<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
TEAM, INC.
200 HERMANN DRIVE
ALVIN, TEXAS 77511
(281) 331-6154
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 16, 1998
To the Shareholders of Team, Inc.:
The 1998 Annual Meeting of Shareholders of Team, Inc. (the "Company") will
be held on Friday, October 16, 1998 at 3:00 p.m. Houston time, at the Company's
offices, 200 Hermann Drive, Alvin, Texas 77511 for the following purposes:
1. To elect two persons to serve as Class III Directors for a term of three
years and one person to serve as a Class I Director for the remaining term of
one year on the Company's Board of Directors.
2. To consider and vote on a proposed amendment to the Company's Articles
of Incorporation to increase the number of authorized shares of the Company's
common stock, $0.30 par value per share, from 10,000,000 to 30,000,000 shares.
3. To consider and vote on a proposal to approve the adoption of the 1998
Incentive Stock Option Plan.
4. To consider and vote on a proposal to approve the appointment of
Deloitte & Touche, LLP as the independent certified public accountants to audit
the Company's accounts for the fiscal year ending May 31, 1999.
5. To transact such other business as may properly come before the meeting
and all adjournments thereof.
The Board of Directors has fixed the close of business on August 17, 1998
as the record date for determination of shareholders who are entitled to notice
of and to vote either in person or by proxy at the 1998 Annual Meeting of
Shareholders and any adjournment thereof.
All shareholders are cordially invited to attend the meeting in person.
Even if you plan to attend the meeting, YOU ARE REQUESTED TO SIGN, DATE AND
RETURN THE ACCOMPANYING PROXY AS SOON AS POSSIBLE.
By Order of the Board of Directors
/s/ William A. Ryan
William A. Ryan
Chairman of the Board of Directors
and Chief Executive Officer
September 9, 1998
YOUR VOTE IS IMPORTANT.
PLEASE SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD PROMPTLY.
<PAGE> 3
TEAM, INC.
200 HERMANN DRIVE
ALVIN, TEXAS 77511
(281) 331-6154
PROXY STATEMENT
GENERAL
This Proxy Statement and the accompanying proxy card are furnished in
connection with the solicitation of proxies by the Board of Directors of Team,
Inc., a Texas corporation (the "Company"), to be voted at the 1998 Annual
Meeting of Shareholders (the "1998 Annual Meeting"), and at any adjournment
thereof, to be held at the time and place and for the purposes set forth in the
accompanying Notice. This Proxy Statement and enclosed form of proxy is being
mailed to shareholders beginning on or about September 9, 1998.
The Company will bear the costs of soliciting proxies in the accompanying
form. In addition to the solicitation made hereby, proxies may also be solicited
by telephone, telegram or personal interview by officers and employees of the
Company. The Company will reimburse brokers or other persons holding stock in
their names or in the names of their nominees for their reasonable expenses in
forwarding proxy material to beneficial owners of stock.
All duly executed proxies received prior to the 1998 Annual Meeting will be
voted in accordance with the choices specified thereon, unless revoked as
described below. As to any matter for which no choice has been specified in a
proxy, the shares represented thereby will be voted by the persons named in the
proxy: (1) FOR the election of the two nominees listed herein as Class III
Directors for a term of three years and the nominee listed herein as a Class I
Director for a term of one year; (2) FOR the proposed amendment to the Company's
Articles of Incorporation; (3) FOR the proposal to approve the adoption of the
1998 Incentive Stock Option Plan; (4) FOR the proposal to approve the
appointment of Deloitte & Touche, LLP as independent certified public
accountants of the Company for the fiscal year ending May 31, 1999; and (5) in
the discretion of such person in connection with any other business that may
properly come before the meeting. Shareholders may revoke their proxy at any
time prior to the exercise thereof by written notice to Mr. Ted W. Owen of the
Company at the above address of the Company, by the execution and delivery of a
later dated proxy or by attendance at the meeting and voting their shares in
person. Proxy cards that are not signed or that are not returned are treated as
not voted for any purposes.
VOTING SECURITIES
As of the close of business on August 17, 1998, the record date for
determining shareholders entitled to vote at the 1998 Annual Meeting, the
Company had outstanding and entitled to vote 7,294,952 shares of common stock,
$0.30 par value per share ("Common Stock"). Each share of Common Stock is
entitled to one vote with respect to each matter to be acted upon at the
meeting. The holders of a majority of the total shares of Common Stock of the
Company issued and outstanding as of August 17, 1998, whether present in person
or represented by proxy, will constitute a quorum for the transaction of
business at the meeting. Abstentions, or with respect to the election of
directors withholds, are counted for purposes of determining the presence or
absence of a quorum for the transaction of business while broker non-votes are
not so counted. Additionally, abstentions and/or withholds are counted in
tabulations of the votes cast on proposals presented to shareholders whereas
broker non-votes are not counted for purposes of determining whether a proposal
has been approved.
<PAGE> 4
PROPOSAL ONE -- ELECTION OF DIRECTORS
GENERAL
The Company's Restated Articles of Incorporation and Bylaws provide that
the Company's Board of Directors will consist of not less than six nor more than
nine persons, the exact number to be fixed from time-to-time by the Board of
Directors. The Board of Directors has fixed the number of directors constituting
the Board of Directors at six, divided into three classes with staggered
three-year terms.
The Board of Directors has nominated two Class III Directors to be elected
to serve a three-year term expiring on the date of the Annual Meeting of
Shareholders of the Company to be held in 2001, and to hold office until their
successors are duly elected and qualified. Messrs. George W. Harrison and Sidney
B. Williams have been nominated by the Board of Directors to stand for
reelection as Class III Directors for a three-year term.
In May 1998, the Board of Directors, in accordance with the Company's
Bylaws, appointed Louis A. Waters to the Board of Directors. At the time of Mr.
Waters' appointment, the Board consisted of one Class I Director, two Class II
Directors and two Class III Directors. Therefore, in accordance with the
Company's Bylaws, Mr. Waters was appointed to the position of Class I Director,
the term of which expires on the date of the Annual Meeting of Shareholders of
the Company to be held in 1999. However, pursuant to the Company's Bylaws, the
term of a Director appointed to fill a newly created directorship continues only
until the next election of Directors by the shareholders. Accordingly, the Board
has nominated Mr. Waters to be elected to serve as a Class I Director for the
remaining one-year term expiring on the date of the Annual Meeting of
Shareholders of the Company to be held in 1999, and to hold office until his
successor is duly elected and qualified.
Directors are elected by a plurality of votes cast at the Annual Meeting.
