<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended FEBRUARY 28, 1998
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period to
--------------- ---------------
Commission file number 1-9950
--------------------------------------
TEAM, INC.
(Exact name of registrant as specified in its charter)
Texas 74-1765729
-------------------------------- ----------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation Identification Number)
or organization)
1019 South Hood Street, Alvin, Texas 77511
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (281) 331-6154
----------------------------
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- -------
On March 25, 1998, there were 6,083,742 shares of the Registrant's common stock
outstanding.
<PAGE> 2
TEAM, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets -- 3
February 28, 1998 and May 31, 1997
Consolidated Statements of Earnings -- 4
Three Months Ended
February 28, 1998 and 1997
Nine Months Ended
February 28, 1998 and 1997
Consolidated Statements of Cash Flows -- 5
Nine Months Ended
February 28, 1998 and 1997
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis 7
of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 28, MAY 31,
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,267,000 $ 1,672,000
Accounts receivable, net of allowance for doubtful
accounts of $80,000 and $61,000 9,293,000 7,211,000
Materials and supplies 6,403,000 6,310,000
Prepaid expenses and other current assets 990,000 820,000
------------- -------------
Total Current Assets 17,953,000 16,013,000
Property, Plant and Equipment:
Land and buildings 6,855,000 6,526,000
Machinery and equipment 11,156,000 11,292,000
------------- -------------
18,011,000 17,818,000
Less accumulated depreciation and amortization 11,935,000 12,010,000
------------- -------------
6,076,000 5,808,000
Other Assets 1,984,000 2,247,000
------------- -------------
$ 26,013,000 $ 24,068,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Current portion of long-term debt $ 263,000 $ 300,000
Accounts payable 1,731,000 740,000
Other accrued liabilities 2,703,000 3,298,000
Current income taxes payable -- 166,000
------------- -------------
Total Current Liabilities 4,697,000 4,504,000
Long-term Debt and Other Obligations 6,257,000 7,601,000
Stockholders' Equity:
Preferred stock, cumulative, par value $100 per share,
500,000 shares authorized, none issued -- --
Common stock, par value $.30 per share, 10,000,000 shares
authorized, 6,057,042 and 5,259,542 shares issued at 1,817,000 1,578,000
February 28, 1998 and May 31, 1997, respectively
Additional paid-in capital 27,031,000 25,123,000
Accumulated deficit (13,692,000) (14,641,000)
Treasury stock at cost, 9,700 shares (97,000) (97,000)
-------------- -------------
15,059,000 11,963,000
------------- -------------
$ 26,013,000 $ 24,068,000
============= =============
</TABLE>
See notes to consolidated financial statements
3
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TEAM, INC. AND SUBSIDIARIES
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 28, February 28,
----------------------------- ------------------------------
1998 1997 1998 1997
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Revenues $ 11,483,000 $ 11,305,000 $ 33,428,000 $ 32,732,000
Operating expenses 6,744,000 6,437,000 19,382,000 18,414,000
Selling, general and administrative expenses 4,038,000 4,258,000 12,036,000 12,652,000
Interest 111,000 215,000 347,000 687,000
------------ ------------ ------------ ------------
Earnings from continuing operations before
income taxes 590,000 395,000 1,663,000 979,000
Provision for income taxes 275,000 185,000 714,000 450,000
------------ ------------ ------------ ------------
Earnings from continuing operations, net of
income taxes 315,000 210,000 949,000 529,000
Earnings from Military Housing projects
discontinued operations, net -- -- -- 182,000
Estimated loss on sale of Military Housing projects
discontinued operations, net -- -- -- (181,000)
------------ ------------ ------------ ------------
Net earnings $ 315,000 $ 210,000 $ 949,000 $ 530,000
============ ============ ============ ============
NET EARNINGS PER COMMON SHARE - BASIC
Net earnings from continuing operations $ 0.05 $ 0.04 $ 0.16 $ 0.10
Net earnings discontinued operations -- -- -- 0.00
------------ ------------ ------------ ------------
Net earnings $ 0.05 $ 0.04 $ 0.16 $ 0.10
============ ============ ============ ============
Weighted average number of shares outstanding 6,045,000 5,160,000 5,902,000 5,160,000
============ ============ ============ ============
NET EARNINGS PER COMMON SHARE - DILUTED
Net earnings from continuing operations $ 0.05 $ 0.04 $ 0.16 $ 0.10
Net earnings discontinued operations -- -- -- 0.00
------------ ------------ ------------ ------------
Net earnings $ 0.05 $ 0.04 $ 0.16 0.10
============ ============ ============ ============
Weighted average number of shares outstanding 6,227,000 5,160,000 6,095,000 5,160,000
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
February 28,
-----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 949,000 $ 530,000
Earnings from discontinued operations -- (1,000)
----------- -----------
Net earnings from continuing operations 949,000 529,000
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 1,094,000 1,050,000
Provision for doubtful accounts 20,000 --
Noncurrent deferred income taxes 561,000 353,000
Gain on sale of assets -- (21,000)
Change in assets and liabilities:
(Increase) decrease:
Accounts receivable (2,102,000) 398,000
Materials and supplies (93,000) (286,000)
Prepaid expenses and other assets (170,000) 96,000
Increase (decrease):
Accounts payable 991,000 95,000
Other accrued liabilities (595,000) (573,000)
Income taxes payable (166,000) 81,000
----------- -----------
Net cash provided by continuing operating activities 489,000 1,722,000
Cash Flows From Discontinued Operations:
Earnings from discontinued operations -- 1,000
Depreciation -- 1,093,000
Decrease in current assets -- 993,000
Increase in current liabilities -- (533,000)
----------- -----------
Net cash provided by discontinued operations -- 1,554,000
----------- -----------
Net cash provided by operating activities 489,000 3,276,000
Cash Flows From Investing Activities:
Capital expenditures (1,219,000) (1,103,000)
Disposal of property and equipment 7,000 183,000
Decrease (increase) in other assets (264,000) 16,000
----------- -----------
Net cash used in investing activities (1,476,000) (904,000)
Cash Flows From Financing Activities:
Payments under debt agreements
and capital lease obligations - continuing (2,414,000) (2,067,000)
Proceeds from borrowings 849,000 --
Payments under debt agreements - discontinued -- (1,041,000)
Issuance of common stock 2,147,000 --
----------- -----------
Net cash provided by (used in) financing activities 582,000 (3,108,000)
----------- -----------
Net decrease in cash and cash equivalents (405,000) (736,000)
Cash and cash equivalents at beginning of year 1,672,000 2,037,000
----------- -----------
Cash and cash equivalents at end of period $ 1,267,000 $ 1,301,000
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest:
Operating $ 367,000 $ 701,000
Discontinued -- 3,274,000
----------- -----------
$ 367,000 $ 3,975,000
=========== ===========
Income taxes paid $ 440,000 $ 13,000
=========== ===========
Income taxes refunded $ -- $ 4,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Method of Presentation
General
The interim financial statements are unaudited, but in the opinion of
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of results for such periods.
The results of operations for any interim period are not necessarily
indicative of results for the full year. These financial statements should
be read in conjunction with the financial statements and notes thereto
contained in the Company's annual report for the fiscal year ended May 31,
1997.
2. Dividends
No dividends were paid during the first nine months of fiscal 1998 or
1997. Pursuant to the Company's Credit Agreement, the Company may not pay
quarterly dividends without the consent of its senior lender. Future
dividend payments will depend upon the Company's financial condition and
other relevant matters.
3. Long-Term Debt
As previously disclosed, the Company has extended its bank credit
agreement with its primary lender. The revised agreement provides a
$10,000,000 line of credit and the term was extended one year to December
31, 1999. The amount available for borrowings at the end of the quarter was
$5.2 million.
Also, during the quarter the Company entered into a Construction Loan
Agreement for construction of an addition to an existing building, which
will serve as the corporate facility. This loan for $750,000 is due August
2010 and bears interest at prime plus 0.5 percent and provides for 150
installments, the first six of which are interest only, the next 143 of
which will be evenly monthly installments of principal and interest and the
final installment being all unpaid principal and accrued interest. The
lender, at its sole discretion, can adjust the interest rate on the loan in
February 2005. The company also modified and extended an existing term loan
with the same bank. The loan, to mature June 1999, was extended to February
2007 and the interest rate was reduced from prime plus 1.25 percent to
prime plus 0.5 percent. Land and buildings secure both of these loans.
4. Other
During the third quarter of fiscal year 1998, the Board of Directors of
the Company approved the Team, Inc. 1998 Incentive Stock Option Plan which
authorizes options to purchase 500,000 shares of common stock for key
employees of the Company. Options granted under this Plan during the
quarter totaled 269,000.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 28, 1998 COMPARED
TO THREE MONTHS ENDED FEBRUARY 28, 1997
For the three-month period ended February 28, 1998, revenues were $11.5
million, a 2 percent improvement over revenues of $11.3 million reported in the
same period of the prior fiscal year. Three of the Company's five service lines
- - hot tapping, concrete repair and energy management services - showed sales
gains during the quarter while leak repair and emissions control services had
revenue declines.
Gross margins declined from 43 percent to 41 percent. Ordinary compensation
and material costs were factors in the decrease. Selling, general and
administrative expenses for the current quarter showed a 5 percent improvement
over the same period of the prior fiscal year. This was largely the result of
lower charges for professional fees, insurance and certain compensation related
items. Interest expense of $111,000 in the third quarter of fiscal 1998 was 48
percent lower than in the same period of the prior year due to reduced average
borrowing levels. Pre-tax earnings of $590,000 for the third quarter increased
from 1997 third quarter pre-tax earnings of $395,000.
NINE MONTHS ENDED FEBRUARY 28, 1998 COMPARED
TO NINE MONTHS ENDED FEBRUARY 28, 1997
For the nine-month period ended February 28, 1998, revenues totaled $33.4
million, 2 percent higher than revenues of $32.7 million reported in the same
period last year. The increase in revenues was primarily due to significantly
improved sales in the Company's hot tapping service line as well as improved
sales in concrete repair and energy management services. This improvement was
somewhat offset by declines in emissions control and leak repair services
revenue.
Gross margins declined from 44 percent to 42 percent for the first nine
months of fiscal 1998 due to increases in operating expenses. Ordinary
compensation and material costs were factors in the decrease. Selling, general
and administrative expenses of $12.0 million for the first nine months were
$616,000 or 5 percent lower than in the prior year. Less compensation related
costs, professional fees and insurance were factors in the decrease.
Interest expense of $347,000 in the first nine months of fiscal 1998 was 49
percent lower than in the same period of 1997 due to reduced borrowing levels.
Pre-tax earnings of $1.7 million for the first nine months increased from
pre-tax earnings of $979,000.
7
<PAGE> 8
LIQUIDITY AND CAPITAL RESOURCES
At February 28, 1998, the Company's working capital totaled $13.3 million,
an increase of 1.8 million from working capital of $11.5 million at May 31,
1997. The Company has been able to finance its working capital requirements
through its internally generated cash flow and its unused borrowing capacity
under its bank credit agreement.
As of February 28, 1998, cash and cash equivalents totaled $1.3 million,
decreasing $405,000 in the first nine months of the current fiscal year. This
cash decrease resulted mainly from $1,476,000 used in the Company's investing
activities offset by $582,000 provided by the Company's financing activities and
$489,000 provided by the Company's operating activities. See "Consolidated
Statements of Cash Flows" for additional detail.
Management expects that capital expenditures which are intended to provide
for normal replacement of assets and new assets to support planned growth will
approximate $2.0 million for fiscal 1998. Of this amount, $750,000 is for
construction of an addition to an existing facility. All other planned capital
expenditures are discretionary and will be made based on available funds.
The Company's current and long-term debt and other obligations were $6.5
million at February 28, 1998, compared to $7.9 million at May 31, 1997. At the
end of the third quarter, $3.0 million was owed to the Company's primary bank
lender. The company paid down the revolving line of credit in the amount of $2.0
million during the first nine months using proceeds from the sale of common
stock as described below. During the third quarter, the Company extended its
bank credit agreement. The revised agreement, which expires December 31, 1999,
provides a $10,000,000 line of credit. The amount available for borrowings at
the end of the quarter was $5.2 million. Also, during the quarter the Company
entered into a Construction Loan Agreement for construction of an addition to an
existing building. This loan for $750,000 is due August 2010 and bears interest
at prime plus 0.5 percent and provides for 150 installments, the first six of
which are interest only, the next 143 of which will be evenly monthly
installments of principal and interest and the final installment being all
unpaid principal and accrued interest. The lender, at its sole discretion, can
adjust the interest rate on the loan in February 2005. The company also modified
and extended an existing term loan with the same bank. The loan, to mature June
1999, was extended to February 2007 and the interest rate was reduced from prime
plus 1.25 percent to prime plus 0.5 percent. Land and buildings secure both of
these loans.
