<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended FEBRUARY 28, 1999
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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.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 74-1765729
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
200 Hermann Drive, Alvin, Texas 77511
- --------------------------------------------------------------------------------
(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 [ ]
On April 6, 1999, there were 7,608,352 shares of the Registrant's common stock
outstanding.
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TEAM, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
--------
<S> <C> <C>
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -- 1
February 28, 1999 (Unaudited) and May 31, 1998
Consolidated Condensed Statements of Operations
(Unaudited) -- 2
Three Months Ended
February 28, 1999 and 1998
Nine Months Ended
February 28, 1999 and 1998
Consolidated Condensed Statements of Cash Flows
(Unaudited) -- 3
Nine Months Ended
February 28, 1999 and 1998
Notes to (Unaudited) Consolidated Condensed
Financial Statements 4
Item 2. Management's Discussion and Analysis 8
of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 28, MAY 31,
ASSETS 1999 1998
------------ ------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 300,000 $ 1,355,000
Accounts receivable, net of allowance for doubtful
accounts of $225,000 and $247,000 10,700,000 9,564,000
Materials and supplies 8,406,000 6,801,000
Prepaid expenses and other current assets 1,177,000 862,000
------------ ------------
Total Current Assets 20,583,000 18,582,000
Property, Plant and Equipment:
Land and buildings 9,565,000 6,735,000
Machinery and equipment 15,525,000 11,746,000
------------ ------------
25,090,000 18,481,000
Less accumulated depreciation and amortization 13,102,000 11,833,000
------------ ------------
11,988,000 6,648,000
Goodwill 3,677,000 0
Other Assets 2,318,000 1,850,000
------------ ------------
Total Assets $ 38,566,000 $ 27,080,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 426,000 $ 286,000
Accounts payable 1,516,000 1,416,000
Other accrued liabilities 3,627,000 3,483,000
Current income taxes payable 191,000 348,000
------------ ------------
Total Current Liabilities 5,760,000 5,533,000
Long-term Debt and Other Obligations 13,130,000 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
February 28, 1999 and May 31, 1998, respectively 2,275,000 1,828,000
Additional paid-in capital 30,965,000 27,098,000
Accumulated deficit (13,406,000) (13,248,000)
Unearned compensation (61,000) 0
Treasury stock at cost, 9,700 shares (97,000) (97,000)
------------ ------------
Total Stockholders' Equity 19,676,000 15,581,000
------------ ------------
Total Liabilities and Stockholders' Equity $ 38,566,000 $ 27,080,000
============ ============
</TABLE>
See notes to unaudited consolidated condensed financial statements.
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TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY 28, FEBRUARY 28,
------------------------------ ------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 14,419,000 $ 11,483,000 $ 39,679,000 $ 33,428,000
Operating expenses 8,614,000 6,744,000 23,248,000 19,382,000
------------ ------------ ------------ ------------
Gross Margin 5,805,000 4,739,000 16,431,000 14,046,000
Selling, general and administrative expenses 5,055,000 4,038,000 14,598,000 12,036,000
Severance and other charge 1,241,000 0 1,241,000 0
Interest 238,000 111,000 543,000 347,000
------------ ------------ ------------ ------------
Income (loss) before income taxes (729,000) 590,000 49,000 1,663,000
Provision (benefit) for income taxes (172,000) 275,000 207,000 714,000
------------ ------------ ------------ ------------
Net income (loss) $ (557,000) $ 315,000 $ (158,000) $ 949,000
============ ============ ============ ============
Net income (loss) per common share:
Basic $ (0.07) $ 0.05 $ (0.02) $ 0.16
============ ============ ============ ============
Diluted $ (0.07) $ 0.05 $ (0.02) $ 0.16
============ ============ ============ ============
Weighted average number of shares outstanding:
Basic 7,540,000 6,045,000 7,413,000 5,902,000
============ ============ ============ ============
Diluted 7,540,000 6,221,000 7,413,000 6,059,000
============ ============ ============ ============
</TABLE>
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<PAGE> 5
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FEBRUARY 28,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ (158,000) $ 949,000
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 1,692,000 1,094,000
Provision for doubtful accounts 0 20,000
Provision for amount due to former officers 816,000 0
Gain on sale of assets (43,000) 0
Non-current deferred income taxes (250,000) 561,000
Change in assets and liabilities, net of effects from purchase of Climax
Portable Machine Tools, Inc.:
(Increase) decrease:
Accounts receivable (172,000) (2,102,000)
Materials and supplies 519,000 (93,000)
Prepaid expenses and other current assets (42,000) (170,000)
Increase (decrease):
Accounts payable (91,000) 991,000
Other accrued liabilities (861,000) (595,000)
Income taxes payable (157,000) (166,000)
------------ ------------
Net cash provided by operating activities 1,253,000 489,000
Cash Flows From Investing Activities:
Capital expenditures (1,982,000) (1,219,000)
Cash received for disposal of property and equipment 117,000 7,000
Increase in other assets (600,000) (264,000)
Acquisition of Climax, net of cash and equivalents acquired (6,987,000) 0
Payments of Climax notes payable at acquisition date (2,893,000) 0
------------ ------------
Net cash used in investing activities (12,345,000) (1,476,000)
Cash Flows From Financing Activities:
Payments under debt agreements and other long-term obligations (5,553,000) (2,414,000)
Proceeds from issuance of long-term debt 12,137,000 849,000
Issuance of common stock 3,453,000 2,147,000
------------ ------------
Net cash provided by financing activities 10,037,000 582,000
------------ ------------
Net increase (decrease) in cash and cash equivalents (1,055,000) (405,000)
Cash and cash equivalents at beginning of year 1,355,000 1,672,000
------------ ------------
Cash and cash equivalents at end of period $ 300,000 $ 1,267,000
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 433,000 $ 367,000
============ ============
Income taxes paid $ 858,000 $ 440,000
============ ============
</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 nine months ended February 28, 1999 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 nine 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 of Climax
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 February 28, 1999 include the results for Climax for the period from
September 1, 1998 to February 28, 1999. 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 4.
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>
Nine Months Ended
February 28,
------------------------------
1999 1998
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<S> <C> <C>
Net sales $ 42,009,000 $ 42,554,000
Net income (loss) $ (161,000) $ 1,140,000
Earnings (loss) per share:
Basic $ (0.02) $ 0.19
Diluted $ (0.02) $ 0.18
</TABLE>
4. Long-Term Debt and Other Obligations
Long-term obligations consist of:
<TABLE>
<CAPTION>
February 28, May 31,
1999 1998
---------------------------
<S> <C> <C>
Revolving credit $ 4,910,000 $ 2,500,000
Term notes 6,338,000 1,693,000
Capital lease obligations 262,000 340,000
Compensation agreements 1,768,000 1,418,000
Other 278,000 301,000
----------- -----------
13,556,000 6,252,000
Less current portion 426,000 286,000
----------- -----------
Total $13,130,000 $ 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 7.3%. 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 February 28, 1999, $4,910,000 in
revolving loans and $6,338,000 in term loans (including the mortgage loan)
were outstanding under the facility.
On April 9, 1999, an additional $7.7 million was borrowed under the
credit facilities to finance the acquisition of X-Ray Inspection, Inc. -
see note 7.
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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 February 28, 1999,
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 February 28, 1999 Three months ended February 28, 1998
---------------------------------------- ---------------------------------------
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 (loss) $(557,000) 7,540,000 $ (0.07) $ 315,000 6,045,000 $ 0.05
Effect of Dilutive Securities:
Options -- -- -- 182,000
--------- --------- --------- ---------
Diluted EPS:
Net income $(557,000) 7,540,000 $ (0.07) $ 315,000 6,227,000 $ 0.05
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Three months ended February 28, 1999 Three months ended February 28, 1998
---------------------------------------- ---------------------------------------
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 (loss) $(158,000) 7,413,000 $ (0.02) $ 949,000 5,902,000 $ 0.16
Effect of Dilutive Securities:
Options -- -- -- 157,000
--------- --------- --------- ---------
Diluted EPS:
Net income $(158,000) 7,413,000 $ (0.02) $ 949,000 6,059,000 $ 0.16
========= ========= ========= =========
</TABLE>
The effect of common stock equivalents arising from stock options and
non-vested restricted stock is anti-dilutive for the three months and nine
months ended February 28, 1999, and therefore is not included in the above
calculations.
6. Severance and Other Charge
The Company reduced headquarters support staff by approximately 20% (19
individuals) which resulted in a one-time charge of $425,000 made in the
third quarter ending February 28, 1999. Additionally, a one-time charge of
$816,000 was 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
7. Acquisition of X-Ray Inspection, Inc.
Effective April 9, 1999, the Company acquired X-Ray Inspection, Inc.
("X-Ray"), a mechanical inspection company located in Lafayette, La.
Consideration consisted of $7.7 million in cash and 595 thousand shares of
newly - issued Team common stock. Additional consideration of up to $2.5
million in cash could be paid to the sellers over the next four years if
aggressive growth plans of X-Ray are achieved. The Company also entered
into five year employment/consulting agreements with the two former
shareholders of X-Ray. The amount of consideration paid by Team to the
former X-Ray shareholders was determined as a result of arm-length
negotiations and agreement between unrelated parties.
In order to finance the acquisition, Team borrowed $7.7 million under
existing credit facilites -- see Note 4.
As of the date of filing of this Current Report on Form 10-Q, it is
impracticable to provide the financial statements required with respect to
the acquisition of X-Ray. Such financial statements shall be filed no later
than June 23, 1999.
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<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 28, 1999 COMPARED
TO THREE MONTHS ENDED FEBRUARY 28, 1998
Revenues for the quarter ended February 28, 1999 were $14.4 million compared to
$11.5 million for the corresponding period of the preceding year. $2.5 million
of the $2.9 million increase is attributable to the inclusion of Climax Portable
Machine Tools, Inc in Team's operating results for the 1999 period.
In the 1999 quarter, the Company experienced a pre tax loss of $729 thousand
versus pre-tax income of $590 thousand in the quarter ended February 28, 1998.
The year-to-year change is directly attributable to a $1.2 million charge
taken in the 1999 quarter. $425 thousand of the charge was for severance
and related separation costs associated with significant staff reductions
undertaken in January, 1999 at Team's headquarters location and at Climax. Total
headquarters staffs have been reduced by approximately 20%. $816 thousand of the
charge represents the remaining payments due under consulting agreements with
two former officers. The Company does not expect to continue to utilize the
services of those individuals in the future. The full impact of these staffing
and consulting cost reductions will begin to be realized in the fourth quarter.
NINE MONTHS ENDED FEBRUARY 28, 1999 COMPARED
TO NINE MONTHS ENDED FEBRUARY 28, 1998
For the nine months ended February 28, 1999, income before income taxes was $49
thousand or $1.6 million less than the same period of 1998. $1.2 million of the
decline is the result of the charge taken in the third quarter, as discussed
above. The remaining $400 thousand decline in pre-tax income is primarily
attributable to the quarter ended November 30, 1998, as a result of increased
operating and general and administrative expenses when compared to the same
quarter of 1998, as well as costs associated with international start-up
activities. A summary of the nine-month comparison is as follows:
Revenues--1999 revenues of $39.7 million were 18.9% greater than the $33.4
million reported in 1998. The increase is attributable to the Climax revenues of
$4.8 million included since its acquisition at the end of the first quarter of
the current fiscal year, as well as an increase of industrial service revenues
of $1.4 million over the same period of 1998.
Gross Margins--For the nine months ended February 28, 1999, the gross operating
margin was 41.4% of sales, which is down slightly from the 42.0% achieved in the
same period of 1998. Operating margins from Climax are consistent with Team's
year to date results.
Selling, General and Administrative Expenses--For the nine months ended February
28, 1999, SG &A expenses were 36.8% of revenues, compared to 36.0% for the same
period of 1998. For the nine months, SG&A associated with international
activities was $170 thousand higher than in 1998 due to costs associated with
start-up and timing of activities.
Interest--Interest expense increased $196 thousand for the nine months ended
February 28, 1999, when compared to the same period in 1998, as a result of the
additional debt associated with the acquisition of Climax.
-8-
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
At February 28, 1999, the Company's working capital totaled $14.8 million,
an increase of $1.8 million since May 31, 1998. The Climax acquisition has
contributed net working capital of $2.8 million, partially offset by a reduction
in cash balances as explained in the following paragraph. 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.
As of February 28, 1999, cash and cash equivalents totaled $300 thousand, a
decrease of $1.1 million since May 31, 1998. The 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 is comprised of (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. The revolving
credit loan and term loans 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 7.5%. 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% 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 February 28, 1999, $4.9
million in revolving loans and $6.3 million in term and mortgage loans were
outstanding under the facility.
At February 28, 1999, approximately $6.5 million was available under the
revolving credit facility and $5 million was available under one of the term
loan facilities. In April, 1999 the Company borrowed $7.7 million to complete
the acquisition of X-Ray Inspection, Inc--see note 7.
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.
-9-
<PAGE> 12
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.
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.
Effective February 1, 1999, the Company substantially completed a
comprehensive project to upgrade its information, technology, and manufacturing
facilities computer hardware and software to programs that address the Year 2000
problem. The new hardware and packaged software was 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
$950,000, which consists primarily of a new management information system that
will be implemented during February and March 1999. As of February 28, 1999
approximately $800,000 of the $950,000 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
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<PAGE> 13
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.
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 5. OTHER INFORMATION
The following information is reported in lieu of filing a Form 8-K Report
on the following matter.
On April 9, 1999, the Company acquired 100% of the outstanding capital
stock of X-Ray Inspection, Inc. ("X-Ray"), a Louisiana corporation, from E.
Patrick Manuel and B. Dal Miller in consideration for the payment to the sellers
of an aggregate of $7.7 million in cash and 595,000 shares of newly issued
Company common stock. Additional consideration of up to $2.5 million in cash
could be payable to the sellers over the next four years if certain high growth
operating results are achieved by X-Ray. In order to finance the purchase, the
Company borrowed $7.7 million under its existing credit facilities (see Note 4
to the Financial Statements under Item 1 of this Report). X-Ray is in the
business of providing mechanical inspection services consisting primarily of
non-invasive inspections of pipelines and piping systems in industrial plants
using x-ray and similar inspection techniques. X-Ray's inspection services
include radiographic testing, ultrasonic testing, magnetic particle testing, and
visual inspection. Currently, X-Ray has four service locations, all located in
Louisiana. X-Ray's revenues for 1998 were $9.4 million.
As of the date of filing of this Form 10-Q Report, it is impracticable for
the Registrant to provide the financial statements required by Item 7(a) of Form
8-K. In accordance with Item 7(a)(4) of Form 8-K, such financial statements
shall be filed under a Form 8-K Report no later than 60 days after April 24,
1999.
As of the date of filing of this Form 10-Q Report, it is impracticable for
the Registrant to provide the pro forma financial information required by Item
7(b) or Form 8-K. In accordance with Item 7(b) of Form 8-K, such financial
statements shall be filed under a Form 8-K Report no later than 60 days after
April 24, 1999.
-11-
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
(2) Stock Purchase Agreement Among Team, Inc. (Buyer) and E.
Patrick Manuel and B. Dal Miller (Sellers) dated April 9, 1999
providing for the acquisition by Team, Inc. of 100% of the
outstanding capital stock of X-Ray Inspection, Inc.
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed this quarter.
-12-
<PAGE> 15
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: April 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)
-13-
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
(2) Stock Purchase Agreement Among Team, Inc. (Buyer) and E.
Patrick Manuel and B. Dal Miller (Sellers) dated April 9, 1999
providing for the acquisition by Team, Inc. of 100% of the
outstanding capital stock of X-Ray Inspection, Inc.
(27) Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 2
STOCK PURCHASE AGREEMENT
AMONG
TEAM, INC.
AND
E. PATRICK MANUEL
AND
B. DAL MILLER
APRIL 9, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. Definitions..............................................................................................1
1.1. "Accredited Investor" ..........................................................................1
1.2. "Adverse Consequences" .........................................................................1
1.3. "Affiliate" ....................................................................................1
1.4. "Affiliated Group" .............................................................................2
1.5. "Applicable Rate" ..............................................................................2
1.6. "Audited Financial Statements" .................................................................2
1.7. "Base EBIT".....................................................................................2
1.8. "Basis" ........................................................................................2
1.9. "Cap"...........................................................................................2
1.10. "Capital Expenditures" .........................................................................2
1.11. "Cash" .........................................................................................2
1.12. "Claim" ........................................................................................2
1.13. "Closing" ......................................................................................2
1.14. "Closing Date" .................................................................................2
1.15. "Code" .........................................................................................2
1.16. "Confidential Information" .....................................................................2
1.17. "Controlled Group of Corporations" .............................................................3
1.18. "Current Assets" ...............................................................................3
1.19. "Current Liabilities" ..........................................................................3
1.20. "Deferred Intercompany Transaction" ............................................................3
1.21. "Deferred Payment"..............................................................................3
1.22. "Denial" .......................................................................................3
1.23. "Disclosure Schedule" ..........................................................................3
1.24. "EBIT" .........................................................................................3
1.25. "Earn-out" .....................................................................................3
1.26. "Employee Benefit Plan" ........................................................................3
1.27. "Employee Pension Benefit Plan".................................................................4
1.28. "Employee Welfare Benefit Plan" ................................................................4
1.29. "Environmental, Health, and Safety Laws" .......................................................4
1.30. "ERISA" ........................................................................................4
1.31. "Escrow Agent" .................................................................................4
1.32. "Escrow Agreement" .............................................................................4
1.33. "Escrow Amount" ................................................................................4
1.34. "Extremely Hazardous Substance" ................................................................4
1.35. "Fiduciary" ....................................................................................4
1.36. "Final Closing Date Balance Sheet" .............................................................4
1.37. "Financial Statement" ..........................................................................4
1.38. "GAAP" .........................................................................................4
1.39. "Indemnified Party" ............................................................................4
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS (Cont'd.)
<TABLE>
<S> <C> <C>
1.40. "Indemnifying Party" ...........................................................................4
1.41. "Intellectual Property" ........................................................................5
1.42. "Knowledge" ....................................................................................5
1.43. "Liability" ....................................................................................5
1.44. "Mechanical Inspection Services" ...............................................................5
1.45. "Most Recent Balance Sheet" ....................................................................5
1.46. "Most Recent Financial Statements" .............................................................5
1.47. "Most Recent Fiscal Month End" .................................................................5
1.48. "Most Recent Fiscal Year End" ..................................................................5
1.49. "Multiemployer Plan" ...........................................................................5
1.50. "Net Working Capital Deficit" ..................................................................5
1.51. "Net Working Capital Surplus" ..................................................................5
1.52. "Ordinary Course of Business" ..................................................................6
1.53. "Party" ........................................................................................6
1.54. "PBGC" .........................................................................................6
1.55. "Person" .......................................................................................6
1.56. "Preliminary Closing Date Balance Sheet" .......................................................6
1.57. "Preliminary Net Working Capital Deficit" ......................................................6
1.58. "Preliminary Net Working Capital Surplus" ......................................................6
1.59. "Prohibited Transaction" .......................................................................6
1.60. "Purchase Price" ...............................................................................6
1.61. "Release Letter" ...............................................................................6
1.62. "Reportable Event" .............................................................................6
1.63. "Right of Setoff" ..............................................................................6
1.64. "SEC" ..........................................................................................6
1.65. "Securities Act" ...............................................................................6
1.66. "Securities Exchange Act" ......................................................................6
1.67. "Security Interest" ............................................................................6
1.68. "Seller" .......................................................................................7
1.69. "Setoff"........................................................................................7
1.70. "Setoff Amount".................................................................................7
1.71. "Subsidiary" ...................................................................................7
1.72. "Tax" ..........................................................................................7
1.73. "Tax Return" ...................................................................................7
1.74. "Team's Auditor" or "Team Auditor"..............................................................7
1.75. "Team Stock" ...................................................................................7
1.76. "Term"..........................................................................................7
1.77. "Territories"...................................................................................7
1.78. "Third Party Claim" ............................................................................7
1.79. "Unassumed Liabilities".........................................................................8
1.80. "X Ray" ........................................................................................8
1.81. "X Ray Shares"..................................................................................8
1.82. "XRI Management Company" .......................................................................8
1.83. "Year 2000 Compliant" ..........................................................................8
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS (Cont'd.)
<TABLE>
<S> <C> <C>
2. Purchase and Sale of X Ray Shares........................................................................8
2.1. Basic Transaction...............................................................................8
2.2. Purchase Price..................................................................................8
2.2.1. Cash Portion of the Purchase Price.....................................................8
2.2.2. Capital Expenditures Portion of the Purchase Price.....................................9
2.2.3. Deferred Payment. .....................................................................9
2.2.4. Earn-out Portion of the Purchase Price.................................................9
2.3. Escrow Agreement; Right of Setoff..............................................................11
2.4. The Closing....................................................................................13
2.5. Deliveries at the Closing......................................................................13
2.6. Certain Other Agreements. .....................................................................14
3. Representations and Warranties Concerning the Transaction...............................................14
3.1. Representations and Warranties of the Sellers..................................................14
3.1.1. Authorization of Transaction..........................................................14
3.1.2. Noncontravention......................................................................14
3.1.3. Brokers' Fees.........................................................................15
3.1.4. Investment............................................................................15
3.1.5. X Ray Shares..........................................................................15
3.2. Representations and Warranties of Team. ......................................................15
3.2.1. Organization of Team..................................................................15
3.2.2. Authorization of Transaction..........................................................15
3.2.3. Noncontravention......................................................................16
3.2.4. Brokers' Fees.........................................................................16
3.2.5. Investment............................................................................16
3.2.6. Treatment of Transactions.............................................................16
4. Preparation and Delivery of Disclosure Schedule.........................................................16
5. Representations and Warranties Concerning X Ray and Its Subsidiaries....................................16
5.1. Organization, Qualification, and Corporate Power...............................................17
5.2. Capitalization.................................................................................17
5.3. Noncontravention...............................................................................17
5.4. Brokers' Fees..................................................................................17
5.5. Title to Assets................................................................................18
5.6. Subsidiaries...................................................................................18
5.7. Financial Statements...........................................................................18
5.8. Events Subsequent to the date of the Most Recent Financial Statements..........................18
5.9. Undisclosed Liabilities........................................................................20
5.10. Legal Compliance...............................................................................20
5.11. Tax Matters....................................................................................21
5.12. Real Property..................................................................................22
5.13. Intellectual Property..........................................................................23
</TABLE>
iii
<PAGE> 5
TABLE OF CONTENTS (Cont'd.)
<TABLE>
<S> <C> <C>
5.14. Tangible Assets................................................................................26
5.15. Inventory......................................................................................26
5.16. Contracts......................................................................................26
5.17. Notes and Accounts Receivable..................................................................27
5.18. Powers of Attorney.............................................................................27
5.19. Insurance......................................................................................28
5.20. Litigation.....................................................................................28
5.21. Warranty.......................................................................................29
5.22. Liability in Respect of Services Provided......................................................29
5.23. Employees......................................................................................29
5.24. Employee Benefits..............................................................................29
5.25. Guaranties.....................................................................................31
5.26. Environment, Health, and Safety................................................................31
5.27. Certain Business Relationships with X Ray......................................................32
5.28. Year 2000 Compliance...........................................................................32
5.29. Disclosure.....................................................................................32
6. Intentionally Deleted...................................................................................32
7. Post-Closing Covenants..................................................................................32
7.1. General........................................................................................32
7.2. Litigation Support.............................................................................32
7.3. Transition.....................................................................................33
7.4. Confidentiality................................................................................33
7.5. Team Stock.....................................................................................33
7.6. Preliminary Closing Date Balance Sheet; Final Closing Date
Balance Sheet.................................................................................34
7.7. Noncompetition.................................................................................36
7.8. Stub Period Tax Return for X Ray...............................................................37
7.9. Award of Stock Options.........................................................................38
7.10. Unassumed Liabilities..........................................................................38
7.11. Auditors' Consent..............................................................................38
8. Intentionally Deleted...................................................................................38
9. Remedies for Breaches of This Agreement.................................................................39
9.1. Survival of Representations and Warranties.....................................................39
9.2. Indemnification Provisions for Benefit of Team.................................................39
9.3. Indemnification Provisions for Benefit of the Sellers..........................................39
9.4. Matters Involving Third Parties................................................................40
9.5. Defense of Third Party Claims..................................................................40
9.6. Indemnification Payments Deemed to be Adjustments to Purchase Price............................41
9.7. Other Indemnification Provisions...............................................................41
9.8. Threshold......................................................................................41
</TABLE>
iv
<PAGE> 6
TABLE OF CONTENTS (Cont'd.)
<TABLE>
<S> <C> <C>
9.9. Cap; Timing of Claims..........................................................................41
9.10. Other Covenants................................................................................42
9.11. Certain Undertaking of Sellers.................................................................42
10. Intentionally Deleted...................................................................................42
11. Miscellaneous...........................................................................................42
11.1. Press Releases and Public Announcements........................................................42
11.2. No Third-Party Beneficiaries...................................................................42
11.3. Entire Agreement...............................................................................43
11.4. Succession and Assignment......................................................................43
11.5. Counterparts...................................................................................43
11.6. Headings.......................................................................................43
11.7. Notices........................................................................................43
11.8. Governing Law..................................................................................44
11.9. Amendments and Waivers.........................................................................44
11.10. Severability...................................................................................44
11.11. Expenses.......................................................................................44
11.12. Construction...................................................................................45
11.13. Incorporation of Exhibits and Schedules........................................................45
11.14. Specific Performance...........................................................................45
11.15. Arbitration....................................................................................45
11.15.1. Special Rules................................................................46
11.15.2. Commencement.................................................................46
11.15.3. Three Arbitrators............................................................46
11.15.4. Appointment of Chairman......................................................46
11.15.5. Qualifications of Chairman...................................................46
11.15.6. Unavailability of Blue Ribbon Panelists......................................46
11.15.7. Impartiality.................................................................47
11.15.8. Written Opinion..............................................................47
11.15.9. Framing of Issues............................................................47
11.15.10. Discovery....................................................................47
11.15.11. Locale.......................................................................47
11.15.12. Reservation of Rights........................................................47
</TABLE>
v
<PAGE> 7
TABLE OF CONTENTS (Cont'd.)