Unless contrary instructions are set forth in the proxies, the persons with full
power of attorney to act as proxies at the 1998 Annual Meeting will vote all
shares represented by such proxies for the election of the nominees named
therein as directors. Should any of the nominees become unable or unwilling to
accept nomination or election, it is intended that the persons acting under the
proxy will vote for the election, in the nominee's stead, of such other persons
as the Board of Directors of the Company may recommend. The management has no
reason to believe that either of the nominees will be unable or unwilling to
stand for election or to serve if elected.
NOMINEES
Set forth below is certain information as of August 17, 1998 concerning the
nominees for election at the 1998 Annual Meeting, including the business
experience of each for at least the past five years:
<TABLE>
<CAPTION>
PRESENT POSITION
WITH THE DIRECTOR
NAME AGE COMPANY SINCE
---- --- ---------------- --------
<S> <C> <C> <C>
Mr. George W. Harrison........................ 71 Director 1995
Mr. Louis A. Waters........................... 60 Director 1998
Mr. Sidney B. Williams........................ 65 Director 1973
</TABLE>
Mr. Harrison is currently a consultant for the Company. From 1987 until his
retirement in 1997, Mr. Harrison served as Senior Vice President of the Company
and was involved in most aspects of the Company including operations,
engineering, manufacturing, marketing and research and development.
Mr. Waters is currently the Chairman of the Board of Tyler Corporation
("Tyler"), a New York Stock Exchange listed company. Tyler's principal business
is providing information management services to local governments. Mr. Waters
was elected to Tyler's Board of Directors in August 1997 and elected Chairman of
the Board in October 1997. In addition, Mr. Waters is one of the founders and
was the first Chairman of the Board of Browning-Ferris Industries, Inc. ("BFI").
He served as Chairman and Chief Executive Officer from 1969 through 1980,
Chairman of BFI's Executive Committee from 1980 through 1988, and Chairman of
the Finance Committee from 1988 to March 1997. Mr. Waters also directed BFI's
international activities, serving
2
<PAGE> 5
as Chairman and Chief Executive Officer of BFI International, Inc. from 1991 to
March 1997, when he retired from full-time duty with BFI. See also "Certain
Relationships and Related Transactions."
Mr. Williams is the sole shareholder of a professional corporation which is
a partner in the law firm of Chamberlain, Hrdlicka, White, Williams & Martin in
Houston, Texas and has been a partner in that firm for more than the past five
years.
DIRECTORS CONTINUING IN OFFICE
Set forth below is certain information concerning the three directors
continuing in office until the expiration of their respective terms, including
the business experience of each for at least the past five years:
<TABLE>
<CAPTION>
EXPIRATION OF
PRESENT POSITION DIRECTOR PRESENT
NAME AGE WITH THE COMPANY SINCE TERM
---- --- ---------------- -------- -------------
<S> <C> <C> <C> <C>
William A. Ryan....... 71 Chairman of the Board of Directors 1987 1999
and Chief Executive Officer
Jack M. Johnson, Jr... 60 Director 1992 2000
E. Theodore Laborde... 60 Director 1991 2000
</TABLE>
Mr. Ryan was elected Chairman of the Board of Directors, President and
Chief Executive Officer of the Company in August of 1995. Previously, Mr. Ryan
was President and Chief Operating Officer of Continental Materials Corporation
in Chicago, Illinois, from 1974 until his retirement in August 1995. Continental
Materials Corporation engages in the business of manufacturing heating and
cooling equipment and producing minerals and mineral products, and its common
stock is listed on the American Stock Exchange.
Mr. Johnson has been Managing General Partner of Wintermann & Company, a
general partnership that owns approximately 25,000 acres of real estate in Texas
which is used in farming, ranching and oil and gas exploration activities, for
more than the past five years. Mr. Johnson is also President of Winco
Agriproducts, an agricultural products company that primarily processes rice for
seed and commercial sale. Mr. Johnson is also a director of Security State Bank
in Anahuac, Texas and a director of Allstar Systems in Houston, Texas.
Mr. Laborde served in various capacities with J & H Marsh & McLennan, Inc.,
an insurance brokerage firm, in New Orleans, Louisiana, for approximately 35
years before retiring in December 1997. From 1982 until his retirement, Mr.
Laborde acted as Managing Director of the New Orleans operation. J & H Marsh &
McLennan, Inc. is a subsidiary of Marsh & McLennan Companies.
Mr. Williams and Mr. Laborde are brothers-in-law.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors held seven regular meetings and three telephone
conference meetings during the fiscal year ended May 31, 1998. No director
attended fewer than 75% of the meetings held by the Board and the Committees on
which he served.
The Board of Directors has an Executive Committee, an Audit Committee and a
Compensation Committee but does not have a Nominating Committee. The Executive
Committee is composed of Messrs. Ryan, Williams and Waters. The Executive
Committee is responsible for assisting with the general management of the
business and affairs of the Company during intervals between meetings of the
Board of Directors. The Executive Committee met 29 times during fiscal 1998.
The Audit Committee is composed of Messrs. Laborde, Harrison and Waters.
The Audit Committee is charged with the duties of recommending the appointment
of the independent certified public accountants; reviewing their fees; ensuring
that proper guidelines are established for the dissemination of financial
information to the Company's shareholders; meeting periodically with the
independent certified public
3
<PAGE> 6
accountants, the Board of Directors and certain officers of the Company and its
subsidiaries to ensure the adequacy of internal controls and reporting;
reviewing consolidated financial statements; and performing any other duties or
functions deemed appropriate by the Board. The Audit Committee met one time
during fiscal 1998.
The Compensation Committee, composed of Messrs. Johnson and Williams
reviews management performance and makes recommendations to the Board of
Directors concerning management compensation and other corporate benefits. The
Compensation Committee met three times during fiscal 1998 regarding specific
employee matters.
COMPENSATION OF DIRECTORS
All non-employee directors currently receive an annual fee of $20,000 of
which one-half ($10,000) is paid in cash on a quarterly basis. The remaining
$10,000 is paid in the form of Common Stock. The stock payments are made July 1
of each year with the number of shares calculated by dividing $10,000 by the
closing price per share on the preceding business day.
In December 1991, the Company adopted the Non-Employee Directors' Stock
Option Plan (the "Non-Employee Director Plan"). In January 1998, the Board of
Directors approved an amendment to the Non-Employee Director Plan to increase
the maximum number of shares which may be offered from 265,000 to 310,000. The
purpose of the Non-Employee Director Plan is to attract and to retain the
services of experienced and knowledgeable independent individuals as directors,
to extend to them the opportunity to acquire a proprietary interest in the
Company so that they will apply their best efforts for the benefit of the
Company, and to provide such individuals with an additional incentive to
continue in their position.
