<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 NOVEMBER 30, 1998
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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 0-9950
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TEAM, INC.
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(Exact name of registrant as specified in its charter)
Texas 74-1765729
- ------------------------------------------ -----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
200 Hermann Drive, Alvin, Texas 77511
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (281) 331-6154
---------------
Indicate by checkmark 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
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On January 11, 1999, there were 7,573,352 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 Condensed Balance Sheets -- 1
November 30, 1998 (Unaudited) and May 31, 1998
Consolidated Condensed Statements of Operations (Unaudited) -- 2
Three Months Ended
November 30, 1998 and 1997
Six Months Ended
November 30, 1998 and 1997
Consolidated Condensed Statements of Cash Flows (Unaudited)-- 3
Six Months Ended
November 30, 1998 and 1997
Notes to (Unaudited) Consolidated Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis 7
of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 30, MAY 31,
ASSETS 1998 1998
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<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,030,000 $ 1,355,000
Accounts receivable, net of allowance for doubtful
accounts of $237,000 and $247,000 10,062,000 9,564,000
Materials and supplies 8,672,000 6,801,000
Prepaid expenses and other current assets 908,000 862,000
------------- -------------
Total Current Assets 20,672,000 18,582,000
Property, Plant and Equipment:
Land and buildings 9,808,000 6,735,000
Machinery and equipment 15,528,000 11,746,000
------------- -------------
25,336,000 18,481,000
Less accumulated depreciation and amortization 12,590,000 11,833,000
------------- -------------
12,746,000 6,648,000
Goodwill 3,580,000 0
Other Assets 1,596,000 1,850,000
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Total Assets $ 38,594,000 $ 27,080,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 425,000 $ 286,000
Accounts payable 1,779,000 1,416,000
Other accrued liabilities 4,438,000 3,483,000
Current income taxes payable 190,000 348,000
------------- -------------
Total Current Liabilities 6,832,000 5,533,000
Long-term Debt and Other Obligations 11,590,000 5,966,000
Stockholders' Equity:
Preferred stock, cumulative, par value $100 per share,
500,000 shares authorized, none issued 0 0
Common stock, par value $.30 per share, 30,000,000 shares
authorized, 7,550,052 and 6,093,442 shares issued at
November 30, 1998 and May 31, 1998, respectively 2,265,000 1,828,000
Additional paid-in capital 30,852,000 27,098,000
Accumulated deficit (12,848,000) (13,248,000)
Treasury stock at cost, 9,700 shares (97,000) (97,000)
------------- -------------
Total Stockholders' Equity 20,172,000 15,581,000
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Total Liabilities and Stockholders' Equity $ 38,594,000 $ 27,080,000
============= =============
</TABLE>
See notes to unaudited consolidated condensed financial statements.
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<PAGE> 4
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
----------------------------- -----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues $ 13,892,000 $ 11,717,000 $ 25,260,000 $ 21,946,000
Operating expenses 8,142,000 6,587,000 14,634,000 12,639,000
------------- ------------- ------------- -------------
Gross Margin 5,750,000 5,130,000 10,626,000 9,307,000
Selling, general and administrative expenses 5,302,000 4,215,000 9,543,000 7,998,000
Interest 210,000 104,000 305,000 235,000
------------- ------------- ------------- -------------
Income before income taxes 238,000 811,000 778,000 1,074,000
Provision for income taxes 131,000 283,000 379,000 439,000
------------- ------------- ------------- -------------
Net income $ 107,000 $ 528,000 $ 399,000 $ 635,000
============= ============= ============= =============
Net income per common share:
Basic $ 0.01 $ 0.09 $ 0.05 $ 0.11
============= ============= ============= =============
Diluted $ 0.01 $ 0.09 $ 0.05 $ 0.11
============= ============= ============= =============
Weighted average number of shares outstanding:
Basic 7,509,000 5,972,000 7,350,000 5,833,000
============= ============= ============= =============
Diluted 7,680,000 6,178,000 7,598,000 5,996,000
============= ============= ============= =============
</TABLE>
See notes to unaudited consolidated condensed financial statements.
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<PAGE> 5
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30,
--------------------------------
1998 1997
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<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 399,000 $ 635,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,040,000 721,000
Gain on sale of assets (14,000) 0
Non-current deferred income taxes 0 349,000
Change in assets and liabilities, net of effects from purchase
of Climax Portable Machine Tools, Inc.:
(Increase) decrease:
Accounts receivable 466,000 (1,780,000)
Materials and supplies 253,000 (7,000)
Prepaid expenses and other current assets 51,000 (78,000)
Increase (decrease):
Accounts payable 172,000 357,000
Other accrued liabilities 166,000 22,000
Income taxes payable (158,000) (75,000)
-------------- --------------
Net cash provided by operating activities 2,375,000 144,000
Cash Flows From Investing Activities:
Capital expenditures (1,790,000) (541,000)
Cash received for disposal of property and equipment 74,000 5,000
Increase in other assets (374,000) (122,000)
Acquisition of Climax, net of cash and equivalents acquired (6,746,000) 0
Payments of Climax notes payable at acquisition date (2,893,000) 0
-------------- --------------
Net cash used in investing activities (11,729,000) (658,000)
Cash Flows From Financing Activities:
Payments under debt agreements and capital lease obligations (5,070,000) (2,327,000)
Proceeds from issuance of long-term debt 10,708,000 0
Issuance of common stock 3,391,000 2,101,000
-------------- --------------
Net cash provided by (used in) financing activities 9,029,000 (226,000)
-------------- --------------
Net increase (decrease) in cash and cash equivalents (325,000) (740,000)
Cash and cash equivalents at beginning of year 1,355,000 1,672,000
-------------- --------------
Cash and cash equivalents at end of period $ 1,030,000 $ 932,000
============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 235,000 $ 268,000
============== ==============
Income taxes paid $ 731,000 $ 167,000
============== ==============
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In connection with the acquisition of Climax Portable Machine Tools, Inc., the
Company issued 200,000 shares of its common stock with an assigned value of
$4.00 per share. During the six months ended November 30, 1998, the Company
received a $35,000 note receivable (in addition to $12,000 cash) in
connection with the sale of land
See notes to unaudited consolidated condensed financial statements.
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<PAGE> 6
TEAM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED 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 consolidated condensed balance sheet at May 31, 1998 is
derived from the May 31, 1998 audited consolidated financial statements.
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,
1998.
2. Dividends
No dividends were paid during the first six months of fiscal 1999
or 1998. 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. Acquisition
Effective August 31, 1998 (the "Effective Date"), the Company
acquired all of the outstanding capital stock of Climax Portable Machine
Tools, Inc., an Oregon corporation ("Climax"), in exchange for cash in
the amount of $6.4 million and 200,000 newly-issued shares of the
Company's common stock, $0.30 par value per share (the "Common Stock").
Additionally, at the acquisition date, the Company refinanced the
majority of Climax's notes payable in the amount of $2.9 million.
Pursuant to the purchase agreement and based on the approximate market
value of the Common Stock, a value of $4.00 per share was assigned to the
Common Stock issued to the former shareholders of Climax. The Company
also entered into employment agreements with three of the former
shareholders, pursuant to which such persons were granted options to
purchase up to an aggregate of 50,000 shares of Common Stock at an
exercise price of $4.125 per share.
The acquisition was accounted for using the purchase method of
accounting, and accordingly, the consolidated financial statements
subsequent to the Effective Date reflect the purchase price, including
transaction costs. As the acquisition was effective August 31, 1998, the
consolidated results of operations for the Company for the three months
ended November 30, 1998 include the results for Climax for the period
from September 1, 1998 to November 30, 1998. The purchase price was
allocated to the assets and liabilities of Climax based on their
estimated fair values. Based on preliminary purchase accounting, the
goodwill associated with the Climax acquisition approximated $3.6
million, which is being amortized on a straight-line basis over forty
years.
In order to finance the acquisition of the Climax shares, future
acquisitions, and operations the Company closed a credit facility with
NationsBank, N.A. of Houston on August 26, 1998 in the amount of
$24,000,000. See Note 5.
Climax designs and manufactures portable, metal cutting machine
tools for on-site maintenance and repair purposes.
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<PAGE> 7
The unaudited pro forma consolidated results of operations of the
Company are shown below as if the acquisition had occurred at the
beginning of the fiscal periods indicated. These results are not
necessarily indicative of the results which would actually have occurred
if the purchase had taken place at the beginning of the periods, nor are
they necessarily indicative of future results.
<TABLE>
<CAPTION>
Six Months Ended
November 30,
-------------------------------
1998 1997
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<S> <C> <C>
Net sales $ 27,591,000 $ 27,543,000
Net income $ 397,000 $ 719,000
Earnings per share:
Basic $ 0.05 $ 0.12
Diluted $ 0.05 $ 0.12
</TABLE>
4. Long-Term Debt and Other Obligations
Long-term debt and other obligations consist of:
<TABLE>
<CAPTION>
November 30, May 31,
1998 1998
---------------------------
<S> <C> <C>
Revolving credit $ 3,520,000 $ 2,500,000
Term notes 6,369,000 1,693,000
Capital lease obligations 284,000 340,000
Compensation agreements 1,343,000 1,418,000
Other 499,000 301,000
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12,015,000 6,252,000
Less current portion 425,000 286,000
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Total $ 11,590,000 $ 5,966,000
============ ============
</TABLE>
Effective August 26, 1998, the Company entered into a new credit
facility with a new primary lender in the amount of $24,000,000. This new
facility provides for (i) a $12,500,000 revolving loan, (ii) $9,500,000
in term loans for business acquisitions and (iii) a $2,000,000 mortgage
loan to refinance existing real estate indebtedness. Amounts borrowed
under the revolving credit loan are due August 28, 2001. Amounts borrowed
against the term loans are due August 8, 2003. Amounts outstanding under
this facility bear interest at a marginal rate over the LIBOR rate or
prime rate, depending upon the amount of funded debt to cash flow. The
effective rate on outstanding borrowings under the new agreement is
approximately 7%. In October 1998, the Company finalized the mortgage loan
and borrowed $1.8 million to refinance the existing real estate.
Additionally, in October 1998, the Company entered into an interest rate
swap transaction on the $4.5 million term loan, exchanging a floating
LIBOR rate of 5.3% at the time of the swap for a fixed LIBOR rate of 5.19%
for a period of three years. In December 1998, the Company executed
interest rate swap transactions for two years with respect to the $1.8
million mortgage loan and for $2 million of amounts outstanding under the
revolver. At the time of the December swaps, the floating LIBOR was 5.25%.
The fixed swap rates received in exchange are at 5.13%. At November 30,
1998, $3,520,000 in revolving loans and $6,369,000 in term loans
(including the mortgage loan) were outstanding under the facility. A
previously existing $10,000,000 revolving credit agreement that was due
December 31, 1999, and bore interest at a rate not to exceed the bank's
prime rate plus 0.5 percent, was terminated.
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<PAGE> 8
Loans under the Company's bank credit facility are secured by
substantially all of the assets of the Company. The terms of the
agreement require the maintenance of certain financial ratios and limit
investments, liens, leases and indebtedness, among other things. At
November 30, 1998, the Company was in compliance with all credit facility
covenants.
5. Earnings Per Share
The following table is a reconciliation of the numerators and
denominators of the basic and diluted earnings per share computations:
<TABLE>
<CAPTION>
Three months ended November 30, 1998 Three months ended November 30, 1997
------------------------------------- ---------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net income $ 107,000 7,509,000 $ 0.01 $ 528,000 5,972,000 $ 0.09
Effect of Dilutive Securities:
Options -- 171,000 -- 206,000
----------- --------- ----------- ---------
Diluted EPS:
Net income $ 107,000 7,680,000 $ 0.01 $ 528,000 6,178,000 $ 0.09
=========== ========= =========== =========
Six months ended November 30, 1998 Six months ended November 30, 1997
------------------------------------- ---------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ------------ ------------- -----------
Basic EPS:
Net income $ 399,000 7,350,000 $ 0.05 $ 635,000 5,833,000 $ 0.11
Effect of Dilutive Securities:
Options -- 248,000 -- 163,000
----------- --------- ----------- ---------
Diluted EPS:
Net income $ 399,000 7,598,000 $ 0.05 $ 635,000 5,996,000 $ 0.11
=========== ========= =========== =========
</TABLE>
6. Subsequent Events
On January 8, 1999, the Company reduced headquarters support staff
by approximately 20% (19 individuals). A one-time charge of $425,000 will
be made in the third quarter ending February 28, 1999, to provide for
severance and related costs associated with the staffing reduction.
Additionally, a one-time charge of $816,000 will be made in the third
quarter to fully provide for the future payments due to two former
officers under deferred compensation agreements that extend beyond the
period in which services are expected to be rendered. Payments pursuant to
that charge will be made through 2004.
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<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED NOVEMBER 30, 1998 COMPARED
TO THREE MONTHS ENDED NOVEMBER 30, 1997
Revenues for the quarter ended November 30, 1998 were $13.9 million compared to
$11.7 million for the corresponding period of the preceding year. The $2.2
million increase is primarily attributable to the inclusion of Climax Portable
Machine Tools, Inc in Team's operating results for the 1998 period. Climax did
not contribute to pre-tax income during the quarter, however, since profits on
$300 thousand of inter-company sales from Climax to Team were eliminated in
consolidation and because of less than expected third-party sales in the first
three months since acquisition.
Income before income taxes was $238 thousand for the 1998 quarter, a decrease of
$573 thousand from the $811 thousand of pre-tax income reported in the same
quarter of 1997. The decline in profitability for the quarter was directly
attributable to increased operating and general and administrative expenses when
compared to the same period of 1997, as well as $170 thousand of cost associated
with international activities primarily related to timing and startup costs.
Additionally, there was an increase in interest expense of $106 thousand
resulting from the additional debt incurred in connection with the Climax
acquisition. The Company has taken steps to reduce future costs through a
staffing reduction implemented in January 1999 as described in Note 6 to the
financial statements included in Item 1.
SIX MONTHS ENDED NOVEMBER 30, 1998 COMPARED
TO SIX MONTHS ENDED NOVEMBER 30, 1997
For the six months ended November 30, 1998, income before income taxes was $778
thousand or $296 less than the same period of 1997. The decline in pre tax
income is a result of the factors occurring in the second quarter, as discussed
above, which were somewhat mitigated by the strength of the operating results
of the first three months of the current fiscal year, when compared to the same
period of 1997. A summary of the six-month comparison is as follows:
Revenues--1998 revenues of $25.3 million were 15% greater than the $21.9
million reported in 1997. The increase is attributable to the Climax revenues
of $2.2 million included in the second quarter of 1998 as well as an increase
of first quarter industrial service revenues of $1.14 million over the same
period of 1997.
Gross Margins--For the six months ended November 30, 1998, the gross operating
margin was 42.1% of sales, which is consistent with the 42.4% achieved in the
same period of 1997. However, second quarter 1998 margins for Team's industrial
service group were 41.3% compared to 42.9% in the first quarter, reflecting the
reduced second quarter profitability discussed above. Operating margins from
Climax are consistent with Team's year to date results.
Selling, General and Administrative Expenses--For the six months ended November
30, 1998, Selling, General and Administrative expenses were 37.8% of revenues,
compared to 36.4% for the same period of 1997. This ratio is impacted by a
disproportionately high administrative cost (44% of revenues) of Climax in
the second quarter as a result of lower than expected sales.
LIQUIDITY AND CAPITAL RESOURCES
At November 30, 1998, the Company's working capital totaled $13.8 million, an
increase of $800 thousand since May 31, 1998. The Company has been able to
finance its working capital requirements primarily through its internally
generated cash flow and through borrowings under a revolving credit facility.
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<PAGE> 10
As of November 30, 1998, cash and cash equivalents totaled $1.0 million, a
decrease of $325 thousand since May 31, 1998. This cash decrease is primarily
reflective of a change in cash management features associated with the
Company's new credit facility, whereby excess operating funds are automatically
used to reduce the amount outstanding under the revolving facility. See
"Consolidated Statements of Cash Flows" for additional detail.
Effective August 31, 1998, the company acquired all of the outstanding
capital stock of Climax Portable Machine Tools, Inc., an Oregon corporation
("Climax"), in exchange for cash in the amount of $6.4 million and 200,000
newly-issued shares of the Company's common stock, $0.30 par value per share
(the "Common Stock"). Additionally, at the acquisition date, the Company
refinanced the majority of Climax's notes payable in the amount of $2.9
million. Pursuant to the purchase agreement and based on the approximate market
value of the Common Stock, a value of $4.00 per share was assigned to the
Common Stock issued to the former shareholders of Climax.
In order to finance the acquisition of the Climax shares, the Company
closed a new credit facility with NationsBank, N.A on August 26, 1998 in the
amount of $24,000,000. The new facility provides for (i) a $12,500,000
revolving loan, (ii) $9,500,000 in term loans for business acquisitions and
(iii) a $2,000,000 mortgage loan to refinance existing real estate
indebtedness. Amounts borrowed under the revolving credit loan are due August
28, 2001. Amounts borrowed against the term loans are due August 8, 2003.
Amounts outstanding under the facility bear interest at a marginal rate over the
LIBOR rate or prime rate, depending upon the amount of funded debt to cash
flow. The effective rate on outstanding borrowings under the new agreement is
approximately 7%. In October 1998 the Company finalized the mortgage loan
and borrowed $1.8 million to refinance existing real estate. Additionally in
October 1998, the Company entered into an interest rate swap transaction on the
$4.5 million term loan, exchanging a floating LIBOR rate of 5.3% at the time of
the swap for a fixed LIBOR rate of 5.19% for a period of three years. In
December 1998, the Company executed interest rate swap transactions for two
years with respect to the $1.8 million mortgage loan and for $2 million of
amounts outstanding under the revolver. At the time of the December swaps, the
floating LIBOR was 5.25%. The fixed swap rates received in exchange are at
5.13%. At November 30, 1998, $3,520,000 in revolving loans and $6,369,000 in
term and mortgage loans were outstanding under the facility. At November 30,
approximately $5.5 million was available under the revolving credit facility.
In June 1998, the Company completed the sale of 1,200,000 shares of Team's
common stock for $2.75 per share to Houston Post Oak Partners ("Houston
Partners") in a private placement transaction. Houston Partners then owned
approximately 17% of the Company's outstanding common shares on a fully diluted
basis. Proceeds from the sale were used to reduce the Company's long-term debt.
YEAR 2000 COMPLIANCE
The Company, like other businesses, is facing the Year 2000 issue. Many
computer systems and equipment with embedded chips or processors use only two
digits to represent the calendar year. This could result in computational or
operational errors as dates are compared across the century boundary causing
possible disruptions in business operations. The year 2000 issue can arise at
any point in the Company's supply, manufacturing, processing, distribution, and
financial chains.
-8-
<PAGE> 11
State of Readiness--The Company began addressing the Year 2000 issue in 1997,
with an initial assessment of Year 2000 readiness. Based on the assessment, a
Year 2000 Plan was developed. By January 1998, a Year 2000 Plan had been
completed that included the following components:
1) Assessment of all systems for Year 2000 compliance,
2) Development of a schedule for replacement of non-compliant systems,
3) Obtaining manufacturers certification of Year 2000 compliance,
4) Developing a list of significant vendors/suppliers for surveying their
Year 2000 readiness efforts.
The Year 2000 issue is being addressed within the Company by its Year 2000
compliance team and progress is reported periodically to management. The
Company has committed resources to conduct risk assessment and to take
corrective action, where required, with a target date of becoming Year 2000
ready for the most critical systems by the third quarter of calendar year
1999.
The Company is currently engaged in a comprehensive project to upgrade its
information, technology, and manufacturing facilities computer hardware and
software to programs that will address the year 2000 problem. In connection
with this project, new hardware and packaged software have been recently
purchased from large vendors who have represented that the systems are already
Year 2000 compliant.
With respect to the plant systems, including automation and embedded chips
used in manufacturing operations, the manufacturing plant is in the process of
completing their inventory and assessment reviews. The Company is relying on
vendor certification and testing. Assessment and testing, with corrective
action as required, is expected to be completed by the third quarter of
calendar year 1999.
With respect to the external parties, including suppliers and customers,
the Company's Year 2000 compliance team is in the process of surveying the Year
2000 readiness efforts of critical external parties. Risk assessment is
expected to be completed by June 1999 and monitoring risk in this area will
continue into the third quarter of calendar year 1999, as many external parties
will not have completed their Year 2000 readiness efforts.
Cost--The total estimated cost for the Company's Year 2000 readiness efforts is
$835,000 which consist primarily of a new management information system that
will be implemented in February 1999. As of November 30, 1998 approximately
$460,000 of the $835,000 has been incurred.
Risks--The Company relies on third party suppliers for raw materials, water,
utilities, transportation and other key services. Interruption of supplier
operations due to Year 2000 issues could affect the Company's operations. While
the project team will evaluate the status of its major suppliers' Year 2000
readiness efforts and develop contingency plans to manage the risk, it can not
eliminate the potential for disruption due to third party failures.
The Company is also dependent upon its customers for sales and cash flow.
Year 2000 interruptions in the operations of its major customers could result
in reduced sales, increased inventory or receivable levels and cash flow
reductions. The Company is in the process of surveying its major customers'
Year 2000 readiness efforts to assess risk and develop plans with an intent to
minimize the impact on its operations.
The Company believes that it is taking all reasonable steps to ensure Year
2000 readiness. It's ability to meet the projected goals, including the costs
of addressing the Year 2000 issue and the dates upon which compliance will be
attained, depends on the Year 2000 readiness of its key suppliers and
customers, the completion of its final remediation and testing efforts and the
successful development and implementation of contingency plans. The Company
currently has not yet developed any contingency plans. These and other
unanticipated Year 2000 issues could have a material adverse effect on the
results of operations or financial condition.
