<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 22, 1997
Commission File No.
1-10361
NDE ENVIRONMENTAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-3634420
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
8900 Shoal Creek Boulevard, Suite 200
Austin, Texas 78757
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (512) 451-6334
Page 1
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NDE ENVIRONMENTAL CORPORATION
INDEX
Page (s)
ITEM 2. Acquisition or Disposition of Assets.................................3
ITEM 7. Financial Statements and Exhibits....................................3
Unaudited Pro Forma Condensed Consolidated
Balance Sheet...................................................5
Unaudited Pro Forma Condensed Consolidated
Statement of Operations.........................................6
Notes to Unaudited Pro Forma Condensed
Financial Information...........................................7
SIGNATURES.....................................................................8
Index to Exhibits..............................................................9
2
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NDE ENVIRONMENTAL CORPORATION
ITEM 2. Acquisition or Disposition of Assets
On May 22, 1997 NDE Environmental Corporation (NDE) (Bulletin Board, NDEC,
dba Tanknology/ NDE), a leading provider of underground storage tank
environmental compliance services sold all of the capital stock of its USTMAN
Industries Inc. (USTMAN) subsidiary to Watson General Corporation (NASDAQ symbol
WGEN) for $5,750,000 plus other consideration described below.
USTMAN provides Statistical Inventory Reconciliation services for the
monitoring of underground storage tanks and was purchased in October 1996 as
part of the acquisition of Tanknology Corporation International, USTMAN and
Tanknology Canada (1988), Inc. (Collectively the "UST Group of Companies") from
TEI Incorporated (formerly Tanknology Environmental International).
The sale price included a cash payment at closing of $5,250,000 and an 8%
note for $500,000 (the "Note") due in one year. All cash on hand at USTMAN
immediately prior to the closing of the transaction was also retained by the
Company. The sale agreement also provides for a further payment to NDE relating
to a post-closing adjustment based upon certain working capital calculations. As
a condition of approval of the sale transaction by the Company's senior bank and
senior subordinated debt holder, three million dollars ($3,000,000) of the cash
proceeds will be placed in a restricted account with the Company's senior bank
and will be held as collateral against outstanding loans until the Company
identifies appropriate investment opportunities. The Note will also be pledged
to the bank and subordinated debt holder as collateral. The remaining net cash
proceeds (after transaction expenses) will be used to pay down debt under the
Company's revolving credit line. The Company can reborrow funds on the credit
line any time.
The excess of the net proceeds of the transaction over the Company's basis
in USTMAN will be treated, for accounting purposes, as an adjustment to the
purchase price of the October 1996 acquisition and accordingly be applied as a
reduction to goodwill and other intangibles.
ITEM 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information
The following unaudited pro forma condensed consolidated financial
statements set forth the results of operations for the year ended December
31, 1996 and the three months ended March 31, 1997 as if the disposition of
USTMAN and the sale of the operations of Tanknology Canada (1988), Inc. (as
reported in Form 8-K dated February 20, 1997) occurred on October 25, 1996,
the date upon which both were acquired as part of the UST Group of
Companies. The pro forma condensed consolidated balance sheet presented
gives effect to the disposition if it had occurred as of the balance sheet
date, March 31, 1997.
The pro-forma information is based upon the historical financial
statements of the Company and all material adjustments necessary to be made
to the historical financial statements to reflect these assumptions.
The pro forma financial information presented herein is not
necessarily indicative of the results that actually would have occurred had
the sales been effected on the dates and for the periods indicated or that
may be obtained in the future. The pro forma financial information should
be read in conjunction with the Financial Statements included in the
Company's Form 10-KSB/A for the fiscal year ended December 31, 1996 and in
Item 1 of the Company's Form 10-Q for the quarter ended March 31, 1997.
3
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NDE ENVIRONMENTAL CORPORATION
(c) Exhibits
Stock Purchase Agreement dated May 22, 1997 between the Company and Watson
General Corporation.
Press Release dated May 27, 1997, announcing the completion by the Company
of the sale of USTMAN.
Amendment No. 2 to Loan Agreement dated May 20, 1997 between the Company
and Bank One, Texas, N.A.
Notice of Final Agreement between the Company and Bank One, Texas, N.A.
with an effective date of May 20, 1997
Pledge of Certificate of Deposit between the Company and Bank One, Texas,
N.A. with an effective date of May 20, 1997
Assignment of Promissory Note between the Company and Bank One, Texas, N.A.
with an effective date of May 20, 1997
Consent and Agreement dated and effective May 20, 1997 between the Company
and Bank One, Texas, N.A.
Consent and Agreement dated and effective May 20, 1997 between the
Company and Banc One Capital Partners L.P.
4
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NDE ENVIRONMENTAL CORPORATION
NDE Environmental Corporation and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of March 31, 1997
<TABLE>
<CAPTION>
Pro Forma
March 31, 1997 Adjustments Pro Forma
----------------------------------------------------------
ASSETS (Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash and restricted cash ....................................... $ 1,031,652 $ 2,887,650 b $ 3,919,302
Accounts receivable, net ....................................... 6,680,397 (907,974) a 5,772,423
Inventories .................................................... 466,153 -- 466,153
Prepaid expenses and other current assets ...................... 962,825 751,847 a,b 1,714,672
-------------- ------------- --------------
Total Current Assets ................................................ 9,141,027 2,731,523 11,872,550
Equipment and improvements, net ..................................... 5,317,615 (458,310) a 4,859,305
Intangible Assets
Goodwill ....................................................... 4,845,107 (4,832,741) e 12,366
Intangible assets, ............................................. 1,985,090 (83,923) a 1,901,167
Deferred financing costs ...................................... 866,939 -- 866,939
-------------- ------------- --------------
Total assets ........................................................ $ 22,155,778 $(2,643,451) $ 19,512,327
============== ============= ==============
Liabilities and Stockholder's Equity
Accounts payable ............................................... $ 1,775,724 $ (75,931) $ 1,699,793
Accrued liabilities ............................................ 3,607,728 (317,520) a 3,290,208
Accrued payroll and payroll taxes .............................. 1,645,859 -- 1,645,859
Current portion of long-term debt .............................. 2,272,223 -- 2,272,223
-------------- ------------- --------------
Total Current Liabilities ........................................... 9,301,534 (393,451) 8,908,083
-------------- ------------- --------------
Long Term Debt, less Current Portion ........................... 12,880,416 (2,250,000) b 10,630,416
Warrants with put option ....................................... 1,800,250 -- 1,800,250
-------------- ------------- --------------
Total Liabilities .................................................. $ 23,982,200 $(2,643,451) $ 21,338,749
============== ============= ==============
Stockholders' Deficit
Series AAA Convertible Preferred Stock, $.0001 par value ...... 5,000 -- 5,000
Common stock, $.0001 par value ................................. 1,598 -- 1,598
Additional paid-in capital ..................................... 27,578,446 -- 27,578,446
Accumulated deficit ............................................ (29,382,700) -- (29,382,700)
Cumulative foreign currency translation adjustment ............. (28,766) -- (28,766)
-------------- ------------- --------------
Total Stockholders' Deficit ......................................... (1,826,422) -- (1,826,422)
-------------- ------------- --------------
Total liabilities and stockholders' deficit ......................... 22,155,778 (2,643,451) 19,512,327
============== ============= ==============
<FN>
The accompanying notes are an integral part of the pro forma condensed
consolidated financial statements.
</FN>
</TABLE>
5
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NDE ENVIRONMENTAL CORPORATION
NDE Environmental Corporation and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
<TABLE>
<CAPTION>
Twelve Months Ended December 31, 1996 Three Months Ended March 31, 1997
------------------------------------------- -------------------------------------------
(c) (d)
Pro Forma Pro Forma
Consolidated Adjustments Pro-Forma Consolidated Adjustments Pro-Forma
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues .............................. $ 15,939,126 $ (951,661) $ 14,987,465 $ 7,462,643 $ (1,567,452) $ 5,895,191
Cost of testing services .............. 11,085,062 (611,169) 10,473,893 5,602,108 (945,761) 4,656,347
------------- ------------- ------------- ------------- ------------- -------------
Gross Margin .......................... 4,854,064 (340,492) 4,513,572 1,860,535 (621,691) 1,238,844
Selling, general and
administrative ........................ 6,581,337 (174,328) 6,407,009 2,045,144 (143,495) 1,901,649
Impairment of long-lived assets ....... (833,321) -- (833,321) -- -- --
------------- ------------- ------------- ------------- ------------- -------------
Operating loss ........................ (2,560,594) (166,164) (2,726,758) (184,609) (478,196) (662,805)
Other income (expense):
Interest expense ..................... (1,062,409) 34,000 (1,028,409) (845,146) 39,664 (805,482)
Other income, net .................... 214,641 -- 214,641 -- -- --
------------- ------------- ------------- ------------- ------------- -------------
Net loss before income taxes and
extraordinary gain .................... (3,408,362) (132,164) (3,540,526) (1,029,755) (438,532) (1,468,287)
Provision for income taxes ............ (43,785) 43,785 -- -- -- --
Extraordinary gain .................... 1,813,149 -- 1,813,149 -- -- --
------------- ------------- ------------- ------------- ------------- -------------
Net loss .............................. $ (1,638,998) $ (88,379) $ (1,727,377) $ (1,029,755) $ (438,532) $ (1,468,287)
============= ============= ============= ============= ============= =============
Net loss per common share:
Before extraordinary gain ........... $ (0.45) $ (0.01) $ (0.46) $ (0.06) $ (0.03) $ (0.09)
Extraordinary gain .................. 0.24 0.00 0.24 0.00 0.00 --
------------- ------------- ------------- ------------- ------------- -------------
Net loss per common share ............ $ (0.21) $ (0.01) $ (0.22) $ (0.06) $ (0.03) $ (0.09)
============= ============= ============= ============= ============= =============
Weighted average common
shares outstanding .................... 7,725,377 7,725,377 7,725,377 15,978,610 15,978,610 15,978,610
============= ============= ============= ============= ============= =============
<FN>
The accompanying notes are an integral part of the pro forma condensed
consolidated financial statements
</FN>
</TABLE>
6
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NDE ENVIRONMENTAL CORPORATION
Notes to Unaudited Pro Forma Condensed Financial Information
a Adjustment to eliminate the assets and liabilities of USTMAN in the
Company's consolidated balance sheet as of March 31, 1997 which were
sold to Watson General Corporation.
b Adjustment to reflect the proceeds and the application thereof against
long-term debt from the sale of USTMAN.
c Adjustment to eliminate the operations of USTMAN and Tanknology Canada
(1988), Inc. for the twelve-month period ended December 31, 1996. and
interest expense on debt for the period from October 25, 1996 to
December 31, 1996.
d Adjustment to eliminate the operations of USTMAN and Tanknology Canada
(1988), Inc. and interest expense on debt for the three-month period
ended March 31, 1997.
e Adjustment to eliminate goodwill originally recorded in October 1996
in connection with the acquisition of the UST Group of Companies. The
amount eliminated represents the amount by which the proceeds from the
sale of USTMAN exceeded the net assets sold, other than goodwill.
7
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NDE ENVIRONMENTAL CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned,
thereunto duly authorized.
NDE ENVIRONMENTAL CORPORATION
Date: June 6, 1997 By: /s/ DAVID G. OSOWSKI
----------------------- ----------------------------------
David G. Osowski
Vice President and
Chief Financial Officer
PRINCIPAL ACCOUNTING OFFICER
8
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NDE ENVIRONMENTAL CORPORATION
Index to Exhibits
Exhibit
Number Exhibit
- ---------- -------------------------------------------------------------------
2.1 Stock Purchase Agreement dated May 22, 1997 between the
Company and Watson General Corporation.
99.1 Press Release dated May 27, 1997, announcing the completion by
the Company of the sale of USTMAN.
99.2 Amendment No. 2 to Loan Agreement dated May 20, 1997 between the
Company and Bank One, Texas, N.A.
99.3 Notice of Final Agreement between the Company and Bank One, Texas,
N.A. Pledge of Certificate of Deposit between the Company and Bank
One, Texas, N.A. with an effective date of May 20, 1997
99.4 Pledge of Certificate of Deposit between the Company and Bank One,
Texas, N.A. with an effective date of May 20, 1997
99.5 Assignment of Promissory Note between the Company and Bank One,
Texas, N.A. with an effective date of May 20, 1997
99.6 Consent and Agreement dated and effective May 20, 1997 between the
Company and Bank One, Texas, N.A.
99.7 Consent and Agreement dated and effective May 20, 1997 between the
Company and Banc One Capital Partners L.P.
9
Exhibit 2.1
STOCK PURCHASE AGREEMENT
between
WATSON GENERAL CORPORATION
as Buyer
and
NDE ENVIRONMENTAL CORPORATION
as Seller
Dated as of May 22, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C> <C>
ARTICLE I Definitions..............................................................1
ARTICLE II Purchase and Sale........................................................5
Section 2.1 The Sale................................................5
Section 2.2 Purchase Price..........................................5
Section 2.3 Note and Subsidiary Guarantees..........................5
Section 2.4 Post Closing Adjustment.................................6
Section 2.5 Transactions Prior to Closing...........................8
ARTICLE III Closing..................................................................9
ARTICLE IV Representations and Warranties of Seller................................10
Section 4.1 Organization and Good Standing of the Company..........10
Section 4.2 Corporate Records......................................10
Section 4.3 Authorization..........................................11
Section 4.4 Non-Contravention......................................11
Section 4.5 Validity...............................................11
Section 4.6 Broker Involvement.....................................12
Section 4.7 Litigation.............................................12
Section 4.8 Title to Shares........................................12
Section 4.9 Contracts and Commitments..............................12
Section 4.10 Taxes..................................................13
Section 4.11 Title to Properties....................................15
Section 4.12 Trademarks, Trade Names and Intellectual Property......15
Section 4.13 Financial Records; Budget..............................16
Section 4.14 Condition of Assets and Inventory......................16
Section 4.15 Liabilities............................................16
Section 4.16 Employees and Related Matters..........................17
Section 4.17 No Material Change.....................................17
Section 4.18 Compliance With Law....................................18
Section 4.19 Tangible Personal Property.............................18
Section 4.20 Insurance..............................................18
Section 4.21 Government Licenses, Permits and Related Approvals.....18
Section 4.22 Distributed Products...................................18
Section 4.23 Safety Reports.........................................19
Section 4.24 Transactions with Certain Persons......................19
Section 4.25 Accounts Receivable....................................20
Section 4.26 Studies, Etc...........................................20
Section 4.27 Disclosure.............................................20
Section 4.28 Employee Benefits......................................21
Section 4.29 Environmental Matters..................................24
Section 4.30 Knowledge of Seller....................................25
Section 4.31 Conduct of the Business. .............................25
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ARTICLE V Representations and Warranties of Buyer.................................27
Section 5.1 Corporate Status and Good Standing.....................27
Section 5.2 Authorization..........................................27
Section 5.3 Non-Contravention......................................28
Section 5.4 Validity...............................................28
Section 5.5 Broker Involvement.....................................29
Section 5.6 Litigation.............................................29
Section 5.7 Investment Intention...................................29
Section 5.8 Disclosure of Information..............................29
Section 5.9 Financial Condition....................................30
Section 5.10 Restricted Securities..................................30
ARTICLE VI Additional Agreements and Covenants.....................................30
Section 6.1 Other Offers...........................................30
Section 6.2 Public Announcements...................................31
Section 6.3 Further Assurances.....................................31
Section 6.4 Covenant Against Competition...........................32
Section 6.5 Governmental Filings...................................35
Section 6.6 Access to Information..................................35
Section 6.7 Use of Name............................................35
Section 6.8 Other Action...........................................36
Section 6.9 Employee Benefit Matters...............................36
Section 6.10 Cooperation with Financings and Financial Reporting . .36
Section 6.11 Consents...............................................36
Section 6.12 Tax Certificate........................................37
Section 6.13 Certain Tax Elections..................................37
Section 6.14 Liability for Taxes....................................38
Section 6.15 Cooperation and Exchange of Information................40
Section 6.16 Conflict...............................................40
Section 6.17 Insurance..............................................41
ARTICLE VII Extent and Survival of Representations, Warranties,
Covenants and Agreements; Indemnification............................41
Section 7.1 Indemnification of Buyer...............................41
Section 7.2 Indemnification of Seller..............................43
Section 7.3 Survival...............................................44
Section 7.4 Indemnification Procedures.............................45
Section 7.5 Indemnification Procedures for Prior Period Claims. ...48
Section 7.6 Arbitration of Disputes................................50
Section 7.7 General................................................50
ARTICLE VIII Conditions to Closing...................................................51
Section 8.1 Conditions Precedent to Obligations of Buyer...........51
Section 8.2 Conditions Precedent to Obligations of Seller..........52
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ARTICLE IX Actions to be Taken at Closing..........................................53
Section 9.1 Actions to be Taken by Seller at the Closing...........53
Section 9.2 Actions to be Taken by Buyer at the Closing............54
ARTICLE X General Provisions......................................................55
Section 10.1 Termination............................................55
Section 10.2 Confidentiality; Publicity; Books and Records..........56
Section 10.3 Expenses...............................................58
Section 10.4 Entire Agreement.......................................58
Section 10.5 Waivers and Consents...................................58
Section 10.6 Notices................................................58
Section 10.7 Successors and Assigns.................................59
Section 10.8 Performance............................................59
Section 10.9 Choice of Law; Section Headings; Table of Contents.....59
Section 10.10 Counterparts...........................................59
Section 10.11 Jurisdiction and Venue.................................60
Section 10.12 Severability...........................................60
Section 10.13 Assignment.............................................60
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SCHEDULES
Schedule 4.1 Foreign Qualifications
Schedule 4.4 Seller Non-Contravention
Schedule 4.7 Seller Litigation
Schedule 4.9 Contracts and Commitments
Schedule 4.10 Taxes
Schedule 4.11 Title to Properties
Schedule 4.12 Trademarks, Trade Names and Intellectual Property
Schedule 4.13 Financial Statements
Schedule 4.15 Liabilities
Schedule 4.16 Employees
Schedule 4.19 Tangible Personal Property
Schedule 4.20 Insurance Policies
Schedule 4.21 Permits
Schedule 4.22 Distributed Products
Schedule 4.23 Safety Reports
Schedule 4.24 Transactions with Certain Persons
Schedule 4.26 Studies
Schedule 4.28 Employee Benefit Plans
Schedule 4.29 Environmental Matters
Schedule 4.31 Changes to Employee Benefits
Schedule 5.3 Buyer Non-Contravention
Schedule 5.9 Financial Condition
Schedule 6.4 Noncompetition
</TABLE>
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of May 22, 1997,
is entered into by and between Watson General Corporation, a California
corporation ("Buyer"), and NDE Environmental Corporation, a Delaware corporation
("Seller").
