SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant []
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for the use of the Commission
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11 (c) or ss.240.14a-12
Tanknology - NDE International, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement; if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how is was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
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<PAGE>
Tanknology-NDE International, Inc.
8900 Shoal Creek Boulevard, Building 200
Austin, Texas 78757
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON June 15, 1999
To the Stockholders of Tanknology-NDE International, Inc.:
Notice is hereby given that the 1999 Annual Meeting of Stockholders (the
"Annual Meeting") of Tanknology- NDE International, Inc., a Delaware corporation
(the "Company"), will be held on Tuesday, June 15, 1999, at the Company's
offices located at 8900 Shoal Creek Boulevard, Building 200, Austin, TX 78757 at
10:00 a.m. Central time, for the following purposes:
1. To consider and vote on the nominees for directors of the
Company;
2. To ratify the appointment of independent public accountants for
the 1999 fiscal year; and
3. Such other business as may properly come before the Annual Meeting
or any adjournment or postponement thereof.
Only stockholders of record at the close of business on April 30, 1999 are
entitled to notice of and to vote at the Annual Meeting and any adjournment or
postponement thereof.
Stockholders are cordially invited to attend the Annual Meeting in person.
Those who do not plan to attend and who wish their shares voted are requested to
sign, date and mail promptly the enclosed proxy, for which a return envelope is
provided.
FOR THE BOARD OF DIRECTORS,
//s// JAY ALLEN CHAFFEE
Jay Allen Chaffee
Chairman of the Board
Austin, Texas
May 11, 1999
<PAGE>
Tanknology-NDE International, Inc.
8900 Shoal Creek Boulevard, Building 200
Austin, Texas 78757
PROXY STATEMENT
------
May 11, 1999
General
The accompanying proxy is solicited on behalf of the Board of Directors of
Tanknology-NDE International, Inc., a Delaware corporation (the "Company"), for
use at the annual meeting of stockholders of the Company (the "Meeting") to be
held at 10:00 a.m. Central time on Tuesday, June 15, 1999, in the Company's
offices located at 8900 Shoal Creek, Building 200, Austin TX, 78757.
Only holders of record at the close of business on April 30, 1999 (the
"Record Date") of shares of common stock of the Company, par value $0.0001 per
share (the "Common Stock") and shares of Series A Redeemable Convertible
Preferred Stock of the Company, par value $0.0001 per share (the "Preferred
Stock"), will be entitled to vote at the Meeting with respect to the election of
the five directors as described in Proposal 1 and with respect to the
ratification of appointment of independent public accountants as described in
Proposal 2. Holders of record on the Record Date of Preferred Stock will be
entitled to vote at the Meeting with respect to the election of one additional
director as described in Proposal 1. Each share of Preferred Stock is entitled
to 20,000 votes, and each share of Common Stock is entitled to one vote in
matters in which such stock is entitled to vote. At the close of business on the
Record Date, 16,735,040 shares of Common Stock were outstanding and entitled to
vote, and 150 shares of Preferred Stock were outstanding and entitled to vote. A
majority of the shares of Common Stock and Preferred Stock outstanding on the
Record Date will constitute a quorum.
This Proxy Statement and accompanying proxy was mailed to stockholders on
or about May 11, 1999.
Vote Required; Abstentions
Five directors to serve as members of the Board of Directors will be
elected by a plurality of the votes cast by the holders of Common Stock and
Preferred Stock, voting together as a class. One additional director to serve as
a member of the Board of Directors will be elected by a plurality of the votes
cast by the holders of Preferred Stock. There will be no cumulative voting for
directors. For all matters except the election of directors, the affirmative
vote of a majority of the votes entitled to be cast by the holders of Common
Stock and Preferred Stock, voting together as a class, present in person or by
proxy is required.
Abstentions are treated as present and entitled to vote and, thus, will be
counted in determining whether a quorum is present. Abstentions will have the
same effect as a vote against a matter, except as to the election of directors,
as to which they will have no effect.
Solicitation of Proxies; Expenses
Solicitation of proxies by mail is expected to commence on or about May 11,
1999, and the cost thereof will be borne by the Company. In addition to such
solicitation by mail, certain of the directors, officers and regular employees
of the Company may, without extra compensation, solicit proxies by telephone,
telecopy or personal interview. Arrangements will be made with certain brokerage
houses, custodians, nominees and other fiduciaries for the forwarding of
solicitation materials to the beneficial owners of Common Stock and Preferred
Stock held of record by such persons, and such brokers, custodians, nominees and
fiduciaries will be reimbursed by the Company for reasonable out-of-pocket
expenses incurred by them in connection therewith.
Revocability of Proxies
Any person signing a proxy in the form accompanying this Proxy Statement
has the power to revoke it prior to the Meeting or at the Meeting prior to the
vote pursuant to the proxy. A proxy may be revoked by a writing delivered to the
Company, signed by the person who signed the proxy and stating that the proxy is
revoked, by a subsequent proxy that is signed by the person who signed the
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<PAGE>
earlier proxy and that is presented at the Meeting or by attending the Meeting
and voting in person. Please note, however, that if a stockholder's shares are
held of record by a broker, bank or other nominee and that stockholder wishes to
vote at the Meeting, the stockholder must bring to the Meeting a letter from the
broker, bank or other nominee confirming that stockholder's beneficial ownership
of the shares.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
At the meeting, the holders of the Company's Common Stock and Preferred
Stock will elect five directors to hold office until the next annual meeting of
stockholders and until their respective successors have been elected and
qualified or until such director's earlier resignation or removal.