LIST OF ANNEXES, SCHEDULES AND EXHIBITS:
ANNEX I - Exceptions to Representations and Warranties of the Sellers contained
in Section 3.1.
ANNEX II - Exceptions to Representations and Warranties of the Team contained in
Section 3.2.
DISCLOSURE SCHEDULE - Exceptions to Representations and Warranties of the
Sellers concerning X Ray and the Subsidiaries contained in Section 5.
EXHIBIT A - Shareholder List
EXHIBIT B - Capital Expenditures
EXHIBIT C - Consulting Agreement of Pat Manuel
EXHIBIT D - Employment Agreement of Dal Miller
EXHIBIT E - Opinion of Counsel to the Sellers
EXHIBIT F - Opinion of Counsel to Team
EXHIBIT G - Escrow Agreement
EXHIBIT H - Stock Restriction Agreement
EXHIBIT I - Registration Rights Agreement
EXHIBIT J - Territories
EXHIBIT K - Sample Earn-Out Calculations
vi
<PAGE> 8
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into on
April 9, 1999, by and among TEAM, INC., a Texas corporation ("Team"), E. PATRICK
MANUEL, who is an individual resident of the State of Louisiana ("Manuel"), and
B. DAL MILLER, who is an individual resident of the State of Louisiana
("Miller"). Manuel and Miller are referred to collectively herein as the
"Sellers" and individually as "Seller." Team and the Sellers are referred to
collectively herein as the "Parties."
INTRODUCTION
This Agreement contemplates a transaction in which Team will purchase
from the Sellers, and the Sellers will sell to Team, all of the outstanding
capital stock of X-Ray Inspection, Inc., a Louisiana corporation ("X Ray," with
such capital stock being referred to as the "X Ray Shares"), in return for the
consideration provided below.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
AGREEMENT
1. Definitions.
1.1. "Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
1.2. "Adverse Consequences" means the dollar amount of any and all
losses suffered by the Party who is entitled to be indemnified pursuant to
Section 9 as the result of a breach of a representation, warranty and/or
covenant by the other Party, including all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses, including expenses of defending and/or pursuing a Third Party Claim.
The Parties shall take into account the time cost of money (using the Applicable
Rate as the discount rate) and insurance proceeds actually received in
determining Adverse Consequences.
1.3. "Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
<PAGE> 9
1.4. "Affiliated Group" means any affiliated group within the meaning
of Code Sec. 1504 or any similar group defined under a similar provision of
state, local or foreign law.
1.5. "Applicable Rate" means the corporate base rate of interest
announced from time to time by NationsBank, N.A.
1.6. "Audited Financial Statements" has the meaning set forth in
Section 5.7 below.
1.7. "Base EBIT" has the meaning set forth in Section 2.2.4 below.
1.8. "Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
1.9. "Cap" has the meaning set forth in Section 9.9 below.
1.10. "Capital Expenditures" means those capital expenditures (net of
any associated debt or lease obligation assumed by Team) incurred by X Ray
and/or XRI Management Company after September 30, 1998, which are listed on
Exhibit B hereto and which shall exclude any and all capital expenditures which
are in the nature of replacement or maintenance items.
1.11. "Cash" means payment by bank cashier's check, by wire transfer or
delivery of other immediately available funds.
1.12. "Claim" has the meaning set forth in Section 2.3.3 below.
1.13. "Closing" has the meaning set forth in Section 2.4 below.
1.14. "Closing Date" has the meaning set forth in Section 2.4 below.
1.15. "Code" means the Internal Revenue Code of 1986, as amended.
1.16. "Confidential Information" means any information concerning the
Mechanical Inspection Services business that is not already generally available
to the public, including (i) any of all trade secrets concerning the Mechanical
Inspection Services business, including but not limited to specifications, data,
know-how and ideas, past, current and planned methods and processes, customer
lists, current and anticipated customer requirements, price lists, market
studies, business plans, computer software and programs (including object code
and source code), computer software and data-base technologies, systems,
structures and architectures (and related processes, formulas, compositions,
improvements, devices, know-how, inventions, discoveries, concepts, ideas,
designs, methods and information) used in the Mechanical Inspection Services
business and any other
2
<PAGE> 10
information, however documented, that is a trade secret of the Mechanical
Inspection Services business, (ii) any and all information concerning the
Mechanical Inspection Services business (including but not limited to historical
financial statements, financial projections and budgets, historical and
projected sales, capital spending budgets and plans, the names and backgrounds
of key personnel, personnel training and techniques and materials), however
documented; and (iii) any and all notes, analyses, compilations, studies,
summaries and other material prepared by or for Team, X Ray, or any of Team's
Subsidiaries with respect to the Mechanical Inspection Services business
containing or based, in whole or in part, on any information included in the
foregoing.
1.17. "Controlled Group of Corporations" has the meaning set forth in
Code Section 1563(a)(1).
1.18. "Current Assets" means the current assets set forth on the
Preliminary Closing Date Balance Sheet under Section 7.6.1 and the Final Closing
Date Balance Sheet under Section 7.6.2, which shall include cash, accounts
receivable, inventory, prepaid expenses and other cash or cash-equivalent assets
existing as of March 31, 1999.
1.19. "Current Liabilities" means the current liabilities set forth on
the Preliminary Closing Date Balance Sheet under Section 7.6.1 and the Final
Closing Date Balance Sheet under Section 7.6.2, which shall include accounts
payable and accrued liabilities existing as of March 31, 1999, but which shall
exclude all Unassumed Liabilities.
1.20. "Deferred Intercompany Transaction" has the meaning set forth in
Treas. Reg. Section 1.1502-13.
1.21. "Deferred Payment" shall have the meaning set forth in Section
2.2.3 below.
1.22. "Denial" has the meaning set forth in Section 2.3.3 below.
1.23. "Disclosure Schedule" has the meaning set forth in Section 4
below.
1.24. "EBIT" has the meaning set forth in Section 2.2.3 below.
1.25. "Earn-out" has the meaning set forth in Section 2.2.4 below.
1.26. "Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
3
<PAGE> 11
1.27. "Employee Pension Benefit Plan" has the meaning set forth in
ERISA Sec. 3(2).
1.28. "Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Sec. 3(1).
1.29. "Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
1.30. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.31. "Escrow Agent" has the meaning set forth in Section 2.3.1 below.
1.32. "Escrow Agreement" has the meaning set forth in Section 2.3.1
below.
1.33. "Escrow Amount" has the meaning set forth in Section 2.3.1 below.
1.34. "Extremely Hazardous Substance" has the meaning set forth in Sec.
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
1.35. "Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
1.36. "Final Closing Date Balance Sheet" has the meaning set forth in
Section 7.6.2 below.
1.37. "Financial Statement" has the meaning set forth in Section 5.7
below.
1.38. "GAAP" means United States generally accepted accounting
principles as in effect from time to time, with depreciation based on
alternative minimum tax lives, at straight line rates.
1.39. "Indemnified Party" has the meaning set forth in Section 9.4
below.
1.40. "Indemnifying Party" has the meaning set forth in Section 9.4
below.
4
<PAGE> 12
1.41. "Intellectual Property" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations, continuations-in-
part, revisions, extensions, and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names, and corporate names, together
with all translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including data and related documentation), (g) all
other proprietary rights, and (h) all copies and tangible embodiments thereof
(in whatever form or medium).
1.42. "Knowledge" means the actual knowledge of either of the Sellers.
1.43. "Liability" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
1.44. "Mechanical Inspection Services" means all examination services,
including both destructive and non-destructive examination services, but
excluding Team's and Team's Subsidiaries' existing and future emissions control
and monitoring services.
1.45. "Most Recent Balance Sheet" means the balance sheet contained
within the Most Recent Financial Statements.
1.46. "Most Recent Financial Statements" has the meaning set forth in
Section 5.7 below.
1.47. "Most Recent Fiscal Month End" has the meaning set forth in
Section 5.7 below.
1.48. "Most Recent Fiscal Year End" has the meaning set forth in
Section 5.7 below.
1.49. "Multiemployer Plan" has the meaning set forth in ERISA Sec.
3(37).
1.50. "Net Working Capital Deficit" has the meaning set forth in
Section 7.6.2 below.
1.51. "Net Working Capital Surplus" has the meaning set forth in
Section 7.6.2 below.
5
<PAGE> 13
1.52. "Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
1.53. "Party" has the meaning set forth in the preface above.
1.54. "PBGC" means the Pension Benefit Guaranty Corporation.
1.55. "Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
1.56. "Preliminary Closing Date Balance Sheet" has the meaning set
forth in Section 7.6.1 below.
1.57. "Preliminary Net Working Capital Deficit" has the meaning set
forth in Section 7.6.1 below.
1.58. "Preliminary Net Working Capital Surplus" has the meaning set
forth in Section 7.6.1 below.
1.59. "Prohibited Transaction" has the meaning set forth in ERISA Sec.
406 and Code Sec. 4975.
1.60. "Purchase Price" has the meaning set forth in Section 2.2 below.
1.61. "Release Letter" has the meaning set forth in Section 2.3.3
below.
1.62. "Reportable Event" has the meaning set forth in ERISA Sec. 4043.
1.63. "Right of Setoff" has the meaning set forth in Section 2.3.2
below.
1.64. "SEC" means the United States Securities and Exchange Commission.
1.65. "Securities Act" means the Securities Act of 1933, as amended.
1.66. "Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
1.67. "Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and payable,
(c) purchase money liens and liens securing rental payments under capital lease
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<PAGE> 14
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
1.68. "Seller" has the meaning set forth in the preface above.
1.69. "Setoff" has the meaning set forth in Section 2.3.2 below.
1.70. "Setoff Amount" has the meaning set forth in Section 2.3.2 below.
1.71. "Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of sufficient securities to elect
a majority of the directors.
1.72. "Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Sec. 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
1.73. "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
1.74. "Team's Auditor" or "Team Auditor" means the national public
accounting firm that Team designates from time to time to audit Team's annual
financial statements and issue an audit report thereon.
1.75. "Team Stock" means 600,000 shares of the common stock, $0.30 par
value per share, of Team to be issued as set forth on Exhibit A, and otherwise
in accordance with the terms and conditions of this Agreement.
1.76. "Term" means, as to Manuel, the term of his consulting agreement
plus two (2) years, and as to Miller, the term of his employment agreement plus
two (2) years.
1.77. "Territories" means the counties and parishes listed on Exhibit J
hereto.
1.78. "Third Party Claim" has the meaning set forth in Section 9.4
below.
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<PAGE> 15
1.79. "Unassumed Liabilities" means all Liabilities of X Ray other than
Current Liabilities; "Unassumed Liabilities" specifically includes Liabilities
for interest, current maturities of interest-bearing debt, obligations for Taxes
arising on or prior to the Closing Date (including Taxes in respect of the Tax
Returns referred to in Sections 6.9 and 7.8) and obligations due to the Sellers
(in their respective capacities as shareholders of X Ray), their respective
family members or XRI Management Company.
1.80. "X Ray" has the meaning set forth in the Introduction above.
1.81. "X Ray Shares" has the meaning set forth in the Introduction
above.
1.82. "XRI Management Company" means XRI Management Company, a
Louisiana corporation the capital stock of which is wholly-owned by Manuel and
his children.
1.83. "Year 2000 Compliant" means that the system in question: (i) will
correctly and unambiguously process date information at all times, including as
the years 1999 and 2000 are approached and reached, and (ii) will not suffer any
amends, aborts, improper operation or other interruptions in operation as a
result of the approach or reaching of any particular date or the improper
computerized processing of any date. Processing of date information includes,
but is not limited to, accepting input of dates without ambiguity, outputting
all dates in an unambiguous form, and performing calculations, comparisons or
operations or taking actions or making decisions using dates, portions of dates
or time periods. The concept of Year 2000 Compliance includes all issues
relating to the handling of dates or time periods, including the processing of
the leap year that will occur in the year 2000. In the case of products that X
Ray uses as part of a larger system, then the expression "Year 2000 Compliant"
means that the larger system shall be Year 2000 Compliant.
2. Purchase and Sale of X Ray Shares.
2.1. Basic Transaction. Each Seller is the record owner of that number
of X Ray Shares set forth next to such Seller's name on Exhibit A attached
hereto. At the Closing and subject to the terms and conditions of this
Agreement, Team agrees to purchase from each of the Sellers, and each of the
Sellers agrees to sell to Team, all of such Seller's X Ray Shares for the
consideration specified in Section 2.2 below and as reflected by Exhibit A. The
Parties agree that the transactions contemplated hereunder shall be deemed
effective as of the close of business on March 31, 1999.
2.2. Purchase Price. Team agrees to pay to the Sellers at the Closing,
against delivery to Team by the Sellers of X Ray Shares representing 100% of the
issued and outstanding capital stock of X Ray, the following (the "Purchase
Price"):
2.2.1. Cash Portion of the Purchase Price. Team shall pay
$7,500,000 (less the Cash portion of the Deferred Payment) in Cash to
the Sellers as part of the Purchase Price.
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<PAGE> 16
2.2.2. Capital Expenditures Portion of the Purchase Price.
Team shall pay the amount of the Capital Expenditures to the Sellers in
Cash as part of the Purchase Price. Such payment shall be reduced by
the amount of indebtedness to Tri-Parish Bank that is related to the
assets that are the subject of the Capital Expenditures.
2.2.3. Deferred Payment. Team shall deliver (i) $500,000.00 in
Cash, and (ii) the Team Stock to the Escrow Agent (such Cash and such
Team Stock being referred to as the "Deferred Payment"). Team
acknowledges that Sellers have requested that Team issue 5,000 shares
of the Team Stock to G.A. Herrera & Co., and Team agrees to comply with
such request. Such 5,000 shares shall be included within the Purchase
Price paid for the X Ray Shares hereunder; however, the amount of Team
Stock constituting the Deferred Payment delivered to the Escrow Agent
shall be reduced, share-for-share, by such 5,000 shares. The Deferred
Payment shall be held and disposed of in accordance with the terms of
the Escrow Agreement.
2.2.4. Earn-out Portion of the Purchase Price. Following the
Closing, the Sellers shall be entitled to additional consideration of
up to $2,500,000 in the aggregate under an earn-out (the "Earn-Out")
calculated with respect to the earnings of Team's Mechanical Inspection
Services, including those conducted by X Ray and earnings arising
directly in connection with Mechanical Inspection Services conducted
through Team's branch operations during the periods, and on such terms
and conditions as set forth below:
2.2.4.1. The maximum amount payable to the Sellers
under the Earn-Out shall be $2,500,000.
2.2.4.2. The Earn-Out shall be calculated in
accordance with Section 2.2.4.3 below, and in
accordance with the provisions of this Section 2.2.4.
Prior to the calculation of the Earn-Out, the Team
Auditors shall have completed the annual audit of
Team's consolidated financial statements and delivery
of the related audit report thereon for the fiscal
year period under examination. Sample calculations of
the Earn-Out are attached as Exhibit K for
illustrative purposes only. Team shall deliver to the
Team Auditors and the Sellers a statement of the
calculation of the Earn-Out simultaneously with
Team's audit report for each of such periods, which
statement shall be delivered no later than the August
31 following the end of each period indicated below.
Such calculation shall have been reviewed by the Team
Auditors, who shall evidence such review by issuance
of an agreed-upon procedures report. Team shall pay
the amount owing to the Sellers in respect of the
Earn-Out, if any, within thirty (30) days after the
delivery of such statement.
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<PAGE> 17
2.2.4.3. The minimum (or floor) amounts of earnings
before interest and taxes of Team's Mechanical
Inspection Services, including those conducted by X
Ray and earnings arising directly in connection with
Mechanical Inspection Services conducted through
Team's branch operations ("EBIT," with such minimum
amount of EBIT being referred to as the "Floor EBIT")
and the base amounts of EBIT ("Base EBIT") for each
of such years being as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
PERIOD FLOOR EBIT BASE EBIT
- ----------------------------------------------------------------------------------------
<S> <C> <C>
April 1, 1999 to $1,925,000 $2,275,000
May 31, 2000
- ----------------------------------------------------------------------------------------
June 1, 2000 to $2,050,000 $2,350,000
May 31, 2001
- ----------------------------------------------------------------------------------------
June 1, 2001 to None. $2,900,000
May 31, 2002
- ----------------------------------------------------------------------------------------
June 1, 2002 to None. $3,500,000
May 31, 2003
- ----------------------------------------------------------------------------------------
</TABLE>
(i) If EBIT for a particular period is less
than the Floor EBIT, if any, then the
Sellers shall not receive anything in
respect of the Earn-Out. For periods
without a Floor EBIT, if EBIT for such
period is less than the Base EBIT, the
Sellers shall not receive anything in
respect of the Earn-Out.
(ii) For periods in which EBIT is between
the Floor EBIT and the Base EBIT, the amount
under the Earn-Out that the Sellers shall
receive will be equal to (x) a fraction, the
numerator of which is the actual EBIT, the
denominator of which is the Base EBIT,
multiplied by (y) the difference between the
actual EBIT and the Floor EBIT, multiplied
by (z) 0.50.
(iii) For periods in which EBIT is in excess
of the Base EBIT, the amount under the
Earn-Out that the Sellers shall receive will
be equal to the greater of (x) the
difference between the actual EBIT and the
Base EBIT, multiplied by 0.50, or (y)
$150,000.
2.2.4.4. The Earn-Out shall be calculated on a
cumulative basis, but paid out annually; however, in
no event shall the Sellers have to pay to Team any
deficit or cumulative deficit in the Earn-Out
calculation, and in no event shall Team have to pay
to the Sellers any more than $2,500,000 in the
aggregate.
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<PAGE> 18
2.2.4.5. EBIT shall include only direct and dedicated
expenses attributable to Mechanical Inspection
Services (regardless of whether such expenses could
be classified as overhead or otherwise), with no
allocations of existing Team overheads.
2.2.4.6. Team covenants and agrees that neither it
nor any Team Subsidiary shall take any action the
primary purpose of which is to impede the Sellers
from achieving the Earn-Out.
2.2.4.7. Team covenants and agrees that the Earn-Out
shall be guaranteed by X Ray as it is earned.
2.2.4.8. Team covenants and agrees that Sellers shall
have the right to review the EBIT and Earn-Out
calculations, and that the Parties shall first submit
any dispute regarding such calculations to informal
meetings (whether one or more) of Miller and the
President and Chief Operating Officer of Team (or
such officer of Team holding a substantially
equivalent executive position at the time), who shall
in good faith attempt to resolve such dispute during
fifteen (15) days after such submission; thereafter,
if the Parties are unable to agree upon such
calculations, such dispute shall be subject to the
arbitration provisions contained in Section 11 of
this Agreement.
2.3. Escrow Agreement; Right of Setoff.
2.3.1. Team shall place the Deferred Payment in escrow at
Closing (with such total amount, together with all dividends,
distributions and interest thereon from and after the Closing Date,
constituting the "Escrow Amount"). The Escrow Amount shall be held by
Southwest Bank of Texas, N.A., as escrow agent (the "Escrow Agent"),
pursuant to an escrow agreement substantially in the form of Exhibit G
hereto (the "Escrow Agreement").
2.3.2. Team shall have the right to set off against and deduct
(such action being referred to as a "Setoff") from the Deferred Payment
payable to the Sellers as provided in Section 2.2.3 above the amount
for which (i) Team is entitled to an adjustment to the Purchase Price
in connection with a Preliminary Net Working Capital Deficit and a Net
Working Capital Deficit, as provided in Section 7.6, and (ii) the
Sellers are obligated to indemnify Team, as provided in Section 9
(Team's "Right of Setoff", with each such amount deducted constituting
a "Setoff Amount"); the exercise by Team of its Right of Setoff shall
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<PAGE> 19
not be deemed a default by Team of its obligation under this Agreement
to deliver such Deferred Payment to Sellers or any portion thereof.
2.3.3. Team may exercise its Right of Setoff as follows: (i)
Team shall deliver to the Sellers a notice of setoff stating the
asserted Setoff Amount and specifying the basis for the claim giving
rise to such Right of Setoff, including a written declaration of the
Adverse Consequences incurred (or a statement of Team's reasonable
estimate of Adverse Consequences to be incurred, which statement shall
derive from an actual asserted or threatened claim or the discovery by
Team of facts and circumstances which could reasonably lead to an
actual or threatened claim for Adverse Consequences) or, in the case of
a Preliminary Net Working Capital Deficit or a Net Working Capital
Deficit, the amount of the same (any of such events being referred to
as a "Claim"), with a copy being contemporaneously delivered to the
Escrow Agent; (ii) the Sellers shall have twenty (20) days following
receipt of a Claim to deliver to Team a written objection to such Claim
(a "Denial"), with a copy being contemporaneously delivered to the
Escrow Agent; (iii) if no Denial is timely interposed by the Sellers,
the Setoff Amount shall be deemed agreed upon and the Escrow Agent
shall deduct from the Escrow Amount and deliver to Team the Setoff
Amount asserted in the Claim; (iv) if a Denial is timely delivered to
the Escrow Agent by the Sellers, Team and the Sellers shall negotiate
in good faith during the fifteen (15) days following Team's receipt of
the Denial to resolve any disagreement over the Claim, and if Team and
the Sellers resolve such disagreement they shall, if applicable,
jointly execute and deliver to the Escrow Agent a directive ("Release
Letter") instructing the Escrow Agent to deduct from the Escrow Amount
and deliver to Team the amount agreed to by Team and the Sellers; and
(v) if a Denial is timely delivered to the Escrow Agent by the Sellers
and the Claim cannot be resolved by Team and the Sellers within that
fifteen (15) day period, such Claim shall be resolved by arbitration
pursuant to Section 11 hereof, and any amounts awarded to Team as a
result of such arbitration shall constitute the Setoff Amount which
shall be put forth in a Release Letter which Team and the Sellers shall
execute and deliver to the Escrow Agent.
2.3.4. The Parties agree that, following the resolution of the
Preliminary Net Working Capital Deficit or the Preliminary Net Working
Capital Surplus in accordance with Section 7.6.1 below, the Escrow
Agent shall maintain the remaining Cash portion of the Deferred
Payment, if any, in the Escrow Account pending resolution of the Net
Working Capital Deficit or Net Working Capital Surplus, as the case may
be, in accordance with Section 7.6.2 below. Upon such resolution the
Parties shall jointly instruct the Escrow Agent to deliver to Sellers
the excess of such Cash above the amount of the Net Working Capital
Deficit, if any; or, in the case of a Net Working Capital Surplus, Team
shall join with Sellers to instruct the Escrow Agent to deliver to
Sellers the entirety of such Cash, and Team shall pay to Sellers (in
the proportions set forth on Exhibit A) the amount of such Net Working
Capital Surplus in Cash.
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<PAGE> 20
2.3.5. The Parties agree that the Escrow Agent shall maintain
the Team Stock portion of the Deferred Payment in the Escrow Account
until the first business day after the first annual anniversary of the
Closing Date; from and after such date, the Parties agree that the
Escrow Agent shall continue to hold $1,000,000 worth of Team Stock
(determined by dividing $1,000,000 by the Valuation Price per share, as
such term is defined in Section 6 of the Escrow Agreement), but in no
event more than 300,000 shares of Team Stock; the amount of shares of
Team Stock in the Escrow Account in excess of such amount shall be
released to Sellers. The shares of Team Stock then remaining in the
Escrow Account shall continue to be held by the Escrow Agent until the
first business day after the second annual anniversary of the Closing
Date; from and after such date, the Parties agree that the Escrow Agent
shall continue to hold $500,000 worth of Team Stock (determined by
dividing $500,000 by the Valuation Price per share, as such term is
defined in Section 6 of the Escrow Agreement), but in no event more
than 150,000 shares of Team Stock; the amount of shares of Team Stock
in the Escrow Account in excess of such amount shall be released to
Sellers. The then remaining shares of Team Stock shall continue to be
held by the Escrow Agent until the first business day after the third
annual anniversary of the Closing Date; on such date, the Parties agree
that the Escrow Agent shall release to Sellers all remaining shares of
Team Stock held in the Escrow Account. The amount of shares of Team
Stock released by the Escrow Agent, as described in this Section 2.3.5,
shall be subject to reduction in each case by any asserted and pending
Claims. Each Party agrees to join with the other Parties in jointly
instructing the Escrow Agent to disburse the Team Stock portion of the
Escrow Account in accordance with the provisions of this Section 2.3.5.
2.3.6. The Parties agree that the detailed requirements and
conditions set forth in this Agreement pertaining to the Escrow Amount
and the rights and obligations of Team and Sellers with regard to
Claims and disbursements from the Escrow Amount shall continue to apply
even though the said requirements and conditions are not incorporated
in the Escrow Agreement.
2.4. The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place simultaneously with the execution of
this Agreement at the offices of Chamberlain, Hrdlicka, White, Williams &
Martin, 1200 Smith Street, Suite 1400, Houston, Texas (with such execution date
being referred to as the "Closing Date").
2.5. Deliveries at the Closing. At the Closing, (i) each of the Sellers
will deliver to Team stock certificates representing all of such Seller's X Ray
Shares, endorsed in blank or accompanied by duly executed assignment documents,
(ii) Team will deliver to each of the Sellers and the Escrow Agent, as
applicable, the consideration specified in Sections 2.2.1, 2.2.2 and 2.2.3
above, (iii) Team will deliver to Manuel 5,000 shares of the common stock of
Team, $0.30 par value per share, issued in the name of G.A. Herrera & Co., (iv)
Manuel and Team shall enter into the consulting agreement in substantially the
form of Exhibit C attached hereto, (v) Miller and Team shall enter into the
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<PAGE> 21
employment agreement in substantially the form of Exhibit D attached hereto,
(vi) counsel to the Sellers shall deliver to Team an opinion in form and
substance as set forth on Exhibit E attached hereto, (vii) Team and the Sellers
shall enter into the stock restriction agreement in substantially the form of
Exhibit G attached hereto, (viii) the Parties shall enter into the Escrow
Agreement with the Escrow Agent, (ix) counsel to Team shall deliver an opinion
in form and substance as set forth in Exhibit F attached hereto, and (x) the
Parties shall enter into the registration rights agreement in substantially the
form of Exhibit I attached hereto.