Pursuant to the Non-Employee Director Plan, each non-employee director
receives an automatic grant of options upon such director's appointment,
reappointment, election or reelection to the Board of Directors equal to the
product obtained by multiplying five thousand (5,000) by the number of years, or
any part of any year, that such director is appointed or elected to serve on the
Board of Directors. The exercise price of the options is equal to the fair
market value of the Company's Common Stock on the date of grant, and the options
expire ten years after the date of grant. Options to purchase 5,000 shares vest
on the date of grant and each anniversary thereafter until all of the options
granted are fully vested. During fiscal 1998, Messrs. Laborde and Johnson were
each granted options to purchase 15,000 shares with an exercise price of $4.00
per share, pursuant to their reelection to the Board of Directors at the 1997
Annual Meeting of Shareholders. In addition, Mr. Waters was granted an option to
purchase 5,000 shares with an exercise price of $3.00 per share, pursuant to his
appointment to the Board of Directors in May 1998.
4
<PAGE> 7
CURRENT DIRECTORS AND EXECUTIVE AND OTHER OFFICERS
The following table sets forth information regarding the current directors
and executive and other officers of the Company:
<TABLE>
<CAPTION>
YEAR YEAR
ELECTED ELECTED
AS AS
NAME OF DIRECTOR OR OFFICER AGE DIRECTOR OFFICER POSITION WITH COMPANY
- --------------------------- --- -------- ------- ---------------------
<S> <C> <C> <C> <C>
William A. Ryan(1)........ 71 1987 1995 Chairman of the Board of Directors
and Chief Executive Officer
Kenneth M. Tholan......... 59 -- 1996 President and Chief Operating
Officer
Ted W. Owen............... 46 -- 1998 Vice President, Chief Financial
Officer, Secretary and Treasurer
John P. Kearns............ 42 -- 1996 Senior Vice President
Clark A. Ingram........... 42 -- 1996 Vice President
William H. Nelson......... 32 -- 1996 Controller and Assistant Secretary
Sidney B. Williams(1)(3)... 65 1973 -- Director
George W. Harrison(2)..... 71 1995 1974 Director
E. Theodore Laborde(2).... 60 1991 -- Director
Jack M. Johnson, Jr.(3)... 60 1992 -- Director
Louis A. Waters(1)(2)..... 60 1998 -- Director
</TABLE>
- ---------------
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
Mr. Tholan joined the Company in June 1996 as General Manager of the
Company and shortly thereafter was elected as Vice President. In 1997, he was
named Executive Vice President and Chief Operating Officer and in January 1998
was promoted to President of the Company. Previously, from 1993 to 1996, Mr.
Tholan held the position of Vice President and General Manager for Furmanite
America, Inc. (a Kaneb company) with responsibility for the Southwest Division,
as well as engineering and manufacturing of on-site mechanical services for the
refinery, chemical and other related industries. From 1989 to 1992, Mr. Tholan
served as Vice President of Smith Diamond, a division of Smith International
Inc. He was responsible for the engineering, manufacturing and sales of
synthetic diamond bits and other related products to the oil and gas industry.
Mr. Owen joined the Company in February 1998 in anticipation of the
retirement of Margie E. Rogers, who previously held the offices of Chief
Financial Officer, Secretary and Treasurer. Upon Ms. Rogers' retirement, Mr.
Owen was elected as Vice President, Chief Financial Officer, Secretary and
Treasurer. From 1994 to 1997, Mr. Owen held the position of Business Practices
Officer for Alyeska Pipeline Service Co. From 1992 to 1994, Mr. Owen served as
Vice President and Chief Financial Officer for Welltech, Inc., an oil field
service company.
Mr. Kearns joined the Company in 1980 as a design engineer and assumed the
position of Vice President of Engineering and Manufacturing in 1996. Mr. Kearns
has been involved with the Company's engineering, manufacturing and research and
development functions for more than the last five years.
Mr. Ingram joined the Company in 1988 as Risk and Human Resource Manager
and assumed his position as Vice President of Human Resources in 1996. Mr.
Ingram has been involved with the Company's human resources, insurance and
employee benefits for more than the last five years.
Mr. Nelson joined the Company in 1993 as Assistant Controller and assumed
his position of Assistant Secretary in 1996 and Corporate Controller in 1997.
Prior to joining the Company, Mr. Nelson was employed by the accounting firm of
Coopers & Lybrand, LLP.
5
<PAGE> 8
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who beneficially own more than
ten percent (10%) of a registered class of the Company's equity securities to
file reports of ownership and changes of ownership with the Securities and
Exchange Commission. Officers, directors and greater than 10% beneficial owners
are required to furnish the Company with copies of all Section 16(a) reports
they file.
Based solely on its review of the forms received by the Company, or written
representations from certain reporting persons that no Form 5 reports were
required for those persons, the Company believes that during the year ended May
31, 1998, all filing requirements applicable to the Company's officers,
directors and greater than 10% beneficial owners were satisfied.
EMPLOYMENT AND OTHER AGREEMENTS
Mr. Ryan is a party to an employment and consulting agreement with the
Company in which he is to serve as the Company's Chief Executive Officer until
the earlier of (i) May 31, 2002, (ii) his voluntary resignation or (iii) his
termination with or without cause by the Company. In the event Mr. Ryan resigns
or is terminated without cause by the Company prior to May 31, 2002, he is
obligated under the agreement to serve as a consultant to the Company until May
31, 2002. In addition, Mr. Ryan is entitled to certain payments for a period of
five years after he ceases to serve as Chief Executive Officer, except in the
case of termination for cause. Mr. Ryan has agreed not to compete with the
Company for a period of two years following the receipt of such payments. Also,
Mr. Ryan has agreed not to disclose any confidential information regarding the
Company without the prior written consent of the Company. See also "Deferred
Compensation Plan for Mr. Ryan."
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth compensation information for the fiscal
years ended May 31, 1998, 1997 and 1996 for the Chief Executive Officer and the
other executive officers of the Company earning in excess of $100,000 during the
Company's 1998 fiscal year (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
-------------------- SECURITIES
YEAR ENDING SALARY BONUS UNDERLYING
NAME AND PRINCIPAL POSITION MAY 31 ($) ($) OPTIONS(#)
- --------------------------- ----------- -------- ------- ------------
<S> <C> <C> <C> <C>
William A. Ryan,.............................. 1998 100,000(1) 50,000 50,000
Chairman of the Board of Directors 1997 212,692(1) 50,000 --
and Chief Executive Officer 1996 230,769(1) -- 60,000(2)
Kenneth M. Tholan,............................ 1998 131,077 20,000 40,000
President and Chief 1997 118,808 20,000 15,000
Operating Officer 1996 (3) (3) (3)
</TABLE>
- ---------------
(1) Includes $50,000, $175,000 and $125,000 for 1998, 1997 and 1996,
respectively, deferred at the option of Mr. Ryan. See "Deferred Compensation
Plan for Mr. Ryan."