As previously reported, the Company completed the sale of 650,000 shares of
Team's common stock for $3.00 per share to Armstrong International, Inc. in a
private placement transaction. Proceeds from the sale were used to reduce the
Company's long-term debt.
Also, as previously reported, the Company signed a letter of intent with
Wescon, S.A. of Singapore to provide leak sealing and hot tapping services in
Singapore, Malaysia, Indonesia and Brunei. This letter of intent was terminated
due to lack of progress in organizing the joint venture. The Company's
management continues to assess other strategic alternatives. In addition, in the
first quarter the Company signed a letter of intent for the potential sale of
newly issued common stock to Wingate Partners, L.P. at $3.125 per share
representing 50 percent of Team's issued and outstanding shares. This
transaction is contingent upon the negotiation and consummation of a mutually
acceptable business acquisition. It is expected that the proceeds of
8
<PAGE> 9
such a stock sale to Wingate would be used for the purchase consideration for
such a business acquisition. The Company is vigorously pursuing various
acquisition candidates. The Company has extended this letter of intent with
Wingate Partners through June 1998.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Construction Loan Agreement dated February 20, 1998, by and
between Sterling Bank and Team, Inc.
10.2 Modification and Extension Agreement dated February 20, 1998,
by and between Sterling Bank and Team, Inc.
10.3 Team Inc. 1998 Incentive Stock Option Plan
11 Statement Re Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no Form 8-K Reports filed during the quarter ended February 28,
1998.
9
<PAGE> 10
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
TEAM, INC.
(Registrant)
Date: March 31, 1998
/s/ WILLIAM A. RYAN
--------------------------------------
William A. Ryan, Chairman of the Board
and Chief Executive Officer
/s/ MARGIE E. ROGERS
--------------------------------------
Margie E. Rogers, Vice President,
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer
10
<PAGE> 11
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
Ex-10.1 Construction Loan Agreement dated February 20, 1998, by and
between Sterling Bank and Team, Inc.
Ex-10.2 Modification and Extension Agreement dated February 20, 1998,
by and between Sterling Bank and Team, Inc.
Ex-10.3 Team Inc. 1998 Incentive Stock Option Plan
Ex-11 Statement Re Computation of Per Share Earnings
Ex-27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1. CONSTRUCTION LOAN AGREEMENT
This Construction Loan Agreement made and entered into as of the 20th
day of February, 1998, by and between STERLING BANK, A TEXAS BANKING
CORPORATION, whose address for notice hereunder is P. O. Box 40333, Houston,
Texas 77240- 0333 (hereinafter called "LENDER") and TEAM, INC., A TEXAS
CORPORATION, whose address for notice hereunder is P. O. Box 123, Alvin,
Texas 77512 (hereinafter called "BORROWER");
W I T N E S S E T H:
Borrower has applied to Lender for a loan to aid Borrower in the
construction of the Improvements on the Premises, and Lender is willing to make
such loan upon the terms and conditions hereinafter set forth. In
consideration of the mutual covenants and agreements herein contained, Lender
and Borrower agree as follows:
Section I - Definitions
As used in this Agreement, the following terms shall have the
respective meanings indicated:
"AFFIDAVIT OF COMMENCEMENT" shall mean an affidavit which meets the
requirements set forth in '53.124 of the Texas Property Code and is
substantially in the form attached hereto as EXHIBIT "F" and made a part hereof
for all purposes, executed by Borrower and General Contractor.
"AFFIDAVIT OF COMPLETION" shall mean an affidavit which meets the
requirements set forth in '53.106 of the Texas Property Code and is
substantially in the form attached hereto as EXHIBIT "G" and made a part hereof
for all purposes, executed by Borrower.
"APPROVED BUDGET" shall mean a schedule prepared by Borrower in form
and substance acceptable to Lender, which shall reflect the cost of each item
of work or material required to construct the Improvements pursuant to the
Plans, together with all other costs and expenses, including interest and
professional fees, and the dates upon which Borrower expects to require
advances from Lender hereunder for such costs and expenses.
"ARCHITECT" shall mean an architect or engineer selected by Borrower
and approved by Lender.
"ARCHITECT'S AGREEMENT" shall mean a completed Architect's Agreement
and Consent in substance satisfactory to Lender executed by the Architect in
substantially the form attached hereto as Exhibit "C" and made a part hereof
for all purposes.
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<PAGE> 2
"ARCHITECT'S COMPLETION CERTIFICATE" shall mean a certificate in form
and substance satisfactory to Lender in substantially the form attached hereto
as EXHIBIT "E" and made a part hereof for all purposes, executed by an
architect selected by Borrower and approved by Lender.
"ASSIGNMENT OF LEASES" shall mean an assignment of the Leases as
security for the Note in form satisfactory to Lender.
"LENDER" and "BORROWER" shall mean the parties identified above.
"CLOSING DATE" shall mean the time of the execution and delivery of
this Agreement by Borrower and Lender.
"COMPLETION DATE" shall mean on or before six (6) months from the date
hereof.
"CONSTRUCTION CONTRACTS" shall mean the contracts between Borrower and
General Contractor relating to rendering of services or furnishing of material
in connection with construction of the Improvements, contracts between the
General Contractor and any subcontractor, and contracts between any of the
foregoing and any other person or entity relating to rendering of services or
furnishing of material in connection with construction of the Improvements.
"CONTRACTOR'S AGREEMENT" shall mean a completed Contractor's Agreement
and Consent in substance satisfactory to Lender executed by the General
Contractor in substantially the form attached hereto as Exhibit "D" and made a
part hereof for all purposes.
"DEED OF TRUST" shall mean, individually and collectively, the
Construction Deed of Trust and Security Agreement, whether one or more,
covering the Premises and certain personal properties and fixtures, to be
executed and delivered by Borrower to secure the Note, which Construction Deed
of Trust and Security Agreement shall be in form and substance satisfactory to
Lender.
"ENVIRONMENTAL LAWS" shall mean all Governmental Requirements
pertaining to environmental, air quality, zoning, building, health, fire,
safety, traffic, industrial hygiene, or other Governmental Requirements,
including without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 ("CERCLA") as amended, 42 U.S.C. ' 9601
et seq., the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C.
' 6901 et seq., the Texas Solid Waste Disposal Act ("SWDA") V.A.C.S. Art.
4477-7, the Texas Hazardous Substance and Spill Prevention Control Act ("Spill
Control Act"), Tex. Water Code, ' 26.261 et seq., the Inactive Hazardous
Substance, Pollutant and Contaminant Disposal Facilities ("Inactive Facilities
Provisions") of Tex. Water Code, ' 26.301, et seq., and the requirements
relating to Underground Storage Tanks ("UST Provisions") of Tex. Water Code, '
26.341, et seq.
"FINANCIAL STATEMENTS" shall mean financial statements of Borrower.
- 2 -
<PAGE> 3
"GENERAL CONTRACTOR" shall mean ARCCON.
"GOVERNMENTAL AUTHORITY" includes the United States, the State of
Texas, the County of Brazoria, the City of Alvin, and any political subdivision
of any of the foregoing, and any agency, department, commission, board, bureau
or instrumentality or any of them which exercises jurisdiction over the
Premises or construction thereon.
"GOVERNMENTAL REQUIREMENT" shall mean any law, statute, code,
ordinance, order, rule, regulation, or requirement of a Governmental Authority.
"HAZARDOUS SUBSTANCES" shall include without limitation: (a) those
substances included within the definitions of "hazardous substances,"
"hazardous materials," toxic substances," or "solid waste" in CERCLA, RCRA, and
the Hazardous Materials Transportation Act, 49 U.S.C. ' 1801 et seq., and in
the regulations promulgated pursuant to said laws; (b) those substances
included within the definitions of "hazardous substances," "pollutant or
contaminant," "regulated substances," or "hazardous wastes" in the SWDA, Spill
Control Act, Inactive Facilities Provisions, and UST Provisions, and in the
regulations promulgated pursuant to said laws; (c) those substances listed in
the United States Department of Transportation Table (49 CFR ' 172.101 and
amendments thereto) or by the Environmental Protection Agency (or any successor
agency) as hazardous substances (40 CFR Part 302 and amendments thereto); (d)
any material, waste or substances which is (i) petroleum, (ii) asbestos, (iii)
polycholorinated biphenyls, (iv) designated as a "hazardous substance" pursuant
to ' 311 of the Clean Water Act, 33 U.S.C. 1251 et seq. (33 U.S.C. ' 1321) or
listed pursuant to ' 307 of the Clean Water Act (33 U.S.C. ' 1317); (v)
flammable explosives; or (vi) radioactive materials; and (e) such other
substances, materials and wastes which are or become regulated under applicable
local, state or federal law, or the United States government, or which are
classified as hazardous or toxic under federal, state, or local laws or
regulations.
"IMPROVEMENTS" shall mean the improvements described in the Plans.
"INDEPENDENT SUPERVISING ARCHITECT" shall mean an architect or
engineer selected and retained by Lender at Borrower's expense. Such architect
or engineer may, at the option of Lender from time to time, perform the duties
of either an independent supervising architect or an independent inspecting
engineer.
"LEASES" shall mean all leases heretofore or hereafter entered into
relating to rental of space in the Improvements, and all amendments or
supplements thereto.
"NOTE" shall mean the note in the form and substance attached as
EXHIBIT "B" hereto and all extensions, renewals, rearrangements and
modifications thereof.
"OWNER'S AFFIDAVIT" shall mean a sworn affidavit of Borrower, in form
and substance satisfactory to Lender, to the effect that all labor and material
bills of every kind and character incurred by Borrower to the date of such
affidavit in connection with the Improvements have been paid in accordance
with the
- 3 -
<PAGE> 4
payment provisions of each contract except for the unpaid bills to be paid from
the proceeds of the current advance requested. Such affidavit shall be
supported by Waivers of Lien Rights or Bills Paid Affidavits, executed in such
form and substance as Lender may require, by all contractors, subcontractors,
laborers and materialmen (unless any of such persons are specifically exempted
from this requirement by Lender) who have furnished labor or material to date
and for payment of whom a Request for Advance has been made or received.
"OWNER'S INTEREST" shall mean the fee simple estate and other rights,
titles and interests of the Borrower in the Premises.
"PLANS" shall mean the final plans and specifications for the
construction of the Improvements on the Premises, to be prepared by the
Architect, and all amendments and modifications thereof approved by Lender; the
term shall include the final plans and specifications for segments of the work.
"PREMISES" shall mean all of the property described on EXHIBIT "A"
attached hereto and made a part hereof for all purposes.
"REQUEST FOR ADVANCE" shall mean a certificate of the Architect and
Borrower in such form as Lender may request, setting forth the parties to whom
money is owed and the amount owed each, which certificate shall certify among
other things that such amounts represent payments due for services actually
rendered or materials actually acquired or furnished in connection with
construction of the Improvements, and which certificate shall state whether the
sum requested is within the Approved Budget and whether, in the opinion of the
Architect and Borrower, the unadvanced portion of the Approved Budget (i) for
the item(s) requested is sufficient to complete such item(s) pursuant to the
Plans, and (ii) for all items is sufficient to complete the Improvements
pursuant to the Plans and to pay for all labor, material, interest and other
expenses in connection therewith. Such certificate shall be accompanied by
copies of billing statements, vouchers or invoices from the parties named
therein, in form satisfactory to Lender. Such certificates shall refer to an
attached schedule, to be verified by the Independent Supervising Architect
prior to the advance being requested, identifying in a manner satisfactory to
Lender all materials not yet affixed or incorporated into the Improvements but
which have been covered by certificates submitted to date, including the
current certificate; and such certificate shall contain a statement, to be
verified by the Independent Supervising Architect prior to the advance being
requested, that all such materials not yet affixed or incorporated into the
Improvements have been stored at the Premises or at one or more other locations
(which shall have been approved by Lender in writing) identified therein
(specifying the materials located at each location) under adequate safeguards
to minimize the possibility of loss, damage or commingling with other materials
or projects.
"SECURITY INSTRUMENTS" shall mean individually and collectively this
Agreement, the Note, the Deed of Trust, the Assignment of Leases and any other
instruments, whether or not expressly mentioned herein, executed in connection
with or as security for the payment of the Note and/or the performance of the
obligations under this Agreement.
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"TITLE INSURANCE" shall mean a paid mortgagee's title insurance
policy, in form and substance satisfactory to Lender, issued by the Title
Insurer in the aggregate amount of the Note (which may include a rider or
endorsement limiting the policy to the aggregate amounts actually advanced and
which may except liens arising from materials furnished or labor performed in
connection with the construction of the Premises contemplated hereunder to be
performed by General Contractor), covering the lien on the Owner's Interest
described therein.
"TITLE INSURER" shall mean Fidelity National Title Insurance Company,
whose agent is Partners Title Company, with address at 712 Main Street, Suite
2000E, Houston, Texas 77002-3218, Attn: Ms. Sandra O. George.