2.6. Certain Other Agreements. With regard to those certain personal
vehicles transferred from X Ray to Manuel, which vehicles are (i) Silver/Black
1998 Chevrolet, VIN 1GNEC16R9WJ337334, (ii) Beige 1995 Chevrolet Pickup, VIN
2GBEKXS1301557, (iii) Red 1999 Chevrolet Suburban, VIN 1GNFK16R6XJ384510, and
(iv) White 1997 Chevrolet Pickup, VIN 2GCEK19R1V1290221, Team agrees that the
consideration for such transfer shall be the reduction to the shareholder debt
to X Ray indicated on the face of those certain bills of sale dated April 1,
1999, executed by X Ray in favor of Manuel. On or before the Closing Date,
Sellers shall cause the transfer to X Ray from XRI Management Company of all
vehicles and related radiography equipment used in the business of X Ray.
3. Representations and Warranties Concerning the Transaction.
3.1. Representations and Warranties of the Sellers. Each Seller
represents and warrants to Team that the statements with respect to such Seller
contained in this Section 3.1 are correct and complete.
3.1.1. Authorization of Transaction. Each Seller has the legal
power, authority and capacity to execute and deliver this Agreement and
to perform his or its obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of each of the Sellers,
enforceable in accordance with its terms and conditions. None of the
Sellers needs to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions
contemplated by this Agreement.
3.1.2. Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court
to which any of the Sellers is subject or (B) conflict with, result in
a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which any of the Sellers
is a party or by which he is bound or to which any of his assets is
subject.
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<PAGE> 22
3.1.3. Brokers' Fees. In the event the transactions
contemplated by this Agreement are consummated, Sellers and/or X Ray
are liable for the payment of a broker's fee to G. A. Herrera & Co. The
Sellers agree and acknowledge that Team shall not be liable or
obligated for the payment of any broker's fees owed by any of the
Sellers or X Ray. Other than the broker's fee to G. A. Herrera & Co.,
none of the Sellers or X Ray has any Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Team could become
liable or obligated.
3.1.4. Investment. Each of the Sellers (A) understands that
the Team Stock has not been, and may not be, registered under the
Securities Act, or under any state securities laws, and is being
offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (B) is acquiring the
Team Stock solely for his own account for investment purposes, and not
with a view to the distribution thereof, (C) is a sophisticated
investor with knowledge and experience in business and financial
matters, (D) has received Team's most recent Form 10-K report to the
SEC and Proxy Statement pursuant to the Securities Exchange Act, and
all reports that Team has filed with the SEC pursuant to the Securities
Exchange Act since its most recent Form 10-K, and has had the
opportunity to obtain additional information as desired in order to
evaluate the merits and the risks inherent in holding the Team Stock,
(E) is able to bear the economic risk and lack of liquidity inherent in
holding the Team Stock, and (F) is an Accredited Investor.
3.1.5. X Ray Shares. Each of the Sellers holds of record and
owns beneficially the number of X Ray Shares set forth next to his name
on Exhibit A, free and clear of any restrictions on transfer (other
than any restrictions under the Securities Act and state securities
laws), Taxes, Security Interests, options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands. None of the
Sellers is a party to any option, warrant, purchase right, or other
contract or commitment that could require such Seller to sell,
transfer, or otherwise dispose of any capital stock of X Ray (other
than this Agreement). None of the Sellers is a party to any voting
trust, proxy, or other agreement or understanding with respect to the
voting of any capital stock of X Ray.
3.2. Representations and Warranties of Team. Team represents and
warrants to the Sellers that the statements contained in this Section 3.2 are
correct and complete.
3.2.1. Organization of Team. Team is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
3.2.2. Authorization of Transaction. Team has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation
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<PAGE> 23
of Team, enforceable in accordance with its terms and conditions. Team
does not need to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions
contemplated by this Agreement.
3.2.3. Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court
to which Team is subject or any provision of its respective charter or
bylaws or (B) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or
other arrangement to which Team is a party or by which it is bound or
to which any of its assets is subject.
3.2.4. Brokers' Fees. Team has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which
any Seller could become liable or obligated.
3.2.5. Investment. Team is not acquiring X Ray Shares with a
view to or for sale in connection with any distribution thereof within
the meaning of the Securities Act.
3.2.6. Treatment of Transactions. The transactions
contemplated by this Agreement shall be treated for Tax purposes as an
acquisition by Team of stock, and shall not be treated for Tax purposes
as an asset acquisition. Team shall take no position or action other
than in accordance with such treatment.
4. Preparation and Delivery of Disclosure Schedule. Simultaneously with the
execution of this Agreement, the Sellers have prepared and delivered to Team a
disclosure schedule (the "Disclosure Schedule"), which supplies the various
items specified by Section 5 hereof. The mere listing (or inclusion of a copy)
of a document or other item on the Disclosure Schedule shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
unless the representation or warranty has to do with the existence of the
document or other item itself. The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
Section 5.
5. Representations and Warranties Concerning X Ray and Its Subsidiaries. The
Sellers represent and warrant to Team that the statements contained in this
Section 5 (including the information contained in the Disclosure Schedule
delivered by the Sellers to Team pursuant to Section 4 above) are correct and
complete.
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<PAGE> 24
5.1. Organization, Qualification, and Corporate Power. X Ray is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. X Ray is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required. X Ray has full corporate power and
authority and all licenses, permits, and authorizations necessary to carry on
the businesses in which it is engaged and in which it presently proposes to
engage and to own and use the properties owned and used by it. Section 5.1 of
the Disclosure Schedule lists the directors and officers of X Ray. The Sellers
have delivered to Team correct and complete copies of the charter and bylaws of
X Ray as amended to date. The minute books (containing the records of meetings
of the stockholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of X Ray are
correct and complete. X Ray is not in default under or in violation of any
provision of its charter or bylaws.
5.2. Capitalization. The entire authorized capital stock of X Ray
consists of 100,000 shares of common stock, no par value per share, of which
5,000 shares are issued and outstanding and 3,000 shares are held in treasury.
All of the X Ray Shares have been duly authorized, are validly issued, fully
paid, and nonassessable, and are held of record by the respective Sellers as set
forth in Exhibit A. There are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require X Ray to issue, sell, or
otherwise cause to become outstanding any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to X Ray. There are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting of the capital stock of X Ray.
5.3. Noncontravention. Neither the execution and the delivery of this
agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which X Ray is subject or any provision of the
charter or bylaws of X Ray or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which X Ray is a party or by which it is bound or to which any of its assets
is subject (or result in the imposition of any Security Interest upon any of its
assets). X Ray shall not be required to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement.
5.4. Brokers' Fees. In the event the transactions contemplated by this
Agreement are consummated, X Ray is liable for the payment of a broker's fee to
G. A. Herrera & Co. Sellers each agree and acknowledge that Team shall not be
liable or obligated for the payment of any broker's fees owed by X Ray and/or
Sellers. Other than the broker's fee to G. A. Herrera & Co., X Ray has no
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Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement for which
Team could become liable or obligated.
5.5. Title to Assets. Except as disclosed by Section 5.5 of the
Disclosure Schedule, X Ray has good and marketable title to, or a valid
leasehold interest in, the properties and assets used by it, located on its
premises, or shown on the Most Recent Balance Sheet or acquired after the date
thereof, free and clear of all Security Interests, except for properties and
assets acquired and/or disposed of in the Ordinary Course of Business since the
date of the Most Recent Balance Sheet.
5.6. Subsidiaries. X Ray does not have any Subsidiaries.
5.7. Financial Statements. Attached hereto as Section 5.7 of the
Disclosure Schedule are the following financial statements (collectively the
"Financial Statements"): (i) unaudited balance sheets and statements of income,
changes in stockholders' equity, and cash flow as of and for the fiscal year
ended December 31, 1996 for X Ray, (ii) audited balance sheets and statements of
income, changes in stockholders' equity, and cash flow ("Audited Financial
Statements") as of and for each of the fiscal years ended December 31, 1997 and
December 31, 1998 (the "Most Recent Fiscal Year End") for X Ray; and (iii)
unaudited balance sheets and statements of income, changes in stockholders'
equity, and cash flow (the "Most Recent Financial Statements") as of and for the
two months ended February 28, 1999 (the "Most Recent Fiscal Month End") for X
Ray. The Financial Statements (including the notes thereto) have been prepared
in accordance with GAAP, present fairly the financial condition of X Ray as of
such dates and the results of operations of X Ray for such periods, are correct
and complete, and are consistent with the books and records of X Ray (which
books and records are correct and complete).
5.8. Events Subsequent to the date of the Most Recent Financial
Statements. Except as disclosed on Section 5.8 of the Disclosure Schedule, since
the Most Recent Fiscal Month End, there has not been any material adverse change
in the business, financial condition, operations, results of operations, or
future prospects of X Ray. Without limiting the generality of the foregoing,
except as disclosed on Section 5.8 of the Disclosure Schedule, since the Most
Recent Fiscal Month End:
5.8.1. X Ray has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
5.8.2. X Ray has not entered into any agreement, contract,
lease or license (or series of related agreements, contracts, leases,
and licenses) either involving more than $10,000 or outside the
Ordinary Course of Business;
5.8.3. no party (including X Ray) has accelerated, terminated,
modified, or canceled any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses)
involving more than $10,000 to which X Ray is a party or by which it is
bound;
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5.8.4. X Ray has not imposed any Security Interest upon any of
its assets, tangible or intangible;
5.8.5. X Ray has not made any capital expenditure (or series
of related capital expenditures) either involving more than $10,000 or
outside the Ordinary Course of Business;
5.8.6. X Ray has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of, any other Person
(or series of related capital investments, loans, and acquisitions)
either involving more than $10,000 or outside the Ordinary Course of
Business;
5.8.7. X Ray has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness
for borrowed money or capitalized lease obligation either involving
more than $10,000 singly or $100,000 in the aggregate, except as
recorded on the books of X Ray and disclosed in writing to Team;
5.8.8. X Ray has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
5.8.9. X Ray has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims)
either involving more than $10,000 or outside the Ordinary Course of
Business;
5.8.10. X Ray has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
5.8.11. there has been no change made or authorized in the
charter or bylaws of X Ray;
5.8.12. X Ray has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or
exercise) any of its capital stock;
5.8.13. X Ray has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
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5.8.14. X Ray has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property, except as
recorded on the books and records of X Ray and disclosed in writing to
Team;
5.8.15. X Ray has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
5.8.16. X Ray has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms
of any existing such contract or agreement;
5.8.17. X Ray has not granted any increase in the base
compensation of any of its directors, officers, and employees outside
the Ordinary Course of Business;
5.8.18. except for the 1999 Incentive Bonus Program and the
401K Plan established in January 1999, X Ray has not adopted, amended,
modified, or terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of
any of its directors, officers, and employees (or taken any such action
with respect to any other Employee Benefit Plan);
5.8.19. X Ray has not made any other change in employment
terms for any of its directors, officers, and employees outside the
Ordinary Course of Business;
5.8.20. X Ray has not made or pledged to make any charitable
or other capital contribution outside the Ordinary Course of Business;
5.8.21. there has not been any other occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving X Ray; and
5.8.22. X Ray has not committed to any of the foregoing.
5.9. Undisclosed Liabilities. Except as disclosed by Section 5.9 of the
Disclosure Schedule, X Ray has no Liability (and there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against X Ray giving rise to any Liability), except
for (i) Liabilities set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) and (ii) Liabilities which have arisen after
the Most Recent Fiscal Month End in the Ordinary Course of Business (none of
which results from, arises out of, relates to, is in the nature of, or was
caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law).
5.10. Legal Compliance. Except as disclosed by Section 5.10 of the
Disclosure Schedule, X Ray and its Affiliates have complied with all applicable
laws (including rules, regulations, codes,
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plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of federal, state, local, and foreign governments (and all agencies thereof),
and no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against any of them
alleging any failure so to comply.
5.11. Tax Matters.
Except as disclosed by Section 5.11 of the Disclosure
Schedule, the following statements are correct and complete:
5.11.1. X Ray has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all material
respects. All Taxes owed by X Ray (whether or not shown on any Tax
Return) have been paid or accrued. X Ray currently is not the
beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a jurisdiction
where X Ray does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Security Interests on any
of the assets of X Ray that arose in connection with any failure (or
alleged failure) to pay any Tax.
5.11.2. X Ray has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third
party, except for those Taxes accrued as a payable on the Final Closing
Date Balance Sheet.
5.11.3. No Seller or director or officer (or employee
responsible for Tax matters) of X Ray expects any taxing authority to
assess any additional Taxes for any period for which Tax Returns have
been filed. There is no dispute or claim concerning any Tax Liability
of X Ray either (A) claimed or raised by any authority in writing or
(B) as to which any of the Sellers has Knowledge based upon personal
contact with any agent of such authority. Section 5.11 of the
Disclosure Schedule lists all federal, state, local, and foreign Tax
Returns filed with respect to X Ray for taxable periods ended on or
after December 31, 1996, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the subject
of audit. The Sellers have delivered to Team correct and complete
copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by X Ray since
December 31, 1996.
5.11.4. X Ray has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency.
5.11.5. X Ray has not filed a consent under Code Sec. 341(f)
concerning collapsible corporations. X Ray has not made any payments,
is not obligated to make any payments, nor
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is a party to any agreement that under certain circumstances could
obligate it to make any payments that will not be deductible under Code
Sec. 280G. X Ray has not been a United States real property holding
corporation within the meaning of Code Sec. 897(c)(2) during the
applicable period specified in Code Sec. 897(c)(1)(A)(ii). X Ray has
disclosed on its federal income Tax Returns all positions taken therein
that could give rise to a substantial understatement of federal income
Tax within the meaning of Code Sec. 6662. X Ray is not a party to any
Tax allocation or sharing agreement. X Ray (A) has not been a member of
an Affiliated Group filing a consolidated federal income Tax Return
(other than a group the common parent of which was X Ray) or (B) has no
Liability for the Taxes of any Person (other than X Ray) under Treas.
Reg. Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
5.11.6. Section 5.11 of the Disclosure Schedule sets forth the
following information with respect to X Ray as of the most recent
practicable date: (A) the basis of X Ray in its assets; (B) the amount
of any net operating loss, net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable contribution allocable
to X Ray and (C) the amount of any deferred gain or loss allocable to X
Ray arising out of any Deferred Intercompany Transaction.
5.11.7. The unpaid Taxes of X Ray (A) did not, as of the Most
Recent Fiscal Month End, exceed the accrual for Tax Liability (rather
than any accrual for deferred Taxes established to reflect temporary
differences between book basis and Tax basis of assets and liabilities)
set forth on the face of the Most Recent Balance Sheet (rather than in
any notes thereto) and (B) do not exceed that accrual as adjusted
through the Closing Date.
5.12. Real Property. X Ray owns no real property. Section 5.12 of the
Disclosure Schedule lists and describes briefly all real property leased or
subleased to X Ray. The Sellers have delivered to Team correct and complete
copies of the leases and subleases listed in Section 5.12 of the Disclosure
Schedule (as amended to date). With respect to each lease and sublease listed in
Section 5.12 of the Disclosure Schedule:
5.12.1. the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
5.12.2. except for those leases with Manuel and/or Affiliates
of Manuel for which Team and Manuel and/or such Affiliate
shall enter into one or more new leases, as more specifically
provided herein, the lease or sublease will continue to be
legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the
transactions contemplated hereby;
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5.12.3. no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of time,
would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
5.12.4. no party to the lease or sublease has repudiated any
provision thereof;
5.12.5. there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
5.12.6. with respect to each sublease, the representations and
warranties set forth in subsections 5.12.1 through 5.12.5 above are
true and correct with respect to the underlying lease;
5.12.7. X Ray has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold
or subleasehold;
5.12.8. all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including licenses
and permits) required in connection with the operation thereof and have
been operated and maintained in accordance with applicable laws, rules,
and regulations;
5.12.9. all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation
of said facilities; and
5.12.10. to the Knowledge of Sellers, and except as set forth
in Section 5.12.10 of the Disclosure Schedule, the owner of the
facility leased or subleased has good and marketable title to the
parcel of real property, free and clear of any Security Interest,
easement, covenant, or other restriction, except for installments of
special easements not yet delinquent and recorded easements, covenants,
and other restrictions which do not impair the current use, occupancy,
or value, or the marketability of title, of the property subject
thereto.
5.13. Intellectual Property.
Except as otherwise disclosed by Section 5.13 of the
Disclosure Schedule, the following statements are correct and complete:
5.13.1. X Ray owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
necessary for the operation of the business of X Ray as presently
conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by X Ray immediately prior to the
Closing hereunder will be owned or available for use by X Ray on
identical terms and conditions immediately subsequent to
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the Closing hereunder. X Ray has taken all necessary action to maintain
and protect each item of Intellectual Property that it owns or uses.
5.13.2. X Ray has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the Sellers and the
directors and officers (and employees with responsibility for
Intellectual Property matters) of X Ray has ever received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that
any of X Ray must license or refrain from using any Intellectual
Property rights of any third party). To the Sellers' Knowledge, no
third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of X
Ray.
5.13.3. Section 5.13.3 of the Disclosure Schedule identifies
each patent or registration which has been issued to X Ray with respect
to any of its Intellectual Property, identifies each pending patent
application or application for registration which X Ray has made with
respect to any of its Intellectual Property, and identifies each
license, agreement, or other permission which X Ray has granted to any
third party with respect to any of its Intellectual Property (together
with any exceptions). The Sellers have delivered to Team correct and
complete copies of all such patents, registrations, applications,
licenses, agreements, and permissions (as amended to date) and have
made available to Team correct and complete copies of all other written
documentation evidencing ownership and prosecution (if applicable) of
each such item. Section 5.13.3 of the Disclosure Schedule also
identifies each trade name or unregistered trademark used by X Ray in
connection with any of its businesses. With respect to each item of
Intellectual Property required to be identified in Section 5.13.3 of
the Disclosure Schedule:
5.13.3.1. X Ray possesses all right, title, and
interest in and to the item, free and clear of any Security
Interest, license, or other restriction;
5.13.3.2. the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
5.13.3.3. no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or to the Sellers' Knowledge is threatened which challenges
the legality, validity, enforceability, use, or ownership of
the item; and
5.13.3.4. X Ray has never agreed to indemnify any
Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
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5.13.4. Section 5.13.4 of the Disclosure Schedule identifies
each item of Intellectual Property that any third party owns and that X
Ray uses pursuant to license, sublicense, agreement, or permission. The
Sellers have delivered to Team correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to
date). With respect to each item of Intellectual Property required to
be identified in Section 5.13.4 of the Disclosure Schedule:
5.13.4.1. the license, sublicense, agreement, or
permission covering the item is legal, valid, binding,
enforceable, and in full force and effect;
5.13.4.2. the license, sublicense, agreement, or
permission will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms
following the Closing;
5.13.4.3. no party to the license, sublicense,
agreement, or permission is in breach or default, and no event
has occurred which with notice or lapse of time would
constitute a breach or default or permit termination,
modification, or acceleration thereunder;
5.13.4.4. no party to the license, sublicense,
agreement, or permission has repudiated any provision thereof;
5.13.4.5. with respect to each sublicense, the
representations and warranties set forth in subsections
5.13.4.1 through 5.13.4.4 above are true and correct with
respect to the underlying license;
5.13.4.6. the underlying item of Intellectual
Property is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
5.13.4.7. no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or to the Sellers' Knowledge is threatened which challenges
the legality, validity, or enforceability of the underlying
item of Intellectual Property; and
5.13.4.8. X Ray has not granted any sublicense or
similar right with respect to the license, sublicense,
agreement, or permission.
5.13.5. X Ray will not interfere with, infringe upon,
misappropriate, or otherwise come into conflict with, any Intellectual
Property rights of third parties as a result of the continued operation
of its business as presently conducted.
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5.13.6. None of the Sellers has any Knowledge of any new
products, inventions, procedures, or methods of manufacturing or
processing that any competitors or other third parties have developed
which reasonably could be expected to supersede or make obsolete any
product or process of X Ray.
5.14. Tangible Assets. X Ray owns or leases all buildings, machinery,
equipment, and other tangible assets necessary for the conduct of Mechanical
Inspection Services as presently conducted and as presently proposed to be
conducted. Each such tangible asset is free from defects (patent and latent),
has been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used and presently is
proposed to be used.
5.15. Inventory. The inventory of X Ray consists of raw materials and
supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured, and is carried at its net realizable value in
accordance with GAAP, subject only to the reserve for inventory write down set
forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto) as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of X Ray.
5.16. Contracts. Section 5.16 of the Disclosure Schedule (i) contains a
copy of X Ray's internally-generated list of master service agreements, which
are not job specific, and (ii) lists the following contracts and other
agreements to which X Ray is a party:
5.16.1. any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease
payments in excess of $10,000 per annum;
5.16.2. any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one
year, result in a loss to X Ray, or involve consideration in excess of
$10,000;
5.16.3. any agreement concerning a partnership, joint venture
or limited liability company;
5.16.4. any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, in excess of
$10,000 or under which it has imposed a Security Interest on any of its
assets, tangible or intangible;
5.16.5. any agreement concerning confidentiality or
noncompetition;
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5.16.6. any agreement with any of the Sellers and their
Affiliates (other than X Ray);
5.16.7. any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors,
officers, and employees;
5.16.8. any collective bargaining agreement;
5.16.9. any agreement for the employment of any individual on
a full-time, part-time, consulting, or other basis providing annual
compensation in excess of $50,000 or providing severance benefits;
5.16.10. any agreement under which it has advanced or loaned
any amount to any of its directors, officers, and employees outside the
Ordinary Course of Business; or
5.16.11. any agreement under which the consequences of a
default or termination could have an adverse effect on the business,
financial condition, operations, results of operations, or future
prospects of X Ray.
Except for such master service agreements, which Sellers have made available for
Team's inspection at X Ray's offices, the Sellers have delivered to Team a
correct and complete copy of each written agreement listed in Section 5.16 of
the Disclosure Schedule (as amended to date) and a written summary setting forth
the terms and conditions of each oral agreement referred to in Section 5.16 of
the Disclosure Schedule. With respect to each such agreement, except as
disclosed by Section 5.16 of the Disclosure Schedule: (A) the agreement is
legal, valid, binding, enforceable, and in full force and effect; (B) the
agreement will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default, or permit termination, modification, or acceleration, under the
agreement; and (D) to the Sellers' Knowledge, no party has repudiated any
provision of the agreement.
5.17. Notes and Accounts Receivable. All notes and accounts receivable
of X Ray are reflected properly on their books and records, are valid
receivables subject to no setoffs or counterclaims, and are collectible in the
Ordinary Course of Business no later than 60 days after the Closing Date.
5.18. Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of X Ray except for the power of attorney and audit
representation letter by X Ray to Wright, Moore, DeHart, Dupuis & Hutchinson for
tax matters for X Ray pertaining to all periods through Closing.
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5.19. Insurance. Section 5.19 of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which X Ray has been a party, a named insured,
or otherwise the beneficiary of coverage at any time within the past 5 years:
5.19.1. the name, address, and telephone number of the agent;
5.19.2. the name of the insurer, the name of the policyholder,
and the name of each covered insured;
5.19.3. the policy number and the period of coverage;
5.19.4. the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are calculated
and operate) of coverage; and
5.19.5. a description of any retroactive premium adjustments
or other loss-sharing arrangements.
With respect to each such insurance policy, except as disclosed by Section 5.19
of the Disclosure Schedule: (A) the policy is in full force and effect; (B)
assuming premiums are paid and the insurer does not cancel the policy or
otherwise attempt to void its obligations, then the policy will continue to be
in full force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) X Ray nor any other party to the policy is
in breach or default (including with respect to the payment of premiums or the
giving of notices), and, to Sellers' Knowledge, no event has occurred which,
with notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy; and (D) to
Sellers' Knowledge, no party to the policy has repudiated any provision thereof.
X Ray has been covered during the past 10 years by insurance in scope and amount
customary and reasonable for the businesses in which it has engaged during the
aforementioned period. Section 5.19 of the Disclosure Schedule describes any
self-insurance arrangements affecting X Ray.
5.20. Litigation. Section 5.20 of the Disclosure Schedule sets forth
each instance in which X Ray (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or to Sellers'
Knowledge is threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in Section 5.20 of the Disclosure Schedule could result
in any adverse change in the business, financial condition, operations, results
of operations, or future prospects of X Ray.
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5.21. Warranty. To Sellers' Knowledge, each and every service provided
by X Ray has been in conformity with all applicable contractual commitments and
all express and implied warranties, and X Ray has no Liability (and there is no
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) for replacement, repair or other additional services in
respect thereof or other damages in connection therewith, subject only to the
reserve for warranty claims set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto), as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of X
Ray. Section 5.21 of the Disclosure Schedule includes copies of the standard
terms and conditions of service for X Ray.
5.22. Liability in Respect of Services Provided. Except as may be set
forth in Section 5.22 of the Disclosure Schedule, to the Sellers' Knowledge X
Ray has no Liability (and there is no Basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of them giving rise to any Liability) arising out of any injury to
individuals or property as a result of any services provided by X Ray.
5.23. Employees. To the Knowledge of the Sellers, no executive, key
employee (except for Brandon Stelley who terminated his employment on 2/2/99),
or group of employees has any plans to terminate employment with X Ray. X Ray is
not a party to or bound by any collective bargaining agreement, nor has X Ray
experienced any strikes, grievances, claims of unfair labor practices, or other
collective bargaining disputes. X Ray has not committed any unfair labor
practice. The Sellers do not have any Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of any of X Ray.