W I T N E S S E T H:
WHEREAS, Seller owns all of the outstanding capital stock consisting of
1,000 shares of common stock represented by share certificate no. 3 in the name
of Seller (the "Shares") of USTMAN Industries, Inc. ("USTMAN"), a Delaware
corporation with its principal place of business at 12265 W. Bayaud Ave.,
Lakewood, CO 80225; and
WHEREAS, Buyer desires to acquire the Shares from Seller, and Seller
desires to sell the Shares to Buyer, upon the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
The terms set forth below in this Article I shall have the meanings
ascribed to them below:
Affiliate: with respect to any person, means any person that directly or
indirectly controls, is controlled by or is under common control with such
person.
Applicable Law: means any and all federal, national, state, regional,
local, municipal or foreign laws, statutes, rules, regulations, guidelines,
ordinances, licenses, Permits or judicial or administrative decisions of any
country, or any political subdivision, agency, commission, official or court
thereof having jurisdiction over Seller or USTMAN.
best efforts: means a party's efforts in accordance with reasonable
commercial practice and without the incurrence of unreasonable expense.
Business: means all of the business and operations conducted by USTMAN.
Code: means the United States Internal Revenue Code of 1986, as amended, or
any amending or superseding Tax laws of the United States.
Environmental Law: means any applicable law (including common law)
regulating or prohibiting Releases into any part of the workplace or the
environment, or pertaining to the protection or improvement of natural resources
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<PAGE>
or wildlife, the environment or public and employee health and safety
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA") (42 U.S.C. Section 9601 et seq.),
the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the
Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 7401
et seq.), the Atomic Energy Act of 1954 (42 U.S.C. Section 2014 et seq.),
the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136
et seq.), the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.)
("OSHA") and the regulations promulgated pursuant thereto, and any such
applicable state or local statutes, and the regulations promulgated pursuant
thereto, as such laws have been and may be amended or supplemented.
Excluded Assets: shall mean (a) all cash and cash equivalents of USTMAN at
Closing and (b) amounts owed to USTMAN by other Affiliates of Seller at Closing.
Forms 8023-A: means IRS Form 8023-A (including the required schedules
thereto) and any other form required to be filed with any jurisdiction so that
such jurisdiction will recognize the Section 338(h)(10) Election.
Hazardous Material: means any substance, material or waste which is
regulated pursuant to any Environmental Law by any public or governmental
authority in any jurisdiction in which Seller or USTMAN conducts business, or
the United States, including, without limitation, any material or substance
which is defined as a "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste," "restricted hazardous waste,"
"contaminant," "toxic waste," "toxic substance," "source material," "special
nuclear material," "byproduct material," "high- level radioactive waste,"
"low-level radioactive waste" or "spent nuclear material" under any provision of
Environmental Law.
IRS: means the United States Internal Revenue Service.
Lien: means any lien, pledge, claim, charge, security interest, mortgage or
other encumbrance, option or other rights of any third person of any nature
whatsoever.
Permit: means any and all federal, national, state, regional, local,
municipal or foreign licenses, permits, variances, waivers, riders,
registrations or any other governmental authorizations or approvals necessary or
appropriate for USTMAN to conduct its Business.
person: means any individual, firm, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization, government or agency or subdivision thereof or any other entity.
Regulation: means a United States Department of Treasury regulation issued
with respect to the Code.
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Release: means any release, spill, effluent, emission, leaking, pumping,
pouring, emptying, escaping, dumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or outdoor environment, or into
or out of any property currently or formerly owned, operated or leased by Seller
or USTMAN.
Remedial Action: means all actions, including, without limitation, any
capital expenditures, required by a governmental entity or required under any
Environmental Law, or voluntarily undertaken to (a) clean up, remove, treat, or
in any other way ameliorate or address any Hazardous Materials or other
substance in the indoor or outdoor environment; (b) prevent the Release or
threat of Release, or minimize the further Release of any Hazardous Material so
it does not endanger or threaten to endanger the public or employee health or
welfare of the indoor or outdoor environment; (c) perform pre-remedial studies
and investigations or post-remedial monitoring and care pertaining or relating
to a Release; or (d) bring the applicable party into compliance with any
Environmental Law.
Section 338(h)(10) Election: shall have the meaning set forth at Section
6.13.
Taxes: means all United States federal, state, county and local, foreign
and all other taxes, charges, fees, levies or other assessments, including,
without limitation, all net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, profit share, license, lease, service,
service use, value added, withholding, payroll, employment, excise, estimated,
severance, stamp, occupation, premium, real and personal property, windfall
profits, gains, capital stock, production, business and occupation, disability,
custom duties or other taxes of any kind whatsoever, together with any interest,
penalties, additions to tax, fines or other additional amounts imposed thereon
or related thereto, and the term "Tax" means any one of the foregoing Taxes.
Tax Certificate: shall have the meaning set forth at Section 6.12.
Tax Returns: means all United States federal, local and state and all
foreign returns, declarations, reports, estimates, information returns,
statements and other documents of, relating to, or required to be filed in
respect of, any and all Taxes.
ARTICLE II
Purchase and Sale
Section 2.1 The Sale. Upon the terms and subject to the conditions of this
Agreement, at the Closing, as defined below under Article III, Seller will sell,
assign, transfer and deliver the Shares to Buyer (together with a stock power or
powers executed in blank), and Buyer will purchase and acquire the Shares from
Seller.
Section 2.2 Purchase Price. The purchase price for all the Shares (the
"Purchase Price") shall be $5,750,000. The Purchase Price shall be subject to
adjustment only pursuant to Section 2.4. The Purchase Price shall be paid by
Buyer at Closing by (i) wire transfer of $5,250,000 in immediately available
funds to an account or accounts designated in writing by Seller at Closing and
(ii) delivery of the Purchase Note to Seller as defined in Section 2.3.
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Section 2.3 Note and Subsidiary Guarantees. At the Closing, Buyer shall
deliver to Seller an unsecured senior note validly executed by Buyer in
substantially the form attached hereto as Exhibit A (the "Purchase Note"). The
Purchase Note shall be in the aggregate principal amount of $500,000 and shall
bear interest at a rate of 8.5% per annum. Accrued interest on the outstanding
principal balance of the Purchase Note shall be payable quarterly on September
1, 1997, December 1, 1997 and March 1, 1998. The unpaid principal balance of,
and all accrued and unpaid interest on, the Purchase Note shall be due and
payable in full on June 1, 1998. Immediately following the Closing, Buyer shall
cause USTMAN, Watson Systems, Inc., a Missouri corporation and a wholly-owned
subsidiary of Buyer, and EnvirAlert, Inc., a Delaware corporation and a
wholly-owned subsidiary of Buyer, to each execute the guaranty (the "Subsidiary
Guaranty") of Buyer's obligations under the Purchase Note in substantially the
form attached hereto as Exhibit B. Seller hereby recognizes and acknowledges
that, in connection with the transactions described herein, Buyer has obtained
certain acquisition financing and that such financing may be secured by some or
all of the assets of Buyer and its subsidiaries at or after Closing.
Section 2.4 Post Closing Adjustment.
(a) Within 60 calendar days following the Closing, Buyer shall prepare
and deliver to Seller a balance sheet (the "Balance Sheet") of USTMAN as of
the Closing Date, as defined below under Article III (prior to the effects
of the transactions occurring at the Closing) and a statement (the
"Statement"), reflecting the calculation of the adjustment, if any, to the
Purchase Price pursuant to Section 2.4(b). The Balance Sheet shall be
prepared in accordance with generally accepted accounting principles
consistently applied in the United States and the financial reporting
policies and procedures utilized by Seller prior to the Closing ("GAAP").
Seller shall have a period of 30 calendar days after delivery of the
Balance Sheet and the Statement to review such documents and make any
objections it may have in writing to Buyer. If written objections are
delivered to Buyer by Seller within such 30-day period, then Buyer and
Seller shall attempt to resolve the matter or matters in dispute. If no
written objections are made by Seller within such 30-day period, then the
Balance Sheet and the Statement shall be final and binding on the parties
hereto. If disputes with respect to the Balance Sheet or the Statement
cannot be resolved by Buyer and Seller within 30 calendar days after the
delivery of the objections thereto, then, at the request of Buyer or
Seller, the specific matters in dispute shall be submitted to Arthur
Andersen & Co. or such other independent accounting firm as may be approved
by Seller and Buyer (the "Auditors"), which firm shall render its opinion
as to such matters. Based on such opinion, such independent accounting firm
will then send to Seller and Buyer its determination of the specified
matters in dispute, which determination shall be final and binding on the
parties hereto. The fees and expenses of the Auditors shall be borne
one-half by Seller and one-half by Buyer.
(b) The Purchase Price shall be adjusted to reflect the difference, if
any, between the working capital balance of USTMAN as of the opening of
business on the date of Closing after taking into account the transactions
set forth in Section 2.5 (the "Closing Balance") and $424,271 (representing
the working capital balance of USTMAN as of December 31, 1996); provided
that for purposes of this Section 2.4, working capital balance shall mean
the difference between (i) current assets (excluding cash and cash
equivalents) and
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(ii) current liabilities (excluding income tax payable and
amounts due Seth Hunt) each as determined in accordance with GAAP. To
the extent the Closing Balance is greater than $424,271, the Purchase
Price shall be adjusted upward by an amount equal to the difference;
and to the extent the Closing Balance is less than $424,271, the
Purchase Price shall be adjusted downward by an amount equal to the
difference. If the adjustment to Purchase Price is upward, then within
five days following the final determination thereof, Buyer shall pay
Seller by wire transfer in immediately available funds to the account
or accounts designated by Seller the amount by which the Purchase
Price is adjusted upward. If the aggregate adjustment to Purchase
Price is downward, then within five days following the final
determination thereof, Seller shall pay Buyer by wire transfer in
immediately available funds to the account or accounts designated by
Buyer the amount by which the Purchase Price is adjusted downward. Any
amount otherwise payable as a result of an adjustment to the Purchase
Price pursuant to this Section 2.4 may not be offset against any other
obligation (whether such obligation results from the indemnification
provisions set forth in Article VII hereof, the Purchase Note, the
Subsidiary Guaranty, or otherwise), but shall be paid promptly.
Section 2.5 Transactions Prior to Closing.
(a) At or prior to the Closing, Seller shall cause USTMAN to transfer
to Seller all cash and cash equivalents of USTMAN measured as of the close
of business on the day immediately prior to the date of Closing. In the
event that within 60 calendar days following the Closing either party
determines that the amount of such transfer, at the time made, was not
equal to the cash and cash equivalents of USTMAN immediately prior to
Closing, either party shall remit the difference to the other, as
appropriate. If a dispute with respect to the amount of such transfer
cannot be resolved by Buyer and Seller within 30 calendar days after
notice, then, at the request of Buyer or Seller, the specific matters in
dispute shall be submitted to the Auditors, which firm shall render its
opinion as to such matters, which determination shall be final and binding
on the parties. The fees and expenses of the Auditors shall be borne
one-half by Seller and one-half by Buyer. The payment of any amounts
following Closing pursuant to this Section 2.5(a) shall not be subject to
any set off rights of either party. Buyer hereby recognizes and
acknowledges that such transfer shall not affect the Purchase Price, the
Initial Balance, the calculation of the Closing Balance or the calculation
of the Purchase Price adjustment provided for pursuant to Section 2.4.
(b) Prior to Closing, Seller shall eliminate or cause its Affiliates
to eliminate all intercompany account balances between Seller and its
Affiliates, on one hand, and USTMAN on the other.
(c) At or prior to Closing, Seller shall execute assumption agreements
reasonably acceptable to Buyer assuming from USTMAN any and all income
Taxes for the period through the Closing Date.
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ARTICLE III
Closing
The closing of the transactions contemplated hereby (the "Closing") shall
take place at such time and at such date as are mutually agreed to by Buyer and
Seller at the offices of Baker & Botts, L.L.P., Houston, Texas, or New York, New
York but in no event later than May 22, 1997 except as otherwise agreed by
Seller. The date on which the Closing is held is referred to in this Agreement
as the "Closing Date".
ARTICLE IV
Representations and Warranties of Seller
Buyer and Seller acknowledge and agree that Seller has owned the Shares
only since the closing (the "October Closing") on October 25, 1996, of the
acquisition thereof pursuant to the Stock Purchase Agreement dated October 7,
1996 (the "October Agreement"), between Seller and Tanknology Environmental,
Inc. ("TEI"). Notwithstanding the foregoing, Seller represents and warrants to
Buyer the following:
Section 4.1 Organization and Good Standing of the Company. Each of Seller
and USTMAN is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has full
corporate power and authority to own, operate and lease its assets in the manner
currently owned, operated and leased by it and to carry on its business as now
conducted. USTMAN is duly qualified to do business as a foreign corporation in
all jurisdictions in which the nature of its business requires such
qualification and where the failure to do so would have a material adverse
effect on USTMAN. Schedule 4.1 is a complete list of all jurisdictions in which
USTMAN is currently licensed or qualified to transact business as a foreign
entity.
Section 4.2 Corporate Records. Copies of the certificate of incorporation
and by-laws of USTMAN have been delivered to Buyer and are complete and correct
as of the date hereof. The minute book and stock book of USTMAN have been
exhibited to Buyer, and each is a complete and accurate record of the material
corporate actions of the stockholders and directors (and any committees thereof)
of USTMAN through the date hereof and all issuances, cancellations and transfers
of the capital stock thereof.
Section 4.3 Authorization. Seller has full corporate power and authority
under its certificate or articles of incorporation and by-laws, and all
necessary corporate action has been taken to authorize it, to execute and
deliver this Agreement and the exhibits and schedules hereto, to consummate the
transactions contemplated herein and to take all actions required to be taken by
it pursuant to the provisions hereof, and each of this Agreement and the
exhibits hereto constitutes the valid and binding obligation of Seller
enforceable against Seller in accordance with its terms, except as such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
and general principles of equity.
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Section 4.4 Non-Contravention. Except as set forth in Schedule 4.4, neither
the execution and delivery of this Agreement or any documents executed in
connection herewith, nor the consummation of the transactions contemplated
herein or therein, does or will violate, conflict with, result in breach of or
require notice or consent under any Applicable Law, the charter or by-laws of
Seller or USTMAN or any provision of any agreement or instrument to which Seller
or USTMAN is a party or result in the creation of any Lien upon the capital
stock, properties or assets of USTMAN. Except as set forth in Schedule 4.4, no
consent, approval, exemption, authorization or other action of, or notice to or
filing with, any third party, court or administrative or other governmental or
regulatory body is required by Seller or USTMAN to execute, deliver or perform
this Agreement and to consummate the transactions contemplated herein and to
take all actions required to be taken by it pursuant to the provisions hereof.
Section 4.5 Validity. There are no pending or threatened judicial or
administration actions, proceedings or investigations which question the
validity of this Agreement or any action taken or contemplated by Seller in
connection with this Agreement.
Section 4.6 Broker Involvement. Neither Seller nor USTMAN has hired,
retained or dealt with any broker or finder in connection with the transactions
contemplated by this Agreement.
Section 4.7 Litigation. Except as set forth in Schedule 4.7, there is no
investigation, claim or proceeding or litigation of any type pending or
threatened involving Seller or USTMAN or that would have an adverse effect on
USTMAN, and Seller is unaware after reasonable investigation of any judgment,
order, writ, injunction or decree of any court, government, governmental agency
or arbitral tribunal against or involving Seller or USTMAN or that would have an
adverse effect on USTMAN or Buyer.
Section 4.8 Title to Shares. All of the outstanding Shares were duly
authorized for issuance and are validly issued, fully paid and nonassessable,
and none of such Shares are held in treasury. Seller owns, or will own prior to
Closing, the Shares beneficially and of record, free and clear of all Liens, and
such Shares are not, or will not be prior to Closing, subject to any agreements
or understandings with respect to the voting or transfer of any of the Shares.
There are no outstanding subscriptions, options, convertible securities,
warrants or calls of any kind issued or granted by, or binding upon, Seller to
purchase or otherwise acquire or to sell or otherwise dispose of any security of
or equity interest in USTMAN. Seller has the requisite legal right to sell,
assign and transfer the Shares owned by it to Buyer and will, upon delivery of a
certificate or certificates representing such Shares to Buyer pursuant to the
terms hereof, transfer to Buyer title to such Shares, free and clear of any
Liens.
Section 4.9 Contracts and Commitments. Schedule 4.9 lists all agreements,
leases, commitments, contracts, undertakings or understandings, oral or written,
to which USTMAN is a party as of the date of execution of this Agreement,
including but not limited to trademark, trade name or patent license agreements,
service agreements, lease, purchase or sale agreements, supply agreements,
distribution or distributor agreements, purchase orders, customer orders and
equipment rental agreements, that are either material to USTMAN or involve
consideration with a value of $50,000 or more. USTMAN is not in breach of or
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default under any agreement, lease, contract or commitment listed or of a type
required to be listed (without regard to the date thereof) in Schedule 4.9
(collectively, the "Agreements"). Each Agreement is a valid, binding and
enforceable agreement of USTMAN and, to the knowledge of Seller after reasonable
investigation, the other parties thereto, enforceable except as such enforcement
may be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights and
general principles of equity. There has not occurred any breach or default under
any Agreement on the part of the other parties thereto, and no event has
occurred which with the giving of notice or the lapse of time, or both, would
constitute a default under any Agreement. There is no dispute between the
parties to any Agreement as to the interpretation thereof or as to whether any
party is in breach or default thereunder, and no party to any Agreement has
indicated its intention to, or suggested it may evaluate whether to, terminate
any Agreement. USTMAN is not a party to any covenant or obligation of any nature
limiting the freedom of USTMAN to compete in any line of business after the
Closing. No notice has been given under any lease to extend the term hereof
beyond its current term.