Common Stock and Preferred Stock represented by the accompanying proxy will
be voted for the election of those five nominees recommended by the Board unless
the proxy is marked in such a manner as to withhold authority to vote or so as
to vote for one or more alternative candidates. If any nominee for any reason is
unable to serve or will not serve, the proxies may be voted for such substitute
nominee as the proxy holder may determine. The Company is not aware of any
nominee who would be unable or unwilling to serve as a director.
Nominees
Unless contrary indications are set forth in the proxy, it is intended that
the person named in the proxy will vote all shares of Common Stock represented
by the proxy for the election of Messrs. Jay Allen Chaffee, A. Daniel Sharplin,
Charles C. McGettigan, Michael S. Taylor, and Myron A. Wick, III as directors.
Messrs. Chaffee, McGettigan, Sharplin, Taylor and Wick are all presently members
of the Board of Directors of the Company. Directors of the Company are elected
annually and hold office until their successors have been elected and qualified
or their earlier resignation or removal. Management is not aware of any
circumstances likely to render any nominee unavailable for election. However,
should any nominee become unavailable for election, the Board of Directors of
the Company may designate another nominee, in which case the person acting under
a duly executed proxy will vote for the election of the replacement nominee. A
stockholder may, in the manner set forth in the enclosed proxy card, instruct
the proxy holder not to vote that stockholder's shares for one or more of the
named nominees.
The Company's by-laws currently provide for a Board of Directors of seven
persons. Six persons currently serve on the Board and are expected to continue
to serve until the Meeting. The proxies solicited hereby cannot be voted for a
number of persons greater than the number of nominees named below. The
Certificate of Incorporation of the Company, as amended to date, does not permit
cumulative voting. A plurality of the votes of the holders of the outstanding
shares of Common Stock and Preferred Stock of the Company represented at a
meeting at which a quorum is present may elect directors other than the director
to be elected by the holders of the Company's Preferred Stock. The Company's
Certificate of Designation for Preferred Stock provides that a plurality of the
votes of the holders of the outstanding shares of the Company's Preferred Stock
represented at a meeting at which a quorum is present may elect one director.
The following sets forth information concerning the five nominees for
election by the holders of Common Stock and Preferred Stock as directors at the
meeting, including their position with the Company, their business experience
during at least the past five years, and their age of April 30, 1999.
<TABLE>
<CAPTION>
Director
Name Age Principal Occupation Since
- ----------------------------- ----------- --------------------------------------- -------------
<S> <C> <C> <C>
Jay Allen Chaffee(1) 47 Chairman of the Board 1991
A. Daniel Sharplin 36 President and Chief Executive Officer 1995
Charles C. McGettigan(3) 54 Merchant Banking 1995
Michael S. Taylor(2)(3) 57 Investment Banking 1992
Myron A. Wick, III(1)(2) 55 Merchant Banking 1991
- ---------------------------
<FN>
(1) Member of Executive Committee
(2) Member of Compensation Committee
(3) Member of Audit Committee
</FN>
</TABLE>
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<PAGE>
Each of the directors named herein was elected to be a director at the
Company's annual meeting of stockholders held on May 19, 1998.
Jay Allen Chaffee was elected to the Company's Board of Directors in April
1991 and has been the Chairman of the Board since December 1994. He served as
the Company's President, Chief Executive Officer and Chief Financial Officer
from May 1991 until June 1995. Mr. Chaffee has served as President and a
director of Bunker Hill Associates, Inc. ("Bunker Hill") since 1985, and he
continues to serve in these capacities. Mr. Chaffee received a Bachelor of Arts
from Franklin & Marshall College in 1974 and a Juris Doctor from the University
of Tulsa College of Law in 1978.
A. Daniel Sharplin has been a director and the Company's President, and
Chief Executive Officer since June 1995. He became the Company's Vice President,
Western Region, in December 1991, was appointed the Company's Chief Operating
Officer and Secretary in July 1992 and was appointed President in December 1994.
Prior to joining the Company, Mr. Sharplin was an environmental service industry
consultant from April 1991 to December 1991. Mr. Sharplin received a Masters of
Business Administration from the University of Texas in 1987.
Charles C. McGettigan has been a director since 1995. Since November 1988,
he has been a Managing Director of McGettigan, Wick & Co. Inc. ("McGettigan
Wick"), an investment banking firm in San Francisco. Since May 1991, Mr.
McGettigan has been a general partner of Proactive Investment Managers, L.P.
("PIM"), which is the general partner of Proactive Partners, L.P. ("Proactive"),
a merchant banking fund. Prior to co-founding McGettigan, Wick & Co., Mr.
McGettigan was a Principal, Corporate Finance, of Hambrecht & Quist,
Incorporated. Prior to that time, Mr. McGettigan was a Senior Vice President of
Dillon, Read & Co. Inc. He currently serves on the boards of directors of
Cuisine Solutions, Inc., Modtech, Inc, Onsite Energy, Inc., PMR Corporation,
Sonex Research, Inc., and Wray-Tech Instruments, Inc. Mr. McGettigan is a
graduate of Georgetown University, and also received a Masters of Business
Administration in Finance from the Wharton School at the University of
Pennsylvania.
Michael S. Taylor has been a director of the Company since July 1992. He
has been Senior Vice President- Corporate Finance of Gilford Securities
Incorporated since December 1996. From March 1996 to November 1996, he held a
similar position with Laidlaw Equities. From June 1989 to March 1996 he was an
Associate Director of Investment Banking at Josephthal Lyons & Ross, Inc.
("Josephthal") . From early 1980 until joining Josephthal, he was President of
Mostel & Taylor Securities, Inc. He has been involved in the securities industry
since 1966 when he joined Lehman Brothers Inc. as an analyst. He became a
director of New Paradigm Software Corporation in April 1996. He attended Amherst
College and Columbia University.