5.24. Employee Benefits.
5.24.1. Section 5.24 of the Disclosure Schedule lists each
Employee Benefit Plan that X Ray maintains and/or to which X Ray
contributes.
5.24.1.1. Each such Employee Benefit Plan (and each
related trust, insurance contract, or fund) complies in form
and in operation in all material respects with the applicable
requirements of ERISA, the Code, and other applicable laws.
5.24.1.2. To the extent applicable, all required
reports and descriptions (including Form 5500 Annual Reports,
Summary Annual Reports, PBGC-1's, and Summary Plan
Descriptions) have been filed or distributed appropriately
with respect to each such Employee Benefit Plan. The
requirements of Part 6 of Subtitle B of Title I of ERISA and
of Code Sec. 4980B have been met with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit
Plan.
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5.24.1.3. All contributions (including all employer
contributions and employee salary reduction contributions)
which are due have been paid to each such Employee Benefit
Plan which is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing
Date which are not yet due have been paid to each such
Employee Pension Benefit Plan or accrued in accordance with
the past custom and practice of X Ray. All premiums or other
payments for all periods ending on or before the Closing Date
have been paid with respect to each such Employee Benefit Plan
which is an Employee Welfare Benefit Plan.
5.24.1.4. Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan meets the requirements of a
"qualified plan" under Code Sec. 401(a).
5.24.1.5. The market value of assets under each such
Employee Benefit Plan which is an Employee Pension Benefit
Plan (other than any Multiemployer Plan) equals or exceeds the
present value of all vested and nonvested Liabilities
thereunder determined in accordance with PBGC methods,
factors, and assumptions applicable to an Employee Pension
Benefit Plan terminating on the date for determination.
5.24.1.6. The Sellers have delivered to Team correct
and complete copies of the plan documents and summary plan
descriptions, and all related trust agreements, insurance
contracts, and other funding agreements which implement each
such Employee Benefit Plan.
5.24.2. With respect to each Employee Benefit Plan that X Ray
and the Controlled Group of Corporations which includes X Ray maintains
or ever has maintained or to which any of them contributes, ever has
contributed, or ever has been required to contribute:
5.24.2.1. No such Employee Benefit Plan which is in
Employee Pension Benefit Plan (other than any Multiemployer
Plan) has been completely or partially terminated or been the
subject of a Reportable Event as to which notices would be
required to be filed with the PBGC. No proceeding by the PBGC
to terminate any such Employee Pension Benefit Plan (other
than any Multiemployer Plan) has been instituted or
threatened.
5.24.2.2. There have been no Prohibited Transactions
with respect to any such Employee Benefit Plan. No Fiduciary
has any material Liability for breach of fiduciary duty or any
other failure to act or comply in connection with the
administration or investment of the assets of any such
Employee Benefit Plan. No
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action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets
of any such Employee Benefit Plan (other than routine claims
for benefits) is pending or, to Sellers' Knowledge,
threatened. There is no Basis for any such action, suit,
proceeding, hearing, or investigation.
5.24.2.3. X Ray has not incurred, and none of the
Sellers has any reason to expect that X Ray will incur, any
Liability to the PBGC (other than PBGC premium payments) or
otherwise under Title IV of ERISA (including any withdrawal
Liability) or under the Code with respect to any such Employee
Benefit Plan which is an Employee Pension Benefit Plan.
5.24.3. X Ray, nor the other members of the Controlled Group
of Corporations that includes X Ray contributes to, ever has
contributed to, or ever has been required to contribute to any
Multiemployer Plan or has any Liability (including withdrawal
Liability) under any Multiemployer Plan.
5.24.4. Except for supplemental medical insurance payments for
Manuel's parents, which payments will cease on the Closing Date, X Ray
does not maintain nor has it maintained, it does not contribute nor has
it contributed, and it never has been required to contribute to any
Employee Welfare Benefit Plan providing medical, health, or life
insurance or other welfare-type benefits for current or future retired
or terminated employees, their spouses, or their dependents (other than
in accordance with Code Sec. 4980B).
5.25. Guaranties. X Ray is not a guarantor or otherwise liable for any
Liability or obligation (including indebtedness) of any other Person.
5.26. Environment, Health, and Safety.
5.26.1. Except as set forth on Section 5.26 of the Disclosure
Schedule, each of X Ray and its Affiliates has complied with all
Environmental, Health, and Safety Laws, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand,
or notice has been filed or commenced against any of them alleging any
failure so to comply. Without limiting the generality of the preceding
sentence, each of X Ray and its Affiliates has obtained and been in
compliance with all of the terms and conditions of all permits,
licenses, and other authorizations which are required under, and each
has complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental, Health, and
Safety Laws.
5.26.2. All properties and equipment used in the business of X
Ray have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2-trans-dichloroethylene,
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dioxins, dibenzofurans, and Extremely Hazardous Substances (except for
radioactive substances identified in Section 5.26 of the Disclosure
Schedule).
5.27. Certain Business Relationships with X Ray. Except (i) as
disclosed by Section 5.27 of the Disclosure Schedule, (ii) for XRI Management
Company's previous relationship with X Ray, and (iii) Manuel's relationship as
lessor to X Ray of the Lafayette and Sulphur facilities, the Sellers have not
been involved in any business arrangement or relationship with X Ray within the
past 12 months, and none own any asset, tangible or intangible, which is now
used in the business of X Ray.
5.28. Year 2000 Compliance. X Ray's business system, including its
computer hardware and software, are Year 2000 Compliant in all material respects
necessary for the day to day operation of X Ray's business.
5.29. Disclosure. The representations and warranties contained in this
Section 5 or in any Exhibit, certificate or Schedule attached hereto do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements and information contained herein
or therein not misleading and all such statements, representations, warranties,
Exhibits, certificates and Schedules are true, correct and complete in all
material respects.
6. Intentionally Deleted.
7. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
7.1. General. In case at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, each of the Parties
will take such further action (including the execution and delivery of such
further instruments and documents) as any other Party reasonably may request,
all at the sole cost and expense of the requesting Party (unless the requesting
Party is entitled to indemnification therefor under Section 9 below). The
Sellers acknowledge and agree that from and after the Closing Team will be
entitled to possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to X Ray.
7.2. Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, audit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving X Ray, each of the other Parties will cooperate
with him or it and his or its counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or defense, all at
the sole cost and expense of
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the contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 9 below).
7.3. Transition. None of the Sellers will take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of any of X Ray from maintaining
the same business relationships with X Ray and its Subsidiaries after the
Closing as it maintained with X Ray prior to the Closing. Each of the Sellers
will refer all customer inquiries relating to the business of X Ray to Team from
and after the Closing.
7.4. Confidentiality. Each of the Sellers will treat and hold as such
all of the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
Team or destroy, at the request and option of Team, all tangible embodiments
(and all copies) of the Confidential Information which are in his or its
possession. Each of the Sellers acknowledges and agrees that all Confidential
Information known or obtained by such Seller whether before or after the date
hereof, is and shall be the property of X Ray. In the event that any of the
Sellers is requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information, that
Seller will notify Team promptly of the request or requirement so that Team may
seek an appropriate protective order or waive compliance with the provisions of
this Section 7.4. If, in the absence of a protective order or the receipt of a
waiver hereunder, any of the Sellers is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for
contempt, that Seller may disclose the Confidential Information to the tribunal;
provided, however, that the disclosing Seller shall use his or its reasonable
best efforts to obtain, at the reasonable request of Team, an order or other
assurance that confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as Team shall designate. The
foregoing provisions shall not apply to any Confidential Information which is
generally available to the public immediately prior to the time of disclosure.
7.5. Team Stock. Each certificate for shares of Team Stock to be issued
hereunder will be imprinted with a legend substantially in the following form:
The shares represented by this certificate have not been
registered under the Securities Act of 1933 ("Act") or any
other securities statute, and no reoffer, sale, transfer,
pledge or other disposition thereof may be made unless the
shares are registered under the Act and any other applicable
statute, or, in the written opinion of counsel reasonably
satisfactory to the issuer, such transaction will not require
registration under the Act or any other securities statute.
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Full statements of the designations, preferences, limitations
and relative rights of the shares of each class of authorized
stock of Team, the variations in the relative rights and
preferences of the shares of any series of Preferred Stock so
far as the same have been fixed and determined, and the
authority of the Board of Directors to fix and determine the
relative rights and preferences each series thereof, and of
the denial of the preemptive rights of shareholders to acquire
unissued or treasury shares of Team, are set forth in the
Articles of Incorporation of Team, as amended, which are on
file in the Office of the Secretary of State of the State of
Texas, copies of which may be obtained without charge on
written request to Team at its principal place of business or
registered office.
The shares represented by this certificate are subject to the
provisions of a Stock Restriction Agreement between Team,
Inc., E. Patrick Manuel, and B. Dal Miller, and may not be
sold or transferred except in accordance with such Stock
Restriction Agreement, a counterpart of which has been
deposited with the Corporation at its principal office, and a
copy of which will be provided to any shareholder upon written
request.
7.6. Preliminary Closing Date Balance Sheet; Final Closing Date Balance
Sheet.
7.6.1. Within fifteen (15) business days after the Closing
Date, the Sellers shall deliver to Team the Sellers' preliminary calculation of
the Final Closing Date Balance Sheet described in Section 7.6.2 below
("Preliminary Closing Date Balance Sheet"), which shall set forth a statement of
the Sellers' good faith estimate of the Current Assets and the Current
Liabilities of X Ray as of March 31, 1999. In the event that the Current Assets
fail to exceed the Current Liabilities by $500,000 (the amount of such deficit
being referred to as the "Preliminary Net Working Capital Deficit"), then the
Purchase Price for the X Ray Shares, as provided in Section 2.2 of this
Agreement and as reflected by Exhibit A, shall be retroactively reduced
dollar-for-dollar by the amount of such Preliminary Net Working Capital Deficit,
and the Sellers agree that such Preliminary Net Working Capital Deficit shall be
paid from the Escrow Account under Team's Right of Setoff by means of Team's
Claim to the Escrow Agent under Section 2.3.3 above, subject to Sellers' right
to object as provided in Section 2.3.3 above. In the event that the Cash portion
of the Deferred Payment shall be insufficient to satisfy a Preliminary Net
Working Capital Deficit, then the Sellers agree to pay to Team the amount of
such Preliminary Net Working Capital Deficit in Cash within five (5) business
days after resolution of the Claim for such Preliminary Net Working Capital
Deficit under Section 2.3.3 above. In the event that the Current Assets exceed
the Current Liabilities by $500,000 or more (the amount of such surplus, if any,
being referred to as the "Preliminary Net Working Capital Surplus"), then the
Purchase Price for the X Ray Shares, as provided in Section 2.2 of this
Agreement and as reflected by Exhibit A, shall be retroactively increased
dollar-for-dollar by the amount of the Preliminary Net Working Capital Surplus,
and Team shall pay to the Sellers the
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amount of such difference in Cash within five (5) business days after delivery
of the Preliminary Closing Date Balance Sheet. Any Preliminary Net Working
Capital Deficit shall be increased dollar-for-dollar by the amount of Unassumed
Liabilities, if any, appearing on the Preliminary Closing Date Balance Sheet;
any Preliminary Net Working Capital Surplus shall be reduced dollar-for-dollar
by the amount of Unassumed Liabilities, if any, appearing on the Preliminary
Closing Date Balance Sheet. The adjustment to the Purchase Price described in
this Section 7.6.1 shall be borne by the Sellers or payable to the Sellers, as
the case may be, in the ratio that the number of X Ray Shares held by such
Seller bears to all of the X Ray Shares purchased hereunder by Team.
7.6.2. Team shall cause a balance sheet, which shall set forth
the Current Assets and the Current Liabilities of X Ray as of March 31, 1999, to
be prepared for X Ray and shall cause Team's Auditor to audit such balance sheet
("Final Closing Date Balance Sheet"). Team shall deliver the Final Closing Date
Balance Sheet to all Parties promptly upon its completion, which shall be on or
before August 31, 1999. Only those accounts receivable existing as of March 31,
1999 and collected within 60 days after the Closing Date shall be included in
the Current Assets as stated on the Final Closing Date Balance Sheet.
Inventories included within Current Assets as stated on the Final Closing Date
Balance Sheet shall be valued at the lower of cost or market price, and, except
for radioactive materials included in inventory, shall have been fully used
within 90 days after the Closing Date. Radioactive materials included within
Current Assets as stated on the Final Closing Date Balance Sheet shall be valued
in an amount equal to the historical cost per Curie multiplied by the number of
Curies shown to be remaining in accordance with standard depletion charts
provided by third-party vendors for such radioactive materials. In the event
that the Current Assets fail to exceed the Current Liabilities by $500,000 (the
amount of such deficit being referred to as the "Net Working Capital Deficit"),
then the Purchase Price for the X Ray Shares, as provided in Section 2.2 of this
Agreement and as reflected by Exhibit A, shall be retroactively reduced
dollar-for-dollar by the amount of such Net Working Capital Deficit, and the
Sellers agree that such Net Working Capital Deficit shall be paid from the
Escrow Account under Team's Right of Setoff by means of Team's Claim to the
Escrow Agent under Section 2.3.3 above, subject to Sellers' right to object as
provided in Section 2.3.3 above. In the event that the Cash portion of the
Deferred Payment shall be insufficient to satisfy a Net Working Capital Deficit,
then the Sellers agree to pay to Team the amount of such Net Working Capital
Deficit in Cash within five (5) business days after resolution of the Claim for
such Net Working Capital Deficit under Section 2.3.3 above. In the event that
the Current Assets exceed the Current Liabilities by $500,000 or more (the
amount of such surplus, if any, being referred to as the "Net Working Capital
Surplus"), then the Purchase Price for the X Ray Shares, as provided in Section
2.2 of this Agreement and as reflected by Exhibit A, shall be retroactively
increased dollar-for-dollar by the amount of the Net Working Capital Surplus,
Team shall pay to the Sellers the amount of such difference in Cash within five
(5) business days after delivery of the Final Closing Date Balance Sheet, and
Team shall join with Sellers to instruct the Escrow Agent to deliver to the
Sellers the entirety of the Cash in the Escrow Account, as provided by Section
2.3.4 above. Any Net Working Capital Deficit shall be increased
dollar-for-dollar by the amount of Unassumed Liabilities, if any, appearing on
the Final Closing Date Balance Sheet; any
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Net Working Capital Surplus shall be reduced dollar-for-dollar by the amount of
Unassumed Liabilities, if any, appearing on the Final Closing Date Balance
Sheet. The amount of any Net Working Capital Deficit shall be decreased
dollar-for-dollar by the amount of any Preliminary Net Working Capital Deficit
paid under Section 7.6.1, and shall be increased dollar-for-dollar by the amount
of any Preliminary Net Working Capital Surplus paid under Section 7.6.1;
similarly, the amount of any Net Working Capital Surplus shall be increased
dollar-for-dollar by the amount of any Preliminary Net Working Capital Deficit
paid under Section 7.6.1, and shall be decreased dollar-for-dollar by the amount
of any Preliminary Net Working Capital Surplus paid under Section 7.6.1. The
adjustment to the Purchase Price described in this Section 7.6.2 shall be borne
by the Sellers or payable to the Sellers, as the case may be, in the ratio that
the number of X Ray Shares held by such Seller bears to all of the X Ray Shares
purchased hereunder by Team.
7.6.3. In the event any payments are made on the accounts
receivable of X Ray existing as of March 31, 1999, and such underlying
account(s) receivable(s) is not included in Current Assets as set forth in
Section 7.6.2 above, Team agrees and covenants to promptly remit to Sellers in
Cash all such payments and collections.
7.6.4. The expense of the audit conducted by Wright, Moore,
DeHart, Dupuis & Hutchinson in connection with the Audited Financial Statements
shall be reflected on the Preliminary Closing Date Balance Sheet so as to
increase any Preliminary Net Working Capital Deficit or decrease any Preliminary
Net Working Capital Surplus on a dollar-for-dollar basis. Similarly, the
Liability in respect of Taxes owing on Tax Returns for the period January 1,
1998 through December 31, 1998 shall be reflected on the Preliminary Closing
Date Balance Sheet so as to increase any Preliminary Net Working Capital Deficit
or decrease any Preliminary Net Working Capital Surplus on a dollar-for-dollar
basis.
7.6.5. Following final disbursement of the Cash portion of the
Deferred Payment in accordance with the provisions of this Section 7.6, Team
shall make no further claims for adjustments to the Purchase Price in respect of
matters set forth on the Final Closing Date Balance Sheet; provided, however,
that Team shall be entitled to claim Adverse Consequences arising in connection
with the breach by Sellers of the representations, warranties, and covenants
contained in this Agreement and in accordance with the terms and conditions
contained in Section 9 hereof.
7.7. Noncompetition. Each of the Sellers, for and in consideration of
the Purchase Price and the covenants and agreements of Team hereunder, agrees
that:
7.7.1. During the Term, (i) Each of the Sellers shall not,
directly or indirectly, engage or invest in, own, manage, operate,
finance, control or participate in the ownership, management,
operations, financing or control of, be employed by, associated with,
or in any manner connected with, lend his name or the name of X Ray, or
any similar name to, lend his credit to, or render services or advice
to any business the products or activities compete
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in whole or in part with the products or activities of the Mechanical
Inspection Services anywhere within the Territories; provided, however
that each of the Sellers may purchase or otherwise acquire any class of
securities of any enterprise, (but without otherwise participating in
the activities of such enterprise) if such securities are listed on any
national securities exchange or have been registered under Section
12(g) of the Securities Exchange Act; (ii) Each of the Sellers shall
not, directly or indirectly, for himself or any other person (A) induce
or attempt to induce any employee or agent of X Ray or Team or any of
its Subsidiaries, to leave the employ of X Ray or Team or any of its
Subsidiaries, (B) in any way interfere with the relationship between X
Ray or Team or any of its Subsidiaries, and any employee or agent of X
Ray or Team or any of its Subsidiaries, (C) employ, or otherwise engage
as an employee, independent contractor, or otherwise, any employee of X
Ray or Team or any of its Subsidiaries, or (D) induce or attempt to
induce any customer, supplier, licensee or business relation of X Ray
or Team or any of its Subsidiaries, to cease doing business with X Ray
or Team or any of its Subsidiaries, or in any way interfere with the
relationship between any customer, supplier, licensee or business
relation of X Ray or Team or any of its Subsidiaries; and (iii) Each of
the Sellers shall not, directly or indirectly, either for himself or
any other person, solicit the business of any person known to each
Seller to be a customer of X Ray or Team or any of its Subsidiaries,
whether or not such Seller had personal contact with such person, with
respect to products or activities of the Mechanical Inspection Services
in the Territories. Team shall have provided the Sellers with written
notice and fifteen (15) days to cure such conduct prior to any claim of
breach against such Seller with respect to the matters covered in
subsections (ii)(B) and (ii)(D).
7.7.2. Each of the Sellers agrees that each of the covenants
set forth in Section 7.7.1 is reasonable with respect to its duration,
geographical area and scope.
7.7.3. Each of the Sellers shall not during the Term or at any
time after the Term disparage X Ray or Team or any of its Subsidiaries,
or the Mechanical Inspection Services or any of the directors,
officers, employees, or agents of X Ray or Team or any of its
Subsidiaries.
7.7.4. In the event that any provision of this Section 7.7 is
found to be unenforceable, the Parties agree that this Section 7.7
shall be interpreted, and shall be deemed to be revised, so as to
permit its enforcement in accordance with and to the extent permitted
by applicable law.
7.8. Stub Period Tax Return for X Ray. Each of the Sellers covenants
and agrees to cause the preparation of and to file all final (including federal
income and state and local) Tax Returns for X Ray in all jurisdictions which
require such Tax Returns, which shall cover the period from January 1, 1999
until the Closing Date. The Sellers shall file all such Tax Returns as soon as
practicable after the Closing, but in no event shall the Sellers file a
particular Tax Return later than
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the date after which such Tax Return would no longer be considered timely filed.
Such Tax Returns shall be consistent with the Audited Financial Statements. The
Sellers shall provide Team with copies of all such Tax Returns, which shall be
true, correct and complete in all material respects. The Liability in respect of
such Taxes shown as owing on such Tax Returns shall be paid by X Ray, and shall
be reflected on the Final Closing Date Balance Sheet so as to increase any Net
Working Capital Deficit or decrease any Net Working Capital Surplus on a
dollar-for-dollar basis.
7.9. Award of Stock Options. The Parties agree and understand that
Miller, in connection with his duties and responsibilities under the employment
agreement referenced in Section 8.1.9 below, shall be entitled to recommend the
award of stock options to key employees of X Ray, subject to approval by Team's
Board of Directors. The total amount of the said stock options shall not exceed
50,000, and the maximum amount awarded to any key employee (other than Miller
himself) shall not exceed 7,500.
7.10. Unassumed Liabilities. To the extent that the Sellers have not
satisfied and discharged the Unassumed Liabilities on or prior to the Closing
Date (or, in the case of the Unassumed Liabilities arising in respect of
Seller's obligations under Section 7.8, provided for a reserve or accrual in an
amount satisfactory to Team) and the Preliminary Net Working Capital Surplus,
Preliminary Net Working Capital Deficit, Net Working Capital Deficit or Net
Working Capital surplus, as the case may be, has not been adjusted with respect
thereto under Section 7.6.2 above, then the Sellers shall satisfy and discharge
the Unassumed Liabilities from time to time after the Closing Date within five
(5) days after written notice from Team.
7.11. Auditors' Consent. The Sellers shall cause Wright, Moore, DeHart,
Dupuis & Hutchinson to consent to the use of their audit report on the Audited
Financial Statements by Team in connection with filings with appropriate
governmental authorities, including the SEC.
8. Intentionally Deleted.
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9. Remedies for Breaches of This Agreement.
9.1. Survival of Representations and Warranties.
9.1.1. The representations, warranties and covenants of the
Sellers contained in Sections 3.1, 5.1, 5.2, 5.3, and 5.4 shall survive the
Closing and shall continue in full force and effect thereafter forever.
9.1.2. The representations, warranties and covenants of the
Sellers contained in Section 5.11 shall survive the Closing and shall continue
in full force and effect until the expiration of all statutes of limitations
applicable with respect thereto.
9.1.3. The covenants of Team contained in Section 2.2.4 shall
survive until the final settlement of the Earn-Out; the representations,
warranties and covenants of Team contained in Section 3.2 shall survive the
Closing and continue in full force and effect thereafter forever.
9.1.4. All other representations, warranties and covenants of
the Parties contained in this Agreement and for which a survival period is not
specifically described in Sections 9.1.1, 9.1.2 and 9.1.3 above, shall survive
the Closing hereunder until the first business day after the date which is the
third annual anniversary of the Closing Date.
9.2. Indemnification Provisions for Benefit of Team. In the event any
Seller breaches (or in the event any third party alleges facts that, if true,
would mean a Seller has breached) any of his representations, warranties, and
covenants contained in this Agreement, then each such Seller agrees to indemnify
Team from and against the entirety of any Adverse Consequences (up to the amount
of the Cap, if applicable) Team may suffer through and after the date of the
claim for indemnification resulting from, arising out of, relating to, in the
nature of, or caused by the breach (or the alleged breach). Each Seller shall
indemnify Team from and against the entirety of any Adverse Consequences Team
may suffer as a result of any breach of his covenant in Section 2 above and his
representations and warranties in Section 3.1 above concerning the transaction,
with such indemnity obligations arising only with respect to the particular
Seller (whether one or more) who has breached such representations and
warranties.
9.3. Indemnification Provisions for Benefit of the Sellers. In the
event Team breaches (or in the event any third party alleges facts that, if
true, would mean Team has breached) any of its representations, warranties, and
covenants contained herein, then Team agrees to indemnify each of the Sellers
from and against the entirety of any Adverse Consequences the Sellers may suffer
through and after the date of the claim for indemnification resulting from,
arising out of, relating to, in the nature of, or caused by the breach (or the
alleged breach).
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9.4. Matters Involving Third Parties. If any third party shall notify
any Party (the "Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification against any other
Party (the "Indemnifying Party") under this Section 9, then the Indemnified
Party shall promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the Indemnifying
Party thereby is prejudiced.
9.5. Defense of Third Party Claims. Any Indemnifying Party will have
the right to defend the Indemnified Party against the Third Party Claim
(including any claim related to Taxes owed by X Ray for periods prior to the
Closing Date) with counsel of its choice reasonably satisfactory to the
Indemnified Party so long as (A) the Indemnifying Party notifies the Indemnified
Party in writing within 10 days after the Indemnified Party has given notice of
the Third Party Claim that the Indemnifying Party will indemnify the Indemnified
Party from and against the entirety of any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to, in the nature of,
or caused by the Third Party Claim, (B) the Third Party Claim involves only
money damages and does not seek an injunction or other equitable relief, (C)
settlement of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing business
interests of the Indemnified Party, and (D) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently. So long as the
Indemnifying Party is conducting the defense of the Third Party Claim in
accordance with the foregoing, (A) the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in the defense of the
Third Party Claim, (B) the Indemnified Party will not consent to the entry of
any judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party (not to be withheld
unreasonably), and (C) the Indemnifying Party will not consent to the entry of
any judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (not to be withheld
unreasonably). In the event any of the aforesaid conditions in this Section 9.5
fail and/or cease to be satisfied, (A) the Indemnified Party may defend against,
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith, provided that the
Indemnified Party keeps the Indemnifying Party informed as to all material
matters pertaining to the Third Party Claim), (B) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (C) the Indemnifying Parties will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this Section 9.
