<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
NEW ENVIRONMENTAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
May 22, 1996
To our shareholders:
You are cordially invited to attend the 1996 Annual Meeting of
Shareholders of NDE Environmental Corporation, Inc. to be held at our Corporate
Headquarters, located at 8900 Shoal Creek Blvd., Bldg. 200, Austin, Texas
78758, on Wednesday, June 26, 1996 at 9:00 a.m.
The matters expected to be acted upon at the meeting are described in
detail in the following Notice of Annual Meeting of Shareholders and Proxy
Statement. Also enclosed for your information is the Company's Annual Report
on Form 10-KSB for 1995.
It is important that you use this opportunity to take part in the
affairs of your Company by voting on the business to come before this meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN, AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE
PRIOR TO THE MEETING. Returning the Proxy does not deprive you of your right
to attend the meeting and to vote your shares in person.
We look forward to seeing you at the meeting.
Sincerely,
A. Daniel Sharplin
President & CEO
<PAGE> 3
NDE ENVIRONMENTAL CORPORATION
8900 SHOAL CREEK BOULEVARD, BUILDING 200
AUSTIN, TEXAS 78758
______
PROXY STATEMENT
______
MAY 22, 1996
THE ACCOMPANYING PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF NDE ENVIRONMENTAL CORPORATION, A DELAWARE CORPORATION (THE
"COMPANY"), FOR USE AT THE ANNUAL MEETING OF STOCKHOLDERS OF THE COMPANY (THE
"MEETING") TO BE HELD AT 9:00 A.M. ON WEDNESDAY, JUNE 26, 1996 AT THE COMPANY'S
CORPORATE HEADQUARTERS LOCATED AT 8900 SHOAL CREEK BOULEVARD, BUILDING 200,
AUSTIN, TEXAS, 78758. ONLY HOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON MAY
30, 1996 (THE "RECORD DATE") OF SHARES OF COMMON STOCK, PAR VALUE $0.0001 PER
SHARE, OF THE COMPANY ("COMMON STOCK") WILL BE ENTITLED TO VOTE AT THE MEETING
ON ALL MATTERS REFERRED TO BELOW.
AT THE CLOSE OF BUSINESS ON THE RECORD DATE, THE COMPANY EXPECTS TO
HAVE 7,978,610 SHARES OF COMMON STOCK OUTSTANDING AND ENTITLED TO VOTE. A
MAJORITY OF THE SHARES OF COMMON STOCK OUTSTANDING ON THE RECORD DATE WILL
CONSTITUTE A QUORUM FOR THE HOLDERS OF COMMON STOCK.
NONE OF THE PROPOSALS TO BE ACTED UPON AT THE MEETING GIVES RISE TO
THE RIGHTS OF APPRAISAL OR SIMILAR RIGHTS OF DISSENTERS.
THIS PROXY STATEMENT AND THE ACCOMPANYING PROXY ARE INTENDED TO BE
MAILED TO STOCKHOLDERS ON OR ABOUT JUNE 1, 1996.
VOTING RIGHTS AND SOLICITATIONS OF PROXIES
HOLDERS OF COMMON STOCK ARE ENTITLED TO ONE VOTE FOR EACH SHARE HELD
AND WILL BE ABLE TO VOTE UPON ALL MATTERS LISTED BELOW. SHARES OF STOCK MAY
NOT BE VOTED CUMULATIVELY. ABSTENTIONS AND BROKER NON-VOTES EACH WILL BE
INCLUDED IN DETERMINING THE NUMBER OF SHARES PRESENT AND VOTING AT THE MEETING.
ABSTENTIONS WILL BE COUNTED IN TABULATIONS OF THE VOTES CAST ON PROPOSALS,
WHEREAS BROKER NON-VOTES WILL NOT BE COUNTED FOR PURPOSES OF DETERMINING
WHETHER A PROPOSAL HAS BEEN APPROVED.
THE EXPENSES OF SOLICITING PROXIES IN THE ENCLOSED FORM WILL BE PAID
BY THE COMPANY. FOLLOWING THE ORIGINAL MAILING OF THE PROXIES AND OTHER
SOLICITING MATERIALS, THE COMPANY WILL REQUEST BROKERS, CUSTODIANS, NOMINEES
AND OTHER RECORD HOLDERS TO FORWARD COPIES OF THE PROXY AND OTHER SOLICITING
MATERIALS TO PERSONS FOR WHOM THEY HOLD SHARES OF COMMON STOCK AND TO REQUEST
AUTHORITY FOR THE EXERCISE OF PROXIES. IN SUCH CASES, THE COMPANY, UPON THE
REQUEST OF THE RECORD HOLDERS, WILL REIMBURSE SUCH HOLDERS FOR THEIR REASONABLE
EXPENSES.
2
<PAGE> 4
REVOCABILITY OF PROXIES
ANY PERSON SIGNING A PROXY IN THE FORM ACCOMPANYING THIS PROXY
STATEMENT HAS THE POWER TO REVOKE IT PRIOR TO THE MEETING OR AT THE MEETING
PRIOR TO THE VOTE PURSUANT TO THE PROXY. A PROXY MAY BE REVOKED BY A WRITING
DELIVERED TO THE COMPANY, SIGNED BY THE PERSON WHO SIGNED THE PROXY AND STATING
THAT THE PROXY IS REVOKED, BY A SUBSEQUENT PROXY THAT IS SIGNED BY THE PERSON
WHO SIGNED THE EARLIER PROXY AND IS PRESENTED AT THE MEETING OR BY ATTENDANCE
AT THE MEETING AND VOTING IN PERSON. PLEASE NOTE, HOWEVER, THAT IF A
STOCKHOLDER'S SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND
THAT STOCKHOLDER WISHES TO VOTE AT THE MEETING, THE STOCKHOLDER MUST BRING TO
THE MEETING A LETTER FROM THE BROKER, BANK OR OTHER NOMINEE CONFIRMING THAT
STOCKHOLDER'S BENEFICIAL OWNERSHIP OF THE SHARES.
PROPOSAL NO. 1 -- TO ADOPT AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
(increasing the authorized number of shares of Common Stock from 10,000,000 to
50,000,000)
The holders of Common Stock will be asked to approve the Amended and
Restated Certificate of Incorporation of the Company, attached hereto as
Exhibit A, which increases the number of shares of Common Stock from 10,000,000
to 50,000,000. If approved by the holders of a majority of the outstanding
shares of Common Stock on the Record Date, the proposal will be adopted.
Without regard to the Common Shares issuable pursuant to the 1995
Refinancing and the 1996 Refinancing (see "Certain Transactions"), there were
3,616,673 shares of the Company's Common Stock outstanding or issuable under
warrant, conversion, or option agreements. The 5,482,254 Common Shares related
to the 1995 Refinancing were issued in April 1996, bringing the total shares
issued or issuable to 9,098,927. The Company's management is seeking an
increase in the number of Common Shares authorized, in part, to have available
the 6,000,000 shares issuable pursuant to the 1996 Financing.
Management is also seeking an increase in the number of shares
issuable under the Company's 1989 Stock Option Plan from 248,500 to 2,500,000.
(Please refer to Proposal No. 3.) An increase in the number of shares
authorized is also necessary in order to have shares available for this
purpose.
The Board of Directors of the Company believes that it is in the best
interest of the Company to increase the authorized number of shares of Common
Stock to ensure that sufficient shares are available for the purposes set forth
herein and so that additional authorized shares will be available for issuance
in the future for such corporate purposes as the Board of Directors deems
advisable from time to time, without further action by the stockholders and
without the accompanying delay and expense of calling and holding a special
meeting of stockholders, unless such action is required by applicable law.
Such corporate purposes may include, among other things, future equity
issuances in public or private offerings or the use by the Company of its
equity securities for future acquisitions the Board of Directors may decide are
in the best interests of the Company to pursue.
Shares represented by the accompanying proxy will be voted for the
increase in the number of authorized shares of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL
OF THE PROPOSAL TO ADOPT THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION.
PROPOSAL No. 2 - ELECTION OF DIRECTORS
At the meeting, the holders of the Company's Common Stock will elect
five directors to hold office until the next annual meeting of stockholders and
until their respective successors have been elected and qualified or until such
directors' earlier resignation or removal.
3
<PAGE> 5
PROPOSAL No. 2 - ELECTION OF DIRECTORS (Continued)
Shares represented by the accompanying proxy will be voted for the
election of those nominees recommended by the Board unless the proxy is marked
in such a manner as to withhold authority to vote or so as to vote for one or
more alternative candidates. If any nominee for any reason is unable to serve
or will not serve, the proxies may be voted for such substitute nominee as the
proxy holder may determine. The Company is not aware of any nominee who will
be unable to or who will not serve as a director.
DIRECTORS NOMINATED
Unless contrary indications are set forth in the proxy, it is intended
that the person named in the proxy will vote all shares of Common Stock
represented by the proxy for the election of Messrs. Jay Allen Chaffee, Charles
C. McGettigan, A. Daniel Sharplin, Michael S. Taylor, and Myron A. Wick as
directors. Messrs. Chaffee, McGettigan, Sharplin, Taylor, and Wick are all
presently members of the Board of Directors of the Company. Directors of the
Company are elected annually and hold office until their successors have been
elected and qualified or their earlier resignation or removal. Should any
nominee become unavailable for election, the Board of Directors of the Company
may designate another nominee, in which case the person acting under duly
executed proxies will vote for the election of the replacement nominee,
although management is not aware of any circumstances likely to render any
nominee unavailable for election. A stockholder may, in the manner set forth
in the enclosed proxy card, instruct the proxy holder not to vote that
stockholder's shares for one or more of the named nominees.