Myron A. Wick, III has been a director of the Company since November 1991.
Since November 1988, he has been a Managing Director of McGettigan Wick. Since
May 1991, Mr. Wick has been a general partner of PIM, which is the general
partner of Proactive. From September 1985 to May 1988, Mr. Wick was Chief
Operating Officer of California Biotechnology, Inc., a publicly traded
biotechnology firm. Mr. Wick is a director of Modtech, Inc., Sonex Research,
Inc., and Wray-Tech Instruments, Inc. Mr. Wick received a Bachelor of Arts from
Yale University in 1965 and a Masters of Business Administration from Harvard
University in 1968.
The holders of the Preferred Stock are entitled to elect one director in
accordance with the Certificate of Designation for the Preferred Stock. On June
26, 1998, the Board of Directors, pursuant to the Company's By-laws, elected
Lawrence K. Landers to the Board of Directors to replace Steven H. Sigmon and
serve as the representative of the holders of the Preferred Stock. Mr. Landers
has been nominated for election to the Company's Board of Directors at the
Meeting. The following sets forth certain information regarding Mr. Landers:
<TABLE>
<CAPTION>
Director
Name Age Principal Occupation Since
- ----------------------------- ----------- --------------------------------------- -------------
<S> <C> <C> <C>
Lawrence K. (Kel) Landers 49 Vice-President, Marketing, General 1998
Manager of Simplicity Petroleum Data
Services for Veeder-Root Company
(Subsidiary of Danaher Corporation)
</TABLE>
Mr. Landers has been a director since June 1998. Since September 1998, he
has been Vice President of Marketing for Veeder-Root Company ("Veeder-Root"), a
subsidiary of Danaher Corporation ("Danaher"), and from December 1996 to
September 1998 served as the General Manager of Simplicity Data Services for
Veeder-Root. Prior to that time, Mr. Landers was employed with United Parcel
Service as the Vice President, Marketing of UPS Worldwide Logistics , a
subsidiary of UPS from June 1995 to December 1996, and as International
Marketing Manager for UPS from March 1994 to June 1995. Mr. Landers received a
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<PAGE>
Bachelor of Science from the University of Alabama in 1973 and a Masters in
Business Administration from Duke University in 1984.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ELECTION OF EACH OF THE FOREGOING NOMINEES AS DIRECTORS
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, officers and beneficial
owners of more than 10% of any class of any equity securities of the Company to
file with the Securities and Exchange Commission (the "SEC"), initial reports of
ownership and reports of changes in ownership of such equity securities of the
Company. Officers, directors and 10% stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. The Company believes that, during the 1998 fiscal year, the filings
required of its officers, directors or greater than 10% beneficial owners were
timely filed with the exception of Form 5 for each of Mr. Chaffee and Mr.
Sharplin which were not timely filed.
Meetings of the Board of Directors and Certain Committees
During all of 1998, Jay Allen Chaffee, A. Daniel Sharplin, Charles C.
McGettigan, Michael S. Taylor and Myron A. Wick, III were members of the Board
of Directors. Effective May 26, 1998, The Board of Directors unanimously elected
Kel Landers to the Board of Directors to replace Steven H. Sigmon, who had been
elected a director on February 19,1998 and served as a director until May 26,
1998.
The Board of Directors met four times in 1998. The standing committees of
the Board of Directors include an Executive Committee, an Audit Committee and a
Compensation Committee. The Board of Directors does not have a Nominating
Committee. The functions of the Nominating Committee are performed by the Board
of Directors. During 1998, the Executive Committee, the Compensation Committee
and the Audit Committee did not conduct meetings separate from the regular Board
meetings. All directors attended at least 75% of the meetings of the Board of
Directors held in 1998.
During 1998, the members of the Executive Committee were Jay Allen Chaffee,
Myron A. Wick, III and A. Daniel Sharplin. Messrs. Chaffee, Wick and Sharplin
continue to be members of the Executive Committee. The Executive Committee has,
in general, the authority to take substantially all actions that can be taken by
the Board of Directors as a whole.
During 1998, the members of the Compensation Committee were Michael S.
Taylor and Myron A. Wick, III. Messrs. Taylor and Wick continue to be members of
the Compensation Committee. The Compensation Committee has the authority to
determine the compensation and other benefits received by the Company's Chief
Executive Officer and members of the Company's senior management group.
During 1998, the members of the Audit Committee were Charles C. McGettigan
and Michael S. Taylor. Messrs. McGettigan and Taylor continue to be the members
of the Audit Committee. The Audit Committee reviews with the Company's outside
auditors the Company's financial reporting systems and controls and meets with
the outside auditors concerning the scope and terms of their engagement and the
results of their audits.
Executive Officers
Jay Allen Chaffee. See "Proposal No. 1 -- Election of Directors --
Nominees."
A. Daniel Sharplin. See "Proposal No. 1 -- Election of Directors --
Nominees."
H. Baxter Nairon, age 39, was named Vice President of Strategy and Business
Development of the Company in December 1997. Prior to that time, he was
President of Field Services for the Company from April 1996 to December
1997. Before joining the Company, from 1989 to 1996, Mr. Nairon was
employed by Booz-Allen & Hamilton, a global management consulting firm,
where he achieved the position of Principal, specializing in engagements
for large oil companies. He has received a Professional Engineering
registration and holds a Bachelor of Science in Mechanical Engineering from
the University of Tennessee at Knoxville and a Masters of Business
Administration from the University of Texas.
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<PAGE>
David G. Osowski, age 46, was named Vice President, Secretary and Chief
Financial Officer in December 1996. Prior to joining the Company, from May
1991 until July 1996, Mr. Osowski served as Senior Vice President,
Controller and Treasurer for Summagraphics Corporation. Mr. Osowski
received a Bachelor of Science from the University of Bridgeport.
