable. The Bank shall account to Pledgor for any surplus. If the proceeds
are not sufficient to pay the Secured Obligations in full, Pledgor shall remain
liable for any deficiency.
ARTICLE XI.
NOTICE OF SALE
Reasonable notification of the time and place of any public
sale of the Collateral, or reasonable notification of the time after which any
private sale or other intended disposition of the Collateral is to be made,
shall be sent to Pledgor and to any other person entitled under the Code to
notice. It is agreed that notice sent or given not less than ten (10) calendar
days prior to the taking of the action to which the notice relates is
reasonable notification and notice for the purpose of this paragraph.
ARTICLE XII.
BANK APPOINTED ATTORNEY-IN-FACT
Pledgor hereby irrevocably appoints the Bank as Pledgor's
attorney-in-fact, with full authority in the place and stead of Pledgor and in
the name of Pledgor or otherwise, from time to time after the occurrence of an
Event of Default, to take any action, to execute any instruments and to
exercise any rights, privileges, options, elections or powers of Pledgor
pertaining or relating to the Collateral which the Bank may reasonably deem
necessary or desirable to preserve and enforce its security interest in the
Collateral and otherwise to accomplish the purposes of this Security Agreement.
The Bank shall not have any duty to take any such action, to execute any such
instrument, to exercise any such rights, privileges, options, elections or
powers or to sell or otherwise to realize upon any of the Collateral, as
hereinafter authorized, and the Bank shall not be responsible for any failure
to do so or delay in so doing.
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ARTICLE XIII.
BANK MAY PERFORM
If Pledgor fails to perform any agreement contained herein,
the Bank may (but shall not be obligated to) perform, or cause performance of,
such agreement. Pledgor shall reimburse the Bank on demand for any amounts
paid or any expenses incurred by the Bank in connection therewith.
ARTICLE XIV.
BANK'S DUTIES
The powers conferred on the Bank hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. The Bank shall have no duty whatsoever to (i) take
any steps to preserve the security interest granted hereby, or (ii) preserve or
protect or take any action whatsoever with respect to, any of the Collateral.
ARTICLE XV.
AMENDMENTS, ETC.
No amendment or waiver of any provision of this Security
Agreement, nor consent to any departure by Pledgor therefrom, shall in any
event be effective unless the same shall be in writing and signed by the Bank,
and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
ARTICLE XVI.
CUMULATIVE RIGHTS
All rights and remedies of the Bank are cumulative of each
other and of every other right or remedy which the Bank may otherwise have at
law or in equity or under any other contract or other writing for the
enforcement of the security interest herein or the collection of the
indebtedness evidenced by the Secured Obligations, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies.
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ARTICLE XVII.
ASSIGNABILITY
The rights, powers and interests held by the Bank hereunder,
together with the Collateral, may be transferred and assigned by the Bank, in
whole or in part, at such time and upon such terms as it may deem advisable;
and the term "Bank" shall be deemed to refer to and include such transferees
and assignees and the holder or holders from time to time of the Secured
Obligations.
ARTICLE XVIII.
NO WAIVER
The acceptance by the Bank at any time and from time to time
of part payment of the aggregate amount of the Secured Obligations then matured
shall not be deemed to be a waiver of any default then existing. No waiver by
the Bank of any default shall be deemed to be a waiver of any subsequent
default, nor shall any such waiver by the Bank be deemed to be a continuing
waiver. No delay or omission by the Bank in exercising any right or power
hereunder, or under any other writings executed by Pledgor as security for or
in connection with the Secured Obligations, shall impair any such right or
power or be construed as a waiver thereof or any acquiescence therein, nor
shall any single or partial exercise of any such right or power preclude other
or further exercise of any other right or power of the Bank hereunder.
ARTICLE XIX.
GOVERNING LAW; SEVERABILITY
THIS SECURITY AGREEMENT IS EXECUTED UNDER AND SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AND THIS SECURITY
AGREEMENT IS PERFORMABLE IN TEXAS, AND PLEDGOR WAIVES THE RIGHT TO BE SUED
ELSEWHERE. Any provision of this Security Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
ARTICLE XX.
BINDING EFFECT
This Security Agreement shall be binding on Pledgor and
Pledgor's successors and assigns and shall inure to the benefit of the Bank and
the Bank's successors and assigns.
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ARTICLE XXI.
NOTICES
Unless otherwise specified herein all notices, requests and
other communications to any party hereunder shall be in writing (including
telex, facsimile or similar writing) and shall be given to such party at its
address or telex or facsimile number set forth below or such other address or
telex or facsimile number as such party may hereafter specify by notice to the
other party. Each such notice, request or other communication shall be
effective (i) if given by telex, when such telex is transmitted to the telex
number specified in this Article XXI and the appropriate answerback is
received, (ii) if given by facsimile or other form of facsimile transmission,
when the recipient confirms legible transmission thereof, or (iii) if given by
any other means, when delivered at the address specified in this Article:
(a) If to Pledgor:
USTMAN INDUSTRIES, INC.
12265 Bayaud Ave.
Lakewood, Colorado 80225
Attention: President
Telephone: (800) 253-8054
Facsimile: (303) 986-8227
With a copy to:
USTMAN INDUSTRIES, INC.
712 Main Street, Suite 1700
Houston, Texas 77002
Attention: Jay Allen Chaffee
Telephone: (713) 223-5730
Facsimile: (713) 223-5379
(b) If to the Bank:
BANK ONE, TEXAS, N.A.