The Company's bylaws currently provide for a Board of Directors of
seven persons. Five persons currently serve on the Board and are expected to
continue to serve until the annual meeting. The proxies solicited hereby
cannot be voted for a number of persons greater than the number of nominees
named below. The Certificate of Incorporation of the Company, as amended to
date, does not permit cumulative voting. A plurality of the votes of the
holders of the outstanding shares of Common Stock of the Company represented at
a meeting at which a quorum is present may elect directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE ELECTION OF EACH OF THE FOREGOING AS DIRECTORS
Nominees -- The following sets forth information concerning the five nominees
for election as directors at the meeting, including position with the Company
and the business experience of each during at least the past five years, and
the age of each nominee as of April 30, 1996.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Jay Allen Chaffee 44 Chairman of the Board and Director(1)
Charles C. McGettigan 51 Director(3)
A. Daniel Sharplin 33 President and Chief Executive Officer
Michael S. Taylor 52 Director(2)(3)
Myron A. Wick, III 51 Director(1)(2)
</TABLE>
(1) Member of Executive Committee
(2) Member of Compensation Committee
(3) Member of Audit Committee
4
<PAGE> 6
Each of the directors listed above was elected to be a director at the
Company's Annual Meeting of Stockholders held on June 22, 1995.
Jay Allen Chaffee was elected to the Board of Directors in April 1991
and became President, Chief Operating Officer and Chief Financial Officer of
the Company in May 1991. He was appointed Chief Executive Officer in November
1991 and Chairman of the Board of Directors in November 1994. Mr. Chaffee
served as President of Kaneb Services, Inc., an underground storage tank
testing company (the principal assets of which were acquired by the Company in
April 1991) and Senior Vice President of KSI, a pipeline and specialty services
company, from September 1989 to May 1991. He has served as President and a
director of Bunker Hill Associates, Inc. a management consulting firm ("Bunker
Hill"), since 1985, and he continues to serve in these capacities. Under
agreements with Mr. Chaffee and Bunker Hill, the Company compensates Bunker
Hill for the services rendered by Mr. Chaffee to the Company. Bunker Hill in
turn compensates Mr. Chaffee. Mr. Chaffee received a B.A. from Franklin &
Marshall College in 1974 and a J.D. from the University of Tulsa, College of
Law in 1978.
Charles C. McGettiganhas been a director of the Company since June
1995. He was a founding partner in 1991 and is a general partner of Proactive
Investment Managers, L.P., which is the general partner of Proactive Partners,
L.P. ("Proactive"). Mr. McGettigan is a managing director and was a
co-founder in 1988 of McGettigan, Wick & Co., Inc., an investment banking firm.
From 1984 to 1988, he was a Principal, Corporate Finance, of Hambrecht & Quist,
Incorporated. Prior to that, Mr. McGettigan was a Senior Vice President of
Dillon, Read & Co. Inc. He currently serves on the Boards of Directors of
Digital Dictation, Inc.; I-Flow Corporation; Modtech, Inc.; Onsite Energy,
Inc.; PMR Corporation; Sonex Research, Inc.; and Wray-Tech Instruments, Inc.
Mr. McGettigan is a 1966 graduate of Georgetown University, and he received his
MBA in Finance from the Wharton School at the University of Pennsylvania in
1969.
A. Daniel Sharplinhas been the Company's President and Chief Executive
Officer since June 1995. He became the Company's Vice President, Western
Region in December 1991. He was appointed the Company's Chief Operating
Officer and Secretary in July 1992. In November 1994 he was appointed
President. Mr. Sharplin functioned as an environmental service industry
consultant from April 1991 to December 1991. From May 1990 to April 1991 he
served as Vice President, Western Region and Director of Regulatory Affairs for
Kaneb Metering Corporation. Form June 1989 to May 1990, he was special
Assistant to the Chief Executive Officer of Lone Star Steel Corporation, and he
served as Manager of Special Projects and Special Assistant to Chairman of Lone
Star Technologies, Inc. from January 1988 to June 1989. Mr. Sharplin
received an M.B.A. from the University of Texas at Austin in 1987.
Michael S. Taylor has been a director of the Company since July 1992.
He is Managing Director of Investment Banking at Laidlaw Equities. He was
Associate Director of Investment Banking for Josephthal Lyon & Ross from June
1989 to March 1996. From early 1980 until joining Josephthal, he was President
of Mostel & Taylor Securities, Inc., an NASD- member investment banking and
brokerage firm. He has been involved in the securities industry since 1966,
when he joined Lehman Brothers as an analyst. He became a director of New
Paradigm Software Corporation this year. He is also Chairman of the Board of
Jennifer Muller/The Works, a contemporary dance company. He attended Amherst
College and Columbia University. In 1991, the Securities and Exchange
Commission entered an administrative order finding that, in 1988 and 1989, Mr.
Taylor aided Mostel & Taylor Securities, Inc. in connection with certain
violations of the net capital requirements for securities broker-dealers
imposed by the Securities Exchange Act of 1934, and suspended him from
associating with a broker dealer in any capacity for 90 days and in a
proprietary or supervisory capacity for two years. He has applied to remove
the suspension. Mr. Taylor consented to the order without admitting or denying
its findings.
Myron A. Wick, III has been a director of the Company since November
1991. Since November 1988, he has been a Managing Director of McGettigan, Wick
& Co., Inc., an investment banking firm in San Francisco which he co-founded.
Since May 1991, Mr. Wick has been a general partner of Proactive Investment
Managers, L.P., which is the general partner of Proactive, a merchant banking
fund investing in and providing financial services to small public companies.
From September 1985 to May 1988, Mr. Wick was Chief Operating Officer of
California Biotechnology, Inc., a publicly traded biotechnology firm. Mr. Wick
is a director of Children's Discovery Centers of America, Inc.; Digital
Dictation, Inc.; Modtech, Inc.; Phoenix Network, Inc.; Sonex
5
<PAGE> 7
Myron A. Wick, III - (Continued)
Research, Inc. and Wray-Tech Instruments, Inc. Mr. Wick received a B.A. from
Yale University in 1965 and an M.B.A. from Harvard University in 1968.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's directors and officers, and persons who own more
than 10% of the Common Stock, to file with the Securities and Exchange
Commission (the "SEC"), initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company.
Officers, directors and 10% stockholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on review of copies of such reports furnished to the
Company or written representations that no other reports were required, the
Company believes that during the 1995 fiscal year, all filing requirements
applicable to its officers, directors or greater than 10% beneficial owners
were complied with except that (i) one report, covering an aggregate of four
transactions, has not been filed by Proactive, (ii) one report, covering an
aggregate of four transactions, has not been filed late by Lagunitas.
BOARD OF DIRECTOR'S MEETINGS AND CERTAIN COMMITTEES
The Board of Directors met five times in 1995. The standing
committees of the Board include an Executive Committee, an Audit Committee and a
Compensation Committee. The Board does not have a nominating committee. The
functions of the nominating committee are performed by the Board. During 1995,
the Executive Committee met three (3) times, the Compensation Committee met one
(1), and the Audit Committee met one (1) time. All directors attended at least
75% of the meetings held in 1995 of the Board of Directors and any committees on
which they served during their term of service as directors.
During 1995, the members of the Executive Committee were Jay Allen
Chaffee and Myron A. Wick, III. Messrs. Chaffee and Wick continue to be the
members of the Executive Committee. The Executive Committee has, in general,
the authority to take any action that can be taken by the Board of Directors.
During 1995, the members of the Compensation Committee were Michael S.
Taylor and Myron A. Wick, III. The Compensation Committee has the authority to
determine the compensation and other benefits received by the Company's Chief
Executive Officer and members of the Company's senior management group.
Charles C. McGettigan and Michael S. Taylor were members of the Audit
Committee during 1995. Messrs. McGettigan and Taylor continue to be the
members of the Audit Committee. The Audit Committee reviews with the Company's
outside auditors the Company's financial reporting systems and controls and
meets with the outside auditors concerning the scope and terms of their
engagement and the results of their audits.
EXECUTIVE OFFICERS AND OTHER SIGNIFICANT EMPLOYEES
H. Baxter Nairon was named President, Field Services Division in April 1996.
The Field Services Division includes all field management, technicians,
Customer Service Representatives, sales and administrative personnel, as well
as technical and field support staff. Prior to joining NDE, Mr. Nairon was a
Principal with Booz-Allen & Hamilton, a global management consulting firm,
focusing on business process re-engineering, restructuring, organization
design, outsourcing and shared services engagements for the world's largest
integrated oil companies. Previously, Mr. Nairon worked as a project and
operations engineer for six years with Shell Oil Company in Houston and Shell
PipeLine Company in New Orleans. During this time he managed the design,
construction and startup of large projects, supported operations management,
and attained his Professional Engineering registration. He holds a Bachelor of
Science degree in Mechanical Engineering from the University of Tennessee at
Knoxville, and an M.B.A. from the University of Texas at Austin, where he
served as Graduate
6
<PAGE> 8
H. Baxter Nairon - (Continued)
Business Council President and received the Outstanding Student Award of his
graduating class. He is 36 years old.
Eric J. (Rick) Hopkins has been the Company's Vice President and Chief
Financial Officer since June 1995. He previously served in separate capacities
as the Company's Controller and as Vice President of Operations. He is a
certified public accountant, and before joining the Company he was in public
practice, first with Laventhol & Horwath from 1988 to 1991, then with Morse
Kimmel Burstein & Yu, an accounting firm in Beverly Hills, California, from
1991 to 1992. From 1986 to 1988, he served as Southern California Area Manager
to Motel 6, L.P., which owns and operates a national chain of motor lodges.
Mr. Hopkins received a B.B.A. from Kent State University in 1976 and an M.B.A.
from Pepperdine University in 1988. He is 41 years old.