(2) Includes options to purchase 40,000 shares which were repriced in December
1995 and options to purchase 20,000 shares which were granted to Mr. Ryan in
December 1995.
(3) Mr. Tholan was named an executive officer during fiscal 1997.
6
<PAGE> 9
DEFERRED COMPENSATION PLAN FOR MR. RYAN
Effective January 1, 1996, an agreement was entered into with Mr. Ryan by
which he is permitted, prior to the beginning of each calendar year, to elect to
defer a designated portion of his regular annual salary for income tax purposes.
The deferred salary is contributed by the Company into a trust held and managed
by a designated bank, until distributed to Mr. Ryan in the future. The amount of
such deferred salary in fiscal 1998, 1997 and 1996 is included in the above
Summary Compensation Table. The trust is treated as a grantor trust for federal
income tax purposes. As a result, the agreement provides that the annual income
tax on the trust's taxable income shall be paid by the Company and not charged
to the trust. Therefore, the trust's taxable income for 1997 will be included in
the Company's consolidated federal tax return.
OPTION GRANTS IN FISCAL 1998
The following table sets forth additional information with respect to stock
options granted in fiscal 1998 to the Named Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENTAGE OF ANNUAL RATES OF STOCK
NUMBER OF TOTAL OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO FOR OPTION TERM(4)
UNDERLYING EMPLOYEES IN EXERCISE EXPIRATION ---------------------
NAME OPTIONS FISCAL 1998 PRICE DATE 5% 10%
- ---- ---------- --------------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
William A. Ryan.......... 50,000(1) 14% $2.50 11/30/2005 $63,500 $154,500
Kenneth M. Tholan........ 15,000(2) 4% $2.50 11/30/2005 $19,050 $ 46,350
25,000(3) 7% $3.50 1/29/2008 $55,000 $139,500
</TABLE>
- ---------------
(1) These options were granted on June 26, 1997 at the then fair market price of
the Company's Common Stock. Pursuant to the vesting schedule in Mr. Ryan's
Option Agreement, all options are currently exercisable.
(2) These options were granted on June 26, 1997 at the then fair market price of
the Company's Common Stock. Pursuant to the vesting schedule in Mr. Tholan's
Option Agreement, 10,000 shares are currently exercisable and 5,000 shares
become exercisable June 26, 1999.
(3) These options were granted on January 29, 1998 at the then fair market price
of the Company's Common Stock. Pursuant to the vesting schedule in Mr.
Tholan's Option Agreement, 6,250 shares are currently exercisable and 6,250
shares become exercisable on each January 29 of the years 1999, 2000 and
2001.
(4) Potential realizable value is based on the assumption that the Common Stock
price appreciates at the annual rate shown (compounded annually) from the
date of grant until the end of the option term. The stock prices at the end
of the option term for the options described in footnotes (1) and (2) are
$3.77 and $5.59, assuming 5% and 10% appreciation rates, respectively. The
stock prices at the end of the option term for the option described in
footnote (3) are $5.70 and $9.08, respectively. The amounts of hypothetical
appreciation reflect required calculations at rates set by the Securities
and Exchange Commission and, therefore, are not intended to represent either
historical appreciation or anticipated future appreciation in the price of
Common Stock.
7
<PAGE> 10
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
The following table provides certain information with respect to options
exercised during fiscal 1998 by each of the Named Executive Officers:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED END OF FISCAL 1998 END OF FISCAL 1998(1)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William A. Ryan....... -- N/A 110,000 -- $290,625 --
Kenneth M. Tholan..... -- N/A 27,500 27,500 $ 66,406 $50,157
</TABLE>
- ---------------
(1) The value of unexercised in-the-money options is the difference between (i)
the closing price of the Company's Common Stock on the last trading day of
fiscal 1998 ($4.9375) and (ii) the exercise price of the in-the-money
options, multiplied by the number of underlying shares subject to the
options.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Jack M. Johnson, Jr. -- Chairman
Sidney B. Williams
COMPENSATION COMMITTEE REPORT
Pursuant to rules adopted by the Securities and Exchange Commission, the
Compensation Committee of the Board of Directors (the "Committee"), which is
composed entirely of independent outside directors, has furnished the following
report on executive compensation:
The Committee's major responsibilities include, but are not limited to, the
following:
1. Reviewing the Company's major compensation and benefit practices,
policies and programs with respect to executive officers;
2. Reviewing executive officers' salaries and bonuses; and
3. Administering the Company's stock option plans.
Following review and approval by the Committee, all issues pertaining to
the compensation of, and the grant of options to, the executive officers are
submitted to the full Board of Directors for approval.
COMPENSATION PHILOSOPHY
The Committee's compensation philosophy operates on several different
levels. First, the Committee must ensure that the compensation is competitive in
order to attract and retain highly qualified executives. In order to facilitate
the first objective, the Committee as a rule considers various compensation
surveys and proxy statements for companies in the industry of comparable size
and complexity to the Company. Second, in order to motivate its executives, the
Committee links executive pay levels to the performance of the Company through
the grant of options pursuant to the Company's stock option programs. Third, the
Committee endeavors to reward outstanding individual contributions to the
Company and to set compensation at levels that reflect each executive officer's
individual contribution towards the Company's goals through its bonus and stock
option programs. The Committee endeavors to support the Company's commitment to
providing superior shareholder value. The compensation and related programs are
designed to reward and motivate executives for the accomplishment of the
Company's commitment to its shareholders.
COMPENSATION PROGRAM COMPONENTS
To achieve its compensation goals, the compensation program consists of
four components -- base salary, bonuses, various employee benefits (including
medical and life insurance and 401(k) plan benefits generally available to the
employees of the Company) and the Company's stock option plans. The total
program is
8
<PAGE> 11
structured to deliver a significant percentage of pay through at-risk pay
programs which reward executives if the performance of the Company warrants.
Maximizing shareholder value is a basic principle underlying the Company's pay
programs.
Annually, the Committee seeks to review the base salary of each executive
officer to determine its fairness. During its annual consideration of the base
salaries of the executive officers, the Committee considers the level of
responsibility, experience and performance of each executive officer. The
Committee also takes into account the competitive conditions of the marketplace,
the Company's profitability and the cost of living index. When reviewing
competitive conditions of the marketplace, the Committee considers the Company's
pay levels with those of companies of similar size and complexity. As the
Company believes there is no survey data relating to the Company's service
industries, the Company studies compensation surveys for companies of a similar
size and complexity and various other data and information brought to its
attention, including proxy statements of companies in the Company's service
industry. Based on such information, the Committee endeavors to ensure that the
pay levels fall in the median range of the amounts paid by the comparable
companies. In certain circumstances, bonuses may be awarded to those executive
officers who have made outstanding individual contributions during the current
fiscal year. Subsequent to the end of fiscal 1998, each officer of the Company
received an increase in base salary and a bonus commensurate with levels of
responsibility and individual performance.