Section 4.10 Taxes.
(a) USTMAN and any affiliated, combined or unitary group of which
USTMAN is or was a member has (i) timely (taking into account any
extensions) filed all Tax Returns required to be filed or sent by or with
respect to it in respect of any Taxes, (ii) timely paid all Taxes
(including estimated Taxes) that are due and payable for which USTMAN may
be liable, (iii) established reserves that are adequate for the payment of
all Taxes not yet due and payable with respect to the results of operations
of USTMAN through the Closing Date and (iv) complied in all respects with
all applicable laws, rules and regulations relating to the payment and
withholding of Taxes and has in all respects timely withheld from employee
wages and paid over to the proper taxing and other governmental authorities
all amounts required to be so withheld and paid over, based on the manner
in which USTMAN has classified its employees under the Fair Labor Standards
Act and Department of Transportation regulations.
(b) Schedule 4.10 sets forth any affiliated, consolidated, combined,
unitary or similar group Tax Return in which USTMAN is or has been a member
or is or has joined in the filing. Except to the extent being contested in
good faith, all deficiencies asserted as a result of such examinations have
been paid, fully settled or adequately provided for in accordance with GAAP
as reflected in Seller's most recent audited financial statements. No Tax
audits or other administrative proceedings or court proceedings are
presently pending with regard to any Taxes for which USTMAN would be
liable, and no deficiency for any such Taxes has been proposed, asserted or
assessed pursuant to such examination against USTMAN by any taxing
authority with respect to any period.
(c) USTMAN has not executed or entered into with the IRS or any other
taxing authority (i) any agreement or other document extending or having
the effect of extending the period for assessments or collection of any Tax
for which USTMAN would be liable or (ii) a closing agreement pursuant to
Section 7121 of the Code that relates to the assets or operations of USTMAN
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other than the items noted on Schedule 4.10. There are no Tax liens upon
any assets of USTMAN.
(d) USTMAN has not made an election under Section 341(f) of the Code
or agreed to have Section 341(f)(2) of the Code apply to any disposition of
a subsection (f) asset (as such term is defined in Section 341(f)(4) of the
Code) owned by USTMAN.
(e) USTMAN is not a party to, is bound by or has any obligation under
any Tax sharing agreement or similar agreement or arrangement.
Section 4.11 Title to Properties. Except as set forth in Schedule 4.11
hereto, USTMAN has good and indefeasible title to all of its assets, free and
clear of all Liens.
Section 4.12 Trademarks, Trade Names and Intellectual Property. Schedule
4.12 contains an accurate and complete list of (a) all patents, pending patent
applications and invention memoranda owned by USTMAN or relating to the Business
of USTMAN, (b) all registered United States and foreign trademarks, trade names
and logos owned or used by USTMAN and all registrations thereof and (c) all
unregistered United States and foreign trademarks, trade names and logos used by
USTMAN. USTMAN has the right to use all trademarks, trade names, logos, patents,
pending patent applications and invention memoranda referred to herein. Except
as expressly set forth in Schedule 4.7 hereto, there is no pending or threatened
action or claim that would impair any such right. Except as set forth in
Schedule 4.12 hereto, USTMAN is the sole and exclusive owner of, with all right,
title and interest in and to, each item described in Schedule 4.12 and has sole
and exclusive rights to the use thereof or the material covered thereby.
Section 4.13 Financial Records; Budget. The unaudited financial statements
of USTMAN as of and for the year ended December 31, 1996 as set forth on
Schedule 4.13 (the "Financial Statements") are each accurate, complete, true and
correct in all material respects, were prepared in accordance with GAAP (except
as set forth therein), and fairly present in all material respects the financial
condition and results of operations of USTMAN.
Section 4.14 Condition of Assets and Inventory. All the assets of USTMAN
are in good, serviceable condition and fit for the particular purposes for which
they are used in the business of the owner thereof, subject only to normal
maintenance requirements and normal wear and tear reasonably expected in the
ordinary course of business. All items of inventory of USTMAN are merchantable
or (in the case of raw materials, supplies and work in process) suitable and
useable for the production or completion of merchantable products, for sale in
the ordinary course of business as first quality goods at mark-ups consistent
with past practice, none of such items is below standard quality, obsolete or
obsolescent, and each item is reflected in the Financial Statements on the basis
of a physical count and is valued at the lower of cost or market in accordance
with GAAP (including any required reduction for impaired value or slow-moving
inventory). Such inventory includes a sufficient but not an excess quantity of
each type of such inventory to meet the normal requirements of USTMAN.
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Section 4.15 Liabilities. Except as set forth in Schedule 4.15 or in the
financial statements and notes thereto referred to in Section 4.13, there is no
existing, contingent or, to Seller's knowledge after reasonable investigation,
material threatened liability, obligation, lien or claim of any nature
(absolute, accrued, contingent or otherwise) that relates to or has been or may
be asserted against USTMAN.
Section 4.16 Employees and Related Matters.
(a) Set forth on Schedule 4.16 is a complete list of all employees of
USTMAN, listing the title or position held, base salary, any commissions or
other compensation paid or payable in 1996 as reflected on such Schedule,
all employee benefits received by such employees and any other terms of any
oral or written agreement between any such employee and USTMAN. Seller has
heretofore delivered to Buyer true and correct copies of each management or
employment contract or contract for personal services and a complete
description of any other understanding or commitment between USTMAN (or
Seller on behalf of USTMAN) and any officer, consultant, director,
employee, independent contractor or other person or entity.
(b) USTMAN is not a party to any collective bargaining agreement or
labor contract.
(c) Based on the assumption that Buyer intends to retain all of the
current employees of USTMAN, USTMAN has taken all necessary actions to
comply with the Worker Adjustment and Retraining Notification Act (the
"WARN Act") through the Closing Date, to the extent it is subject to such
act, and Buyer shall not have any disclosure or announcement obligations
under the WARN Act as a result of the transaction contemplated by this
Agreement.
Section 4.17 No Material Change. There has been no material adverse change
in the business, results of operations, assets or financial position of USTMAN
from December 31, 1996 to and including the Closing Date, and no event has
occurred which could be expected to lead to or cause such a material adverse
change.
Section 4.18 Compliance With Law. USTMAN is not in violation of any
provision of Applicable Law, including any Environmental Law, and USTMAN has not
received any notice of any alleged violation of such Applicable Law, which in
either case would result in a material adverse effect on USTMAN.
Section 4.19 Tangible Personal Property. Except for the Excluded Assets,
all of the fixtures, machinery and equipment reflected in the Financial
Statements and/or used in connection with the Business of USTMAN are in the
possession and under the operating control of USTMAN ("Tangible Personal
Property"). Except as set forth in Schedule 4.19 hereto, no item of Tangible
Personal Property requires repairs in excess of $2,500 to be in good,
serviceable condition and fit for the particular purpose for which it is
currently used, subject only to normal maintenance requirements and normal wear
and tear reasonably expected in the ordinary course of business.
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Section 4.20 Insurance. Schedule 4.20 contains a list of all insurance
policies of Seller or USTMAN or relating to the conduct of the Business and the
status of prepayments. Seller has heretofore delivered to Buyer a copy of all
such policies. Such policies are in full force and effect, and Seller and USTMAN
are not in default under any of them.
Section 4.21 Government Licenses, Permits and Related Approvals. Schedule
4.21 sets forth a list of all Permits required for the conduct of Business by
USTMAN, all of which are in full force and effect and are not being violated in
any manner which would have a material adverse effect on USTMAN.
Section 4.22 Distributed Products. Schedule 4.22 sets forth a complete
listing of all products (a) distributed by USTMAN (and the manufacturer thereof
and the person, if different, for whom USTMAN distributes such product) or (b)
manufactured or sold by USTMAN and distributed by others (and the name of such
distributor). Such Schedule also sets forth the terms of each such distribution
arrangement. USTMAN has full right to distribute all products referred to in
clause (a) of this Section.
Section 4.23 Safety Reports. Schedule 4.23 sets forth a complete listing of
all insurance loss runs, worker's compensation reports and claims, safety
citations and reports, OSHA reports and all documents respecting USTMAN and
relating to any of the foregoing since July 1, 1993.
Section 4.24 Transactions with Certain Persons. Except as set forth in
Schedule 4.24, since October 25, 1996, USTMAN has not, directly or indirectly,
purchased, leased or otherwise acquired any property or obtained any services
from, or sold, leased or otherwise disposed of any property or furnished any
services to, or otherwise dealt with (except with respect to remuneration for
services rendered as a director, officer or employee of USTMAN), in the ordinary
course of business or otherwise, with a value of or in a transaction or series
of transactions with a value of $60,000 or more, (a) any officer, director or
shareholder of Seller or any Affiliate thereof other than USTMAN or (b) any
person, firm or corporation which, directly or indirectly, alone or together
with others, controls, is controlled by or is under common control with Seller
or any shareholder thereof. Except as set forth in Schedule 4.24, USTMAN does
not owe any amount to, or have any contract with or commitment to, any of its
shareholders, directors, officers, employees or consultants (other than
compensation for current services not yet due and payable and reimbursement of
expenses arising in the ordinary course of business not in excess of $1,000 in
the aggregate), and none of such persons owes any amount to USTMAN.
Section 4.25 Accounts Receivable. All the accounts receivable of USTMAN are
valid, genuine and subsisting, arise out of bona fide sales and deliveries of
goods, performance of services or other business transactions in the ordinary
course of business, are owned free and clear and not subject to any Lien, and
are current and collectible net of any reserves shown on the Financial
Statements as of December 31, 1996 (which reserves are adequate and were
calculated consistently with past practice).
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Section 4.26 Studies, Etc. Schedule 4.26 sets forth a complete list of all
studies, reports, plans, analyses or similar documents of a material nature
(whether prepared by employees of Seller or USTMAN or others) in the possession
or control of Seller or USTMAN thereof relating to safety, the environment,
Hazardous Material, intellectual property, markets, competitors, strategic
planning, product liability, warranties or otherwise relating directly to
USTMAN.
Section 4.27 Disclosure. All schedules to this Agreement are complete and
accurate in all material respects or will be on the Closing Date. No
representation or warranty by Seller in this Agreement or in any schedule or
exhibit to this Agreement, or in any statement or certificate or other document
furnished to Buyer by Seller or any representative of Seller, contains or will
contain any untrue statement of a material fact or omits or will omit a material
fact necessary to make the statements therein not misleading. The information
concerning Seller in Seller's filings, reports and submissions under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), does not
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements therein not misleading.
Section 4.28 Employee Benefits.
(a) For purposes of Section 4.28, all references to Seller shall be
deemed to refer to Seller, USTMAN and any trade or business, whether or not
incorporated, that together with Seller or USTMAN would be deemed or
treated as a "single employer" within the meaning of Section 4001 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") or
Code Section 414.
The term "Seller Plan" shall mean any stock purchase, stock option,
pension, profit-sharing, retirement, bonus, deferred compensation,
incentive compensation, commission, severance or termination pay,
hospitalization, medical, dental, disability, life or other insurance, or
supplemental unemployment benefits plan or agreement or policy or contract
or other arrangement that is or ever has been maintained or contributed to
by Seller for the purpose of providing employment-related compensation or
benefits to any current or former officer, consultant, director, annuitant,
employee, retiree or independent contractor of Seller or members of their
respective families (other than directors' and officers' liability
policies), whether or not insured, including without limitation "employee
benefit plans" as defined in ERISA and the rules and regulations
thereunder.
The term "USTMAN Plan" shall mean any Seller Plan that formerly
provided, provides or is intended to provide compensation or benefits to
any person or member of a person's family as a consequence of that person's
current or former relationship to USTMAN.
(b) As of the Closing Date, no Seller Plan is or has been (i) covered
by Title IV of ERISA, (ii) subject to the minimum funding requirements of
Section 412 of the Code, (iii) a "multi-employer plan" as defined in
Section 3(37) of ERISA, (iv) subject to Section 4063 or 4064 of ERISA, or
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or (v) a voluntary employees' beneficiary association within the mean-
ing of Code Section 501(c)(9).
(c) Seller has no commitment or obligation to establish or adopt any
new or additional plans or other arrangements that would constitute an
USTMAN Plan if adopted, or to increase materially the benefits under any
existing USTMAN Plan. Schedule 4.28 sets forth true and correct copies of
the following:
(i) each written USTMAN Plan and all amendments thereto as of the
date hereof;
(ii) a complete written description of each other USTMAN Plan;
(iii) all current summary plan descriptions provided to employees
regarding the USTMAN Plans;
(iv) each trust agreement and annuity contract (or any other
funding instruments), and each insurance contract, pertaining to any
of the USTMAN Plans, including all amendments to such documents to the
date hereof;
(v) the most recent IRS Form 5500 for any USTMAN Plan and
schedules thereto; and
(vi) the most recent determination letter issued by the IRS with
respect to any USTMAN Plan qualified under Section 401(a) of the Code.
(d) Each USTMAN Plan is in compliance with the provisions of all
applicable laws, rules and regulations, including, without limitation,
ERISA and the Code. No person has engaged in any prohibited transaction
(within the meaning of Section 4975 of the Code or Section 406 of ERISA)
that could subject USTMAN to a liability.
(e) All contributions and premiums required of USTMAN (or of Seller on
behalf of USTMAN) by any legal requirement or by the terms of any Seller
Plan or any contract relating thereto have been timely made (without regard
to any waivers granted with respect thereto) or accrued. All obligations of
USTMAN (and of Seller on behalf of USTMAN) with respect to each Seller Plan
have been paid or performed.
(f) Except as provided in Schedule 4.28, no Seller Plan nor USTMAN
Plan provides for medical, life insurance or health benefits or death
benefits after an employee's termination of employment (including
retirement) except for continuation coverage required pursuant to Section
4980B of the Code and Part 6 of Title I of ERISA and the regulations
thereunder.
(g) USTMAN has no obligation to make any payments that would be
"excess parachute payments" under Section 280G of the Code. Except as set
forth on Schedule 4.24, consummation of the transactions contemplated by
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this Agreement will not (A) entitle any current or former employee of
USTMAN to severance pay, employment compensation or any other payment,
benefit or award (whether under an USTMAN Plan or otherwise) or (B)
accelerate the time of payment or vesting, or increase the amount of any
benefit, award (including stock options, restricted stock and similar
awards) or compensation due any such employee or former employee.
(h) There are no pending, threatened or anticipated claims or
proceedings against any USTMAN Plan, the assets of any USTMAN Plan or
USTMAN, or the plan administrator or fiduciary of any USTMAN Plan with
respect to the operation of any such plan (other than routine, uncontested
benefit claims), and there are no facts or circumstances that could form
the basis for any such claim or proceeding.
Section 4.29 Environmental Matters.
(a) The operations of USTMAN have been and, as of the Closing Date,
will be, in compliance with all Environmental Laws in all material
respects;
(b) USTMAN has obtained and will, as of the Closing Date, maintain all
Permits and has made and will, as of the Closing Date, make all material
filings, reports and notices required under applicable Environmental Law in
connection with the operations of their respective businesses;
(c) As of the date hereof, USTMAN is not subject to any outstanding
written orders, contracts or agreements with any governmental entity or
other person respecting (i) Environmental Law, (ii) Remedial Action, (iii)
any Release or threatened Release of Hazardous Material or (iv) an
assumption of responsibility for environmental claims of another entity;
(d) USTMAN has not received any written communication alleging, with
respect to any such party, a material violation of or material liability
under any Environmental Law or requesting, with respect to any such party,
information with respect to an investigation pursuant to CERCLA or any
other Environmental Law;
(e) USTMAN has no material contingent liability in connection with the
Release of any Hazardous Material into the indoor or outdoor environment
(whether on-site or off-site) or employee or third-party exposure to
Hazardous Materials;
(f) The operations of USTMAN involving the generation, transportation,
treatment, storage or disposal of hazardous waste, as defined and regulated
under 40 C.F.R. parts 260-270 or any state equivalent, are in compliance
with applicable Environmental Laws in all material respects; and
(g) Except as described on Schedule 4.29, there is not now, nor, to
the best knowledge of Seller as of the date hereof, or has there ever been,
on or in any property owned, operated, leased or under option by, USTMAN or
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for which USTMAN has assumed responsibility for material environmental
claims, any of the following: (i) any underground storage tanks or surface
impoundments, (ii) any on-site disposal of solid waste or Hazardous
Materials, (iii) any asbestos-containing materials or (iv) any
polychlorinated biphenyls.
Section 4.30 Knowledge of Seller. Notwithstanding (but without limiting)
the other representations and warranties of Seller set forth in this Agreement,
except for the liabilities of USTMAN to Seth Hunt, Seller has no actual
knowledge of any error, inaccuracy, breach or misrepresentation of any
representation or warranty relating to USTMAN contained in the October
Agreement.