40
<PAGE> 48
9.6. Indemnification Payments Deemed to be Adjustments to Purchase
Price. All indemnification payments under this Section 9 shall be deemed
adjustments to the Purchase Price. As to matters involving money damages, Team
covenants and agrees to first exercise its Right of Setoff prior to the exercise
of any other indemnification remedies it may have under this Section 9 against
any of the Sellers.
9.7. Other Indemnification Provisions. Following the Closing, the
foregoing indemnification provisions shall constitute the sole and exclusive
remedies any Party may have against any other Party for breach of
representation, warranty, or covenant continued in this Agreement, except in the
case of fraud, fraudulent inducement, intentional concealment or intentional
misrepresentation, and except for Team's failure to pay the Earn-out in
accordance with this Agreement, in any of which cases the injured Party shall
have such rights and remedies with respect thereto as are provided at law or in
equity. Each of the Sellers hereby agrees that he or it will not make any claim
for indemnification against X Ray by reason of the fact that he or it was a
director, officer, employee, or agent of any such entity or was serving at the
request of any such entity as a partner, trustee, director, officer, employee,
or agent of another entity (whether such claim is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses, expenses, or
otherwise and whether such claim is pursuant to any statute, charter document,
bylaw, agreement, or otherwise) with respect to any action, suit, proceeding,
complaint, claim, or demand brought by Team against such Seller (whether such
action, suit, proceeding, complaint, claim, or demand is pursuant to this
Agreement, applicable law, or otherwise).
9.8. Threshold. The Parties covenant and agree that the Sellers shall
not be liable for any Adverse Consequences under this Section 9 until the
aggregate amount for all indemnifiable claims under this Section 9 exceeds
$100,000.00. This Section 9.8 shall not apply to the breach by Sellers of those
representations, warranties and covenants identified in Section 9.1.1 or 9.1.2,
or to the undertaking set forth in Section 9.11.
9.9. Cap; Timing of Claims. From and after the Closing Date until the
first business day after the date that is the first annual anniversary of the
Closing Date, the aggregate liability of Sellers for Adverse Consequences under
Section 9 (the "Cap") shall be equal to the Purchase Price. After the date that
is the first business day after the first annual anniversary of the Closing Date
until the first business day after the date that is the second annual
anniversary of the Closing Date, the Cap shall be equal to 66 2/3% of the
Purchase Price. After the date that is the first business day after the second
annual anniversary of the Closing Date until the first business day after the
date that is the third annual anniversary of the Closing Date, the Cap shall be
equal to 33 1/3% of the Purchase Price. For purposes of calculating the Purchase
Price under this Section 9.9, the Earn-Out shall be included only to the extent
paid to Sellers and the Purchase Price shall be subject to all adjustments
(except those under this Section 9) provided in this Agreement. A claim for
indemnification under this Section 9 must be made prior to the dates referenced
in this Section 9.9 in order for the Cap applicable to such date to apply to
such claim; similarly, with respect to those representations,
41
<PAGE> 49
warranties and covenants the survival of which is limited under Sections 9.1.2
and 9.1.4, a claim for indemnification under this Section 9 must be made on or
prior to the date of expiration of such survival period. Notwithstanding
anything to the contrary herein contained, the Cap shall be unlimited (and the
limitations on Sellers' liability contained in this Section 9.9 shall be of no
force or effect) for the breach of those representations, warranties and
covenants identified in Sections 9.1.1 and 9.1.2, or to the undertaking set
forth in Section 9.11.
9.10. Other Covenants. If a claim, including a Third Party Claim, is
covered by insurance, the Indemnified Party shall diligently prosecute the
corresponding claim under such insurance policy and any insurance proceeds
received shall either be paid to the Indemnified Party in respect of such claim
or remitted to the Indemnifying Party (to the extent that such Indemnifying
Party has paid Adverse Consequence with respect to such claim). Manuel's
responsibility for Adverse Consequences for which Team is entitled to indemnity
under this Section 9 shall be equal to 90% of such Adverse Consequences;
Miller's responsibility for Adverse Consequences for which Team is entitled to
indemnity under this Section 9 shall be equal to 10% of such Adverse
Consequences. The Sellers shall be severally, but not jointly, liable for
Adverse Consequences for which Team is entitled to indemnity under this Section
9. It is the intention of the Parties that Sellers shall not be solidarily
liable for Adverse Consequences.
9.11. Certain Undertaking of Sellers. Sellers agree to indemnify Team
from and against the entirety of any Adverse Consequences Team may suffer
through and after the date hereof from, arising out of, relating to, in the
nature of, or caused by Tara Vezina v. X-Ray Inspection, Inc., EEOC Charge No.
###-##-####, disclosed on Section 5.20 of the Disclosure Schedule.
10. Intentionally Deleted.
11. Miscellaneous.
11.1. Press Releases and Public Announcements. Sellers shall not issue
any press release or make any public announcement relating to the subject matter
of this Agreement without the prior written approval of Team. Team shall, after
the execution of this Agreement by the Parties and payment of the consideration
provided in Sections 2.2.1, 2.2.2 and 2.2.3 above, issue a press release and
make such public disclosure with respect to the Agreement as it believes in good
faith is appropriate and/or is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities and will use its
reasonable best efforts to timely provide the Sellers with a copy of such press
release and public announcement .
11.2. No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
42
<PAGE> 50
11.3. Entire Agreement. This Agreement (including the documents and
exhibits referred to herein) constitutes the entire agreement among the Parties
and supersedes any prior understandings, agreements, or representations by or
among the Parties, written or oral, to the extent they related in any way to the
subject matter hereof. As among the Parties, in the event of any conflict
between the provisions of the Escrow Agreement and this Agreement, the
provisions of this Agreement shall control.
11.4. Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of Team and the Sellers; provided, however, that Team may (i)
assign any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases Team nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
11.5. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
11.6. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.7. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
<TABLE>
<S> <C> <C>
If to the Sellers: Copy to:
c/o X Ray Inspection, Inc. Liskow & Lewis
102 Row 3 822 Harding Street
Lafayette, Louisiana 70508 Lafayette, Louisiana 70503
P.O. Box 51651 P.O. Box 52008
Lafayette, Louisiana 70505 Lafayette, Louisiana 70505
Facsimile: (318) 233-1470 Attn: Mr. Billy J. Domingue
Facsimile: (318) 267-2398
</TABLE>
43
<PAGE> 51
<TABLE>
<S> <C> <C>
If to Team: Copy to:
Team, Inc. Chamberlain, Hrdlicka, White,
200 Hermann Drive Williams & Martin
Alvin, Texas 77511 1200 Smith Street, Suite 1400
P.O. Box 123 Houston, Texas 77002-4310
Alvin, Texas 77512-0123 Attn: Mr. Sidney B. Williams
Attn: Philip J. Hawk, Chairman and CEO Facsimile: (713) 658-2553
Facsimile: (281) 388-5583
</TABLE>
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
11.8. Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Texas without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Texas or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of Texas.
11.9. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by Team
and the Sellers. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
11.10. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
11.11. Expenses. Each of the Parties, X Ray will bear his or its own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby. The Sellers agree
that X Ray has not borne or will not bear any of the Sellers' costs and expenses
(including any of their legal fees and expenses) in connection with this
Agreement or any of the transactions contemplated hereby; provided, however, to
the extent that X Ray has borne such costs and expenses, Sellers agree to cause
such costs and expenses to be
44
<PAGE> 52
reflected in such a way so as to increase the Preliminary Net Working Capital
Deficit and the Net Working Capital Deficit or decrease the Preliminary Net
Working Capital Surplus and the Net Working Capital Surplus, as the case may be,
as contemplated under Sections 7.6.1 and 7.6.2, respectively. Team shall pay all
costs associated with the compilations and restatement performed by Wright,
Moore, DeHart, Dupuis & Hutchinson in connection with the adjustments to the
Audited Financial Statements to Team's fiscal year, which costs Team shall treat
as an acquisition expense. With regard to the transfer of certain vehicles and
related radiography equipment from XRI Management Company to X Ray, Team, on the
one hand, and Sellers, on the other hand, shall each pay 50% of any State of
Louisiana transfer taxes imposed with respect to such transfers.
11.12. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
11.13. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
11.14. Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in Section 11.15 below), in addition to any other remedy to which they may
be entitled, at law or in equity.
11.15. Arbitration. All disputes, controversies or claims arising out
of the transaction evidenced by this Agreement, or between or among the Parties
hereto, including but not limited to those arising out of or relating to this
Agreement or any related instruments, agreements, or documents, including any
claim from an alleged tort, shall be determined by binding arbitration in
45
<PAGE> 53
accordance with the Federal Arbitration Act (or if not applicable, the
applicable state law), the Rules of Practice and Procedure for the Arbitration
of Commercial Disputes of the American Arbitration Association or any successor
thereof ("AAA"), and the "Special Rules" set forth below. In the event of any
inconsistency, the Special Rules shall control. Judgment upon any arbitration
award may be entered in any court having jurisdiction. Any Party to this
agreement or any related instruments, agreements, or documents may bring an
action, including a summary or expedited proceeding, to compel arbitration of
any controversy or claim to which this agreement applies in any court having
jurisdiction over such action.
11.15.1. Special Rules. The following "Special Rules" shall
apply to all arbitrations hereunder:
11.15.2. Commencement. All arbitration hearings will be
commenced within 90 days of the demand for arbitration; further, the arbitrator
shall only, upon a showing of cause, be permitted to extend the commencement of
such hearing for up to an additional 60 days.
11.15.3. Three Arbitrators. The arbitration shall be conducted
before a tribunal composed of three neutral arbitrators each of whom shall sign
an oath agreeing to be bound by the code of ethics for arbitrators in commercial
disputes promulgated by the AAA for neutral arbitrators. Each Party shall
appoint an arbitrator, obtain its appointee's acceptance of such appointment,
and deliver written notification of such appointment and acceptance to the other
Party within 30 days after delivery of the notice of arbitration.
11.15.4. Appointment of Chairman. The two Party-appointed
arbitrators shall jointly appoint the third arbitrator from the AAA "blue
ribbon" panel for commercial disputes. If the appointment of the third
arbitrator is not effected within 30 days, then, upon the joint request of the
Parties or the request of either of them, the appointing authority shall appoint
the third arbitrator, obtain acceptance of such appointment and acceptance. The
third arbitrator shall serve as the chairman of the tribunal.
11.15.5. Qualifications of Chairman. The chairman shall be a
lawyer admitted to the bar of the State of Texas who shall have practiced for at
least 12 years, shall speak, read and write the English language fluently, shall
have expertise in commercial litigation, and be either a former judicial officer
or an active partner in a law firm of no less than 50 lawyers.
11.15.6. Unavailability of Blue Ribbon Panelists. If for any
reason members of the blue ribbon panel are not available to serve as
arbitrators or as chairman, then other commercial arbitrators of the AAA may
serve, provided that preference shall be given to former judicial officers or
active partners or shareholders in a law firm of no less than 50 lawyers with
expertise in commercial litigation.
46
<PAGE> 54
11.15.7. Impartiality. It is the intent of the Parties to
avoid the appearance of impropriety due to bias or partiality on the part of any
arbitrator. Prior to his or her formal appointment, each arbitrator shall
disclose to the Parties and to the other members of the tribunal, any financial,
fiduciary, kinship or other relationship between that arbitrator and any Party
or its counsel, or between that arbitrator and any individual or entity with any
financial, fiduciary, kinship or other relationship with any Party. For the
purpose of this Agreement, "appearance of impropriety" shall be defined as such
relationship or behavior as would cause a reasonable person to believe that bias
or partiality on the part of the arbitrator may exist in favor of any Party.
11.15.8. Written Opinion. Any award or portion thereof,
whether preliminary or final, shall be in a written opinion containing findings
of fact and conclusions of law signed by each arbitrator. The arbitrator
dissenting from an award or portion thereof shall issue a dissent from the award
or portion thereof in writing, stating the reasons for his dissent.
11.15.9. Framing of Issues. The notice of arbitration shall
contain a statement of any dispute in sufficient detail to apprise the other
party of (i) the nature and scope of each dispute, (ii) the initiating party's
position and (iii) the relief sought. Each other party shall, within 45 days
after receipt of the notice, or within such other period of time as the parties
may agree, deliver its answer to the initiating party, which shall contain its
statement of the dispute, its positions and any counterclaims and the relief
that it seeks. The initiating party shall then have 45 days, or such other
period of time as the parties may agree, to deliver its reply to any
counterclaim raised in the answer. No amendments to the notice, answer or reply
shall be permitted without the consent of the other parties or of the
arbitrators.
11.15.10. Discovery. The Parties agree that discovery shall be
handled expeditiously. The Parties shall be entitled to a reasonable number of
depositions, the final number which may be decided by the arbitrators if the
Parties cannot agree. Interrogatories and requests for production may be used by
the Parties under the Texas Rules of Civil Procedure. All disputes regarding
discovery shall be promptly resolved by the arbitrators.
11.15.11. Locale. The locale for the arbitration shall be in
Houston, Texas, unless otherwise agreed by the Parties.
11.15.12. Reservation of Rights. Nothing in this arbitration
provision shall be deemed to limit the applicability of any otherwise applicable
statutes of limitation or repose and any waivers contained in this Agreement.
SIGNATURES APPEAR ON THE FOLLOWING PAGE.
47
<PAGE> 55
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
TEAM:
TEAM, INC.
By: /s/ PHILIP J. HAWK
------------------------------------
Philip J. Hawk, Chairman and CEO
SELLERS:
/s/ E. PATRICK MANUEL
---------------------------------------
E. Patrick Manuel
/s/ B. DAL MILLER
---------------------------------------
B. Dal Miller
48
<PAGE> 56
EXHIBIT A
SHAREHOLDER LIST
<TABLE>
<CAPTION>
NAME OF NO. OF X RAY SHARES CASH DELIVERED AT DEFERRED PAYMENT
SHAREHOLDER HELD CLOSING
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
E. Patrick Manuel 4,500 $6,300,000, plus 90% 535,500* shares of
of the Capital Team Stock and
Expenditures $450,000 in Cash
- ------------------------------------------------------------------------------------------------------------
B. Dal Miller 500 $700,000, plus 10% 59,500* shares of
of the Capital Team Stock and
Expenditures $50,000 in Cash
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* After adjustment for the 5,000 shares of Team Stock to be issued to G.A.
Herrera & Co.
<PAGE> 57
EXHIBIT B
CAPITAL EXPENDITURES
<PAGE> 58
EXHIBIT 2
ANNEX I
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
OF
SELLERS CONTAINED IN SECTION 3.1
None.
<PAGE> 59
ANNEX II
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
OF
TEAM CONTAINED IN SECTION 3.2
None.
<PAGE> 60
EXHIBIT 2
CONSULTING AGREEMENT
This CONSULTING AGREEMENT ("Agreement") is made as of April 9, 1999
(the "Effective Date"), by and between TEAM, INC., a Texas corporation (the
"Company"), and E. PATRICK MANUEL ("Consultant").
INTRODUCTION
Of even date herewith, the Company has consummated the transactions
contemplated under that certain Stock Purchase Agreement, of even date herewith
("Stock Purchase Agreement"), by and among the Company, E. Patrick Manuel and B.
Dal Miller. Under the Stock Purchase Agreement, the Company has acquired all of
the capital stock of X-Ray Inspection, Inc., a Louisiana corporation ("X Ray").
In order to assist the Company in the transition of management, and for such
other purposes as set forth below, the Company desires to engage Consultant, and
Consultant desires to accept such engagement, to provide consulting services to
the Company pursuant to the terms hereof. Capitalized terms not otherwise
defined herein shall have the meanings given to them in the Stock Purchase
Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
AGREEMENT
1. Engagement of Consultant. The Company hereby engages Consultant, and
Consultant hereby accepts such engagement, to provide consulting services to the
Company upon the terms and conditions contained herein. Upon reasonable notice
to Consultant from the Company, Consultant shall be available to consult with
the Board of Directors, the officers, and other executive employees of the
Company and its subsidiaries as directed by the chief executive officer of the
Company concerning matters pertaining to the organization, operation and
management of the Company's Mechanical Inspection Services business (which
includes, without limitation, the organization, operation and management of X
Ray), the fiscal policy pertaining to the Mechanical Inspection Service
business, the relationship of the Company with the Mechanical Inspection Service
business' employees or with any organization representing such employees, the
transition of management of the Mechanical Inspection Service business from X
Ray to the Company, and in general, concerning any problems of importance with
respect to the business affairs of the Company related to the Mechanical
Inspection Service business as may be reasonably requested from time to time by
the chief executive officer of the Company. In connection with such services,
from and after the Effective Date and continuing until the fourth annual
anniversary of the Effective Date, the Company shall invite Consultant to attend
all regular meetings of the Board of Directors of the Company and Consultant
shall serve as a director of X Ray. Consultant's engagement hereunder shall not
require that Consultant work more than 1,020 hours per year. While the parties
understand that Consultant shall work primarily from the Lafayette, Louisiana
office of X Ray, Consultant acknowledges that the Company is now and intends to
continue to be an international provider of industrial services, and that the
Mechanical Inspection Services business is a part of such industrial services,
and as such, the Company may require, upon reasonable notice to Consultant, that
Consultant travel significantly outside of the Lafayette, Louisiana office of X
Ray. The Company agrees that
<PAGE> 61
Consultant's travel shall be reasonable in scope and duration and shall be
appropriate when considered in the light of the Company's business objectives
for the Mechanical Inspection Services business.
2. Term of and Termination of Consultancy.
2.1. General. The term of this Agreement shall begin on the
Effective Date and continue until the fifth annual anniversary thereof ("Term").
The Company and Consultant agree that Consultant's consultancy hereunder may be
terminated by the Consultant resigning or by the Company's declaration of
termination with or without "Cause" at any time, subject to the terms of this
Section 2. Such termination shall be effective upon delivery of written notice
from the acting party to the other of its election to terminate the consultancy
pursuant to this Section 2. "Cause" shall mean the termination of the
Consultant's consultancy by the Company by reason of (i) Consultant's breach of
a material provision of this Agreement after reasonable written notice and
opportunity to cure such breach; (ii) the conviction of, or the entering of a
guilty plea or no contest plea by, the Consultant for a crime involving moral
turpitude by a court of competent jurisdiction; (iii) the commission by the
Consultant of an act of fraud upon the Company or any of its affiliates; (iv)
the misappropriation of any funds or property of the Company or any of its
affiliates by the Consultant; or (v) the failure by the Consultant to perform
material duties assigned to him or to comply with any written Company policy
after reasonable written notice and opportunity to cure such performance or
compliance, as the case may be.
2.2. Termination for Cause or Resignation. If the Company
terminates the Consultant's consultancy for Cause or the Consultant voluntarily
resigns, the Company shall pay the Consultant's compensation under Section 3
earned through the date of termination, but all other rights of Consultant
arising hereunder shall be canceled and terminated in all respects concurrently
with such termination of the consultancy.
2.3. Termination Without Cause. In the event that the
Consultant's consultancy is terminated by the Company without Cause, the Company
shall, subject to the terms of Section 2.4 below, pay the Consultant's
compensation under Section 3 through the remainder of the Term, but all other
rights of Consultant arising hereunder shall be canceled and terminated in all
respects concurrently with such termination of consultancy.
2.4. Disability; Death. If at any time during the Term
Consultant is unable, due to physical or mental disability, to perform
effectively his duties hereunder, or if Consultant should die during the Term,
then Consultant's consultancy and the Company's obligations hereunder shall
terminate as of the end of the month in which Consultant's disability or death,
as the case may be, occurs. Consultant shall be deemed to have incurred a
disability if Consultant suffers a physical or mental condition which, in the
reasonable judgment of the Board, prevents Consultant from engaging in any
substantial consultancy with the Company for a period of more than three (3)
months.
3. Compensation. As consideration for the consulting services to
be provided by Consultant hereunder, the Company shall pay to Consultant equal
monthly installments of $10,000.00 each during the Term. Consultant's
compensation hereunder shall be charged to X Ray. During the Term, the Company
shall reimburse Consultant for all reasonable and necessary (as
2
<PAGE> 62
determined by the Company from time to time) out-of-pocket business expenses
incurred by Consultant in rendering consulting services required under the terms
of this Agreement pursuant to expense reports filed in accordance with the
Company's policies in effect from time to time. The Company shall provide
Consultant with a monthly vehicle allowance of $450.00.
4. Independent Contractor. Consultant acknowledges that he is an
independent contractor and not an agent or employee of the Company. As a
consequence thereof, Consultant shall be free to determine, in his sole
discretion, the methods and techniques, that in his opinion, will best
accomplish the performance of his consulting services; provided, however, that
such methods and techniques shall be in accordance with good and reputable
business practices. Consultant acknowledges that he is solely responsible for
the payment of any taxes due at any time in connection with the compensation
paid to him under this Agreement, and for obtaining such insurance coverage
(whether medical or otherwise) as Consultant desires, at Consultant's sole cost
and expense.
5. No Agency. Consultant is authorized to represent himself as an
independent contractor of the Company, but shall have no authority to and shall
not represent that he has authority to bind the Company in any manner.
6. Governing Law. The substantive laws of the State of Louisiana,
excluding any law, rule or principle which might refer to the substantive law of
another jurisdiction, will govern the interpretation, validity and effect of
this Agreement without regard to the place of execution or the place for
performance thereof.
7. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
7.1. If to the Consultant: Pat Manuel
1206 Hwy 190 West
Eunice, LA 70535
with a copy to: Liskow & Lewis
822 Harding Street
Lafayette, Louisiana 70503
P. O. Box 52008
Lafayette, Louisiana 70505
Attn: Mr. Billy J. Domingue
Facsimile: (318) 267-2398
3
<PAGE> 63
7.2. If to the Company: Team, Inc.
200 Hermann Drive
Alvin, Texas 77511
P.O. Box 123
Alvin, Texas 77512-0123
Attn: Philip J. Hawk, Chairman
and CEO
Facsimile: (281) 388-5583
with a copy to: Chamberlain, Hrdlicka, White,
Williams & Martin
1200 Smith Street, Suite 1400
Houston, Texas 77002-4310
Attn: Mr. Sidney B. Williams
Facsimile: (713) 658-2553
Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other parties
notice in the manner herein set forth.
8. Assignment. This Agreement is personal to the Consultant, and he
shall not assign any of his rights or delegate any of his duties hereunder
without the prior written consent of the Company. Neither the Consultant nor his
spouse will have the right to commute, encumber, or otherwise dispose of any
prospective payments under this Agreement. The Company shall not assign any of
its rights or delegate any of its duties hereunder without the prior written
consent of Consultant, except that the Company may assign any of its rights or
delegate any of its duties hereunder to any of its wholly-owned subsidiaries
(regardless of whether such ownership is direct or indirect).
9. Binding Upon Successors. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective heirs,
legal representatives, successors and permitted assigns.
10. Entire Agreement. This Agreement constitutes the entire agreement
between the Company and the Consultant with respect to the terms of the
engagement of the Consultant by the Company and supersedes all prior agreements
and understandings, whether written or oral, between them concerning such terms
of such engagement.
4
<PAGE> 64
11. Waiver and Amendments; Cumulative Rights and Remedies.
11.1. This Agreement may be amended, modified or supplemented,
and any obligation hereunder may be waived, only by a written instrument
executed by the parties hereto. The waiver by either party of a breach of any
provision of this Agreement shall not operate as a waiver of any subsequent
breach.
11.2. No failure on the part of any party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a waiver
hereof, nor shall any single or partial exercise of any such right or remedy by
such party preclude any other or further exercise thereof or the exercise of any
other right or remedy. All rights and remedies hereunder are cumulative and are
in addition to all other rights and remedies provided by law, agreement or
otherwise.
11.3. The obligations of the parties hereto and such parties'
rights and remedies hereunder are in addition to all other obligations of such
parties, and all rights and remedies of such parties, created pursuant to any
other agreement.
12. Construction. Each party to this Agreement has had the
opportunity to review this Agreement with legal counsel. This Agreement shall
not be construed or interpreted against any party on the basis that such party
drafted or authored a particular provision, parts of or the entirety of this
Agreement.
13. Severability. In the event that any provision or provisions of
this Agreement is held to be invalid, illegal or unenforceable by any court of
law or otherwise, the remaining provisions of this Agreement shall nevertheless
continue to be valid, legal and enforceable as though the invalid or
unenforceable parts had not been included therein. In addition, in such event
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible with respect
to those provisions which were held to be invalid, illegal or unenforceable.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
THE COMPANY:
TEAM, INC.
By:
-----------------------------------------------
Philip J. Hawk, Chairman and CEO
CONSULTANT:
--------------------------------------------------
E. Patrick Manuel
5
<PAGE> 65
EXHIBIT 2
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made as of April 9, 1999
("Effective Date") by and between TEAM, INC., a Texas corporation, (the
"Company"), and B. DAL MILLER (the "Employee").
INTRODUCTION
Of even date herewith, the Company has consummated the transactions
contemplated under that certain Stock Purchase Agreement, of even date herewith
("Stock Purchase Agreement"), by and among the Company, E. Patrick Manuel, and
B. Dal Miller. Under the Stock Purchase Agreement, the Company has acquired all
of the capital stock of X-Ray Inspection, Inc., a Louisiana corporation ("X
Ray"). Employee has served in a managerial capacity with X Ray, and the Company
desires to employ Employee, and Employee desires to be employed by the Company,
on the terms and conditions herein contained. Capitalized terms not otherwise
defined herein shall have the meanings given to them in the Stock Purchase
Agreement.
AGREEMENT
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment. The Company hereby agrees to employ the Employee and the
Employee hereby agrees to work for the Company under the terms and conditions
set forth herein.
2. Term of Employment. The term of this Agreement ("Term") shall begin
on the Effective Date and shall continue in effect for a period of five years
after the Effective Date, in accordance with the terms and conditions contained
herein.