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<PAGE> 12
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
Certain forward-looking information contained herein is being provided in
accordance with the provisions of the Private Securities Litigation Reform Act.
Such information is subject to certain assumptions and beliefs based on current
information known to the Company and is subject to factors that could result in
actual results differing materially from those anticipated in the
forward-looking statements contained herein. Such factors include domestic and
international economic activity, interest rates, market conditions for the
Company's customers, regulatory changes and legal proceedings, and the
Company's successful implementation of its internal operating plans.
Accordingly, there can be no assurance that the forward-looking statements
contained herein will occur or that objectives will be achieved.
PART II -OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1998 Annual Meeting of Shareholders of the Company was held on October 16,
1998. At the meeting, Messrs. George W. Harrison and Sidney B. Williams were
reelected to serve as Class III Directors for a term of three years. Louis A.
Waters was elected to serve as a Class I Director for a term of one year. The
votes with respect to the election of each such director were as follows:
<TABLE>
<CAPTION>
NAME FOR WITHHELD
- -------------------------------------------------------------------
<S> <C> <C>
Mr. George W. Harrison 5,793,623 522,260
- -------------------------------------------------------------------
Mr. Sidney B. Williams 5,730,781 585,102
- -------------------------------------------------------------------
Mr. Louis A. Waters 5,886,013 429,870
- -------------------------------------------------------------------
</TABLE>
The three directors continuing in office until the expiration of their
respective terms are Messrs. William A. Ryan, Jack M. Johnson, Jr. and E.
Theodore Laborde.
The shareholders approved a proposed amendment to the articles of incorporation
to increase the number of authorized shares of Common Stock from 10,000,000 to
30,000,000 by the following vote:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
- -------------------------------------------------------------------
<S> <C> <C>
5,650,271 644,995 20,617
- -------------------------------------------------------------------
</TABLE>
The shareholders considered and approved the adoption of the 1998 Incentive
Stock Option Plan by the following vote:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
- -------------------------------------------------------------------
<S> <C> <C>
3,856,270 394,144 61,095
- -------------------------------------------------------------------
</TABLE>
The shareholders also approved the appointment of Deloitte & Touche as
independent certified public accountants to audit the Company's accounts for
the fiscal year ending May 31, 1999 by the following vote:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
- -------------------------------------------------------------------
<S> <C> <C>
6,240,083 31,932 43,868
- -------------------------------------------------------------------
</TABLE>
-10-
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
3.1 Second Restated Articles of Incorporation of the Company, as
amended on October 23, 1998.
10.1 Employment Agreement by and between Philip J. Hawk and
Team, Inc. dated November 2, 1998.
10.2 Incentive Stock Option Award Agreement by and between
Philip J. Hawk and Team, Inc. dated November 2, 1998.
10.3 Standard Restricted Stock Option Award Agreement by and
between Philip J. Hawk and Team, Inc. dated November 2, 1998.
10.4 Price Vested Restricted Stock Option Award Agreement by and
between Philip J. Hawk and Team, Inc. dated November 2, 1998.
10.5 Stock Purchase Agreement by and between Philip J. Hawk and
Team, Inc. dated November 2, 1998.
10.6 Employment Termination and Consulting Agreement by and between
Team, Inc. and William A. Ryan dated November 1, 1998.
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
A current report on Form 8-K dated August 26, 1998, as amended by a Form
8-K/A dated September 9, 1998, was filed during the quarter ended November 30,
1998, reporting under Items 2 and 7 thereof, the acquisition of all the
outstanding capital stock of Climax Portable Machine Tools, Inc. Item 7 of Form
8-K/A included the following financial statements:
(i) Consolidated Financial Statements of Climax Portable Machine Tools, Inc.
Independent Auditors' Report
Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1997
and 1996
Consolidated Statements of Operations for the Years Ended December 31,
1997 and 1996
Consolidated Statements of Cash Flow for the Years Ended December 31,
1997 and 1996
Notes to Financial Statements
Interim Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheet as of June 30, 1998
Consolidated Statement of Shareholders' Equity for the Six-Month
Period Ended June 30, 1998
Consolidated Statements of Operations for the Six-Month Periods
Ended June 30, 1998 and 1997
Consolidated Statements of Cash Flows for the Six-Month Periods Ended
June 30, 1998 and 1997
Notes to Financial Statements
(ii) Pro Forma Consolidated Financial Information of Team, Inc. (Unaudited)
Pro Forma Consolidated Financial Statements
Pro Forma Consolidated Statement of Operations - Year Ended May 31,
1998
Pro Forma Consolidated Statement of Operations - Three Months Ended
August 31, 1998
Notes to Pro Forma Consolidated Financial Statements
-11-
<PAGE> 14
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: January 14, 1999
/s/PHILIP J. HAWK
---------------------------------------------
Philip J. Hawk
Chief Executive Officer and Director
/s/TED W. OWEN
---------------------------------------------
Ted W. Owen, Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
-12-
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
3.1 Second Restated Articles of Incorporation of the Company, as
amended on October 23, 1998.
10.1 Employment Agreement by and between Philip J. Hawk and
Team, Inc. dated November 2, 1998.
10.2 Incentive Stock Option Award Agreement by and between
Philip J. Hawk and Team, Inc. dated November 2, 1998.
10.3 Standard Restricted Stock Option Award Agreement by and
between Philip J. Hawk and Team, Inc. dated November 2, 1998.
10.4 Price Vested Restricted Stock Option Award Agreement by and
between Philip J. Hawk and Team, Inc. dated November 2, 1998.
10.5 Stock Purchase Agreement by and between Philip J. Hawk and
Team, Inc. dated November 2, 1998.
10.6 Employment Termination and Consulting Agreement by and between
Team, Inc. and William A. Ryan dated November 1, 1998.
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION OF
TEAM, INC.
AS AMENDED
ARTICLE I.
The name of the Corporation is TEAM, INC.
ARTICLE II.
The period of its duration is perpetual.
ARTICLE III.
The purpose for which the Corporation is organized is to transact any
and all lawful business for which corporations may be incorporated under the
Texas Business Corporation Act.
ARTICLE IV.
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) par value each, issuable in
series.
The Board of Directors is hereby authorized from time to time to divide
all or any part of the preferred shares into series thereof and to fix and
determine variations, if any, between any series so established as to any one or
more of the following matters:
(i) The rate of dividends;
(ii) The price at and the terms and conditions under which
shares may be redeemed;
(iii) The amount payable upon shares in the event of
voluntary liquidation;
(iv) The amount payable upon shares in the event of
involuntary liquidation;
(v) Sinking fund provisions for the redemption or
purchase of shares;
<PAGE> 2
(vi) The terms and conditions on which shares may be
converted, if the shares of any series are issued
with the privilege of conversion;
(vii) Voting rights; and
(viii) Any and all such other provisions as may be fixed or
determined by the Board of Directors of the
Corporation pursuant to Texas law.
All shares of preferred stock shall be identical except as to the
relative rights and preferences fixed and determined from time to time by the
Board of Directors with respect to different series of shares when each such
series is established in accordance with the Articles of Incorporation, as
amended, and the Texas Business Corporation Act.
The following provisions set forth the preferences, limitations and
relative rights of the classes of shares:
(1) Preferred Dividends. The holders of all preferred shares,
regardless of series, at the time outstanding shall be entitled to receive, when
and as declared to be payable by the Board of Directors, out of any funds
legally available for the payment thereof, dividends at the rate theretofore
fixed by the Board of Directors for each series of such preferred shares that
have theretofore been established, and no more, with dividend payment dates at
such intervals as the Board of Directors shall determine.
(2) Dividends Other Than Preferred Dividends. After adequate provision
has been made for payment of full dividends on all preferred shares then
outstanding for all past dividend periods and for the current dividend period,
the Board of Directors may declare such further dividends as are permitted by
law, and the Board of Directors shall have the absolute discretion of fixing the
fashion in which holders of preferred shares and holders of common shares shall
participate in such further dividends, with provision being made for one class
participating more fully than the other or to the total exclusion of the other.
(3) Cumulativeness of Preferred Dividends. Dividends on all preferred
shares, regardless of series, shall be cumulative. No dividends shall be
declared on any shares of any series of preferred shares for any dividend period
unless all dividends accumulated for all prior dividend periods shall have been
declared or shall then be declared at the same time upon all preferred shares
then outstanding. No dividends shall be declared on shares of any series of
preferred shares unless a dividend for the same period shall be declared at the
same time upon all preferred shares outstanding at the time of such declaration
in like proportion to
-2-
<PAGE> 3
the dividend rate then declared. No dividends shall be declared or paid on the
common shares unless full dividends on all the preferred shares then outstanding
for all past dividend periods and for the current dividend period shall have
been declared and the Corporation shall have paid such dividends or shall have
set apart a sum sufficient for the payment thereof.
(4) Preferences on Liquidation. In the event of any dissolution,
liquidation or winding up of the Corporation, whether voluntary or involuntary,
the holders of each series of the then outstanding preferred shares shall be
entitled to receive the amount fixed for such purpose in the resolution or
resolutions of the Board of Directors establishing the respective series of
preferred shares that might then be outstanding, together with a sum equal to
the amount of all accumulated and unpaid dividends thereon at the dividend rate
fixed therefor in the aforesaid resolution or resolutions. After such payment to
such holders of preferred shares, the remaining assets and funds of the
Corporation shall be distributed pro rata among the holders of the common
shares. A consolidation, merger or other reorganization of the Corporation with
any other corporation or corporations or a sale of all or substantially all of
the assets of the Corporation shall not be considered a dissolution, liquidation
or winding up of the Corporation within the meaning of these provisions.
(5) Redemption Privileges of the Corporation. The whole or any part of
the outstanding preferred shares or the whole or any part of any series thereof
may be called for redemption and redeemed at any time at the option of the
Corporation, exercisable by the Board of Directors upon thirty (30) days' notice
by mail to the holders of such shares as are to be redeemed, by paying therefor
in cash the redemption price fixed for such shares in the resolution or
resolutions of the Board of Directors establishing the respective series of
which the shares to be redeemed are a part, together with a sum equal to the
amount of all accumulated and unpaid dividends thereon at the dividend rate
fixed therefor in the aforesaid resolution or resolutions to the date fixed for
such redemption. The Corporation may redeem the whole or any part of the shares
of any series without redeeming the whole or any part of the shares of any other
series; provided, however, that if at any time less than the whole of the
preferred shares of any particular series then outstanding shall be called for
redemption, the particular shares called for redemption shall be determined by
lot or by such other equitable method as may be determined by the Board of
Directors. The Corporation may, on or prior to the date fixed for redemption of
redeemable shares as specified in the notice, deposit with any bank or trust
company in the City of Houston, Texas, or any bank or trust company in the
United States duly appointed and acting as transfer agent for such Corporation,
as a trust fund, a sum sufficient to redeem shares called for redemption, with
irrevocable
-3-
<PAGE> 4
instructions and authority to such bank or trust company to give or complete the
notice of redemption thereof and to pay, on or after the date fixed for such
redemption, to the respective holders of shares, as evidenced by a list of
holders of such shares certified by the corporation by its President or a Vice
President and by its Secretary or an Assistant Secretary, the redemptive price
upon the surrender of their respective share certificates. Thereafter, from and
after the date fixed for redemption, such shares shall be deemed to be redeemed
and dividends thereon shall cease to accrue after such date fixed for
redemption. Such deposit shall be deemed to constitute full payment of such
shares to their holders. Thereafter, such shares shall no longer be deemed to be
outstanding, and the holders thereof shall cease to be shareholders with respect
to such shares, and shall have no rights with respect thereto except the right
to receive from the bank or trust company payment of the redemptive price of
such shares without interest, upon the surrender of their respective
certificates therefor, and any right to convert such shares which may exist. In
case the holders of such shares shall not, within six (6) years after such
deposit, claim the amount deposited for redemption thereof, such bank or trust
company shall upon demand pay over to the Corporation the balance of such amount
so deposited to be held in trust and such bank or trust company shall thereupon
be relieved of all responsibility to the holders thereof.
(6) Conversion Privilege. The Board of Directors is authorized to grant
or to deny to the holders of shares of one or more of the series of preferred
shares the right to convert such preferred shares into common shares with par
value of thirty cents ($0.30) a share, and the Board of Directors is further
authorized to fix and determine the terms and conditions on which such preferred
shares may be so converted into common shares. The conversion rights granted,
fixed and determined pursuant to the preceding sentence, along with the terms
and conditions thereof, shall be set forth in the resolution or resolutions in
which the Board of Directors establishes the respective series of preferred
shares.
(7) Preemptive Rights Denied. No shareholder of the Corporation shall
have any preemptive right to acquire any additional unissued or treasury shares
of the Corporation of any class now or hereafter authorized or held.
(8) Voting Rights. The holders of common shares shall vote one (1) vote
for each share of common stock with respect to all of the affairs of the
Corporation. The Board of Directors is authorized to fix and determine or to
deny voting rights with respect to one or more series of the preferred shares,
and such voting rights shall be fixed and determined or denied in the resolution
or resolutions adopted by the Board of Directors by which such respective series
of preferred shares is established. Except as required by law, the
-4-
<PAGE> 5
holders of preferred shares having voting rights and the holders of common
shares shall vote together as one class. Shareholders of this Corporation shall
not have the right to accumulate their votes at any election of directors.
ARTICLE V.
The Corporation will not commence business until it has received for
the issuance of its shares consideration of a value of at least $1,000,
consisting of money, labor done or property actually received.
ARTICLE VI.
A director of the Corporation is not liable to the Corporation or its
shareholders for monetary damages for an act or omission in the director's
capacity as a director except for liability for: (i) a breach of a director's
duty of loyalty to the Corporation or its shareholders; (ii) an act or omission
not in good faith or that involves intentional misconduct or a knowing violation
of the law; (iii) a transaction from which a director received improper benefit,
whether or not the benefit resulted from an action taken with the scope of the
director's office; (iv) an act or omission for which the liability of a director
is expressly provided for by statute; or (v) an act related to an unlawful stock
repurchase or payment of a dividend.
ARTICLE VII.
-- Deleted --
ARTICLE VIII.
The Corporation shall have the power to indemnify directors, officers,
employees and agents pursuant to applicable law.
ARTICLE IX.
No contract or other transaction between the Corporation and any other
corporation shall be affected by the fact that one or more of the directors or
officers of this Corporation is interested in or is a director or officer of
such other Corporation, and any director or officer individually may be a party
to or may be interested in any contract or transaction of this Corporation. No
contract or transaction of this Corporation with any person or persons, firm or
association shall be affected by the fact that any director or officer of this
Corporation is a party to or interested
-5-
<PAGE> 6
in such contract or transaction, or in any way connected with such person or
persons, firm or association, provided that the interest in any such contract or
other transaction of any such director or officer shall be fully disclosed and
that such contract or other transaction shall be authorized or ratified by the
vote of a sufficient number of directors of the company not so interested. In
the absence of fraud, no director or officer having such adverse interest shall
be liable to the Corporation or to any shareholder or creditor thereof, or to
any other person, for any loss incurred by it under or by reason of such
contract or transaction, nor shall any such director or officer be accountable
for any gains or profits realized thereon. In any case described in this Article
IX, any such director may be counted in determining the existence of a quorum at
any meeting of the Board of Directors which shall authorize or ratify any such
contract or transaction.
ARTICLE X.
The address of the initial registered office of the Corporation is 1930
Two Shell Plaza, Houston, Texas. The name of the initial registered agent of the
Corporation at such address is Sidney B. Williams.
ARTICLE XI.
1. Number and Classification of Company's Board of Directors. The
number of directors which shall constitute the whole Board of Directors of the
Corporation shall be not less than six (6) nor more than nine (9) as specified
from time to time by action of the Board of Directors pursuant to the Bylaws.
The directors shall be classified into three classes: Class I, Class II and
Class III. Such classes shall be as nearly equal in number of directors as
possible. Each director shall serve for a term ending on the third annual
meeting following the annual meeting at which such director was elected;
provided, however, that the directors originally elected to Class I shall serve
for a term expiring at the annual meeting of shareholders to be held in 1990,
the directors originally elected to Class II shall serve for a term expiring at
the annual meeting of shareholders to be held in 1991 and the directors
originally elected to Class III shall serve for a term expiring at the annual
meeting of shareholders to be held in 1992. The foregoing notwithstanding, each
director shall serve until his successor shall have been duly elected and
qualified, unless he shall resign, become disqualified or disabled, or shall
otherwise be removed.
At each annual election, the directors chosen to succeed those whose
terms then expire shall be of the same class as the directors
-6-
<PAGE> 7
they succeed, unless, by reason of any intervening changes in the authorized
number of directors, the Board of Directors shall designate one or more
directorships whose term then expires as directorships of another class in order
more nearly to achieve equality of number of directors among the classes.
Notwithstanding the rule that the three classes shall be as nearly
equal in number of directors as possible, in the event of any change in the
authorized number of directors, each director then continuing to serve as such
shall nevertheless continue as a director of the class of which he is a member
until the expiration of his current term, or his prior death, resignation or
removal. If any newly created directorship may, consistent with the rule that
the three classes shall be as nearly equal in number of directors as possible,
be allocated to one or two or more classes, the Board of Directors shall
allocate it to that of the available classes whose terms of office are due to
expire at the earliest date following such allocation. No decrease in the number
of directors constituting the Board of Directors shall shorten the term of any
incumbent director.
2. Removal. No director of the Corporation shall be removed from his
office as a director by vote or other action of shareholders or otherwise except
for cause.
3. Newly Created Directorships and Vacancies. Newly created
directorships resulting from any increase in the number of directors may be
filled by the affirmative vote of a majority of the directors for a term of
office continuing only until the next election of one or more directors by the
shareholders entitled to vote thereon; provided, however, that the Board of
Directors shall not fill more than two such directorships during the period
between two successive annual meetings of shareholders. Any vacancies on the
Board of Directors resulting from death, resignation, disqualification, removal
or other cause shall be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the Board
of Directors. Any director elected to fill any such vacancy shall hold office
for the remainder of the full term of the director whose departure from the
Board of Directors created the vacancy and until such newly elected director's
successor shall have been elected and qualified.
4. Provision, Repeal, Etc. Notwithstanding anything contained in these
Articles of Incorporation to the contrary, the affirmative vote of the holders
of at least eighty percent (80%) of the voting power of all outstanding shares
of capital stock of the Corporation entitled to vote on the election of
directors, voting together as a single class, shall be required to alter, amend
or repeal, or adopt any provision inconsistent with, this Article XI or any
-7-
<PAGE> 8
parallel or similar provision contained in the Bylaws of the Corporation.
ARTICLE XII.
1. Vote Required for Certain Business Combinations. In addition to any
affirmative vote required by law or these Articles of Incorporation or the
Bylaws of the Corporation, and except as otherwise expressly provided in Section
2 of this Article XII, a Business Combination (as hereinafter defined) with, or
proposed by or on behalf of, any Related Person (as hereinafter defined) or any
Affiliate or Associate (as hereinafter defined) of any Related Person or any
person who thereafter would be an Affiliate or Associate of such Related Person,
shall require the affirmative vote of not less than eighty percent (80%) of the
votes entitled to be cast by the holders of all of the then outstanding shares
of Voting Stock (as hereinafter defined), voting together as a single class, and
the affirmative vote of not less than a majority of the votes entitled to be
cast by the Voting Stock beneficially owned by persons other than such Related
Person. Each share of Voting Stock shall have the number of votes granted to it
in, or duly fixed by the Board of Directors pursuant to, Article IV of these
Articles of Incorporation. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a lesser
percentage or separate class vote may be specified, by law, or in any agreement
with any national securities exchange or otherwise.
2. Exceptions to Higher Vote Requirement. The provisions of Section 1
of this Article XII shall not be applicable to any particular Business
Combination, and such Business Combination shall require only such affirmative
vote, if any, as is required by law or by any other provision of these Articles
of Incorporation or the Bylaws of the Corporation, or any agreement with any
national securities exchange, if all of the conditions specified in either of
the following Paragraphs (a) or (b) are met or, in the case of a Business
Combination not involving the payment of consideration to the holders of the
Corporation's outstanding Capital Stock (as hereinafter defined), if the
condition specified in the following Paragraph (a) is met:
(a) The Business Combination shall have been approved either
specifically or as a transaction which is within an approved category of
transactions, by a majority (whether such approval is made prior to or
subsequent to the acquisition of or announcement or public disclosure of the
intention to acquire, beneficial ownership of the Voting Stock that caused the
Related Person to become a Related Person) of the Continuing Directors (as
hereinafter defined).
-8-
<PAGE> 9
(b) All of the following conditions shall have been met:
(i) The aggregate amount of cash and the Fair Market Value (as
hereinafter defined), as of the date of the consummation of the Business
Combination, of consideration other than cash to be received per share by
holders of common stock of the Corporation in such Business Combination shall be
at least equal to the higher amount determined under clauses (A) and (B) below:
(A) (If applicable) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by or on behalf of the Related Person for any share of common stock
of the Corporation in connection with the acquisition by the Related Person of
beneficial ownership of shares of common stock,
(x) within the two-year period immediately
prior to the first public announcement of the proposed Business
Combination (the "Announcement Date"), or
(y) in the transaction in which it became a
Related Person,
whichever is higher, in either case as adjusted for any subsequent stock split,
stock dividend, subdivision or reclassification with respect to the common stock
of the Corporation; and
(B) The Fair Market Value per share of common stock
of the Corporation on the Announcement Date or on the date (the "Determination
Date") on which the Related Person became a Related Person, whichever is higher,
as adjusted for any subsequent stock split, stock dividend, subdivision or
reclassification with respect to the common stock of the Corporation.