CERTAIN TRANSACTIONS
Term Loan Guarantee
In April 1994, Proactive guaranteed the Company's repayment of a
$750,000 term bank loan originally due November 1996. This loan has
subsequently been extended by the bank to June 1997. In return for the
guarantee, the Company issued to Proactive warrants to purchase 50,000 shares
of Common Stock. Such warrants were originally exercisable at a price of $7.50
per share and expire in April 1999.
Series CCC Preferred Stock
In May 1994, the Company issued to Proactive and Lagunitas 16 and 8
shares, respectively, of Series CCC Preferred Stock, par value $.0001 per share
(the "Series CCC Stock") and warrants to purchase 8,000 and 4,000 shares,
respectively, of Common Stock. Such warrants were originally exercisable at a
price of $7.50 per share and expire in May 1999. In April 1995, Proactive and
Lagunitas converted all of their Series CCC Preferred Stock to 16,000 and 8,000
shares of Common Stock, respectively.
The 1995 Refinancing
In January 1995, the Company was in need of additional working capital.
Proactive and Lagunitas responded by supplying the Company with $250,000 each
in return for the Company's promissory note (the "Bridge Note"). At the time,
Proactive also held the Company's Promissory Note dated April 21, 1993 in the
principal amount of $200,000 (the "Subordinated Note"). In June 1995, the
Company reached an agreement with Proactive and Lagunitas regarding the Bridge
Note, the Subordinated Note, and additional 1995 financing as follows (the
"1995 Refinancing"): The Bridge Note (principal of $250,000 and accrued
interest of $12,822.50 each to Proactive and Lagunitas for a total of $525,645)
and the Subordinated Debt (Principal of $200,000 and accrued interest of
$77,766 to Proactive for a total of $277,766) were converted into Common Stock
of the Company at the rate of $0.21875 per share. Also as part of the 1995
Refinancing, Proactive and Lagunitas agreed to provide the Company with an
additional $250,000 each in return for the Company's Common Stock (a total of
$500,000). $125,000 was received each from Proactive and Lagunitas in June
1995 (A total of $250,000) in return for 571,429 shares each of Common Stock
($0.21875 per share); and $125,000 was received each from Proactive and
Lagunitas in December 1995 (a total of $250,000) in return for 333,333 shares
each of the Company's Common Stock ($0.375 per share). In the aggregate, the
1995 Refinancing involved investments in the Company of $1,303,411 ($790,589
from Proactive and $512,823 from Lagunitas) in return for 5,482,253 shares of
the Company's Common Stock. (3,376,024 to Proactive and 2,106,236 to
Lagunitas). This common stock was issued in April 1996. The average price per
share of common stock was $0.238; Proactive's average cost was $0.234,
Lagunitas's average cost was $0.243.
At the time of the 1995 Refinancing, a total of 46,470 of shares of
the Company's Common Stock had traded in the previous 60 days at prices
ranging from $0.625 to $0.50. Because the number of shares involved in the
1995 Refinancing was so large in comparison to the current trading volume, it
was believed that these shares
7
<PAGE> 9
The 1995 Refinancing - (Continued)
were inherently illiquid; accordingly, it was determined that the price per
share should be discounted from the market price. In addition, these shares
are subject to Section 144 trading restrictions which further inhibits their
liquidity and thus their value. Also, in December 1994, a block of
approximately 644,000 shares was traded in an arms-length transaction between
Spears, Benzak, Soloman & Farrell, theretofore the Company's largest
stockholder, and A. Daniel Sharplin, at the time the Company's Vice President
and Chief Operating officer, at the price of $0.15. For these reasons it was
determined that the prices of $0.21875 (for the June transactions) and $0.375
(for the December transaction) were reasonable.
The 1996 Refinancing
In March and April 1996, the Company was in need of further financing.
Additionally, the Company had the opportunity to achieve a significant
restructuring of its debt obligation to Gilbarco, Inc. ("Gilbarco"). In return
for a payment of $256,000, the Company could prepay the remaining $2,194,000
obligation at a very favorable discount. In order to provide the Company with
additional working capital as well as the $256,000 needed to take advantage of
the opportunity to restructure the Gilbarco debt, Proactive and Lagunitas
provided the Company with $575,000 and $175,000, respectively, in exchange for
the Company's convertible debentures (the "1996 Funding). These debentures
bear interest at the rate of 8%; principal and interest are due April 1, 1997.
They are convertible at the rate of $0.125 per common share into an aggregate
of 6,000,000 shares of the Company's Common Stock. This conversion is
contingent upon shareholder approval of an increase in the number of authorized
Common Shares. The 1996 Funding Agreement was signed on March 27, 1996.
During the 60 days previous to this date, a total of 5,803 shares of the
Company's Common Stock were traded via the OTC Bulletin Board. These trades
occurred at a price of $0.0625. For these reasons and the reasons cited in the
paragraph above with regard to the 1995 Financing, the price of $0.125 per
share was deemed reasonable.
New Warrant Agreement
In January 1995, in partial consideration for the 1995 Bridge Loan and
for Proactive's agreement to extend the guarantee of the $750,000 bank loan,
the Company issued 175,000 new warrants (the "New Warrants") at $0.375 and
agreed to re-price all 135,798 warrants held by Proactive, Lagunitas, and
McGettigan, Wick & Co. ("McGettigan Wick") to $0.15.
Bunker Hill Associates
The Company has an agreement with Bunker Hill Associates, Inc.
("Bunker Hill") to retain Mr. Chaffee and to have Mr. Chaffee in officer or
director positions as designated by the Board of Directors. The current term
of the agreement is on a month-to-month basis and can be terminated by either
party without cause. In 1995, Mr. Chaffee and/or his affiliate, Bunker Hill,
(i) billed NDE $113,671 for services performed in 1995, and $46,060 for
reimbursement of expenses; and (ii) received $19,969 for a performance bonus
relating to 1993. In 1994, Mr. Chaffee and /or Bunker Hill received $114,000
for services performed in 1994 and an additional $66,969 in reimbursed
expenses.
8
<PAGE> 10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as to the
beneficial ownership of the Company's capital stock, as of April 30, 1996, by:
(a) each stockholder known by the Company to be the beneficial owner of more
than 5% of a class of voting stock, (b) each director, (c) each of the
executive officers of the Company named in the Summary Compensation Table below
and (d) all executives officers and directors as a group.
BENEFICIAL OWNERSHIP OF COMMON STOCK(1)
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
--------- -------------
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES CLASS
------------------------------------ ------- -----
<S> <C> <C>
Proactive Partners, L.P.(2) 6,276,562 75.7%
50 Osgood Place, Penthouse
San Francisco, CA 94153
Lagunitas Partners, L.P.(3) 6,269,552 75.7%
50 Osgood Place, Penthouse
San Francisco, CA 94153
Myron A. Wick, III (4) 3,320,366 40.2%
c/o Proactive Partners
50 Osgood Place, Penthouse
San Francisco, CA 94133
Charles C. McGettigan (5) 3,316,366 40.1%
c/o Proactive Partners
50 Osgood Place, Penthouse
San Francisco, CA 94133
A. Daniel Sharplin (6) 639,128 7.9%
NDE Environmental Corp.
8900 Shoal Creed Blvd., Bldg. 200
Austin, TX 78758
Jay Allen Chaffee (7) 117,150 1.5%
NDE Environmental Corporation
8900 Shoal Creek Blvd., Bldg. 200
Austin, TX 78758
Michael S. Taylor (8) 8,000 *
c/o Laidlaw Equities
100 Park Ave., 28th Floor
New York, NY 10017
All executive officers and directors as a group 8,061,942 94.2%
(7 persons) (9)
</TABLE>
*Less than 1%
______________
(1) For the purposes of the above table and the following notes, the shares of
Common Stock shown as "beneficially owned" include all shares of Common Stock
which the "beneficial owner" has the right to acquire within 60 days upon the
conversions of other securities, upon the exercise of warrants or otherwise.
In calculating the total number of shares of Common Stock deemed to be
outstanding for the purposes of reflecting the beneficial owner's percentage of
the class, the shares which other owners did not then own but had the right to
acquire within 60 days or more are not included.
9
<PAGE> 11
BENEFICIAL OWNERSHIP OF COMMON STOCK - (CONTINUED)
(2) Includes 3,032,482 outstanding shares of Common Stock. Also includes (I)
175,000 and 105,874 shares reserved for issuance upon the exercise of warrants
at prices of $0.375 and $0.15, respectively; (II) 2,956,196 shares
beneficially owned by Lagunitas and referred to in note (3) below; (III) the
4,000 shares benefically owned by Mr. Wick and referred to in note (4) below,
and (IV) 3,010 shares issuable upon the exercise of warrants at a price of
$0.15 issued to McGettigan, Wick & Co., Inc. (for the benefit of Proactive
Investment Managers, L.P.). Mr. Wick is a general partner of McGettigan, Wick
& Co., Inc. and of Proactive's general partner, Proactive Investment Managers,
L.P. See also note (7) below.
(3) Includes 2,929,282 outstanding shares of Common Stock. Also includes (I)
26,914 shares of Common Stock issuable upon the exercise of warrants at a price
of $0.15 per share; and (II) 3,313,356 shares beneficially owned by Proactive
and referred to in note (2) above.
Two of the general partners of Lagunitas, Jon D. Gruber and J. Patterson
McBaine, are also general partners of the general partner of Proactive.
Accordingly, Mr. Gruber and Mr. McBaine could be regarded as sharing the power
to vote and dispose of all the securities referred to in this note (3) and in
note (2) above, as well as the other securities referred to in the table as
beneficially owned by Proactive or Lagunitas.
(4) Includes (a) 4,000 shares of Common Stock issuable upon the exercise of
stock options granted to Mr. Wick under the Company's 1989 Stock Option Plan
and (b) the shares beneficially owned by Proactive and referred to in note (2)
above. Mr. Wick is a general partner of the general partner of Proactive.
Also includes 3,010 shares beneficially owned by McGettigan, Wick & Co. Mr.