SECTION II - COMMITMENT OF LENDER
Subject to the terms, provisions and conditions of this Agreement:
1. Lender will make, and Borrower will accept, loans and advances
up to the aggregate amount of $750,000.00. To evidence such loans Borrower
will execute and deliver the Note to Lender on the Closing Date.
2. Interest provided in the Note shall be calculated on sums
actually advanced to Borrower pursuant to the terms of this Agreement and only
from the date or dates of such advances. Borrower's liability for payment of
principal and interest provided in the Note shall be limited to principal
amounts actually advanced to or for the benefit of Borrower pursuant to this
Agreement and interest on such amounts calculated as aforesaid.
3. All advances hereunder shall be made by Lender at intervals
not shorter than once a month on or about the 10th day of a calendar month,
provided Lender has received a proper Request for Advance and an Owner's
Affidavit a reasonable period prior thereto. In no event shall Lender be
required to make any advance for any item in excess of the amount budgeted for
such item in the Approved Budget. Further, Lender shall not be obligated to
make any advance if the unadvanced loan proceeds budgeted in the Approved
Budget for any particular item including interest shall at any time appear, in
the judgment of Lender, to be less than the amount which will be required for
such item prior to completion of the Improvements pursuant to the Plans and the
maturity of the Note, or if any other expenses are required for completion of
the Improvements pursuant to the Plans which were not scheduled in the Approved
Budget, and thereafter Lender shall not be required to resume the advancement
of loan proceeds unless and until Borrower shall have complied with all terms
and conditions of this Agreement and the Security Instruments, including the
provisions of Paragraph 17 of Section IV hereof.
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<PAGE> 6
4. At the option of Lender, Lender is authorized to charge
interest payment advances directly against the Note in the event Borrower has
not paid such interest by the due date, and any and all such advances shall be
considered advances hereunder and under the Note.
5. Lender shall not be obligated to advance Borrower any sums
hereunder after maturity (however such maturity is brought about) of the Note.
6. On the Closing Date or on such other dates as Lender shall
designate, Borrower shall pay to Lender a financing fee in the aggregate amount
of $3,750.0, and Lender shall be entitled to receive same in addition to the
interest referred to in Paragraph 2 of this Section.
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SECTION III - REPRESENTATIONS AND
WARRANTIES OF BORROWER
Borrower represents and warrants, now and continuing throughout the
term of this Agreement, that:
1. The Plans are satisfactory to Borrower and, to the extent
required by applicable law or any effective restrictive covenant, have been
approved by all Governmental Authority and the beneficiary of any such
covenant. No violation of any Governmental Requirement exists with respect to
the Premises, and the anticipated use thereof complies with applicable zoning
ordinances, regulations and restrictive covenants affecting the Premises, and
all Governmental Requirements for such use have been satisfied.
2. The Financial Statements heretofore delivered to Lender are
true and correct in all respects, have been prepared in accordance with
generally accepted accounting principles consistently followed, and fully and
accurately present the financial condition of the subjects thereof as of the
dates thereof, and no materially adverse change has occurred in the financial
condition reflected therein since the dates thereof.
3. There are no actions, suits or proceedings pending, or to the
knowledge of Borrower threatened, against or affecting Borrower or the
Premises, or involving the validity or enforceability of the Security
Instruments or the priority of the lien of the Deed of Trust, at law or in
equity, or before or by any Governmental Authority, except actions, suits and
proceedings fully covered by insurance or which, if adversely determined, would
not materially impair the ability of Borrower to complete construction of the
Improvements by the Completion Date, or impair the ability of Borrower to
perform Borrower's obligations under this Agreement and to cause to be paid
when due any amounts which may become payable under the Note. Borrower is not
in default with respect to any order, writ, injunction, decree or demand of any
court of any Governmental Authority, or under any mortgage, deed of trust,
lease, loan or credit agreement, partnership agreement or other instrument to
which Borrower is a party or by which Borrower may be bound or affected; and
the consummation of the transactions hereby contemplated and the execution,
delivery and performance of the Security Instruments will not result in any
breach of, or constitute a default under, any mortgage, deed of trust, lease,
loan or credit agreement, partnership agreement or other instrument to which
Borrower is a party or by which Borrower may be bound or affected.
4. All utility services necessary for the construction of the
Improvements and the operation thereof for their intended purpose are available
at the boundaries of the Premises, including water supply, storm and sanitary
sewer facilities, gas, electric and telephone facilities.
5. This Agreement does, and the Note and the Security Instruments
and such other instruments referred to herein to which Borrower is a party upon
their creation, issuance, execution and delivery will, constitute valid and
binding obligations of Borrower, enforceable in accordance with their
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<PAGE> 8
terms (except as enforceability may be subject to any applicable bankruptcy,
insolvency or similar laws generally affecting the enforcement of creditor's
rights).
6. Borrower has not made investments in, advances to or
guaranties of, and is not otherwise responsible for the obligations of any
corporation, partnership, joint venture, person or other entity except as
reflected in the Financial Statements or heretofore disclosed to Lender in
writing concurrently with or subsequent to the delivery to Lender of the
Financial Statements.
7. Borrower has filed all tax returns required to be filed and
paid all taxes shown thereon to be due, including interest and penalties, or
provided adequate reserves for the payment thereof.
8. Borrower is a corporation duly organized, legally existing and
in good standing under the laws of the jurisdiction in which it is incorporated
and is duly qualified as a foreign corporation in all jurisdictions wherein the
property owned or the business transacted by it makes such qualification
necessary.
9. Borrower is duly authorized and empowered to create and issue
the Note and to execute and deliver the other Security Instruments to which
Borrower is a party. All action on Borrower's part requisite for the creation,
issuance, execution and delivery of the Note, this Agreement and such other
instruments has been duly and effectively taken.
10. Borrower holds full legal title to the Premises and the
Improvements and is the sole beneficial owner thereof.
11. Borrower has relied and is relying upon Borrower's expertise
and business plan in all matters in connection with the Premises, the
Improvements, the Security Instruments and this Agreement. Borrower has not
relied and is not relying on Lender's expertise or business acumen in any
manner in connection with the Premises, the Improvements, the Security
Instruments or this Agreement. The relationship between Borrower and Lender is
solely that of borrower and lender, and Lender has no fiduciary or other
special relationship with Borrower. No term or condition of the Security
Instruments shall be construed so as to deem the relationship between Borrower
and Lender to be other than that of borrower and lender.
12. Neither any portion of the Premises nor Borrower is in
violation of or subject to any existing, pending, or threatened investigation
by any Governmental Authority under any Governmental Requirement pertaining to
Environmental Laws. Borrower has not and is not required by any Environmental
Law to obtain any permit or license to construct or use any improvements,
fixtures, or equipment forming a part of the Property. Borrower has conducted
an inquiry into previous uses and ownership of each portion of the Property,
and after such inquiry has determined that to the best of its knowledge, no
Hazardous Substance has been disposed of or released on or to any portion of
the Property. Borrower's prior (if any) and intended use of the Property will
not result in the disposal or release of any Hazardous Substance on or to any
portion of the Property.
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<PAGE> 9
SECTION IV - COVENANTS OF BORROWER
Borrower covenants with Lender as follows:
1. Borrower will cause all Governmental Requirements, and also
all restrictive covenants affecting the Premises, to be complied with promptly,
and Lender will be furnished, on demand, evidence of such compliance. If the
construction, use or occupancy of the Premises or the Improvements shall,
pursuant to any Governmental Requirement, restrictive covenant or otherwise, be
permitted only so long as any special conditions or agreements shall be kept,
Borrower will so advise Lender and will cause all such conditions to be
continuously fulfilled. Borrower assumes full responsibility for the
compliance of the Plans with Governmental Requirements and with sound
architectural practice, and, notwithstanding any approval by Lender of the
Plans, Lender shall have no responsibility therefor.
2. Borrower has entered or will enter into a Construction
Contract with the General Contractor and other contractors sufficient to
provide for construction of the Improvements in accordance with the Plans.
Borrower will deliver to Lender a true and correct copy of the Construction
Contract upon its execution by Borrower and the General Contractor. Borrower
will not execute any contract or become party to any arrangement for the
performance of work on the Premises or for the supplying of materials for the
Improvements except with persons or entities approved by Lender.
3. At the request of Lender, each Construction Contract entered
into by Borrower with an original contractor or the General Contractor in
connection with the Improvements shall contain a provision specifically
subordinating any right to a lien against the Premises by reason of materials
supplied or services rendered to the liens and security interests created under
and by virtue of the Deed of Trust, or if so requested, such liens shall be
subordinated by separate instrument, all in form and substance satisfactory to
Lender.
4. At Lender's request, Borrower will cause the Affidavit of
Commencement to be completed, executed and recorded with the county clerk of
the county in which the Premises are located within thirty (30) days of the
date of the actual commencement of construction of the Improvements or delivery
of materials to the Premises, all in accordance with '53.124 of the Texas
Property Code.
5. Borrower shall provide insurance as required by the Deed of
Trust. In addition and without limitation, Borrower will obtain a Builder's
Risk Insurance Policy with a company approved by Lender, covering the
construction of the Improvements in a face amount of not less than the
insurable value of the Improvements and containing a loss payable clause in
favor of Lender as its interest might appear.
6. The legal or beneficial title and ownership of Borrower in the
Premises and Improvements will not be conveyed or encumbered in any way without
the consent of Lender. Notwithstanding anything
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<PAGE> 10
herein to the contrary, Borrower may transfer the Premises to a limited
partnership owned directly or indirectly 100% by Borrower, without the
requirement of obtaining the prior approval of Lender. Further, there shall be
no fees, modifications to documents, or other conditions payable to or due to
Lender because of such transfer; provided, however, Lender may require the
limited partnership to execute an agreement in which the limited partnership
assumes the indebtedness, the liabilities and the obligations evidenced by the
Note and contained in the Security Instruments, and Borrower agrees to pay the
reasonable fees incurred in the preparation and recordation of said agreement.
Borrower will promptly discharge any lien, assignment or encumbrance not
permitted by this Agreement on any part of the Premises or Improvements or
affecting any rights intended to be covered by any of the Security Instruments,
unless such lien, assignment or encumbrance is being contested in good faith
and Borrower has escrowed monies or made other arrangements satisfactory to
Title Insurer so that Title Insurer will issue an endorsement to the Title
Insurance removing any exception to such lien, assignment or encumbrance.
Borrower will promptly pay and discharge prior to the date when any interest or
penalties shall accrue thereon, all taxes, levies, charges, impositions, water
and sewer rents, and assessments of every kind or nature, whether foreseen or
unforeseen and whether general or special, which are now or shall hereafter be
charged or assessed against the Premises or the Improvements, or any part
thereof, or which may become a lien thereon, unless such taxes are being
contested in good faith and Borrower has made arrangements satisfactory to
Lender to pay such taxes and any penalties and interest thereon if Borrower
loses in contesting such taxes. Upon request, Borrower will furnish to Lender
satisfactory evidence of such payments made. Borrower shall not at any time
during the performance of the work make, or cause to be made, or permit the
General Contractor or any other contractor to make, any contract for materials
or equipment of any kind or nature whatsoever to be incorporated in or to
become a part of the Improvements, title to which is not good or which is
subject to any lien or title retention arrangement. Borrower will deliver to
Lender, on demand, any contracts, bills of sale, statements, receipted
vouchers, or agreements, under which Borrower claims title to any materials,
fixtures, or articles used in the construction of the Improvements.
7. The construction of the Improvements will be prosecuted by
Borrower with diligence and continuity, and Borrower will complete the same in
accordance with the Plans on or before the Completion Date, free and clear of
liens or claims for liens, for material supplied and for labor or services
performed in connection with the construction of the Improvements. After date
hereof, no work shall be commenced with respect to any particular segment of
construction until the Plans for such segment shall have been submitted to and
approved by Lender. Borrower will not amend the Plans or permit the Plans to
be amended without the written approval of Lender.
8. Borrower shall furnish to Lender, as soon as practicable and
within a reasonable time and again upon completion of each foundation of the
structure, a survey certified to by a licensed engineer showing that the
location of said slab or foundation, as the case may be, is entirely within the
property lines, and does not encroach upon any easement, building set-back line
or other Governmental Requirement. Within thirty (30) days following the
pouring of the slab, Lender is to be provided a report from a testing
laboratory acceptable to Lender detailing the results of either a concrete
cylinder test or a core sample test of the slab.
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<PAGE> 11
9. Borrower will, upon demand of Lender, correct any structural
defect in the Improvements or any material departure from the Plans not
approved by Lender or any encroachment by any part of the Improvements or any
other structures on or over any building lines, easements, property lines or
other restricted areas that any survey or inspection reflects. The advance of
any loan proceeds shall not constitute a waiver of Lender's right to require
compliance with this covenant with respect to any such defects or departures
from the Plans not theretofore discovered by, or called to the attention of,
Lender in writing.