(ii) The aggregate amount of cash and the Fair Market Value,
as of the date of the consummation of the Business Combination, of consideration
other than cash to be received per share by holders of shares of any class or
series of outstanding Capital Stock, other than common stock of the Corporation,
shall be at least equal to the highest amount determined under clauses (A), (B)
and (C) below:
(A) (If applicable) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by or on behalf of the Related Person for any share of such class or
series of Capital Stock in connection with the acquisition by the Related Person
of beneficial ownership of shares of such class or series of Capital Stock,
-9-
<PAGE> 10
(x) within the two-year period immediately
prior to the Announcement Date, or
(y) in the transaction in which it became a
Related Person,
whichever is higher, in either case as adjusted for any subsequent stock split,
stock dividend, subdivision or reclassification with respect to such class or
series of Capital Stock;
(B) The Fair Market Value per share of such class or
series of Capital Stock on the Announcement Date or on the Determination Date,
whichever is higher, as adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification with respect to such class or series of Capital
Stock; and
(C) (If applicable) the highest preferential amount
per share to which the holders of shares of such class or series of Capital
Stock would be entitled, as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect to such class or series
of Capital Stock, in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation regardless of
whether the Business Combination to be consummated constitutes such an event.
The provisions of this Paragraph (b) shall be required to be met with respect to
every class or series of outstanding Capital Stock, whether or not the Related
Person has previously acquired beneficial ownership of any shares of a
particular class or series of Capital Stock.
(iii) The consideration to be received by holders of a
particular class or series of outstanding Capital Stock shall be in cash or in
the same form as previously has been paid by or on behalf of the Related Person
in connection with its direct or indirect acquisition of beneficial ownership of
shares of such class or series of Capital Stock. If the consideration so paid
for shares of any class or series of Capital Stock varies as to form, the form
of consideration for such class or series of Capital Stock shall be either cash
or the form used to acquire beneficial ownership of the largest number of shares
of such class or series of Capital Stock previously acquired by the Related
Person.
(iv) After the Determination Date and prior to the
consummation of such Business Combination:
(A) Except as approved by a majority of the
Continuing Directors, there shall have been no failure to declare and pay at the
regular date therefor any full quarterly dividends
-10-
<PAGE> 11
(whether or not cumulative) payable in accordance with the terms of
any outstanding Capital Stock;
(B) There shall have been no reduction in the annual
rate of dividends paid on the common stock of the Corporation (except as
necessary to reflect any stock split, stock dividend or subdivision of the
common stock of the Corporation), except as approved by a majority of the
Continuing Directors;
(C) There shall have been an increase in the annual
rate of dividends paid on the common stock of the Corporation as necessary to
reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction that has the effect
of reducing the number of outstanding shares of common stock of the Corporation,
unless the failure to increase such annual rate is approved by a majority of the
Continuing Directors; and
(D) Such Related Person shall not have become the
beneficial owner of any additional shares of Capital Stock except as part of the
transaction that results in such Related Person becoming a Related Person and
except in a transaction that, after giving effect thereto, would not result in
any increase in the Related Person's percentage beneficial ownership of any
class or series of Capital Stock.
(v) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder (the
"Act") (or any subsequent provisions replacing such Act, rules or regulations)
shall be mailed to all shareholders of the Corporation at least thirty (30) days
prior to the consummation of such Business Combination (whether or not such
proxy or information statement is required to be mailed pursuant to such Act or
subsequent provisions). The proxy or information statement shall contain on the
first page thereof, in a prominent place, any statement as to the advisability
(or inadvisability) of the Business Combination that the Continuing Directors,
or any of them, may choose to make and, if deemed advisable by a majority of the
Continuing Directors, the opinion of an investment banking firm selected by a
majority of the Continuing Directors as to the fairness (or lack of fairness) of
the terms of the Business Combination from the financial point of view of the
holders of the outstanding shares of Capital Stock other than the Related Person
and its Affiliates or Associates, such investment banking firm to be furnished
with all information it reasonably requests and to be paid a reasonable fee for
its services by the Corporation.
-11-
<PAGE> 12
(vi) Such Related Person shall not have made any major change
in the Corporation's business or equity capital structure without the approval
of a majority of the Continuing Directors.
(vii) After the Determination Date, the Related Person shall
not have received the benefit, directly or indirectly (except proportionately as
a shareholder), of any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages provided by the
Corporation, whether in anticipation of or in connection with such Business
Combination or otherwise.
3. Certain Definitions. The following definitions shall apply with
respect to this Article XII:
(a) The term "Business Combination" shall mean:
(i) Any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (A) any Related Person or (B) any other
company (whether or not itself a Related Person) which is, or after such merger
or consolidation would be, an Affiliate or Associate of a Related Person; or
(ii) Any sale, lease, exchange, mortgage, pledge, transfer or
other disposition or security arrangement, investment, loan, advance, guarantee,
agreement to purchase, agreement to pay, extension of credit, joint venture
participation or other arrangement (in one transaction or a series of
transactions) to, with or for the benefit of any Related Person or any Affiliate
or Associate of any Related Person involving any assets, securities or
commitments of the Corporation, any Subsidiary or any Related Person or any
Affiliate or Associate of any Related Person which (except for any arrangement,
whether as employee, consultant or otherwise, other than as a director, pursuant
to which any Related Person or any Affiliate or Associate thereof shall,
directly or indirectly, have any control over or responsibility for the
management of any aspect of the business or affairs of the Corporation, with
respect to which arrangements the value tests set forth below shall not apply),
together with all other such arrangements (including all contemplated future
events), has an aggregate Fair Market Value and/or involves aggregate
commitments of $2,500,000 or more or constitutes more than five percent (5%) of
the book value of the total assets (in the case of transactions involving assets
or commitments other than capital stock) or five percent (5%) of the
shareholders' equity (in the case of transactions in capital stock) of the
entity in question (the "Substantial Part"), as reflected in the most recent
fiscal year-end consolidated balance sheet of such entity existing at the time
the shareholders of the Corporation would be required to
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<PAGE> 13
approve or authorize the Business Combination involving the assets, securities
and/or commitments constituting any Substantial Part; or
(iii) The adoption of any plan or proposal for the liquidation
or dissolution of the Corporation proposed by or on behalf of any Related Person
or any Affiliate or Associate of any Related Person; or
(iv) Any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with, into or otherwise involving a Related Person)
that has the effect, directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of Equity Security (as hereinafter
defined) of the Corporation or any Subsidiary, that is beneficially owned by any
Related Person or any Affiliate or Associate of any Related Person; or
(v) Any agreement, contract or other arrangement providing for
any one or more of the actions specified in the foregoing clauses (i) to (iv).
(b) The term "Capital Stock" shall mean all capital stock of the
Corporation authorized to be issued from time to time under Article IV of these
Articles of Incorporation, and the term "Voting Stock" shall mean all Capital
Stock which by its terms may be voted on all matters submitted to the
shareholders of the Corporation generally.
(c) The term "person" shall mean any individual, firm, company or other
entity and shall include any group comprised of any person and any other person
with whom such person or any Affiliate or Associate of such person has any
agreement, arrangement or understanding, directly or indirectly, for the purpose
of acquiring, holding, voting or disposing of Capital Stock.
(d) The term "Related Person" shall mean any person (other than the
Corporation or any Subsidiary and other than any profit-sharing, employee stock
ownership or other employee benefit plan of the Corporation or any Subsidiary or
any trustee of or fiduciary with respect to any such plan when acting in such
capacity and other than any person who on the date of adoption by the
Corporation's Board of Directors of this Article XII was the holder of five
percent (5%) of more of the outstanding shares of common stock of the
Corporation) who or which (i) is or has announced or publicly disclosed a plan
or intention to become the beneficial owner of Voting Stock representing ten
percent (10%) of more of the votes entitled to be cast by the holders of all the
then outstanding shares of Voting Stock; or (ii) is an Affiliate or
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<PAGE> 14
Associate of the Corporation and at any time within the two-year period
immediately prior to the date in question was the beneficial owner of Voting
Stock representing ten percent (10%) of more of the votes entitled to be cast by
the holders of all the then outstanding shares of Voting Stock; or (iii) is an
assignee of or has otherwise succeeded to any shares of Voting Stock that were
at any time within the two-year period immediately prior to the date in question
beneficially owned by any Related Person, if such assignment or succession shall
have occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act of 1933, as
amended.
(e) A person shall be a "beneficial owner" of any Capital Stock (i)
which such person or any of its Affiliates or Associates beneficially owns,
directly or indirectly; (ii) which such person or any of its Affiliates or
Associates has, directly or indirectly, (A) the right to Acquire (whether such
right is exercisable immediately or only after the passage of time and
notwithstanding that Rule 13d-3 under the Act deems such shares to be
beneficially owned only if such right may be exercised within sixty (60) days),
pursuant to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise, or (B)
the right to vote pursuant to any agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or indirectly, by any other person
with which such person or any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares of Capital Stock. For the purposes of determining
whether a person is a Related Person pursuant to Paragraph (d) of this Section
3, the number of shares of Capital Stock deemed to be outstanding shall include
shares deemed beneficially owned by such person through application of this
Paragraph (e) of Section 3, but shall not include any other shares of Capital
Stock that may be issuable pursuant to any arrangement or understanding, or upon
exercise of conversion rights, warrants or options, or otherwise.
(f) The terms "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Act as in effect on
September 1, 1989 (the term "registrant" in said Rule 12b-2 meaning, in this
case, the Corporation).
(g) The term "Subsidiary" means any company of which a majority of any
class of Equity Security is beneficially owned by the Corporation; provided,
however, that for the purposes of the definition of Related Person set forth in
Paragraph (d) of this Section 3, the term "Subsidiary" shall mean only a company
of which a majority of each class of Equity Security is beneficially owned by
the Corporation.
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<PAGE> 15
(h) The term "Continuing Director" means any member of the Board of
Directors of the Corporation, while such person is a member of the Board of
Directors, who is not an Affiliate or Associate or representative of the Related
Person and was a member of the Board of Directors prior to the Determination
Date, and any successor of a Continuing Director, while such successor is a
member of the Board of Directors, who is not an Affiliate or Associate or
representative of the Related Person and is recommended or elected to succeed
the Continuing Director by a majority of Continuing Directors.
(i) The term "Fair Market Value" means (i) in the case of stock, the
highest closing sales price during the 30-day period immediately preceding the
date in question of a share of such stock on the principal United States
securities exchange registered under the Act on which such stock is listed, or,
if such stock is not listed on any such exchange, the highest closing bid
quotation with respect to a share of such stock during the 30-day period
preceding the date in question on the National Association of Securities
Dealers, Inc. Automated Quotations System or any similar system then in use, or
if no such quotations are available, the fair market value on the date in
question of a share of such stock as determined by a majority of the Continuing
Directors in good faith; and (ii) in the case of property other than stock, ,the
fair market value of such property on the date in question as determined by a
majority of the Continuing Directors in good faith.
(j) In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as used in
Paragraphs (b)(i) and (b)(ii) of Section 2 of this Article XII shall include the
shares of common stock of the Corporation and/or the shares of any other class
or series of Capital Stock retained by the holders of such shares.
(k) The term "Equity Security" shall have the meaning ascribed to such
term in Section 3(a)(11) of the Act, as in effect on September 1, 1989.
4. Powers of Continuing Directors. A majority of the Continuing
Directors shall have the power and duty to determine for the purposes of this
Article XII, on the basis of information known to them after reasonable inquiry,
any and all questions, interpretations and determinations arising under, or with
regard to the application of, this Article XII, including, without limitation,
(a) whether a person is a Related Person, (b) the number of shares of Capital
Stock or other securities beneficially owned by any person, (c) whether a person
is an Affiliate or Associate of another, (d) whether a Business Combination is
with, or proposed by, or on behalf of a Related Person or an Affiliate or
Associate of a Related Person, (e) whether the assets that are the
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<PAGE> 16
subject of any Business Combination have, or the consideration to be received
for the issuance or transfer of securities by the Corporation or any Subsidiary
in any Business Combination has, an aggregate Fair Market Value of $2,500,000 or
more, and (f) whether the assets or securities that are the subject of any
Business Combination constitute a Substantial Part. Any such determination made
in good faith shall be binding and conclusive on all parties.
5. No Effect on Fiduciary Obligations of Related Persons. Nothing
contained in this Article XII shall be construed to relieve any Related Person
from any fiduciary obligation imposed by law.
6. Compliance with this Article XII. The fact that any Business
Combination complies with the provisions of Section 2 of this Article XII shall
not be construed to impose any fiduciary duty, obligation or responsibility on
the Board of Directors, or any member thereof, to approve such Business
Combination or recommend its adoption or approval to the shareholders of the
Corporation, nor shall such compliance limit, prohibit or otherwise restrict in
any manner the Board of Directors, or any member thereof, with respect to
evaluations of or actions and responses taken with respect to such Business
Combination.
7. Business Combinations Proposed by a Related Person. For the purposes
of this Article XII, a Business Combination is presumed to have been proposed
by, or on behalf of, a Related Person or an Affiliate or Associate of a Related
Person or a person who thereafter would become such if (a) after the Related
Person became such, the Business Combination is proposed following the election
of any director of the Corporation who with respect to such Related Person,
would not qualify to serve as a Continuing Director or (b) such Related Person,
Affiliate, Associate or person votes for or consents to the adoption of any such
Business Combination, unless as to such Related Person, Affiliate, Associate or
person a majority of the Continuing Directors makes a good faith determination
that such Business Combination is not proposed by or on behalf of such Related
Person, Affiliate, Associate or person, based on information known to them after
reasonably inquiry.
8. Provision, Repeal, Etc. Notwithstanding anything contained in these
Articles of Incorporation to the contrary, the affirmative vote of the holders
of at least eight percent (80%) of the voting power of all outstanding shares of
Voting Stock, voting together as a single class, and the affirmative vote of the
holders of at least a majority of the voting power of all outstanding shares of
Voting Stock, voting together as a single class, excluding the Voting Stock
beneficially owned by a Related Person, shall be required to alter, amend or
repeal, or adopt any provision inconsistent with, this Article XII.
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<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into by and
between PHILIP J. HAWK, an individual ("Hawk"), and TEAM, INC., a Texas
corporation ("Team"), to be effective as of the date appearing on the signature
pages hereof (the "Effective Date").
INTRODUCTION
Team desires to employ Hawk as its Chief Executive Officer and Hawk
desires to serve as Team's Chief Executive Officer. The parties desire to enter
into this Agreement to set forth the terms and conditions of Hawk's employment
relationship with Team.
NOW, THEREFORE, in consideration of the premises, and the covenants
herein set forth and for other good and valuable consideration, the receipt and
sufficiency and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
AGREEMENT
1. EMPLOYMENT AS CHIEF EXECUTIVE OFFICER. Subject to the terms and
conditions hereinafter stated, Team shall employ Hawk and Hawk shall serve as
Chief Executive Officer of Team with the duties specified in Section 2 below
throughout the Term (defined in Section 7 below).
2. DUTIES AS CHIEF EXECUTIVE OFFICER. Hawk agrees to serve throughout
the Term as Chief Executive Officer of Team, subject to the Team Bylaws and
management policies, and to perform such other duties as shall from time to time
be reasonably assigned to Hawk by the Board of Directors of Team ("Board") which
are consistent with Hawk's position as Chief Executive Officer. Hawk shall, as
consideration for serving hereunder as Team's Chief Executive Officer, be
compensated in the manner provided in Section 3 below. No change in the duties
of Hawk which are consistent with his position as Chief Executive Officer shall
result in a termination or rescission of this Agreement. Hawk acknowledges that
the position of Chief Executive Officer is a full-time position, and he shall
devote such time and attention to perform his duties hereunder as is consistent
with such full-time position. Hawk shall be permitted to serve on the Boards of
Directors of Highlands Insurance Group and of such other corporations as may be
approved by the Board from time to time. The foregoing notwithstanding, the
parties recognize and agree that Hawk may engage in personal investments and
other business activities that do not conflict with the business of and affairs
of Team or interfere with Hawk's performance of his duties as a full-time
employee hereunder. Hawk shall make available to Team any and all business
opportunities that become available to Hawk which involve an area of business in
which Team or any Affiliate thereof conducts business. Any such business
opportunities shall be the property of Team.
<PAGE> 2
3. COMPENSATION.
a. CHIEF EXECUTIVE OFFICER. Throughout the Term, Hawk shall be
paid not less than Two Hundred Twenty Five Thousand Dollars ($225,000.00) per
year ("Base Compensation"), in equal and consecutive monthly installments of not
less than Eighteen Thousand Seven Hundred Fifty Three Dollars ($18,753.00), as
that sum may increase from time to time ("Monthly Salary Payments").
b. PERFORMANCE BONUS. As promptly as practical hereafter, the
Board, acting in its sole discretion, will establish performance goals for Hawk
for Team's current fiscal year which ends on May 31, 1999. As promptly as
practical following the end of each of Team's fiscal years thereafter during
which Hawk serves as Team's Chief Executive Officer, the Board, acting in its
sole discretion, will likewise meet and confer with Hawk to establish
performance goals for Hawk for the next fiscal year. Hawk shall receive a
performance bonus with respect to each such fiscal period during which he
achieves Board-established performance goals, which bonus shall be equal to up
to fifty percent (50%) of the Base Compensation that he earns during such fiscal
year or part thereof, assuming that he fully achieves the Board-established
performance goals. In establishing such performance goals, the Board shall meet
and confer with Hawk.
c. DEFERRAL OPTION. Hawk shall have the right to defer all or a
portion of the Base Compensation and bonuses due to him under this Section 3.
At such time as Hawk elects to defer any compensation, Hawk and Team shall enter
into a Salary Deferred Compensation Agreement in substantially the form attached
hereto as Exhibit "A," except that under such agreement Hawk may make an
election to defer all or a portion of his Base Compensation and/or bonus for a
calendar year at any time prior to the beginning of such year. In addition, Team
shall pay such deferred compensation to a trust to be created with terms
substantially the same as the form of the Deferred Compensation Trust Agreement
attached hereto as Exhibit "B." The trustee of such trust shall be a trustee
possessing corporate trust powers under the laws of the State of Texas and
acceptable to Hawk.
4. STOCK PURCHASE AND SALE. Team hereby grants to Hawk an option to
purchase up to 65,000 shares of Team common stock, $0.30 par value per share
("Common Stock"), at a purchase price equal to the market price for Team Common
Stock trading on the American Stock Exchange as of the close of business on the
date of exercise of such option right by Hawk, less that number of shares of
Common Stock of which Hawk is the Beneficial Owner as of the date of exercise of
such option right by Hawk. Hawk shall have the right to exercise the option
granted under this Section 4 in whole or in part at any time within thirty (30)
days after the Effective Date by delivery of written notice to Team. Payment for
such shares shall be due three (3) business days after the date Hawk delivers
written notice of exercise to Team, and such sale of Team Common Stock to Hawk
shall be consummated as promptly as practicable thereafter. To the extent that
Hawk does not exercise this option granted under this Section 4 in full within
thirty (30) days of the Effective Date, then the remainder of this option shall
lapse. The Team Common Stock that Hawk receives under this Section 4 shall be
"restricted stock" under SEC Rule 144.
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<PAGE> 3
5. STOCK OPTIONS.
a. INCENTIVE STOCK OPTIONS. Pursuant to a separate award agreement
to be executed simultaneously with this Agreement, Team shall issue to Hawk
incentive stock options ("ISOs") to purchase that number of shares of Team
Common Stock that is equal to the quotient of $400,000.00 divided by the market
price for Team Common Stock trading on the American Stock Exchange as of the
close of business on the Effective Date, less 1,000 shares and rounded to the
nearest whole share. Such award of ISOs to Hawk shall be in accordance with
Team's incentive stock option plan now in effect (the "ISO Plan"). One-fourth
of the ISOs shall become exercisable as of the end of each of the three (3)
succeeding annual anniversary dates of the Effective Date with the last
one-fourth becoming exercisable as of January 30, 2002.
b. STANDARD NON-QUALIFIED OPTIONS. Pursuant to a separate award
agreement to be executed simultaneously with this Agreement, Team shall issue
to Hawk standard non-qualified options ("SNOs") to purchase that number of
shares of Team Common Stock equal to 150,000 less the number of ISOs issued to
Hawk under Section 5(a) herein. One-third of the SNOs shall become exercisable
as of the end of each of the three succeeding annual anniversary dates of the
Effective Date and shall generally be subject to the same exercise price,
conditions and restrictions as the ISOs under the ISO Plan; provided, however,
that (i) in the event that this Agreement is terminated as provided in Section
8(a) herein or as provided in Section 8(c) herein, the SNOs shall become fully
vested as of the effective date of such termination, and (ii) in the event a
"Change of Control" of Team (as that term is defined in Section 25(b) of this
Agreement) occurs in a transaction which is not recommended by the Board, then
all the SNOs shall become fully vested immediately prior to consummation of
such transaction, irrespective of any termination of this Agreement. In
addition, upon the occurrence of any of the events causing acceleration of the
vesting of any of the SNOs as provided above in this Section 5(b), Team shall,
simultaneously with such event causing acceleration, issue to Hawk more SNOs
(the "Additional SNOs") in addition to the SNOs issued to Hawk as of the
Effective Date (the "Original SNOs"). The number of shares of Team Common Stock
purchasable under the Additional SNOs shall equal the number of shares of Team
Common Stock that would have become vested under the ISOs had such event
causing acceleration of vesting of the Original SNOs applied to the remaining
non-vested ISOs. Such Additional SNOs shall be immediately exercisable at the
same exercise price as the Original SNOs and shall otherwise be subject to
the same terms and conditions as the Original SNOs. The remaining non-vested
ISOs as of the date of such acceleration shall be reduced by the same number of
shares as are included in the Additional SNOs.
c. PRICE-VESTED OPTIONS. Pursuant to a separate award agreement to
be executed simultaneously with this Agreement, Team shall issue price vested
options ("PVOs") to Hawk to purchase 200,000 shares of Team Common Stock. The
PVOs shall be generally subject to the same conditions and restrictions as the
SNOs; provided, however, that (i) in the event that this Agreement is
terminated as provided in Section 8(a) herein or as provided in Section 8(c)
herein, the PVOs shall become fully vested as of the effective date of such
termination, and (ii) in the event a "Change of Control" of Team (as that term
is defined in Section 25(b) of this Agreement) occurs in a transaction which is
not recommended by the Board, then all the PVOs
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<PAGE> 4
shall, notwithstanding anything to the contrary herein, become fully vested
immediately prior to consummation of such transaction, irrespective of any
termination of this Agreement. Further provided and subject to the vesting
acceleration provisions in this Section 5(c), that the vesting for the PVOs
shall occur in three vesting levels ("Vesting Levels"): vesting for 33 1/3% of
the PVOs shall occur at the end of any consecutive six-month period during which
the average market price of Team Common Stock is $7.00 per share (as adjusted
for any splits, stock dividends and the like), provided that the market price is
also at least that high at the end of such six-month period; the next 33 1/3% of
the PVOs shall vest at the end of any consecutive six-month period during which
the average market price of Team Common Stock is $10.50 per share (as adjusted
for any splits, stock dividends and the like) provided that the market price is
also at least that high at the end of such six-month period; and the last
33 1/3% of the PVOs shall vest when the average market price of Team Common
Stock is $14.00 per share (as adjusted for any splits, stock dividends and the
like), provided that the market price is also at least that high at the end of
such six-month period. If the market price requirements for two or more
previously unachieved Vesting Levels are achieved in a single six-month period,
then the vesting of PVOs for all such Vesting Levels achieved in such single
six-month period shall occur.
d. Team shall, at its sole expense, cause to be filed within a
reasonable time after the date of this Agreement and cause to become and remain
effective with the Securities and Exchange Commission, a Registration Statement
on Form S-8 or the equivalent with respect to the shares of Common Stock
underlying the ISOs, SHOs and PVOs.