Wick is a general partner of McGettigan, Wick & Co.
(5) Includes the shares beneficially owned by Proactive and referred to in
note (2) above. Mr. McGettigan is a general partner of the general partner of
Proactive. Also includes 3,010 shares beneficially owned by McGettigan, Wick &
Co. Mr. McGettigan is a general partner of McGettigan, Wick & Co.
(6) Includes 503,588 outstanding shares of Common Stock. Also includes
35,840, 25,200, and 24,500 shares reserved for issuance upon the exercise of
warrants, at prices of $7.50, $3.00, and $2.50, respecctively. Also includes
50,000 shares reserved for issuance to Mr. Sharplin under the Company's 1989
Stock Option Plan but does not include an additional 10,000 shares subject to
options that are not yet exercisable.
(7) Includes 67,150 outstanding shares of Common Stock. These shares are held
in the name of Bunker Hill, an affiliate of Mr. Chaffee. Also includes 50,000
shares subject to exercisable options granted to Bunker Hill under the
Company's 1989 Stock Option Plan but does not include 10,000 shares subject to
options that are not yet exercisable.
(8) Includes 4,000 shares issuable upon the exercise of options granted to Mr.
Taylor under the Company's 1989 Stock Option Plan. Also includes 4,000 shares
outstanding held by Mr. Taylor's wife. Mr. Taylor disclaims beneficial
ownership of his wife's shares.
(9) Includes all shares beneficially owned by the current officers and
directors listed above. Also includes 64,412 shares beneficially owned by
officers not listed above, as well as 20,000 shares subject to exercisable
options granted to officers not listed above under the Company's 1989 Stock
Option Plan, but does not include 25,000 shares subject to currently
unexercisable options granted to officers not listed in the table.
The following table sets forth all compensation awarded to, earned by or paid
to Jay Allen Chaffee, the Company's Chairman and Chief Executive Officer
through June 22, 1995 and Chairman at the end of 1995, and A. Daniel Sharplin,
the Company's President and Chief Executive Officer at the end of 1995, for all
services rendered in all capacities to the Company and its subsidiaries during
1993, 1994 and 1995. No other person who was an executive officer of the
Company at the end of 1995 was awarded, earned or received annual salary and
bonus in excess of $100,000.
10
<PAGE> 12
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
NAME AND PRINCIPLE OTHER ANNUAL RESTRICTED
POSITION YEAR SALARY BONUS COMPENSATION STOCK AWARD OPTIONS
-------- ---- ------ ----- ------------ ----------- -------
<S> <C> <C> <C> <C> <C> <C>
JAY ALLEN CHAFFEE 1995 $113,671(1) $19,969(1) - - 440,000(2)
CHAIRMAN OF THE BOARD 1994 $114,000 - - -
OF DIRECTORS 1993 $92,500 $16,677 $11,871 50,000 (3)
A. DANIEL SHARPLIN 1995 $136,779(1) $19,969(1) - - 640,000(4)
PRESIDENT AND CHIEF 1994 $117,885 - - - -
EXECUTIVE OFFICER 1993 $91,755 $16,667 - - 50,000(5)
</TABLE>
(1) In 1993, the Company initiated a senior management compensation plan
providing for base salaries, performance bonuses, option grants and change in
control protection. Messrs. Chaffee and Sharplin are subject to the plan with
base salaries of $125,000 and bonus potentials of approximately 50% of their
base salaries. The performance bonus awards are to be apportioned between
quantitative and qualitative criteria. In 1993 Messrs. Chaffee and Sharplin
were each paid $16,667 for the third quarter performance bonus. The Company
accrued $19,969 for 1993 year-end bonuses for Messrs. Chaffee and Sharplin;
these amounts were paid in 1995. During 1994, no bonuses were earned under the
compensation plan. In July 1995 the Company amended the Senior Executive
Compensation Plan, and Mr. Sharplin's base annual salary was increased to
$150,000; Mr. Chaffee's base annual salary was decreased to $90,000. Mr.
Chaffee was paid $12,286 in 1995 for services billed in 1994. Mr. Chaffee was
also reimbursed for $46,060 of expenses in 1995 and $60,969 in 1994. The
Compensation Committee awarded Mr. Sharplin a $20,000 bonus for the year ended
1995 to be paid in subsequent periods.
(2) In June 1995 the Board of Directors adopted an amendment to the 1989
Incentive Option Plan. The Board of Directors in March 1996 finalized the
awards pursuant to the amended plan. Mr. Chaffee was awarded 440,000 options
and Mr. Sharplin was awarded 640,000 options. Also in March 1996, the Board
granted to Mr. Hopkins 224,000 options at $0.125 per share, and to Mr. Nairon
384,000 at market price of NDE common stock on Mr. Nairon's hire date. The
prior awards will be canceled upon issuance of the 1995 Plan amendment options.
The options were priced at $0.125, the prevailing market price. These grants
are contingent upon shareholder approval of the amendment to the option plan
and shareholder approval of an increase in common stock authorized.
The options will vest (i) to Messrs. Chaffee and Sharplin, 50,000 upon
issuance; to Mr. Hopkins, 20,000 upon issuance; and (ii) the remainder of each
option holder amount shall ratably vest one-third each year starting June 30,
1996.
(3) In 1992, the Company granted to Bunker Hill on Mr. Chaffee's behalf, under
the Company's 1989 Stock Option Plan, options to purchase 56,000 shares at
$7.50 per share, an amount equal to the per share market value on the date of
grant. Options for 9,333 of these shares were exercisable in September 1993,
and the balance of the options became exercisable in 2002, unless the exercise
date was advanced based on the Company achieving certain performance criteria.
On September 30, 1993, the options granted in 1992 were canceled and the
Company granted to Bunker Hill on Mr. Chaffee behalf options to purchase 50,000
shares at $3.75 per share, the per share fair market value on the date of
grant. Options to purchase 30,000 of these shares were exercisable on the date
of grant, and the balance of the options become exercisable over four years at
the rate of 5,000 shares per year. The options expire in September 2002. In
June 1995 the Board approved immediate vesting of all management options,
including 50,000 each to Messrs. Chaffee and Sharplin. See note (2) above for
current status of options.
11
<PAGE> 13
SUMMARY COMPENSATION TABLE - (CONTINUED)
(4) Mr. Sharplin's options have the same terms as outlined in note (2) above.
(5) Mr. Sharplin's options that were granted on September 30, 1993 have the
same terms as the options granted on that date to Mr. Chaffee. (See Notes (2)
and (3) above.)
The following table sets forth further information regarding the stock
options referred to above.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
PERCENT OF OPTIONS
OPTIONS GRANTED TO EMPLOYEES
NAME GRANTED IN FISCAL YEAR EXERCISE PRICE EXPIRATION DATE
<S> <C> <C> <C> <C>
JAY ALLEN CHAFFEE 440,000 (1) 26.1% $0.125 JUNE 2005
A. DANIEL SHARPLIN 640,000 (2) 37.9% $0.125 JUNE 2005
- ----------------
</TABLE>
(1) See Note (2) to the immediately preceding table.
(2) See Note (2) and (4) to the immediately preceding table.
OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTIONS VALUES
<TABLE>
<CAPTION>
NUMBERS OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
SHARES OPTIONS AT DECEMBER 31, THE-MONEY OPTIONS AT
ACQUIRED ON VALUE 1995 DECEMBER 31, 1995
NAME EXERCISE REALIZED EXERCISABLE/UNEXCERISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C> <C> <C>
JAY ALLEN CHAFFEE 0 0 50,000/0 $0/$0(1)
A. DANIEL SHARPLIN 0 0 50,000/0 $0/$0(1)
</TABLE>
(1) Represents (i) the difference between the exercise price of the options
($3.75) and the per share fair market value on December 31, 1995 ($0.05) times
(ii) the number of shares subject to the options. For purposes of this table
the 1995 plan amendment options are not reflected because they remained
unissued pending shareholder approval of the plan amendment.
The four executive officers of the Company (Messrs. Chaffee, Sharplin,
Nairon, and Hopkins) are subject to a change of control protection provision,
which was instituted by the Board in order to maintain a high-caliber officer
group. The provision is effective for the period July 1, 1993 through June 30,
1997, and provides, in case of a change of control, (1) the immediate vesting
of all options allocated to each officer in the 1989 stock option plan, and (2)
a payment in cash of two times the annual base salary of any designated officer
who is not offered a position comparable in pay and authority with NDE if it is
the surviving entity or an acquiring firm, or (3) a payment in cash equal to
the annual base salary if the designated officer is offered a position
comparable in pay and authority with NDE or an acquiring firm. Change in
control is defined as (1) an acquisition by a party owning less than 25% of NDE
as of July 1, 1993, giving effect to all convertible securities, of greater
than 30% of the common shares; or (2) a change in one year of over 50% of the
members of the Board of Directors other than in the normal course of business
or pursuant to the rights under preferred share certificates.
12
<PAGE> 14
Compensation of Directors
The Company has agreed to pay or reimburse the travel expenses of its
directors resulting from attendance at Board meetings.
In 1992, the Company granted to each of its then outside directors
(Messrs. Charles G. Crane, Glen A. Dell, Michael Taylor and Myron A. Wick),
options to purchase 4,000 shares of Common Stock (16,000 shares in the
aggregate). In March 1993, the Company granted to its new outside director,
Donald Valverde, options to purchase 4,000 shares of Common Stock. All these
options were granted at exercise prices equal to the market prices on the grant
dates ($7.50 for options to purchase 12,000 shares granted to Messrs. Crane,
Dell, and Wick, $12.50 for options to purchase 4,000 shares granted to Mr.
Taylor and $16.l25 for options to purchase 4,000 shares granted to Mr.
Valverde). The options of Messrs. Crane and Dell expired 30 days after their
resignations from the Company's Board of Directors. The options of Messrs.