10. Borrower will cause all materials acquired or furnished in
connection with the construction of the Improvements but not affixed or
incorporated into the Premises to be stored at the Premises or at other
locations approved by Lender in writing, in each case under adequate safeguards
to minimize the possibility of loss, theft, damage or commingling with other
materials or projects.
11. Lender, or its representatives, will be permitted to enter
upon the Premises and any other locations where materials for the Improvements
are being stored, to inspect the Improvements and all materials to be used in
the construction thereof, and to examine all detailed plans and shop drawings
which are or may be kept at the construction site.
12. Borrower will comply with and furnish Lender with any official
notice or claim made by any Governmental Authority pertaining to all or any
part of the Premises or Improvements. Borrower will also promptly notify
Lender of any substantial fire, casualty, or notice of any taking by eminent
domain, affecting any part of the Premises or the Improvements. Any such event
shall conclusively be deemed substantial (only for the purpose of this
paragraph) if the cost of repair or restoration or the value of the property
taken shall exceed $50,000.00.
13. Borrower will cause all conditions of Section VI hereof to be
satisfied to the extent that Borrower has the power to do so.
14. Borrower agrees to maintain a special account with Lender into
which all advances hereunder (but no other funds) shall be deposited and
against which checks shall be drawn only for payment of all bills for labor and
materials incident to the construction of the Improvements and for other items
in the Approved Budget.
15. Borrower shall expend all the proceeds of each advance
hereunder for the cost of construction and completion of the Improvements in
accordance with the Plans and for other costs contemplated by the Approved
Budget. No funds advanced by Lender shall ever be used to defray living
expenses, to anticipate profit, or to defray any other item not directly
connected with construction costs of the Improvements.
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<PAGE> 12
16. Lender may apply loan proceeds hereunder to the satisfaction
of any covenant or condition hereof, and proceeds so applied shall be part of
the loan and shall be secured by the Security Instruments. Lender will give
prior notice to Borrower of such application of loan proceeds.
17. Borrower will promptly advise Lender if and when the cost of
completing the Improvements in accordance with the Plans shall exceed or appear
likely to exceed the amount of unadvanced loan proceeds hereunder, either in
the aggregate or with respect to any particular item in the Approved Budget,
and shall give Lender sufficiently detailed information with respect thereto.
18. If, in the sole good faith judgment of Lender, it appears at
any time or from time to time that the unadvanced loan proceeds as reflected in
the Approved Budget for the Improvements or any particular item thereon
including interest will be insufficient to complete the Improvements or any
particular item substantially in accordance with the Plans, and to pay for all
labor and material comprising the cost of such Improvements or any item thereof
and to pay interest on the Note to the maturity thereof, or if any other
expenses are required for completion of the Improvements pursuant to the Plans
which were not scheduled in the Approved Budget, Borrower shall make
arrangements satisfactory to Lender for the deposit of, or shall deposit with
Lender, such additional monies as, in the sole good faith judgment of the
Lender, shall, when added to the unadvanced loan proceeds, be sufficient so to
complete and/or otherwise cover the cost of such Improvements or item thereof.
Lender shall have the absolute right to apply such proceeds for costs prior to
advancing any further funds under this loan.
19. Borrower will cause a sign satisfactory to Lender to be placed
conspicuously on the Premises stating that construction financing has been
furnished by Lender.
20. All costs and expenses required to satisfy the conditions of
this Agreement will be paid by Borrower. Without limitation of the generality
of the foregoing, Borrower will pay:
(a) all inspection fees;
(b) all taxes and recording expenses, including stamp taxes, if
any;
(c) the fees and commissions, if any, lawfully due to brokers in
connection with this transaction; and
(d) the reasonable fees and expenses of counsel for Lender in
connection with this Agreement and all transactions pursuant hereto.
Borrower will indemnify Lender from claims of brokers arising by reason of the
execution hereof or the consummation of the transactions contemplated hereby.
21. Borrower will execute such additional instruments as may be
reasonably requested by Lender in order to carry out the intent of this
Agreement and to perfect or give further assurances of any of the rights
granted or provided for hereunder or under the Security Instruments.
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<PAGE> 13
22. Upon Lender's request, Borrower will furnish or cause to be
furnished performance and labor and material payment bonds with corporate
sureties satisfactory to Lender, as Lender in its absolute discretion may
request. All such bonds pertaining to the Construction Contracts, whether
required by Lender or obtained at Borrower's own election, shall name Lender as
a co-obligee or shall be assigned to or made for the benefit of Lender, as
shall be satisfactory to Lender.
23. If any portion of the Improvements will be situated in an area
identified as having special flood hazards, Borrower will maintain with an
authorized Texas servicing company of the National Flood Insurers Association,
flood insurance on the Improvements and any and all personal property used or
to be used in connection therewith, up to the maximum limits of insurance
available under the National Flood Insurance Program.
24. Borrower shall not sell, assign, mortgage or otherwise
transfer or encumber its interest in the Premises without first obtaining the
prior written consent of Lender. Lender shall be under no obligation to
consent to any requested sale, assignment, transfer, mortgage or encumbrance of
Borrower's interest in the Premises. Without limiting the foregoing, if Lender
does grant such consent, it may make such conditions for the granting of that
consent as it may in its sole discretion deem necessary, desirable or
appropriate, including without limitation (i) requiring the payment to it of a
transfer fee to cover the cost of documenting the transaction on its books,
(ii) requiring the payment of all of its attorneys' fees in connection with
such sale, assignment, transfer, mortgage or encumbrance, (iii) increasing the
interest rate on the Note, (iv) requiring the express assumption of payment of
the indebtedness and of the obligations under the Deed of Trust by the
transferee of such interest in the Premises (with or without the release of
Borrower from liability for such payment and obligations), (v) requiring the
execution of assumption agreements, modification agreements, supplemental
security documents and financing statements satisfactory in form and substance
to Lender, (vi) requiring endorsements to any existing mortgagee title
insurance policies insuring its security interest in the Premises, and (vii)
requiring additional security for the payment of the Note. Borrower's failure
to comply with this Paragraph prior to consummating any such sale, assignment,
transfer, mortgage or encumbrance shall, at Lender's option, constitute a
default under the Note and breach of the Deed of Trust and this Agreement
entitling Lender to avail itself of all rights, powers, remedies and recourses
allowed or permitted therein or herein. Notwithstanding anything herein to the
contrary, Borrower may transfer the Premises to a limited partnership owned
directly or indirectly 100% by Borrower, without the requirement of obtaining
the prior approval of Lender. Further, there shall be no fees, modifications
to documents, or other conditions payable to or due to Lender because of such
transfer; provided, however, Lender may require the limited partnership to
execute an agreement in which the limited partnership assumes the indebtedness,
the liabilities and the obligations evidenced by the Note and contained in the
Security Instruments, and Borrower agrees to pay the reasonable fees incurred
in the preparation and recordation of said agreement.
25. Borrower shall operate the Premises in accordance with all
applicable Environmental Laws.
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<PAGE> 14
26. Borrower hereby agrees that any additional funds that Lender
may advance to pay for additional or extra work or materials in connection with
the construction of the Improvements on the Premises shall be advanced pursuant
to the terms and provisions of this Agreement and shall be secured by the
Security Instruments.
27. Borrower will deliver to Lender executed counterparts of the
Leases, if any, and any and all amendments thereto. Borrower will, from time
to time at reasonable intervals, furnish Lender with a written certification
signed by Borrower as to all then existing Leases and the names of the tenants
and rents payable thereunder, together with copies of all such leases.
28. Upon completion of the construction of the Improvements,
Borrower will cause (i) the Affidavit of Completion to be completed, executed
and recorded with the county clerk of the county in which the Premises are
located on or before the 10th day after the date of actual completion of the
Improvements; and (ii) copies of said Affidavit of Completion to be mailed to
the persons entitled to receive copies of said Affidavit of Completion, all in
accordance with '53.106 of the Texas Property Code.
29. Borrower hereby agrees to provide, or cause to be provided, to
Beneficiary, all information reasonably requested by Beneficiary concerning the
Premises and the financial status of Borrower and any other parties obligated
on the Note, including, without limitation, the following:
ANNUAL FINANCIAL STATEMENTS OF BORROWER. Promptly after
becoming available and in any event within ninety (90) days after the
close of each fiscal year of Borrower, a copy of the annual audited
financial statement (consisting of at least a balance sheet and
related statements of income and of cash flow) of Borrower, prepared
in accordance with generally accepted accounting principles applied on
a basis consistent with that of the preceding fiscal year, and
certified (with no material qualifications or exceptions in scope) by
an independent certified public accountant selected by Borrower and
satisfactory to Lender.
SECTION V - EVENTS OF DEFAULT AND REMEDIES
1. The following shall constitute Events of Default hereunder:
(a) if there is a failure to comply with any of the covenants
contained in this Agreement or any of the Security Instruments;
(b) if any installment of principal or interest on the Note is not
paid as and when same is due and payable;
(c) if at any time any representation or warranty shall be
incorrect which has been made by Borrower herein or in any of the
Security Instruments; or any representation, statement (including
financial statement), certificate or data furnished or made by
Borrower (or any officer,
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<PAGE> 15
architect, accountant or attorney of Borrower) hereunder or under any
of the Security Instruments proves to have been untrue in any respect,
as of the date as of which the facts therein set forth were stated or
certified;
(d) if the construction of the Improvements be at any time
discontinued or not carried on with reasonable dispatch to such an
extent that it is unlikely in Lender's reasonable judgment that they
will be completed by the Completion Date;
(e) if any of the materials, fixtures or articles used in the
construction of the Improvements or the appurtenances thereto, or to
be used in the operation thereof, be not substantially in accordance
with the Plans as approved by the Architect and Lender;
(f) if the Improvements, in the exclusive reasonable judgment of
Lender and the Independent Supervising Architect, will not be
completed on or before thirty (30) days after the stated Completion
Date;
(g) if Borrower is unable to satisfy any condition of the right to
receipt of an advance hereunder for a period in excess of 30 days;
(h) if Borrower shall (i) apply for or consent in writing signed
by Borrower or Borrower's duly authorized attorney to the appointment
of a receiver, trustee, custodian or liquidator of Borrower, the
Premises or Improvements or any part thereof; or (ii) file a voluntary
petition in bankruptcy, or fail to generally pay its debts as such
debts become due; or (iii) make a general assignment for the benefit
of creditors, or (iv) file a petition or answer seeking reorganization
or rearrangement with creditors or taking advantage of any insolvency
law; or (v) file an answer admitting the material allegations of a
petition filed against Borrower in any bankruptcy, reorganization,
insolvency or similar proceeding; or
(i) if an order, judgment or decree shall be entered by any court
of competent jurisdiction or by any other duly authorized authority on
the application of a creditor or otherwise, adjudicating Borrower as
bankrupt or insolvent or approving a petition seeking reorganization
of Borrower or appointing a receiver, trustee or liquidator of the
Premises or Improvements or of all or any substantial part of the
assets of Borrower, and such order, judgment or decree shall continue
unstayed and in effect for any period of thirty (30) consecutive days.
2. Lender shall have the right, upon the happening of any such
Event of Default, notwithstanding any cure period which may be provided for in
this Agreement or in the Note, and in addition to any rights or remedies
available to it under any of the Security Instruments, to enter into possession
of the Premises and perform any and all work and labor necessary to complete
the Improvements substantially in accordance with the Plans and employ watchmen
and protect the Premises and the Improvements; all sums so expended by Lender
shall be deemed to have been paid to Borrower and secured by the Security
Instruments. For this purpose, Borrower hereby constitutes and appoints
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<PAGE> 16
Lender as the true and lawful attorney-in-fact of Borrower with full power of
substitution to complete, or cause to be completed, the Improvements in the
name of Borrower, and hereby empowers said attorney or attorneys as follows:
to use such sums as are necessary, including funds of Borrower, including
without limitation any balance which may be held in escrow and any funds which
may remain unadvanced hereunder for the purpose of completing the Improvements
in the manner called for by the Plans; to make such additional changes and
corrections in the Plans which shall be necessary or desirable to complete the
Improvements in substantially the manner contemplated by the Plans; to employ
such contractors, subcontractors, agents, architects and inspectors as shall be
required for said purposes; to pay, settle or compromise all existing bills and
claims which are or may be liens against said Premises, or may be necessary or
desirable for the completion of the work or the clearance of title; to execute
all applications and certificates in the name of Borrower which may be required
by any Construction Contract; to endorse the name of Borrower on all checks or
drafts for the payment of insurance proceeds or other checks or instruments,
whether to use such funds to complete the Improvements or to reimburse Lender
for sums theretofore advanced or expended; and to do any and every act with
respect to the construction of the Improvements which Borrower may do in
Borrower's own behalf. It is understood and agreed that this power of attorney
shall be deemed to be a power coupled with an interest which cannot be revoked.