3. Scope of Duties; Covenants.
3.1. Throughout the Term, the parties covenant and agree that
the Employee shall be employed by the Company as its Vice President and General
Manager - Mechanical Inspection Services, and in such position shall serve as a
full-time employee of the Company, perform the duties which are customary to
that office and such other reasonable duties as the Company's board of directors
("Board") shall from time to time specify, and shall report directly to the
Company's President. Such duties shall include, without limitation,
responsibility for the organization, operation and management of the Company's
Mechanical Inspection Services business (which includes, without limitation, the
organization, operation and management of X Ray). In connection with Employee's
employment hereunder, Employee shall serve as a director of X Ray beginning on
the Effective Date and continuing until the fourth annual anniversary of the
Effective Date. While the parties understand that Employee shall work primarily
from the Lafayette, Louisiana office of X Ray, Employee acknowledges that the
Company is now and intends to continue to be an international provider of
industrial services, and that the Mechanical Inspection Services business is a
part of such industrial services, and as such, the Company may require that
Employee travel significantly outside of the Lafayette, Louisiana office of X
Ray. The Company agrees that Employee's travel shall be reasonable in scope and
duration and shall be appropriate when considered in the light of the Company's
business objectives for the Mechanical Inspection Services business.
<PAGE> 66
3.2. So long as he is employed by the Company, the Employee
shall, consistent with the time commitments contained in Section 3.1 above,
devote his skill, energy and best efforts to the faithful discharge of his
duties as an employee of the Company. The Employee agrees that in the provision
of all services to the Company, he will comply with and follow all lawful
directives, policies, standards and regulations from time to time established by
the Board.
3.3. The Employee represents and warrants that Employee is
under no contractual or other restrictions or obligations which will
significantly limit the performance of Employee's obligations under this
Agreement or which will prohibit or limit the disclosure or use by the Employee
of any information which directly or indirectly relates to the business of the
Company or the services to be rendered by the Employee under this Agreement.
4. Compensation.
4.1. During the Term as defined above, the Company shall pay
the Employee a base salary, payable in equal periodic installments in accordance
with the Company's customary payroll practices, not less frequently than
monthly, in an amount no less than that which is set forth on Schedule A and
identified as "Base Compensation" thereon.
4.2. On the Effective Date, the Company shall pay the Employee
a sign-on bonus in accordance with the provisions set forth on Schedule A
("Sign-On Bonus").
4.3. During the Term as defined above, the Company shall pay
the Employee a bonus in accordance with the provisions set forth on Schedule A
("Bonus").
4.4. All payments of salary and other compensation to the
Employee shall (i) be made after deduction of any taxes which are required to be
withheld with respect thereto under applicable federal and state laws, and (ii)
be charged to X Ray.
5. Vacation/Personal Time. Employee shall be entitled to leave for
vacation and personal time off consistent with the terms and conditions set
forth on Schedule A hereof. For purposes of this Agreement, "personal time off"
shall include time taken off by Employee on account of illness, family emergency
or death in the immediate family.
6. Fringe Benefits; Expenses. So long as the Employee is employed by
the Company, the Employee shall be entitled to participate in any employee
benefit plans sponsored by the Company generally for the employees of the
Company serving in similar employment capacities as the Employee and as
determined from time to time by the Company and on terms at least as favorable
to Employee as are generally offered to other employees of the Company serving
in a similar capacity. The Company shall also reimburse Employee for his
reasonable and necessary (as determined by the Company from time-to-time)
out-of-pocket business expenses incurred in connection with his employment under
this Agreement pursuant to expense reports filed in accordance with the
Company's policies in effect from time to time.
2
<PAGE> 67
7. Termination.
7.1. General. The Company and Employee agree that Employee's
employment hereunder may be terminated by the Employee resigning or by the
Company's declaration of termination with or without "Cause" at any time,
subject to the terms of this Section 7. Such termination shall be effective upon
delivery of written notice from the acting party to the other of its election to
terminate employment pursuant to this Section 7. "Cause" when used in connection
with the termination of employment with the Company, shall mean the termination
of the Employee's employment by the Company by reason of (i) Employee's breach
of a material provision of this Agreement after reasonable written notice and
opportunity to cure such breach; (ii) the conviction of, or the entering of a
guilty plea or no contest plea by, the Employee for a crime involving moral
turpitude by a court of competent jurisdiction; (iii) the commission by the
Employee of an act of fraud upon the Company or any of its affiliates; (iv) the
misappropriation of any funds or property of the Company or any of its
affiliates by the Employee; or (v) the failure by the Employee to perform
material duties assigned to him or to comply with any written Company policy
after reasonable written notice and opportunity to cure such performance or
compliance, as the case may be.
[GRAPHIC OMITTED]
7.2. Termination for Cause or Resignation. If the Company
terminates the Employee's employment for Cause or the Employee voluntarily
resigns, the Company shall pay the Employee's Base Compensation earned through
the date of termination (which shall include accrued but unused vacation), but
all rights to any other compensation or benefits arising hereunder shall be
canceled and terminated in all respects, except for Employee's rights under
COBRA, concurrently with such termination of employment.
7.3. Termination Without Cause. In the event that the
Employee's employment is terminated by the Company without Cause, the Company
shall, subject to the terms of Section 7.4 below, pay the Employee's Base
Compensation through the remainder of the Term, but all rights to any other
compensation or benefits arising hereunder shall be canceled and terminated in
all respects, except for Employee's rights under COBRA, concurrently with such
termination of employment.
7.4. Disability; Death. If at any time during the term of this
Agreement, Employee is unable, due to physical or mental disability, to perform
effectively his duties hereunder, the Company shall continue payment of
compensation as provided in Section 4 during the first six months of such
disability to the extent not covered by the Company's disability insurance
policies. Upon the expiration of such six month period, the Company, at its sole
option, may continue payment of Employee's salary for such additional periods as
the Company elects, or may terminate this Agreement without any further
obligations hereunder, except for Employee's rights under COBRA. If Employee
should die during the term of this Agreement, Employee's employment and the
Company's obligations hereunder shall terminate, except for Employee's spouse's
rights under COBRA, if any, as of the end of the month in which Employee's death
occurs and there will be no salary continuation period. Employee shall be deemed
to have incurred a disability if Employee suffers a physical or mental condition
which (i) satisfies the definition of "total disability" in the Company's
disability insurance policies, or (ii) if no such policy or plan is then
covering Employee, in the reasonable judgment of the Board, prevents Employee
from engaging in any substantial gainful employment with the Company for a
period of more than six (6) months.
3
<PAGE> 68
8. Governing Law. The substantive laws of the State of Louisiana,
excluding any law, rule or principle which might refer to the substantive law of
another jurisdiction, will govern the interpretation, validity and effect of
this Agreement without regard to the place of execution or the place for
performance thereof.
9. Notice. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
9.1. If to the Employee: P. O. Box 51651
Lafayette, Louisiana 70505
with a copy to: Liskow & Lewis
822 Harding Street
Lafayette, Louisiana 70503
P. O. Box 52008
Lafayette, Louisiana 70505
Attn: Mr. Billy J. Domingue
Facsimile: (318) 267-2398
9.2. If to the Company: Team, Inc.
200 Hermann Drive
Alvin, Texas 77511
P.O. Box 123
Alvin, Texas 77512-0123
Attn: Philip J. Hawk, Chairman and
CEO
Facsimile: (281) 388-5583
with a copy to: Chamberlain, Hrdlicka, White,
Williams & Martin
1200 Smith Street, Suite 1400
Houston, Texas 77002-4310
Attn: Mr. Sidney B. Williams
Facsimile: (713) 658-2553
Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other parties
notice in the manner herein set forth.
10. Assignment. This Agreement is personal to the Employee, and he
shall not assign any of his rights or delegate any of his duties hereunder
without the prior written consent of the Company. Neither the Employee nor his
spouse will have the right to commute, encumber, or
4
<PAGE> 69
otherwise dispose of any prospective payments under this Agreement. The Company
shall not assign any of its rights or delegate any of its duties hereunder
without the prior written consent of Employee, except that the Company may
assign any of its rights or delegate any of its duties hereunder to any of its
wholly-owned subsidiaries (regardless of whether such ownership is direct or
indirect).
11. Binding Upon Successors. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective heirs,
legal representatives, successors and permitted assigns.
12. Entire Agreement. This Agreement constitutes the entire agreement
between the Company and the Employee with respect to the terms of employment of
the Employee by the Company and supersedes all prior agreements and
understandings, whether written or oral, between them concerning such terms of
employment.
13. Waiver and Amendments; Cumulative Rights and Remedies.
13.1. This Agreement may be amended, modified or supplemented,
and any obligation hereunder may be waived, only by a written instrument
executed by the parties hereto. The waiver by either party of a breach of any
provision of this Agreement shall not operate as a waiver of any subsequent
breach.
13.2. No failure on the part of any party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a waiver
hereof, nor shall any single or partial exercise of any such right or remedy by
such party preclude any other or further exercise thereof or the exercise of any
other right or remedy. All rights and remedies hereunder are cumulative and are
in addition to all other rights and remedies provided by law, agreement or
otherwise.
13.3. The obligations of the parties hereto and such parties'
rights and remedies hereunder are in addition to all other obligations of such
parties, and all rights and remedies of such parties, created pursuant to any
other agreement.
14. Construction. Each party to this Agreement has had the opportunity
to review this Agreement with legal counsel. This Agreement shall not be
construed or interpreted against any party on the basis that such party drafted
or authored a particular provision, parts of or the entirety of this Agreement.
15. Severability. In the event that any provision or provisions of this
Agreement is held to be invalid, illegal or unenforceable by any court of law or
otherwise, the remaining provisions of this Agreement shall nevertheless
continue to be valid, legal and enforceable as though the invalid or
unenforceable parts had not been included therein. In addition, in such event
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible with respect
to those provisions which were held to be invalid, illegal or unenforceable.
5
<PAGE> 70
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement on the Effective Date.
TEAM, INC.
By:
--------------------------------------
Philip J. Hawk, Chairman and CEO
EMPLOYEE:
-----------------------------------------
B. Dal Miller
6
<PAGE> 71
EXHIBIT 2
DIRECT DIAL NO. (713) 658-2516
SIDNEY B. WILLIAMS, P.C.
PARTNER
April 9, 1999
E. Patrick Manuel
B. Dal Miller
P.O. Box 51651
Lafayette, Louisiana 70505
Ladies and Gentlemen:
We have acted as counsel to TEAM, INC., a Texas corporation ("Team"),
in connection with the Stock Purchase Agreement, dated April 9, 1999 (the
"Purchase Agreement"), by and among Team, E. PATRICK MANUEL ("Manuel"), and B.
DAL MILLER ("Miller"), regarding the sale to Team by Manuel and Miller of their
shares of capital stock of X-RAY INSPECTION, INC., a Louisiana corporation (the
"Company"). This opinion is delivered to you as required by the Purchase
Agreement. Capitalized terms used and not otherwise defined herein have the
meanings given to them in the Purchase Agreement.
We have examined copies, certified or otherwise identified to our
satisfaction, of the Purchase Agreement and such other documents, corporate
records and other information furnished us, certificates of public officials and
other instruments, and have considered such matters of fact or law as we have
deemed appropriate to enable us to render the opinions expressed below. We have
assumed the authenticity of all documents submitted to us as originals and the
correctness of all statements of fact contained therein, the genuineness of all
signatures (except those of Team), the legal capacity of natural persons, and
the conformity to the originals of all documents submitted to us as copies. We
have further assumed that none of the such documents has been subsequently
rescinded, revoked, restated, modified or amended in any way other than by
documents that have been submitted to us. As to questions of fact material to
this opinion, we have, when relevant facts were not independently established,
relied upon certificates of an authorized representative of Team.
With respect to the opinions expressed herein, we have assumed that at
all relevant times (i) each of Manuel and Miller has duly executed and delivered
the Purchase Agreement, (ii) the Purchase Agreement constitutes valid, binding
and enforceable obligations of each of Manuel and Miller, (iii) each of Manuel
and Miller has all requisite power and authority and any and all necessary
consents and approvals to enter into, execute, deliver and perform their
respective
<PAGE> 72
E. Patrick Manuel
B. Dal Miller
April 9, 1999
Page 2
obligations under the Purchase Agreement, and (iv) the execution, delivery and
performance of the Purchase Agreement and related instruments by each of Manuel
and Miller does not breach, violate or conflict with any agreement or the laws
or governmental rules and regulation of any jurisdiction or authority applicable
to any of Manuel, Miller, the Company or to any of the Company's properties.
Based on the foregoing and subject to the qualifications, exceptions
and assumptions contained herein, and having regard for such legal
considerations as we deem relevant, we are of the opinion that:
1. Team is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas; Team has all requisite corporate
power and authority to own and operate its properties, to lease the properties
it operates under lease and to conduct its business.
2. The Purchase Agreement has been duly executed and delivered by Team
and constitutes the legal, valid and binding obligations of Team, enforceable
against Team in accordance with its terms, except as such enforceability may be
subject to the effect of (a) any applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and (b) general principles of equity
(regardless of whether that enforceability is considered in a proceeding in
equity or at law).
3. Neither the execution, delivery and performance of the Purchase
Agreement nor the consummation of the transactions contemplated thereby
violates, breaches or constitutes a default under (i) any provision of the
Articles of Incorporation, Bylaws or other organizational documents of Team,
(ii) any law, statute, code, ordinance, order, rule, regulation, judgment,
decree, injunction, writ, award, authorization, or other requirement of any
governmental authority known to us to be applicable to Team, or (iii) any
material agreement or instrument of Team known to us.
4. Upon consummation of the transactions contemplated in the Purchase
Agreement, the shares of Team capital stock to be issued thereunder: (i) will be
duly authorized and validly issued in accordance with the applicable
governmental requirements of the State of Texas and the Articles of
Incorporation, Bylaws and other organizational documents of Team, (ii) will be
fully paid and nonassessable, and (iii) will not be issued in violation of any
preemptive rights or, to our knowledge, rights of first refusal or other similar
rights.
5. To our knowledge, the representations and warranties of Team
contained in Section 3.2 of the Purchase Agreement are correct and complete.
<PAGE> 73
E. Patrick Manuel
B. Dal Miller
April 9, 1999
Page 3
The foregoing opinion is predicated on and qualified in its entirety by
the following:
a. The foregoing opinion is based on and is limited to the law of the
State of Texas and the relevant law of the United States of America, and we
render no opinion with respect to the law of any other jurisdiction.
b. The opinions expressed in Paragraph 2 above are subject to the
additional qualification that we express no opinion as to the enforceability of
(i) any severability or reformation provisions contained in the Purchase
Agreement, (ii) any provisions in the Purchase Agreement which purport to
entitle a party to indemnification in respect of any matter arising under any
securities laws or to the extent indemnification in respect of any matter would
otherwise be against public policy, (iii) any provisions of the Purchase
Agreement purporting to establish a right to enforce a covenant or restriction
by injunctions or restraining orders or (iv) any provisions of the Purchase
Agreement that have the effect of prohibiting oral amendments or waivers of any
provisions of those documents.
c. The use of the words "to our knowledge" or "known to us" herein
means that during the course of our representation of Team relative to the
transactions contemplated under the Purchase Agreement, no information has come
to the attention of the attorneys of this law firm involved in the transactions
described herein which could give such attorneys current actual or constructive
knowledge of the existence of facts or circumstances contrary to the opinions so
qualified. We have relied exclusively upon one or more certificates of
authorized representatives of Team (after the discussion of the contents thereof
with such persons) as to the existence or nonexistence of certain facts and
circumstances, as stated therein, and, except as otherwise expressly set forth
herein, we have not undertaken any investigation whatsoever to determine the
existence of such facts or circumstances, and no inference as to our knowledge
of such matters shall be drawn from our representation of any party to this
transaction or otherwise.
d. We express no opinion as to any matters other than as expressly set
forth above, and no opinion is to be otherwise implied or inferred herefrom.
This opinion and the matters addressed herein are as of the date
hereof, and we undertake no, and hereby disclaim any, obligation to advise you
of any change in any matter set forth herein occurring after the date hereof.
This opinion is addressed solely to you and may be relied upon by
<PAGE> 74
E. Patrick Manuel
B. Dal Miller
April 9, 1999
Page 4
you and your counsel only in connection with the transactions contemplated by
the Purchase Agreement and may not be used or relied upon by you or by any other
person for any other purpose without in each instance our prior written consent.
Very truly yours,
CHAMBERLAIN, HRDLICKA, WHITE,
WILLIAMS & MARTIN
By:
--------------------------------------------
Sidney B. Williams, P.C.
<PAGE> 75
EXHIBIT 2
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated as of April 9, 1999 (this "Agreement") is
entered into by and among TEAM, INC., a Texas corporation ("Buyer"), E. PATRICK
MANUEL and B. DAL MILLER (collectively, "Sellers"), and SOUTHWEST BANK OF TEXAS,
N.A. (the "Escrow Agent"). The Escrow Agent, the Buyer and the Sellers are
referred to collectively herein as the "Parties" and individually as a "Party".
INTRODUCTION
Pursuant to that certain Stock Purchase Agreement, dated as of even
date herewith (the "Purchase Agreement"), by and among Buyer and Sellers, Buyer
has agreed to purchase from the Sellers, and the Sellers will sell to Buyer, all
of the outstanding capital stock of X-RAY INSPECTION, INC., a Louisiana
corporation (the "Acquisition"). It is a condition precedent to the consummation
of the Acquisition ("Closing") that the Buyer, the Sellers and the Escrow Agent
execute and deliver this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the respective
agreements and covenants contained herein, and other good and valuable
consideration, the receipt of which is hereby acknowledged, the Parties,
intending to be legally bound hereby, agree as follows:
SECTION 1. ESTABLISHMENT OF ESCROW ACCOUNT. Concurrently with the
execution of this Agreement, Buyer has delivered to the Escrow Agent (a) by wire
transfer of immediately available funds, $500,000.00 (the "Escrow Funds"), and
(b) certificates representing in the aggregate 595,000 shares of the common
stock, $0.30 par value per share, of Buyer issued to the Sellers (the "Escrow
Shares"). Collectively, the Escrow Funds and the Escrow Shares shall be referred
to in this Agreement as the "Escrowed Property." The Escrow Agent shall hold the
Escrowed Property in an account designated by the Escrow Agent as the "Deferred
Payment Escrow Account" (the "Escrow Account"). The Escrowed Property and any
interest, dividends, income, or other proceeds earned thereon from and after the
date hereof ("Earnings") shall be held, administered and disposed of by the
Escrow Agent in accordance with the terms and conditions hereinafter set forth.
SECTION 2. INVESTMENT OF ESCROW FUNDS; DISTRIBUTION OF EARNINGS.
2.1 In the absence of written instructions to the contrary
from Buyer and Sellers, the Escrow Agent shall from time to time promptly invest
and reinvest the Escrow Funds, if any, in direct obligations of the United
States of America or obligations the principal of and interest on which are
unconditionally guaranteed by the United States of America (such investments
being referred to as "Permitted Investments").
2.2 Any Earnings shall be set aside and distributed as
provided in Section 2.4.
<PAGE> 76
2.3 The Escrow Agent will act upon joint investment
instructions from Buyer and Sellers the business day after such instructions are
received, provided the requests are communicated within a sufficient amount of
time to allow the Escrow Agent to make the specified investment. Instructions
received after an applicable investment cutoff deadline will be treated as being
received by the Escrow Agent on the next business day, and the Escrow Agent
shall not be liable for any loss arising directly or indirectly, in whole or in
part, from the inability to invest Escrow Funds on the day the instructions are
received. The Escrow Agent shall not be liable for any loss incurred by the
actions of third parties or by any loss arising by error, failure or delay in
the making of an investment or reinvestment, unless such error, failure or delay
results from the Escrow Agent's gross negligence or willful misconduct, and the
Escrow Agent shall not be liable for any loss of principal or income in
connection therewith. As and when the Escrowed Funds or any Earnings or any
portion thereof is to be released under this Agreement, the Escrow Agent shall
cause the Permitted Investments to be converted into cash, and the Escrow Agent
shall not be liable for any loss of principal or income in connection therewith.
None of the Parties hereto shall be liable for any loss of principal or income
due to the choice of investments in which the Escrowed Funds is invested or the
choice of investments that are converted into cash pursuant to this Section 2.3.
2.4 Except as otherwise provided herein, (i) upon the
disbursement of the Escrow Funds hereunder, all Earnings shall be distributed to
the recipient of the Escrow Funds in an amount equal to the total Earnings
thereon multiplied by a fraction, the numerator of which is the amount of Escrow
Funds to which such person is entitled hereunder and the denominator of which is
the total amount of the Escrow Funds (not including Earnings thereon), and (ii)
upon disbursement of the Escrow Shares hereunder, all Earnings shall be
distributed to the recipient of the Escrow Shares in an amount equal to the
total Earnings thereon multiplied by a fraction, the numerator of which is the
amount of Escrow Shares to which such person is entitled hereunder, and the
denominator of which is the total amount of the Escrow Shares (not including
Earnings thereon). Notwithstanding anything to the contrary contained herein,
any provision of this Agreement requiring the disbursement of Earnings by the
Escrow Agent shall be construed to refer only to Earnings which have accrued and
been paid to the Escrow Agent. Any Earnings which have accrued and, except for
the fact that it has not been paid to the Escrow Agent, would be required to be
disbursed, shall be disbursed within two business days of being paid.
2.5 Pending ultimate distribution in accordance with the terms
and conditions herein contained, all Earnings shall be the income of the Buyer.
Buyer and Sellers shall file Tax Returns and the Escrow Agent shall file a Form
1099 consistent with such treatment.
SECTION 3. RELEASE OF THE ESCROWED PROPERTY.
3.1 Release of the Escrow Funds. The Escrow Agent shall
release the Escrow Funds in accordance with joint written instructions signed by
Buyer and Sellers, and otherwise in accordance with the provisions of Section 8
below.
3.2 Release of the Escrow Shares. The Escrow Agent shall
release the Escrow Shares in accordance with joint written instructions signed
by Buyer and Sellers, and otherwise in accordance with the provisions of Section
8 below.
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<PAGE> 77
3.3 Delivery of Certificates. From time to time as necessary,
Buyer shall deliver to the Escrow Agent (i) a certificate representing the
Escrow Shares to be delivered to the Sellers in accordance with Section 3.2,
(ii) a certificate or certificates representing the Escrow Shares to be
segregated to satisfy Pending Claims in accordance with Section 5.1, (iii) a
certificate or certificates representing the Escrow Shares to be delivered to
Buyer under Section 8.4, and/or (iv) a certificate or certificates representing
the unsegregated Escrow Shares that Escrow Agent shall continue to hold in
accordance with this Agreement. On receipt of the replacement certificates, the
Escrow Agent shall deliver the certificate or certificates as required under (i)
and (iii), retain the certificate or certificates for the Escrow Shares as
required under (ii) and (iv), and deliver the original certificate or
certificates to Buyer for cancellation.
SECTION 4. NO DISTRIBUTION OF EXPENSES. Except as provided in Section 8
of this Agreement with respect to Buyer, neither Sellers nor Buyer shall be
entitled to reimbursement out of the Escrowed Property for any costs and
expenses incurred by them in connection with exercising their rights or
performing their duties under this Agreement.
SECTION 5. SEGREGATION OF THE ESCROWED PROPERTY.
5.1 The Escrow Agent shall segregate from the Escrow Account
and transfer into a separate account (the "Pending Claims Account") maintained
by the Escrow Agent for the benefit of Buyer and the Sellers the portion of the
Escrowed Property sufficient to satisfy all Pending Claims (as defined below),
and shall hold such portion of the Escrowed Property in accordance with this
Section 5. "Pending Claims" shall mean that portion of any Claim (as defined in
Section 8) that Seller has contested under Section 8.3.
5.2 Any portion of the Escrowed Property segregated under
Section 5.1 shall continue to be segregated and held by the Escrow Agent until
the Escrow Agent is directed to release such Escrowed Property under Sections
8.4(ii) or 8.4(iii). Notwithstanding any provision to the contrary contained
herein, if there is no Escrowed Property remaining except Escrowed Property held
in the Pending Claims Account, the Escrow Agent shall release from the Pending
Claims Account any amount in order to make a payment otherwise required under
Section 8.4.
SECTION 6. VALUATION PRICE. With respect to any disbursement made under
Section 8 below or segregation of Escrow Shares pursuant to Section 5.1 above,
the number of Escrow Shares to be disbursed or segregated shall be based on the
Valuation Price, as defined below. Buyer shall include a statement of the
Valuation Price in any Claims Notice submitted to Escrow Agent under Section 8.
"Valuation Price" shall mean the average closing price per share of Buyer's
common stock as reported by The Wall Street Journal for the ten trading days
immediately preceding the date of the Claims Notice submitted by Buyer under
Section 8.2, subject to appropriate adjustment in the event that, subsequent to
the date hereof, Team:
(a) declares a dividend payable in shares of its
common stock;
(b) splits or combines the shares of its common stock
then outstanding;
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(c) declares a distribution (other than a
non-liquidating cash dividend) on shares of its common stock;
(d) merges or consolidates with any corporation in
which Buyer's common stock is exchanged or converted; or
(e) reorganizes, recapitalizes or reclassifies any of
the shares of its common stock.
SECTION 7. TAXPAYER IDENTIFICATION NUMBERS. The Parties acknowledge
that payment of any Earnings earned on the Escrowed Property invested in this
escrow, or the distribution of any other amounts under this escrow, will be
subject to backup withholding penalties unless a properly completed Internal
Revenue Service Form W-8 or W-9 certification is submitted to the Escrow Agent
by the Party entitled to receive such payment. Any Form W-8 or W-9 certification
shall be submitted to the Escrow Agent on or before the date hereof.
SECTION 8. CLAIMS AGAINST THE ESCROWED PROPERTY.