Additionally, all executive officers are eligible to receive stock options,
at the Committee's discretion, giving them the right to purchase shares of the
Company's stock at a specified price in the future. By increasing senior
management's equity position in the Company, the interests of the shareholders
and the executives will be more closely aligned. To that end, Mr. Tholan was
granted an option in June 1997 under the Officers' Restricted Stock Option Plan
to purchase 15,000 shares with an exercise price of $2.50 per share. In
addition, under the 1998 Incentive Stock Option Plan (the "1998 Plan"), Mr.
Tholan was granted an option to purchase 25,000 shares, while Messrs. Owen,
Kearns, Ingram and Nelson were each granted an option to purchase 15,000 shares.
All of the options granted under the 1998 Plan have an exercise price of $3.50
per share. See also "Proposal Three -- Approval of the 1998 Incentive Stock
Option Plan."
PERFORMANCE MEASURES
When evaluating annual executive compensation, the Committee considers the
Company's earnings, adjusted for certain unusual or nonrecurring items, return
on net investment and cash flows. These factors are compared to the Company's
prior year's performance, its annual business plan and the performance of other
companies which operate in the same industry segments as the Company. These
performance measures assist the Committee in ensuring that the interests of its
shareholders, as well as its executives, are represented in a fair and equitable
manner. No specific fixed weighting or formula is applied to such performance
measures. Rather, the Committee exercises its judgment in evaluating financial
and non-financial factors and in determining appropriate compensation.
OTHER
The Omnibus Budget Reconciliation Act of 1993 (the "Act") restricts the
ability of a publicly-held corporation to deduct compensation in excess of
$1,000,000 paid to its Chief Executive Officer and the four most highly
compensated officers. During fiscal 1998, the threshold was not met for any of
the executive officers. However, the Committee continually reviews all aspects
of the Act in order to determine future compliance issues regarding same.
This Compensation Committee Report was for the most part prepared by
management at the direction of the Committee, and approved by the Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Williams served on the Committee and Board of Directors during fiscal
1998. Mr. Williams is also the sole shareholder of a professional corporation
which is a partner in the law firm of Chamberlain, Hrdlicka, White, Williams and
Martin in Houston, Texas, which rendered services to the Company during fiscal
1998.
9
<PAGE> 12
Fees to the law firm did not exceed five percent (5%) of that law firm's gross
revenue for its last full fiscal year. In addition, each of the members of the
Committee has been granted options under the Company's Non-Employee Director
Plan.
COMPARISON OF TOTAL SHAREHOLDER RETURN
The following graph compares the Company's cumulative total shareholder
return on its Common Stock for a five-year period (May 31, 1993 to May 31,
1998), with the cumulative total return of the American Stock Exchange Market
Value Index ("ASEMVI"), and a peer group of companies selected by the Company.
The "Peer Group" is described in more detail below. The graph assumes that the
value of the investment in the Company's Common Stock and each index was $100 at
May 31, 1993 and that all dividends were reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURN*
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) TEAM, INC. ASEMVI PEER GROUP
<S> <C> <C> <C>
1993 100.00 100.00 100.00
1994 88.89 100.51 94.27
1995 38.89 112.30 64.96
1996 55.56 155.77 102.24
1997 41.67 158.12 115.98
1998 109.73 189.05 147.50
</TABLE>
- ---------------
Assumes Initial Investment of $100
* Total return assumes reinvestment of dividends
Note: Total returns based on market capitalization
The peer group is composed of five companies which provide industrial
and/or leak repair services. The returns of each company have been weighted
according to their respective market capitalization for purposes of arriving at
a peer group average. The members of the peer group are C.H. Heist Corp.,
Industrial Holdings, Inc., Kaneb Services, Inc., Matrix Service Company and
Versar, Inc.
The foregoing graph is based on historical data and is not necessarily
indicative of future performance.
10
<PAGE> 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock (the only class of voting securities of
the Company) as of August 17, 1998 of (a) each person known by the Company to be
the beneficial owner of more than 5% of the outstanding Common Stock, (b) each
director or nominee for director of the Company, (c) the Named Executive
Officers and (d) all executive and other officers and directors of the Company
as a group. The information shown assumes the exercise by each person (or all
directors and officers as a group) of the stock options owned by such person
that are currently exercisable or exercisable within 60 days of August 17, 1998.
Unless otherwise indicated, the address of each person named below is the
address of the Company at 200 Hermann Drive, Alvin, Texas 77511.
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
NUMBER OF SHARES COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) STOCK
- ------------------------------------ --------------------- -------------
<S> <C> <C>
William A. Ryan............................................. 130,505(2) 1.7%
Sidney B. Williams.......................................... 125,906(3) 1.6%
1200 Smith Street, Suite 1400
Houston, Texas 77002
E. Theodore Laborde......................................... 40,886(4) *
601 Poydras Street, Suite 1850
New Orleans, Louisiana 70130
Jack M. Johnson, Jr......................................... 41,162(5) *
127 N. McCarty
Eagle Lake, Texas 77434
George W. Harrison.......................................... 179,225(6) 2.3%
2119 Sieber Drive
Houston, Texas 77017
Louis A. Waters............................................. 1,207,162(7) 15.5%
520 Post Oak Blvd., Suite 850
Houston, Texas 77027
Kenneth M. Tholan........................................... 27,500(8) *
All directors and executive and other officers as a group
(11 persons).............................................. 1,772,537(9)(10) 22.8%
Armstrong International, Inc................................ 691,000(11) 8.9%
2081 East Ocean Blvd, 4th Floor
Stuart, Florida 34996-3376
Brinson Partners, Inc....................................... 473,500(12) 6.1%
209 South LaSalle Street
Chicago, Illinois 60604-1295
Houston Post Oak Partners, Ltd.............................. 1,200,000 15.5%
520 Post Oak Blvd., Suite 850
Houston, Texas 77027
</TABLE>
- ---------------
* Less than 1% of outstanding Common Stock.
(1) The information as to beneficial ownership of Common Stock has been
furnished, respectively, by the persons and entities listed, except as
indicated below. Each individual or entity has sole power to vote and
dispose of all shares listed opposite his or its name except as indicated
below.
(2) Includes 15,500 shares owned by Joan Ryan, Mr. Ryan's wife, and 110,000
shares which may be acquired pursuant to the exercise of stock options
currently exercisable or exercisable within 60 days of August 17, 1998.