Section 4.31 Conduct of the Business. Since December 31, 1996, USTMAN has
complied with the provisions set forth below:
(a) USTMAN has operated its Business in the ordinary course;
(b) Except as set forth in Schedule 4.31, neither Seller nor USTMAN
has (i) granted or agreed to grant any bonuses to any employee, officer,
director, representative or agent of USTMAN, (ii) granted any general
increase in the rates of salaries or compensation of employees, officers,
directors, representatives or agents of USTMAN or any material specific
increase to any employee, officer, director, representative or agent of
USTMAN, (iii) provided for any new pension, retirement or other employment
benefits to any employee, officer, director, representative or agent of any
of USTMAN or any increase in any existing benefits, (iv) terminated or
amended in any material respect or provide for any material increase in
benefits under any Seller Plan or (v) executed any employment agreement,
severance arrangement, consulting arrangement, sales agency agreement,
representation agreement or distribution agreement with any employee,
officer, director, representative or agent of USTMAN;
(c) USTMAN has not amended its certificate of incorporation or by-laws
and neither Seller nor USTMAN has entered into any merger or consolidation
agreement involving USTMAN or its assets;
(d) Neither Seller nor USTMAN has authorized for issuance, issued,
sold, delivered or agreed or commited to issue, sell or deliver (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any capital stock of any
class or any other securities or equity equivalents of USTMAN or amended
any of the terms of any such securities or agreements;
(e) USTMAN has not sold, assigned or disposed of any of its material
assets or properties, tangible or intangible, or incured or assumed any
liabilities or entered into any sale/leaseback or similar transaction,
except for sales and dispositions made, or liabilities incurred, in the
ordinary course of business consistent with past practices;
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(f) Seller has used its best efforts to (i) maintain and preserve the
Business, (ii) retain USTMAN's employees and (iii) maintain USTMAN's
relationships with customers, suppliers and others;
(g) USTMAN has not assumed, guaranteed, endorsed or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person or made any loans, advances or capital
contributions to or investments in any other person, with the exception of
certain purchase orders and related cash deposits with Caldwell Systems;
and
(h) Seller and USTMAN have not implemented or adopted (i) any change
in its accounting methods or principles or the application thereof
(including depreciation lives) or (ii) any material change in its tax
methods or principles or the application thereof (including depreciation
lives).
ARTICLE V
Representations and Warranties of Buyer
Buyer represents and warrants to Seller the following:
Section 5.1 Corporate Status and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of California,
with full corporate power and authority under its articles certificate of
incorporation and by-laws to conduct its business as the same exists on the date
hereof and on the Closing Date.
Section 5.2 Authorization. Buyer has full corporate power and authority
under its articles of incorporation and by-laws, and all necessary corporate
action has been taken to authorize it, to execute and deliver this Agreement,
the Purchase Note and the exhibits and schedules hereto, to consummate the
transactions contemplated herein and to take all actions required to be taken by
it pursuant to the provisions hereof or thereof, and each of this Agreement and
the exhibits hereto constitutes the valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms, except as such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
and general principles of equity.
Section 5.3 Non-Contravention. Neither the execution and delivery of this
Agreement and the schedules and exhibits hereto, nor the consummation of the
transactions contemplated herein or therein, does or will violate, conflict with
or result in breach of or require notice or consent under any Applicable Law,
the charter or by-laws of Buyer or any provision of any agreement or instrument
to which Buyer is a party or result in the creation of any Lien upon the capital
stock, property or assets of Buyer, such that there would be a material adverse
effect on any benefit to Seller hereunder. Except as set forth in Schedule 5.3,
no consent, approval, exemption, authorization or other action of, or notice to
or filing with, any third party, court or administrative or other governmental
or regulatory body is required by Buyer to execute, deliver or perform this
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Agreement and to consummate the transactions contemplated herein and to take all
actions required to be taken by it pursuant to the provisions hereof.
Section 5.4 Validity. There are no pending or threatened judicial or
administrative actions, proceedings or investigations which question the
validity of this Agreement or any action taken or contemplated by Buyer in
connection with this Agreement.
Section 5.5 Broker Involvement. Buyer has not hired, retained or dealt with
any broker or finder in connection with the transactions contemplated by this
Agreement.
Section 5.6 Litigation. There is no investigation, claim or proceeding or
litigation of any type pending or threatened involving Buyer and Buyer is
unaware of any judgment, order, writ, injunction or decree of any court,
government or governmental agency or arbitral tribunal against or involving
Buyer, that would have a material adverse effect on any benefit to Seller
hereunder.
Section 5.7 Investment Intention. The Shares are being purchased by Buyer
for investment purposes, and not with a view to, or for resale in connection
with, the distribution or other disposition thereof.
Section 5.8 Disclosure of Information. Buyer agrees and acknowledges that
it and its employees, officers and agents have been permitted full and complete
access to the books and records, plants, facilities, equipment, tax returns,
contracts, inventories and other assets and information of USTMAN which it and
its employees, officers and agents have desired to review. Buyer further
acknowledges that it has conducted such investigation of USTMAN, its assets,
liabilities, operations and financial conditions, as it has deemed necessary and
advisable for purposes of determining to enter into this Agreement. Except to
the extent of the express representations, warranties and agreements contained
in this Agreement, Buyer is purchasing the Shares in reliance upon its own
investigation of USTMAN. Buyer agrees and acknowledges that it is experienced in
the statistical inventory reconciliation business and has the knowledge and
ability to conduct a full investigation of USTMAN and to evaluate USTMAN's
business, operations, financial conditions, assets and liabilities. Buyer
expressly represents and warrants that it has not relied on any projections or
representations (oral or written) except as set out herein, which Buyer has
obtained from Seller or USTMAN and/or any of their respective directors,
officers, employees or agents.
Section 5.9 Financial Condition. At Closing, Buyer's financial condition
will be adequate to bear the economic risks of this acquisition. Except as set
forth on Schedule 5.9, at Closing Buyer will be in compliance with all financial
and other covenants related to all of its outstanding credit agreements
including the facilities being utilized to consummate this transaction and will
not be in default on any credit agreement or facility.
Section 5.10 Restricted Securities. Buyer understands that the Shares are
characterized as "restricted securities" under the United States federal
securities laws and that under such laws and applicable rules and regulations
promulgated thereunder the Shares may be resold without registration under the
Securities Act of 1933, as amended (the "Act") only in certain circumstances.
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Buyer understands that the certificates evidencing the Shares may contain a
legend restricting transfer as provided under the Act and applicable rules and
regulations promulgated thereunder.
ARTICLE VI
Additional Agreements and Covenants
Section 6.1 Other Offers. From and after the date hereof until Closing,
Seller and each of its officers, directors, stockholders, employees, affiliates,
representatives or agents shall not, directly or indirectly, (a) solicit, enter
into or conduct discussions relating to, initiate or knowingly encourage any
offer or proposal for, or any indication of interest in, directly or indirectly,
a merger or business combination involving USTMAN or the acquisition of an
equity interest in, or a substantial portion of the assets of, USTMAN or (b)
unless required by law, regulation or judicial compulsion, disclose any
nonpublic information relating to USTMAN or the Business of USTMAN, or afford
access to the properties, books or records of USTMAN, to any person.
Section 6.2 Public Announcements. Prior to Closing, neither party shall
make any public announcement, issue any press release, mention the transaction
provided for herein to any analyst or any stockholder who is not also an officer
or director of either party, or otherwise reveal the existence of this Agreement
or the transaction provided for herein without the prior written consent of the
other party, unless, on written advice of counsel, management of the releasing
entity determines the release is required to comply with applicable federal
securities laws. In the event of a required release, the releasing party shall
deliver a copy of the written advice of counsel and the proposed release to the
other party two business days prior to an intended release.
Section 6.3 Further Assurances. Seller and Buyer each shall execute,
acknowledge and deliver or cause to be executed, acknowledged and delivered to
Buyer or Seller, as the case may be, such assignments or other instruments of
transfer, assignment and conveyance, in form and substance reasonably
satisfactory to Buyer or Seller, as the case may be, on advice of their
respective counsel, as shall be necessary to vest in Buyer all of the right,
title and interest in and to the Shares free and clear of all liens, charges,
encumbrances, rights of others, mortgages, pledges or security interests, and
any other document reasonably requested by Buyer in connection with this
Agreement. Seller and Buyer each agree that, from time to time, whether before,
at or after the Closing Date, it will execute and deliver such further
instruments and take such other action as may be reasonably necessary to carry
out the purposes and intent of this Agreement.
Section 6.4 Covenant Against Competition.
(a) As an essential consideration for the obligations of the parties
under this Agreement, Buyer and Seller hereby agree and covenant, subject
to Section 6.4(c) below, as follows:
(i) for a period of five years following the Closing Date, in the
United States, Seller and/or its Affiliates shall not develop or
license software that provides Statistical Inventory Reconciliation
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certified pursuant to protocols of the United States Environmental
Protection Agency ("Certified SIR"), nor will it enter into joint
ventures, affiliations or other agreements with third parties to
develop, market or sell Certified SIR; provided, that this provision
shall not restrict Seller and/or its Affiliates from (A) developing,
marketing or distributing automatic tank gauges, tank level monitors
or other equipment based at an underground storage tank site that
offers a Certified SIR product as an integral component ("Imbedded
SIR"), (B) becoming affiliated or entering into joint ventures with
any other person selling and/or distributing products with Imbedded
SIR, (C) remotely monitoring products with Imbedded SIR or (D)
developing products for inventory purposes not associated with
Certified SIR. In the event Seller and/or its Affiliates develops any
products pursuant to (A) above, Seller will give Buyer the first right
of refusal to license the Certified SIR system to be imbedded in such
products and/or for any statistical evaluation services in connection
therewith.
(ii) For a period of five years after the Closing Date, in the
United States, Buyer and/or its Affiliates shall not own or operate
vehicles for servicing underground storage tank sites ("Site
Services"), other than for the limited purpose of installing or
marketing in-tank gauges which are manufactured or distributed by
Buyer; provided that this provisions shall not restrict Buyer and/or
its Affiliates from (A) marketing or distributing any Site Services of
any person other than Buyer or an Affiliate of Buyer, (B) becoming
affiliated or entering into joint ventures with any other person which
owns or operates vehicles for Site Services or (C) operating remote
monitoring systems and utilizing any other person's Site Services for
responses.
(b) If either party believes the other party or any Affiliate of
the other party has violated the provisions of Section 6.4(a), such
party shall have the right to seek relief from any court of competent
jurisdiction. The parties acknowledge that money damages alone will
not provide adequate compensation in the event of a breach of the
covenants of this Section. Therefore, the parties agree that in
addition to all remedies available at law, in equity or under this
Agreement, the non-breaching party shall be entitled to injunctive
relief for the enforcement of this covenant. The parties agree that
the covenants in this Section are reasonable with respect to their
duration, scope and geographical area. If, at the time of enforcement
of this Section, a court should hold that the restrictions herein are
unreasonable under the circumstances then existing or otherwise, the
parties agree that the maximum duration, scope or geographical area
legally permissible under such circumstances will be substituted for
the duration, scope or area stated herein.
(c) Notwithstanding Section 6.4(a)(ii):
(i) For a period of twelve months after the Closing Date,
Toxguard Systems, Inc. a Nevada corporation and a majority-owned
subsidiary of Buyer ("Toxguard"), shall not be prohibited by the
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terms of this Agreement from conducting its business as conducted
at the Closing Date, provided that Toxguard shall not own or
operate any vehicles for the provision of Site Services not owned
and operated at the Closing Date except as specifically permitted
pursuant to Section 6.4(a)(ii).
(ii) Seller hereby recognizes and acknowledges that Buyer is
considering the acquisition of the business (the "Target
Business") of the person set forth on Schedule 6.4 ("Target"),
either through the purchase of substantially all of the assets or
all of the issued and outstanding stock of Target, and that
certain activities in connection with the Target Business would
be in violation of Section 6.4(a)(ii) if such activities were
conducted by Buyer or an Affiliate of Buyer. Seller hereby
consents to the acquisition by Buyer of the Target Business and
agrees that the provisions of Section 6.4(a)(ii) shall not
restrict Buyer or Target from conducting the Target Business as
conducted at the date of the acquisition of the Target Business
by Buyer (the "Target Acquisition Date") for a period of 3 years
from the Target Acquisition Date; provided that neither Buyer nor
Target shall (A) enter into any contracts (not including any
renewals or extensions of existing contracts) for the provision
of Site Services after the Target Acquisition Date, (B) provide
Site Services in any geographical area not served prior to the
date of Closing or (C) own or operate any vehicles for the
provision of Site Services in addition to the number of vehicles
so owned and operated at the date of Closing, in any case whether
in connection with the Target Business or otherwise.
Section 6.5 Governmental Filings. As promptly as practicable after the
execution of this Agreement, each party shall, in cooperation with the other,
file any reports or notifications that may be required to be filed by it under
applicable law and shall furnish to the other all such information in its
possession as may be necessary for the completion of the reports or
notifications to be filed by the other.
Section 6.6 Access to Information. Prior to Closing, Buyer may make such
investigation of the business and properties of USTMAN as Buyer may desire and,
upon reasonable notice, Seller and USTMAN shall give to Buyer and its counsel,
accountants and other representatives reasonable access, during normal business
hours throughout the period prior to the Closing, to the property, books,
commitments, agreements, records, files and personnel of Seller and USTMAN
related to USTMAN, and Seller shall furnish to Buyer during that period all
copies of documents and information concerning the Business of USTMAN as Buyer
may reasonably request, subject to applicable law. Buyer shall hold, and shall
cause its counsel, accountants and other agents and representatives to hold, all
such information and documents in confidence. Seller will cooperate with Buyer's
transition planning for the acquisition by providing access to key executives of
Seller and USTMAN.
Section 6.7 Use of Name. Prior to or at Closing, Seller shall eliminate,
and cease and desist from, any use of any designation indicating an affiliation
with USTMAN, and immediately following Closing, Buyer shall cause USTMAN to
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eliminate, and cease and desist from, any use of any designation indicating an
affiliation with Seller.
Section 6.8 Other Action. Each of the parties shall use its best efforts to
cause the fulfillment at the earliest practicable date but, in any event, prior
to the Closing Date of all conditions to their respective obligations to
consummate the transactions under this Agreement.
Section 6.9 Employee Benefit Matters. Effective as of the Closing Date,
Seller shall amend all USTMAN Plans except stock options plans of Seller to
terminate the participation of USTMAN therein, and shall further amend Seller's
defined contribution USTMAN Plans except stock option plans of Seller to provide
for full vesting of the accounts of all current and former employees of USTMAN
participating therein.
Section 6.10 Cooperation with Financings and Financial Reporting. Seller
acknowledges and understands that in the event Buyer conducts certain offerings
of its securities or is subject to reporting requirements under the Exchange
Act, Buyer may be required to obtain certain information relating to Seller,
USTMAN or the Business, including, but not limited to, audited or unaudited
financial statements of USTMAN, and disclose such information in registration
statements and other documents filed with the Securities and Exchange Commission
under the federal securities laws or in disclosure documents given investors in
certain securities offerings. Seller agrees to use its best efforts to cooperate
fully and promptly, and shall cause its Affiliates, accountants, counsel and
other agents and representatives to cooperate fully and promptly, with Buyer in
connection therewith.
Section 6.11 Consents. Each party will cooperate with the other and
proceed, as promptly as is practicable, to seek to obtain all necessary consents
and approvals set forth in Schedule 4.4 or Schedule 5.3, and to endeavor to
comply with all other legal or contractual requirements for or preconditions to
the execution and consummation of this Agreement.
Section 6.12 Tax Certificate. On or before the Closing Date, Seller will
provide to Buyer a certificate ("Tax Certificate") that sets forth the following
information as of the date for each particular item of information which is as
close to the Closing Date as is reasonably practicable:
(a) The following information shall be provided in accordance with the
reporting of such information on the most recently filed Tax Return for
each such Tax:
(i) The adjusted basis for Tax purposes of the assets of USTMAN,
and
(ii) The amounts of the net operating loss, net capital loss,
foreign Tax credit and Tax credit carry forwards, the overall foreign
losses and the foreign Taxes paid or accrued in excess of the
applicable foreign Tax credit limitations of or allocable to USTMAN;
(b) All current consents and elections with respect to Taxes of or
with respect to USTMAN that have been filed with any taxing authority;
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(c) All taxable periods for which the income and franchise Tax Returns
of or with respect to USTMAN are open; and
(d) All Tax partnerships in which USTMAN is a member.
Section 6.13 Certain Tax Elections. Buyer and Seller shall make a timely
and effective joint election (the "Section 338(h)(10) Election") under Section
338(h)(10) of the Code for USTMAN with respect to the purchase of the Shares.
Moreover, Buyer shall prepare completed Forms 8023-A for USTMAN providing for
the Section 338(h)(10) Elections. If Buyer and Seller disagree as to any
information (including but not limited to the valuation of any asset) required
to be provided on any Form 8023-A (including any schedule attached thereto), the
specific matters in dispute shall be submitted to the Auditors, which firm shall
render its opinion as to such matters. Based on such opinion, such independent
accounting firm will then send to Seller and Buyer its determination of the
specified matters in dispute, which determination shall be final and binding on
the parties hereto. The parties agree to represent such information on Form
8023-A consistent with such Auditors' opinion. The fees and expenses of the
Auditors shall be borne one-half by Seller and one-half by Buyer. At the Closing
Date or as soon as practicable thereafter, Seller and Buyer will jointly execute
such Forms 8023-A, and thereafter Buyer, on behalf of Buyer and Seller, will
timely file such Forms 8023-A with the relevant taxing authority and will
provide proof of such filing to Seller.
Section 6.14 Liability for Taxes.
(a) Seller shall be liable for, and shall defend, indemnify and hold
Buyer harmless against, (i) any Taxes incurred by USTMAN for any taxable
period ending on or before the Closing Date, (ii) any income Taxes caused
by, or arising from, the Section 338(h)(10) Election, (iii) any transfer or
sales Taxes arising from the transactions contemplated in this Agreement,
other than transfer or sales Taxes that are imposed because of the Section
338(h)(10) Election if such Taxes are in excess of the transfer or sales
Taxes that would have been imposed if the Section 338(h)(10) Election had
not been made, (iv) any Taxes imposed with respect to any payment from
Seller under this sentence and (v) any Taxes for a Consolidated Group with
Seller of which USTMAN is determined to be a part. Any Tax refunds received
by Buyer relating to the Tax liability of USTMAN for a period ending on or
before the Closing Date shall be the property of Seller other than Tax
refunds generated because of a Buyer tax attribute. Seller will ensure that
with respect to any Tax partnership listed on the Tax Certificate, the
appropriate party has made or will make a valid election under Section 754
of the Code with respect to each such Tax partnership in the time and in
the manner provided in Regulation ss. 1.754-1(b) such that each such
election is in effect for the taxable year of each such Tax partnership
that includes the Closing Date.