8.1 From and after the Closing, Buyer shall be entitled to
(i) reimbursement out of the Escrow Funds for any Preliminary Net Working
Capital Deficit or Net Working Capital Deficit (as such terms are defined in the
Purchase Agreement), and (ii) reimbursement out of the Escrow Shares for Adverse
Consequences (as such term is defined in the Purchase Agreement) for which the
Sellers are responsible as provided in the Purchase Agreement (collectively, the
"Claims"). Notwithstanding any of the provisions of the Purchase Agreement, the
Escrow Agent shall be entitled to rely conclusively upon the provisions of
Sections 8.1-4 hereof in determining whether a Claim shall be paid out of the
Escrowed Property.
8.2 Buyer shall promptly notify Sellers and the Escrow Agent
in writing of any Claims ("Claims Notice"). Failure of Buyer to exercise
promptness in such notification shall not amount to a waiver of such Claim
unless the resulting delay materially and adversely prejudices Sellers. Such
notice shall consist of a description of the Claim and specify the amount (which
may be estimated by Buyer) of the Claim in United States dollars.
8.3 Sellers may contest the Claims specified in Section 8.2
(or any portion thereof) by giving the Escrow Agent and Buyer written notice
signed by each Seller of such contest within twenty days after receipt by
Sellers and Escrow Agent of a notice from Buyer under Section 8.2, which notice
of contest shall include a statement of the grounds of such contest and shall
state the amount, if any, of any such Claim by Buyer that Sellers do not
dispute.
8.4 Payment of any Claim (or portion thereof) shall become due
and payable as follows:
(i) If at 5:00 p.m. (Houston, Texas time) on the twentieth
day after receipt by Sellers and the Escrow Agent of a Claims Notice pursuant to
Section 8.2 above, the Escrow Agent has not received written notice from Sellers
that the Sellers contests the Claim (or portion thereof) pursuant to Section 8.3
above, the Claim (or the uncontested portion thereof) shall be promptly paid by
the Escrow Agent to Buyer;
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(ii) If the Sellers contest the Claim (or portion thereof)
pursuant to Section 8.3 and the Claim (or portion thereof) is settled by written
agreement of Sellers and Buyer, the amount provided in such written agreement
shall, upon receipt by the Escrow Agent of a copy of such written agreement or
other joint written instructions, signed by Buyer and Sellers, be promptly paid
by the Escrow Agent pursuant to the terms of such written agreement or joint
written instructions; and
(iii) If the Sellers contest the Claim (or portion
thereof) pursuant to Section 8.3 hereof and a Final Determination has been
obtained, the amount set forth in such Final Determination shall be promptly
paid by the Escrow Agent pursuant to the terms of such Final Determination. A
"Final Determination" means a final, non-appealable judgment of a court of
competent jurisdiction accompanied by an opinion of counsel for the presenting
Party to the effect that such judgment is a final, non-appealable judgment of a
court of competent jurisdiction unless the non-presenting Party (whether Buyer
or Sellers) delivers an opinion of its counsel to the contrary within twenty
days of the delivery of such judgment and such opinion of counsel to the
presenting Party to Escrow Agent by the presenting Party, in which case the
Escrow Agent shall continue to hold and segregate such portion of Escrowed
Property in the Pending Claims Account in accordance with Section 5.1 above.
SECTION 9. CLAIMS DEADLINE. Any Claim for reimbursement from the
Escrowed Property must be asserted in writing by Buyer by means of a Claims
Notice received by Sellers and the Escrow Agent prior to 5:00 p.m. (Houston,
Texas time) prior to the close of business on the first business day after the
date which is three years from the date of this Agreement.
SECTION 10. THE ESCROW SHARES. Simultaneously with the execution
hereof, Sellers have executed and delivered to Escrow Agent such stock powers,
endorsed in blank, as are necessary to transfer all of the Escrow Shares held
hereunder. So long as any Escrow Shares are held by the Escrow Agent under this
Agreement, the Sellers shall from time to time sign and deliver to the Escrow
Agent stock powers endorsed in blank to transfer to Buyer the number of Escrow
Shares determined in accordance with the provisions of this Agreement. The
Parties acknowledge that the sale or other disposition of the Escrow Shares are
subject to that certain Stock Restriction Agreement, of even date herewith, by
and among the Buyer and the Sellers.
SECTION 11. THE ESCROW AGENT. To induce the Escrow Agent to act
hereunder, it is further agreed by Buyer and Sellers that:
11.1 The Escrow Agent shall not be under any duty to give the
Escrowed Property held by it hereunder any greater degree of care than it gives
its own similar property and shall not be required to invest any Escrowed
Property held hereunder except as directed in this Agreement. Uninvested
Escrowed Property held hereunder shall not earn or accrue interest.
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<PAGE> 80
11.2 This Agreement expressly sets forth all the duties of the
Escrow Agent with respect to any and all matters pertinent hereto. No implied
duties or obligations shall be read into this Agreement against the Escrow
Agent. The Escrow Agent shall not be bound by the provisions of any agreement
among the other Parties hereto except this Agreement.
11.3 The Escrow Agent shall not be liable, except for its own
gross negligence or willful misconduct and, except with respect to claims based
upon such gross negligence or willful misconduct that are successfully asserted
against the Escrow Agent, Buyer and Sellers shall jointly and severally
indemnify and hold harmless the Escrow Agent (and any successor escrow agent)
from and against any and all losses, liabilities, claims, actions, damages and
expenses, including reasonable attorneys' fees and disbursements, arising out of
and in connection with this Agreement. Without limiting the foregoing, the
Escrow Agent shall in no event be liable in connection with its investment or
reinvestment of any cash held by it hereunder in good faith, in accordance with
the terms hereof, including without limitation, any liability for any delays
(not resulting from its gross negligence or willful misconduct) in the
investment or reinvestment of the Escrowed Property or any loss of interest
incident to any such delays. This Section 11.3 shall survive notwithstanding any
termination of this Agreement or the resignation of the Escrow Agent.
11.4 The Escrow Agent shall be entitled to rely in good faith
upon any order, judgment, certification, demand, notice, instrument or other
writing delivered to it hereunder without being required to determine the
authenticity or the correctness of any fact stated therein or the propriety or
validity or the service thereof. The Escrow Agent may act in reliance upon any
instrument or signature believed by it in good faith to be genuine and may
assume that any person purporting to give receipt or advice or make any
statement or execute any document in connection with the provisions hereof has
been duly authorized to do so.
11.5 The Escrow Agent may act pursuant to the advice of
counsel with respect to any matter relating to this Agreement and shall not be
liable for any action taken or omitted in good faith in accordance with such
advice.
11.6 The Escrow Agent does not have any interest in the
Escrowed Property deposited hereunder but is serving as escrow holder only and
having only possession thereof. Any payments of income from the Escrow Account
shall be subject to withholding regulations then in force with respect to United
States taxes. It is understood that the Escrow Agent shall be responsible for
income reporting only with respect to income earned on investment of the
Escrowed Property and is not responsible for any other reporting. This Section
11.6 shall survive notwithstanding any termination of this Agreement or the
resignation of the Escrow Agent.
11.7 The Escrow Agent makes no representation as to the
validity, value, genuineness or the collectability of any security or other
document or instrument held by or delivered to it.
11.8 The Escrow Agent shall not be called upon to advise any
Party as to the wisdom in selling or retaining or taking or refraining from any
action with respect to any securities or other property deposited hereunder.
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11.9 The Escrow Agent (and any successor escrow agent) may at
any time resign as such by delivering the Escrowed Property to any successor
escrow agent jointly designated by the other Parties hereto in writing or to any
court of competent jurisdiction pursuant to an action in interpleader, whereupon
the Escrow Agent shall be discharged of and from any and all further obligations
arising in connection with this Agreement. The resignation of the Escrow Agent
will take effect on the earlier of the date (the "Resignation Date") of the
appointment of a successor (including a court of competent jurisdiction) or the
date which is 30 days after the date of delivery of its written notice of
resignation to the other Parties hereto. Upon the appointment of a successor
escrow agent, such successor escrow agent shall deliver written notice to Buyer
and Sellers on the appointment of such successor escrow agent. If at the
Resignation Date the Escrow Agent has not received a designation of a successor
escrow agent, the Escrow Agent's sole responsibility after the Resignation Date
shall be to safekeep the Escrowed Property until receipt of a designation of
successor escrow agent or a joint written disposition instruction by the other
Parties hereto or a Final Determination.
11.10 The Escrow Agent shall have no responsibility for the
contents of any writing of any third party contemplated herein as a means to
resolve disputes and may rely without any liability upon the contents thereof.
11.11 In the event of any disagreement between Buyer and
Sellers resulting in adverse claims or demands being made in connection with the
Escrowed Property, or in the event that the Escrow Agent in good faith is in
doubt as to what action it should take hereunder, the Escrow Agent shall be
entitled to retain the Escrowed Property until the Escrow Agent shall have
received a Final Determination directing delivery of the Escrowed Property or
joint written instructions executed by Buyer and Sellers directing delivery of
the Escrowed Property, in which event the Escrow Agent shall disburse the
Escrowed Property in accordance with such Final Determination or joint written
instructions. The Escrow Agent shall act on such Final Determination or joint
written instructions without further question.
11.12 The compensation of the Escrow Agent (as payment in
full) for the services to be rendered by the Escrow Agent hereunder shall be the
amount of $2,000.00 at the time of execution of this Agreement and $50.00 per
transfer of the Escrow Shares, and reimbursement for all reasonable expenses,
disbursements and advances incurred or made by the Escrow Agent in performance
of its duties hereunder (including reasonable fees, expenses and disbursements
of its counsel). Buyer shall pay all of such fees and expenses identified in
this Section 11.12.
11.13 No prospectuses, press releases, reports and promotional
material, or other similar materials which mention in any language the Escrow
Agent's name or the rights, powers, or duties of the Escrow Agent shall be
issued by the other Parties hereto or on such Parties' behalf unless the Escrow
Agent shall first have given its specific written consent thereto; provided,
however, that the Escrow Agent acknowledges that Buyer may file a copy of this
Agreement as an exhibit with Buyer's filings required under the Securities
Exchange Act of 1934, as amended, and the Escrow Agent consents to the
appearance of its name in such filings.
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SECTION 12. NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
<TABLE>
<S> <C>
If to the Sellers: Copy to:
E. Patrick Manuel Liskow & Lewis
1206 Hwy 190 West 822 Harding Street
Eunice, Louisiana 70535 Lafayette, Louisiana 70503
P.O. Box 52008
B. Dal Miller Lafayette, Louisiana 70505
211 Liberty Ave, Apt 135 Attn: Mr. Billy J. Domingue
Lafayette, Louisiana 70508 Facsimile: (318) 267-2398
If to Buyer: Copy to:
Team, Inc. Chamberlain, Hrdlicka, White,
200 Hermann Drive Williams & Martin
Alvin, Texas 77511 1200 Smith Street, Suite 1400
P.O. Box 123 Houston, Texas 77002-4310
Alvin, Texas 77512-0123 Attn: Mr. Sidney B. Williams
Attn: Philip J. Hawk, Chairman and CEO Telephone: (713) 658-2516
Telephone: (381) 331-6154 Facsimile: (713) 658-2553
Facsimile: (281) 388-5583
If to the Escrow Agent:
Southwest Bank of Texas, N.A.
P.O. Box 27459
Houston, Texas 77227-7459
Telephone: (713) 439-5946
Facsimile: (713) 439-5994
Attn: Ms. Jenifer Stepanik
</TABLE>
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
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SECTION 13. WAIVERS; AMENDMENTS. Any waiver by any Party hereto of any
breach of or failure to comply with any provision of this Agreement by any other
Party hereto shall be in writing and shall not be construed as, or constitute, a
continuing waiver of such provision, or a waiver of any other breach of, or
failure to comply with, any other provision of this Agreement. This Agreement
may only be modified by a writing signed by all of the Parties hereto.
SECTION 14. CONSTRUCTION. The headings in this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement. Unless otherwise stated, references to
Sections are references to Sections of this Agreement.
SECTION 15. ASSIGNMENT; THIRD PARTIES. The Sellers may not assign this
Agreement without the consent of the Buyer. In connection with an assignment by
Buyer of the Purchase Agreement in accordance with the terms contained in
Section 11.4 thereof, Buyer may assign this Agreement and its rights and
obligations hereunder upon 10 days' prior written notice to the Escrow Agent.
Subject to the preceding sentence, this Agreement shall be binding upon and
inure solely to the benefit of the Parties hereto and their respective
successors and assigns, heirs, administrators and representatives and shall not
be enforceable by or inure to the benefit of any third party, except as provided
in Section 11.9 with respect to a resignation by the Escrow Agent.
SECTION 16. TERMINATION. This Agreement shall terminate at the time of
the final distribution by the Escrow Agent of all Escrowed Property in
accordance with the provisions of this Agreement.
SECTION 17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute a single instrument.
SECTION 18. GOVERNING LAW; SEVERABILITY. This Agreement shall be
construed in accordance with and governed by the internal law of the State of
Texas (without reference to its rules, provisions and principles as to choice of
law and conflicts of law). The invalidity, legality or enforceability of any
provisions of this Agreement shall in no way affect the validity, legality or
enforceability of any other provision; and if any provision is held to be
unenforceable as a matter of law, the other provisions shall not be affected
thereby and shall remain in full force and effect.
SECTION 19. CONSENT TO SERVICE. Buyer and Sellers hereby irrevocably
submit to the jurisdiction of any state or federal court located in Harris
County, Texas in any action or proceeding arising out of or relating to this
Agreement, and the Parties hereby irrevocably agree that all claims in respect
of such action or proceeding shall be heard and determined in such a state or
federal court located in Harris County, Texas. The Parties hereby consent to and
grant to any such court jurisdiction over the persons of such Parties and over
the subject matter of any such dispute and agree that delivery or mailing of any
process or other papers in the manner provided herein above, or in such other
manner as may be permitted by law, shall be valid and sufficient service
thereof.
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SECTION 20. WAIVER OF SETOFF RIGHTS. The Escrow Agent hereby waives any
and all rights to setoff that it may have against the Escrowed Property
including, without limitation, claims arising as a result of any claims,
amounts, liabilities, costs, expenses, indemnified costs, or other losses
(collectively "Escrow Agent Claims") that the Escrow Agent may be otherwise
entitled to collect from any Party to this Agreement, other than Escrow Agent
Claims arising under this Agreement.
SECTION 21. OTHER REMEDIES UNAFFECTED. This Agreement shall not limit
the extent to which Buyer may be entitled to indemnification or to the exercise
of other rights and remedies under the Purchase Agreement. This Agreement shall
not limit or otherwise affect Sellers' or Buyer's rights to indemnity or other
remedies under the Purchase Agreement.
[Remainder of page intentionally left blank]
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<PAGE> 85
IN WITNESS WHEREOF, the Parties to this Agreement have caused this
Agreement to be executed by their duly authorized officers as of the date set
forth in the preface to this Agreement.
BUYER:
TEAM, INC.
By:
------------------------------------------
Philip J. Hawk, Chairman and CEO
SELLERS:
---------------------------------------------
E. Patrick Manuel
---------------------------------------------
B. Dal Miller
ESCROW AGENT:
SOUTHWEST BANK OF TEXAS, N.A.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
11
<PAGE> 86
EXHIBIT 2
STOCK RESTRICTION AGREEMENT
THIS STOCK RESTRICTION AGREEMENT (the "Agreement"), is entered into on
April 9, 1999, by and between Team, Inc., a Texas corporation ("Team") and E.
Patrick Manuel, and B. Dal Miller, (collectively "Shareholders", with each being
referred to singularly as "Shareholder"). Team and the Shareholders are referred
to collectively herein as the "Parties."
INTRODUCTION
Pursuant to a Stock Purchase Agreement, of even date herewith ("Stock
Purchase Agreement"), Shareholders have acquired an aggregate of 595,000 shares
("Shares") of the common stock, $0.30 par value per share ("Common Stock"), of
Team. The Shareholders and Team have agreed that this Agreement shall be
executed as a condition precedent to the closing of the transactions
contemplated by the Stock Purchase Agreement, in order to promote the stability
of the management of Team, in recognition that such stability is necessary and
desirable for Team, and for the Shareholders as a result of their substantial
investment in Team represented by the Shares, to promote stable relationships
with customers, suppliers and lenders, to assist in recruiting key employees and
to avoid contributing to excessive volatility in the market price of Team Common
Stock. Capitalized terms not otherwise defined herein shall have the meaning
given to them in the Stock Purchase Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows:
Section 1. Definition of Subject Shares. "Subject Shares" means (i)
from and after the date hereof until the close of business on the first business
day after the date which is the second annual anniversary ("Second Anniversary")
of the date hereof, all of the Shares; (ii) from and after the Second
Anniversary until the close of business on the first business day after the date
which is the third annual anniversary ("Third Anniversary") of the date hereof,
300,000 of the Shares; and (iii) from and after the Third Anniversary until the
close of business on the first business day after the date which is the fourth
annual anniversary ("Fourth Anniversary") of the date hereof, 150,000 of the
Shares. From and after the Fourth Anniversary, this Agreement shall terminate
and shall be of no further force or effect. All references to Shares hereunder
shall be adjusted appropriately for any stock splits, stock dividends, or other
similar capital adjustments to, or recapitalizations on, or share exchanges with
(including by reason of merger, consolidation or other business combination
involving Team) the Common Stock.
Section 2. Legend, Stop Order, Etc.
2.1 The Shareholders and Team acknowledge and agree that the
provisions of Section 4 hereof constitute reasonable restrictions on transfer of
the Subject Shares within the meaning of Article 2.22 of the Texas Business
Corporation Act, as amended ("TBCA").
Stock Restriction Agreement/Page 1
<PAGE> 87
2.2 The Shareholders and Team agree that each certificate
issued to Shareholders representing Subject Shares shall bear the following
legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE PROVISIONS OF A STOCK RESTRICTION AGREEMENT BETWEEN
TEAM, INC., E. PATRICK MANUEL AND B. DAL MILLER, AND MAY NOT
BE SOLD OR TRANSFERRED EXCEPT IN ACCORDANCE WITH SUCH
STOCK RESTRICTION AGREEMENT.
2.3 The Shareholders and Team acknowledge and agree that a
counterpart of this Agreement shall be deposited with Team at its principal
office.
2.4 Each of the Shareholders consents to the entry of a stop
transfer order with the transfer agent or agents of Team securities against the
transfer of the Subject Shares except in compliance with the requirements of
this Agreement, or if Team is its own transfer agent with respect to any Subject
Shares, to the refusal by Team to transfer any such securities except in
compliance with the requirements of this Agreement.
Section 3. Right of First Refusal.
3.1 Transfers other than under a Tender Offer.
(a) In the event that a Shareholder desires to sell or
otherwise dispose of any Subject Shares, such Shareholder shall give notice (the
"Transfer Notice") to Team in writing of such intention, which shall specify the
number of Subject Shares proposed to be sold or otherwise disposed of. The
Transfer Notice shall be deemed to be Shareholder's offer to sell Team that
portion of the Subject Shares which such Shareholder wishes to sell or otherwise
dispose of for a price per share which is equal to the average closing price of
Team Subject Shares of Common Stock as reported by The Wall Street Journal for
the ten trading days immediately preceding the date of the Transfer Notice to
Team.
(b) Team shall have the right, exercisable by written
notice given by Team within 3 business days after receipt of such Transfer
Notice to purchase (or to cause a corporation, entity, person or group
designated by Team to purchase) all, but not a part of, the Subject Shares
specified in such Transfer Notice for cash at the price described in this
Section 3.1. If Team exercises its right of first refusal hereunder, the closing
of the purchase of the Subject Shares with respect to which such right has been
exercised shall take place within 10 business days after the date of the written
notice by Team. Upon exercise of its right of first refusal, Team shall be
legally obligated to use its best efforts to secure all approvals required in
connection therewith and shall be liable for damages to the selling party if any
failure of Team to perform its obligations hereunder shall result in the failure
of such purchase to occur.
(c) If Team does not exercise its right of first refusal
hereunder within the time specified for such exercise or if Team cannot or does
not secure any necessary approval to purchase the Subject Shares within the time
period established in Section 3.1(b), the party giving the
Stock Restriction Agreement/Page 2
<PAGE> 88
Transfer Notice shall be free following the expiration of such time for exercise
to sell the Subject Shares at any price.
3.2 Transfers under a Tender Offer. In the event that any
person shall make a tender or exchange offer ("Tender Offer") for more than 20%
of the outstanding Common Stock of Team prior to the termination of this
Agreement, Shareholder shall not tender any Subject Shares pursuant to such
Tender Offer unless it gives notice to Team no later than six days prior to the
last day when securities may be tendered in order to be accepted under such
offer or to qualify for any proration applicable to such offer (the "Tender
Date") that it intends to tender a specified number of Subject Shares pursuant
to such offer. For purposes hereof a Tender Offer to purchase Subject Shares of
Common Stock shall be deemed to be an offer at the price specified therein,
without regard to any provisions thereof with respect to proration or conditions
to the offeror's obligation to purchase. If notice is given, Team shall have the
right, exercisable by giving notice to Shareholder at least two days prior to
the Tender Date, to purchase or cause its designee to purchase the number of
Subject Shares specified in Shareholder's notice for cash. If Team exercises
such right by giving such notice, the closing of the purchase of the Subject
Shares shall take place not later than one day prior to the Tender Date. If Team
does not exercise such right by giving such notice, then Shareholder shall be
free to accept the Tender Offer with respect to which such notice of exercise
was given. Shareholder shall have the right to withdraw such notice (whether or
not Team shall have theretofore given notice of withdrawal) to Team at any time
up to the earlier of the closing of any purchase from Shareholder or its
designee or the Tender Date. At any time on or before the day prior to the
Tender Date, Team shall have the right to withdraw its notice to Shareholder and
decline to purchase the Subject Shares, in which event Shareholder shall be free
to tender its Common Stock pursuant to such offer. The purchase price to be paid
by Team or its designee pursuant to this Section 3.2 shall be (i) if such Tender
Offer is consummated, the purchase price that Shareholder would have received if
it had tendered its Subject Shares and such Subject Shares had been purchased in
such Tender Offer, including any increase in the price paid by the tender
offeror after exercise by Team of its right of first refusal hereunder, or (ii)
if such Tender Offer is not consummated, the highest price offered pursuant
thereto.
3.3 Other Provisions. In the event that Team elects to
exercise its rights of first refusal under this Section 3, Team may specify in
its notice of intention to exercise such right another person as its designee to
purchase the Subject Shares to which such notice relates. If Team shall
designate another person as the purchaser pursuant to this Section 3, this
giving of notice of acceptance of the right of first refusal by Team shall
constitute a legally binding obligation of Team to complete such purchase if
such person shall fail to do so; provided, however, that Team shall have its
rights to withdrawal provided for in Section 3.2.
Section 4. Miscellaneous Provisions.
4.1 The Parties acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state thereof
Stock Restriction Agreement/Page 3
<PAGE> 89
having jurisdiction, this being in addition to any other remedy to which they
may be entitled at law or equity.
4.2 No Party shall issue any press release or make any public
announcement relating to the subject matter of this Agreement prior to the
Closing without the prior written approval of Team and Shareholders; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities.
4.3 This Agreement shall not confer any rights or remedies
upon any Person other than the Parties and their respective successors and
permitted assigns.
4.4 This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they have related in any way to the subject
matter hereof.
4.5 This Agreement shall be binding upon and inure to the
benefit of the Parties named herein and their respective successors and
permitted assigns. No Party may assign either this Agreement or any of his or
its rights, interests, or obligations hereunder without the prior written
approval of the Buyer and the Seller.
4.6 This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
4.7 The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
4.8 All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below.
If to the Shareholders: Copy to:
E. Patrick Manuel Liskow & Lewis
1206 Hwy 190 West 822 Harding Street
Eunice, Louisiana 70535 Lafayette, Louisiana 70503
P.O. Box 52008
B. Dal Miller Lafayette, Louisiana 70505
211 Liberty Ave, Apt 135 Attn: Mr. Billy J. Domingue
Lafayette, Louisiana 70508 Facsimile: (318) 267-2398
Stock Restriction Agreement/Page 4
<PAGE> 90
<TABLE>
<S> <C>
If to Team: Copy to:
Team, Inc. Chamberlain, Hrdlicka, White,
200 Hermann Drive Williams & Martin
Alvin, Texas 77511 1200 Smith Street, Suite 1400
P.O. Box 123 Houston, Texas 77002-4310
Alvin, Texas 77512-0123 Attn: Mr. Sidney B. Williams
Attn: Philip J. Hawk, Chairman and CEO Facsimile: (713) 658-2553
Facsimile: (281) 388-5583
</TABLE>
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
4.9 This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Texas without giving effect to
any choice or conflict of law provision or rule (whether of the State of Texas
or any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Texas.
4.10 No amendment of any provision of this Agreement shall be
valid unless the same shall be in writing and signed by Team and Shareholders.
No waiver by any Party of any default, misrepresentation, or breach of warranty
or covenant hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
4.11 Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
4.12 Each of the Parties will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.
4.13 The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
The word "including" shall mean including without limitation.
Stock Restriction Agreement/Page 5
<PAGE> 91
IN WITNESS WHEREOF, the Parties have executed this Agreement on the
date first above written.
TEAM:
TEAM, INC.
By:
-----------------------------------
Philip J. Hawk, Chairman and CEO
SHAREHOLDERS:
--------------------------------------
E. Patrick Manuel
--------------------------------------
B. Dal Miller
Stock Restriction Agreement/Page 6
<PAGE> 92
EXHIBIT 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as
of April 9, 1999, by and among Team, Inc., a Texas corporation (the "Company"),
and the holders of certain Common Stock (as defined herein) whose names appear
on the signature pages of this Agreement under the caption "HOLDERS" (the
"Holders").
INTRODUCTION
Concurrently with the execution and delivery of this Agreement, the
Company is issuing shares of its common stock, par value $0.30 per share (the
"Common Stock"), to the Holders as partial consideration paid to the Holders for
the Company's acquisition from the Holders of the issued and outstanding capital
stock of X-Ray Inspection, Inc., a Louisiana corporation ("X Ray"), pursuant to
that certain Stock Purchase Agreement dated as of even date herewith, executed
among the Company and the Holders ("Stock Purchase Agreement"). In order to
induce the Holders to complete the transactions contemplated by the Stock
Purchase Agreement, the Company has agreed to enter into this Registration
Rights Agreement.