Daniel J. Kubala, age 35 joined the Company as Vice President of Marketing
in August 1996. Before joining the company, from 1993 to 1996, Mr. Kubala
served as Technology Marketing Manager for the IC2 Institute, assisting
start-up firms in licensing and marketing NASA and CIA technologies for
private sector use. Prior to that, Mr. Kubala was Product Manager for
Quaker Oats Company's Gatorade sports drink, where he was responsible for
pricing strategy, forecasting, new flavors, and packaging. Mr. Kubala holds
a Bachelor of Arts in Mathematics from the University of Dallas and a
Masters of Business Administration from the University of Texas.
Allen Porter, age 41, was named Vice President of Sales in August, 1998.
From May, 1985 to August 1998, Mr. Porter was employed by the Company as
Vice President, Total Compliance. Prior to joining the Company, from May
1995 to May 1998, Mr. Porter served in various management positions
including Director of Sales and Vice President of Marketing and, most
recently, as the Vice President, Encompass Division at Arizona Instrument,
Inc. Mr. Porter received a Bachelor of Science from Marquette University.
Certain Transactions
During the last fiscal year, the following transactions in excess of
$60,000 were entered into with related parties: During 1998, the Company paid
$374,601 to Bunker Hill for the services of Jay Allen Chaffee and related
expenses as described below. Mr. Chaffee is the Chairman of the Board and
President of Bunker Hill.
Transactions with Management
Employment Agreements
In 1991, the Company entered into a service contract with Bunker Hill, to
retain the services of Mr. Chaffee. Mr. Chaffee is a principal of Bunker Hill, a
management consulting firm based in Houston, Texas. Pursuant to the contract,
Mr. Chaffee has agreed to serve the Company in various capacities as an officer
and director. In July 1997, the Company entered into an Executive Consulting
Agreement pursuant to which the Company agreed to pay a base retainer for such
services at the rate of $7,500 per month with additional stock and cash bonus
consideration. The term of the agreement is three and one-half years, it may be
extended for one or more additional periods, and it can be terminated by Bunker
Hill on thirty days' prior written notice and by the Company at any time. The
agreement supercedes the 1991 service contract between the Company and Bunker
Hill. In 1998, Bunker Hill, on behalf of Mr. Chaffee, received $90,000 in
consideration for Mr. Chaffee's management services as an officer of the Company
plus a bonus of $200,000 earned but not paid in fiscal year 1998. In July 1998
the Company also retained Bunker Hill, on behalf of Mr. Chaffee to provide
management and support services in connection with the Company's environmental
risk management function for a monthly fee of $4,250. Accordingly, Bunker Hill,
on behalf of Mr. Chaffee was paid a total of $25,500 for these services in 1998.
In addition, $59,101 was remitted to Bunker Hill for secretarial support and
reimbursement of travel and out-of-pocket expenses related to Mr. Chaffee's
services.
In July 1997, the Company entered into an employment agreement (the
"Employment Agreement") with A. Daniel Sharplin, its President, Chief Executive
Officer and a director, pursuant to which Mr. Sharplin will continue to serve
the Company as President, Chief Executive Officer and director. Pursuant to the
Employment Agreement, the Company paid Mr. Sharplin a base salary at the rate of
$225,000 in 1998,. Pursuant to the Employment Agreement, the Company will pay
Mr. Sharplin an annual base salary of $250,000 for all periods after December
31, 1998, except that the salary may be increased but not decreased at the
discretion of the Board of Directors. On February 23, 1999, the Compensation
Committee of the Board of Directors voted to increase Mr. Sharplin's annual
salary to $290,000 effective January 1, 1999. Mr. Sharplin will also receive
additional stock and cash bonus consideration. The term of the contract is three
and one-half years, and it may be extended for one or more additional periods.
The agreements described above between the Company and Messrs. Chaffee and
Sharplin (who for the purposes of this paragraph only will be referred to as the
"Employed Person") provide for change of control protection. In case of a change
of control, (i) if the Employed Person is terminated, (A) the Employed Person
will be entitled to receive his base compensation for a period equal to the
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remaining portion of the designated term of the relationship, (B) all of the
stock appreciation rights or stock options of the Employed Person granted
pursuant to the agreement which have accrued but not vested prior to the date on
which the change in control has occurred will automatically vest as of such date
and (C) all other rights and benefits the Employed Person may have under the
employee benefit, bonus and/or stock option plans and programs of the Company
will be determined in accordance with the terms and conditions of those plans
and programs, and (ii) if the Employed Person is not terminated, (A) the terms
and provisions of the agreements will remain in full force and effect, (B) at
the election of the Employed Person, the stock appreciation rights and stock
options of the Employed Person granted pursuant to the agreements which have
accrued but not vested prior to the date of such change in control shall either
(x) vest or (y) remain accrued but not vested and (C) regardless of the election
of the Employed Person pursuant to the immediately preceding clause, the stock
appreciation rights and stock options granted pursuant to the agreements shall
continue to accrue after the date of the change in control. A change in control
means a change in control of the Company which shall be deemed to have occurred
if (i) there is an event required to be reported with respect to the Company
under federal securities laws, (ii) any person shall have become the beneficial
owner, directly or indirectly, of securities of the Company representing 40% or
more of the combined voting power of the Company's then outstanding voting
securities, (iii) the Company is a party to a merger, consolidation, sale of
assets or other reorganization, or a proxy contest, as a consequence of which
members of the Board of Directors in office immediately prior to such
transaction or event constitute less than a majority of the Board of Directors
thereafter or (iv) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors cease for any
reason to constitute at least a majority of the Board of Directors.