(b) Seller shall prepare, or cause USTMAN to prepare, and submit to
Buyer all Tax Returns of USTMAN (and any Tax partnerships in which (i)
USTMAN owns an interest and (ii) Seller or USTMAN has responsibility for
preparing and filing partnership Tax Returns) for Taxes for any taxable
period ending on or before the Closing Date and for which the due date of
any such Tax Return is subsequent to the Closing Date. Any such Tax Return
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shall be prepared on a basis consistent with Tax Returns prepared with
respect to USTMAN for prior taxable periods, unless otherwise required by
law, and shall be submitted to Buyer not later than (i) in the case of any
United States federal income Tax Return, 60 days before the due date of
such Tax Return, and (ii) in the case of any other Tax Return, 30 days
before the due date of such Tax Return. Seller is responsible for filing
any such Tax Return and for preparing and filing any other Tax Return of
USTMAN for Taxes for any taxable period ending on or before the Closing
Date.
(c) Buyer and its Affiliates, including USTMAN, are responsible for
preparing and filing with the appropriate taxing authorities all Tax
Returns which relate to the Taxes of USTMAN other than those described in
Section 6.14(c), except that Tax Returns which relate to a Post-Closing
Period shall be completed by Buyer. Seller shall cooperate with Buyer and
shall make available all necessary records and timely take all action
necessary to allow Buyer to file, or prepare and file, as the case may be,
the Tax Returns described in this paragraph (including, without limitation,
providing or causing to be provided to Buyer any powers of attorney which
Buyer shall request for purposes of filing any such Tax Returns). Such Tax
Returns shall be prepared on a basis consistent with those prepared with
respect to USTMAN for taxable periods ending on or before the Closing Date,
unless otherwise required by law.
Section 6.15 Cooperation and Exchange of Information. The parties will
provide each other with such cooperation and information as they may reasonably
request of each other in preparing or filing any Tax Return, amended Tax Return
or claim for refund, in determining a liability or a right to refund or in
conducting any audit or other proceeding, in respect of Taxes imposed on the
parties or their respective Affiliates. USTMAN and each party will preserve and
retain all Tax Returns, schedules, work papers and other documents relating to
any such Tax Returns, claims, audits or other proceedings until the expiration
of the statutory period of limitations (including extensions) of the taxable
periods to which such documents relate and until the final determination of any
payments which may be required with respect to such periods under this Agreement
and shall make such documents available to representatives of Seller upon
reasonable notice and at reasonable times, it being understood that such
representatives shall be entitled to make copies of any such books and records
as they shall deem necessary. Any information obtained pursuant to this Section
6.15 shall be kept confidential, except as may be otherwise necessary in
connection with the filing of Tax Returns or claims for refund or in conducting
any audit or other proceeding.
Section 6.16 Conflict. In the event of a conflict between the provisions of
Sections 6.12, 6.13, 6.14 or 6.15 and any other provision of this Agreement, the
provisions of this Article VI shall control.
Section 6.17 Insurance. Buyer agrees to procure and maintain for three
years after the Closing Date commercial general liability insurance and
environmental liability insurance covering contractors' legal liability and
professional errors and omissions liability with no pollution exclusion with
policy terms, conditions, exclusions, limits and deductibles not materially less
favorable than such insurance maintained by Seller, as described in Schedule
4.20, and shall name Seller as an additional insured.
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ARTICLE VII
Extent and Survival of Representations,
Warranties, Covenants and Agreements; Indemnification
Section 7.1 Indemnification of Buyer.
(a) Subject to and to the extent provided in Section 7.1(b), Seller
agrees to defend, indemnify and hold harmless Buyer (including its
officers, directors, employees and agents and Affiliates) from and against,
any and all claims, actions, causes of action, arbitrations, proceedings,
losses, damages, liabilities, judgments and expenses (including, without
limitation, reasonable attorneys' fees) ("Claim") incurred by Buyer, any
Affiliate of Buyer, Seller or USTMAN, net of the amount of insurance
coverage required pursuant to Section 6.18 (regardless of whether Buyer
maintains such Insurance), as a result of (i) any error, inaccuracy, breach
or misrepresentation in any of the representations and warranties made by
or on behalf of Seller in this Agreement or in any certificate or other
instrument delivered by or on behalf of Seller in connection with this
Agreement (including the Schedules hereto), (ii) any violation or breach by
Seller of or default by Seller under the terms of this Agreement, (iii) any
act or omission occurring, or condition or circumstances existing, prior to
the Closing, or any condition or circumstances caused by any act or
omission occurring prior to the Closing, by Seller or USTMAN or otherwise
with respect to Seller or USTMAN, (iv) the past or present presence,
release, remediation or clean-up of, or exposure to, Hazardous Material
relating to or located on, within or under any assets owned, leased or used
by Seller or USTMAN, or (v) any product liability, strict liability or
other claims concerning (A) products sold or services provided by Seller or
USTMAN prior to the Closing or (B) inventory owned by Seller or USTMAN at
the Closing.
(b) The maximum amount of all liability of Seller to Buyer pursuant to
Section 7.1(a), other than any liability arising from any fraudulent acts
of Seller or in respect of Taxes, shall be as follows:
(i) In the event of any Claim pursuant to Section 7.1(a)(i) where
Seller, at the time of Closing, had actual knowledge of, and did not
disclose to Buyer, the error, inaccuracy, breach or misrepresentation
giving rise to such Claim, Seller's obligation to indemnify Buyer
shall be unlimited as to amount.
(ii) In the event of one or more Claims pursuant to (A) Section
7.1(a)(i) where the error, inaccuracy, breach or misrepresentation
giving rise to such Claim or Claims existed at the time of the October
Closing (other than a Claim described in Section 7.1(b)(i) above), (B)
Section 7.1(a)(iii) where the act or omission giving rise to the Claim
or Claims occurred, or the condition or circumstances existed, at or
prior to the October Closing, (C) Section 7.1(a)(iv) where the
presence, release, remediation or clean-up of, or exposure to,
Hazardous Material giving rise to the Claim or Claims occurred or
existed at or prior to the October Closing or (D) Section 7.1(a)(v)
where the liability giving rise to the Claim or Claims relates to
products sold or services provided by USTMAN prior to the October
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Closing (any Claims described in (A) - (D) of this Section 7.1(b)(ii)
being referred to as "Prior Period Claims"), then Seller shall be
obligated to proceed against TEI in accordance with the procedures set
forth in Section 7.5 and Seller shall pay to Buyer any and all amounts
recovered from TEI in connection with such Prior Period Claim. In the
event that the amount of the any Prior Period Claim is determined in
accordance with the procedures set forth in the October Agreement to
be subject to indemnification by TEI thereunder and the amount thereof
is in excess of the indemnification obligations of TEI under the
October Agreement, then Seller shall be liable for the amount of such
excess up to a maximum aggregate amount, for all Prior Period Claims,
of $1,000,000.
(iii) The maximum amount of liability of Seller to Buyer for any
Claim not covered by Section 7.1(b)(i) or (ii), shall be limited to
the aggregate amount of $5,750,000.
Section 7.2 Indemnification of Seller. Buyer agrees to defend, indemnify
and hold harmless Seller (including its officers, directors, employees and
agents and Affiliates) from and against, any and all Claims incurred by Seller,
any Affiliate of Seller, Buyer or USTMAN as a result of (a) any error,
inaccuracy, breach or misrepresentation in any of the representations and
warranties made by or on behalf of Buyer in this Agreement or in any certificate
or other instrument delivered by or on behalf of Buyer in connection with this
Agreement (including the Schedules hereto), (b) any violation or breach by Buyer
of or default by Buyer under the terms of this Agreement, (c) any act or
omission occurring, or condition or circumstances existing, after the Closing,
or any condition or circumstances caused by any act or omission occurring after
the Closing, by Buyer or USTMAN or otherwise with respect to Buyer or USTMAN,
(d) the post-Closing presence, release, remediation or clean-up of, or exposure
to, Hazardous Material relating to or located on, within or under any assets
owned, leased or used by Buyer or USTMAN, or (e) any product liability, strict
liability or other claims concerning (i) products sold or services provided by
Buyer or USTMAN after the Closing or (ii) inventory owned by Buyer or USTMAN
after the Closing. Seller shall be entitled to recover its reasonable and
necessary attorneys' fees and litigation expenses incurred in connection with
successful enforcement of its rights under this Section. Buyer's obligation to
indemnify Seller pursuant to this Section 7.2 shall be unlimited as to time or
amount.
Section 7.3 Survival.
(a) The representations, warranties and covenants of Seller in this
Agreement and in any certificate or instrument delivered in connection
herewith shall be continuing and shall survive the Closing until two years
after the Closing Date (the period during which the representations and
warranties shall survive being referred to herein with respect to such
representations and warranties as the "Survival Period"), but shall
thereafter terminate and be of no further force and effect unless a written
notice asserting a claim shall have been made pursuant to this Article VII
within the Survival Period with respect to such matter. Any claim for
indemnification of a Claim of the type set forth in Section 7.1(a)(i)-(iv)
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of this Agreement made during the Survival Period shall remain in effect
for purposes of such indemnification notwithstanding such Claim may not be
resolved within the Survival Period.
(b) Any claim for indemnification of Buyer for a Claim of the type set
forth in Section 7.1(a)(v) of this Agreement must be made no later than
three years after the Closing Date. Any such Claim shall remain in effect
for purposes of such indemnification even if the Claim is not resolved
within three years after the Closing Date.
Section 7.4 Indemnification Procedures. Subject to Section 7.5, all claims
for indemnification under this Agreement shall be asserted and resolved as
follows:
(a) A party claiming indemnification under this Agreement (an
"Indemnified Party") shall with reasonable promptness (i) notify the party
from whom indemnification is sought (the "Indemnifying Party") of any
third-party claim or claims asserted against the Indemnified Party ("Third
Party Claim") for which indemnification is sought and (ii) transmit to the
Indemnifying Party a copy of all papers served with respect to such claim
(if any) and a written notice ("Claim Notice") containing a description in
reasonable detail of the nature of the Third Party Claim, an estimate of
the amount of damages attributable to the Third Party Claim to the extent
feasible (which estimate shall not be conclusive of the final amount of
such claim) and the basis of the Indemnified Party's request for
indemnification under this Agreement.
Within 15 days after receipt of any Claim Notice (the "Election
Period"), the Indemnifying Party shall notify the Indemnified Party whether
the Indemnifying Party disputes its potential liability to the Indemnified
Party with respect to such Third Party Claim and, if the Indemnifying Party
does not dispute its potential liability to the Indemnified Party with
respect to such Third Party Claim, whether the Indemnifying Party elects to
defend the Indemnified Party with respect to such Third Party Claim.
If the Indemnifying Party does not dispute its potential liability to
the Indemnified Party within the Election Period and notifies the
Indemnified Party that it elects to defend such Third Party Claim, the
Indemnified Party shall control negotiations toward resolution of such
claim without the necessity of litigation, and if litigation ensues, to
defend the same with counsel reasonably acceptable to both parties, at the
Indemnifying Party's expense, and the Indemnified Party shall extend
reasonable cooperation in connection with such defense. The Indemnified
Party shall be entitled to elect to participate in, but not to control, the
defense of any Third Party Claim resulting in litigation, at its own cost
and expense; provided, however, that if the parties to any suit or
proceeding shall include the Indemnifying Party as well as the Indemnified
Party and the Indemnified Party shall have been advised by counsel that one
or more legal defenses may be available to it that may not be available to
the Indemnifying Party, then the Indemnified Party shall be entitled to
elect to control such suit or proceeding, but the Indemnifying Party shall
be obligated to bear the fees and expenses of counsel of the Indemnified
Party, which shall be selected by the Indemnified Party in its complete and
sole discretion. If the Indemnifying Party does not dispute its potential
liability to the Indemnified Party within the Election Period and the
Indemnified Party fails to assume control of the negotiations prior to
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litigation or to defend such action within a reasonable time, the
Indemnifying Party shall be entitled, but not obligated, to assume control
of such negotiations or defense of such action, and the Indemnifying Party
shall be liable to the Indemnified Party for its expenses reasonably
incurred or amounts paid in connection therewith. If the Indemnifying Party
disputes its potential liability to the Indemnified Party within the
Election Period or does not elect to defend such Third Party Claim, then
the Indemnified Party shall be entitled to assume control of such
negotiations or defense of action and the liability for the expense
thereof, as well as any liability with respect to such Third Party Claim,
shall be determined as provided in Section 7.6 below.
If the Indemnifying Party fails to notify the Indemnified Party within
the Election Period that the Indemnifying Party elects to defend the
Indemnified Party pursuant to the preceding paragraph, or if the
Indemnifying Party elects to defend the Indemnified Party but fails to
prosecute or settle the Third Party Claim as herein provided, then the
Indemnified Party shall have the right to defend, at the sole cost and
expense of the Indemnifying Party (if the Indemnified Party is entitled to
indemnification hereunder), the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously prosecuted
by the Indemnified Party to a final conclusion or settled. The Indemnified
Party shall have full control of such defense and proceedings.
Notwithstanding the foregoing, if the Indemnifying Party has delivered a
written notice to the Indemnified Party to the effect that the Indemnifying
Party disputes its potential liability to the Indemnified Party under this
Article VII and if such dispute is resolved in favor of the Indemnifying
Party, the Indemnifying Party shall not be required to bear the costs and
expenses of the Indemnified Party's defense pursuant to this Section or of
the Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party shall reimburse the Indemnifying Party
in full for all costs and expenses of such litigation. The Indemnifying
Party may participate in, but not control, any defense or settlement
controlled by the Indemnified Party pursuant to this Section, and the
Indemnifying Party shall bear its own costs and expenses with respect to
such participation.
Neither the Indemnifying Party nor the Indemnified Party shall settle,
compromise, or make any other disposition of any Third Party Claim which
would or might result in any liability to the Indemnified Party or the
Indemnifying Party under this Article VII without the written consent of
such other party.
(b) In the event any Indemnified Party should have a claim against any
Indemnifying Party hereunder that does not involve a Third Party Claim, the
Indemnified Party shall transmit to the Indemnifying Party a written notice
(the "Indemnity Notice") describing in reasonable detail the nature of the
claim, an estimate of the amount of damages attributable to such claim to
the extent feasible (which estimate shall not be conclusive of the final
amount of such claim) and the basis of the Indemnified Party's request for
indemnification under this Agreement. If the Indemnifying Party does not
notify the Indemnified Party within 15 days from its receipt of the
Indemnity Notice that the Indemnifying Party disputes such claim, the claim
specified by the Indemnified Party in the Indemnity Notice shall be deemed
a liability of the Indemnifying Party hereunder.
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Section 7.5 Indemnification Procedures for Prior Period Claims. Any claim
by Buyer for indemnification in connection with any Prior Period Claim shall be
asserted and resolved as follows:
(a) Buyer shall deliver to Seller a Claim Notice or Indemnity Notice
as set forth in Section 7.4.
(b) Within 15 days after receipt of such notice, Seller shall notify
Buyer of Seller's determination that such claim for indemnification is
based on a Prior Period Claim. Unless Buyer objects to Seller's
determination within 10 business days after Seller's notice to Buyer, the
claim for indemnification shall be deemed to be based on a Prior Period
Claim. If Buyer objects to Seller's determination, Seller and Buyer agree
to promptly negotiate in good faith to determine whether such claim for
indemnification is based on a Prior Period Claim. If the parties have
failed to agree within 15 days after the date of Buyer's objection to
Seller's determination, such dispute shall be submitted to arbitration in
accordance with Section 7.6. The decision of the arbitrator regarding the
classification of the claim as a Prior Period Claim shall be binding on the
parties.
(c) Once the parties have determined that a claim for indemnification
is based on a Prior Period Claim, Seller shall promptly notify TEI of the
Prior Period Claim in accordance with the provisions of Section 7.3 of the
October Agreement. Seller covenants and agrees that it shall exercise its
rights under the October Agreement as directed by Buyer and at Buyer's
expense and shall extend reasonable cooperation in connection therewith.
With the exception of the liability of Seller for amounts in excess of the
limitations on liability of TEI under the October Agreement as described in
Section 7.1(b)(ii), Seller shall have no other obligation with respect to
any Prior Period Claim. Seller shall have the right, but not the
obligation, to engage Seller's own counsel at Seller's own expense to
participate in the prosecution of any Prior Period Claims against TEI or to
participate in the defense of any Third Party Claim against Buyer based on
a Prior Period Claim.
(d) Following any recovery from TEI pursuant to this Section 7.5,
Seller shall be obligated to pay an amount equal to the amount of any funds
received from TEI to Buyer promptly after receipt thereof, together with
any additional amounts as required by Section 7.1(b)(ii).
Section 7.6 Arbitration of Disputes. If the Indemnifying Party disputes,
either as to the amount or liability, that any claim described in a Claim Notice
or an Indemnity Notice, as the case may be, is covered by such Indemnifying
Party's covenant to indemnify contained in this Article VII, then the
Indemnifying Party and the Indemnified Party agree to promptly negotiate in good
faith to resolve their differences and to mutually agree upon an amount, if any,
owed to Indemnified Party by the Indemnifying Party hereunder. If Indemnifying
Party and Indemnified Party fail to agree within 30 days thereafter, the dispute
shall be resolved by binding and final arbitration of a single arbitrator
mutually agreed to by Buyer and Seller conducted in Houston, Texas in accordance
with the rules of commercial arbitration of the American Arbitration
Association. The prevailing party in any such arbitration proceeding shall be
entitled to attorneys' fees and other out- of-pocket expenses reasonably and
necessarily incurred in connection with such proceeding, the amounts of which
shall be contained in the award of the arbitrator. After a final arbitration
decision with respect to a Claim by Buyer against Seller, Buyer shall have a
limited right of set off against the Purchase Note.
Section 7.7 General. The covenants and agreements entered into pursuant to
this Agreement to be performed after the Closing shall survive the Closing
without limitation. The indemnification obligations under this Article VII shall
apply regardless of whether any Claim results solely or in part from the active,
passive or concurrent negligence of the Indemnified Party prior to the Closing
Date. The parties agree that this Article VII does not entitle either party to
indemnification for either party's act or omission after the Closing Date. All
representations, warranties and covenants and agreements made by the parties
shall not be deemed merged into any instruments or agreements delivered in
connection with the Closing or otherwise in connection with the transactions
contemplated hereby.