910 Travis
Houston, Texas 77002
Attention: Charles Kingswell-Smith
Telephone: (713) 751-7803
Facsimile: (713) 751-7894
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Any party hereto may at any time, by giving five (5) days written notice to the
other parties hereto, designate any other address in substitution of the
foregoing address to which such notice shall be given.
ARTICLE XXII.
HEADINGS
The article and section headings contained in this Security
Agreement are for reference purposes only and shall have no effect upon the
meaning or interpretation of any provision hereof.
ARTICLE XXIII.
MISCELLANEOUS
23.01 The principal office of the Pledgor is in Lakewood,
Colorado.
23.02 Pledgor shall, at its expense, make, procure, execute
and deliver such financing statement or amendments thereof or supplements
thereto, or other instruments, certificates and supplemental writings, and do
and deliver all acts, things, writings and assurances as the Bank may from time
to time reasonably require in order to comply with the Code, or any other
applicable law, and to preserve and protect the security interest hereby
granted. In the event, for any reason, that the law of any jurisdiction other
than the State of Texas becomes or is applicable to the Collateral, or any part
thereof, or to any of the Obligation, Pledgor agrees to execute and deliver all
such instruments and do all such other things as may be necessary or
appropriate to preserve, protect and enforce the security interests or liens of
the Bank, under the law of such other jurisdiction, to at least the same extent
as such security interests would be protected under the Code.
23.03 Pledgor shall perform, at its sole cost and expense,
any and all steps, and shall pay the amount of all expenses necessary to
obtain, preserve, perfect, defend and enforce the security interest in any of
the Collateral, the collection of the Obligation, and preserve, defend, enforce
and collect the Collateral.
23.04 Should the Collateral or any part thereof, ever be in
any manner converted into another type of property or any money or other
proceeds ever be paid or delivered to the Pledgor as a result of Pledgor's
rights in the Collateral, then, in any such event, all such property, money or
other proceeds shall become part of the Collateral, and Pledgor covenants to
forthwith pay and deliver to the Bank all of the same, which are acceptable of
delivery, and, at the same time Pledgor will properly endorse or assign the
same.
23.05 THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
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EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the day and year first above written.
PLEDGOR:
USTMAN INDUSTRIES, INC.,
a Delaware corporation
By: /s/ JAY ALLEN CHAFFEE
-----------------------------------------
Jay Allen Chaffee
Chairman of the Board
BANK:
BANK ONE, TEXAS, N.A.
By: /s/ CHARLES KINGSWELL-SMITH
-----------------------------------------
Charles Kingswell-Smith
Vice President
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[TANKNOLOGY - NDE LETTERHEAD]
FOR IMMEDIATE RELEASE
NDE ENVIRONMENTAL CORPORATION COMPLETES PURCHASE OF TANK SERVICE BUSINESSES
FROM TANKNOLOGY ENVIRONMENTAL, INC.
AUSTIN, Texas, Oct. 28 -- NDE Environmental Corporation ("NDE", NASDAQ
OTC Bulletin Board: NDEC) reported today the completion of its previously
announced agreement with Tanknology Environmental, Inc. ("TEI", NASDAQ National
Market: TANK) to acquire three TEI subsidiaries involved in underground storage
tank (UST) services. The transaction consisted of a cash payment of
approximately $12 million for TEI subsidiaries Tanknology Corporation
International, USTMAN Industries Inc., and Tanknology Canada, Inc. The
combined firm will be named "Tanknology-NDE".
With the completion of the merger, Tanknology-NDE will operate the
largest national fleet of field service and testing vehicles in the storage
tank services industry. Through its USTMAN division, Tanknology-NDE will
provide customers with statistical inventory reconciliation services to monitor
storage tank leaks by reconciling product inventory records. The firm will
also expand its ability to provide a complete line of compliance management
services to ensure customers comply with federal, state, and local regulations
governing underground storage tanks.
The combined firm will employ approximately 300 people, and combined
1996 revenues are expected to exceed $36 million.
"While the transaction is technically an acquisition, operationally we
view it as a merger of the best people, technology, and practices to maximize
the value to our customers," said Dan Sharplin, President and CEO of NDE. "The
Tanknology subsidiaries have an outstanding field service organization which,
when combined with NDE's infrastructure, will provide unparalleled ability to
provide the highest quality services to customers nationwide. Also, we will
utilize NDE's and USTMAN's advanced information systems across the combined
company to increase efficiency, reliability, quality, and responsiveness to our
customers."
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NDE - TANKOLOGY MERGER - Page 2
The completed transaction allows Tanknology-NDE to offer a
comprehensive package of services to its customer base of retail and non-retail
fuel distributors. Services offered include:
. "Outsourced" compliance management services providing turn-key
regulatory compliance.
. Periodic testing, certification, repair, and maintenance of
UST systems, continuous monitoring systems, and stage II vapor
recovery systems.
. Cathodic protection installation, testing, and maintenance to
protect steel storage tanks from corrosion.
. Inventory management and statistical inventory reconciliation
("SIR") services.
. Information acquisition and software products and services.
. International testing equipment sales, technical support, and
joint ventures.
"This broad service offering enables "one-stop shopping" for our
customers, lowers their costs, and allows them to focus on their core
businesses," Sharplin said.
The transaction was closed on October 24, 1996. NDE obtained
financing from Banc One Texas and Banc One Capital Partners of Columbus, Ohio.
CONTACT: Jay Allen Chaffee, Chairman of the Board, or Daniel Sharplin,
President and CEO, NDE Environmental, 512-451-6334.
###