Said attorney-in-fact shall also have power to prosecute and defend all actions
or proceedings in connection with the construction of the Improvements on the
Premises and to take such action and require such performance as is deemed
necessary.
3. Lender shall also have the right, upon the happening of any
such Event of Default and after the giving of notice as required under the Deed
of Trust, at its election to declare the Note to be forthwith due and payable
without presentment, protest, or notice of any kind, notice of default, notice
of intention to accelerate, notice of intention to foreclose, notice of
acceleration, all of which are hereby expressly waived by Borrower.
4. Upon the happening of any such Event of Default,
notwithstanding any cure period which may be provided for in this Agreement or
in the Note, any obligation of the Lender to advance funds hereunder, and all
other obligations (if any) of Lender hereunder, shall immediately cease and
terminate unless and until Lender shall reinstate same in writing.
5. Any of Lender's funds used for the purposes referred to in
this Section shall be deemed advances under the Note or under this Agreement or
the Security Instruments, as the case may be, and in any event shall bear
interest at the maximum rate permitted by applicable law.
6. Notwithstanding anything to the contrary contained in this
Agreement, in the Note or in any other Security Instrument, Lender may
accelerate the maturity of the Note because of a default under this Agreement,
under the Note or under any other Security Instrument only if such default is
continuing for more than ten (10) days after written notice of such default is
given to Borrower. Written notice will be considered as given when deposited
in the U.S. mail, postage prepaid, certified mail, return receipt requested,
addressed to Borrower at the most recent address for Borrower in Lender's
records.
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<PAGE> 17
SECTION VI - CONDITIONS TO LENDER'S
OBLIGATIONS TO MAKE LOAN ADVANCES
Lender shall not be obligated to make any advance, including any
advances subsequent to the first advance, of loan proceeds hereunder unless and
until the following conditions shall have been satisfied (with proof thereof in
form and sufficiency as may be reasonably requested by Lender):
1. Lender shall have received the Note, Deed of Trust, Assignment of
Leases, Architect's Agreement, Contractor's Agreement, Borrower's Certificate
Environmental Certificate and the financing statements referred to in this
Agreement Authorization , all properly executed by the respective parties
thereto.
2. The Deed of Trust and Assignment of Leases shall have been
recorded in the Real Property Records in the office of the County Clerk of
Brazoria County, Texas, with all filing fees and taxes therefor paid, all prior
to the commencement of any construction on any part of the Premises and the
placing of any material or equipment on the Premises.
3. Lender shall have received such financing statements with such
proof of filing in the appropriate offices in the State of Texas and any other
applicable jurisdiction and such other things and instruments as are necessary
or appropriate in the opinion of Lender to perfect a security interest in the
property covered by the Deed of Trust and all other Security Instruments
pursuant to the Texas Uniform Commercial Code and the similar statutes of each
other applicable jurisdiction, and Lender shall have received proof that no
prior financing statements from Borrower as Debtor or from any other party
affecting any of such property shall have been filed in any such office in
favor of any other party.
4. Lender shall have received the Title Insurance which shall
show the lien on the Owner's Interest in favor of Lender as holder of the Note
to be a valid, first and prior lien on the Premises free and clear of all
defects and encumbrances except such as Lender shall approve. Such Title
Insurance shall contain no survey exceptions not theretofore approved by
Lender, and the status of title to the Owner's Interest shown therein shall
otherwise be satisfactory to Lender.
5. The representations and warranties made in Section III hereof
shall be true and correct on and as of the date of the advance with the same
effect as if made on such date; Lender shall have received such assurances in
this respect as Lender may reasonably request, including without limitation
advice from any Governmental Authority relating to the availability of utility
services as stated in Paragraph 4 of Section III hereof.
6. Upon Lender's request and within the thirty (30) days after
the date of the actual commencement of construction of the Improvements or
delivery of materials to the Premises, the Affidavit of Commencement shall have
been completed, executed and recorded with the county clerk of the county in
which the Premises are located, all in accordance with '53.124 of the Texas
Property Code.
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<PAGE> 18
7. Lender shall have received and approved (a) copies of the
Plans, the Approved Budget and any Construction Contracts that may be requested
by Lender; (b) all authorizations and permits required by any Governmental
Authority for the construction of the Improvements, including those so required
for the use and operation of the Premises for the purposes contemplated by the
Plans which are presently procurable; (c) a current title report from the Title
Insurer which shall described the Premises and shall have attached thereto
copies of all instruments which appear as exceptions in the report; (d) an
original current survey of the Premises certified to Lender and the Title
Insurer showing the locations of the perimeter of the Premises by courses and
distances, all easements and rights-of-way (identified to recordings in public
records), the proposed building lines, the lines of the streets abutting the
Premises and the width thereof, encroachments and the extent thereof in feet
and inches upon the Premises, the relation of the proposed Improvements by
distances to the perimeter of the Premises, the proposed building lines and the
street lines, and if the Premises are described as being on a field map, a
legend relating the survey to said map and a certification by the surveyor
thereon that the Premises are not situated within the 100-year flood plain; (e)
the Financial Statements; (f) advice from the Architect and, if Lender elects,
the Independent Supervising Architect, to the effect that the Plans have been
approved by him or them and that the Construction Contracts are acceptable to
him or them and satisfactorily provide for the construction of the
Improvements; (g) letters from the appropriate public utility companies
evidencing the availability of adequate utilities for the Premises; (h) the
policies of insurance required by the Deed of Trust and/or this Agreement
accompanied by evidence of payment of the premiums therefor; and (i) if and to
the extent requested by Lender, in its absolute discretion, subordination
agreements from any or all contractors, subcontractors, laborers, materialmen
and/or suppliers subordinating to the lien of the Deed of Trust and lien or
claim the said persons might have against Borrower and/or the Premises and the
Improvements or any portion thereof by constitution, statute or otherwise, by
reason of said persons' furnishing labor, material, machinery, fixtures, tools
and/or other goods and services to, for or on the Premises or Improvements.
There shall have been, as of the date of the advance, no change in the state of
title and no survey exceptions not theretofore approved by Lender.
8. Lender shall have received (a) a proper Request for Advance;
(b) if construction has been performed prior to the advance, advice from the
Architect and, if Lender elects, the Independent Supervising Architect, to the
effect that in his or their opinion the construction of the Improvements
theretofore performed is in accordance with the Plans; (c) verification from
the Independent Supervising Architect that all materials covered by requests
for Advances but which have not yet been affixed or incorporated into the
Improvements are satisfactorily identified, located and safeguarded; (d) as to
advances after the first advance, a current survey if required by Title
Insurer; and (e) as to advances after the first advance, a notice of title
continuation or any endorsement with respect to the Title Insurance theretofore
delivered indicating that since the last preceding advance, there has been no
change in the state of title and no survey exceptions not theretofore approved
by Lender, which endorsement shall have the effect of increasing the coverage
of the Title Insurance by an amount equal to the advance then being made if the
Title Insurance does not by its terms provide for such additional coverage
without such an endorsement.
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<PAGE> 19
9. Prior to the final advance, Lender shall have received: (a)
the Architect's Completion Certificate; (b) at the option of Lender, a
completion certificate satisfactory to Lender from the Independent Supervising
Architect; (c) satisfactory evidence that '53.106 of the Texas Property Code
has been complied with, including without limitation, the recording of the
Affidavit of Completion; (d) evidence satisfactory to Lender that all
Governmental Requirements have been met; (e) final lien waivers from all
contractors, subcontractors and materialmen; and (f) satisfactory evidence that
no mechanics' and materialmen's liens or other encumbrances have been filed and
remain on the Premises.
10. The Improvements, to the extent any have been made prior to
the date of the advance, shall not have been materially injured or damaged by
fire or other casualty unless there shall have been received by Lender
insurance proceeds sufficient in the judgment of Lender, the Architect and, if
Lender elects, the Independent Supervising Architect, to effect the
satisfactory restoration of the Improvements and to permit the completion
thereof prior to the Completion Date.
11. There shall be no default under this Agreement, the Note, or
any of the Security Instruments.
12. All legal matters incident to this Agreement and the
transactions contemplated hereby shall be satisfactory to McGlinchey Stafford,
counsel to Lender.
13. Lender shall have received evidence satisfactory to Lender
that the Improvements will not be situated in an area that has been identified
as an area having special flood hazards. Should it be determined, however,
that the Improvements are to be situated in an area identified as having
special flood hazards, Lender shall have received a copy of the flood insurance
policy application, indicating that the maximum limits of coverage have been
obtained and that the full premium therefor has been paid in full, and as to
advances after the first advance, Lender shall have received the flood
insurance policy or policies, all in form and substance satisfactory to Lender.
14. To the extent requested by Lender, Lender shall have received
a performance bond naming Lender as co- obligee, and a labor and payment bond
of such character and in such penal sum as to such of the Construction
Contracts with the General Contractor and all other original contractors as
Lender may designate.
SECTION VII - GENERAL TERMS AND PROVISIONS
1 No advance of loan proceeds hereunder shall constitute a
waiver of any of the conditions of Lender's obligation to make further advances
nor, in the event Borrower is unable to satisfy any such condition, shall any
such waiver have the effect of precluding Lender from thereafter declaring such
inability to be an Event of Default as hereinabove provided.
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<PAGE> 20
2 All proceedings taken in connection with the transactions
provided for herein, such as surveys, appraisals and documents required or
contemplated by this Agreement, the Security Instruments or otherwise, and the
persons responsible for the execution and preparation hereof, all
subcontractors, sureties, insurers and the forms of Construction Contracts and
policies of insurance, shall be satisfactory in form, substance and coverage to
Lender, and Lender shall have received copies (or certified copies where
appropriate in Lender's judgment) of all documents which Lender may request in
connection herewith.
3 All conditions to the obligations of Lender to make advances
hereunder are imposed solely and exclusively for the benefit of Lender and its
assigns, and no other person shall have standing to require satisfaction of
such conditions in accordance with their terms or be entitled to assume that
Lender will refuse to make advances in the absence of strict compliance with
any or all thereof, and any or all of such conditions may be freely waived in
whole or in part by Lender at any time if, in Lender's sole discretion, Lender
deems it advisable to do so.
4 All notices hereunder shall be in writing and shall be deemed
to have been sufficiently given or served for all purposes when presented
personally or deposited in the United States mail, postage prepaid, certified
or registered mail, return receipt requested, addressed to the party to receive
said notice at its address above stated or at such other address of which it
shall have notified in writing the party giving such notice.
5 This Agreement has been executed and delivered in the State of
Texas, and the Note issuable hereunder will also be executed and delivered in
said State; and this Agreement and the Note shall be deemed to be contracts
made under and shall be construed in accordance with and governed by the laws
of said State and of the United States of America, as applicable.
6 The rights and remedies of Lender under this Agreement, the
Note, or any of the Security Instruments shall be cumulative, and the exercise
or partial exercise of any such right or remedy shall not preclude the exercise
of any other right or remedy.
7 In establishing the charges by Lender to Borrower in
connection with this loan and the services of Lender with respect to the
transactions contemplated and mentioned in this Agreement, Borrower provided
Lender a schedule in the Approved Budget estimating the amounts and times of
Requests for Advances hereunder, which schedule was used by Lender and Borrower
in negotiating and approving the charges for such services and loan. It is the
intention of the parties hereto to conform strictly to applicable usury laws.
The terms "applicable law" and "law" include any laws that allow a greater rate
of interest, as such laws now exist or may be changed or amended in the future.
Accordingly, if the transactions contemplated hereby would be usurious under
applicable law (including the laws of the State of Texas and the laws of the
United States of America), then, notwithstanding anything to the contrary in
the Note, this Agreement, or any other Security Instrument or agreement entered
into in connection with or as security for the Note, it is agreed as follows:
(i) the aggregate of all consideration which constitutes interest under
applicable law that is contracted for, charged or received under the Note, this
Agreement or under any of the other aforesaid Security Instruments or
agreements or otherwise in
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<PAGE> 21
connection with the Note shall under no circumstances exceed the maximum amount
of interest allowed by applicable law, and any excess shall be credited on the
Note by the holder thereof (or, if the Note shall have been paid in full,
refunded to the Borrower); and (ii) in the event that the maturity of the Note
is accelerated by reason of an election of the holder thereof resulting from
any Event of Default under this Agreement or otherwise, or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest may never include more than the maximum amount allowed by applicable
law, and excess interest, if any, provided for in this Agreement or otherwise
shall be cancelled automatically as of the date of such acceleration or
prepayment, and, if theretofore paid, shall be credited on the Note (or, if the
Note shall have been paid in full, refunded to the Borrower).