11
<PAGE> 14
(3) Includes 2,685 shares owned by Nancy Williams, Mr. William's wife, and
1,000 shares held as custodian under the Uniform Gift to Minors Act for Mr.
William's nephews. Mr. Williams disclaims any economic interest in these
shares. Also includes 80,000 shares which may be acquired pursuant to the
exercise of stock options currently exercisable or exercisable within 60
days of August 17, 1998.
(4) Includes 1,886 shares owned by Mr. Laborde and his wife, Mary Laborde, as
joint tenants. Also includes 35,000 shares which may be acquired pursuant
to the exercise of stock options currently exercisable or exercisable
within 60 days of August 17, 1998.
(5) Includes 30,000 shares which may be acquired pursuant to the exercise of
stock options currently exercisable or exercisable within 60 days of August
17, 1998.
(6) Includes 15,000 shares which may be acquired pursuant to the exercise of
stock options currently exercisable or exercisable within 60 days of August
17, 1998.
(7) Includes 5,000 shares which may be acquired pursuant to the exercise of
stock options currently exercisable or exercisable within 60 days of August
17, 1998. Also includes 1,200,000 shares owned by Houston Post Oak
Partners, Ltd., a Texas limited partnership of which Mr. Waters is the sole
general partner. See also "Certain Relationships and Related Transactions."
(8) Includes 27,500 shares which may be acquired pursuant to the exercise of
stock options currently exercisable or exercisable within 60 days of August
17, 1998.
(9) Includes 324,000 shares which may be acquired pursuant to the exercise of
stock options currently exercisable or exercisable within 60 days of August
17, 1998.
(10) Includes shares allocated to employees through participation in the
Company's Employee Stock Ownership Plan and the Salary Deferral Plan and
Trust. As of May 31, 1998, 2,908 shares are allocated to officers in the
Salary Deferral Plan and Trust and 783 shares in the Employee Stock
Ownership Plan.
(11) The Company has relied upon information contained in Amendment No. 1 to
Schedule 13D filed with the SEC on August 4, 1997. According to the amended
Schedule 13D, 650,000 shares are owned by Armstrong International, Inc. and
41,000 shares are owned by Merrill H. Armstrong and Barbara I. Armstrong,
both of whom are officers of Armstrong International, Inc.
(12) The Company has relied upon information contained in Amendment No. 7 to
Schedule 13G filed with the SEC on February 11, 1998. According to the
amended Schedule 13G, the shares are owned by Brinson Partners, Inc., a
Delaware corporation. Brinson Partners, Inc. is wholly-owned by Brinson
Holdings, Inc., a Delaware corporation, which is wholly-owned by SBC
Holding (USA), Inc., a Delaware corporation, which is wholly-owned by Swiss
Bank Corporation, a Swiss banking corporation.
The Company does not know of any arrangement that may at a subsequent date
result in a change of control of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Louis A. Waters. In June 1998, the Company entered into a Stock Purchase
Agreement with Houston Post Oak Partners, Ltd., a Texas limited partnership of
which Mr. Waters is the sole general partner ("Post Oak"). Pursuant to the Stock
Purchase Agreement, the Company issued 1,200,000 shares of Common Stock to Post
Oak in exchange for $3,300,000. The shares have not been registered with the
Securities and Exchange Commission but were issued in a private transaction
exempt from registration under the Securities Act of 1933, pursuant to Section
4(2) thereof as a "transaction by an issuer not involving any public offering."
The purchase price of $2.75 per share represents a discount of approximately
eight percent (8%) from the market price of $3.00 per share at the time of the
transaction. The Company's independent investment bankers have delivered a
written opinion to the Company confirming that the purchase price was fair to
the Company after taking into account, among other things, the large number of
shares and the lack of immediate marketability for the shares.
12
<PAGE> 15
PROPOSAL TWO -- APPROVAL AND ADOPTION OF AMENDMENT
TO THE COMPANY'S ARTICLES OF INCORPORATION
At its meeting held on July 30, 1998, the Board of Directors of the Company
approved resolutions declaring it advisable to amend Article IV of the Company's
Second Restated Articles of Incorporation (the "Articles") to increase the
number of authorized shares of Company Common Stock from 10,000,000 shares to
30,000,000 shares, and directing that the proposed amendment be submitted to
shareholders for their approval at the 1998 Annual Meeting. In order to effect
the proposed increase in the authorized shares of Common Stock, the Board of
Directors has proposed that the first sentence of Article IV of the Articles be
amended to read as follows:
"The aggregate number of shares which the Corporation shall have the
authority to issue is Thirty Million Five Hundred Thousand (30,500,000)
shares, of which Thirty Million (30,000,000) shares shall be common shares
of Thirty Cents ($0.30) par value each and Five Hundred Thousand (500,000)
shares shall be preferred shares of One Hundred Dollars ($100.00) par value
each, issuable in series."
Periodically, the Board of Directors is presented with opportunities to
make strategic acquisitions on behalf of the Company. The proposed amendment
would provide the Board flexibility in financing such acquisitions by issuing
additional equity, either in the place of or in conjunction with debt. The
Common Stock could also be issued in connection with public offerings, private
placements or other financing transactions, as well as stock dividends, employee
stock plans and for other general corporate purposes.
If the proposed amendment is approved, issuances of Common Stock could be
made without further action of the shareholders and without first offering such
shares to the shareholders for subscription, unless such action were required by
applicable law or the rules of the American Stock Exchange or any other stock
exchange on which the Company's securities may then be listed or traded. The
rules of the American Stock Exchange (where the Common Stock is currently
listed) generally require shareholder approval for issuances equal to twenty
percent (20%) or more of the outstanding shares. Issuances of Common Stock could
have the effect of diluting shareholders' equity, earnings per share and voting
rights.
The proposed amendment to the Company's Articles of Incorporation to
authorize the increase in the number of authorized shares of Common Stock will
be submitted to shareholders for their approval at the 1998 Annual Meeting.
Approval and adoption of the proposed amendment to the Company's Articles of
Incorporation requires the vote of the holders of at least two-thirds of the
outstanding shares of Common Stock entitled to vote at the 1998 Annual Meeting.
If adopted by the shareholders, the amendment will become effective upon filing
as required by the Texas Business Corporation Act.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE PROPOSED
AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION AS DESCRIBED ABOVE.