Crane and Dell expired 30 days after their resignations from the Company's
Board of Directors. In March 1996 the Company cancelled the prior options
issued to Messrs. Taylor and Wick and granted 40,000 options to each non-
management director (Messrs. Taylor, Wick, and McGettigan). The cancellation
of the prior options and the issuance of the new director options are subject
to the approval of the shareholders an an amendment of the 1989 incentive
compensation plan. There was no other director compensation paid during 1993,
1994, or 1995 to the management directors.
PROPOSAL No. 3 - TO AMEND THE 1989 STOCK OPTION PLAN to increase the number of
shares reserved thereunder from 248,250 to 2,500,000.
1989 Stock Option Plan
The Board adopted the NDE Environmental 1989 Stock Option Plan (the "Plan")
in August 1989 to establish a compensatory plan to attract, retain and provide
equity incentives to selected employees, officers, directors, consultants,
independent contractors and advisors in order to promote the financial success
of the Company.
Proposed Amendments
The Board approved the amendments to the Plan increasing the number of
shares available thereunder in order to provide incentive for its directors,
officers, and senior managers in view of the significant dilution of the
Company's shares of capital stock as a result of the 1995 and the 1996
Refinancings (referred to above). Subject to stockholder approval of proposals
number 1 and 3, the Board has granted the following increases in options
grants: to A. Daniel Sharplin, options to purchase an additional 640,000
shares; to Jay Allen Chaffee, options to purchase an additional 440,000
shares; to Baxter Nairon, options to purchase 384,000 shares; and to Eric J.
Hopkins, options to purchase an additional 224,000 shares. These options are
to vest ratably over a three year period beginning June 22, 1995, and are
priced at $0.125 if the individual was employed by the Company at June 22, 1995
or at the average market price during the week of the individual's hire date if
not employed at June 22, 1995. The Board has also granted, subject to
stockholder approval of proposals number 1 and 3, options to purchase an
additional 36,000 shares to each of its outside directors (Messrs. Wick,
McGettigan, and Taylor). These options are priced at $0.125. The above
contingent grants to Messrs. Sharplin, Chaffee, Nairon, Hopkins, Wick,
McGettigan, and Taylor represent a total of 1,796,000 shares. The Board
believes the Plan is an important part of its overall management incentive
program and is necessary in order to obtain and keep a strong executive
management team.
Summary Description of the Plan
The following summary of the principal provisions of the Plan and the
proposed amendments thereto is qualified by reference to the full text of the
Plan. The Company will provide, without charge, a copy of the Plan to the
stockholders of the Company upon request. Tax information regarding the Plan
follows the summary description of the Plan below.
13
<PAGE> 15
Administration
The Plan is currently administered by the Board, although it may be
administered by a committee appointed by the Board (the Board of such
committee, whichever administers the Plan, is referred to as the "Committee").
The Committee must consist of at least three persons, not necessarily
directors, all of whom are not, and have not been within the past year,
eligible to receive options on a discretionary basis under the Plan or any
other plan allowing the acquisition of the stock ("Disinterested Persons"),
except as provided in Section 4 of the Plan as it applied to Outside Directors.
Only Disinterested Persons may vote on the administration of the Plan or the
grant of options pursuant to the Plan to officers or directors of the Company
or other persons (collectively "Insiders") whose transactions in the Company's
Common Stock are subject to Section 16(b) of the Exchange Act. The members of
the Committee do not receive any additional compensation for administering the
Plan.
Subject to the terms of the Plan, the Committee is responsible for
determining the optionees, the number of shares subject to each option, the
exercise prices, the exercise periods and conditions and the grant dates. The
Committee also has the authority to construe and interpret any of the
provisions of the Plan or any options granted thereunder. Such interpretations
are binding on the Company and on the optionees. The Committee may delegate to
officers of the Company the authority to grant options under the Plan to
persons who are not Insiders.
Eligibility
All employees, officers, directors, consultant, independent contractors and
advisors of the Company (or any subsidiary or affiliate of the Company) are
eligible to receive option grants under the Plan. Outside Directors under the
Plan, as amended, will not be granted options for more than 40,000 shares per
Outside Director or 300,000 shares in aggregate. As of December 31, 1995, the
Company and its subsidiaries had approximately 115 employees eligible to
participate in the Plan.
An optionee may hold more than one option granted under the Plan. Both
incentive stock options ("ISOs"), as defined in Section 422A of the Internal
Revenue Code of 1986, as amended (the "Code"), and nonqualified stock options
("NQSOs") may be granted under the Plan. The committee determines whether an
option under the Plan will be an ISO or an NQSO. ISOs may be granted only to
employees. The Plan limits the aggregate fair market value (determined as of
the time the option is granted) of the shares with respect to which ISOs are
exercisable for the first time by the optionee during any calendar year to not
more than $100,000. There is no similar limit on NQSOs granted under the Plan.
Terms of the Options
Each option granted pursuant to the Plan in evidenced by a stock option
grant (the "Grant") issued by the Company, and an exercise agreement (the
"Exercise Agreement") to be completed by the optionee at the time an option is
exercised. The Company does not receive any consideration from an optionee at
the time an option is granted. The forms of the Grant and the Exercise
Agreements are determined by the Committee and may be amended by the Committee
from time to time, subject to the terms of the Plan. Options may be granted
under the Plan until August 1999, ten years after the Plan was first adopted by
the Board.
Subject to the provisions of the Plan, the Committee may determine the
vesting schedule of each option and other terms and conditions of
exercisability.
ISOs granted under the Plan must be exercised with ten years of the option
grant date, but no option issued to an Outside Director will be exercisable
more than five years or less than one year after the grant date. Any ISO
granted to a person owning ten percent or more of the total combined voting
power of all classes of stock of the Company must be excised within five years
of the option grant date. The Committee may specify a reasonable minimum
number of shares for each exercise.
14
<PAGE> 16
Terms of the Options - (Continued)
The Committee determines the terms, including exercise price, of each option
granted, which is set forth in the Grant. The exercise price of an ISO must be
at least equal to the fair market value per share of the Company's Common Stock
on the date the option is granted, and the exercise price of an NQSO shall be
not less that 85% of the fair market value of the shares on the date the option
is granted. The exercise price of an option granted to a person owning more
than ten percent of the total combined voting power of all classes of stock of
the Company must be a least equal to 110% of the fair market value per share on
the grant date. On April 30, 1996 the fair market value of the Company's
Common Stock (as determined by the closing bid on the NASDAQ OTC Bulletin
Board) was $0.25.
To exercise an option, the optionee must deliver to the Company an executed
Exercise Agreement and full payment for the shares being purchased. Payment
under the Plan may be made: by cash or check, or, where lawful and approved by
the Committee, in its sole discretion: (a) by cancellation of Company debts
owed to the optionee; (b) by surrender of fully paid-for Company Common Stock
owned by the optionee for over six months; (c) by tender of a full-recourse
note or a nonrecourse note fully secured by collateral other than the shares
purchased; (d) by waiver of compensation due to the optionee; (e) through a
broker-dealer's commitment to a same-day sale in a public market and payment of
the purchase price to the Company; (f) through a margin commitment security
arrangement assuring payment by a broker-dealer of the purchase price to the
Company; or (g) by any combination of the foregoing. Provision for withholding
obligations, if any, must also be made.
Resale of Shares. Generally, the Plan, the Grant and the Exercise Agreement
do not impose any restrictions on the resale of shares of Common Stock
purchased under the Plan. However, the shares are expected to be subject to
resale restrictions imposed by state securities laws.
Nontransferability and Termination of Options. Options granted under the
Plan may not be transferred by the optionee other than by will or by the laws
of descent and distribution, except that NQSOs held by persons not subject to
Section 16(b) of the Exchange Act may be transferred to such relatives, trusts
and charities as the Committee may, in its discretion, approve at the time of
grant. During the lifetime of the optionee, an option may be exercised only by
the optionee or his or her legal representative.
If an optionee's employment with the Company or a subsidiary is terminated
for any reason other than death or disability, any outstanding option, to the
extent ( and only to the extent) that it was exercisable on the date of such
termination, may be exercised by the optionee within three months after such
termination (or a shorter period specified in the Grant), but in no event later
than the expiration of the option. This period will be extended, and any
extension beyond three months will be treated as an NQSO, as necessary for the
optionee to avoid liability under Section 16(b) of the Exchange Act, if
applicable. If an optionee's employment with the Company is terminated because
of the optionee's death or disability, any outstanding ISO may be exercised, to
the extent that the optionee's right to exercise such option would have been
fully exercisable on the date of termination, at any time within one year (or
such shorter period specified in the Grant) after the optionee's death.
Adjustment Upon Changes In Capitalization. If the number of outstanding
shares of Common Stock of the Company is changed by a stock dividend, stock
split, reverse stock split, combination, reclassification or similar change in
the capital structure of the Company without consideration, the number of
shares of Common Stock available for option grants under the Plan and the
number of shares and the exercise price per share for each outstanding option
will be proportionately adjusted.
In the event of a dissolution, liquidation, merger or consolidation in which
the Company is not the surviving corporation, the sale of all or substantially
all of the assets of the Company, or similar transaction, the vesting of
options will accelerate unless the successor corporation assumes the
outstanding options, substitutes substantially equivalent options, or provides
consideration substantially similar to that received by the stockholders.
15
<PAGE> 17
Outstanding Options Under the Plan
At May 20, 1996, there are 214,850 shares reserved for issuance under the
plan. Of these, 180,000 are reserved for Executive Officers and Mr. Chaffee;
12,000 are reserved for outside directors; the remainder, or 18,850, are
reserved for former officers or other current employees.