8. All covenants and agreements contained by or on behalf of the
Borrower in the Note, this Agreement and any other Security Instrument shall
bind its successors and assigns and shall inure to the benefit of Lender and
its successors and assigns. The Borrower shall not, however, have the right to
assign its rights under this Agreement or any interest herein, without the
prior written consent of Lender. In the event that Lender sells participations
in the Note or other indebtedness of the Borrower incurred or to be incurred
pursuant to this Agreement, to other lenders, each of such other lenders shall
have the rights of set off against such indebtedness and similar rights or
liens to the same extent as may be available to Lender.
9. All provisions of this Agreement and of any other Security
Instruments relating to the Note or other indebtedness shall apply with equal
force and effect to each and all promissory notes hereinafter executed which in
whole or in part represent a renewal, extension for any period, increase or
rearrangement of any part of the indebtedness originally represented by the
Note or of any part of such other indebtedness.
10. No course of dealing on the part of Lender, its officers,
employees, consultants or agents, nor any failure or delay by Lender with
respect to exercising any right, power or privilege of Lender under the Note,
this Agreement or any of the other Security Instruments shall operate as a
waiver thereof.
11. The Note, this Agreement and the other Security Instruments
embody the entire agreement and understanding between Lender, the Borrower and
other respective parties hereto and thereto and supersede all prior agreements
and understandings between such parties relating to the subject matter hereof
and thereof.
12. In the event any one or more of the provisions contained in
this Agreement, any of the other Security Instruments or in any other
instrument referred to herein or executed in connection with or as security for
the Note shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement, any of the other Security
Instruments, or any such other instrument.
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<PAGE> 22
13. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought.
14. Words used herein in the singular, where the context so
permits, shall be deemed to include the plural and vice versa. The definitions
of words in the singular herein shall apply to such words when used in the
plural where the context so permits and vice versa.
15. The words "herein," "hereof," "hereunder" and other words of
similar import when used in this Agreement refer to this Agreement as a whole,
and not to any particular article, section or subsection.
16. The exhibits attached to this Agreement are incorporated
herein and shall be considered a part of this Agreement for the purposes stated
herein, except that in the event of any conflict between any of the provisions
of such exhibits and the provisions of this Agreement, the provisions of this
Agreement shall prevail.
17. This Agreement may be executed in two or more counterparts,
and it shall not be necessary that the signatures of all parties hereto be
contained on any one counterpart hereof; each counterpart shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
THIS WRITTEN LOAN AGREEMENT AND THE "SECURITY INSTRUMENTS" REFERENCED
HEREIN FOR THE LOAN OR OTHER EXTENSION OF CREDIT DESCRIBED HEREIN 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 have executed this Agreement the day
and year first above written.
LENDER:
STERLING BANK, a Texas banking corporation
By: /s/ JEFFREY VELLIGAN
-----------------------------
Name: Jeffrey Velligen
Title: Sr. Vice President
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<PAGE> 23
BORROWER:
TEAM, INC., a Texas corporation
By: /s/ MARGIE E. ROGERS
-----------------------------
Name: Margie E. Rogers
Title: Vice President
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<PAGE> 1
EXHIBIT 10.2. MODIFICATION AND EXTENSION
AGREEMENT
THE STATE OF TEXAS )
)
COUNTY OF BRAZORIA )
This MODIFICATION AND EXTENSION AGREEMENT ("AGREEMENT") is executed
effective the 20th day of February, 1998, by and between TEAM, INC., A TEXAS
CORPORATION ("BORROWER"), whose address for notice hereunder is P. O. Box 123,
Alvin, Texas 77512, and STERLING BANK, A TEXAS BANKING CORPORATION ("LENDER"),
whose address for notice hereunder is P. O. Box 40333, Houston, Texas
77240-0333;
W I T N E S S E T H:
WHEREAS, Lender has loaned to Borrower, and Borrower has borrowed from
Lender $1,700,000.00 ("Loan") such Loan being evidenced, in part, by the
following instruments:
(a) Promissory Note (the "NOTE") dated November 15, 1993, executed
by Borrower, payable to the order of Lender, in the original principal amount
of $1,700,000.00, upon which there remains unpaid a principal balance of
$1,180,109.21, and upon which interest has been paid to the effective date of
this Agreement;
(b) Deed of Trust and Security Agreement (the "DEED OF TRUST") of
even date with the Note, executed by Borrower in favor of Daryl D. Bohls,
Trustee, and Lender, as "Beneficiary," and being recorded under Clerk's File
No. 93-041770 in the Real Property Records of Brazoria County, Texas, covering
the property described on Exhibit "A" attached hereto and made a part hereof
for all purposes (the "PROPERTY"); and
(c) Assignment of Rents and Leases (the "ASSIGNMENT OF RENTS") of
even date with the Note, executed by Borrower in favor of Lender, as Assignee,
and being recorded under Clerk's File No. 93-041771 in the Real Property
Records of Brazoria County, Texas, covering the Property;
WHEREAS, the Note, the Deed of Trust, the Assignment of Rents, and
each and every other agreement, document and instrument executed or to be
executed for the benefit of Lender in connection with the Loan (collectively,
the "LOAN DOCUMENTS") are hereby incorporated by this reference for all
purposes to the same extent as if set out herein verbatim; and
WHEREAS, Borrower and Lender desire to amend and modify the Loan
Documents and to renew, extend and carry forward all liens and security
interests securing the Note.
<PAGE> 2
NOW, THEREFORE, in consideration of the sum of TEN and NO/100 DOLLARS
($10.00) and other good and valuable considerations, the receipt and legal
sufficiency of which are hereby acknowledged, and in further consideration of
the terms, covenants and agreements contained in the Loan Documents and this
Agreement:
(1) Modification of Note. Lender and Borrower hereby agree that
the Note is hereby renewed, rearranged, extended, amended and modified as
follows:
(a) The outstanding, unpaid principal balance of the Note
is $1,180,109.21, and Borrower hereby promises and agrees to pay said
amount to Lender, together with interest thereon, all in accordance
with the terms and provisions of the Note, as renewed, rearranged,
extended, amended and modified by this Agreement.
(b) The outstanding, unpaid balance of the Note, as
renewed, rearranged, extended, amended and modified by this Agreement,
is due and payable in one hundred eight (108) consecutive monthly
installments, the first one hundred seven (107) of which being in the
amount of Sixteen Thousand Two Hundred Twenty-two and No/100 Dollars
($16,222.00), including accrued interest each, and the one hundred
eighth (108th) and final installment being in the amount of the
balance of principal and accrued interest then due on the Note, as
renewed, rearranged, extended, amended and modified by this Agreement.
The first such installment is due and payable March 15, 1998, and the
remaining installments are due and payable in consecutive order on the
same day of each and every succeeding calendar month thereafter until
all sums called for under the Note, as renewed, rearranged, extended,
amended and modified by this Agreement, have been paid in full.
(c) Notwithstanding the payment schedule specified above,
Lender may, at its sole discretion and from time to time increase or
decrease the payment amounts specified above to a level sufficient to
amortize the Note, as renewed, rearranged, extended, amended and
modified by this Agreement, at not more than its original rate of
amortization for the remaining term of the Note, as renewed,
rearranged, extended, amended and modified by this Agreement, at the
interest rate then in effect by giving prior written notice to
Borrower, with such notice to be considered as given when deposited in
the United States mail, postage prepaid, addressed to Borrower at the
address specified above.
(d) Interest on the outstanding balance of the Note, as
renewed, rearranged, extended, amended and modified by this Agreement,
shall accrue from and after the effective date of this Agreement until
maturity as above stated at a varying rate per annum which is one-half
of one percent (.5%) per annum (hereinafter called the "MARGIN
PERCENTAGE"),
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<PAGE> 3
above the Prime Rate (hereinafter defined) as published in the
Southwest Edition of the Wall Street Journal from time to time (but in
no event to be less than seven percent (7.0%) per annum nor to exceed
the lesser of eleven percent (11.0%) per annum or the Maximum Rate
(hereinafter defined), with adjustments in such varying rate to be
made on the same date as any change in the Prime Rate and adjustments
due to changes in the Maximum Rate to be made on the effective date of
any change in the Maximum Rate. For the purposes of the Note, as
renewed, rearranged, extended, amended and modified by this Agreement,
"Prime Rate" means that variable rate of interest per annum published
in the Southwest Edition of the Wall Street Journal from time to time
as the "prime rate". This rate is a composite or the highest of any
range of rates set by financial institutions selected by the Wall
Street Journal. These financial institutions set their respective
"prime rates" as a general reference rate of interest, taking into
account such factors as they may deem appropriate, it being understood
that many of their commercial or other loans are priced in relation to
such rate, that it is not necessarily the lowest or best rate actually
charged to any customer and that they and Lender may make various
commercial or other loans at rates of interest having no relationship
to such rate. If for any reason the Prime Rate, as defined above,
ceases to exist or to be readily available, then Lender may replace
and substitute the Prime Rate and the Margin Percentage, as defined
above, with a different index and margin percentage that historically
has yielded or that Lender believes prospectively will yield an
interest rate on the Note, as renewed, rearranged, extended, amended
and modified by this Agreement, comparable to the Prime Rate plus the
Margin Percentage, as defined above. Notwithstanding the foregoing,
if at any time the sum of the Margin Percentage plus the Prime Rate
exceeds the Maximum Rate, the rate of interest to accrue on the Note,
as renewed, rearranged, extended, amended and modified by this
Agreement, will be limited to the Maximum Rate, but any subsequent
reductions in the Prime Rate will not reduce the rate of interest
accruing on the Note, as renewed, rearranged, extended, amended and
modified by this Agreement, below the Maximum Rate until the total
amount of interest accrued on the Note, as renewed, rearranged,
extended, amended and modified by this Agreement, equals the amount of
interest which would have accrued if a varying rate per annum equal to
the sum of the Margin Percentage plus the Prime Rate had at all times
been in effect. If at maturity or final payment of the Note, as
renewed, rearranged, extended, amended and modified by this Agreement,
the total amount of interest paid or accrued under the foregoing
provisions is less than the total amount of interest that would have
accrued if a varying rate per annum equal to the sum of the Margin
Percentage plus the Prime Rate had at all times been in effect, then
Borrower agrees to pay to Lender an amount equal to the difference
between (a) the lesser of (i) the amount of interest which would have
accrued on the Note, as renewed, rearranged, extended, amended and
modified by this Agreement, if the Maximum Rate had at all times been
in effect or (ii) the amount of interest which would have accrued if a
varying rate per annum equal to the sum of the Margin Percentage plus
the Prime Rate had at all times been in effect, and (b)
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<PAGE> 4
the amount of interest accrued in accordance with the other provisions
of the Note, as renewed, rearranged, extended, amended and modified by
this Agreement. All payments of interest shall be computed on the per
annum basis of a year of 360 days and for the actual number of days
elapsed unless such calculation would result in a usurious rate, in
which case interest shall be calculated on the per annum basis of a
year of 365 or 366 days, as the case may be.
(e) Notwithstanding the interest rate or the floor or
ceiling on said interest rate, all as specified above, Lender may, at
its sole discretion, on February 15, 2005, increase or decrease the
interest rate payable under the Note, as renewed, rearranged,
extended, amended and modified by this Agreement (with a corresponding
increase or decrease in remaining monthly payments) to a rate not in
excess of the lesser of (i) three percent (3.0%) per annum above the
Prime Rate or (ii) the Maximum Rate by giving written notice to
Borrower, with such notice to be considered as given when deposited in
the United States mail, postage prepaid, addressed to Borrower at the
address specified above.
(f) All past due principal and interest will bear
interest from the date due until paid at the Maximum Rate. The
MAXIMUM RATE" means the maximum nonusurious rate of interest per annum
permitted by whichever of applicable laws of the United States of
America or Texas permit the higher interest rate, including to the
extent permitted by applicable laws, any future amendments of such
laws or any new laws coming into effect in the future to the extent a
higher rate of interest is permitted by any such amendment or new law;
provided, however, that if applicable laws do not provide for a
maximum nonusurious rate of interest (for example, a loan secured by a
first lien on residential real estate), then the Maximum Rate means
twenty-four percent (24%) per annum. The Maximum Rate will be applied
by taking into account all amounts characterized by applicable law as
interest on the debt evidenced by the Note, as renewed, rearranged,
extended, amended and modified by this Agreement, so that the
aggregate of all interest does not exceed the maximum nonusurious
amount permitted by applicable law. Alternatively, Lender may charge
and collect a late fee of five percent (5%) of any scheduled
installment that is more than ten (10) days past due.
All other terms and provisions of the Note, except as expressly
renewed, rearranged, extended, amended and modified by this Agreement, remain
the same.
(2) Modification of Deed of Trust. Lender and Borrower hereby
agree that Paragraph 18 of the Deed of Trust is hereby amended and modified by
adding the following language to the end of said paragraph:
"Notwithstanding anything herein to the contrary, Grantors may
transfer the premises to a limited partnership owned directly or
indirectly 100% by Grantors, without the
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<PAGE> 5
requirement of obtaining the prior approval of Beneficiary. Further,
there shall be no fees, modifications to documents, or other
conditions payable to or due to Beneficiary because of such transfer;
provided, however, that Beneficiary may require the limited
partnership to execute an agreement in which the limited partnership
assumes the indebtedness, the liabilities and the obligations
evidenced by the Note and contained in all documents, instruments and
agreements executed in connection with or as security for the Note,
and Grantors agree to pay the reasonable fees incurred in the
preparation and recordation of said agreement."