PROPOSAL THREE -- APPROVAL OF THE 1998 INCENTIVE STOCK OPTION PLAN
The Board of Directors has determined that it is in the best interest of
the Company and its shareholders to enable its officers and other key employees,
upon whose judgment and initiative the Company is largely dependent for its
continued success, to further develop their proprietary interest in the Company
through ownership of options to acquire Common Stock. Accordingly, in January
1998, the Board of Directors of the Company adopted the 1998 Incentive Stock
Option Plan (the "1998 Plan"). The aggregate number of shares which may be
offered under the 1998 Plan is 500,000.
Although shareholder approval is not required pursuant to the rules of the
American Stock Exchange or Section 16 of the Securities Exchange Act of 1934
(the "Exchange Act"), Section 422(b)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"), requires shareholder approval in order to obtain favorable
tax treatment to the employee-optionee as an incentive stock option. Therefore,
the adoption of the 1998 Plan was made expressly contingent on shareholder
approval. A summary of the material features of the 1998 Plan is set forth
below.
13
<PAGE> 16
ADMINISTRATION
The Compensation Committee of the Board of Directors (the "Committee") acts
as manager for and otherwise administers the 1998 Plan. Committee members are
elected by a majority vote of the Board for an indefinite term and may be
removed only by a majority vote of the Board. All members of the Committee shall
qualify as both "non-employee directors" as defined in Rule 16b-3(b)(3)
promulgated under the Exchange Act and "outside directors" within the meaning of
Section 162(m) of the Code. The Committee has the general authority to determine
which key employees receive options under the 1998 Plan, the date of grant, the
date on which the options become exercisable, the exercise price, the number of
shares of Common Stock to be offered to each optionee, the duration of the
options and other terms and conditions applicable to each option subject to the
terms of the 1998 Plan.
ELIGIBILITY
Officers and other key employees of the Company or any of its (at least 50
percent owned) subsidiaries are eligible to receive options under the 1998 Plan;
however, the Committee, in its discretion, determines the specific individuals
who will be granted options under the 1998 Plan. As of August 17, 1998, the
Company has five officers and approximately fifty other key employees
participating in the 1998 plan, representing options to purchase an aggregate of
262,875 shares of Common Stock.
The number of shares which may be purchased pursuant to each option is
established by the Committee and set forth in the related stock option
agreements. There is no established maximum or minimum limitation on the number
of shares of Common Stock to be allocated to any particular group or subgroup of
officers or other key employees pursuant to the 1998 Plan. No monetary
consideration is paid by any person for the issuance of the options.
SHARES SUBJECT TO OPTION
The maximum number of shares of Common Stock that may be offered under the
1998 Plan is 500,000 shares. Adjustments will be made under the 1998 Plan in the
number of shares of Common Stock which are issuable upon exercise of options and
in the price per share thereof to protect the holders of options against
dilution in the event of a stock split, recapitalization, combination of shares
or like event resulting in a change in the number of shares outstanding.
OPTION PRICE
The exercise price for the option shares is determined by the Committee.
The exercise price will generally be the then current market price. Shares
purchased pursuant to the options must be paid for in cash or cashier's check,
presented at the principal offices of the Company following the date the
optionee gives notice to the Company of his or her desire to exercise the
option. The Committee may in its discretion, accept payment of the option price
in whole or in part in shares of Common Stock of the Company already owned by
the participant. The Committee may impose reasonable conditions on the delivery
of stock certificates to the optionee upon exercise of an option including the
payment by the optionee of any withholding or other tax liability resulting from
such exercise.
DURATION OF OPTIONS
Options may be exercisable during any specified period of time from the
date such option is granted, but in no event shall the exercise period of an
option extend beyond a date which is ten years from the date of grant. No option
may be granted under the 1998 Plan after January 28, 2008.
TRANSFERABILITY
Options granted under the 1998 Plan will be transferable only by will or
under the laws of descent and distribution.
14
<PAGE> 17
EXERCISE OF OPTIONS
Except as otherwise provided herein, an option is exercisable by the
optionee only while the individual continues the employment relationship with
the Company. In the event of the death of a holder of an option granted under
the 1998 Plan before the date of expiration of such option and before
termination of employment with the Company, such option will be terminated on
the earlier of such date of expiration or twelve (12) months following the date
of death. If an optionee's employment is terminated for reasons other than
death, his then outstanding vested options shall be exercisable for a period
ending on the earlier of the expiration date of such options or three months
(six months for certain longer term employees) following termination of
employment. However, if exercised later than three months after termination,
other than in cases of death or disability, the option will no longer qualify as
an incentive stock option under the tax law.
TERMINATION AND AMENDMENTS
The 1998 Plan will terminate on January 28, 2008, unless terminated earlier
by appropriate action of the Board of Directors. Termination of the 1998 Plan
will not alter or impair any of the rights or obligations of any option which
has been granted under the 1998 Plan prior to the effective date of termination
without the express consent of the optionee.
The Board of Directors has the power to amend the 1998 Plan to cause the
options granted thereunder to conform to applicable law or in any other respect
as the Board determines to be in the best interests of the Company. However, any
such amendment may not, without the approval of the Company's shareholders,
increase the aggregate number of shares of Common Stock subject to the 1998 Plan
(except for increases due to certain adjustments). In addition, any such
amendment may not, without the approval of the Company's shareholders, change
the class of employees eligible to receive options or awards under the 1998 Plan
in order for the 1998 Plan to continue to comply with Rule 16b-3 or Sections
162(m), 422 and 423 of the Code. Any amendment or termination of the 1998 Plan
may not alter or impair any of the rights or obligations which may have been
granted to or been incurred by any optionee under the 1998 Plan prior to
amendment or termination, unless such action is expressly consented to by the
optionee whose rights are affected.
CERTAIN FEDERAL TAX CONSEQUENCES
The following is a brief summary of the principal federal income tax
consequences under current federal income tax laws relating to options granted
under the 1998 Plan. This summary is not intended to be exhaustive and, among
other things, does not describe state, local or foreign income tax consequences
or federal employment tax consequences.
The grant of options under the 1998 Plan will not result in federal income
tax consequences to either the Company or the optionees. At the time the options
are exercised, the optionee will recognize ordinary income in an amount equal to
the excess, if any, of the fair market value of the stock on the date of
exercise over the option exercise price. Any such income is subject to ordinary
income tax rates. Further, the Company is required to pay employment taxes and
deduct appropriate amounts from the optionee's compensation to pay withholding
taxes to the Internal Revenue Service incident to such recognition of ordinary
income. The Company will withhold such taxes from the optionee's compensation
upon the exercise of an option and the optionee will be obligated under his
stock option agreement to pay an appropriate amount to the Company, if
necessary, to cover appropriate employment and withholding taxes. The Company
ordinarily will be entitled to a business expense deduction at the same time in
an amount equal to the amount of income realized by the optionee.