ARTICLE VIII
Conditions to Closing
Section 8.1 Conditions Precedent to Obligations of Buyer. The obligation of
Buyer to consummate the purchase under this Agreement is subject to the
fulfillment, prior to or at the Closing, of each of the following conditions
(any or all of which may be waived by Buyer):
(a) all representations and warranties of Seller contained in this
Agreement including all Schedules to this Agreement shall be true and
correct in all respects at and as of the time of the Closing with the same
effect as though made again at, and as of, that time, except such as will
not have a material adverse effect and except such as would not reasonably
be expected to have a material adverse effect on Seller's ability to
perform its obligations under this Agreement;
(b) Seller shall have performed and complied in all material respects
with all obligations and covenants required by this Agreement to be
performed or complied with by Seller prior to or at the Closing;
(c) Buyer shall have been furnished with a certificate, dated the
Closing Date, executed by an officer of Seller certifying to the
fulfillment of the conditions specified in Sections 8.1(a) and 8.1(b)
hereof;
(d) no provision of any Applicable Law shall prohibit, and there shall
not be in effect any injunction, restraining order or decree issued by a
court of competent jurisdiction or any governmental body that shall
prohibit the consummation of this Agreement and there shall be no action or
proceeding pending or threatened seeking any such injunction, order or
decree;
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(e) Seller shall have received all consents, approvals and Permits to
execute this Agreement and to consummate the transactions contemplated
hereby; and
(f) Buyer shall be furnished with an opinion of counsel to Seller and
USTMAN, as to the due execution and delivery of this Agreement and the
documents delivered by Seller at Closing and substantially as to the
matters set forth in Sections 4.1, 4.3, 4.4, 4.7 and 4.8 hereof (qualified
appropriately as to knowledge) and such other matters as Buyer may
reasonably request.
Section 8.2 Conditions Precedent to Obligations of Seller. The obligation
of Seller to consummate the sale under this Agreement is subject to the
fulfillment, prior to or at the Closing, of each of the following conditions
(any or all of which may be waived by Seller):
(a) all representations and warranties of Buyer contained in this
Agreement, including all Schedules to this Agreement, shall be true and
correct in all respects at and as of the time of the Closing with the same
effect as though made again at, and as of, that time, except such as will
not have a material adverse effect and except such as would not reasonably
be expected to have a material adverse effect on Buyer's ability to perform
its obligations under this Agreement;
(b) Buyer shall have performed and complied in all material respects
with all obligations and covenants required by this Agreement to be
performed or complied with by Buyer prior to or at the Closing;
(c) Seller shall have been furnished with a certificate, dated the
Closing Date, executed by an officer of Buyer certifying to the fulfillment
of the conditions specified in Sections 8.2(a) and 8.2(b) hereof; and
(d) no provision of any Applicable Law shall prohibit, and there shall
not be in effect any injunction or restraining order issued by a court of
competent jurisdiction in any action or proceeding against, the
consummation of this Agreement.
(e) Seller shall be furnished with an opinion of counsel to Buyer, as
to the due execution and delivery of this Agreement and the documents
delivered by Buyer at Closing and substantially as to the matters set forth
in Sections 5.1, 5.2, 5.3 and 5.6 hereof (qualified appropriately as to
knowledge) and such other matters as Seller may reasonably request,
including without limitation the authorization, due execution, delivery and
enforceability of the Purchase Note and the Subsidiary Guarantees.
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ARTICLE IX
Actions to be Taken at Closing
Section 9.1 Actions to be Taken by Seller at the Closing. Seller shall take
the following actions at the Closing:
(a) Seller shall deliver to Buyer copies certified by its Secretary of
resolutions duly adopted by the board of directors of Seller authorizing
and approving the execution and delivery of this Agreement, including the
exhibits and schedules hereto, and the consummation of the transactions
contemplated herein;
(b) Seller shall endorse and deliver to Buyer a stock certificate
representing the Shares;
(c) Seller shall deliver the officer's certificate referred to in
Section 8.1(c);
(d) Buyer shall have been furnished with a legal opinion as provided
in Section 8.1(f) hereof; and
(e) Seller shall have delivered to Buyer a letter of resignation from
each noncontinuing officer and director of USTMAN.
Section 9.2 Actions to be Taken by Buyer at the Closing. Buyer shall take
the following actions at the Closing:
(a) Buyer shall deliver to Seller a copy certified by its Secretary of
resolutions duly adopted by the board of directors of Buyer authorizing and
approving the execution and delivery of this Agreement, including the
exhibits and schedules hereto, and the consummation of the transactions
contemplated herein;
(b) Buyer shall make the payment of funds specified for payment at
Closing under Section 2.2;
(c) Buyer shall deliver the Purchase Note and the Subsidiary Guaranty
to Seller as set forth in Section 2.3;
(d) Buyer shall deliver the officer's certificate referred to in
Section 8.2(c); and
(e) Seller shall have been furnished with a legal opinion as provided
in Section 8.2(e).
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ARTICLE X
General Provisions
Section 10.1 Termination.
(a) This Agreement may be terminated at any time prior to the Closing:
(i) by mutual written agreement executed by Seller and Buyer; or
(ii) if the Board of Directors of Seller in the exercise of its
fiduciary duties under applicable laws as advised in writing by
counsel withdraws or modifies its approval or recommendation of the
proposed acquisition of Shares by Buyer on the terms and conditions
set forth herein in any manner adverse to Buyer and recommends or
approves a Competing Transaction, or resolves to do the foregoing. For
purposes of this Agreement, "Competing Transaction" shall mean any
merger, consolidation, share exchange, business combination or similar
transaction involving USTMAN, or the acquisition in any manner,
directly or indirectly, of a material interest in any voting
securities of, or a material interest in a substantial portion of the
assets of, USTMAN, other than the transactions contemplated by this
Agreement.
(b) Upon termination of this Agreement, neither of the parties nor any
other person shall have any liability or further obligation arising out of
this Agreement except for any liability resulting from its breach of this
Agreement prior to termination and as stated in Section 10.1(c) hereof,
except that the provisions of Sections 10.2, 10.3, 10.9 and 10.11 shall
continue to apply.
(c) In the event Seller terminates this Agreement pursuant to Section
10.1(a)(ii) hereof and enters into a Competing Transaction, Seller shall
reimburse Buyer for its reasonable costs related to Buyer's proposed
acquisition of the Shares, not to exceed $250,000.
Section 10.2 Confidentiality; Publicity; Books and Records.
(a) Neither party nor any Affiliate thereof will, directly or
indirectly, disclose or provide to any other person any non-public
information of a confidential nature concerning the other party or their
business or operations, and neither Seller nor any Affiliate thereof will
directly or indirectly, disclose or provide to any other person any
non-public information of a confidential nature concerning USTMAN or its
business or operations, except as is required in governmental filings or
judicial, administrative or arbitration proceedings. In the event that a
party or its Affiliate becomes legally required to disclose any such
information in any governmental filings or judicial, administrative or
arbitration proceedings, that party shall, and shall cause such Affiliate
to, provide the other party with prompt notice of such requirement so that
the other party may seek a protective order or other appropriate remedy. In
the event that such protective order or other remedy is not obtained, the
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disclosing party shall, and shall cause such Affiliate to, furnish only
that portion of the information that the disclosing party or such
Affiliate, as the case may be, is advised by its counsel is legally
required and such disclosure shall not result in any liability hereunder
unless such disclosure was caused by or resulted from a previous disclosure
by the other party which was not permitted by this Agreement, by that
certain Confidentiality Agreement between the parties dated as of November
19, 1996. Subject to applicable securities law or stock exchange
requirements, the parties hereto will promptly advise, and obtain the
approval of, the other parties before issuing any press release with
respect to this Agreement or the transactions contemplated hereby.
(b) If the parties fail to close the acquisition of Shares
contemplated in this Agreement, each party shall, and shall cause its
officers, directors, employees, representatives and agents (the
"Representatives") to return all copies of the other party's confidential
non- public information in its possession or in the possession of its
Representatives, and destroy all copies of any analyses, compilations,
studies or other documents prepared by that party or its Representatives or
for its use containing or reflecting any such information.
For purposes of this Agreement, non-public information of a
confidential nature shall not include any information which (i) at the time
of disclosure or thereafter is generally available to and known by the
public (other than as a result of a disclosure directly or indirectly by a
party, its Affiliate or its Representatives), (ii) was available to a party
on a nonconfidential basis from a source other than the other party, its
Affiliate or Representatives, provided that such source is not and was not
directly or indirectly bound by a confidentiality agreement with the
nondisclosing party, its Affiliate or Representatives with respect to that
information or (iii) has been independently acquired or developed by the
other party, its Affiliate or Representatives, without violating any
obligations under this agreement, that certain Confidentiality Agreement
between the parties dated as of November 19, 1996.
(c) For a period of five years after the Closing Date, Buyer will
preserve and retain the books and records of USTMAN and make such books and
records available at the then current administrative headquarters of Buyer
to Seller and its officers, employees and agents, upon reasonable notice
and at reasonable times, at Seller's cost and expense, it being understood
that Seller shall be entitled to make copies of any such books and records
as shall be reasonably necessary.
Section 10.3 Expenses. Buyer and Seller shall pay their own respective
expenses, including the fees and disbursements of their respective counsel in
connection with the negotiation, preparation and execution of this Agreement and
the consummation of the transactions contemplated herein.
Section 10.4 Entire Agreement. This Agreement, including all schedules and
exhibits hereto, constitutes the entire agreement of the parties and supersedes
any prior oral or written agreements with respect to the subject matter hereof,
and may not be modified, amended or terminated except by a written instrument
specifically referring to this Agreement signed by all the parties hereto.
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Section 10.5 Waivers and Consents. All waivers and consents given hereunder
shall be in writing. No waiver by any party hereto of any breach or anticipated
breach of any provision hereof by any other party shall be deemed a waiver of
any other contemporaneous, preceding or succeeding breach or anticipated breach,
whether or not similar.
Section 10.6 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been received only if and when (a)
personally delivered (b) if mailed, on the third day after mailing, by United
States mail, first class, postage prepaid, by certified mail, return receipt
requested, addressed in each case as follows (or to such other address as may be
specified by like notice) or (c) delivered by overnight courier or facsimile:
(i) if to Buyer, to:
Watson General Corporation
32-B Mauchly
Irvine, California 92718
Facsimile: 714-753-7986
Attention: President
(ii) if to Seller, to:
NDE Environmental Corporation
8900 Shoal Creek Blvd., Bldg. 200
Austin, Texas 78758
P.O. Box 140795
Austin, Texas 78714
Facsimile: 512-459-1459
Attention: President
Section 10.7 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors, legal representatives and assigns. No third party shall have any
rights hereunder.
Section 10.8 Performance. Seller agrees to cause USTMAN to perform all its
obligations and agreements under this Agreement and hereby guarantees
performance by USTMAN of all such obligations and agreements.
Section 10.9 Choice of Law; Section Headings; Table of Contents. This
Agreement shall be governed by the internal laws of the State of Texas (without
regard to the choice of law provisions thereof). The section headings and any
table of contents contained in this Agreement are for reference purposes only
and shall not affect the meaning or interpretation of this Agreement.
Section 10.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
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Section 10.11 Jurisdiction and Venue. Seller and Buyer hereby consent to
personal jurisdiction in any action brought with respect to this Agreement and
the transactions contemplated hereunder in any federal or state court in Harris
County, Texas and agree that service of process may be accomplished pursuant to
Section 10.6 above.
Section 10.12 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement which shall remain in full force and
effect.
Section 10.13 Assignment. This Agreement and each party's rights hereunder
may not be assigned without the prior written consent of the other parties;
provided that no such consent shall be required by Buyer or Seller to assign all
or part of its rights to USTMAN or Affiliate but no such assignment shall
relieve the assigning party of any of its obligations under this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
WATSON GENERAL CORPORATION
By: /S/ RONALD G. CRANE
_____________________________________
Ronald G. Crane
President and Chief Executive Officer
NDE ENVIRONMENTAL CORPORATION
By: /S/ JAY ALLEN CHAFFEE
_____________________________________
Jay Allen Chaffee
Chairman of the Board of Directors
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Exhibit 99.1
FOR IMMEDIATE RELEASE
NDE ENVIRONMENTAL ("TANKNOLOGY-NDE") REPORTS FIRST QUARTER LOSS
AND SALE OF USTMAN SUBSIDIARY
AUSTIN, Texas, May 27, 1997 - NDE Environmental Corporation ("NDE" d.b.a.
"Tanknology-NDE", NASDAQ OTC Bulletin Board: NDEC), a leading provider of
storage tank environmental compliance services, today reported a $1,029,755 loss
for the quarter ended March 31, and the sale of its USTMAN Industries Inc.
subsidiary to Watson General Corporation (NASDAQ: WGEN).
NDE revenues for the three months ended March 31, 1997 were $7,462,643
compared to $2,562,367 for the three months ended March 31,1996 period, an
increase of $4,900,276, or 191%. The increase in revenues over last year is due
to the inclusion of the UST Group of Companies acquired on October 25,1996.
Revenues in the first quarter of 1997 also included $117,169 of revenues from
the Company's Canadian operations that were sold on February 20, 1997. Revenues
of the UST Group plus those of the Company, excluding Canadian operations,
increased from $7,124,133 in the first quarter of 1996 to $7,354,474 in the
first quarter of 1997 primarily due to the sale of several SIR software licenses
by the Company's USTMAN subsidiary. The company incurred a net loss of
$1,029,755 for the first quarter of 1997, compared to a loss of $901,999 in
1996, an increase of $127,756 or 14%. The net loss for the current period
includes $453,982 of non-cash charges directly related to the acquisition of the
UST Group with no prior year counterpart.
The Company's USTMAN Industries Inc. subsidiary was sold to Watson General
Corporation on May 22 for a $5,250,000 cash payment and an 8% note for $500,000
due in one year. The sale agreement also provides for an additional payment to
NDE relating to a post-closing adjustment based upon certain working capital
calculations. USTMAN provides Statistical Inventory Reconciliation (SIR)
services that allow tank owners to meet UST leak detection compliance
regulations in many states. Watson General also provides SIR services.
<PAGE>
NDE ENVIRONMENTAL ("TANKNOLOGY-NDE") - Page 2
Tanknology-NDE provides environmental compliance testing and services,
installation of compliance equipment, and consulting to owners and operators of
aboveground and underground storage tanks ("USTs"). Tanknology-NDE operates the
largest national fleet of UST field service and testing vehicles and provides a
complete line of compliance management services to ensure customers comply with
federal, state, and local regulations governing underground storage tanks.
NDE Environmental Corporation (d.b.a. "Tanknology-NDE")
Financial Highlights (unaudited)
Quarter ended March 31, (a)1997 1996
- ------------------------------- ------------- --------------
Revenues $ 7,462,643 $ 2,562,367
Net Loss (1,029,755) (901,999)
Average shares outstanding 15,978,610 2,403,722
Loss per share $ (.06) $ (.38)
(a) Includes the results of the UST Group of companies acquired in October 1996.
CONTACT: Amy Graham, Investor Relations, Tanknology-NDE, (512) 451-6334.
Exhibit 99.2
AMENDMENT NO. 2
TO
LOAN AGREEMENT
DATED OCTOBER 25, 1996
BY AND BETWEEN NDE ENVIRONMENTAL CORPORATION,
TANKNOLOGY/NDE CORPORATION, USTMAN INDUSTRIES, INC.,
PROECO, INC. AND TANKNOLOGY CANADA (1988) INC.
AND
BANK ONE, TEXAS, N.A.
This Amendment No. 2 to Loan Agreement dated as of the 25th day of October,
1996, (this "Second Amendment") by and among NDE ENVIRONMENTAL CORPORATION, a
Delaware corporation, TANKNOLOGY/ NDE CORPORATION, a Delaware corporation,
USTMAN INDUSTRIES, INC., a Delaware corporation, PROECO, INC., a Delaware
corporation, and TANKNOLOGY CANADA (1988) INC., a Canadian federal corporation
(collectively, "Borrower") and BANK ONE, TEXAS, N.A., a national banking
association (the "Bank") is entered into this 20th day of May, 1997.
W I T N E S S E T H:
Borrower has requested that Bank (i) release certain Collateral required in
connection with the sale of intellectual property rights associated with the
Canadian operations of Borrower pursuant to that certain Asset Purchase
Agreement dated as of February 19, 1997, by and between Precision Tank Testing
Limited, Tanknology Canada (1988) Inc., NDE Environmental Corporation and
Tanknology/NDE Corporation; (ii) release Collateral owned by USTMAN Industries,
Inc.; (iii) release all of the issued and outstanding shares of the common
capital stock of USTMAN Industries, Inc. owned by NDE Environmental Corporation
(being 1,000 shares of common stock, par value $0.01 per share, evidenced by
Certificate No. 1, which was reissued as Certificate No. 3); and (iv) waive
Borrower's non-compliance with certain covenants therein; and Bank is willing to
do so in accordance with, and subject to, the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the promises herein contained, and each
intending to be legally bound hereby, the parties agree as follows:
I. Amendments to Loan Agreement.
Release of USTMAN Industries, Inc. USTMAN Industries, Inc. is hereby
released from liability and its Obligations under the Loan Agreement, the
Notes and the Collateral Documents and shall no longer have any right under
any of the foregoing.
Article I, DEFINITIONS, is amended by adding the following
definitions:
"Assignment of Note" shall mean that certain Assignment of Note
of even date herewith made by and between Borrower and Bank pledging
the Watson Note in favor of Bank.
"Canadian Sale" shall mean the sale of intellectual and other
property rights associated with the Canadian operations of Borrower to
Precision Tank Testing Limited pursuant to that certain Asset Purchase
Agreement dated as of February 19, 1997, by and between Precision Tank
Testing Limited, Tanknology Canada (1988) Inc., NDE Environmental
Corporation and Tanknology/NDE Corporation.