6. OTHER BENEFITS AS CHIEF EXECUTIVE OFFICER. While serving as Team's
Chief Executive Officer, Hawk shall be entitled to paid vacations (up to five
(5) weeks per year), expense reimbursements, automobile allowances and similar
perquisites incidental or necessary to the performance of his duties or in
accordance with the policies and procedures established by Team from time to
time. Team shall pay Hawk's YPO membership and meeting expenses, not to exceed
$6,000.00 per year. Hawk shall further be entitled to participate in each plan
established to provide fringe benefits or insurance benefits to employees of
Team at the time and for so long as he meets the eligibility criteria
established for the plan and shall receive benefits thereunder based on the
terms of the plan. Hawk's eligibility and benefit level shall be determined
separately for each plan and all determinations shall be made by the parties
charged with responsibility for such determinations in the plan. Team is under
no obligation to establish any plan or plans to provide benefits for its
employees and this provision shall not be interpreted to require the
establishment of any benefit plan. The terms of any benefit plans existing,
established, or provided hereafter do not constitute a part of this Agreement
and are not incorporated herein for any purpose.
7. TERM. The Term ("Term") of this Agreement commenced as of the
Effective Date and, unless sooner terminated by the parties pursuant to Section
8, shall terminate on January 31, 2002. The Term shall also include any renewal,
extension or continuation of this Agreement. Should this Agreement not be
extended beyond the Term by mutual agreement of Hawk and Team, then this
Agreement shall renew on a month-to-month basis, and all provisions of this
Agreement shall continue to apply in full force and effect, specifically
including all acceleration rights for the PVOs as provided in Section 5(c)
herein, except that the employment relationship
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<PAGE> 5
between Hawk and Team shall be terminable at any time upon thirty (30) days'
prior written notice by either Hawk or Team for any reason whatsoever, with or
without cause. However, if Hawk's employment beyond the Term continues on a
month-to-month basis, and this Agreement is terminated for any of the reasons or
purposes set forth in Section 8(a) herein or Section 8(c) herein, then Hawk
shall be entitled to receive the following benefits: (i) Monthly Salary Payments
for each of the twelve (12) consecutive months following the effective date of
such termination, (ii) a pro rata bonus payment pursuant to Section 3(b) with
respect to the portion of the fiscal year actually worked for the fiscal year in
which effective date of such termination occurred, and (iii) the provisions in
Section 5(c) herein regarding the acceleration of vesting of the PVOs shall
continue to apply.
8. TERMINATION.
a. WITHOUT CAUSE. Team shall not terminate this Agreement "without
cause"; provided, however, that Team shall be permitted to so terminate Hawk's
employment hereunder by giving Hawk at least thirty (30) days' prior written
notice of such termination. Hawk shall be entitled to receive a pro-rata bonus
payment pursuant to Section 3(b) with respect to the portion of the fiscal year
actually worked for the fiscal year in which this Agreement is terminated. Hawk
shall, immediately after this Agreement is terminated pursuant to this Section
8(a), continue to receive Monthly Salary Payments for each of the twelve (12)
consecutive months following his termination under this Section 8(a), and Hawk
shall be entitled to all acceleration of vesting of the options granted pursuant
to Section 5 herein. For purposes of this Agreement, Hawk's death or permanent
disability (as reasonably determined by the Board after conferring with Hawk and
whatever medical doctors Hawk may select, provided such medical doctors are
reasonably acceptable to the Board, to assist in such determination) shall be
deemed a termination without cause and shall be subject to all of the provisions
of this Section 8(a).
b. FOR CAUSE. Notwithstanding anything to the contrary contained
or implied herein, Team may terminate this Agreement and all of its continuing
obligations to Hawk hereunder "for cause" by giving written notice of such
termination "for cause" to Hawk. For purposes of Section 8(b) this Agreement,
the phrase "for cause" shall mean the good faith determination by the Board one
of the following events has occurred: (i) Hawk has knowingly committed acts
involving fraud, dishonesty or violations of criminal or other statutes
involving moral turpitude; or (ii) Hawk's material breach of any material
provision of this Agreement which remains uncorrected for thirty (30) days
following written notice to Hawk by Team of such breach. At least ten (10) days
prior to making a final determination that "cause" exists for termination of the
employment relationship between Team and Hawk, the Board shall provide Hawk
written notice as to the facts and circumstances which are the basis for a
possible determination that "cause" exists and shall provide an opportunity for
Hawk to meet with and be heard by the entire Board prior to making such final
determination;
In making the determinations described in Section 8(b) above, Team
shall act reasonably and in good faith and any such determination shall be
required to be made by the affirmative vote of a majority of the members of the
Board. In the event that Team terminates this Agreement for cause as specified
above, Hawk shall not be entitled to receive any further compensation under this
Agreement from and after the date of such termination for cause.
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<PAGE> 6
c. HAWK'S TERMINATION RIGHTS FOR CAUSE. Hawk may terminate this
Agreement "for cause" after the occurrence of one or more of the following
events:
(i) Team's assignment to Hawk of duties inconsistent with the
duties of Chief Executive Officer of Team;
(ii) the failure of Team to maintain Hawk in the position of Chief
Executive Officer;
(iii) the removal or non-election of Hawk to Team's Board of
Directors as its Chairman;
(iv) the reduction in Hawk's Base Compensation;
(v) the failure of Team to provide Hawk the performance goals and
bonus opportunities as set forth in Section 3(b), which
failure continues for thirty (30) days following written
notice to Team by Hawk;
(vi) a material breach by Team of any material provision of this
Agreement which remains uncorrected for thirty (30) days
following written notice to Team by Hawk of such breach; or
(vii) the change of the location for the primary performance of
Hawk's services under this Agreement from Alvin, Texas to a
city which is more than fifty (50) miles away from such
location, which change is not approved by Hawk.
Hawk shall, immediately after termination of this Agreement pursuant to this
Section 8(c), continue to receive Monthly Salary Payments for each of the twelve
(12) consecutive months following termination of this Agreement under this
Section 8(c), and Hawk shall be entitled to all acceleration of vesting of the
options granted pursuant to Section 5 herein. Hawk shall also be entitled to
receive a pro-rata bonus payment pursuant to Section 3(b) with respect to the
portion of the fiscal year actually worked for the fiscal year in which this
Agreement is terminated.
d. HAWK'S TERMINATION RIGHTS WITHOUT CAUSE. Hawk may terminate this
Agreement without cause upon thirty (30) days' prior written notice to Team. In
such event, Hawk shall be entitled to receive as his total remaining
entitlements hereunder the Monthly Salary Payments through the last date Hawk
actually works and shall not be entitled to receive any further compensation
from and after such date.
e. REEMPLOYMENT. Hawk shall not be under any duty or obligation to
seek or accept other employment following any termination of this Agreement, and
the amounts due Hawk hereunder shall not be reduced or suspended if Hawk accepts
subsequent employment thereafter.
9. PROTECTION OF CONFIDENTIAL INFORMATION AND GOODWILL. Hawk hereby
covenants and agrees as follows:
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<PAGE> 7
a. While serving as Team's Chief Executive Officer, Hawk shall
have access to confidential or proprietary information or trade secrets of Team,
including, but not limited to, information with respect to Team or its
Affiliates (as hereinafter defined) as follows: the identity, lists, and/or
descriptions of any customers of Team; financial statements, cost reports, and
other financial information; product or service pricing information; contracts,
contract proposals and bidding information; policies and procedures developed as
part of a confidential business plan; and management systems and procedures,
including manuals and supplements thereto (collectively, "Trade Secrets").
Notwithstanding the foregoing, Trade Secrets shall not include any data or
information that (i) has been voluntarily disclosed to the general public by the
Team or its Affiliates; (ii) has been independently developed and disclosed to
the general public by others; or (iii) otherwise enters the public domain
through lawful means.
b. Hawk shall not use or disclose, directly or indirectly, for any
reason whatsoever or in any way the Trade Secrets, other than (i) at the
direction of Team during the course of Hawk's employment, (ii) after receipt of
the prior written consent of Team, (iii) as required by any court or
governmental regulatory agency having competent jurisdiction over Team or its
business or over Hawk, or (iv) information made public by Team or information
known or generally available within Team's industry.
c. During the Term and for a period of two (2) years after the
termination of Hawk's employment with Team, Hawk shall not, directly or
indirectly, either as an employee, employer, consultant, agent, principal,
partner, stockholder, corporate officer, director, or in any other individual or
representative capacity, engage or participate in any business that is in
competition in any manner whatsoever with the business of Team or any Affiliate
of Team (as defined in Paragraph 14 hereof) as such business is presently
conducted and as conducted during the Term; provided, however, that following
the Term, the covenant contained in this subsection shall not pertain to
activities which occur more than one hundred (100) miles from any operating
facility of Team or any Affiliate of Team.
d. During the Term and for a period of two (2) years following the
termination of Hawk's employment with Team, Hawk shall not solicit or negotiate,
directly or indirectly, any contract or agreement that constitutes or would
constitute engaging in competition with the business of Team or any Affiliate of
Team as presently conducted and as conducted during the Term; provided, however,
that following the Term, the covenant contained in this subsection shall not
pertain to activities which occur more than one hundred (100) miles from any
operating facility of Team or any Affiliate of Team.
e. During the Term and for a period of two (2) years following the
termination of Hawk's employment with Team, Hawk shall not solicit for
employment or employ, directly or indirectly, any employee employed by Team or
any Affiliate within the one (1) year period immediately prior to such
solicitation for employment.
f. Hawk shall not use the name of Team or any Affiliate of Team in
connection with any business that is in competition in any manner whatsoever
with the business of Team or any Affiliate of Team as presently conducted and as
conducted during the Term.
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<PAGE> 8
g. Team and Hawk agree that the covenants set forth in this Section
9 shall accrue to the benefit of Team, irrespective of the reason for
termination of the other provisions of this Agreement and the corresponding
employment relationship created herein, or Hawk's performance hereunder.
h. In connection with the limited protection afforded Team by the
covenants contained within this Section 9, Hawk recognizes that Team's need for
the covenants is based on the following:
i. Team has spent and will expend substantial time, money
and effort in developing (x) its maintenance, repair and energy
management businesses and (y) valuable Trade Secrets, including, without
limitation, a valuable list of customers and information about their
requirements and needs, purchasing patterns and internal purchasing
procedures;
ii. Hawk, in the course of the Term, has been and will be
compensated to help develop, and has been and will be personally
entrusted with and exposed to, the Trade Secrets, including, without
limitation, Team's contract, business development plans and
opportunities, trade secrets and other confidential and proprietary
information;
iii. Team, during the Term and after its termination, will be
engaged in the highly competitive maintenance, repair and energy
management businesses in which many firms, including Team, compete;
iv. Team provides and will provide services throughout the
United States and Hawk will be involved in providing such services
through operating facilities and Affiliates of Team;
V. Hawk could, after having access to the Trade Secrets,
including, without limitation, Team's financial records, contracts,
technology and associated trade secrets and know-how and receiving
further training by and experience with Team, and after reviewing Team's
trade secrets and confidential information, become a competitor; and
vi. Team will suffer great loss and irreparable harm if,
during or after the Term, Hawk enters directly or indirectly into
competition with Team.
vii. Hawk hereby specifically acknowledges and agrees that
the temporal, geographical and other restrictions contained in this
Section 9 are reasonable and necessary to protect the business and
prospects of Team, and that the enforcement of the provisions of this
Section 9 will not work an undue hardship on him.
viii. Hawk further agrees that in the event either the length
of time, geographical or any other restrictions, or portion thereof, set
forth in this Section 9 is overly restrictive and unenforceable in any
court proceeding, the court may reduce or modify such restrictions to
those which it deems reasonable and enforceable under the
8
<PAGE> 9
circumstances and the parties agree that the restrictions of this
Section 9 will remain in full force and effect as reduced or modified.
i. Hawk further agrees and acknowledges that Team does not have an
adequate remedy at law for the breach or threatened breach by him of the
covenants contained in this Section 9 and Hawk therefore specifically agrees
that Team, in the event of the breach or threatened breach by Hawk of any of the
Hawk's covenants contained in Section 9 of this Agreement, in addition to other
remedies which may be available to it hereunder, may file a suit in equity to
enjoin Hawk from such breach or threatened breach.
j. Nothing in this Section 9 shall be deemed to prevent Hawk from
acquiring through market purchases and owning, solely as an investment, less
than one percent (1%) in the aggregate of the equity or debt securities of any
class of any issuer whose shares are registered under Section 12(b) or Section
12(g) of the Securities Exchange Act of 1934, as amended, and are listed or
admitted for trading on any United States national securities exchange or are
quoted on the National Association of Securities Dealers Automated Quotations
System, or any similar system of automated dissemination of quotations of
securities prices in common use of any such issuer.
Hawk further agrees, in the event that any provision of this Section 9 is
held to be invalid or against public policy, the remaining provisions of this
Section 9 and the remainder of this Agreement shall not be affected thereby.
10. PROPERTY OF TEAM. Hawk agrees that, upon the termination of the Term,
he will immediately surrender to Team all property, equipment, funds, lists,
books, records, and other materials of Team in the possession of or provided to
Hawk.
11. INDEMNIFICATION. Team and its Affiliates shall indemnify Hawk to the
maximum extent allowed or provided in the Articles of Incorporation and/or
Bylaws of Team and its Affiliates and also to the maximum extent provided for
in any agreement containing indemnification provisions between Team, its
Affiliates and any other director or officer of Team and/or its Affiliates. Hawk
shall be entitled to such insurance coverages to secure Team's indemnity
obligations described herein as are afforded to other Team officers and
directors.
12. GOVERNING LAW. This Agreement and all issues relating to the
validity, interpretation, and performance hereof shall be governed by and
interpreted under the laws of the State of Texas, without regard to any law,
whether of Texas or any other jurisdiction, that would apply the laws of any
jurisdiction other than Texas. The parties hereby consent to jurisdiction and
venue in any court of competent jurisdiction in Harris County, Texas, or the
United States District Court for the Southern District of Texas, Houston
Division, and either party may bring any suit that they desire to institute upon
this Agreement in any such court.
13. ARBITRATION. If a dispute arises out of or related to this Agreement,
or its breach, and if the dispute cannot be settled through direct discussion,
then Team and Hawk agree that any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration administered in Houston, Texas by the American Arbitration
Association
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<PAGE> 10
under its commercial arbitration rules, and judgment on the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof.
14. REMEDIES. With respect to each and every breach, violation, or
threatened breach or violation by either party of any of the covenants set
forth herein, the other party, in addition to all other remedies available at
law or in equity, including specific performance of the provisions hereof, shall
be entitled to enjoin the commencement or continuance thereof and, without
notice to the other party, may apply for entry of an immediate restraining order
or injunction. In addition, each party agrees, upon demand, to immediately
account for and pay over to the other party an amount equal to all compensation,
commissions, bonuses, salary, gratuities, or other emoluments of any kind
directly or indirectly received by, or for the use or benefit of, the other
party resulting from any activity, transaction, or employment in breach or
violation of any of the covenants set forth in this Agreement, such amount being
agreed to constitute liquidated damages because the exact amount of actual
damages to be sustained on account of any such breach or violation cannot be
determined with complete accuracy. In addition, each party agrees to pay the
other party a reasonable sum as and for his or its attorneys' fees and costs of
litigation should such other party bring an action against the breaching party
for breach of this Agreement and prevail in such action. Each party may pursue
any of the remedies described in this Section 14 concurrently or consecutively,
in any order, as to any such breach or violation, and the pursuit of one of such
remedies at any time will not be deemed an election of remedies or waiver of the
right to pursue any of the other such remedies.
15. NOTICES. Any notice or request herein required or permitted to be
given to any party hereunder shall be given in writing and shall be personally
delivered or sent to such party by United States mail, certified or registered
mail, return receipt requested, with postage prepaid, at the address set forth
below the signature of such party hereto or at such other address as such party
may designate by written communication to the other party pursuant to, and in
accordance with, this Paragraph 15. Each notice given in accordance with this
Paragraph 15 shall be deemed to have been given, if personally delivered, on the
date personally delivered, or, if mailed, on the day on which it is deposited in
the United States mail, and shall be deemed to be received or delivered, if
personally delivered, on the date personally delivered, or, if mailed, on the
third business day following the day on which it is deposited in the United
States mail.
16. HEADINGS. The headings of the paragraphs of this Agreement have been
inserted for convenience of reference only and shall not be construed or
interpreted to restrict or modify any of the terms or provisions hereof.
17. SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable, and this Agreement and
each separate provision hereof shall be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part of this
Agreement, and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. In addition, in
lieu of such illegal, invalid, or unenforceable provision, there shall be added
automatically as a part of this Agreement, a provision as similar in terms to
10
<PAGE> 11
such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid, and enforceable, if such reformation is allowable under applicable
law.
18. BINDING EFFECT. This Agreement shall be binding upon and shall inure
to the benefit of each party hereto and each party's respective successors,
heirs, permitted assigns, and legal representatives.
19. DEFINITION OF "AFFILIATE." For purposes of this Agreement, the term
"Affiliate" means any subsidiary of Team. For purposes of this definition, a
subsidiary of Team means any corporation or other entity whose outstanding
equity interest are more than fifty percent (50%) directly owned by Team and
shall further mean any corporation or other entity whose outstanding equity
interest are at least fifty percent (50%) owned through an unbroken chain of
ownership through other subsidiaries of Team.
20. ASSIGNMENT. This Agreement and any interest herein or rights, duties,
or obligations hereunder may be assigned or delegated by Team without the prior
written consent of the Hawk, but no such assignment may be made by Hawk.
21. SEPARATE AGREEMENTS. The provisions of Section 9 shall be construed
as a separate agreement in each of the separate geographical areas, if any,
referred to in Section 9, and to the extent that it may be found to be illegal
and/or unenforceable in any of said geographical areas, this Agreement shall not
be affected thereby with respect to each other geographical area.
22. TEAM POLICIES, REGULATIONS, AND GUIDELINES FOR EMPLOYEES. Team may
issue policies, rules, regulations, guidelines, procedures, or other
informational material, whether in the form of handbooks, memoranda, or
otherwise, relating to its employees. These materials are general guidelines for
Hawk's information and shall not be construed to alter, modify, or amend this
Agreement for any purpose whatsoever.
23. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings, whether written
or oral, relating to the subject matter hereof, unless expressly provided
otherwise herein. No amendment, modification, or termination of this Agreement,
unless expressly provided otherwise herein, shall be valid unless made in
writing and signed by each of the parties whose rights, duties, or obligations
hereunder would in any way be affected by an amendment, modification, or
termination. Unless expressly set forth herein, no representations, inducements,
or agreements have been made to induce either Hawk or Team to enter into this
Agreement. This Agreement is the sole source of rights and duties as between
Team and Hawk relating to the subject matter of this Agreement.
24. KEY-MAN INSURANCE. Team shall be entitled to own, purchase and
maintain life or other insurance on the life or disability of the Hawk for
Team's exclusive benefit. Hawk shall execute all documents and perform all acts
necessary to enable Team to effect such insurance.