INCENTIVE STOCK OPTIONS ("ISO")
The options granted under the 1998 Plan will qualify as incentive stock
options ("ISOs"). An employee receiving an ISO will not be in receipt of taxable
income upon the grant of the ISO or upon its timely exercise. Exercise of an ISO
will be timely if made during its term and if the optionee remains an employee
of the Company or its subsidiaries at all times during the period beginning on
the date of the grant of the ISO and ending on the date three months before the
date of exercise (or one year before the date of exercise in the case
15
<PAGE> 18
of a disabled optionee). Exercise of an ISO will also be timely if made at any
time (provided it is exercisable by its terms) by the legal representative of an
optionee who dies (i) while in the employ of the Company or its subsidiaries or
(ii) within three months after termination of employment. The 1998 Plan,
however, limits the right of the legal representative of any optionee to
exercise an option to the one-year period following the death of such optionee,
provided such optionee has died prior to termination of employment. Upon
ultimate sale of the stock received upon such exercise, except as noted below,
the optionee will recognize capital gain or loss (if the stock is a capital
asset of the optionee) equal to the excess of the amount realized upon such sale
over the option exercise price. The Company, under these circumstances, will not
be entitled to any federal income tax deduction in connection with either the
grant or exercise of the ISO or the sale of such stock by the optionee.
The amount by which the fair market value of the stock on the exercise date
of an ISO exceeds the option exercise price will constitute an item of tax
preference to the employee-optionee for purposes of the "alternative minimum
tax" set forth in the Code.
If, however, the stock acquired pursuant to such exercise of an ISO is
disposed of by the optionee prior to the expiration of two years from the date
of grant of the option or one year from the date that such stock is transferred
to the optionee upon exercise (a "disqualifying disposition"), any gain realized
by the optionee generally will be taxable at the time of such disqualifying
disposition as follows: (i) as ordinary compensation income to the extent of the
excess over the option exercise price of the lesser of the fair market value of
the stock on the date the ISO is exercised or the amount realized on such
disqualifying disposition and (ii) if the stock is a capital asset of the
optionee, as capital gain to the extent of any excess of the amount realized on
such disqualifying disposition over the fair market value of the stock on the
date that governs the determination of his or her ordinary compensation income.
In such case, the Company may claim a federal income tax deduction at the time
of such disqualifying disposition for the amount taxable to the optionee as
ordinary compensation income provided the Company satisfies certain tax
information reporting and withholding requirements.
VOTE REQUIRED FOR APPROVAL
The 1998 Plan will be submitted to shareholders for their approval at the
1998 Annual Meeting. The affirmative vote of the holders of at least a majority
of the outstanding shares represented and voted at the meeting is required for
the approval of the 1998 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE 1998
PLAN AS DESCRIBED ABOVE.
PROPOSAL FOUR -- APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Company's Audit Committee has recommended and the Board of Directors
has approved and now recommends the appointment of Deloitte & Touche, LLP as
independent certified public accountants to audit the Company's accounts for the
fiscal year ending May 31, 1999. The firm has audited the Company's accounts
since 1974. Approval of the appointment will require the affirmative vote of a
majority of the shares represented and voted at the meeting.
A representative of Deloitte & Touche, LLP will attend the 1998 Annual
Meeting with the opportunity to make a statement if such representative desires
to do so and to respond to appropriate questions presented at the meeting.
16
<PAGE> 19
OTHER BUSINESS
Management does not intend to bring any business before the meeting other
than the matters referred to in the accompanying notice and at this date has not
been informed of any matters that may be presented at the meeting by others. If,
however, any other matters properly come before the meeting, it is intended that
the persons named in the accompanying proxy will vote, pursuant to the proxy, in
accordance with their best judgment on such matters.
SHAREHOLDER PROPOSALS
Any proposal by a shareholder to be presented at the Company's Annual
Meeting of Shareholders in 1999 must be received by the Company no later than
May 18, 1999 in order to be eligible for inclusion in the Company's Proxy
Statement and form of proxy used in connection with such meeting.
By Order of the Board of Directors
/s/ William A. Ryan
William A. Ryan
Chairman of the Board of Directors
and Chief Executive Officer
September 9, 1998
17
<PAGE> 20
THIS MAP IS PROVIDED FOR THE CONVENIENCE OF SHAREHOLDERS ATTENDING THE 1998
ANNUAL MEETING. COMPLIMENTARY PARKING WILL BE PROVIDED. IN CASE OF ANY
DIFFICULTY, PLEASE TELEPHONE THE COMPANY AT (281) 331-6154.
TEAM, INC.
ANNUAL MEETING
(200 HERMANN DRIVE)
LOGO
<PAGE> 21
- --------------------------------------------------------------------------------
PROXY TEAM, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Kenneth M. Tholan and Ted W. Owen,
and each of them, as proxies, each with the power to appoint his
substitute, and authorizes them to represent and vote, as designated
below and on the reverse side, all of the shares of voting stock of
Team, Inc. held of record by the undersigned on August 17, 1998, at
the Annual Meeting of Shareholders to be held at the Company's
offices, 200 Hermann Drive, Alvin, Texas 77511, at 3:00 p.m. (local
time) on October 16, 1998, or any adjournment(s) thereof.
The Board of Directors recommends a vote "FOR ALL NOMINEES" in Item
1 and "FOR" Items 2, 3, and 4.
1. Election of Directors of the Company
<TABLE>
<S> <C>
[ ] FOR all nominees listed below (except as marked [ ] WITHHOLD AUTHORITY to vote for all nominees listed
to the contrary below). below.
</TABLE>
Nominees: Sidney B. Williams, George W. Harrison, Louis A. Waters
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE(S), WRITE THE NAME OF THE NOMINEE(S) IN THE SPACE(S) PROVIDED
BELOW:
----------------------------------------------------------------------
2. Approval of the Amendment to the Articles of Incorporation of the
Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the 1998 Incentive Stock Option Plan of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Ratification of the appointment of Deloitte & Touche as independent
public accountants of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE)
- --------------------------------------------------------------------------------
<PAGE> 22
- --------------------------------------------------------------------------------
5. In their discretion, the proxies are authorized to vote upon any
other matter that properly may come before the meeting or any
adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, AND 4.
Dated: , 1998
Signature
Signature if held jointly
Please date, sign exactly as
your name appears hereon and
mail this proxy card in the
enclosed envelope. No postage
is required. Where there is
more than one owner, each
should sign. When signing as an
attorney, administrator,
executor, guardian or trustee,
please add your title as such.
If executed by a corporation,
this proxy should be signed by
a duly authorized officer.
[ ] PLEASE CHECK THIS BOX IF YOU PLAN ON ATTENDING THE ANNUAL MEETING.
- --------------------------------------------------------------------------------