Refinancing
In December 1997, the Company entered into several agreements with two
subsidiaries of Danaher Corporation, which encompassed both a commercial
agreement with Veeder-Root Company and an $8 million investment by DH Holdings,
Inc. Veeder-Root is a manufacturer of environmental monitoring equipment and a
provider of supporting services. Under the terms of the commercial agreement,
the Company and Veeder-Root will work to integrate their complementary service
offerings. Under the terms of the investment agreement, the Company issued (i) a
$6.5 million Senior Subordinated Note with a 10% annual interest rate and a
5-year term, (ii) $1.5 million of Preferred Stock that is convertible into 3
million shares of the Company's Common Stock and pays a 10% annual dividend with
a 7-year term and (iii) 4.5 million warrants to purchase the Company's Common
Stock at $0.375 per share with a 5-year term. If DH Holdings, Inc. exercises its
warrants and converts the Preferred Stock, its ownership would be approximately
25% of the Company on a fully-diluted basis. With the proceeds of this
investment and approximately $750,000 of cash, the Company repaid all of its
obligations to Banc One Capital Partners ("BOCP") and repurchased all of the
Company's 13,022,920 outstanding warrants which were held by BOCP. Mr. Landers
is a Vice-President of Veeder-Root and a director of the Company.
Compensation of Directors
The Company has agreed to pay or reimburse the travel expenses of its
directors resulting from their attendance of Board meetings. Except as
hereinafter provided, no other cash compensation was paid to, or on behalf of,
Board of Director members, in consideration of their services provided as
directors in 1999.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information as to the beneficial
ownership of the Company's capital stock as of April 15, 1999 by: (a) each
stockholder known by the Company to be the beneficial owner of more than 5% of a
class of voting stock, (b) each director, (c) each of the executive officers of
the Company and (d) all executive officers and directors as a group.
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<PAGE>
Beneficial Ownership of Common Stock(1)
Amount and nature of
Beneficial Owner Beneficial Ownership Percentage
- ------------------------------------ -------------------- ----------
Proactive Partners, L.P. 13,869,828 (2) 54.71%
50 Osgood Place, Penthouse
San Francisco, CA 94153
Lagunitas Partners, L.P. 13,761,818 (3) 54.29%
50 Osgood Place, Penthouse
San Francisco, CA 94153
Danaher Corporation 4,500,000 (4) 17.75%
1250 24th Street, N.W.
Washington, DC 20037
Myron A. Wick, III 10,083,523 (5) 39.78%
c/o Proactive Partners
50 Osgood Place, Penthouse
San Francisco, CA 94153
Charles C. McGettigan 10,108,523 (6) 39.88%
c/o Proactive Partners
50 Osgood Place, Penthouse
San Francisco, CA 94153
A. Daniel Sharplin 1,744,588 (7) 6.88%
Jay Allen Chaffee 900,014 (8) 3.55%
H. Baxter Nairon 384,000 (9) 1.51%
Lawrence K. Landers -- --
Michael S. Taylor 57,333 (10) *
David G. Osowski 166,667 (11) *
Daniel J. Kubala 134,000 (12) *
Allen Porter 33,333 (13) *
All executive officers and directors 17,289,763 (14) 68.20%
- ---------------------------
* Less than 1% of the outstanding Common Stock
(1) For the purposes of the above table and the following notes, the shares of
Common Stock shown as "beneficially owned" include all shares of Common Stock
that the "beneficial owner" has the right to acquire within 60 days upon the
conversion of other securities, upon the exercise of warrants or options or
otherwise. In calculating the total number of shares of Common Stock deemed to
be outstanding for the purpose of reflecting each beneficial owner's percentage
of the class, the shares that other owners did not then own but had the right to
acquire within 60 days or more are not included.
(2) Includes 10,065,513 outstanding shares of Common Stock, including 25,000
shares owned directly by Mr. McGettigan. Also includes (i) 3,721,305 shares
beneficially owned by Lagunitas Partners, L.P. and referenced in note (3) below;
(iii) 40,000 shares beneficially owned by Mr. McGettigan and referenced in note
(6) below; (iv) 40,000 shares beneficially owned by Mr. Wick and referenced in
note (5) below; and (v) 3,010 shares issuable upon the exercise of warrants at a
price of $0.15 per share issued to McGettigan, Wick & Co., Inc. and to
Proactive's general partner, PIM. See also note (7) below.
(3) Includes 3,694,391 outstanding shares of Common Stock. Also includes (i)
26,914 shares issuable upon the exercise of warrants at a price of $0.15 per
share and (ii) 10,040,513 shares beneficially owned by Proactive and referenced
in note (2) above.
-7-
<PAGE>
(4) Consists of currently exercisable warrants to purchase 4,500,000 shares of
Common Stock at $.375 per share.
(5) Includes (i) 40,000 shares of Common Stock issuable upon the exercise of
stock options granted to Mr. Wick under the Company's 1989 Long-Term Incentive
Plan (the "Incentive Plan"); (ii) 10,040,513 shares beneficially owned by
Proactive and referenced in note (2) above (Mr. Wick is a general partner of PIM
which is the general partners of Proactive); and (iii) 3,010 shares beneficially
owned by McGettigan, Wick & Co. (Mr. Wick is a general partner of McGettigan,
Wick & Co.). Does not include 184,410 shares owned by the Company's 401(K) plan
of which Mr. Wick is a trustee.
(6) Includes 25,000 outstanding shares of common stock. Also includes (i) 40,000
shares of Common Stock issuable upon the exercise of stock options granted to
Mr. McGettigan under the Incentive Plan; (ii) 10,040,513 shares beneficially
owned by Proactive and referenced in note (2) above (Mr. McGettigan is a general
partner of PIM, which is the general partner of Proactive); and (iii) 3,010
shares beneficially owned by McGettigan, Wick & Co. (Mr. McGettigan is a general
partner of McGettigan, Wick & Co.).