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<PAGE> 12
25. MISCELLANEOUS DEFINITIONS.
a. "Beneficial Owner" shall be defined by reference to Rule 13(d)-3
under the Securities Exchange Act of 1934; provided, however, and without
limitation, any individual, corporation, partnership, group, association or
other person or entity which has the right to acquire any Voting Stock at any
time in the future, whether such right is contingent or absolute, pursuant to
any agreement, arrangement or understanding or upon exercise of conversion
rights, warrants or options, or otherwise, shall be the Beneficial Owner of such
Voting Stock.
b. "Change of Control" shall mean the occurrence of any of the
following: (i) the consummation of any Business Combination, as such term is
defined in the Restated Articles of Incorporation of Team filed with the
Secretary of State of Texas on November 15, 1989; (ii) Team merges or
consolidates with any other entity other than a merger or consolidation of Team
which would result in the Voting Stock of Team outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 70% of the
total voting power represented by the voting securities of Team or such
surviving entity immediately after, (iii) Team sells all or substantially all of
its assets to any other person or entity or group or persons acting in concert,
or (iv) Team is dissolved, or if (v) any third person or entity together with
its affiliated or subsidiary entities shall become, directly or indirectly, the
Beneficial Owner of at least 30% of the Voting Stock of Team, or if (vi) the
individuals who constituted the members of Team's Board of Directors as of the
Effective Date ("Incumbent Board") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director whose election or
nomination for election by Team's stockholders was approved by a vote of eighty
percent (80%) of the directors comprising the Incumbent Board (either by a
specific vote or by approval of the proxy statement of Team in which such person
is named as a nominee for director, without objection to such nomination) shall
be, for purposes of this clause (vi), considered as though such person were a
member of the Incumbent Board.
c. "Voting Stock" shall mean all outstanding shares of capital stock
of Team entitled to vote generally in elections for directors, considered as one
class; provided, however, that if Team has shares of Voting Stock entitled to
more or less than one vote for any such share, each reference to a proportion of
shares of Voting Stock shall be deemed to refer to such proportion of the Votes
entitled to be cast by such shares.
26. PARACHUTE TAX. In the event that any amount payable to Hawk under
this Agreement or as a result of the acceleration of the vesting of any stock
option granted to Hawk shall constitute "excess parachute payments" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code"), and any regulations thereunder, and Hawk becomes liable for any excise
tax penalties ("Parachute Tax Amount") that are imposed on excess parachute
payments" pursuant to Section 4999 of the Code, Team shall make a cash payment
to Hawk in an amount equal to the result obtained by multiplying the Parachute
Tax Amount by a fraction, the numerator of which is one and the denominator of
which is one minus the sum of the "parachute tax rate" (as such term is
hereinafter defined) and the "regular tax rate" (as such term is hereinafter
defined). As used herein, the term "parachute tax rate" shall mean the maximum
rate of tax imposed under Section 4999 of the Code or the corresponding
provision of any
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<PAGE> 13
successor statute and the term "regular tax rate" shall mean the maximum
statutory rate of federal income tax imposed on individuals under Section 1 of
the Code or the corresponding provision of any successor statute (disregarding
any tax rate imposed on limited amounts of income as a phase-out of a lower tax
rate).
27. EXECUTION. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. Any telecopied signature shall be deemed a manually
executed and delivered original.
IN WITNESS WHEREOF, the parties have executed this Agreement on this the
16th day of November, 1998, TO BE EFFECTIVE as of November 2, 1998.
/s/ PHILIP J. HAWK
-------------------------------------------------
PHILIP J. HAWK
Address:
4 Bradfield Ct.
-------------------------
Houston, TX 77024
-------------------------
TEAM, INC.
By: /s/ SIDNEY B. WILLIAMS
-------------------------------------------------
Printed Name: Sidney B. Williams
-------------------------------------------------
Title: Director and Member of Executive Committee
-------------------------------------------------
Address:
200 Hermann Drive
Alvin, TX 77511
13
<PAGE> 14
EXHIBIT "A"
SALARY DEFERRED COMPENSATION AGREEMENT
<PAGE> 15
1998 SALARY DEFERRED COMPENSATION AGREEMENT
THIS 1998 SALARY DEFERRED COMPENSATION AGREEMENT ("Agreement") is
entered into this ______ day of ______________________, 1998, by and between
Team, Inc. (the "Company"), a Delaware corporation, and ___________________, a
resident of Harris County, Texas (the "Employee") effective beginning on
_________________, in order to revise certain administrative features requested
by the Trustee of the Trust established under this Agreement to coordinate the
administrative features of this Agreement with the Trust Agreement.
WHEREAS, the Employee performs valued services for the
Company; and
WHEREAS, the Company and Employee both desire that payment of the
Employee's compensation be deferred in accordance with a formal agreement
between them;
THEREFORE, in consideration of the foregoing and other good and
valuable consideration, as more fully set forth herein, the receipt and adequacy
of which are hereby acknowledged, the parties hereby agree as follows:
Section 1. Employee's Services.
The Employee is an employee of the Company. Except as otherwise
expressly provided herein, this Agreement does not alter or affect the
Employee's employment agreement or relations with the Company or any of the
Company's subsidiaries.
<PAGE> 16
Section 2. Deferral of Employee's Compensation.
2.1 Prior to the beginning of each calendar year the Employee may elect
on the form prescribed by the Company to defer the payment to him of a
percentage of the basic salary (not in excess of one hundred (100%) percent) due
and payable to him for such calendar year. For the first year of this Agreement,
this election may be made no later than the date which is 30 days following the
date this Agreement is executed and shall only apply to the pro rata portion of
the annual salary following the date of this Agreement. The salary to be
deferred pursuant to this election for each year shall be deducted and withheld
from the Employee's paycheck on a uniform basis each payroll period unless
otherwise designated by the Employee on the election form.
2.2 Any amounts deferred in accordance with Section 2.1 above shall be
currently paid to the trustee (the "Trustee") of the trust (the "Trust")
established or to be established by the Company (known as the "Team, Inc. 1998
Salary Deferred Compensation Trust") to be held in the Employee's account (the
"Account") in accordance with the terms of such Trust and this Agreement or any
other trust established by the Company for this purpose which conforms to the
terms of the Internal Revenue Service model trust prescribed in Rev. Proc.
92-64.
2.3 The deferral percentage in effect for a calendar year shall
continue in effect for the succeeding calendar year until
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<PAGE> 17
otherwise designated by the Employee in a new election form prior to the
beginning of such succeeding calendar year.
2.4 In lieu of filing an election form for the first year in which this
Agreement is effective, the Employee may designate the deferral percentage here:
---------- percentage (up to maximum 100%)
---------- Employee's initials
Section 3. Investment of Account.
3.1 The Account shall be invested in any assets determined by the
Trustee in the sole discretion of the Trustee in accordance with the terms of
the Trust after consultation with the Employee as to any investment
recommendations of the Employee; provided such recommendations shall be merely
advisory and not binding on the Trustee. The Company shall cooperate in
communicating any exchange of investment information between the Trustee and the
Employee and in communicating any investment recommendations of the Employee.
3.2 Any earnings (or losses), net of any expenses charged to the Trust
in accordance with the provisions of the Trust Agreement on the assets realized
by the Trust in the Account, shall be added to (or subtracted from) the balance
in the Account and as part of such balance shall be distributed in accordance
with Section 4 below. Any income tax imposed on the Company attributable to such
earnings shall be paid by the Company and not charged against or paid from the
Account.
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<PAGE> 18
Section 4. Payment of Account.
4.1 The balance of the amount in the Account shall be paid at the time
or times set forth below in this Section 4, in cash unless the Employee
requests, subject to the consent of the Trustee, to pay such amounts in kind (in
the form of the assets held as investments).
4.2 The distribution of the balance of the Account shall be made to the
Employee in ________________ substantially equal quarterly installments over the
__________-year period beginning with the calendar quarter in which the earlier
of the following occurs:
(a) the Employee's death or Disability; or
(b) the Employee's termination of employment with the Company
(including subsidiaries thereof) for any reason (other than death
or Disability).
Subsequent installments shall be paid in succeeding calendar quarters until the
amounts in the Employee's Account have been paid in full. Payment of the
distribution shall commence within 30 days following the operative date in
Section 4.2(a) and (b) above.
In the event of the Employee's death while receiving payments
hereunder, the Designated Beneficiary (as defined in Section 5 below) shall
receive any remaining (as of the date of death) amounts due hereunder either (at
the Company's sole discretion) in
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<PAGE> 19
the same manner and to the same extent as the deceased Employee would have
received had the Employee not died or in a lump sum.
If the Designated Beneficiary dies following the death of the Employee
before all amounts otherwise payable to the Employee have been paid, the balance
remaining in the Account shall be paid in one lump sum to the estate of such
Designated Beneficiary. If no Designated Beneficiary survives the Employee,
payments otherwise payable hereunder to a Designated Beneficiary shall be paid
in one lump sum to the Employee's estate. Payments under the preceding two
sentences shall be made as soon as practicable after the Employee's death (or
the Designated Beneficiary's death, as the case may be) in an amount equal to
the value of the Account as of the last day of the calendar quarter in which
such death occurred.
4.3 Notwithstanding any other provision of this Agreement, payment of
the balance of the Account shall be made in a single lump sum during the month
of January immediately following the calendar year in which occurs the operative
date specified in the first sentence of Section 4.2 above, if the Employee so
elects at the time of execution of this Agreement. This election shall be
signified by the Employee's initials in the following space:
Lump Sum Elected __________
4.4 For purposes of this Agreement the Employee shall be considered
Disabled if a qualified physician selected by the Company determines that the
Employee is unable due to physical or mental illness or other impairment, to
perform the majority of the
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<PAGE> 20
Employee's customary duties with the Company (including subsidiaries thereof)
and that such condition will likely be permanent or of indefinite duration.
4.5 Notwithstanding any other provision of this Section 4, in the event
of an unforeseeable emergency of the Employee, the Employee shall have the right
to receive an immediate payment under this Agreement from his Account subject to
the following terms and conditions. The term "unforeseeable emergency" shall
mean:
(a) an unanticipated emergency that is caused by an event beyond
the control of the Employee or the Designated Beneficiary that
would result in severe financial hardship to the individual if
a distribution or early withdrawal were not permitted; or
(b) a severe financial hardship to the Employee
resulting from a sudden and unexpected illness or
accident of the Employee or of a dependent (for
income tax purposes) of the Employee, loss of the
Employee's property due to casualty, or other
similar extraordinary and unforeseeable
circumstances arising as a result of events beyond
the control of the Employee.
(c) Examples of what are not considered to be
unforeseeable emergencies include the need to send
an Employee's child to college or the desire to
purchase a home.
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<PAGE> 21
(d) The amount distributed to the Employee under this
Agreement pursuant to the preceding provisions of
this Section 4.5 shall only be made following the
review and approval by the Company of the claim of
the Employee (or Designated Beneficiary) for early
withdrawal pursuant to this provision and shall be
limited to an amount reasonably necessary to
satisfy the unforeseeable emergency. The Company
shall administer this provision in accordance with
the limitations of the provisions of this Section
4.5. The determination by the Company of an
unforeseeable emergency shall, in accordance with
the provisions of Rev. Proc. 92-65ss.3.01(c) (or any
successor later ruling guidelines or regulations of
the Internal Revenue Service), be limited to cases
involving an "unforeseeable emergency" as defined
above. The circumstances that will constitute an
unforeseeable emergency will depend upon the facts
of each case, but, in any case, payment may not be
made to the extent that the severe financial
hardship is or may be relieved --
(i) Through reimbursement or compensation by
insurance or otherwise,
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<PAGE> 22
(ii) By liquidation of the Employee's assets, to the
extent the liquidation of such assets would not itself cause
severe financial hardship, or
(iii) By cessation of deferrals under this Agreement.
4.6 The participant shall have the right at any time to make an
election to receive the entire remaining amount in the participant's account,
and as soon as practicable (but generally no later than 30 days) following the
making and filing with the Committee of such a withdrawal election, 90 percent
of the entire amount of the account shall be paid to the participant in a single
sum, and the remaining 10 percent shall be forfeited. Following such a
withdrawal election and distribution, the participant shall not be eligible to
thereafter again participate in the Plan.
4.7 Unless the Committee otherwise determines, for the Plan as a whole,
Employee shall be given the right to make a one time change in the method of
payment elected in each deferral election with respect to Section 4.2 above,
provided such change is made at least two years prior to the participant's
retirement date.
-8-
<PAGE> 23
Section 5. Designation of Beneficiary.
The Employee designates the person(s) listed on Exhibit A as the
beneficiary or beneficiaries ("Designated Beneficiary") to receive payments
under this Agreement in the event of the Employee's death. The Employee may
change the Designated Beneficiary without the consent of any prior Designated
Beneficiary by notifying the Company of such change on a form provided by the
Company for this purpose. The Company shall promptly deliver a copy of the
current beneficiary designation to the Trustee.
Section 6. Facility of Payment.
If the Trustee determines that a payee under this Agreement is unable
to care for his own affairs because of physical or mental condition or minority,
any such payment may be made in accordance with the terms of Section 13(c) of
the Trust or comparable provisions of whichever trust is in effect or in the
event the trust in effect has no such comparable provisions, then to the payee's
guardian or spouse, or to any descendant, parent, relative, or other person
determined by the Trustee to be trustworthy to utilize the payment for the
benefit of the payee.
Section 7. Nonassignability by Employee.
The Employee shall not have the right to assign, anticipate, sale,
transfer, pledge, encumber, or create a security interest in, or dispose of any
right or interest provided for in this Agreement,
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<PAGE> 24
including, without limitation, the right to receive any severance, retirement,
disability, or death payment or benefit, and no right of the Employee or the
Designated Beneficiary to any such payment or benefit shall be subject to
attachment or garnishment by any of the creditors of the Employee or of the
Designated Beneficiary.
Section 8. Continuation as Employee.
Nothing contained in this Agreement or in the Trust, nor the payment of
any contributions to the Trust, nor the payment of any benefits under this
Agreement or the Trust shall be construed to grant the Employee any right to be
retained in the service of the Company or to restrict the right of the Company
to discharge the Employee regardless of the effects such discharge would have
upon the Employee or upon any other person as a Beneficiary of the Trust. The
Company expressly reserves the right to hire and discharge persons providing
services as if neither this Agreement nor the Trust had been entered into or
established. For purposes of this Section 8, the term "Company" shall include
any subsidiaries which are, directly or indirectly, 50 percent or more owned by
the Company.
Section 9. Status of Account.
Notwithstanding any other provision of this Agreement, and regardless
of the extent amounts deferred by the Employee or payable to Employee have been
transferred to and are held in the
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<PAGE> 25
Trust, the Employee's rights to all such amounts whether or not held in the
Trust, are that of a general unsecured creditor of the Company and such amounts
represent nothing more than a mere promise by the Company to pay such amounts at
the future time or times provided in this Agreement. The Employee shall have a
right only to the balance of the Account including earnings or losses thereon as
provided under Section 3.2, and shall have no right against the Company under
this Agreement with respect to amounts properly contributed to the Account,
beyond payment of the balance in the Account. Notwithstanding the preceding
sentence, the Company shall remain liable to the Employee for payment of the
balance in the Account -
(a) in the event of any noninvestment loss to the Account
while in the Trust for any reason including failure, receivership,
liquidation, bankruptcy or fraud or embezzlement of or by the Trustee,
without regard to any such noninvestment loss to the Account; and
(b) to the extent that amounts in the Account become
unavailable for payment under this Agreement in the event such amounts
pursuant to the terms of the Trust are paid or otherwise become subject
to the creditors of the Company.
Section 10. Miscellaneous.
10.1 The Company, acting in good faith, shall have the sole right and
absolute discretion to interpret and administer this
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<PAGE> 26
Agreement. The Company's interpretation and actions hereunder, including the
computation of payments or the determination of the proper recipient of payments
if made in good faith, shall be conclusive and binding upon all persons for all
purposes. An appropriate procedure shall be established under this Agreement for
the submission for a claim for benefits by the Employee or Designated
Beneficiary for amounts due under this Agreement and the review and
determination by the Company of such claims, and in cases of denial of a claim,
a review of any request for reconsideration.
10.2 This Agreement shall be binding upon and inure to the benefit of
the Company, its successors and assigns, and the Employee, his heirs, executors,
administrators, and legal representatives.
10.3 This Agreement (along with the existing provisions of the Trust)
embodies the full understanding of the parties and may not be amended or
modified except in writing signed by the party to be charged. This Agreement may
be amended by mutual agreement of the Company and the Employee; provided that no
such amendment shall become effective with respect to the Trustee until the
Trustee has received notice of such amendment and that no such amendment shall
alter the duties or obligations of the Trustee without its written consent.
10.4 The laws of Texas shall govern the validity, interpretation,
construction, and performance of this Agreement.
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<PAGE> 27
10.5 This Agreement is intended to comply with the law and rulings
under Sections 83, 402(b), 451 and 671 of the Internal Revenue Code of 1986 as
amended (the "Code" or corresponding provisions of future laws) and the economic
benefit and constructive receipt doctrines thereunder, including the ruling
positions and criteria of the Internal Revenue Service as in effect from time to
time and the related rulings and regulations which result in a deferral of
income tax to the Employee (or the Designated Beneficiary). This Agreement is
also intended to comply with Sections 201(2), 301(a)(3) and 401(a)(1) of the
Employee Retirement Income Security Act of 1974, as amended and the related
rules and regulations thereunder applying to unfunded plans maintained primarily
for the purpose of providing deferred compensation for a select group of
management or highly compensated employees. This Agreement shall be deemed to be
automatically amended to comply with the law, rules and regulations referred to
in this Section 10.5 except to the extent that the Trustee or Company objects in
writing to such amendment within sixty (60) days from the date of the receipt of
notice from the Company of any such amendment.
10.6 Payment of amounts or benefits to the Employee under this
Agreement shall be subject to any applicable tax withholding including federal
income tax withholding, by the Trustee, the Company or the other payor. The
Company and the Trustee may
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<PAGE> 28
allocate or delineate the tax withholding responsibilities in a
separate letter agreement.
10.7 The Company shall deliver the original or a certified copy of this
Agreement to the Trustee within 10 days of the date of execution hereof, and the
Employee shall become a beneficiary of the Trust on the later of the date of
delivery as aforesaid or on the date of the first contribution made to the Trust
by the Company on behalf of the Employee pursuant to this Agreement.
10.8 This Agreement may be executed in any number of counterparts and
each executed counterpart shall be deemed an original and such counterpart shall
constitute one and the same instrument which may be sufficiently evidenced by
any one counterpart.
IN WITNESS WHEREOF, the parties hereto have caused the Amendment and
Restatement of the Agreement to be executed on the day and year first above
written.
ATTEST TEAM, INC.
[Affix Corporate Seal]
By:
-----------------------------------
Kenneth H. Tholan,
President
EMPLOYEE:
-----------------------------------
Philip J. Hawk
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<PAGE> 29
EXHIBIT "A"
DESIGNATED BENEFICIARY
PRIMARY:
Name:
--------------------------------------------------------
Relationship:
--------------------------------------------------------
Percentage:
--------------------------------------------------------
SECONDARY ALTERNATES
(in the event the primary does not survive me) the following
alternates in equal vested shares per stirpes:
Name:
--------------------------------------------------------
Relationship:
--------------------------------------------------------
Percentage:
--------------------------------------------------------
Name:
--------------------------------------------------------
Relationship:
--------------------------------------------------------
Percentage:
--------------------------------------------------------
Name:
--------------------------------------------------------
Relationship:
--------------------------------------------------------
Percentage:
--------------------------------------------------------
Name:
--------------------------------------------------------
Relationship:
--------------------------------------------------------
Percentage:
--------------------------------------------------------
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<PAGE> 30
EXHIBIT "B"
DEFERRED COMPENSATION TRUST AGREEMENT
<PAGE> 31
TEAM, INC.
1998
DEFERRED COMPENSATION TRUST AGREEMENT
For The
1998
Salary Deferred Compensation Agreement
(a) This Team, Inc. 1998 Deferred Compensation Trust Agreement ("Trust
Agreement") is made this ______ day of ____________, 199_, to be effective as of
_____________ by and between Team, Inc. ("Company") and
_________________________ ("Trustee") for use in conjunction with the 1998
Salary Deferred Compensation Agreement.
(b) WHEREAS, Company has adopted the nonqualified deferred compensation
agreement listed in Appendix I hereto (the "Agreement");
(c) WHEREAS, Company has incurred or expects to incur liability under
the terms of such Agreement with respect to the individual employee
participating in the Agreement (the "Participant");
(d) WHEREAS, Company wishes to establish a trust (hereinafter called
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of Company's creditors in the event of Company's
Insolvency, as herein defined, until paid to the Participant and his
beneficiaries in such manner and at such times as specified in the Agreement;
<PAGE> 32
(e) WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the
Agreement as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
(f) WHEREAS, it is the intention of Company to make contributions to
the Trust to provide itself with a source of funds to assist it in the meeting
of its liability under the Agreement;
NOW THEREFORE, this Trust Agreement, is hereby made by and between the
Company and the Trustee with provisions as follows:
SECTION 1. ESTABLISHMENT OF TRUST.
(a) Company has deposited with Trustee in trust an amount equal to or
no less than $500, which shall become the principal of the Trust to be held,
administered and disposed of by Trustee as provided in this Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
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<PAGE> 33
(c) The Trust is intended to be a grantor trust, of which Company is
the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust, and any earnings thereon shall be held
separate and apart from other funds of Company and shall be used exclusively for
the uses and purposes of the Participant and general creditors of the Company as
herein set forth. The Participant and his beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets of the Trust. Any
rights created under the Agreement and this Trust Agreement shall be mere
unsecured contractual rights of Participant and his beneficiaries against
Company. Any assets held by the Trust will be subject to the claims of Company's
general creditors under federal and state law in the event of Insolvency, as
defined in Section 3(a) herein.
(e) After the Trust has become irrevocable pursuant to Section 1(b)
hereof, Company shall be required in accordance with the terms of the Agreement
to make periodic (but no less frequently than quarterly) contributions of cash
or other property to the Trust in an amount sufficient to pay the Participant or
beneficiary the benefits payable pursuant to the terms of the Agreement.
-3-
<PAGE> 34
SECTION 2. PAYMENTS TO THE PARTICIPANT AND HIS BENEFICIARIES.
(a) Company shall deliver to Trustee a copy of the executed Agreement.