(3) Modification of Liability. Lender and Borrower hereby agree
that all references to the Note in the Deed of Trust, and all other Loan
Documents are hereby amended to refer to the Note, as renewed, rearranged,
extended, amended and modified by this Agreement.
(4) Reaffirmation of Liability. Borrower hereby reaffirms to
Lender each of the representations, warranties, covenants and agreements
contained in the Loan Documents, with the same force and effect as if each were
separately stated herein and made as of the date hereof. Borrower hereby
ratifies, affirms, reaffirms, acknowledges, confirms and agrees that the Loan
Documents, as herein modified, represent the valid, binding and enforceable
obligations of Borrower, and Borrower further acknowledges that there are no
existing claims, defenses (personal or otherwise), or rights of setoff
whatsoever with respect to any of the Loan Documents, and Borrower further
acknowledges and represents that no event has occurred and no condition exists
which would constitute a default under any of the Loan Documents, or this
Agreement, either with or without notice or lapse of time, or both. Lender and
Borrower hereby agree that this Agreement and all of the Loan Documents are in
full force and effect so that nothing herein contained shall be construed as
modifying in any manner any of the Loan Documents, except as specifically
modified by this Agreement.
(5) No Release of Liens. Lender and Borrower hereby agree that
this Agreement modifies the Loan Documents, and in no way acts as a
diminishment, impairment, release or relinquishment of the liens, powers,
titles, security interests and rights ("LIENS") securing payment of the Note,
including, without limitation, the Liens created by the Deed of Trust. The
Liens are hereby renewed, extended, ratified, confirmed and carried forward by
Borrower in all respects, except to the extent same have previously been
released of record by Lender.
(6) Borrower's Business Plan. Borrower has relied and is relying
upon Borrower's expertise and business plan in all matters in connection with
the Property, the Loan Documents and this Agreement. Borrower has not relied
and is not relying on Lender's expertise or business acumen in any matter in
connection with the Property, the Loan Documents or this Agreement. The
relationship between Borrower and Lender is solely that of borrower and lender,
and Lender has no fiduciary or other special relationship with Borrower. No
term or condition of the Loan Documents or this Agreement shall be construed so
as to deem the relationship between Borrower and Lender to be other than that
of borrower and lender.
-5-
<PAGE> 6
(7) Release of Lender. Borrower releases, acquits and forever
discharges Lender, Lender's agents, servants and employees and all persons,
natural or corporate, in privity with them or any of them, from any and all
claims or causes of action of any kind whatsoever, at common law, statutory or
otherwise, which Borrower has now or might have in the future, known or
unknown, now existing or that might arise hereafter, directly or indirectly
attributable to the Property, the Loan Documents, or from any transaction or
matter in connection with the Loan Documents, or the Property, it being
intended to release all claims of any kind or nature that Borrower might have
against those hereby released whether asserted or not.
(8) Further Assurances. Borrower agrees to perform any further
acts and to execute and deliver any further documents that may be reasonably
necessary in the opinion of Lender or Lender's counsel to carry out the
provisions of this Agreement.
(9) Entire Agreement. This Agreement sets forth the entire
agreement of Lender and Borrower with respect to the subject matter of this
Agreement. There are no oral conditions, representations or agreements
affecting this Agreement. No extension or variation in the covenants to be
performed under this Agreement or in the terms of this Agreement and no release
or satisfaction of this Agreement shall be binding on any party unless the same
is in writing and signed by the party or an authorized officer of any corporate
party. Notwithstanding anything to the contrary contained in this Agreement or
inferred hereby or in any other instrument executed by Borrower or Lender or in
any other action or conduct undertaken by Borrower or by Lender on or before
the date hereof, the agreements, covenants and provisions contained in this
Agreement shall constitute the only evidence of Lender's consent to modify the
terms and provisions of the Loan Documents in the manner set forth in this
Agreement. Accordingly, no express or implied consent to any further
modifications of the Loan or the Loan Documents, whether any such modifications
involve any of the matters contained in this Agreement or otherwise, shall be
inferred or implied from Lender's execution of this Agreement unless evidenced
by an express written agreement executed by Lender. Further, Lender's
execution of this Agreement shall not constitute a waiver (either express or
implied) of the requirement that any further modification of the Loan or any of
the Loan Documents shall require the express written approval of Lender, no
such approval (either express or implied) having been given as of the date
hereof.
(10) Borrower's Signature. The undersigned individual signing for
and on behalf of Borrower represents and warrants that he or she is duly
authorized and empowered to execute this Agreement; that he or she has read
this Agreement and fully understands this Agreement to be a compromise,
settlement and release of all claims, known or unknown, present or future,
which Borrower has or may have against the parties released, arising out of the
matters described; that he or she is of legal age and legally competent to
execute this Agreement, and that he or she does so of his or her own free will
and accord, without threat or duress, and without reliance on any
representation of any kind or character not expressly set forth in this
Agreement.
(11) Survival. All representations, warranties, covenants and
agreements of Lender and Borrower made in this Agreement shall survive the
execution and delivery of this Agreement, until such time
-6-
<PAGE> 7
as all of the obligations of the signatories hereto shall have lapsed in
accordance with their respective terms or shall have been discharged in full.
(12) Legal Fees and Expenses. All reasonable costs and expenses
incurred by Lender as a result of or in connection with the negotiation,
preparation, performance and enforcement of this Agreement and all transactions
pursuant to this Agreement shall be paid by Borrower, including, without
limitation, Lender's attorneys fees and expenses.
(13) Parties Bound. This Agreement is binding on and inures to the
benefit of Lender, Borrower, and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
(14) Governing Law. This Agreement is executed, delivered and
performable in Houston, Harris County, Texas and shall be construed under and
in accordance with the laws of the State of Texas and federal law.
(15) Conflicts. In the event of any conflict between any of the
terms and provisions of the Note or any of the other Loan Documents and the
terms and provisions of this Agreement, the terms and provisions of this
Agreement shall control.
(16) Executed Counterparts. This Agreement may be executed in two
or more counterparts, and it shall not be necessary that the signatures of all
parties hereto be contained on any one counterpart hereof; each counterpart
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
THIS AGREEMENT AND THE LOAN DOCUMENTS REFERENCED HEREIN FOR THE LOAN
OR OTHER EXTENSION OF CREDIT DESCRIBED HEREIN 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 undersigned have duly executed this Agreement
as of the dates of the acknowledgements set forth below, to be effective for
all purposes, however, as of the date first above written.
BORROWER:
TEAM, INC., A Texas corporation
By: /s/ MARGIE E. ROGERS
--------------------------------
Name: Margie E. Rogers
Title:
-7-
<PAGE> 8
LENDER:
STERLING BANK, a Texas banking
corporation
By: /s/ JEFFREY A. VELLIGAN
-----------------------------
Name: Jeffrey A. Velligan
Title: Sr. Vice President
-8-
<PAGE> 9
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me on the 20th day of
February, 1998, by Margie E. Rogers, Vice President of TEAM, INC., a Texas
corporation, for and on behalf of said corporation.
(SEAL) /s/ Kent W. Simmons
----------------------------------
Notary Public, State of Texas
My Commission Expires: Printed Name of Notary Public
March 21, 1998 Kent W. Simmons
- -------------- ------------------------
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me on the 20th day of
February, 1998, by Jeffrey A. Velligan, Sr. Vice President of STERLING BANK,
A TEXAS BANKING CORPORATION, for and on behalf of said banking corporation.
(SEAL) /s/ Lauren Blaies Blowers
-----------------------------
Notary Public, State of Texas
My Commission Expires: Printed Name of Notary Public
August 20, 2000 Lauren Blaies Blowers
- --------------- -----------------------------
-9-
<PAGE> 1
EXHIBIT 10.3. TEAM, INC.
1998 INCENTIVE STOCK OPTION PLAN
The following Team, Inc. 1998 Incentive Stock Option Plan (the "Plan")
has been adopted by the Board of Directors of Team, Inc. effective beginning on
January 29, 1998 subject to approval by the shareholders of the Company no later
than twelve months following the adoption by the Board.
1. Purpose. The Plan is intended to advance the interests of Team,
Inc. (the "Company"), its shareholders, and its subsidiaries by encouraging and
enabling selected key employees of the Company upon whose judgment, initiative
and effort the Company is largely dependent for the successful conduct of its
business, to acquire and/or increase and retain a proprietary interest in the
Company by ownership of its stock.
2. Definitions.
(a) "Act" means the Securities Exchange Act of 1934, as Aended.
(b) "Affiliates" means, except to the extent otherwise not
permitted under Section 424(f) of the Code, any one or more
corporations which are members of a "parentsubsidiary controlled
group" as such term is defined in Section 1563(a)(1) of the Code,
except that "at least 50 percent" shall be substituted for "at least 80
percent" each place it appears in Section 1563(a)(1) of the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Compensation Committee, or such other
committee as designated by the Board of Directors, vested with
authority for administration of the Plan by the Board pursuant to
Paragraph 3.
(f) "Common Stock" means the Company's $0.30 par value common
stock.
(g) "Date of Grant" means the date on which an Option is
granted under the Plan.
(h) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
<PAGE> 2
(i) "Exercise Price" means the value per share of Common Stock
that is equal to one hundred percent (100%) of the Fair Market Value of
a share of Common Stock on the last date preceding the Date of Grant on
which sales of the Common Stock occurred on the American Stock Exchange
or other primary market or exchange on which the Common Stock traded.
(j) "Fair Market Value" means the closing price of the Common
Stock reported on the composite tape or other reporting medium (for
securities listed on the American Stock Exchange or other primary
market or exchange on which the Common Stock is traded) as of the
relevant date; provided, however, that if the Common Stock does not
trade on the relevant date, such price shall be determined based upon
the closing price of the Common Stock on the next preceding date on
which trades occurred; and provided further, however, that should the
primary market or exchange on which the Common Stock is traded adopt a
continuous twenty-four hour trading policy, "Fair Market Value" for
purposes of this Plan shall mean the price of the Common Stock on the
last trade prior to 4:30 p.m., New York time, on any relevant date.
(k) "Option" means an option granted under the Plan.
(l) "Optionee" means a person to whom an Option, which has not
expired, has been granted under the Plan.
(m) "Successor" means the legal representative of the estate of
a deceased Optionee or the person or persons who acquire the right to
exercise an Option by bequest or inheritance or by reason of the death
of any Optionee.
(n) "Term of Plan" means that period which commences January
29, 1998, and terminates on January 28, 2008, or such earlier date as
the Board hereafter determines.
(o) "Termination of Employment" of an Optionee means the
cessation of such Optionee's relationship as an employee of the Company
or Affiliate (for federal tax purposes).
-2-
<PAGE> 3
3. Administration of Plan. The Plan shall be administered by the
Committee of two or more members. The Committee shall report all action taken by
it to the Board. Except when the Board determines otherwise, the Committee shall
consist of the members of the Compensation Committee of the Board of Directors.
All members of the Committee shall qualify as both "non-employee directors," as
defined in Rule 16b-3(b)(3) promulgated under the Act and "outside directors"
within the meaning of Section 162(m) of the Code. The Committee shall have full
and final authority in its discretion, subject to the provisions of the Plan, to
determine the key employees to whom and the time or times at which Options shall
be granted and the number of shares of Common Stock covered by each Option; to
construe and interpret the Plan; to determine and interpret the terms and
provisions of the respective option agreements, which need not be identical as
between Optionees, including, but without limitation, terms covering the payment
of the Option price; and to make all other determinations and take all other
actions deemed necessary or advisable for the proper administration of the Plan.
All such actions and determinations shall be conclusively binding for all
purposes and upon all persons.
4. Common Stock Subject to Options. The aggregate number of shares
of the Company's Common Stock which may be issued upon the exercise of Options
granted under the Plan shall not exceed 500,000, subject to adjustment under the
provisions of Paragraph 7. The shares of Common Stock to be issued upon the
exercise of Options may be authorized but unissued shares, shares issued and
reacquired by the Company or shares bought on the market for the purposes of the
Plan. In the event any Option - shall, for any reason, terminate or expire or be
surrendered without having been exercised in full, the shares subject to such
Option but not purchased thereunder shall again be available for Options to be
granted under the Plan.
5. Participants. Options may be granted under the Plan to any
person who is a key employee of the Company or Affiliate selected by the
Committee for participation in this Plan.