(7) Includes 513,932 outstanding shares of Common Stock. Also includes (i)
26,360 shares reserved for issuance upon the exercise of warrants at prices of
$7.50 and (ii) 1,744,588 shares reserved for issuance to Mr. Sharplin under the
Incentive Plan. Does not include (i) 685,728 shares subject to options that are
not yet exercisable or (ii) 176,659 shares owned by the Company's 401(K) plan of
which Mr. Sharplin is a trustee.
(8) Includes 67,150 outstanding shares of Common Stock. These shares are held in
the name of Bunker Hill, which is an affiliate of Mr. Chaffee. Also includes
900,014 shares subject to exercisable options granted to Bunker Hill under the
Incentive Plan. Does not include (i) 457,152 shares subject to options that are
not yet exercisable or (ii) 176,659 shares owned by the Company's 401(K) plan of
which Mr. Chaffee is a trustee.
(9) Consists of 384,000 shares issuable upon the exercise of options granted to
Mr. Nairon under the Incentive Plan.
(10) Includes (i) 57,333 shares issuable upon the exercise of options granted to
Mr. Taylor under the Incentive Plan and (ii) 4,000 shares outstanding held by
Mr. Taylor's wife. Mr. Taylor disclaims beneficial ownership of his wife's
shares. Does not include 66,667 shares subject to options that are not yet
exercisable.
(11) Consists of 166,667 shares issuable upon the exercise of options granted to
Mr. Osowski under the Incentive Plan but does not include 83,333 shares subject
to options that are not yet exercisable.
(12) Consists of 134,000 shares issuable upon the exercise of options granted to
Mr. Kubala under the Incentive Plan but does not include 67,000 shares subject
to options that are not yet exercisable.
(13) Consists of 33,333 shares issuable upon the exercise of options granted to
Mr. Porter under the Incentive Plan but does not include 66,667 shares subject
to options that are not yet exercisable.
(14) In calculating the total number of shares of Common Stock owned by all
executive officers and directors, shares that the owners do not own but could be
acquired within 60 days or more are not included.
Beneficial Ownership of Preferred Stock
Beneficial Owner Number of Shares Percentage
- ------------------------------------ -------------------- ----------
Danaher Corporation 150 (1) 100.00%
1250 24th Street, N.W.
Washington, DC 20037
- ---------------------------
(1) Consists of 150 shares of Preferred Stock that is convertible into 3,000,000
shares of Common Stock.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to the most highly compensated executive officers of the Company (the
"Named Executive Officers") for all services rendered in all capacities to the
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<PAGE>
Company and its subsidiaries during 1996, 1997 and 1998. No other person who was
an executive officer of the Company at the end of 1998 was awarded, earned or
received an annual salary and bonus in excess of $100,000.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Compensation
--------------
Awards
--------------
Annual Compensation Shares
Name and ------------------------------------- Underlying All Other
Principal Position Year Salary Bonus Options Compensation
- ----------------------- ---- ------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Jay Allen Chaffee 1998 $ 115,500 (1) $ 200,000 (1) -- --
Chairman of the Board 1997 $ 90,000 (1) $ 200,000 (1) 800,016 (2) --
of Directors 1996 $ 90,000 (1) $ 150,000 (1) -- --
A. Daniel Sharplin 1998 $ 225,000 (3) $ 370,000 (3) -- $ 500 (5)
President and Chief 1997 $ 150,000 (3) $ 100,000 (3) 1,200,024 (4) --
Executive Officer 1996 $ 154,526 (3) $ 75,000 (3) -- $ 4,526 (6)
H. Baxter Nairon 1998 $ 138,000 $ 93,762 (7) -- $ 500 (5)
Vice President of 1997 $ 138,000 $ 58,000 (7) -- --
Strategy and Business 1996 $ 95,537 $ 45,000 (7) 384,000 (8) --
Development
David G. Osowski 1998 $ 135,000 $ 93,762 (9) -- $ 500 (5)
Vice President, 1997 $ 135,000 $ 47,625 (9) 250,000 (10) --
Secretary and Chief 1996 N/A N/A N/A --
Financial Officer
Daniel J. Kubala 1998 $ 90,000 $ 93,762 (11) -- $ 500 (5)
Vice President of 1997 $ 80,000 $ 38,500 (11) -- --
Marketing 1996 $ 27,692 $ 10,111 (11) 201,000 (12) --
Allen Porter 1998 $ 57,692 $ 50,881 (13) 100,000 (14) $ 500 (5)
Vice President of Sales 1997 N/A N/A N/A
1996 N/A N/A N/A
- ---------------------------
</TABLE>
(1) In July 1997, the Company entered into an Executive Consulting Agreement
with Bunker Hill, of which Mr. Chaffee is a principal. See "Certain
Transactions." In 1993, the Company awarded a bonus of $19,969 to Mr.
Chaffee, which was paid in installments in 1995 and 1996. In 1996, the
Compensation Committee awarded Mr. Chaffee a bonus for 1996 of $150,000
which was paid in 1997. In 1997, the Compensation Committee awarded Mr.
Chaffee a bonus for 1997 of $200,000, which was paid in 1998. In 1998, the
Compensation Committee awarded Mr. Chaffee a bonus for 1998 of $200,000,
which will be paid in 1999.