The Agreement shall provide the time and manner of payment to the Participant of
funds from the Trust. Except as otherwise provided herein, Trustee shall make
payments in cash or in kind to the Participant and his beneficiaries in
accordance with the Agreement. Trustee shall, unless otherwise agreed with
Company, report and withhold any federal, state or local taxes that may be
required to be withheld with respect to the accumulation of funds in the Trust
and the payment of funds from the Trust.
(b) The determination of "unforeseeable emergency" under Section 4.5 of
the Agreement shall be solely made by Company and not Trustee.
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST
BENEFICIARY WHEN COMPANY IS INSOLVENT.
(a) Trustee shall cease payment of benefits to the Participant and his
beneficiaries if Company is Insolvent. Company shall be considered "Insolvent"
for purposes of this Trust Agreement if (i) Company is unable to pay its debts
as they become due, or (ii) Company is subject to a pending proceeding as a
debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of Company under federal and state law as set
forth below.
-4-
<PAGE> 35
(1) The Board of Directors and an officer (other than the
Participant) designated by the Company shall have the duty to inform
Trustee in writing of Company's Insolvency. If a person claiming to be
a creditor of Company alleges in writing to Trustee that Company has
become Insolvent, Trustee shall determine whether Company is Insolvent
and, pending such determination, Trustee shall discontinue payment of
benefits to the Participant or his beneficiaries.
(2) Unless Trustee has actual knowledge of Company's
Insolvency, or has received notice from Company or a person claiming to
be a creditor alleging that Company is Insolvent, Trustee shall have no
duty to inquire whether Company is Insolvent. Trustee may in all events
rely on such evidence concerning Company's solvency as may be furnished
to Trustee and that provides Trustee with a reasonable basis for making
a determination concerning Company's solvency.
(3) If at any time Trustee has determined that Company is
Insolvent, Trustee shall discontinue payments to the Participant or his
beneficiaries and shall hold the assets of the Trust for the benefit of
Company's general creditors. Nothing in this Trust Agreement shall in
any way diminish any rights of the Participant or his beneficiaries to
pursue their rights as general creditors of Company with respect to
benefits due under the Agreement or otherwise.
-5-
<PAGE> 36
(4) Trustee shall resume the payment of benefits to the
Participant or his beneficiaries in accordance with Section 2 of this
Trust Agreement only after Trustee has determined that Company is not
Insolvent (or is no longer Insolvent).
(c) For purposes of this Section 3, the Trustee shall have the right as
a reimbursable administration cost and expense under this Trust Agreement to
retain any outside counsel and experts it reasonably believes is necessary or
appropriate to assist it with regard to the determination of insolvency and to
commence a judicial interpleader or declaratory judgment or other appropriate
action for direction regarding this determination.
SECTION 4. PAYMENTS TO COMPANY.
Except as provided in Section 3 hereof, after the Trust has become
irrevocable, Company shall have no right or power to direct Trustee to return to
Company or to divert to others any of the Trust assets before all payment of
benefits have been made to the Participant and his beneficiaries pursuant to the
terms of the Agreement.
-6-
<PAGE> 37
SECTION 5. INVESTMENT AUTHORITY.
Trustee may invest in securities (including stock or rights to acquire
stock) or obligations issued by Company (or affiliated corporations within the
same commonly controlled group). All rights associated with assets of the Trust
shall be exercised by Trustee or the person designated by Trustee, and shall in
no event be exercisable by or rest with the Participant.
SECTION 5A. POWERS AND DUTIES OF TRUSTEE.
All investment and disbursement powers over all property held in this
Trust shall be vested exclusively in the Trustee. Except as provided in the
Trust Agreement to the contrary, Trustee shall have all the rights, powers and
duties granted trustees under the Texas Trust Code, as amended from time to
time, and shall have the power and authority to perform every act necessary or
appropriate to carry out the terms of this Trust to the maximum extent permitted
by law, including, without limitation, the following:
(a) The receipt of contributions or funding under the
Agreement;
(b) To hold, manage, invest, reinvest, sell and exchange all
property of the Trust, together with any additional property which may
from time to time be transferred to the Trustee as herein provided; to
collect, invest and reinvest
-7-
<PAGE> 38
any and all income resulting from all such Trust property; to
accumulate and distribute the income and principal of the Trust in
accordance with this Trust Agreement, after deducting expenses properly
payable from trust income;
(c) The entering into and performance of any agreement;
(d) Subject to the provisions of Section 3 hereof, the
undertaking of any legal action, whether as plaintiff or defendant, on
behalf of the Trust;
(e) The employment of any person, including attorneys,
accountants, investment managers and agents, to advise and assist
Trustee in the performance of its duties;
(f) The execution and delivery of all instruments necessary or
appropriate to accomplishing or facilitating the exercise of Trustee's
powers;
(g) To release, in the discretion of Trustee, any fiduciary
power at any time, in whole or in part, temporarily or permanently,
whenever Trustee may deem it advisable, by acknowledged instrument;
(h) To keep any and all securities or other assets of the
Trust in the name of some other person or entity with a power of
attorney for the transfer attached or in bearer or Federal Reserve
Book Entry form or in the name of Trustee without disclosing the
fiduciary capacity of Trustee;
-8-
<PAGE> 39
(i) To vote, either in person or by proxy, any share of stock
held as part of the assets of the Trust;
(j) To invest and reinvest Trust property and the income
therefrom in a money market fund or other mutual fund from which the
Trustee or an affiliate of the Trustee may receive advisory fees or
other remuneration;
(k) To hold cash uninvested at any time and in any amount
pending investment pursuant to the terms of this Trust Agreement. When
Trustee acts in good faith, Trustee, in all matters pertaining to
Trustee's management and investment of the Trust, may rely upon any
notice, resolution, instruction, direction, order, certificate,
opinion, letter, telegram or other document believed by Trustee to be
genuine, to have been signed by a proper representative of the
Participant or beneficiary, Company or any investment manager or third
party recordkeeper, if one is appointed, and to be the act of the
Participant or beneficiary, Company or the investment manager or third
party recordkeeper, as the case may be. Trustee may accept any
certificate or other instrument duly signed by a proper representative
of the Participant or beneficiary, Company or the investment manager or
third party recordkeeper, if one is appointed which purports to
evidence an instruction,
-9-
<PAGE> 40
direction or order of the Participant or beneficiary, Company, the
investment manager or third party recordkeeper, as the case may be, as
conclusive evidence thereof; and
(l) Any person dealing in good faith with Trustee or in good
faith assisting Trustee in conducting a transaction shall be entitled
to rely without inquiry upon the representation that Trustee has the
power Trustee purports to exercise and has exercised such power in
accordance with the provisions of this Trust Agreement, and in such
event such person shall not be responsible for the application of money
or property paid or delivered to Trustee.
Trustee may solicit from time to time from Company and take into
account in Trustee's sole discretion, an investment objective or objectives of
the Company, in managing the investments of the Trust.
[With respect to the holding of any life insurance policy or separate
account, variable annuity or mutual fund generally described in Appendix II to
this Trust Agreement, the Company shall have the right to select any one or more
life insurance carriers as the issuer or manager of such holdings, and direct
the Trustee to accept such holdings for the Trust.]
-10-
<PAGE> 41
SECTION 6. DISPOSITION OF INCOME.
During the term of this Trust, all income received by the Trust, net of
expenses, shall be accumulated and reinvested.
SECTION 7. ACCOUNTING BY TRUSTEE.
(a) Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions required to be
made, including such specific records as shall be agreed upon in writing between
Company and Trustee. Within 60 days after the removal or resignation of Trustee,
Trustee shall deliver to Company a written account of its administration of the
Trust during such year or during the period from the close of the last preceding
year to the date of such removal or resignation, setting forth all investments,
receipts, disbursements and other transactions effected by it, including a
description of all securities and investments purchased and sold with the cost
or net proceeds of such purchases or sales (accrued interest paid or receivable
being shown separately), and showing all cash, securities and other property
held in the Trust at the end of such year or as of the date of such removal or
resignation, as the case may be.
(b) Trustee shall keep and maintain complete and accurate records of
the Trust and all transactions involving any property of the Trust. Such records
shall be available for inspection by
-11-
<PAGE> 42
Company or Participant at all times during normal business hours. Trustee shall
produce and furnish to Company quarterly (or monthly if the Company or
Beneficiary requests) annual itemized statements identifying all transactions of
the Trust and generally reflecting the condition of the Trust.
SECTION 8. RESPONSIBILITY OF TRUSTEE.
(a) Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by Company which is contemplated by, and
in conformity with, the terms of the Agreement or this Trust and is given in
writing by Company. In the event of a dispute between Company and a party,
Trustee may apply to a court of competent jurisdiction to resolve the dispute.
(b) Company shall indemnify and hold harmless Trustee for any damages,
expenses, liabilities or losses, incurred or sustained by or imposed on Trustee,
arising in connection with the Trust or the Agreement (including reasonable
attorneys' fees), including any litigation that the Trustee defends against or
initiates in connection with the administration of Trustee's powers and duties
under the Trust or the Agreement. If Company does not pay such costs, expenses
and liabilities in a reasonably timely manner, Trustee may obtain payment by
withdrawing funds from the Trust.
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<PAGE> 43
(c) Trustee may consult with legal counsel (who may also be counsel for
Company generally) with respect to any of its duties or obligations hereunder.
(d) Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
(e) Trustee shall have, without exclusion, all powers conferred on
trustees by applicable law, unless expressly provided otherwise herein.
(f) Notwithstanding any powers granted to Trustee pursuant to this
Trust Agreement or to applicable law, Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
(g) Notwithstanding any provisions of this Trust Agreement or the
Agreement to the contrary, Trustee may in good faith fully rely on any
representations or directions given to Trustee by Company (or its officers and
employees designated to Trustee for this purpose) under this Trust Agreement or
the Agreement.
-13-
<PAGE> 44
(h) Notwithstanding any provisions of this Trust Agreement or the
Agreement to the contrary, Trustee shall not be liable for any action taken or
omitted as Trustee of this Trust unless such action or omission constitutes bad
faith, gross negligence or willful disregard for the provisions of this Trust
Agreement.
(i) The Trustee shall be responsible and liable for the assets in the
Trust including assets accepted as contributions to the Trust from the Company.
The Trustee shall be under no obligation and shall not have the duty to collect
or recover any funds or assets that have not yet been contributed to the Trust
until those funds and assets have both been contributed by the Company and
accepted by the Trustee.
SECTION 9. COMPENSATION AND EXPENSES OF TRUSTEE.
For its services hereunder, Trustee shall receive reasonable annual
compensation in accordance with its standard fee schedule in effect at the time
that such services are furnished to the Trust. Except to the extent otherwise
provided in Section 6 hereof, Company shall pay all reasonable or agreed upon
administrative and Trustee's fees and expenses, including any expenses
attributable to the payment of persons engaged or expenses paid in accordance
with the provisions of Sections 3(c), 5A and 8 above. The Trustee shall
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<PAGE> 45
periodically (but no less frequently than quarterly) submit its statements of
account to the Company. Payment shall be made by Company in a prompt manner. If
not so paid, the fees and expenses shall be paid from the Trust.
SECTION 10. RESIGNATION AND REMOVAL OF TRUSTEE.
(a) Trustee may resign at any time by written notice to Company, which
shall be effective 7 days after receipt of such notice unless Company and
Trustee agree otherwise.
(b) Trustee may be removed by Company on 30 days written notice or upon
shorter notice accepted by Trustee.
(c) Upon resignation or removal of Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the successor
Trustee. The transfer shall be completed within 120 days after receipt of
written notice of resignation, removal or transfer, unless Company extends the
time limit.
(d) If Trustee resigns or is removed, a successor shall be appointed,
in accordance with Section 11 hereof, by the effective date of resignation or
removal under paragraph (a) or (b) of this section. If no such appointment has
been made, Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed as administrative expenses of
the Trust.
-15-
<PAGE> 46
SECTION 11. APPOINTMENT OF SUCCESSOR.
(a) If Trustee resigns or is removed in accordance with Section 10(a)
or (b) hereof, Company may appoint any qualified corporate fiduciary, such as a
bank trust department or other party that may be granted corporate trustee
powers under state law, as a successor to replace Trustee upon resignation or
removal. The appointment shall be effective when accepted in writing by the new
Trustee, who shall have all of the rights and powers of the former Trustee,
including ownership rights in the Trust assets. The former Trustee shall execute
any instrument necessary or reasonably requested by Company or the successor
Trustee to evidence the transfer.
(b) The successor Trustee need not examine the records and acts of any
prior Trustee and may retain or dispose of existing Trust assets, subject to
Sections 7 and 8 hereof. The successor Trustee shall not be responsible for and
Company shall indemnify and defend the successor Trustee from any claim or
liability resulting from any action or inaction of any prior Trustee or from any
other past event, or any condition existing at the time it becomes successor
Trustee.
-16-
<PAGE> 47
SECTION 12. AMENDMENT OR TERMINATION.
(a) This Trust Agreement may be amended by a written instrument
executed by Trustee and Company. Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Agreement or shall make the Trust
revocable after it has become irrevocable in accordance with Section 1(b)
hereof.
(b) The Trust shall not terminate until the date on which the
Participant and his beneficiaries are no longer entitled to benefits pursuant to
the terms of the Agreement. Upon termination of the Trust any assets remaining
in the Trust shall be returned to Company.
(c) Upon written approval of the Participant (or his beneficiaries)
entitled to payment of benefits pursuant to the terms of the Agreement, Company
may terminate this Trust prior to the time all benefit payments under the
Agreement have been made. In such case, all assets in the Trust at termination
shall be returned to Company.
(d) Notwithstanding the preceding provisions of this Section 12, the
Trust shall terminate (to the extent required under the applicable rule against
perpetuities) one day prior to the last day of the period ending 21 years after
the death of the Participant.
-17-
<PAGE> 48
SECTION 13. MISCELLANEOUS.
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to the Participant and his beneficiaries under
this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment, garnishment,
levy, execution or other legal or equitable process.
(c) For purposes of facility of payment, in the event that the
Participant or beneficiary to receive a payment or distribution from the Trust
is incompetent or otherwise incapacitated in a manner that the Trustee can
reasonably question that individual's ability to manage his own affairs, the
Trustee may make the payment to (i) such individual's guardian or other legal
representative; (ii) the person responsible for the support and care of such
individual if the trustee can reasonably determine that such person is
trustworthy; or (iii) any other person a court with proper jurisdiction may
direct. Notwithstanding the preceding provisions of this Section 13(c), if in
the judgment of Trustee, the Participant becomes incapacitated, Trustee shall
have full discretionary authority to utilize the income and principal of the
Trust for the health, education, maintenance, support and other needs of the
Participant, as determined by Trustee in its sole
-18-
<PAGE> 49
discretion. No judicial determination shall be required and the Trustee shall
incur no liability to any person whatsoever for making such distributions to or
for the benefit of the Participant.
(d) This Trust Agreement shall be governed by and construed in
accordance with the laws of Texas.
(e) Any provision or requirement for notice to be made under this Trust
Agreement shall mean written notice. Written notice may be delivered in hand
(i.e., personal hand delivery) or by certified mail with a return receipt to the
current address of the person to receive the notice. Telecopy or electronic
facsimile transmissions of notice shall not be binding.
(j) In the event of any inconsistency or conflict between the terms of
this Trust Agreement and the Plan, the Trustee shall be bound and obligated only
to follow the terms of this Trust Agreement, which shall be controlling.
SECTION 14. EFFECTIVE DATE.
The effective date of this Trust Agreement shall be January 1, 1996.
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<PAGE> 50
In witness whereof, this Trust Agreement has been entered into and is
effective on the dates first set forth hereinabove.
TRUSTEE: TEAM, INC.
By: By:
--------------------------- ---------------------------
, Trust Officer
----------
THE STATE OF TEXAS ss.
ss.
COUNTY OF HARRIS ss.
BEFORE ME, the undersigned authority, on this day personally appeared
____________, known to me to be the person whose name is subscribed to the
foregoing instrument as Vice President & Trust Officer of
________________________, a banking institution, and acknowledged to me that
he/she executed the same for the purposes and consideration therein expressed,
in the capacity therein stated, and as the act and deed of said banking
institution.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the _____ day of
_______________, 199_.
------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF T E X A S
Printed Name:
-----------------
My commission expires:
--------
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<PAGE> 51
THE STATE OF TEXAS ss.
ss.
COUNTY OF HARRIS ss.
BEFORE ME, the undersigned authority, on this day personally
appeared_________________, known to me to be the person whose name is subscribed
to the foregoing instrument as ___________________ of Team, Inc., a Delaware
state corporation, and acknowledged to me that he executed the same for the
purposes and consideration therein expressed, in the capacity therein stated,
and as the act and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the _____ day of
_______________, 199_.
------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF T E X A S
Printed Name:
-----------------
My commission expires:
--------
-21-
<PAGE> 52
APPENDIX I
"Agreement"
1998 Salary Deferred Compensation Agreement executed by and
between Philip J. Hawk and Team, Inc. on ________________.
-22-
<PAGE> 1
EXHIBIT 10.2
TEAM, INC.
INCENTIVE STOCK OPTION AWARD AGREEMENT
THIS INCENTIVE STOCK OPTION AWARD AGREEMENT (the "Agreement") is made
effective as of November 2, 1998 between Team, Inc., a Texas corporation (the
"Company"), and PHILIP J. HAWK (the "Option Holder").
1. GRANT OF OPTION. Subject to the terms and conditions of this
Agreement and the Team, Inc., 1998 Incentive Stock Option Plan (the "Plan"), a
copy of which is annexed to and made a part of this Agreement, the Company with
the unanimous authorization and approval of the members of its Board of
Directors hereby grants to the Option Holder effective as of the date hereof
(the "Grant Date") an option (the "Option") to purchase 105,666 shares of the
common stock of the Company, $0.30 par value ("Common Stock") at a price of
$3.75 per share (the "Option Price") which was the per share Fair Market Value
(as defined by the Plan) of the Common Stock as of the Grant Date. This
Agreement and the purchase of the shares of Common Stock hereunder is intended
and should be interpreted to qualify as an Incentive Stock Option as that term
is used in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and any provisions of this Agreement are hereby amended in their
entirety to any extent necessary to permit all Common Stock purchased hereunder
to qualify for treatment as such under Section 422 of the Code.
In the event that the Option Holder is or becomes a longer term
employee, an extension of the option expiration period provided in Section 5
below has been provided from three months to six months following termination of
employment. However, if the Option Holder is not totally and permanently
disabled (as defined in Section 422(c)(6) of the Code) and if the option is
exercised after three months, such exercise will no longer be qualifying for
purposes of Section 421(a) of the Code and the option so exercised shall be
treated as a nonqualified option instead of an incentive stock option.
Notwithstanding anything to the contrary contained herein, the number of Shares
of Common Stock for which the Option is granted pursuant to Section 1 of this
Agreement shall automatically be decreased by the number, if any, of Additional
SNO Shares (as that term is defined in the Employment Agreement) by which the
SNO Option (as that term is defined in the Employment Agreement) is
automatically increased pursuant to Section 5.b. of the Employment Agreement and
Section 1 of the Standard Restricted Stock Option Award Agreement dated as of
November 2, 1998 between Hawk and the Company.
2. OPTION PERIOD. The Option granted herein may be exercised by the
Option Holder in whole or in part, subject to the limitation that said Option
shall be exercisable in increments ratably
- ----------------------------
Incentive Stock Option
Award Agreement - Team, Inc.
<PAGE> 2
as set forth in Exhibit A hereto (the "Vesting Schedule") determined by the
continuous employment of the Option Holder with the Company from the Grant Date
to the date of exercise. Notwithstanding anything in this Agreement to the
contrary, the Vesting Schedule is subject to Section 5 herein and the Committee,
in its sole discretion, may waive the Vesting Schedule and, upon written notice
to the Option Holder, accelerate the earliest date or dates in which any of the
Options granted hereunder are exercisable.
3. METHOD FOR EXERCISING THE OPTION. The vested portion of the Option
may be exercised in whole or in part only by delivery in person or through
certified or registered mail to the Company at its principal office in Alvin,
Texas (attention: Corporate Secretary) of written notice specifying the Option
that is being exercised and the number of shares of Common Stock with respect to
which the Option is being exercised. The notice must be accompanied by payment
of the Option Price for the portion of the Option being exercised. Payment of
this portion of the Option Price for the Common Stock shall be made in full by
any of the following methods or any combination of the following methods:
a. In cash or by certified or cashier's check payable to
Team, Inc.;
b. The delivery to the Company of certificates representing
the number of shares of Common Stock then owned by the Option Holder, the
Designated Value (defined below) of which equals the Option Price of the Common
Stock purchased pursuant to the Option, properly endorsed for transfer to the
Company. (For purposes of this Agreement, the Designated Value of any shares of
Common Stock delivered in payment of the Option Price upon exercise of the
Option shall be the Designated Value as of the exercise date, and the exercise
date shall be the day of delivery of the certificates for the Common Stock used
as payment of the Option Price); or
c. The delivery to the Company of a properly executed notice
of exercise together with irrevocable instructions to a broker to deliver
promptly to the Company, in payment of the Option Price, the amount of the cash
proceeds of the sale of shares of Common Stock or a loan from the broker to the
Option Holder sufficient, in each case, to pay the Option Price, and in a form
satisfactory to the Corporate Secretary.
Upon such notice to the Corporate Secretary and payment in
full of the amount of the Option Price being exercised, the exercise of the
Option shall be deemed to be effective, and a properly executed certificate or
certificates representing the Common Stock so purchased shall be issued by the
Company and delivered to the Option Holder or the agent designated by the Option
Holder.
For purposes of this Agreement, the "Designated Value" of the shares of
Common Stock on a given date shall be determined in the same manner that fair
market value is determined pursuant to Section 2(j) of the Plan.