6. Option Agreements. Any Option granted under this Plan shall be
evidenced by an agreement ("Option Agreement"), which shall be approved as to
form and substance by the Committee. Each such Option Agreement shall be
executed by an officer of the Company and the applicable Optionee. All Options
and Option Agreements granted under the provisions of this Plan shall be subject
to the following limitations and conditions:
(a) Option Price. The Option price per share with respect to
each Option shall be the Exercise Price.
(b) Period of Option. The expiration date of each Option shall
be fixed by the Committee at the Date of Grant, subject to subsequent
extension from time to time by the Committee, but in no event shall the
expiration date be fixed on or extended to a date which is later than
ten years from the Date of Grant.
(c) Holding Period. No Common Stock issued pursuant to exercise
of an Option granted pursuant to this Plan may, unless the Committee
determines otherwise, be sold, transferred, assigned or otherwise
disposed of within six months following the Date of Grant of the
Option. However, for purposes of a qualifying
-3-
<PAGE> 4
disposition under Section 422 of the Code, such Common Stock should not
be disposed of within two years following such Date of Grant or one
year following the issuance of such Common Stock.
(d) Shareholder Rights. Neither an Optionee nor his Successor
shall have any of the rights of a shareholder of the Company by reason
of holding an Option, and such shareholder rights will not exist until
the certificates evidencing the shares of Common Stock purchased under
the Option are properly delivered to such Optionee or his Successor.
(e) Exercise of Option. Each Option shall be exercisable from
time to time over a period commencing on the Date of Grant and ending
upon the expiration or termination of the Option; provided, however,
the Committee may, by the provisions of any Option Agreement, postpone
in whole or in part the vesting or exercisability of the Option and
limit the number of shares purchasable thereunder in any period or
periods of time during which the Option is exercisable. Payment of the
Exercise Price for shares of Stock purchased under this Plan shall be
made in full and in cash or by certified or cashier's check made
payable to the Company or a combination thereof. However, the Committee
in its discretion may allow payment for shares of Stock purchased under
any Option or limited part thereof to be made in whole or in part in
Common Stock which has been owned by the Optionee for any period
prescribed by the Committee prior to the exercise. In the event that
Common Stock is utilized in consideration for the purchase upon the
exercise of an Option, then such Common Stock shall be valued at the
Fair Market Value on the date of exercise. Exercise of an Option shall
not be effective until the Company has received written notice of
exercise. Such notice must specify the number of whole shares to be
purchased and be accompanied by payment in full of the aggregate
Exercise Price for the number of shares purchased. The Company shall
not in any case be required to sell, issue, or deliver a fractional
share with respect to any Option.
(f) Nontransferability of Option. No Option shall be
transferable or assignable by an Optionee, otherwise than by will or
the laws of descent and distribution. Each Option shall be exercisable,
during the Optionee's lifetime, only by such Optionee. No Option shall
be pledged or hypothecated in any way and no Option shall be subject to
execution, attachment, or similar process.
(g) Termination of Employment. Except as provided in
subparagraph (h) below, upon an Optionee's Termination of Employment
his Option privileges shall be limited to the shares which were
immediately purchasable by him at the date of such termination, and
such Option privileges shall be exercisable by such Optionee for three
months after the date of such termination, at which time such Option
shall expire. The Committee may, by the terms of the Option Agreement,
provide for a longer period of six months instead of the three months
provided in the preceding sentence for longer term employees. The
granting of an Option to an eligible person does not alter in any way
the Company's existing rights to terminate such person's
-4-
<PAGE> 5
employment at any time for any reason, nor does it confer upon such
person any rights or privileges except as specifically provided for in
the Plan.
(h) Death of Optionee. If an Optionee dies while in the employ
of the Company, such Optionee's Option to purchase the total number of
the shares covered by the applicable Option Agreement shall thereupon
become fully exercisable and shall remain exercisable by the
Optionee's Successor until the close of the business day on or
immediately preceding the first annual anniversary date of the
Optionee's death, at which time such Option shall expire.
(i) Additional Limitations for Incentive Stock Options. Options
to be granted under the Plan are intended to qualify as "incentive
stock options" as defined in Section 422 of the Code. No Options shall
be granted to any Participant who is not eligible to receive incentive
stock options as provided in Section 422 of the Code. No Options shall
be granted to any Participant if, immediately before the grant of an
Option, such Participant owns more than 10% of the total combined
voting power of all classes of stock of the Company or its Affiliates
(as determined in accordance with the stock attribution rules
contained in Section 424(d) of the Code). Provided, the preceding
sentence shall not apply if at the time the Option is granted, the
Option Price is increased to an amount equal to 110 percent of the
Fair Market Value and such Option by its terms is not exercisable
after the expiration of five years from the date such Option is
granted. The aggregate Fair Market Value (determined as of the time
the Option is granted) of the Stock with respect to which Options are
exercisable for the first time by any Participant during any calendar
year (under all incentive stock option plans qualified under Section
422 of the Code sponsored by the Company or any Affiliate) shall not
exceed $100,000.00.
7. Adjustments.
(a) In the event that the outstanding shares of Common Stock of
the Company are hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities
of the Company or of another corporation, by reason of a
recapitalization, reclassification, stock split-up, combination of
shares, or dividend or other distribution payable in capital stock,
appropriate adjustment shall be made by the Committee in the number
and kind of shares for the purchase of which Options may be granted
under the Plan. In addition, the Committee shall make appropriate
adjustment in the number and kind of shares as to which outstanding
Options, or portions thereof then unexercised, shall be exercisable,
to the end that the proportionate interest of the holder of the Option
shall, to the extent practicable, be maintained as before the
occurrence of such event. Such adjustment in outstanding Options shall
be made without change in the total price applicable to the
unexercised portion of the Option but with a corresponding adjustment
in the Option price per share.
-5-
<PAGE> 6
(b) In the event that the Board shall adopt resolutions
recommending the dissolution or liquidation of the Company, any Option
granted under the Plan shall terminate as of a date to be fixed by the
Committee, provided that not less than thirty (30) days' written notice
of the date so fixed shall be given to each Optionee and each such
Optionee shall have the right during such period to exercise his Option
as to all or any part of the shares covered thereby, including shares
as to which such Option would not otherwise be exercisable by reason of
an insufficient lapse of time.
(c) In the event of a Reorganization (as hereinafter defined)
in which the Company is not the surviving or acquiring company, or in
which the Company is or becomes a wholly owned subsidiary of another
company after the effective date of the Reorganization, then
(i) If there is no plan or agreement respecting the
Reorganization ("Reorganization Agreement") or if the
Reorganization Agreement does not specifically provide for the
change, conversion or exchange of the shares under outstanding
and unexercised stock options for securities of another
corporation, then the Committee shall take such action, and the
Options shall terminate, as provided in subparagraph (b) of this
Paragraph 7; or
(ii) If there is a Reorganization Agreement and if the
Reorganization Agreement specifically provides for the change,
conversion, or exchange of the shares under outstanding and
unexercised stock options for securities of another corporation,
then the Committee shall adjust the shares under such
outstanding and unexercised stock options (and shall adjust the
shares remaining under the Plan which are then available to be
optioned under the Plan, if the Reorganization Agreement makes
specific provision therefor) in a manner not inconsistent with
the provisions of the Reorganization Agreement for the
adjustment, change, conversion, or exchange of such stock and
such Options.
(d) The term "Reorganization" as used in subparagraph (c) of
this Paragraph 7 shall mean any statutory merger, statutory
consolidation, sale of all or substantially all of the assets of the
Company, or sale, pursuant to an agreement with the Company, of
securities of the Company pursuant to which the Company is or becomes a
wholly owned subsidiary of another company after the effective date of
the Reorganization. The provisions of Paragraph 7(c) above shall comply
with Section 424(a) of the Code except to the extent the Committee
determines otherwise.
(e) Adjustments and determinations under this Paragraph 7 shall
be made by the Committee, whose decisions shall be final, binding, and
conclusive.
-6-
<PAGE> 7
8. Restrictions on Issuing Shares. The exercise of each Option shall
be subject to the condition that if at any time the Company shall determine in
its discretion that the satisfaction of withholding tax or other withholding
liabilities, or that the listing, registration, or qualification of any shares
otherwise deliverable upon such exercise upon any securities exchange or under
any state or federal law, or that the consent or approval of any regulatory
body, is necessary or desirable as a condition of, or in connection with, such
exercise or the delivery or purchase of shares pursuant thereto, then in any
such event, such exercise shall not be effective unless such withholding,
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Company.
Without limiting the foregoing, the Company will not be obligated to sell any
Shares hereunder unless the Shares are at the time effectively registered or
exempt from registration under the Securities Act of 1933, as amended, and
applicable state securities laws. The Optionee shall make such investment
representations to the Company and shall consent to the imposition of such
legends on the stock certificates as are necessary, in the opinion of the
Company's counsel, to secure to the Company an appropriate exemption from
applicable securities laws.
9. Use of Proceeds. The proceeds received by the Company from the
sale of Common Stock pursuant to the exercise of Options granted under the Plan
shall be added to the Company's general funds and used for general corporate
purposes.
10. Amendment, Suspension, and Termination of Plan.
(a) The Board shall have complete discretionary authority and
power to amend, suspend or terminate the Plan at any time, subject to
the following provisions:
(b) An amendment increasing the number of shares of Common
Stock provided in Paragraph 4 above, may not be made without
shareholder approval.
(c) The Board may not, without the relevant Optionee's
written consent, modify the terms and conditions of an Option
previously granted under the Plan.
(d) No amendment, suspension or termination of the Plan
shall, without the relevant Optionee's written consent, alter,
terminate or impair any right or obligation under any Option previously
granted under the Plan.
(e) Unless previously terminated, the Plan shall terminate
with respect to the issuance of any new Options, and no more Options
may be granted after January 28, 2008. The Plan shall continue in
effect with respect to Options granted before termination of the Plan
until such Options have been settled, terminated, or forfeited.
-7-
<PAGE> 1
EXHIBIT 11. STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 28, 1998 February 28, 1998
------------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
Basic Earnings Per Common Share:
Net Earnings
<S> <C> <C> <C> <C>
Earnings from continuing operations $ 315,000 $ 210,000 $ 949,000 $ 529,000
Earnings from discontinued operations -- -- -- 1,000
---------- ---------- ---------- ----------
Net Earnings $ 315,000 $ 210,000 $ 949,000 $ 530,000
========== ========== ========== ==========
Weighted average number of common
shares outstanding 6,045,000 5,160,000 5,902,000 5,160,000
========== ========== ========== ==========
Net Earnings Per Common Share:
Earnings from continuing operations $ 0.05 $ 0.04 $ 0.16 $ 0.10
Earnings from discontinued operations -- -- -- 0.00
---------- ---------- ---------- ----------
Net Earnings $ 0.05 $ 0.04 $ 0.16 $ 0.10
========== ========== ========== ==========
Diluted Earnings Per Common Share:
Net Earnings
Earnings from continuing operations $ 315,000 $ 210,000 $ 949,000 $ 529,000
Earnings from discontinued operations -- -- -- 1,000
---------- ---------- ---------- ----------
Net Earnings $ 315,000 $ 210,000 $ 949,000 530,000
========== ========== ========== ==========
Weighted average number of common
shares outstanding 6,045,000 5,160,000 5,902,000 5,160,000
Assumed exercise of stock options 182,000 -- 193,000 --
---------- ---------- ---------- ----------
6,227,000 5,160,000 6,095,000 5,160,000
Net Earnings Per Common Share:
Earnings from continuing operations $ 0.05 $ 0.04 $ 0.16 $ 0.10
Earnings from discontinued operations -- -- -- 0.00
---------- ---------- ---------- ----------
Net Earnings $ 0.05 $ 0.04 $ 0.16 $ 0.10
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements and related notes of Team, Inc. and
Subsidiaries for the nine months ended February 28, 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> FEB-28-1998
<CASH> 1,267,000
<SECURITIES> 0
<RECEIVABLES> 9,373,000
<ALLOWANCES> 80,000
<INVENTORY> 6,403,000
<CURRENT-ASSETS> 17,953,000
<PP&E> 18,011,000
<DEPRECIATION> 11,935,000
<TOTAL-ASSETS> 26,013,000
<CURRENT-LIABILITIES> 4,697,000
<BONDS> 6,257,000<F1>
0
0
<COMMON> 1,817,000
<OTHER-SE> 13,242,000
<TOTAL-LIABILITY-AND-EQUITY> 26,013,000
<SALES> 0
<TOTAL-REVENUES> 33,428,000
<CGS> 0
<TOTAL-COSTS> 19,382,000
<OTHER-EXPENSES> 12,016,000
<LOSS-PROVISION> 20,000
<INTEREST-EXPENSE> 347,000
<INCOME-PRETAX> 1,663,000
<INCOME-TAX> 714,000
<INCOME-CONTINUING> 949,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 949,000
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
<FN>
<F1>Includes $1,455,000 for compensation accruals of former employees.
</FN>
</TABLE>