"Certificate of Deposit" shall mean Certificate of Deposit No.
1698004221 maintained with Bank in the amount of $3,000,000 and being
more particularly described in the Pledge of Certificate of Deposit.
"Consent and Agreement" shall mean that certain Consent and
Agreement of even date herewith made by and between Watson General
Corporation and Bank whereby Watson General Corporation, a California
corporation, consents to the assignment of the Watson Note to Bank.
"Excess Sales Proceeds" shall mean that portion of the sales
proceeds from the USTMAN Sale in excess of (i) the $3,000,000 utilized
for the purchase of the Certificate of Deposit and (ii) the expenses
paid in connection with the USTMAN Sale.
"Pledge of Certificate of Deposit" shall mean that certain Pledge
of Certificate of Deposit of even date herewith made by and between
Borrower and Bank pledging Certificate of Deposit No. 1698004221 in
the amount of $3,000,000 and being maintained with Bank.
"Second Amendment" means Amendment No. 2 to this Loan Agreement,
executed by Borrower and Bank on May 20, 1997.
"Term Loan Repayment Reserve" shall have the meaning attributed
to that term in Section 2.01(C).
"USTMAN Sale" means the sale of all of the outstanding shares of
common stock of USTMAN, Inc., a wholly owned subsidiary of NDE
Environmental Corporation, to Watson General Corporation pursuant to
that certain Stock Purchase Agreement dated as of May 20, 1997, by and
between Watson General Corporation as Buyer and NDE Environmental
Corporation as Seller.
"Watson Note" shall mean that certain promissory note in the
original amount of $500,000 of even date herewith and payable to the
order of NDE Environmental Corporation (together with all extensions,
renewals and modifications thereof and/or substitutions therefor).
Article I, DEFINITIONS, is further amended by deleting "USTMAN" from
the definition of "Pledged Stock".
Section 2.01, Revolving Loan, is amended by adding the following
paragraph at the end of such Section:
(C) Notwithstanding anything contained herein to the contrary,
effective as of the date of the Second Amendment, $500,000 of the
Revolving Commitment shall be reserved for the funding of the Term
Loan Repayment Reserve and will be otherwise unavailable for advances
to Borrower. The Term Loan Repayment Reserve shall remain in force
through and until April 30, 1998, being thirty (30) days after
Borrower is obligated to deliver to Bank annual audited Financial
Statements of Borrower for fiscal year 1997 pursuant to Section 5.04,
below, and the accompanying Compliance Certificate (the "Fiscal Year
1997 Compliance Certificate") delivered pursuant to Section 5.05,
below. In the event that Borrower is in default of the Loan Agreement
based on the Fiscal Year 1997 Compliance Certificate, Bank shall have
the right to fund the Term Loan Repayment Reserve by advancing
$500,000 under the Revolving Note and using to reduce the Term Loan by
a like amount. In the event that Borrower is in compliance with the
Loan Agreement based on the Fiscal Year 1997 Compliance Certificate,
the Term Loan Repayment Reserve shall expire and Borrower shall have
full access to the Revolving Commitment in accordance with the Loan
Agreement.
Schedule 1.01(a), Collateral, is hereby amended by deleting "USTMAN
Industries, Inc." from line (a) under NDE Environmental Corporation and by
adding to the end of line (b) the following: "and Pledged Certificates of
Deposit".
Schedule 1.01(a), Collateral, is hereby further amended by deleting
the parenthetical in line (g) under Tanknology/NDE Corporation so that it
reads as follows: "(g) Patents".
Schedule 1.01(a), Collateral, is hereby further amended by deleting
the following from Schedule 1.01(a):
USTMAN Industries, Inc.
(a) Accounts Receivable
(b) Bank Accounts
(c) Inventory
(d) Furniture and Office Equipment
(e) Proprietary Software
(f) Licensing Agreements
II. Certain Waivers. Bank hereby waives non-compliance by the Borrower with
the covenants set forth in Sections 6.03, 6.04 and 8.13 of the Loan Agreement,
but only to the extent that such non-compliance was the result of the Borrower's
performance of its contractual obligations in the Canadian Sale and/or the
USTMAN Sale. Bank further waives non-compliance by the Borrower with the
covenants set forth in Sections 6.02 of the Loan Agreement, insofar and only
insofar as such covenants would apply to the set-off provisions of the Watson
Note. Notwithstanding anything that may be contained herein to the contrary, no
waiver or any other provision contained herein shall serve to subordinate any of
Borrower's Obligations to Bank to any of Borrower's Obligations to any third
party.
III. Release of Collateral Pursuant to the Second Amendment. As a condition
to the release of Collateral made by Bank pursuant to this Second Amendment,
that at or before closing of the USTMAN Sale Borrower has satisfied the
following conditions:
(a) That the Canadian Sale was completed on or before February
28, 1997.
(b) That a minimum of $500,000 of the sales proceeds from the
Canadian Sale be applied against the outstanding balance of the
Revolving Loan to the extent that such outstanding balance is equal to
or exceeds $500,000.
(c) That $3,000,000 of the sales proceeds from the sale of USTMAN
is wired directly to Bank for the purchase of the Certificate of
Deposit.
(d) That the lesser of the Excess Sales Proceeds or the
outstanding balance of the Revolving Note is wired directly to Bank
for the payment against the balance of the Revolving Note. Any Excess
Sales Proceeds in excess of the balance of the Revolving Note shall be
paid to NDE Environmental Corporation.
(e) That NDE Environmental Corporation endorse the Watson Note:
"PAY TO THE ORDER OF BANK ONE, TEXAS, N.A." and deliver the Watson
Note to Bank.
(f) That NDE Environmental Corporation deliver the executed
Assignment of Promissory Note to Bank.
(g) That Watson General Corporation has executed and delivered to
Bank the Consent and Agreement.
(h) That evidence satisfactory to Bank of all requisite corporate
authorizations of the transactions contemplated hereby have been
delivered by Borrower or Watson General Corporation, as applicable.
(i) That Borrower has paid both (x) all outstanding fees and
expenses previously billed by Bank's legal counsel and (y) the
$3,000.00 advance against fees and expenses anticipated to be incurred
in the preparation of this Second Amendment (and other Loan Documents)
requested by Bank's legal counsel.
IV. Reaffirmation of Representations and Warranties. To induce Bank to
enter into this Second Amendment, Borrower hereby reaffirms, as of the date
hereof, its representations and warranties contained in Article IV of the Loan
Agreement and in all other documents executed pursuant thereto, and additionally
represents and warrants as follows:
A. The execution and delivery of this Second Amendment and the
performance by Borrower of its obligations under this Second Amendment
are within the Borrower's power, have received all necessary
governmental approval (if any shall be required), and do not and will
not contravene or conflict with any provision of law or of any
agreement binding upon the Borrower.
B. The Loan Agreement as amended by this Second Amendment
represents the legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms
subject as to enforcement only to bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally.
C. No Event of Default or Unmatured Event of Default has occurred
and is continuing as of the date hereof.
V. Defined Terms. Except as amended hereby, terms used herein that are
defined in the Loan Agreement shall have the same meanings herein.
VI. Reaffirmation of Loan Agreement. This Second Amendment shall be deemed
to be an amendment to the Loan Agreement, and the Loan Agreement, as amended
hereby, is hereby ratified, approved and confirmed in each and every respect.
All references to the Loan Agreement herein and in any other document,
instrument, agreement or writing shall hereafter be deemed to refer to the Loan
Agreement as amended hereby.
VII. Entire Agreement. The Loan Agreement, as hereby amended, embodies the
entire agreement between Borrower and Bank, and supersedes all prior proposals,
agreements and understandings relating to the subject matter hereof. Borrower
certifies that it is relying on no representation, warranty, covenant or
agreement except for those set forth in the Loan Agreement as hereby amended and
the other documents previously executed or executed of even date herewith.
VIII. Governing Law. THIS SECOND AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA. This Second Amendment has been entered
into in Harris County, Texas, and it shall be performable for all purposes in
Harris County, Texas. Courts within the State of Texas shall have jurisdiction
over any and all disputes between Borrower and Bank, whether in law or equity,
including, but not limited to, any and all disputes arising out of or relating
to this Second Amendment or any other Loan Document; and venue in any such
dispute whether in federal or state court shall be laid in Harris County, Texas.
IX. Severability. Whenever possible each provision of this Second Amendment
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Second Amendment shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Second Amendment.
X. Execution in Counterparts. This Second Amendment may be executed in any
number of counterparts and by the different parties on separate counterparts,
and each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same agreement.
XI. Section Captions. Section captions used in this Second Amendment are
for convenience of reference only, and shall not affect the construction of this
Second Amendment.
XII. Successors and Assigns. This Second Amendment shall be binding upon
the Borrower and Bank and their respective successors and assigns, and shall
inure to the benefit of the Borrower and Bank, and the respective successors and
assigns of Bank.
XIII. Non-Application of Chapter 15 of Texas Credit Codes. The provisions
of Chapter 15 of the Texas Credit Code (Vernon's Texas Civil Statutes, Article
5069-15) are specifically declared by the parties hereto not to be applicable to
the Loan Agreement as hereby amended or any of the other Loan Documents or to
the transactions contemplated hereby.
XIV. Notice. THIS SECOND AMENDMENT TOGETHER WITH THE LOAN AGREEMENT AND THE
OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
be duly executed as of the day and year first above written.
BORROWER:
NDE ENVIRONMENTAL CORPORATION
By: /S/ JAY ALLEN CHAFFEE
________________________________
Jay Allen Chaffee
Chairman of the Board
TANKNOLOGY/NDE CORPORATION
By: /S/ JAY ALLEN CHAFFEE
________________________________
Jay Allen Chaffee
Chairman of the Board
USTMAN INDUSTRIES, INC.
By: /S/ JAY ALLEN CHAFFEE
________________________________
Jay Allen Chaffee
Chairman of the Board
PROECO, INC.
By: /S/ JAY ALLEN CHAFFEE
________________________________
Jay Allen Chaffee
Chairman of the Board
TANKNOLOGY CANADA (1988) INC.
By: /S/ JAY ALLEN CHAFFEE
________________________________
Jay Allen Chaffee
President
BANK:
BANK ONE, TEXAS, N.A.
By: /S/ CHARLES KINGSWELL-SMITH
________________________________
Charles Kingswell-Smith
Vice President
Exhibit 99.3
NOTICE OF FINAL AGREEMENT
TO: NDE Environmental Corporation USTMAN Industries, Inc.
Tanknology/NDE Corporation 12265 Bayaud Avenue
ProEco, Inc. Lakewood, Colorado 80225
Tanknology Canada (1988) Inc.
8900 Shoal Creek, Bldg. 200
Austin, Texas 78757
(collectively, whether one or more, "Borrower")
As of the effective date of this Notice, Borrower and BANK ONE, TEXAS, N.A.
("Bank") have consummated a transaction pursuant to which Bank has agreed to
make a loan or loans to Borrower, or to renew, extend or amend an existing loan
or loans to Borrower, with a Borrowing Base equal to the amount determined in
accordance with the Borrowing Base Certificate, the form of which is attached as
Exhibit "G" to the Written Loan Agreement dated October 25, 1996), which is
comprised of a revolving loan in the amount of $5,000,000 and a term loan in the
amount of $6,000,000 (collectively, the "Loan").
In connection with the Loan, Borrower and Bank and other obligors, if any
(collectively, whether one or more, "Other Obligors") have executed and
delivered certain agreements, instruments and documents (collectively
hereinafter referred to as the "Written Loan Agreement").
It is the intention of Borrower, Bank and Other Obligors that this Notice
be incorporated by reference into each of the written agreements, instruments
and documents comprising the Written Loan Agreement. Borrower, Bank and Other
Obligors each warrants and represents that the entire agreement made and
existing by or among Borrower, Bank and Other Obligors with respect to the Loan
is contained within the Written Loan Agreement, as amended and supplemented
hereby, and that no agreements or promises have been made by, or exist by or
among, Borrower, Bank and Other Obligors that are not reflected in the Written
Loan Agreement.
THE WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Effective Date: May 20, 1997.
BANK ONE, TEXAS, NATIONAL ASSOCIATION
By: /S/ CHARLES KINGSWELL-SMITH
___________________________________
Charles Kingswell-Smith
Vice President
ACKNOWLEDGED AND AGREED:
Borrower:
NDE ENVIRONMENTAL CORPORATION
By: /S/ JAY ALLEN CHAFFEE
________________________________
Jay Allen Chaffee
Chairman of the Board
TANKNOLOGY/NDE CORPORATION
By: /S/ JAY ALLEN CHAFFEE
________________________________
Jay Allen Chaffee
Chairman of the Board
USTMAN INDUSTRIES, INC.
By: /S/ JAY ALLEN CHAFFEE
________________________________
Jay Allen Chaffee
Chairman of the Board
PROECO, INC.
By: /S/ JAY ALLEN CHAFFEE
________________________________
Jay Allen Chaffee
Chairman of the Board
TANKNOLOGY CANADA (1988) INC.
By: /S/ JAY ALLEN CHAFFEE
________________________________
Jay Allen Chaffee
President
Exhibit 99.4
PLEDGE OF CERTIFICATE OF DEPOSIT
This Pledge of Certificate of Deposit is entered into effective May 20,
1997, by and between BANK ONE, TEXAS, N.A., a national banking association, 910
Travis, Houston, Texas 77002 ("Secured Party") and NDE ENVIRONMENTAL
CORPORATION, a Delaware corporation ("Pledgor").
SECTION 1. PLEDGE AND SECURITY INTEREST. For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
including, without limitation, those certain loans made by Secured Party to
Pledgor and others pursuant to that certain Loan Agreement dated as of the 25th
day of October, 1996, by and among NDE ENVIRONMENTAL CORPORATION, a Delaware
corporation, TANKNOLOGY/NDE CORPORATION, a Delaware corporation, USTMAN
INDUSTRIES, INC., a Delaware corporation, PROECO, INC., a Delaware corporation,
and TANKNOLOGY CANADA (1988) INC., a Canadian federal corporation (collectively,
"Borrower"), and BANK ONE, TEXAS, N.A., as amended (the "Loan Agreement") in the
original amount of a Revolving Line of Credit of up to $5,000,000 and a Term
Loan of $6,000,000, as evidenced by those certain notes (the "Notes") of even
effective date therewith, executed by Borrower, payable to the order of Secured
Party, Pledgor has pledged and granted and does hereby pledge and grant to
Secured Party a security interest in and agrees and acknowledges that Secured
Party has and shall continue to have a security interest in the following
described property (the "Collateral"), to wit:
Certificate of Deposit No. 1698004221 in the amount of $3,000,000
maintained with Secured Party.
Debtor agrees to endorse such instruments and execute such additional
pledge agreements or other documents as may be required by Secured Party in
order to effectively grant to Secured Party the security interest in the
Collateral.
SECTION 2. OBLIGATIONS. The pledge and security interest granted hereby is
to secure (a) the payment of the Notes and any and all renewals, amendments, and
modifications thereof, and (b) the performance of all of obligations of Borrower
under the Loan Agreement (all of the foregoing, and any and all renewals,
extensions and rearrangements thereof, hereinafter called the "Obligations").
SECTION 3. EVENTS OF DEFAULT. The occurrence of any "Event of Default" (as
defined in the Loan Agreement) shall constitute an Event of Default hereunder.
SECTION 4. REMEDIES OF SECURED PARTY. Upon the happening of any Event of
Default specified herein, the Secured Party may, at its sole discretion, apply
the Collateral to any amounts owing from Borrower to Secured Party, pursuant to
the Obligations; and Secured Party may exercise any other rights available to
Secured Party under any instrument securing the Obligations, or under applicable
law.
SECTION 5. MISCELLANEOUS.
A. No delay or omission on the part of Secured Party in exercising any
rights hereunder shall operate as a waiver of any such right or any other
right. A waiver on any one or more occasions shall not be construed as a
bar to or waiver of any right or remedy on any future occasion.
B. All rights of Secured Party hereunder shall inure to the benefit of
its successors and assigns, and all obligations of Pledgor shall bind its
successors or assigns. The rights and remedies of Secured Party hereunder
are cumulative, and the exercise of any one or more of the remedies
provided herein shall not be construed as a waiver of any of the other
remedies of Secured Party.
C. The security interest hereby granted and all the terms and
provisions hereof shall be deemed a continuing security interest and shall
continue in full force and effect, and all the terms and provisions hereof
shall remain effective as between the parties, until the repayment by
Borrower of all Obligations.
D. This Pledge and the security interest herein granted are in
addition to, and not in substitution, novation or discharge of, any and all
prior or contemporaneous security agreements and security interests in
favor of Secured Party or assigned to Secured Party by Pledgor. All rights,
powers and remedies of Secured Party in all such security agreements are
cumulative, but in the event of actual conflict in terms and conditions,
the terms and conditions of the latest security agreement shall govern and
control.
E. Any provision of this Pledge found to be invalid under the laws of
the State of Texas, or any other state having jurisdiction or other
applicable law, shall be invalid only with respect to the offending
provision. All words used herein shall be construed of such gender or
number as the circumstances require. The laws of the State of Texas and, as
applicable, the laws of the United States of America, shall govern this
Pledge, its construction, interpretation and enforcement.
F. This Pledge may be executed in any number of counterparts, all of
which together shall constitute one and the same instrument.
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<PAGE>
G. The Collateral shall at all times remain under the control of
Secured Party until the Obligations have been paid in full. Except to the
extent agreed to in writing by Secured Party and Banc One Capital Partners,
L.P., Debtor shall not have access to the Collateral.
EXECUTED to be effective as of May 20, 1997.
PLEDGOR:
NDE ENVIRONMENTAL CORPORATION
By: /S/ JAY ALLEN CHAFFEE
_______________________________
Jay Allen Chaffee
Chairman of the Board
SECURED PARTY:
ACCEPTED AND AGREED TO BY THE
OWNER AND HOLDER OF THE NOTE:
BANK ONE, TEXAS, N.A.