Subject to stockholder approval, the Board has authorized an increase in the
number of shares reserved under the Plan for Executive Officers and Mr. Chaffee
to 1,808,000. The Board has also authorized an increase in the number options
granted to outside directors from 4,000 to 40,000. The shares issuable under
the plan to Executive Officers employed by the Company at June 22, 1995, Mr.
Chaffee, and the Outside Directors are issuable at the price of $0.125 per
share; the shares issuable to executive to Executive Officers not employed by
the Company at June 22, 1995 are issuable at the average market price at during
the individual's week of hire.
Federal Income Tax Information
THE FOLLOWING IS GENERAL SUMMARY AS OF THE DATE OF THIS PROXY STATEMENT OF
THE FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND PARTICIPATING EMPLOYEES
AND DIRECTORS ASSOCIATED WITH STOCK OPTIONS GRANTED UNDER THE OPTION PLAN. THE
FEDERAL TAX LAWS MAY CHANGE AND THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES
FOR ANY OPTIONEE WILL DEPEND UPON HIS OR HER INDIVIDUAL CIRCUMSTANCES. EACH
PARTICIPATING EMPLOYEE HAS BEEN AND IS ENCOURAGED TO SEEK THE ADVICE OF A
QUALIFIED TAX ADVISOR REGARDING THE TAX CONSEQUENCES TO PARTICIPATION IN THE
OPTION PLAN.
Tax Treatment of the Optionee
Optionees will not realize taxable income upon the grant of a NQSO. Upon the
exercise of an NDSO, the optionee will recognize ordinary income (subject to
withholding by the Company) in an amount equal to the excess of (I) the fair
market value of the shares received, over (ii) the exercise paid therefor.
The optionee will generally have a tax basis in the shares received pursuant to
the exercise of an NQSO that equals the fair market value of such shares on the
date of exercise.
Optionees will not have taxable income upon the grant of an ISO. Upon the
exercise of an ISO, the optionee will not have taxable income, although the
excess of the fair market value of the shares of stock acquired (the "ISO
Shares") over the exercise price paid therefor will increase the alternative
minimum taxable income of the optionee, which may cause such optionee to incur
alternative minimum tax. The payment of any alternative minimum tax attributable
to the exercise of an ISO would be allowed as a credit against the optionee's
regular tax liability in a later year to the extent the optionee's regular tax
liability is in excess of the alternative minimum tax for that year.
Upon disposition of ISO Shares that have been held for the requisite holding
period (generally, at least two years from the date of grant and one year from
the date of exercise of the ISO), the optionee will generally recognize capital
gain (or loss) equal to the difference between the amount received in the
disposition and the exercise price paid by the optionee for the ISO Shares.
However, if an optionee disposes of ISO Shares that have not been held for the
requisite holding period (a "disqualifying disposition"), the optionee will
recognize ordinary income in the year of the disqualifying disposition to the
extent that the fair market value of the ISO Shares at the time of exercise of
the ISO (or, if less, the amount realized in the case of an arm's length
disqualifying disposition to an unrelated party) exceeds the exercise price paid
by the optionee for such ISO Shares. The optionee would also recognize capital
gain to the extent the amount realized in the disqualifying disposition exceeds
the fair market value of the ISO Shares on the exercise date. If the exercise
price paid for the ISO Shares exceeds the amount realized in the disqualifying
disposition (in the case of an arm's length disposition to an unrelated party),
such excess would ordinarily constituted a capital loss.
Tax Treatment of the Optionee
Under current rulings, if an optionee transfers previously held shares of
Common Stock (other than ISO Shares that have not been held for the requisite
holding period) in satisfaction of part or all of the exercise price of an NQSO
or ISO, the optionee will recognize income with respect to the Common Stock
received in the manner described above, but no additional gain will be
recognized as a result of the transfer of such previously held shares in
satisfaction of the NQSO or ISO exercise price. Moreover, that number of shares
of Common Stock received upon exercise which equals the number of shares of
previously held Common Stock surrendered therefor in satisfaction of the NQSO or
ISO exercise price will have a tax basis that equals, and a holding period that
includes, the tax basis and holding period of the previously held shares of
Common Stock surrendered in satisfaction of the NQSO or ISO exercise price. Any
additional shares of Common Stock received upon exercise will have a tax basis
that equals the amount of cash (if any) paid by the optionee, plus, in the case
of NQSOs, the amount of ordinary compensation income recognized by the optionee
with respect to the Common Stock received.
16
<PAGE> 18
Tax Treatment of the Company
In general, the Company will be entitled to a deduction with respect to NQSOs
that mirrors as to timing and mount the ordinary income recognized by the
optionee under the rules described above. The Company will generally not be
entitled to a deduction with respect to the grant, exercise or disposition of
ISOs or ISO Shares, except to the extent that the optionee recognizes ordinary
income as a result of a disqualifying disposition of the ISO Shares.
Notwithstanding the foregoing, in order for the amounts described above to be
deductible by the Company, such amounts must constitute reasonable compensation
for services rendered or to be rendered and must be ordinary and necessary
business expenses. Moreover, the ability of the Company to obtain a deduction
could be limited by the golden parachute payment rules of Section 280G of the
Code, which prevents the deductibility of certain excess parachute payments made
in connection with a change in control of an employer. Finally, the ability of
the Company to obtain a deduction could also be affected by Section 162(m) of
the Code, which limits the deductibility of compensation paid to certain
employees to $1,000,000 with respect to any such employee during any taxable
year.
Options
The following table sets forth information as to option granted and
cancelled as of December 31, 1995 to (a) the Company's most highly compensated
executives during 1995 whose cash compensation exceeded $60,000 that year, (b)
each nominee for election as a director, (c) all current officers as a group,
(d) all current directors who are not officers as a group and (e) all current
employees other than executive officers as a group (all the options are to
purchase shares of Common Stock):
1989 Stock Option Plan - Summary of Grants
As of May 22, 1996
<TABLE>
<CAPTION> ---------------------------------------------
Options Granted Options Cancelled
- --------------------------------------------------------------------------------
Average Average
Number of Exercise Number of Exercise
Name of Individual Shares Price Shares Price
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A. Daniel Sharplin 690,000(1) $0.125 0 0
Jay Allen Chaffee 490,000(2) $0.125 0 0
Charles C. McGettigan 40,000(3) $0.125 0 0
Michael S. Taylor 40,000(3) $0.125 0 0
Myron A. Wick III 40,000(3) $0.125 0 0
All current executive officers
as a group (3 persons) 1,318,000(4) $0.125 0 0
All current directors other
than executive officers as a
group(4 persons) 660,000(5) $0.125 0 0
All current employees other than
executive officers as a group
(1 person) $0.125 0 0
Certain former officers: 5,000
</TABLE>
17
<PAGE> 19
1989 STOCK OPTION PLAN SUMMARY OF GRANTS AS OF MAY 22, 1996 - (CONTINUED)
(1) Options for 640,000 shares of Common Stock were granted subject to
stockholder approval of Proposals No. 1 and No. 3; 50,000 were previously
granted.
(2) Options for 440,000 shares of Common Stock were granted subject to
stockholder approval of Proposals No. 1 and No. 3; 50,000 were previously
granted.
(3) Options for 36,000 shares of Common Stock were granted subject to
stockholder approval of Proposals No. 1 and No. 3; 4,000 were previously
granted.
(4) Options for 1,248,000 shares of Common Stock were granted subject to
stockholder approval of Proposals No. 1 and No. 3; 70,000 were previously
granted.
(5) Options for 548,000 shares of Common Stock were granted subject to
stockholder approval of Proposals No. 1 and No. 62,000 were previously
granted.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT OF
THE 1989 STOCK OPTION PLAN.
PROPOSAL NO. 4 - RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
At the Meeting, the stockholders will be asked to ratify the
appointment by the Board of Ernst & Young as the Company's independent public
accountants to perform the audit of the Company's financial statements for the
fiscal year ended December 31, 1996. Ernst & Young has been the Company's
auditors since the resignation of Touche Ross in November 1989. The Board of
Directors expects the representatives of Ernst & Young will not be present at
the Meeting and, accordingly, that such representative will not be available to
respond to appropriate questions. However such representatives are invited to
attend the Meeting and, should they attend, they will be given an opportunity
to make a statement at the Meeting if they desire to do so and will be
available to respond to appropriate questions. The affirmative vote of a
majority of the Company's outstanding shares of Common Stock represented and
voting at the Meeting is required for approval of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG
AS THE COMPANY'S AUDITORS
STOCKHOLDERS PROPOSALS
The Company intends to hold its 1997 annual meeting of stockholders in
June 1997. Stockholders proposals for inclusion in the Company's Proxy
Statement and form of proxy for the 1997 annual meeting of stockholders must be
received by the Company no later than March 13, 1997.
OTHER BUSINESS
The Board of Directors does not presently intend to bring any other
business before the Meeting, and , so far as is known to the Board of
Directors, no matters are to be brought before the Meeting except as specified
in the notice of the Meeting. As to any business that may properly come before
the Meeting, however, it is intended that proxies, in the form enclosed, will
be voted in respect thereof in accordance with the judgment of the persons
voting such proxies.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
18
<PAGE> 20
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NDE ENVIRONMENTAL CORPORATION
(A DELAWARE CORPORATION)
(Originally incorporated on November 23, 1988)
ARTICLE 1
The name of the Corporation is NDE Environmental Corporation.
ARTICLE 2
The address of the registered office of the Corporation in the State
of Delaware is 32 Loockerman Square, Suite L-100, in the City of Dover, County
of Kent. The name of its registered agent at that address is The Prentice-Hall
Corporation System, Inc.
ARTICLE 3
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
law of Delaware.