4. ADJUSTMENTS. In the event of an adjustment (as defined in Section 7
of the Plan), the Committee or the Board of Directors of the Company (as the
case may be), in its discretion, shall act to effect one or more of the
alternatives set forth in Section 7 of the Plan.
2
- ----------------------------
Incentive Stock Option
Award Agreement - Team, Inc.
<PAGE> 3
5. EXPIRATION AND TERMINATION OF THE OPTION. The Option shall expire at
5:00 p.m. Houston, Texas time on the tenth annual anniversary of the Grant Date
or prior to such time as follows (the period from the Grant Date to the date of
the expiration of the Option is defined as the "Option Period"):
a. Upon termination of the employment of the Option Holder for
any reason other than death, the Options exercisable as of the date of
termination may be exercised by Option Holder within three months after the date
of the termination of employment of the Option Holder. If, as of the date of
termination of employment, the Option Holder has completed at least five full
years of continuous service with the Company, the three month period provided
for in the preceding sentence shall be increased to six months. The
determination of whether the Option Holder has completed such period of service
shall be made by the Committee.
b. Upon termination of the employment of the Option Holder by
reason of the death of the Option Holder, all the shares under the Option
without regard to whether exercisable as of the date of the Option Holder's
death, may be exercised by the personal representative of the deceased Option
Holder, within 12 months of the date of the Option Holder's death.
6. TRANSFERABILITY. The Option may not be transferred except by will or
pursuant to the laws of descent and distribution, and it shall be exercisable
during the Option Holder's life only by him, and after his death, only by those
entitled to do so under his will or the applicable laws of descent and
distribution.
7. COMPLIANCE WITH SECURITIES LAWS. Upon the acquisition of any shares
of Common Stock pursuant to the exercise of the Option herein granted, the
Option Holder or any person acting under Section 5(b) will enter into such
written representations, warranties and agreements as the Company may reasonably
request in order to comply with applicable securities laws or with this
Agreement.
8. LEGENDS ON CERTIFICATES. The Certificates representing the shares of
Common Stock purchased by exercise of an Option will be stamped or otherwise
imprinted with legends in such form as the Company or its counsel may require
with respect to any applicable restrictions on sale or transfer and the stock
transfer records of the Company will reflect stock-transfer instructions with
respect to such shares.
9. WITHHOLDING.
a. Arrangement for Withholding. The Option Holder hereby
agrees to make appropriate arrangements with the Company to provide for the
amount of additional tax withholding under Sections 3102 and 3402 of the
Internal Revenue Code and applicable state income tax laws, if any, resulting
from the exercise of the Option. If such arrangements are not made, the Company
may refuse to issue any Common Stock to the Option Holder.
3
- ----------------------------
Incentive Stock Option
Award Agreement - Team, Inc.
<PAGE> 4
b. Withholding Election. The Option Holder may elect to pay
all such amounts of tax withholding, or any part thereof, by electing to
transfer to the Company, or to have the Company withhold from shares otherwise
issuable to the Option Holder, shares of Common Stock having a value equal to
the amount required to be withheld or such lesser amount as may be elected by
the Option Holder provided that all such elections shall be subject to the
approval or disapproval of the Committee. The value of shares of Common Stock to
be withheld shall be based on the Designated Value of the Common Stock on the
date that the amount of tax to be withheld is to be determined.
10. ACKNOWLEDGMENT OF OPTION HOLDER. The Option Holder acknowledges
having received and read a copy of the Plan and this Agreement and agrees to
comply with all laws, rules and regulations applicable to the grant and exercise
of the Option and the sale or other disposition of the Common Stock.
11. MISCELLANEOUS.
a. Notices. Any notice required or permitted to be given under
this Agreement shall be in writing and shall be given by first class registered
or certified mail, postage prepaid, or by personal delivery to the appropriate
party, addressed:
i. If to the Company, to the Company at its
principal place of business at Alvin, Texas (Attention: Corporate Secretary) or
at such other address as may have been furnished to the Option Holder in writing
by the Company; or
ii. If to the Option Holder, to the Option Holder at
his address on file with the Company, or at such other address as may have been
furnished to the Company by the Option Holder.
Any such notice shall be deemed to have been given as of the fourth day after
deposit in the United States Postal Service, postage prepaid, properly addressed
as set forth above, in the case of mailed notice, or as of the date delivered in
the case of personal delivery.
b. Amendment. The Board of Directors may make any adjustment
in the Option Price, the number of shares of Common Stock subject to, or the
terms of the Option by amendment or by substitution of an outstanding Option.
Such amendment or substitution may result in terms and conditions (including
Option Price, the number of shares of Common Stock covered, Vesting Schedule or
Option Period) that differ from the terms and conditions of this Option. The
Board of Directors may not, however, adversely affect the rights of the Option
Holder without the consent of the Option Holder. If such action is effective by
amendment, the effective date of such amendment will be the date of the original
grant of this Option. Except as provided herein, this Agreement may not be
amended or otherwise modified unless evidenced in writing and signed by the
Company and the Option Holder.
c. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, and each other provision of this
Agreement shall be severable and enforceable to the extent permitted by law.
4
- ----------------------------
Incentive Stock Option
Award Agreement - Tean, Inc.
<PAGE> 5
d. Waiver. Any provision contained in this Agreement may be
waived, either generally or in any particular instance, by the Company.
e. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company and the Option Holder and their respective
heirs, executors, administrators, legal representatives, successors and assigns.
f. Rights to Employment. Nothing contained in this Agreement
shall be construed as giving the Option Holder any right to be retained in the
employ of the Company and this Agreement is limited solely to governing the
rights and obligations of the Option Holder with respect to the Common Stock and
the Option.
g. Gender and Number. Except when otherwise indicated by the
context, the masculine gender shall also include the feminine gender, and the
definition of any term herein in the singular shall also include the plural.
h. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
i. Committee. The Committee appointed under the Plan shall
have full discretion to administer the Plan.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date(s) set forth below.
TEAM, INC.
By: /s/ SIDNEY B. WILLIAMS
------------------------------------------------
Name: Sidney B. Williams
Title: Director and Member of Executive Committee
OPTION HOLDER
/s/ PHILIP J. HAWK
---------------------------------------------------
Philip J. Hawk
5
- ----------------------------
Incentive Stock Option
Award Agreement - Team, Inc.
<PAGE> 6
EXHIBIT A
Vesting Schedule
CONDITIONS TO VESTING AMOUNT EXERCISABLE
Upon the continuous employment CUMULATIVE PROPORTION OF THE
by Option Holder through the COMMON STOCK AS TO ALL OR PART OF
applicable date indicated below: WHICH THE OPTION CAN BE EXERCISED
AFTER SATISFACTION OF THE RESPECTIVE
- -------------------------------- CONDITIONS TO VESTING:
------------------------------------
<TABLE>
<S> <C>
1. NOVEMBER 2, 1999 25%
2. NOVEMBER 2, 2000 50%
3. NOVEMBER 2, 2001 75%
4. JANUARY 30, 2002 100%
</TABLE>
- ----------------------------
Incentive Stock Option
Award Agreement - Team, Inc.
<PAGE> 1
EXHIBIT 10.3
TEAM, INC.
STANDARD RESTRICTED STOCK OPTION AWARD AGREEMENT
("SNOS")
THIS STANDARD RESTRICTED STOCK OPTION AWARD AGREEMENT (the
"Agreement") is made effective as of November 2, 1998 (the "Grant Date") between
Team, Inc., a Texas corporation (the "Company"), and PHILIP HAWK ("Hawk" or
"Option Holder").
WHEREAS, Hawk and the Company have entered into an employment agreement the
("Employment Agreement") which is dated as of the Grant Date which provides in
section 5.b. thereof for the grant of an option (the "Option" or "SNO Option")
to purchase shares ("Shares") of the common stock of the Company, $0.30 par
value subject among other things to a stated vesting schedule with respect to
the exercise of such options ; and,
WHEREAS, the Company and Hawk have entered into an Incentive Stock Option Award
Agreement (the "ISO Agreement") which is also dated as of the Grant Date which
grants to Hawk an option ("ISO Option") to acquire 105,666 Shares (Shares which
are acquired pursuant to the ISO Option is referred to herein as the " ISO
Shares"); and,
WHEREAS, the Employment Agreement provides that Hawk's right to exercise the SNO
Option will fully vest immediately in the event that: (i) Hawk's employment with
the Company is terminated pursuant to Sections 8.a. or 8c. of the Employment
Agreement or (ii) a "Change of Control" occurs while Hawk is an employee of the
Company in a transaction which is not recommended by the Company's Board of
Directors (the aforesaid events which give rise to immediate vesting shall be
referred to herein as an "Accelerating Event");
WHEREAS, the Employment Agreement also provides that if an Accelerating Event
occurs, the number of Shares covered by this Agreement will be automatically
increased by the number of the
- ---------------------------------
Standard Restricted Stock Option
Award Agreement - Team, Inc.
<PAGE> 2
ISO Shares (the "Additional SNO Shares") that would have become vested under the
ISO Option had such Accelerating Event provisions that applied to the SNO
Options applied to the ISO Options.;
NOW, THEREFORE, in consideration of the premises and the covenants contained
herein, the receipt and sufficiency and adequacy of which are hereby
acknowledged, the parties agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions of this
Agreement, the Company, with the unanimous authorization and approval of its
Board of Directors, hereby grants to Hawk effective as of the Grant Date this
SNO Option to purchase 44,334 Shares at a price of $3.625 per share (the "Option
Price") which is the mean of the opening price ($3.50) and the closing price of
the Shares as traded on the American Stock Exchange on the Grant Date. This
Agreement and the purchase of Shares hereunder is not intended to be and should
not be interpreted to qualify as an Incentive Stock Option as that term is used
in Section 422 of the Internal Revenue Code of 1986. Immediately following the
occurrence of an Accelerating Event and without further action on behalf of the
Company or Hawk, this SNO Option shall be automatically amended to increase the
number of Shares which may be acquired through the exercise of this SNO Option
by the number of the Additional SNO Shares as provided in Section 5.b. of the
Employment Agreement.
2. OPTION PERIOD. The SNO Option granted herein may be exercised in
whole or in part at any time prior to the termination of the Option Period as
determined pursuant to Section 5 below, subject however to the limitation that
said SNO Option shall be exercisable in increments ratably as set forth in
Exhibit A hereto (the "Vesting Schedule"); provided, however, that
notwithstanding the Vesting Schedule, this SNO Option shall become fully vested
with respect to all Shares covered by this Agreement (including the Additional
SNO Shares) upon the occurrence of an Accelerating Event; and, provided further,
the Board of Directors of the Company, in its sole discretion, may waive the
Vesting Schedule and, upon written notice to the Option Holder, accelerate the
earliest date or dates in which the Option granted hereunder is exercisable. The
SNO Option granted by this Agreement is the Option described in Section 5.b of
the Employment Agreement.
3. METHOD FOR EXERCISING THE OPTION. The vested portion of the Option
may be exercised in whole or in part only by delivery in person or through
certified or registered mail to the Company at its principal office in Alvin,
Texas (attention: Corporate Secretary) of written notice specifying the Option
that is being exercised and the number of Shares with respect to which the
Option is being exercised. The notice must be accompanied by payment of the
Option Price for the portion of the Option being exercised. Payment of this
portion of the Option Price for the Shares shall be made in full by any of the
following methods or any combination of the following methods:
a. In cash or by certified or cashier's check payable to Team,
Inc.;
b. The delivery to the Company of certificates representing
the number of Shares then owned by the Option Holder, the Fair Market Value
(defined in Section 11(i) below) of which equals the Option Price of the Shares
purchased pursuant to the Option, properly endorsed for
- ---------------------------------
Standard Restricted Stock Option
Award Agreement - Team, Inc. 2
<PAGE> 3
transfer to the Company. (For purposes of this Agreement, the Fair Market Value
of any Shares delivered in payment of the Option Price upon exercise of the
Option shall be the Fair Market Value as of the exercise date, and the exercise
date shall be the day of delivery of the certificates for the Shares used as
payment of the Option Price); or
c. The delivery to the Company of a properly executed notice
of exercise together with irrevocable instructions to a broker to deliver
promptly to the Company, in payment of the Option Price, the amount of the cash
proceeds of the sale of Shares or a loan from the broker to the Option Holder
sufficient, in each case, to pay the Option Price, and in a form satisfactory to
the Corporate Secretary.
Upon such notice to the Corporate Secretary and payment in
full of the amount of the Option Price being exercised, the exercise of the
Option shall be deemed to be effective, and a properly executed certificate or
certificates representing the Shares so purchased shall be issued by the Company
and delivered to the Option Holder or the agent designated by the Option Holder.
4. ADJUSTMENTS.
(a) In the event that the outstanding Shares 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 Board in the number and kind of shares as to which
the outstanding Option, 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 Option
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.
(b) In the event that the Board shall adopt resolutions
recommending the dissolution or liquidation of the Company, any Option
granted under this Agreement shall terminate as of a date to be fixed
by the Board, 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
- ---------------------------------
Standard Restricted Stock Option
Award Agreement - Team, Inc. 3
<PAGE> 4
(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 Board shall take such action, and the
Option shall terminate, as provided in subparagraph (b) of
this Paragraph 4; 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 Board shall adjust the Shares
under such outstanding and unexercised stock options in a
manner not inconsistent with the pro visions of the
Reorganization Agreement for the adjustment, change,
conversion, or exchange of such Shares and such Option.
(d) The term "Reorganization" as used in subparagraph (c) of
this Paragraph 4 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.
(e) Adjustments and determinations under this Paragraph 4
shall be made by the Board, whose decisions shall be final, binding,
and conclusive.
5. EXPIRATION AND TERMINATION OF THE OPTION. This SNO Option shall
expire at 5:00 p.m. Houston, Texas time on November 2, 2008 or prior to such
time as follows (the period from the Grant Date to the date of the expiration of
the SNO Option is defined herein as the "Option Period"):
a. Upon termination of the employment of the Option Holder for
any reason other than death, the Option exercisable as of the date of
termination may be exercised by Option Holder within three months after the date
of the termination of employment of the Option Holder. If, as of the date of
termination of employment, the Option Holder has completed at least five full
years of continuous service with the Company, the three month period provided
for in the preceding sentence shall be increased to six months. The
determination of whether the Option Holder has completed such period of service
shall be made by the Company's Board of Directors.
b. Upon termination of the employment of the Option Holder by
reason of the death of the Option Holder, all the shares under the Option
without regard to whether exercisable as of the date of the Option Holder's
death, may be exercised by the personal representative of the deceased Option
Holder, within 12 months of the date of the Option Holder's death.
- ---------------------------------
Standard Restricted Stock Option
Award Agreement - Team, Inc. 4
<PAGE> 5
6. TRANSFERABILITY. The Option may not be transferred except by will or
pursuant to the laws of descent and distribution, and it shall be exercisable
during the Option Holder's life only by him, and after his death, only by those
entitled to do so under his will or the applicable laws of descent and
distribution.
7. COMPLIANCE WITH SECURITIES LAWS. Upon the acquisition of any Shares
pursuant to the exercise of the Option herein granted, the Option Holder or any
person acting under Section 5(b) will enter into such written representations,
warranties and agreements as the Company may reasonably request in order to
comply with applicable securities laws or with this Agreement.
8. LEGENDS ON CERTIFICATES. The Certificates representing the Shares
purchased by exercise of an Option will be stamped or otherwise imprinted with
legends in such form as the Company or its counsel may require with respect to
any applicable restrictions on sale or transfer and the stock transfer records
of the Company will reflect stock-transfer instructions with respect to such
shares.
9. WITHHOLDING.
a. Arrangement for Withholding. The Option Holder hereby
agrees to make appropriate arrangements with the Company to provide for the
amount of additional tax withholding under Sections 3102 and 3402 of the
Internal Revenue Code and applicable state income tax laws, if any, resulting
from the exercise of the Option. If such arrangements are not made, the Company
may refuse to issue any Common Stock to the Option Holder.
b. Withholding Election. The Option Holder may elect to pay
all such amounts of tax withholding, or any part thereof, by electing to
transfer to the Company, or to have the Company withhold from shares otherwise
issuable to the Option Holder, Shares having a value equal to the amount
required to be withheld or such lesser amount as may be elected by the Option
Holder provided that all such elections shall be subject to the approval or
disapproval of the Company's Board of Directors. The value of Shares to be
withheld shall be based on the Designated Value of the Common Stock on the date
that the amount of tax to be withheld is to be determined.
10. ACKNOWLEDGMENT OF OPTION HOLDER. The Option Holder acknowledges
having received and read this Agreement and agrees to comply with all laws,
rules and regulations applicable to the grant and exercise of the Option and the
sale or other disposition of the Common Stock.
11. MISCELLANEOUS.
a. Notices. Any notice required or permitted to be given under
this Agreement shall be in writing and shall be given by first class registered
or certified mail, postage prepaid, or by personal delivery to the appropriate
party, addressed:
i. If to the Company, to the Company at its principal
place of business at Alvin, Texas (Attention: Corporate Secretary) or at such
other address as may have been furnished to the Option Holder in writing by the
Company; or
- ---------------------------------
Standard Restricted Stock Option
Award Agreement - Team, Inc. 5
<PAGE> 6
ii. If to the Option Holder, to the Option Holder at
his address on file with the Company, or at such other address as may have been
furnished to the Company by the Option Holder.
Any such notice shall be deemed to have been given as of the fourth day after
deposit in the United States Postal Service, postage prepaid, properly addressed
as set forth above, in the case of mailed notice, or as of the date delivered in
the case of personal delivery.
b. Amendment. The Board of Directors may make any adjustment
in the Option Price, the number of Shares subject to, or the terms of the Option
by amendment or by substitution of an outstanding Option. Such amendment or
substitution may result in terms and conditions (including Option Price, the
number of Shares covered, Vesting Schedule or Option Period) that differ from
the terms and conditions of this Option. The Board of Directors may not,
however, adversely affect the rights of the Option Holder without the consent of
the Option Holder. If such action is made by amendment, the effective date of
such amendment will be the date of the original grant of this Option. Except as
provided herein, this Agreement may not be amended or otherwise modified unless
evidenced in writing and signed by the Company and the Option Holder.
c. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, and each other provision of this
Agreement shall be severable and enforceable to the extent permitted by law.
d. Waiver. Any provision contained in this Agreement may be
waived, either generally or in any particular instance, by the Company.
e. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company and the Option Holder and their respective
heirs, executors, administrators, legal representatives, successors and assigns.
f. Rights to Employment. Nothing contained in this Agreement
shall be construed as giving the Option Holder any right to be retained in the
employ of the Company and this Agreement is limited solely to governing the
rights and obligations of the Option Holder with respect to the Common Stock and
the Option.
g. Gender and Number. Except when otherwise indicated by the
context, the masculine gender shall also include the feminine gender, and the
definition of any term herein in the singular shall also include the plural.
h. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
i. "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
- ---------------------------------
Standard Restricted Stock Option
Award Agreement - Team, Inc. 6
<PAGE> 7
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.
j. Employment Agreement Controls. To the extent a
conflict exists between the terms of this Agreement and the terms of the
Employment Agreement, the terms of the Employment Agreement shall control.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date(s) set forth below.
TEAM, INC.
By: /s/ SIDNEY B. WILLIAMS
---------------------------------
Name: Sidney B. Williams
Title: Director and Member of Executive
Committee
OPTION HOLDER
/s/ PHILIP J. HAWK
------------------------------------
Philip J. Hawk
7
<PAGE> 8
EXHIBIT A
Vesting Schedule
<TABLE>
<CAPTION>
CONDITIONS TO VESTING AMOUNT EXERCISABLE
Upon the continuous employment cumulative proportion of the
by Option Holder through the common stock as to all or part
applicable date indicated below: of which the option can be
- -------------------------------- exercised after satisfaction of
the respective conditions to
vesting:
-------------------------------
<S> <C>
1. NOVEMBER 2, 1999 331/3%
2. NOVEMBER 2, 2000 662/3%
3. NOVEMBER 2, 2001 100%
</TABLE>
<PAGE> 1
EXHIBIT 10.4
TEAM, INC.
PRICE VESTED RESTRICTED STOCK OPTION AWARD AGREEMENT
("PVOS")
THIS PRICE VESTED RESTRICTED STOCK OPTION AWARD AGREEMENT (the
"Agreement") is made effective as of November 2, 1998 between Team, Inc., a
Texas corporation (the "Company"), and PHILIP J. HAWK (the "Option Holder").
WHEREAS, Hawk and the Company have entered into an employment agreement the
("Employment Agreement") which is dated as of the Grant Date which provides in
section 5.c. thereof for the grant of an option (the "Option" or "PVO Option")
to purchase 200,000 shares ("Shares") of the common stock of the Company, $0.30
par value subject among other things to a vesting schedule with respect to the
exercise of such options ; and,
WHEREAS, the Employment Agreement provides that Hawk's right to exercise the PVO
Option will fully vest immediately in the event that: (i) Hawk's employment with
the Company is terminated pursuant to Sections 8.a. or 8c. of the Employment
Agreement or (ii) a "Change of Control" occurs while Hawk is an employee of the
Company in a transaction which is not recommended by the Company's Board of
Directors (the aforesaid events which give rise to immediate vesting shall be
referred to herein as an "Accelerating Event");
NOW, THEREFORE, in consideration of the premises and the covenants contained
herein, the receipt and sufficiency and adequacy of which are hereby
acknowledged, the parties agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions of this
Agreement, the Company, with the unanimous authorization and approval of its
Board of Directors, hereby grants to Hawk effective as of the Grant Date this
PVO Option to purchase 200,000 Shares at a price of $3.625 per share (the
"Option Price") which is the mean of the opening price ($3.50) and the closing
price of the Shares as traded on the American Stock Exchange on the Grant Date.