(2) In 1996, certain previously granted options were repriced. See "Fiscal Year
End Options Values." On July 1, 1997, pursuant to the Executive Consulting
Agreement, Mr. Chaffee was awarded cash stock appreciation rights ("SARs")
for an aggregate of 800,016 shares of Common Stock at $0.2813 per share. On
July 2, 1997, the Company converted the SARs into a stock option for
800,016 shares of Common Stock at $0.2813 per share which will expire on
December 31, 2005.
(3) In July 1997, the Company entered into an Employment Agreement with Mr.
Sharplin. See "Certain Transactions." In 1995, the Compensation Committee
awarded Mr. Sharplin a $20,000 bonus which was paid in 1997. Mr. Sharplin's
1996 bonus award of $75,000 was paid in 1997. Mr. Sharplin's 1997 bonus
award of $100,000 was paid in 1998. In 1998 the Compensation Committee
awarded Mr Sharplin a bonus for 1998 of $370,000, which was paid in 1999.
(4) In 1996, certain previously granted options were repriced. See "Fiscal Year
End Options Values." On July 1, 1997, pursuant to the Employment Agreement,
Mr. Sharplin was awarded SARs for an aggregate of 1,200,024 shares of
Common Stock at $0.2813 per share. On July 2, 1997, the Company converted
the SARs into a stock option for 1,200,024 shares of Common Stock at
$0.2813 per share which will expire on December 31, 2005.
-9-
<PAGE>
(5) Consists of the Company's 1998 contribution to the 401K plan.
(6) Consists of matching funds for the Company 401(k) plan relating to Company
contributions for 1992, 1993 and 1994 which were made in 1996.
(7) In 1996, the Compensation Committee awarded Mr. Nairon a bonus for 1996 of
$35,000, which was paid in 1997. Mr. Nairon was also paid a $10,000 bonus
as an inducement to join the Company in 1996. In 1997, the Compensation
Committee awarded Mr. Nairon a bonus for 1997of $58,000, of which $16,000
was paid in 1997 and $42,000 was paid in 1998. In 1998, the Compensation
Committee awarded Mr. Nairon a bonus for 1998 of $93,762, which was paid in
1999.
(8) In March 1996, Mr. Nairon was granted an option to purchase 384,000 shares
of Common Stock at $0.1875, the market price of the Company's Common Stock
on Mr. Nairon's hire date. The option vests ratably one-third each year
starting on April 15, 1996.
(9) In 1997, the Compensation Committee awarded Mr. Osowski a bonus for 1997 of
$47,625, of which $28,125 was paid in 1997 and $19,500 was paid in 1998. In
1998, the Compensation Committee awarded Mr. Osowski a bonus for 1998 of
$93,762, which was paid in 1999.
(10) In December 1996, Mr. Osowski was granted an option to purchase 250,000
shares of Common Stock at $0.40625, the market price of the Company's
Common Stock on Mr. Osowski's hire date. The option vests ratably one-third
each year starting on December 19, 1996.
(11) In 1996, the Compensation Committee awarded Mr. Kubala a bonus for 1996 of
$10,111 which was paid in 1997. In 1997, the Compensation Committee awarded
Mr. Kubala a bonus for 1997 of $38,500, of which $8,500 was paid in 1997
and $30,000 was paid in 1998. In 1998, the Compensation Committee awarded
Mr. Kubala a bonus for 1998 of $93,762, which was paid in 1999.
(12) In August 1996, Mr. Kubala was granted an option to purchase 201,000 shares
of Common Stock at $0.15625, the market price of the Company's Common Stock
on Mr. Kubala's employment acceptance date. The option vests ratably
one-third each year starting on August 1, 1996.
(13) Mr. Porter joined the Company in May 1998. In 1998, the Compensation
Committee awarded Mr. Porter a bonus for 1998 of $46,881 which was paid in
1999. Mr. Porter also was paid a $4,000 bonus in 1998 for completing
certain goals as outlined in his initial employment offer.
(14) In April 1998, Mr. Porter was granted an option to purchase 100,000 shares
of Common Stock at $0.78125, the market price of the Company's Common Stock
on Mr. Porter's employment acceptance date. The option vests ratably
one-third each year starting on April 15, 1998.
Option Grants in Last Fiscal Year
The following table sets forth options granted to the Named Executive
Officers during the year ending December 31, 1998.
<TABLE>
<CAPTION>
Number of Percent of Potential Realizable
Shares Total-Options Value-at-Assumed
Underlying Granted to Exercise Annual Rates of Stock
Options Employees in Price Per Price-Appreciation-for
Name Granted Fiscal Year Share Expiration Date Option Term
- ------------------ ---------- ------------- --------- --------------- ----------------------
<S> <C> <C> <C> <C> <C>
5% 10%
Jay Allen Chaffee -- -- -- -- -- --
A. Daniel Sharplin -- -- -- -- -- --
H. Baxter Nairon -- -- -- -- -- --
David G. Osowski -- -- -- -- -- --
Daniel Kubala -- -- -- -- -- --
Allen Porter 100,000 13.4% $.78125 April 15, 2008 $ 49,132 $ 124,511
</TABLE>
Fiscal Year End Options Values
The following table sets forth the option holdings and the value of
unexercised options held by each Named Executive Officer as of December 31,
1998. None of the Named Executive Officers exercised any options during 1998.
-10-
<PAGE>
Numbers of Shares Underlying Value of Unexercised
Unexercised-Options in-the-Money-Options
at December 31, 1998 at December 31, 1998
---------------------------- ----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------ ------------ ------------- ------------ -------------
Jay Allen Chaffee 342,864 457,152 $ 203,576 $ 271,434 (1)
440,000 -- $ 330,000 -- (2)
50,000 -- $ 37,500 -- (2)
A. Daniel Sharplin 514,296 685,728 $ 305,363 $ 407,151 (1)
640,000 -- $ 480,000 -- (2)
50,000 -- $ 37,500 -- (2)
H. Baxter Nairon 256,000 128,000 $ 176,000 $ 88,000 (3)
David G. Osowski 166,667 83,333 $ 78,125 $ 39,063 (4)
Daniel J. Kubala 134,000 67,000 $ 96,313 $ 48,156 (5)
Allen Porter -- 100,000 $ -- $ 9,375 (6)
- ---------------------------
(1) Represents (i) the difference ($0.59375) between the exercise price of the
options ($0.28125) and the per share fair market value of the Company's
Common Stock on December 31, 1998 ($0.875) times (ii) the number of shares
subject to the options.