ARTICLE 4
The total number of shares of stock of all classes which the
corporation has authority to issue is 50,010,000 shares, consisting of
50,000,000 shares of Common Stock with a par value of $0.0001 per share, and
10,000 shares of Preferred Stock with a par value of $0.0001 per share. The
Preferred Stock authorized by this Certificate of Incorporation may be issued
from time to time in one or more series. The Board of Directors is hereby
authorized to fix or alter the dividend rights, dividend rate, conversion
rights, voting rights, rights and terms of redemption, including sinking fund
provisions, the redemption price or prices, the liquidation preferences and the
other preferences, powers, rights, qualifications, limitations and restrictions
of any wholly unissued class or series of Preferred Stock and the number of
shares constituting any such series and the designation thereof.
The Board of Directors is further authorized to increase or decrease
the number of shares of any series of Preferred Stock, the number of which was
fixed by it, subsequent to the issue of shares of that series, but not below
the number of shares of such series then outstanding, subject to the
limitations and
1
<PAGE> 21
restrictions stated in the resolution of the Board of Directors originally
fixing the number of shares of such series. In case the number of shares of
any series shall be so decreased, the shares constituting such decrease shall
resume the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
ARTICLE 5
The stockholders of the Corporation holding a majority of the
Corporation's outstanding voting stock shall have the power to adopt, amend or
repeal the Bylaws. The Board of Directors of the Corporation shall also have
the power to adopt, amend or repeal Bylaws of the Corporation, except as such
power may be expressly limited by Bylaws adopted by the stockholders.
ARTICLE 6
Election of Directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide. If, as of the record date of any meeting
of the stockholders or the date of any action by written consent, the aggregate
number of directors which the holders of the Preferred Stock, either voting
together as a class or as separate series, as the case may be, are entitled to
elect (the "Preferred Number") shall be less than the authorized number of
directors, then the holders of the Common Stock, voting together as a single
class, shall be entitled to elect a number of directors equal to the difference
between the authorized number of directors and the Preferred Number.
ARTICLE 7
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (I) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived an
improper personal benefit.
Any repeal or modification of the foregoing provisions of this Article
7 shall be prospective only, and shall not adversely affect any limitation on
the personal liability of a director of the Corporation existing at the time of
such repeal or modification.
ARTICLE 8
The stockholder vote required to approve Business Combinations (as
hereinafter defined) shall be as set forth in this Article 8.
2
<PAGE> 22
A.(1)Except as otherwise expressly provided in Section B of this Article 8:
(i)any merger or consolidation of the Corporation or any Subsidiary (as
hereinafter defined) with (a) any Interested Shareholder (as hereinafter
defined) or (b) any other corporation (whether or not itself an Interested
Shareholder) which is, or after such merger or consolidation would be, an
Affiliate (as hereinafter defined) of an Interested Shareholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition
(in one transaction or a series of transactions) to or with any Interested
Shareholder or any Affiliate of any Interested Shareholder of any assets of the
Corporation or any Subsidiary having an aggregate Fair Market Value (as
hereinafter defined) of ten percent (10%) or more of the total value of the
assets of the Corporation and its consolidated subsidiaries as reflected in the
most recent balance sheet of the Corporation; or
(iii) the issuance or transfer by the Corporation or any Subsidiary (in one
transaction or a series of transactions) of any securities of the Corporation
or any Subsidiary to any Interested Shareholder or any Affiliate of any
Interested Shareholder in exchange for cash, securities or other property (or a
combination thereof) having an aggregate Fair Market Value of $10,000,000 or
more; or
(iv) the adoption of any plan or proposal for the liquidation or dissolution of
the Corporation proposed by or on behalf of any Interested Shareholder or any
Affiliate of any Interested Shareholder; or
(v) any reclassification of securities (including any reverse stock split), or
recapitalization of the Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other transaction (whether or
not with or into or otherwise involving any Interested Shareholder) which has
the effect, directly or indirectly, of increasing the proportionate share of
the outstanding shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by any
Interested Shareholder or any Affiliate of any Interested Shareholder; shall
require the affirmative vote of the holders of at least 66-2/3 percent of the
voting power of all the then-outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(hereinafter in this Article 8 referred to as the "Voting Stock"), voting
together as a single class (it being understood that, for purposes of this
Article 8, each share of the Voting Stock shall have the number of votes
granted to it pursuant to the Certificate of Incorporation, including any
designation of the rights, powers and preferences of any class or series of
Preferred Stock (a "Preferred Stock Designation")). Such affirmative vote
shall be required notwithstanding any other previsions of this agreement with
any national securities exchange which might otherwise permit a
3
<PAGE> 23
lesser vote or not vote, but such affirmative vote shall be required in
addition to any affirmative vote of the holders of any particular class or
series of the Voting Stock required by law or the Certificate of Incorporation
or any Preferred Stock Designation.
(2) The term "Business Combination" as used in this Article 8 shall mean any
transaction which is referred to in any one or more of subparagraphs (I)
through (v) of paragraph (1) of this Section A.
B. The provisions of Section A of this Article 8 shall not be applicable to any
particular Business Combination, and such Business Combination shall require
only such affirmative vote as is required by law, any other provision of this
Certificate of Incorporation, any Preferred Stock Designation or any agreement
with any national securities exchange, if, in the case of a Business
Combination that does not involve any cash or other consideration being
received by the stockholders of the Corporation, solely in their respective
capacities as stockholders of the Corporation, the condition specified in the
following paragraph (1) is met, or, in the case of any other Business
Combination, the conditions specified in either of the following paragraphs (1)
and (2) are met:
(1) The Business Combination shall have been approved by a majority of the
Continuing Directors (as hereinafter defines), even if the Continuing Directors
do not constitute a quorum of the entire Board of Directors, it being
understood that this condition shall not be capable of satisfaction unless
there is at least one Continuing Director.
(2) All the following conditions shall have been met:
(I) The consideration to be received by holders of shares of a
particular class of outstanding Voting Stock shall be in cash or in the same
form as the Interested Shareholder has paid for shares of such class of Voting
Stock within the two-year period ending on and including the date on which the
Interested Shareholder became an Interested Shareholder (the "Determination
Date"). If, within such two-year period, the Interested Shareholder has paid
for shares of any class of Voting Stock with varying forms of consideration,
the form of consideration to be received per share by holders of shares of such
class of Voting Stock shall be either cash or the form used to acquire the
largest number of shares of such class of Voting Stock acquired by the
Interested Shareholder within such two-year period.
(ii) The aggregate amount of (x) the cash and (y) the Fair Market Value, as of
the date (the "Consummation Date") of the consummation of the Business
Combination shall be at least equal to the higher of the following (it being
intended that the requirements of this paragraph 2 (ii) shall be required to be
4
<PAGE> 24
met with respect to all shares of Common Stock outstanding whether or not the
Interested Shareholder has previously acquired any shares of Common Stock):
(a) (if applicable) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by the
Interested Shareholder for any shares of Common Stock acquired by it within the
two-year period immediately prior to the date of the first public announcement
of the proposal of the Business Combination (the "Announcement Date") or in the
transaction in which it became an Interested Shareholder, whichever is higher,
plus interest compounded annually from the Determination Date through the
Consummation Date at the prime rate of interest of The Bank of America N.T. &
S.A. (or such other major bank headquartered in the State of California as may
be selected by the Continuing Directors) from time to time in effect in the
City of San Francisco, less the aggregate amount of any cash dividends paid,
and the Fair Market Value of any dividends paid in other than cash, on each
share of Common Stock from the Determination Date through the Consummation Date
in an amount up to but not exceeding the amount of interest so payable per
share of Common Stock; or
(b) the Fair Market Value per share of Common Stock on the Announcement Date.
(iii) The aggregate amount of (x) the cash and (y) the Fair Market Value, as of
the Consummation Date, of the consideration other than cash to be received per
share by holders of shares of any class, other than Common Stock, of
outstanding Voting Stock shall be at least equal to the highest of the
following (it being intended that the requirements of this paragraph (2) (iii)
shall be required to be met with respect to every such class of outstanding
Voting Stock, whether or not the Interested Shareholder has previously acquired
any shares of a particular class of Voting Stock):
(a) (if applicable) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by the
Interested Shareholder for any shares of such class of Voting Stock acquired by
it within the two-year period immediately prior to the Announcement Date or in
the transaction in which it became an Interested Shareholder, whichever is
higher, plus interest compounded annually from the Determination Date through
the Consummation Date at the prime rate of interest of The Bank of America N.T.
& S.A. (or such other major bank headquartered in the City of San Francisco as
may be selected by the Continuing Directors) from time to time in effect in the
City of San Francisco, less the aggregate amount of any cash dividends paid,
and the Fair Market Value of any dividends paid in other than cash, on each
share of such class of Voting Stock from the Determination Date through the
Consummation Date in an amount up to but not exceeding the amount of interest
so payable per share of such class of Voting Stock; or
5
<PAGE> 25
(b) the Fair Market Value per share of such class of Voting Stock on the
Announcement Date; or
(c) the highest preferential amount per share to which the holders of shares of
such class of Voting Stock are entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation.
(iv) After such Interested Shareholder has become an Interested Shareholder and
prior to the consummation of such Business Combination: (a) except as approved
by a majority of the Continuing Directors, there shall have been no failure to
declare and pay at the regular date therefor any full quarterly dividends
(whether or not cumulative) on any outstanding Preferred Stock; (b) there shall
have been (I) no reduction in the annual rate of dividends paid on the Common
Stock (except as necessary to reflect any subdivision of the Common Stock),
except as approved by a majority of the Continuing Directors, and (II) an
increase in such annual rate of dividends as necessary to reflect any
reclassification (including any reverse stock split), recapitalization,
reorganization or any similar transaction which has the effect of reducing the
number of outstanding shares of the Common Stock, unless the failure so to
increase such annual rate is approved by a majority of the Continuing
Directors; and (c) such Interested Shareholder shall have not become the
beneficial owner of any additional shares of Voting Stock except as part of the
transaction which results in such Interested Shareholder becoming and
Interested Shareholder.