This Agreement and the purchase of Shares hereunder is not intended to be and
should not be interpreted to qualify as an Incentive Stock Option as that term
is used in Section 422 of the Internal Revenue Code of 1986, as amended.
2. OPTION PERIOD. The PVO Option granted herein may be exercised in
whole or in part at any time prior to the termination of the Option Period as
determined pursuant to Section 5 below,
<PAGE> 2
subject however to the limitation that said PVO Option shall be exercisable in
increments ratably as set forth in Exhibit A hereto (the "Vesting Schedule");
provided, however, that notwithstanding the Vesting Schedule, this PVO Option
shall become fully vested with respect to all Shares covered by this Agreement
upon the occurrence of an Accelerating Event; and, provided further, the Board
of Directors of the Company, in its sole discretion, may waive the Vesting
Schedule and, upon written notice to the Option Holder, accelerate the earliest
date or dates in which the Option granted hereunder is exercisable. The PVO
Option granted by this Agreement is the Option described in Section 5.c of the
Employment Agreement.
3. METHOD FOR EXERCISING THE OPTION. The vested portion of the Option
may be exercised in whole or in part only by delivery in person or through
certified or registered mail to the Company at its principal office in Alvin,
Texas (attention: Corporate Secretary) of written notice specifying the Option
that is being exercised and the number of Shares with respect to which the
Option is being exercised. The notice must be accompanied by payment of the
Option Price for the portion of the Option being exercised. Payment of this
portion of the Option Price for the Shares shall be made in full by any of the
following methods or any combination of the following methods:
a. In cash or by certified or cashier's check payable to Team,
Inc.;
b. The delivery to the Company of certificates representing
the number of Shares then owned by the Option Holder, the Fair Market Value
(defined in Section 11(i) below) of which equals the Option Price of the Shares
purchased pursuant to the Option, properly endorsed for transfer to the Company.
(For purposes of this Agreement, the Fair Market Value of any Shares delivered
in payment of the Option Price upon exercise of the Option shall be the Fair
Market Value as of the exercise date, and the exercise date shall be the day of
delivery of the certificates for the Shares used as payment of the Option
Price); or
c. The delivery to the Company of a properly executed notice
of exercise together with irrevocable instructions to a broker to deliver
promptly to the Company, in payment of the Option Price, the amount of the cash
proceeds of the sale of Shares or a loan from the broker to the Option Holder
sufficient, in each case, to pay the Option Price, and in a form satisfactory to
the Corporate Secretary.
Upon such notice to the Corporate Secretary and payment in
full of the amount of the Option Price being exercised, the exercise of the
Option shall be deemed to be effective, and a properly executed certificate or
certificates representing the Shares so purchased shall be issued by the Company
and delivered to the Option Holder or the agent designated by the Option Holder.
4. ADJUSTMENTS.
(a) In the event that the outstanding Shares 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 Board in the number and kind of shares as to which
outstanding Option, or
2
<PAGE> 3
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 Option 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.
(b) In the event that the Board shall adopt resolutions
recommending the dissolution or liquidation of the Company, any Option
granted under this Agreement shall terminate as of a date to be fixed
by the Board, 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 Board shall take such action, and the
Option shall terminate, as provided in subparagraph (b) of
this Paragraph 4; 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 Board shall adjust the Shares
under such outstanding and unexercised stock options in a
manner not inconsistent with the pro visions of the
Reorganization Agreement for the adjustment, change,
conversion, or exchange of such Shares and such Option.
(d) The term "Reorganization" as used in subparagraph (c) of
this Paragraph 4 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.
(e) Adjustments and determinations under this Paragraph 4
shall be made by the Board, whose decisions shall be final, binding,
and conclusive.
3
<PAGE> 4
5. EXPIRATION AND TERMINATION OF THE OPTION. This PVO Option shall
expire at 5:00 p.m. Houston, Texas time on November 2, 2008 or prior to such
time as follows (the period from the Grant Date to the date of the expiration of
the PVO Option is defined herein as the "Option Period"):
a. Upon termination of the employment of the Option Holder for
any reason other than death, the Option exercisable as of the date of
termination may be exercised by Option Holder within three months after the date
of the termination of employment of the Option Holder. If, as of the date of
termination of employment, the Option Holder has completed at least five full
years of continuous service with the Company, the three month period provided
for in the preceding sentence shall be increased to six months. The
determination of whether the Option Holder has completed such period of service
shall be made by the Company's Board of Directors.
b. Upon termination of the employment of the Option Holder by
reason of the death of the Option Holder, all the shares under the Option
without regard to whether exercisable as of the date of the Option Holder's
death, may be exercised by the personal representative of the deceased Option
Holder, within 12 months of the date of the Option Holder's death.
6. TRANSFERABILITY. The Option may not be transferred except by will or
pursuant to the laws of descent and distribution, and it shall be exercisable
during the Option Holder's life only by him, and after his death, only by those
entitled to do so under his will or the applicable laws of descent and
distribution.
7. COMPLIANCE WITH SECURITIES LAWS. Upon the acquisition of any Shares
pursuant to the exercise of the Option herein granted, the Option Holder or any
person acting under Section 5(b) will enter into such written representations,
warranties and agreements as the Company may reasonably request in order to
comply with applicable securities laws or with this Agreement.
8. LEGENDS ON CERTIFICATES. The Certificates representing the Shares
purchased by exercise of an Option will be stamped or otherwise imprinted with
legends in such form as the Company or its counsel may require with respect to
any applicable restrictions on sale or transfer and the stock transfer records
of the Company will reflect stock-transfer instructions with respect to such
shares.
9. WITHHOLDING.
a. Arrangement for Withholding. The Option Holder hereby
agrees to make appropriate arrangements with the Company to provide for the
amount of additional tax withholding under Sections 3102 and 3402 of the
Internal Revenue Code and applicable state income tax laws, if any, resulting
from the exercise of the Option. If such arrangements are not made, the Company
may refuse to issue any Shares to the Option Holder.
b. Withholding Election. The Option Holder may elect to pay
all such amounts of tax withholding, or any part thereof, by electing to
transfer to the Company, or to have the Company withhold from shares otherwise
issuable to the Option Holder, Shares having a value equal
4
<PAGE> 5
to the amount required to be withheld or such lesser amount as may be elected by
the Option Holder provided that all such elections shall be subject to the
approval or disapproval of the Company's Board of Directors. The value of Shares
to be withheld shall be based on the Designated Value of the Common Stock on the
date that the amount of tax to be withheld is to be determined.
10. ACKNOWLEDGMENT OF OPTION HOLDER. The Option Holder acknowledges
having received and read this Agreement and agrees to comply with all laws,
rules and regulations applicable to the grant and exercise of the Option and the
sale or other disposition of the Common Stock.
11. MISCELLANEOUS.
a. Notices. Any notice required or permitted to be given under
this Agreement shall be in writing and shall be given by first class registered
or certified mail, postage prepaid, or by personal delivery to the appropriate
party, addressed:
i. If to the Company, to the Company at its principal
place of business at Alvin, Texas (Attention: Corporate Secretary) or at such
other address as may have been furnished to the Option Holder in writing by the
Company; or
ii. If to the Option Holder, to the Option Holder at
his address on file with the Company, or at such other address as may have been
furnished to the Company by the Option Holder.
Any such notice shall be deemed to have been given as of the fourth day after
deposit in the United States Postal Service, postage prepaid, properly addressed
as set forth above, in the case of mailed notice, or as of the date delivered in
the case of personal delivery.
b. Amendment. The Board of Directors may make any adjustment
in the Option Price, the number of Shares subject to, or the terms of the Option
by amendment or by substitution of an outstanding Option. Such amendment or
substitution may result in terms and conditions (including Option Price, the
number of Shares covered, Vesting Schedule or Option Period) that differ from
the terms and conditions of this Option. The Board of Directors may not,
however, adversely affect the rights of the Option Holder without the consent of
the Option Holder. If such action is made by amendment, the effective date of
such amendment will be the date of the original grant of this Option. Except as
provided herein, this Agreement may not be amended or otherwise modified unless
evidenced in writing and signed by the Company and the Option Holder.
c. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, and each other provision of this
Agreement shall be severable and enforceable to the extent permitted by law.
d. Waiver. Any provision contained in this Agreement may be
waived, either generally or in any particular instance, by the Company.
5
<PAGE> 6
e. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company and the Option Holder and their respective
heirs, executors, administrators, legal representatives, successors and assigns.
f. Rights to Employment. Nothing contained in this Agreement
shall be construed as giving the Option Holder any right to be retained in the
employ of the Company and this Agreement is limited solely to governing the
rights and obligations of the Option Holder with respect to the Common Stock and
the Option.
g. Gender and Number. Except when otherwise indicated by the
context, the masculine gender shall also include the feminine gender, and the
definition of any term herein in the singular shall also include the plural.
h. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
(i) "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.
(j) Employment Agreement Controls. To the extent a conflict
exists between the terms of this Agreement and the terms of the Employment
Agreement, the terms of the Employment Agreement shall control.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date(s) set forth below.
TEAM, INC.
By: /s/ SIDNEY B. WILLIAMS
------------------------------------
Name: Sidney B. Williams
Title: Director and Member of Executive
Committee
OPTION HOLDER
/s/ PHILIP J. HAWK
---------------------------------------
Philip J. Hawk
6
<PAGE> 7
EXHIBIT A
Vesting Schedule
Vesting of the PVO Option covered by this Agreement shall occur when
the public market price of the Shares achieves the following price levels:
<TABLE>
<CAPTION>
LEVELS OPTION VESTED
------ -------------
LEVEL 1:
- --------
<S> <C>
At the end of any consecutive six
(6) month period during which the
average Closing Price (as hereafter
defined) of the Common Stock throughout 331/3%
such six (6) month period is $7.00 per
share, provided that the Closing Price
is also at least $7.00 per share at the
end of such six (6) month period.
LEVEL 2:
- --------
At the end of any consecutive six
(6) month period during which the average
Closing Price (as hereafter defined) of the 662/3%
Common Stock throughout such six (6) month
period is $10.50 per share, provided that the
Closing Price is also at least $10.50 per
share at the end of such six (6) month period.
LEVEL 3:
- --------
At the end of any consecutive six
(6) month period during which the
average Closing Price (as hereafter 100%
defined) of the Common Stock
throughout such six (6) month
period is $14.00 per share, provided
that the Closing Price is also at
least $14.00 per share at the end of
such six (6) month period.
</TABLE>
<PAGE> 8
For purposes of this Agreement, "Closing Price" 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), provided, 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 Agreement 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.
In the event that an adjustment to the Option Price per share is made
or required to be made pursuant to Section 4(a) of this Agreement, then the
price level requirements in this Exhibit A shall also be appropriately adjusted.
If the market price requirements for two or more previously unachieved
vesting levels are achieved in a single six-month period, then the vesting of
PVO Options for all such vesting levels achieved in such six-month period shall
occur.
8
<PAGE> 1
EXHIBIT 10.5
STOCK PURCHASE AGREEMENT
The undersigned, Team, Inc., a Texas corporation ("Team"), and Philip
J. Hawk, an individual ("Hawk"), enter into this Stock Purchase Agreement to be
effective as of the 2nd day of November, 1998 ("Effective Date").
WHEREAS, Team and Hawk (collectively, the "Parties") entered into a
binding employment agreement (the "Employment Agreement") effective November 2,
1998 pursuant to which Team agreed to grant Hawk an option to purchase from Team
up to 65,000 shares of Team's common stock, $0.30 par value ("Common Stock"), at
a purchase price equal to the average of the high and low trading prices for
Team Common Stock on the American Stock Exchange on November 2, 1998, less the
number of shares of Common Stock of which Hawk is the Beneficial Owner after the
consummation of this Agreement; and,
WHEREAS, the high trading price for Team Common Stock on the American
Stock Exchange on November 2, 1998 was $3.75 per share, the low trading price
was $3.50 per share, and the average of the high and low trading prices is
$3.625 per share (the "Purchase Price"); and,
WHEREAS, in accordance with the Employment Agreement, Hawk has
delivered notice to Team of his desire to purchase 45,000 shares of Common Stock
(the "Team Stock") at the Purchase Price, for an aggregate amount of $163,125 to
be paid in full upon the consummation of this Agreement (the "Transaction");
and,
WHEREAS, the Parties hereby enter into this agreement ("Agreement") for
the purpose of setting forth more fully their understandings with respect to the
Transaction;
NOW, THEREFORE, in consideration of the recitals, the mutual promises
of the Parties and other good and valid consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows:
1. PURCHASE AND SALE OF TEAM STOCK. Upon the execution of this
Agreement, Hawk shall purchase from Team and Team shall sell to Hawk the Team
Stock for the aggregate amount of $163,125. Hawk shall deliver to Team payment
of $163,125, and Team shall deliver to Hawk a Certificate for the Team Stock.
2. TEAM'S REPRESENTATIONS AND WARRANTIES. Team hereby represents and
warrants to Hawk as follows:
(a) Team has full power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of Team, enforceable in accordance with
its terms and conditions. The Team Stock, when issued, shall be validly issued,
fully paid and non-assessable;
<PAGE> 2
(b) Team's most recent Form 10-K Report to the Securities Exchange
Commission ("SEC"), its most recent Proxy Statement, and all reports filed by
Team with the SEC since its most recent Form 10-K are true and correct in all
material respects as of the date hereof.
3. HAWK'S REPRESENTATIONS AND WARRANTIES. Hawk represents and warrants
to Team as follows:
(a) Hawk is an "accredited investor" as such term is used in Regulation
D of the Securities Act of 1933, as amended (the "Act") and hereby acknowledges
that Team has delivered to him a copy of the Team documents mentioned in Section
2(b) above.
(b) Hawk is acquiring the Team Stock for investment and not with a view
to the distribution thereof; and,
(c) Hawk has been represented by independent counsel in connection with
this Agreement and the Transaction.
4. REGISTRATION RIGHTS.
(a) Until the Team Stock is transferable pursuant to Rule 144 under the
Act without the volume limitations set forth in such rule, Hawk shall have the
right to include the Team Stock in any registration statement filed by Team for
an underwritten public offering; provided, however, that the right of Hawk to
include such Team Stock in such registration statement shall be conditioned upon
Hawk's entering into such reasonable underwriting arrangements as Team and the
underwriters shall make regarding the offering, including limiting the number of
shares which may be sold in such offering if the underwriters deem such a
limitation advisable, and provided further that, if such limitation is imposed,
Team shall then reduce the number of shares of Team Stock being registered by
Hawk on a pro rata basis with other holders of similar registration rights. Hawk
shall pay his pro rata portion of the out-of-pocket registration and selling
expenses in connection with the piggy-back rights exercised pursuant to this
paragraph 4(a).
(b) Hawk may at any time after the eighteenth (18th) month following
the Closing Date make a one-time demand upon Team to file within 90 days after
such written demand is made a shelf registration statement with the SEC on Form
S-3 (or the comparable successor form to Form S-3) covering the resale of the
shares of Team Stock owned by Hawk. The right to make such demand for
registration is referred to herein as the "Demand Registration". Team shall use
its reasonable best efforts to cause such registration statement to become
effective as soon as practicable after the filing thereof. Team can defer the
registration for an additional 90 days if the Team Board of Directors determines
that such deferral would be in Team's best interest. Team agrees to take all
reasonable steps necessary to keep the registration statement effective until
the lesser of (A) two years after the effective date of the shelf registration
or (B) until the shares of Team Stock covered by such registration statement are
transferable pursuant to Rule 144 under the Act without the volume
2
<PAGE> 3
limitations set forth in such rule. Hawk shall pay for all reasonable
out-of-pocket expenses incurred in connection with any Demand Registration
pursuant to this paragraph 4(b).
5. CONFIDENTIALITY. Each Party agrees to keep the terms of this
Agreement confidential except to the extent that such Party shall be required by
law to make disclosure hereof.
6. ENTIRE AGREEMENT. This Agreement sets forth the full agreement of
the Parties and supersedes all other Agreements of the Parties concerning the
subject matter hereof.
7. APPLICABLE LAWS. This Agreement shall be construed and enforceable
under the laws of the State of Texas.
In witness whereof the Parties have signed this Agreement as of the
date first above written.
TEAM, INC.
By /s/ SIDNEY B. WILLIAMS
----------------------
/s/ Director
----------------------
/s/ PHILIP J. HAWK
----------------------
Philip J. Hawk
3
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT TERMINATION AND CONSULTING AGREEMENT
This Employment Termination and Consulting Agreement ("Agreement") is
entered into on the date set forth on the signature page hereof ("Effective
Date"), by and between WILLIAM A. RYAN, an individual ("Ryan"), and TEAM, INC.,
a Texas corporation ("Team").
R E C I T A L S:
WHEREAS, Ryan and Team are parties to that certain Employment and
Consulting Agreement, dated effective as of June 1, 1997, as amended by that
certain First Amendment to Employment Agreement, dated August 12, 1998, but
effective as of June 1, 1998 (collectively, the "Employment Agreement"); and
WHEREAS, Ryan and Team have mutually concluded that Ryan shall cease to
serve as Team's Chief Executive Officer and as an employee of Team as of the
Effective Date but that he shall continue to serve as a Director through the
remainder of his current term and that he shall serve as a consultant to Team as
provided more fully hereinafter. They have further agreed that, as of the
Effective Date, the Employment Agreement shall be terminated in its entirety by
this Agreement, except for the provisions of the Employment Agreement that are
specifically preserved by this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
promises set forth herein, and for other good and valuable consideration, the
receipt, sufficiency and adequacy of which are hereby acknowledged, Ryan and
Team hereby agree as follows:
<PAGE> 2
A G R E E M E N T S:
1. TERMINATION OF EMPLOYMENT - SEVERANCE COMPENSATION. As of the
Effective Date, Ryan shall cease to be an officer and employee of Team and its
subsidiary companies. Ryan shall continue to receive monthly salary payments of
$16,666.66 for the months of November and December, 1998, and for the month of
January, 1999, but shall not thereafter be entitled to receive "Monthly Salary
Payments" as that term is defined in Paragraph 1(a) of the Employment Agreement.
2. BONUS COMPENSATION - STOCK AWARD. Ryan shall in recognition of his
past service to Team, as well as in recognition of his services in facilitating
the smooth succession of Team to a new Chief Executive Officer, receive bonus
compensation in the amount of $100,000, which sum will be paid on or before May
31, 1999 ("Bonus Date") if the Board of Directors determines that Ryan has
cooperated with Team management and the Board of Directors in the transition to
a new Chief Executive Officer. In addition, Ryan shall further be issued 15,000
shares of Team common stock, $0.30 par value per share, in recognition of his
services as Chief Executive Officer of Team during the period commencing August
31, 1995 through the Effective Date.
3. POST EMPLOYMENT CONSULTING TERM. During the period commencing with
the Effective Date and for a period of twelve (12) months thereafter, Team shall
pay Ryan the sum of $8,333.33 per month and then for each of the next thirty-six
(36) months thereafter shall make monthly payments to Ryan in the amount of
2
<PAGE> 3
$6,250.00 each. Ryan hereby agrees to cooperate with Team's management and Board
of Directors and to be available to Team's management and its Board of Directors
throughout the period during which the payments are made under this Paragraph
for the purposes of consulting about Team and its business. The payments due
hereunder shall be due to Ryan's estate or personal representative in the event
of his death or legal disability.
4. SURVIVAL OF PARAGRAPH 6 OF EMPLOYMENT AGREEMENT. Paragraph 6 of the
Employment Agreement shall remain in full force and effect from and after the
Effective Date until the expiration of the period provided in Paragraph 6. For
purposes of this provision, the "Term" as used in Paragraph 6 of the Employment
and in the paragraphs in the Employment Agreement that are covered by Paragraph
5 of this Agreement shall be deemed to terminate as of the Effective Date.
5. SURVIVAL OF OTHER PROVISIONS OF THE EMPLOYMENT AGREEMENT. Paragraphs
7 through 18 of the Employment Agreement are incorporated in this Agreement and
shall remain in full force and effect from and after the Effective Date. Except
as provided in Paragraph 4 hereof and this Paragraph 5, the Employment Agreement
is hereby terminated in its entirety.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the 1st day of November, 1998.
/s/ WILLIAM A. RYAN
---------------------------------------
WILLIAM A. RYAN
Address:
1410 SHERIDAN RD.
--------------------------------------
WILMETTE, IL. 60091
--------------------------------------
TEAM, INC.
By: /s/ SIDNEY B. WILLIAMS
-----------------------------------
Name: Sidney B. Williams
---------------------------------
Title: Director and Member of Executive
--------------------------------
Committee
--------------------------------
Address:
200 Hermann Drive
Alvin, TX 77511
4
<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 SIX MONTHS ENDED NOVEMBER 30, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> NOV-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 10,299,000
<ALLOWANCES> 237,000
<INVENTORY> 8,672,000
<CURRENT-ASSETS> 20,672,000
<PP&E> 25,336,000
<DEPRECIATION> 12,590,000
<TOTAL-ASSETS> 38,594,000
<CURRENT-LIABILITIES> 6,832,000
<BONDS> 11,590,000<F1>
0
0
<COMMON> 2,265,000
<OTHER-SE> 17,907,000
<TOTAL-LIABILITY-AND-EQUITY> 38,594,000
<SALES> 0
<TOTAL-REVENUES> 25,260,000
<CGS> 0
<TOTAL-COSTS> 14,634,000
<OTHER-EXPENSES> 9,543,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 305,000
<INCOME-PRETAX> 778,000
<INCOME-TAX> 379,000
<INCOME-CONTINUING> 399,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 399,000
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
<FN>
<F1>Includes $1,343,000 for compensation accruals of former employees.
</FN>
</TABLE>