(2) Represents (i) the difference ($.75) between the exercise price of the
options ($0.125) and the per share fair market value of the Company's
Common Stock on December 31, 1998 ($0.875) times (ii) the number of shares
subject to the options.
(3) Represents (i) the difference ($0.6875) between the exercise price of the
options ($0.1875) and the per share fair market value of the Company's
Common Stock on December 31, 1998 ($0.875) times (ii) the number of shares
subject to the options.
(4) Represents (i) the difference ($.46875) between the exercise price of the
options ($0.40625) and the per share fair market value of the Company's
Common Stock on December 31, 1998 ($0.875) times (ii) the number of shares
subject to the options.
(5) Represents (i) the difference ($.71875) between the exercise price of the
options ($0.15625) and the per share fair market value of the Company's
Common Stock on December 31, 1998 ($0.875) times (ii) the number of shares
subject to the options.
(6) Represents (i) the difference ($.09375) between the exercise price of the
options ($0.78125) and the per share fair market value of the Company's
Common Stock on December 31, 1998 ($0.875) times (ii) the number of shares
subject to the options.
STOCK OPTIONS
The Company's Incentive Plan is intended to retain key executives and other
selected employees, reward them for making major contributions to the success of
the Company and provide them with a proprietary interest in the growth and
performance of the Company and its subsidiaries. In general, the Incentive Plan
permits the award of stock-based compensation in addition to options.
PROPOSAL NO. 2 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS
At the Meeting, the stockholders will be asked to ratify the appointment by
the Board of Directors of Ernst & Young L.L.P. as the Company's independent
public accountants to perform the audit of the Company's financial statements
for the fiscal year ending December 31, 1999. Ernst & Young L.L.P. has been the
Company's auditors since the resignation of Touche Ross, L.L.P. in November
1989. The Board of Directors currently does not expect the representatives of
Ernst & Young L.L.P. to be present at the Meeting, and, accordingly, no
representatives are expected to be available to respond to questions. However,
representatives of Ernst & Young L.L.P. are invited to attend the Meeting, and,
should they attend, they will be given an opportunity to make a statement, if
they desire to do so, and will be available to respond to appropriate questions.
The affirmative vote of a majority of the votes entitled to be cast by the
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<PAGE>
holders of Common Stock and Preferred Stock present in person or by proxy is
required for approval of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF
THE APPOINTMENT OF ERNST & YOUNG L.L.P. AS THE COMPANY'S AUDITORS
Stockholder Proposals for the 2000 Annual Meeting of Stockholders
The Company intends to hold its 2000 annual meeting of stockholders in May
2000. Stockholder proposals for inclusion in the Company's Proxy Statement and
form of proxy for the 2000 annual meeting of stockholders must be received by
the Company no later than December 28, 1999.
Other Business
The Board of Directors does not presently intend to bring any other
business before the Meeting, and, so far as is known to the Board of Directors,
no matters are to be brought before the Meeting except as specified in the
notice of the Meeting. As to any business that may properly come before the
Meeting, however, it is intended that proxies, in the form enclosed, will be
voted in respect thereof in accordance with the judgment of the persons voting
such proxies.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
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<PAGE>
PROXY
Tanknology-NDE THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
International, Inc. The undersigned hereby appoints Jay A. Chaffee, A. Daniel
8900 SHOAL CREEK Sharplin, and each of them, attorneys and agents with full
BOULEVARD power of substitution, to vote as proxy all the shares of
BUILDING 200 Common Stock of Tanknology-NDE International, Inc. held of
AUSTIN, TX 78757 record by the undersigned on April 30,1999 at the annual
meeting of stockholders of Tanknology-NDE International,
Inc. to be held on June 15, 1999 and at any adjournment or
postponement thereof, in the manner indicated on the reverse
hereof and in their discretion on such other matters as may
properly come before said meeting or any adjournments
thereof.
If you wish to vote in accordance with the recommendations of the Board of
Directors, you may just sign and date below and mail in the postage paid
envelope provided. Specific choices may be made on the reverse side.
Dated ______________________________, 1998
-------------------------------------------
Signature
-------------------------------------------
Signature if held jointly
When signing as Executor, Administrator,
Trustee or the like, please give full title.
PROXY (CONTINUED)
This Proxy will be voted as directed, or if no direction is indicated, will be
voted FOR all nominees listed below for election as directors, and FOR Proposal
2. The Board of Directors recommends a vote FOR Proposals 1 and 2.
(1) Election of Directors FOR ALL [ ] WITHHOLD AUTHORITY
[ ] (You may withhold authority TO VOTE FOR:
to vote for any nominee by
lining through or otherwise
striking out the name of
any nominee.)
Jay Allen Chaffee
Charles C. McGettigan
A. Daniel Sharplin ___________________________________
Michael S. Taylor Instructions: To withhold vote for
Myron A. Wick individual(s), write name(s) above.
(2) Ratification of the appointment of FOR [ ] AGAINST [ ] ABSTAIN [ ]
Ernst & Young L.L.P. as Independent
Public Accountants
(Sign and date on reverse side)