By: /S/ CHARLES KINGSWELL-SMITH
_______________________________
Charles Kingswell-Smith
Vice President
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Exhibit 99.5
ASSIGNMENT OF PROMISSORY NOTE
In consideration of financial accommodations made or to be made to or at
the request of NDE ENVIRONMENTAL CORPORATION, a Delaware corporation
("Assignor") by BANK ONE, TEXAS, N.A., a national banking association
("Lender"), Assignor represents, warrants, covenants and agrees with the Lender
as follows:
1. Assignment. Assignor hereby assigns to the Lender all of its right,
title and interest in and to that certain Promissory Note dated of even date
herewith (together with all extensions, renewals and modifications thereof
and/or substitutions therefor, the "Watson Note") made by Watson General
Corporation, a California corporation, ("Watson"), and payable to the order of
Assignor, in the original principal amount of Five Hundred Thousand and No/100
Dollars ($500,000.00), and all monies due or to become due thereunder or
connection therewith. Simultaneously with the execution and delivery of this
Assignment, Assignor shall deliver to Lender the original Assigned Note executed
by Watson. Unless otherwise notified in writing by Lender, Watson shall make all
payments of interest due hereunder to Assignor and all payments of principal due
hereunder to Lender.
2. Collateral Security. This Assignment is made as collateral security for
the prompt payment when due (whether by acceleration or otherwise) of (i) that
certain Revolving Note and that certain Term Note, both dated as of the 25th day
of October, 1996, as described in that certain Loan Agreement dated as of the
25th day of October, 1996, by and among NDE ENVIRONMENTAL CORPORATION, a
Delaware corporation, TANKNOLOGY/NDE CORPORATION, a Delaware corporation, USTMAN
INDUSTRIES, INC., a Delaware corporation, PROECO, INC., a Delaware corporation,
and TANKNOLOGY CANADA (1988) INC., a Canadian federal corporation (collectively,
"Borrower"), and BANK ONE, TEXAS, N.A., as amended (the "Loan Agreement"); (ii)
all extensions, renewals, modifications, and/or substitutions of or for such
promissory note (such promissory notes together with such extensions, renewals,
modifications, and/or substitutions being herein collectively referred to as the
"Notes"); and (iii) all other liabilities and obligations of Assignor to the
Lender, whether now existing or hereafter created or arising, direct or
indirect, matured or unmatured, and whether absolute or contingent, joint,
several, or joint and several, and no matter how the same may be evidenced or
shall arise (all of the foregoing obligations being hereinafter collectively
referred to as the "Obligations"). The Notes evidence the $5,000,000.00
Revolving Line of Credit and $6,000,000.00 Term Loan described in the Loan
Agreement made or to be made by the Lender to Borrower pursuant to the terms and
conditions of the Loan Agreement.
3. Assignor's Warranties. Assignor warrants and represents to the Lender
that it is the sole owner of the Assigned Note, free and clear of all liens,
claims and encumbrances, that it has the right to make the assignment thereof as
<PAGE>
herein set forth, that the Assigned Note is valid, binding and enforceable
against the obligor thereunder in accordance with each and every term and
condition thereof, that, except as disclosed in the Watson Note, there are no
setoffs or defenses thereto, that no modification to the Assigned Note has been
made, that no extensions or renewals have been granted or made changing the
terms thereof, and that as of the date of execution hereof, the current unpaid
balance of the Assigned Note is Five Hundred Thousand and No/100 Dollars
($500,000.00).
4. Negative Covenants. Assignor shall not, without the prior written
consent of the Lender, do or cause to be done any of the following:
(a) execute or consent to any amendment or modification of the
Assigned Note;
(b) compromise or settle amounts due and owing to Assignor pursuant to
the Assigned Note; or
(c) exercise any other rights with respect to the Assigned Note in
violation of any terms, covenants or conditions of the Loan Agreement or
any Loan Document (as such term is defined in the Loan Agreement).
5. Indemnification. Assignor agrees to indemnify the Lender and to hold the
Lender harmless from and against any loss or liability, including the Lender's
reasonable attorneys' fees, in the event of its breach of any of the covenants
or agreements herein set forth or in the event any of the warranties and/or
representations set forth in this Assignment shall prove to be false or untrue
in any respect.
6. Default by the Assignor. An Event of Default shall be deemed to have
occurred hereunder as and when an Event of Default occurs under the Loan
Agreement or any Loan Document.
7. The Lender's Rights in the Collateral. So long as any Obligation shall
remain unpaid, upon the occurrence of any Event of Default, the Lender shall
have the rights and remedies provided to it pursuant to the terms and conditions
of the Loan Agreement, and without limiting the foregoing, shall also have all
of the rights of an unconditional owner of the Assigned Note, including but not
limited to, the following with respect thereto:
(a) The right to declare the entire principal balance thereof
immediately due and payable in the event of a default in any of the terms
thereof;
(b) The right to collect the principal thereof, and upon receipt of
the unpaid balance of the principal sum with interest, to mark the Assigned
Note as having been "paid in full", and to apply such sums received by the
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<PAGE>
Lender on account of the interest and/or principal and/or other sums due
or hereafter to become due on the Notes and/or any other of the
Obligations;
(c) The right to collect the interest thereon which may become due and
payable, and to apply such interest received by the Lender on account of
the interest and/or principal and/or other sums due or hereafter to become
due on the Notes and/or any other of the Obligations; and
(d) The right and authorization to collect or to compromise or to sell
at public or private sale, at the option of the Lender at any time or times
thereafter, without demand, advertisement or notice (other than as set
forth herein below or as specifically required by law), the Assigned Note,
or any part thereof, or any substitute(s) therefor or addition(s) thereto,
applying the net proceeds thereof, after deduction of all costs and
expenses of such collection, compromise or sale (including trustee's and
attorneys' fees), to the payment of the Notes and/or any other of the
Obligations, including interest thereon, and in case such net proceeds
shall be insufficient to pay the balance due under the Notes and/or any
other of the Obligations (including any balance due by virtue of
acceleration of any of the foregoing), Assignor shall immediately pay to
the Lender the amount of such deficiency, with interest thereon at the rate
then applicable to the Obligations from the date of the receipt in
immediately available funds by the Lender of the proceeds of such
collection, compromise or sale, until paid. Ten (10) days notice of the
time and place of such sale shall be sent by certified or registered mail
to Assignor and Assignor hereby waives all other notice thereof. Upon any
such foreclosure, the Lender may purchase all or any part of the Assigned
Note at the best price obtainable without being liable to account to
Assignor or any other person by reason thereof. Nothing in this Paragraph
shall limit any of the Lender's other rights or remedies under the Loan
Documents or applicable law; and
(e) The right to institute, prosecute to judgment, settle or
discontinue any proceeding at law or in equity to enforce the collection of
the Assigned Note and/or the debt evidenced thereby, provided, however,
that after deduction of the amount of any legal and other expenses incurred
in connection with any such collection efforts, together with interest
thereon at the rate then applicable to the Obligations, the proceeds of
such collection efforts shall be applied in reduction of the interest
and/or principal sum and/or other sums due on the Notes and/or any other of
the Obligations, as of the date of receipt of such proceeds by the Lender
in immediately available funds, and Assignor agrees to pay any deficiency
owing on the Notes and on any other of the Obligations, with interest.
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<PAGE>
8. Return of Collateral. If all of the terms hereof are fully performed by
Assignor, and upon the receipt by the Lender (in collected fund) of the entire
principal sum of the Notes and all other of the Obligations, together with
interest and all other sums owing thereon, the Lender shall re-assign to
Assignor (without recourse or warranty) the Assigned Note.
9. Notices. All notices which are required or permitted hereunder shall be
in writing and shall be either hand delivered, or mailed by certified or
registered U.S. Mail, return receipt requested, first class postage prepaid,
addressed to the parties as follows:
If to Lender: BANK ONE, TEXAS, N.A.
910 Travis
Houston, Texas 77002
Attention: Charles Kingswell-Smith
Facsimile: (713) 751-7894
with a copy to: HUTCHESON & GRUNDY, L.L.P.
1200 Smith, Suite 3300
Houston, Texas 77002
Attention: Michael L. Grove
Facsimile: (713) 951-2925
If to the Borrower: NDE ENVIRONMENTAL CORPORATION
8900 Shoal Creek Bldg. 200
Austin, Texas 78757
Attention: President
Facsimile: (512) 459-1459
with a copy to: NDE ENVIRONMENTAL CORPORATION
712 Main Street, Suite 1700
Houston, Texas 77002
Attention: Jay Allen Chaffee
Facsimile: (713) 223-5379
or to such other address as either party shall designate by written notice
to the other in the manner provided herein.
10. Benefit and Governing Law. This Assignment shall be governed in all
respects by the laws of the State of Texas and shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and assigns.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this instrument to be
effective as of the 20th day of May, 1997.
ASSIGNOR:
NDE ENVIRONMENTAL CORPORATION
By: /S/ JAY ALLEN CHAFFEE
________________________________
Jay Allen Chaffee
Chairman of the Board
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Exhibit 99.6
BANK ONE, TEXAS, N.A.
CONSENT, RELEASE AND UNDERTAKING
NDE Environmental Corporation, a Delaware corporation ("NDE"), granted to
Bank One, Texas, N.A. ("Bank One") liens and security interests on the capital
stock ("USTMAN Stock") of USTMAN Industries, Inc., a Delaware corporation
("USTMAN"), and USTMAN granted to Bank One liens and security interest in
certain assets and properties of USTMAN ("USTMAN Assets") in connection with
certain borrowings by NDE from Bank One pursuant to that certain Loan Agreement
dated as of October 25, 1996 ("Loan Agreement") by and among Bank One, NDE,
Tanknology/NDE Corporation ("TNC"), USTMAN, Proeco, Inc. ("Proeco") and
Tanknology of Canada (1988), Inc. ("Tanknology Canada") (such borrowings under
the Loan Agreement are referred to herein as the "Indebtedness");
W I T N E S S E T H:
WHEREAS, NDE has agreed to sell to Watson General Corporation ("Watson")
all of the USTMAN Stock; and
WHEREAS, Bank One has agreed to (a) consent to such sale, (b) release
USTMAN from its Obligations (as defined in the Loan Agreement) with respect to
the Indebtedness and (c) release its liens and security interests in the USTMAN
Stock and USTMAN Assets in accordance with the terms and provisions hereof;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged:
1. Bank One hereby consents to the sale by NDE to Watson of the USTMAN
Stock ("Sale Transaction") and does hereby (a) release USTMAN from its
Obligations with respect to the Indebtedness and (b) release its liens and
security interests in the USTMAN Stock and the USTMAN Assets.
2. Bank One hereby agrees to release Certificate No. 3 evidencing the 1,000
shares of USTMAN Stock.
3. The consents and releases referred to in paragraphs 1 and 2 above shall
be effective only upon closing of the Sale Transaction and the satisfaction of
all of the conditions enumerated in Article III of Amendment No. 2 to the Loan
Agreement of even date herewith (the "Second Amendment").
4. Bank One shall from time to time, upon request by Watson, USTMAN or NDE,
execute and deliver such financing statement releases or other documents
necessary to release any lien or security interest of the undersigned in the
USTMAN Stock or the USTMAN Assets.
5. NDE hereby agrees to (a) deposit $3,000,000 of the cash proceeds from
the Sale Transaction in a certificate of deposit at Bank One pledged to Bank
One, (b) pledge to Bank One the $500,000 note to be received by NDE in
connection with the Sale Transaction and (c) apply the remaining cash proceeds
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<PAGE>
of the Sale Transaction, less expenses, to the outstanding balance of the
Revolving Note (as defined in the Loan Agreement), with any excess over the
outstanding balance of the line of credit to be paid to NDE.
6. NDE hereby agrees to execute the Second Amendment in the form attached
hereto as Exhibit A.
7. This consent, release and undertaking shall be governed by and construed
in accordance with the laws of the State of Texas and applicable United States
federal law.
8. This Consent, Release and Undertaking shall be binding upon each of the
undersigned and its successors and assigns, and shall inure to the benefit of
NDE, USTMAN, Watson and Bank One and their respective successors and assigns.
Notwithstanding anything contained herein to the contrary, this Consent, Release
and Undertaking shall in all respects be subject to and governed by the terms
and conditions of the Second Amendment attached hereto as Exhibit A.
DATED AND EFFECTIVE as of the 20th day of May, 1997.
BANK ONE, TEXAS, N.A.
By: /S/ CHARLES KINGSWELL-SMITH
______________________________________
Authorized Signing Officer
NDE ENVIRONMENTAL CORPORATION
By: /S/ JAY CHAFFEE
______________________________________
Jay Chaffee, Chairman of the Board
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Exhibit 99.7
BANC ONE CAPITAL PARTNERS, L.P.
CONSENT, RELEASE AND UNDERTAKING
NDE Environmental Corporation, a Delaware corporation ("NDE"), granted to
Banc One Capital Partners, L.P. ("Capital Partners") liens and security
interests on the capital stock ("USTMAN Stock") of USTMAN Industries, Inc., a
Delaware corporation ("USTMAN"), and USTMAN granted to Capital Partners liens
and security interests in certain assets and properties of USTMAN ("USTMAN
Assets") in connection with certain borrowings by NDE from Capital Partners
pursuant to that certain Note and Warrant Purchase Agreement dated as of October
25, 1996 ("Note Purchase Agreement") among NDE, TNC, USTMAN, Proeco, Tanknology
Canada and Capital Partners (such borrowings under the Note Purchase Agreement
are referred to herein as the "Indebtedness");
W I T N E S S E T H:
WHEREAS, NDE has agreed to sell to Watson General Corporation, a California
corporation ("Watson"), all of the USTMAN Stock; and
WHEREAS, Capital Partners has agreed to (a) consent to such sale, (b)
release USTMAN from its obligations with respect to the Indebtedness and (c)
release its liens and security interests in the USTMAN Stock and USTMAN Assets
in accordance with the terms and provisions hereof;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged:
1. Capital Partners hereby consents to the sale by NDE to Watson of the
USTMAN Stock ("Sale Transaction") and does hereby (a) release USTMAN from its
obligations with respect to the Indebtedness, including its obligations under
the Note Purchase Agreement and that certain Security Agreement - Personal
Property dated as of October 25, 1996 among NDE, TNC, USTMAN, Proeco, Tanknology
Canada and Capital Partners ("Security Agreement") and (b) release its liens and
security interests in (i) the USTMAN Stock pledged pursuant to that certain
Security Agreement--Pledge of Subsidiary Stock dated as of October 25, 1996
between NDE and Capital Partners and (ii) the USTMAN Assets.
2. Capital Partners agrees to the release by Bank One, Texas, N.A. ("Bank
One") of Certificate No. 3 evidencing 1,000 shares of USTMAN Stock.
3. The consents and releases referred to in paragraphs 1 and 2 above shall
be effective only upon closing of the Sale Transaction.
4. Capital Partners shall from time to time upon request by Watson, USTMAN
or NDE execute and deliver such financing statement releases or other documents
necessary to release any lien or security interest of Capital Partners in the
USTMAN Stock or the USTMAN Assets.
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<PAGE>
5. NDE hereby agrees to (a) deposit $3,000,000 of the cash proceeds from
the Sale Transaction in a certificate of deposit at Bank One pledged to Bank One
and Capital Partners, which collateral account is hereby acknowledged to be
subject to the Security Agreement, (b) pledge to Bank One and Capital Partners
the $500,000 note to be received by NDE in connection with the Sale Transaction,
which $500,000 note is hereby acknowledged to be covered by the Security
Agreement and (c) apply the remaining cash proceeds of the Sale Transaction,
less expenses, to the outstanding balance of the line of credit of NDE from Bank
One, with any excess over the outstanding balance of the line of credit to be
paid to NDE.
6. The $3,000,000 certificate of deposit ("CD") has been pledged and
delivered by NDE to Bank One pursuant to the Pledge of Certificate of Deposit
dated as of May 20, 1997 ("Pledge Agreement") and the $500,000 promissory note
("Watson Note") made by Watson has been assigned to Bank One pursuant to the
Assignment of Promissory Note dated May 20, 1997 ("Assignment Agreement").
Pursuant to the Intercreditor Agreement, Bank One has agreed to hold such CD and
Watson Note as agent for Capital Partners and upon its release of its pledge and
assignment under such Pledge Agreement and Assignment Agreement to deliver such
CD and Watson Note to Capital Partners in pledge under this Consent, Release and
Undertaking. NDE hereby consents to such delivery by Bank One to Capital
Partners. In addition, with respect to the CD and Watson Note, NDE (i) upon
request of Capital Partners, shall deliver to Capital Partners, financing
statements (form UCC-1) in proper form for filing under the Uniform Commercial
Code in each jurisdiction as may be necessary or, in the reasonable opinion of
Capital Partners, desirable to perfect the security interest created, granted,
or extended herein. NDE hereby authorizes Capital Partners to file, and appoints
Capital Partners its attorney-in-fact for the purpose of executing and filing,
such financing statements or any additional financing statement or any
continuation statement without the signature of NDE to the extent permitted by
Applicable Law (as defined in the Security Agreement).
7. NDE hereby represents and warrants that it will not as a result of the
consummation of the Sale Transaction be in non-compliance with any covenant of
the Note Purchase Agreement except for Sections 9(c) (insofar, and only insofar,
as Section 9(c) would apply to the set- off provisions of the Watson Note), 9(g)
and 9(j) thereof, with respect to which Sections such non-compliance is hereby
waived.
8. This consent, release and undertaking shall be governed by and construed
in accordance with the laws of the State of Ohio and applicable United States
federal law.
9. This consent, release and undertaking shall be binding upon each of the
undersigned and its successors and assigns, and shall inure to the benefit of
NDE, USTMAN, Watson and Capital Partners and their respective successors and
assigns.
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<PAGE>
DATED AND EFFECTIVE as of the 20th day of May, 1997.
BANC ONE, CAPITAL PARTNERS, L.P.,
By: BOCP Corporation, General Partner
By: /S/ WILLIAM P. LEAHY
___________________________________
Authorized Signing Officer
NDE ENVIRONMENTAL CORPORATION
By: /S/ JAY CHAFFEE
___________________________________
Jay Chaffee, Chairman of the Board
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