(v) After such Interested Shareholder has become an Interested Shareholder,
such Interested Shareholder shall not have received the benefit, directly or
indirectly (except proportionately, solely in such interested Shareholder's
capacity as a stockholder of the Corporation), of any loans, advances,
guarantees, pledges, or other financial assistance or any tax credits or other
tax advantages provided by the Corporation, whether in anticipation of or in
connection with such Business Combination or otherwise.
(vi) A proxy or information statement describing the proposed Business
Combination complying with the requirements of the Securities Exchange Act of
1934 and the rules and regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations) and setting forth, as an exhibit
thereto, the opinion of an investment banking firm selected by a majority of
the Continuing Directors, or, if there are no Continuing Directors, an opinion
of the investment banking firm most recently retained by the Corporation before
the Interested Shareholder became an Interested Shareholder, or any successor
in interest to such investment banker, that the proposed Business Combination
is fair from a financial point of view to the stockholders of the Corporation
other than the Interested Shareholder, shall be mailed to all stockholders of
the Corporation at least 30 days prior to the consummation of such Business
6
<PAGE> 26
Combination (whether or not such proxy or information statement is required to
be mailed pursuant to such Act or subsequent provisions).
C. For the purposes of this Article 8:
(1) A "person" shall mean any individual, firm, corporation or other entity.
(2) "Interested Shareholder" shall mean any person (other than the Corporation
or any Subsidiary) who or which:
(I) it is the beneficial owner, directly or indirectly, of fifteen percent
(15%) or more of the voting power of the outstanding Voting Stock; or
(ii) is an Affiliate of the Corporation and at any time within the three-year
period immediately prior to the date in question was the beneficial owner,
directly or indirectly, of fifteen percent (15%) or more of the voting power of
the then-outstanding Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any shares of Voting
Stock which were at any time within the three-year period immediately prior to
the date in question beneficially owned by any Interested Shareholder, if such
assignment or succession shall have occurred in the course of a transaction or
series of transactions not involving a public offering within the meaning of
the Securities Act of 1933.
(3) A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates or Associates (as hereinafter
defined) beneficially owns, directly or indirectly; or
(ii) which such person or any of its Affiliates of Associates has (a) the right
to acquire (whether such right is exercisable immediately or only after the
passage of time), pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights, warrants or options,
or otherwise, or (b) the right to vote pursuant to any agreement, arrangement
or understanding; or
(iii) which are beneficially owned, directly or indirectly, by any other person
with which such person or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of any shares of Voting Stock.
(4) For the purposes of determining whether a person is an Interested
Shareholder pursuant to paragraph (2) of this section C, the number of shares
of Voting Stock deemed to be outstanding shall include shares deemed owned
7
<PAGE> 27
through application of paragraph (3) of this section C but shall not include
any other shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
(5) "Affiliate" or "Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on July 1, 1987 (the term
"registrant" in said Rule 12b-2 meaning in this case the Corporation).
(6) "Subsidiary" means any corporation of which a majority of any class of
equity security is owned, directly or indirectly, by the Corporation; provided,
however, that for the purposes of the definition of Interested Shareholder set
forth in paragraph (2) of this section C, the term "Subsidiary" shall mean only
a corporation of which a majority of each class of equity security is owned,
directly or indirectly, by the Corporation.
(7) "Continuing Director" means any member of the Board of Directors of the
Corporation (the "Board") who is unaffiliated with the Interested Shareholder
and was a member of the Boards prior to the time that the Interested
Shareholder became an Interested Shareholder, and any successor of a Continuing
Director who is unaffiliated with the Interested Shareholder and is recommended
to succeed a Continuing Director by a majority of Continuing Directors then on
the Board.
(8) "Fair Market Value" means: (I) in the case of stack, the highest closing
sale price during the 30-day period immediately preceding the date in question
of a share of such stock on the Composite Tape for New York Stock Exchange-
Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the
New York Stock Exchange, or if such stock is not listed on such Exchange, on
the principal United States securities exchange registered under the Securities
Exchange Act of 1934 on which such stock is listed, or, if such stock is not
listed on any such exchange, the highest closing bid quotation with respect to
a share of such stock during the 30-day period preceding the date in question
on the National Association of Securities Dealers, Inc. Automated Quotations
System or any system then in use, or if no such quotations are available, the
highest closing sale price during the 30-day period immediately preceding the
date in question of a share of such stock on any foreign exchange(s) upon which
such stock is listed, or, if such stock is not so listed, the fair market value
on the date in question of a share of such stock as determined by the Board in
good faith; and (ii) in case of property other than cash or stock, the fair
market value of such property on the date in question as determined by the
Board in good faith.
(9) In the event of any Business Combination in which the Corporation survives,
the phrase "consideration other than cash to be received" as used in paragraphs
8
<PAGE> 28
(2) (ii) and (2) (iii) of Section B of this Article 8 shall include the shares
of Common Stock and/or the shares of any other class of outstanding Voting
Stock retained by the holders of such shares.
D. A majority of the total number of authorized directors (whether or not
there exist any vacancies in previously authorized directorships at the time
any such determination as is hereinafter in this Section D specified is to be
made by the Board) shall have the power and duty to determine, on the basis of
information known to them after reasonable inquiry, all facts necessary to
determine compliance with this Article 8, including, without limitation, (1)
whether a person is an Interested Shareholder, (2) the number of shares of
Voting Stock beneficially owned by any person, (3) whether a person is an
Affiliate or Associate of another, (4) whether the applicable conditions set
forth in paragraph (2) of section B have been met with respect to any Business
Combination, (5) whether the assets which are the subject of any Business
Combination referred to in paragraph (1) (ii) of section A have an aggregate
Fair Market Value of 10% of the assets of the Corporation and its consolidated
subsidiaries as reflected in the most recent balance sheet of the Corporation,
and (6) whether the consideration to be received for the insurance or transfer
of securities by the Corporation or any Subsidiary in any Business Combination
referred to in paragraph (1) (iii) of section A has an aggregate Fair Market
Value of $10,000,000 or more.
E. Nothing contained in this Article 8 shall be construed to relieve any
Interested Shareholder from any fiduciary obligation imposed by law.
F. The fact that any Business Combination complies with the provisions of
Paragraph 2 of Section B of this Article 8 shall not be construed to impose any
fiduciary duty, obligation or responsibility on the Board of Directors, or any
member thereof, to approve such Business Combination or recommend its adoption
or approval to the shareholders of the Corporation, nor shall such compliance
limit, prohibit or otherwise restrict in any manner the Board of Directors, or
any member thereof, with respect to evaluations of, or actions and responses
taken with respect to, such Business Combination.
G. Notwithstanding any other provision of the Certificate of Incorporation or
any provision of law that might otherwise permit a lesser vote or not vote, but
in addition to any vote of the holders of any class or series of the stock of
this Corporation required by law or by the Certificate of Incorporation, the
affirmative vote of the holders of at least 66- 2/3 percent of the voting power
of all of the then outstanding shares of Voting Stock, voting together as a
single class shall be required to amend or repeal Article 8.
9
<PAGE> 29
ARTICLE 9
The Corporation elects not to be governed by Section 203 of the
Delaware General Corporation Law.
* * * * * * * *
NDE Environmental Corporation, a Delaware corporation, hereby
certifies that the foregoing Amended and Restated Certificate of Incorporation,
which restates, integrates and further amends the provisions of the Certificate
of Incorporation of this corporation as heretofore amended or supplemented, has
been duly adopted by the corporation's Board of Directors and stockholders in
accordance with Sections 242 and 245 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, said corporation has caused this Restated
Certificate of Incorporation to be signed by its duly authorized officers this
_____ day of _________, 1996.
NDE ENVIRONMENTAL CORPORATION
By:_________________________________
A. Daniel Sharplin, President
ATTEST:
_____________________________________
Eric J. (Rick) Hopkins, Secretary
10
<PAGE> 30
PROXY -- COMMON STOCK
NDE ENVIRONMENTAL CORPORATION
The undersigned hereby appoints Eric J. Hopkins as Proxy, with the power
to appoint his substitute, to represent the undersigned at the Annual Meeting
of Stockholders of NDE Environmental Corporation (the "Company") to be held
June 26, 1996 and at any adjournments or postponements thereof (the
"Meeting"),and to vote, as indicated below, all the shares of Common Stock of
the Company which the undersigned would be entitled to vote if personally
present at the Meeting.
1. PROPOSAL TO ADOPT AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
(increasing the authorized number of shares of Common Stock from 10,000,000
to 50,000,000).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as indicated to vote for all nominees
to the contrary below) listed below
Nominees: Jay Allen Chaffee, Charles C. McGettigan, A. Daniel Sharplin,
Michael S. Taylor, Myron A. Wick III.
Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below:
-----------------------
3. PROPOSAL TO AMEND THE 1989 STOCK OPTION PLAN to increase the number of
shares reserved thereunder from 248,250 to 2,500,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL TO RATIFY SELECTION OF ERNST & YOUNG AS THE COMPANY'S INDEPENDENT
PUBLIC ACCOUNTANTS FOR 1996.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 31
This proxy, when properly executed, will be voted as directed herein by
the undersigned. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSAL 1, FOR THE NOMINEES FOR DIRECTOR, FOR PROPOSAL 2, FOR PROPOSAL 3,
AND AT THE DISCRETION OF THE PROXY, UPON ANY OTHER MATTERS PROPERLY COMING
BEFORE THE MEETING.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
Dated: Please sign exactly as name appears at left.
------------------------- When shares are held by joint tenants, both
should sign. When signing as an attorney,
- -------------------------------- executor, administrator, trustee or guardian,
Signature please give full title as such. If a corpo-
ration, please sign in full corporate name
- -------------------------------- by president or other authorized officer. If
Signature if held jointly a partnership, please sign in partnership
name by authorized person.