In consideration of the mutual promises and covenants hereinafter set
forth, the parties hereby agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"best lawful efforts" shall mean the efforts that a
prudent business person desirous of achieving a result would use under
similar circumstances to ensure that such result is achieved as
expeditiously as possible.
"Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the
Securities Act.
"Common Stock" means the Common Stock, par value
$0.30 per share, of the Company.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, or any similar federal statute and the rules and
regulations of the Commission thereunder, all as the same shall be in
effect at the time.
"Registrable Stock" means any Common Stock held by a
Holder that was issued to such Holder pursuant to the Stock Purchase
Agreement and any stock split, stock dividend, recapitalization, or
similar event applicable to such stock; provided however, that such
shares of Common Stock shall no longer be Registrable Stock when they
can be sold
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<PAGE> 93
in accordance with Rule 144 under the Securities Act (at which time the
registration rights hereunder shall terminate pursuant to Section 3.1).
The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or
ordering of the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses,
other than Selling Expenses (as defined below), incurred by the Company
in complying with Section 2.1 hereof, including, without limitation,
all registration, qualification and filing fees, exchange listing fees,
printing expenses, escrow fees, fees and disbursements of counsel for
the Company, blue sky fees and expenses, and the expense of any special
audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company which shall be
paid in any event by the Company).
"Securities Act" shall mean the Securities Act of
1933, as amended, or any similar federal statute and the rules and
regulations of the Commission thereunder, all as the same shall be in
effect at the time.
"Selling Expenses" shall mean all underwriting
discounts, selling commissions and stock transfer taxes applicable to
the securities registered by the Holders and all fees and disbursements
of counsel for any Holder.
2. Registration Rights.
2.1 Company Registration.
(a) Notice of Registration. If at any time or from time to
time the Company shall determine to file a registration statement with the
Securities and Exchange Commission for the sale of Company Common Stock in an
underwritten public offering for cash, either for its own account or the account
of one or more stockholders, other than a registration (i) on Form S-4 or S-8 or
any successor or similar form, (ii) relating to any capital stock of the Company
under options, warrants or other rights to acquire any such capital stock issued
or to be issued primarily to directors, officers or employees of the Company, or
any of its subsidiaries or affiliates, (iii) filed pursuant to Rule 145 under
the Securities Act or any successor or similar provision, or (iv) relating to
any employee benefit plan or interests therein the Company will:
(A) promptly give to each Holder written notice
thereof, and
(B) use its best lawful efforts to include in such
registration (and any related qualification under blue sky laws or
other compliance), all the Registrable Stock specified in a written
request or requests, made within fifteen (15) days after receipt of
such written notice from the Company, by any Holder.
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<PAGE> 94
(b) Underwriting Agreement. All Holders who have requested the
inclusion of Registrable Stock in such registration shall (together with the
Company and other holders whose securities are included in such registration)
enter into an underwriting agreement in customary form with the managing
underwriter selected for such underwriting by the Company.
Notwithstanding anything herein to the contrary, if the
Company's managing underwriter determines that marketing factors require a
limitation of the number of shares to be offered and sold in such offering,
there shall be included in the offering only that number of Registrable Stock,
if any, that the Company's managing underwriter or financial advisor, as the
case may be, reasonably and in good faith believes will not jeopardize the
success of the offering; provided, however, that any reduction imposed upon
Holders of Registrable Stock shall not be greater, on a percentage basis with
respect to the Registrable Stock requested to be included, than the reduction
imposed on any other persons seeking to exercise piggy-back registration rights
in connection with such offering.
If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw such Holder's Registrable Stock
from the registration statement covering such offering, by written notice to the
Company and the managing underwriter, delivered not less than seven days before
the effective date of such registration statement. Any Registrable Stock so
withdrawn from such underwriting shall be withdrawn from such registration, and
shall not be sold in the public market for a period of one hundred twenty (120)
days after the effective date of the registration statement relating thereto, or
such shorter period of time as may be acceptable to the underwriters.
(c) Right to Terminate Registration. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 2.1 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
2.2 Expenses of Registration. All Registration Expenses shall be borne
by the Company. Unless otherwise agreed by the Company, all Selling Expenses
relating to securities registered on behalf of the Holders shall be borne by the
Holders pro rata on the basis of the number of shares so registered.
2.3 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense, the Company will:
(a) Subject to Section 2.1(c), prepare and file with the
Commission a registration statement with respect to such securities and use its
best lawful efforts to cause such registration statement to become and remain
effective for at least ninety (90) days or until the distribution described in
the Registration Statement has been completed;
3
<PAGE> 95
(b) Furnish to each underwriter such number of copies of a
prospectus, and a preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents as such underwriter may reasonably
request in order to facilitate the public sale of the shares by such
underwriter, and promptly furnish to each underwriter and Holder notice of any
stop- order or similar notice issued by the Commission or any state agency
charged with the regulation of securities; and
(c) Use its best lawful efforts to cause all Registrable Stock
included in such registration to be listed or authorized for inclusion on each
securities exchange or similar trading system on which similar securities issued
by the Company are then listed or authorized for trading.
2.4 Indemnification.
(a) To the extent permitted by law, the Company will indemnify
each Holder participating in a registration pursuant to this Agreement, and each
person controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification or compliance
has been effected pursuant to this Agreement, and each underwriter of the
Company's securities covered by such a registration and each person who controls
such underwriter within the meaning of Section 15 of the Securities Act, against
all expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, to the extent such expenses, claims,
losses, damages or liabilities arise out of or are based on any untrue statement
(or alleged untrue statement) of a material fact contained in any registration
statement, prospectus, or any amendment or supplement thereto, incident to any
such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
in which they were made, not misleading, or any violation by the Company of the
Securities Act or any rule or regulation promulgated under the Securities Act
applicable to the Company or any applicable state securities laws or regulations
in connection with any such registration, qualification or compliance, and the
Company will reimburse each such Holder, and each person controlling such
Holder, each such underwriter and each person who controls any such underwriter,
for any legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action; provided, however, that the indemnity contained herein shall not apply
to amounts paid in settlement of any claim, loss, damage, liability or expense
if settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld); and provided further, that the Company will
not be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by such Holder,
controlling person or underwriter specifically for use therein. Notwithstanding
the foregoing, insofar as the foregoing indemnity relates to any such untrue
statement (or alleged untrue statement) or omission (or alleged omission) made
in a preliminary prospectus but eliminated or remedied in an amended prospectus
on file with the Commission at the time the registration statement becomes
effective or in the final prospectus filed
4
<PAGE> 96
with the Commission pursuant to Rule 424 of the Commission, the indemnity
agreement herein shall not inure to the benefit of any underwriter if a copy of
the final prospectus filed pursuant to Rule 424 was not furnished to the person
or entity asserting the loss, liability, claim or damage at or prior to the time
such furnishing is required by the Securities Act.
(b) To the extent permitted by law, each Holder will, if
Registrable Stock owned by such Holder are included in the securities as to
which such registration, qualification or compliance is being effected,
indemnify the Company, each of its directors and officers, each underwriter of
the Company's securities covered by such a registration, each person who
controls the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other Holder, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, against all expenses,
claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, to the extent such expenses, claims, losses, damages or
liabilities arise out of or are based on any untrue statement (or alleged untrue
statement) by such Holder of a material fact contained in any such registration
statement, prospectus, or any amendment or supplement thereto, incident to any
such registration, qualification or compliance, or based on any omission by such
Holder (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any violation by such Holder of the Securities Act or any rule or regulation
promulgated under the Securities Act applicable to such Holder or any applicable
state securities laws or regulations and relating to action or inaction required
of such Holder in connection with any such registration, qualification or
compliance, and such Holder will reimburse the Company, such other Holders, such
directors, officers, underwriters or control persons for any legal or other
expenses reasonably incurred in connection with defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, in reliance upon
and in conformity with written information furnished to the Company by such
Holder specifically for use therein; provided, however, that the indemnity
contained herein shall not apply to amounts paid in settlement of any claim,
loss, damage, liability or expense if settlement is effected without the consent
of the Holder from whom such payment is sought (which consent shall not be
unreasonably withheld). Notwithstanding the foregoing, the liability of each
Holder under this subsection (b) shall be limited to an amount equal to the net
proceeds from the sale of the shares sold by such Holder, unless such liability
arises out of or is based on intentional misstatements or omissions by such
Holder. In addition, insofar as the foregoing indemnity relates to any such
untrue statement (or alleged untrue statement) or omission (or alleged omission)
made in a preliminary prospectus but eliminated or remedied in an amended
prospectus on file with the Commission at the time the registration statement
becomes effective or in the final prospectus filed pursuant to Rule 424 of the
Commission, the indemnity agreement herein shall not inure to the benefit of the
Company or any underwriter if a copy of the final prospectus filed pursuant to
Rule 424 was not furnished to the person or entity asserting the loss,
liability, claim or damage at or prior to the time such furnishing is required
by the Securities Act.
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(c) Each party entitled to indemnification under this Section
2.4 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or separate or different
defenses. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to the entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. No Indemnified Party shall consent to entry of any judgment or enter
into any settlement without the consent of each Indemnifying Party.
(d) If the indemnification provided for in this Section 2.4 is
unavailable to an Indemnified Party in respect of any losses, claims, damages or
liabilities referred to herein, then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and all shareholders offering
securities in the offering (the "Selling Shareholders") on the other from the
offering of the Company securities, or (ii) if the allocation provided by the
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and the Selling
Shareholders on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and the Selling Shareholders on the other shall be the net
proceeds from the offering (before deducting expenses) received by the Company
on the one hand and the Selling Shareholders on the other. The relative fault of
the Company on the one hand and the Selling Shareholders on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by the Selling
Shareholders and the parties' relevant intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Selling Shareholders agree that it would not be just and equitable if
contribution pursuant to this Section 2.5(d) were based solely upon the number
of entities from whom contribution was requested or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this Section 2.4(d). The amount paid or payable by an Indemnified
Party as a result of the losses, claims, damages and liabilities referred to
above in this Section 2.4(d) shall be
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deemed to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with defending any such action or claim, subject
to the provisions of Section 2.4(c) hereof. Notwithstanding the provisions of
this Section 2.4(d) or any other provision of this Article 2, no Holder shall be
required to contribute any amount or make any other payments under this
Agreement which in the aggregate exceed the net proceeds received in the
offering by such Holder, unless the subject losses, claims, damages and
liabilities arise out of or are based on intentional misstatements or omissions
by such Holder. No person guilty of fraudulent misrepresentation (within the
meaning of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e) Notwithstanding the foregoing provisions of this Section
2.4, if pursuant to an underwritten public offering of capital stock of the
Company, the Company, the Selling Shareholders and the underwriters enter into
an underwriting or purchase agreement relating to such offering which contains
provisions covering indemnification among the parties thereto in connection with
such offering, the indemnification provisions of this Section 2.4, to the extent
they are in conflict therewith, shall be deemed inoperative for the purpose of
such offering, except as to any parties to this Agreement who are not parties to
such subsequent underwriting or purchase agreement.
2.5 Certain Information.
(a) As a condition to exercising the registration rights
provided for herein, each Holder, with respect to any Registrable Stock included
in any registration, shall furnish the Company such information regarding such
Holder and the Registrable Stock as the Company may request in writing and as
shall be required in connection with any registration, qualification or
compliance referred to in Section 2.
(b) The failure of any Holder to furnish the information
requested pursuant to Section 2.5(a) shall not affect the obligation of the
Company under Section 2 to the remaining Holders who furnish such information
unless, in the reasonable opinion of counsel to the Company or the underwriters,
such failure impairs or may impair the legality of the Registration Statement or
the underlying offering.
(c) Each Holder, with respect to any Registrable Stock
included in any registration, shall cooperate in good faith with the Company and
its underwriters, in connection with such registration, including placing such
shares in escrow or custody to facilitate the sale and distribution thereof.
(d) Each Holder, with respect to any Registrable Stock
included in any registration, shall make no further sales or other dispositions,
or offers therefor, of such shares under such registration statement if, during
the effectiveness of such registration statement, such Holder is informed that
an intervening event has occurred which, in the opinion of counsel to the
Company, makes the prospectus included in such registration statement no longer
comply with the Securities
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<PAGE> 99
Act until such time as such Holder has received from the Company copies of a
new, amended or supplemented prospectus complying with the Securities Act;
provided, however, that the 90-day period referenced in Section 2.3(a) shall be
extended by the number of days from the date on which the Holder is so informed
up to and including the date on which the Holder receives new amended or
supplemental prospectuses.
2.6 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Common Stock acquired by Holders under the Stock Purchase Agreement
to the public without registration, the Company agrees to use its best lawful
efforts to:
(a) Make and keep public information available, as those terms
are defined in Rule 144 under the Securities Act, at all times that the Company
is subject to the reporting requirements of the Securities Act or the Exchange
Act;
(b) File with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) So long as a Holder owns any Common Stock that such Holder
acquired under the Stock Purchase Agreement, to furnish to such Holder forthwith
upon request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144, and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company and other
information in the possession of or reasonably obtainable by the Company as a
Holder may reasonably request in order to comply with any rule or regulation of
the Commission allowing such Holder to sell any such securities without
registration.
2.7 Transfer of Registration Rights. The rights granted to a Holder
hereunder may not be assigned or transferred by such Holder, except (i) to the
former spouse of a Holder pursuant to a final decree of divorce or (ii) to the
estate of a holder and the beneficiaries of such estate, upon the death of a
Holder.
2.8 Standstill Agreement. Subject to the provisions of Section 2.1
hereof, each Holder agrees upon request of the underwriter(s) managing any
underwritten public offering of the Company's securities, not to sell, make any
short sale of, loan, grant any option for the purchase of or otherwise dispose
of any equity securities of the Company (other than those included in the
registration) without the prior written consent of such underwriter(s), for such
period of time (not to exceed 120 days) following the effective date of the
registration statement relating to each such underwritten public offering as may
be requested by the underwriter(s).
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3. Miscellaneous.
3.1 Term. The registration rights granted pursuant to this Agreement
shall begin on the date of this Agreement and shall terminate, as to any
individual Holder, at such time as all Common Stock acquired by such Holder
under the Stock Purchase Agreement can be sold in accordance with Rule 144 under
the Securities Act.
3.2 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS BY
THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES
THEREOF.
3.3 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
3.4 Entire Agreement: Amendment. This Agreement shall constitute the
full and entire understanding and agreement between the parties with regard to
the subject hereof. Except as expressly provided herein, this Agreement, or any
provision hereof may be amended, waived, discharged or terminated upon the
written consent of the Company and the Holders holding at least a majority of
the then outstanding Registrable Stock.
3.5 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Holders: Copy to:
E. Patrick Manuel Liskow & Lewis
1206 Hwy 190 West 822 Harding Street
Eunice, Louisiana 70535 Lafayette, Louisiana 70503
P.O. Box 52008
B. Dal Miller Lafayette, Louisiana 70505
211 Liberty Ave, Apt 135 Attn: Mr. Billy J. Domingue
Lafayette, Louisiana 70508 Facsimile: (318) 267-2398
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<TABLE>
<S> <C>
If to the Company: Copy to:
Team, Inc. Chamberlain, Hrdlicka, White,
200 Hermann Drive Williams & Martin
Alvin, Texas 77511 1200 Smith Street, Suite 1400
P.O. Box 123 Houston, Texas 77002-4310
Alvin, Texas 77512-0123 Attn: Mr. Sidney B. Williams
Attn: Philip J. Hawk, Chairman and CEO Facsimile: (713) 658-2553
Facsimile: (281) 388-5583
</TABLE>
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
3.6 Delays or Omissions. Except as expressly provided herein, no delay
or omission to exercise any right, power, or remedy accruing to any party to
this Agreement shall impair any such right, power or remedy of such party nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any party to this Agreement, shall be cumulative and not
alternative.
3.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the parties
hereto, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
3.8 Validity. In the event that any provisions hereof are held to be
invalid, illegal or against public policy, the remaining provisions hereof shall
not be affected thereby. In such event, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible with respect to those provisions which were held
to be invalid, illegal or against public policy.
3.9 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
10
<PAGE> 102
IN WITNESS WHEREOF, the undersigned or each of their respective duly
authorized officers or representatives have executed this Agreement effective as
of the date first set forth above.
"COMPANY"
TEAM, INC.
By:
--------------------------------------
Philip J. Hawk, Chairman and CEO
"HOLDERS"
-----------------------------------------
E. Patrick Manuel
-----------------------------------------
B. Dal Miller
11
<PAGE> 103
EXHIBIT 2
XRI MANAGEMENT COMPANY
ASSETS
<TABLE>
<CAPTION>
DATE ACQUIRED TAX, TITLE JOB
ACQUIRED ASSET# ASSET DESCRIPTION VEH SERIAL # COST LICENSE LOCATION
- -------- ------ ----------------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
10/22/98 227 99 FORD F250 1FTNF21L7XEC35954 $ 21,305.00 $1,671.88 EXXON
RADIOGRAPHY EQUIP $ 19,516.39 BATON ROUGE
11/6/98 228 99 FORD F250 1FTNF21L9XEC35955 $ 21,305.00 $1,671.88 EXXON
RADIOGRAPHY EQUIP $ 19,274.44 BATON ROUGE
11/20/98 231 99 FORD F250 1FTNF20LOXEC7531 $ 18,914.00 $1,493.06 FINA
RADIOGRAPHY EQUIP $ 18,815.87 GONZALES
12/9/98 232 99 CHEVROLET P/U 1GCCS19X7XK11464 $ 17,990.00 $1,417.20 SULPHUR
1/21/99 233 99 FORD F250 1FTNF21LOXED22482 $ 21,395.00 $1,677.13 EXXON
RADIOGRAPHY EQUIP $ 9,321.33 BATON ROUGE
2/8/99 234 99 FORD F250 IFTNF20LXXED5115 $ 18,899.46 $1,448.84 MID LA GAS
RADIOGRAPHY EQUIP $ 5,485.86 BATON ROUGE
===========
TOTAL CAPITALIZED COST $201,602.34
===========
</TABLE>
<PAGE> 104
X-RAY INSPECTION, INC
ASSETS
<TABLE>
<CAPTION>
DATE ACQUIRED TAX, TITLE JOB
ACQUIRED ASSET# ASSET DESCRIPTION VEH SERIAL# COST LICENSE LOCATION
- -------- ------ ---------------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
1/21/99 233 99 FORD F250 1FTNF21L0XED22482 EXXON
RADIOGRAPHY EQUIP $ 7,218.27 BATON ROUGE
GENERATOR $ 1,522.48
2/8/99 234 99 FORD F250 1FTNF20LXXED5115 MID LA GAS
RADIOGRAPHY EQUIP $ 1,275.87 BATON ROUGE
GENERATOR $ 1,522.48
2/22/99 626 WELDING MACHINE 0081-060 $10,887.86 GONZALES
===========
TOTAL CAPITALIZED COST $ 22,426.96
===========
</TABLE>
<PAGE> 105
EXHIBIT 2
[LISKOW & LEWIS LETTERHEAD]
April 9, 1999
Team, Inc. 95975.002
P.O. Box 123
Alvin, Texas 77512-0123
Attn: Philip J. Hawk, Chairman and Chief Executive Officer
Gentlemen:
We have acted as counsel to X-RAY INSPECTION, INC., a Louisiana
corporation (the "Company"), E. PATRICK MANUEL, and B. DAL MILLER (collectively,
the "Stockholders"), in connection with that certain Stock Purchase Agreement,
dated April 9, 1999 (the "Purchase Agreement"), by and among TEAM, INC., a Texas
corporation ("Team"), and the Stockholders, and consented to by the spouses of
the Stockholders, Debra T. Manuel and Leslie S. Miller. This opinion is
delivered to you as required by the Purchase Agreement. Capitalized terms used
and not otherwise defined herein have the meanings given to them in the Purchase
Agreement.
We have examined copies, certified or otherwise identified to our
satisfaction, of the Purchase Agreement, the Consulting Agreement dated of even
date herewith between the Company and E. Patrick Manuel, the Employment
Agreement dated of even date herewith between the Company and B. Dal Miller, the
other agreements and instruments contemplated under the Purchase Agreement
(collectively, "Transaction Documents"), and such other documents, corporate
records and other information furnished us, certificates of public officials and
other instruments and have considered such matters of fact or law as we have
deemed appropriate to enable us to render the opinions expressed below. We have
assumed the authenticity of all documents submitted to us as originals and the
correctness of all statements of fact contained therein, the genuineness of all
signatures (except those of the Company, the Stockholders, and the spouses of
the Stockholders), the legal capacity of natural persons, and the conformity to
the originals of all documents submitted to us as copies. We have further
assumed that none of the such documents has been subsequently rescinded,
revoked, restated, modified or amended in any way other than by documents that
have been submitted to us. As to questions of fact material to this opinion, we
have, when relevant facts were not independently established,
<PAGE> 106
Team, Inc.
April 9, 1999
Page 2
relied upon certificates of the Stockholders and an authorized representative of
the Company and/or representations made by the Stockholders in the Transaction
Documents.
With respect to the opinions expressed herein, we have assumed that at
all relevant times (i) Team has duly authorized, executed and delivered the
Transaction Documents, (ii) the Transaction Documents constitute valid, binding
and enforceable obligations of Team, (iii) Team has all requisite power and
authority and any and all necessary consents and approvals to enter into,
execute, deliver and perform its obligations under the Transaction Documents and
(iv) the execution, delivery and performance of the Transaction Documents and
related instruments by Team does not breach, violate or conflict with any
agreement or the laws or governmental rules and regulation of any jurisdiction
or authority applicable to Team or to any of its properties.
Based on the foregoing and subject to the qualifications, exceptions
and assumptions contained herein, and having regard for such legal
considerations as we deem relevant, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Louisiana and has all requisite
corporate power and authority to own and operate its properties, to lease the
properties it operates under lease and to conduct its business as currently
conducted. The Company is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction outside the State of Louisiana in
which the failure to so qualify would have a material adverse effect on its
business. To our knowledge, the Company is not in violation of any provision of
its articles of incorporation, bylaws or other organizational documents.
2. Each of the Transaction Documents to which any of the Stockholders
is a party has been duly executed and delivered by such Stockholder and
constitutes the legal, valid and binding obligation of such Stockholder,
enforceable against each of them in accordance with its terms, except as that
enforceability may be subject to the effect of (a) any applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium, or similar laws
affecting the enforcement of creditors' rights generally and (b) general
principals of equity (regardless of whether that enforceability is considered in
a proceeding in equity or at law).
3. Neither the execution, delivery and performance of the Transaction
Documents nor the consummation of the transactions contemplated thereby (a)
violates, breaches or constitutes a default under (i) any of the articles of
incorporation or bylaws of the Company, (ii) any governmental requirement
applicable to the Company, or (iii) any material agreement or instrument of the
Company known to us or (b) causes or results in the imposition of, or affords
any Person the right to obtain, any lien or adverse claim upon any property or
assets of the Company (or upon any revenues, income or profits of the Company
therefrom) pursuant to any such agreement. The execution, delivery and
performance in accordance with its terms by the Stockholders of the Transaction
Documents, and the consummation of the transactions contemplated thereby, do
not, (a) violate or conflict with any governmental requirement applicable to any
of the Stockholders, (b) breach or constitute a default under any material
<PAGE> 107
Team, Inc.
April 9, 1999
Page 3
agreement or instrument known to us to which any Stockholder is a party or by
which any Stockholder or any of the shares of Company capital stock owned by any
Stockholder are found or subject or (c) result in the creation or imposition
of, or afford any Person the right to obtain, any lien or adverse claim upon any
property or assets of any Stockholder (or upon any revenues, income or profits
of any Stockholder therefrom) pursuant to any such agreement or instrument.
4. No governmental approvals are required to be obtained, and no
reports or notices or filings with any governmental authority are required to be
made, by the Company or any Stockholder for the execution, delivery or
performance by the Company and the Stockholders of the Transaction Documents,
the enforcement against the Company and the Stockholders of their respective
obligations thereunder or the effectuation of the transactions contemplated
thereby to be effected at or prior to the Closing.
5. To our knowledge, except pursuant to the Transaction Documents,
there are no existing options, warrants, subscriptions or other rights to
purchase or securities convertible into or exchangeable for, the capital stock
of the Company or any of its subsidiaries. To our knowledge, except as disclosed
pursuant to the Transaction Documents, neither the Company nor any Stockholder
is a party to or bound by any agreement, instrument, contract, obligation,
commitment or understanding of any character, except for the Transaction
Documents, relating to the sale, assignment, conveyance, encumbrance, transfer
or delivery of any capital stock of the Company or all or substantially all the
assets of the Company.
6. The Company has obtained all consents of all third parties necessary
under each lease (whether relating to real property or personal property) to
which it is a party for the consummation of the transactions contemplated by the
Transaction Documents.
7. To our knowledge, there is no pending or threatened litigation that
(a) questions the validity of any Transaction Documents or any action taken or
to be taken by the Company or any Stockholder in connection with therewith, at
law or in equity, before or by any governmental authority or before any
arbitrator or (b) if adversely determined, would have a material adverse effect
(i) on the condition (financial or other), earnings, business, operations or
prospects of the Company and its subsidiaries, taken as a whole, or (ii) on the
ability of any Stockholder to perform his obligations under the Transaction
Documents.
8. Immediately prior to the Closing: (a) the authorized capital stock
of the Company consisted of 100,000 shares of common stock, without par value,
of which 5,000 shares were issued and outstanding; (b) all such outstanding
shares of capital stock of the Company were (i) duly authorized and validly
issued in accordance with the applicable governmental requirements of the State
of Louisiana, the articles of incorporation and the bylaws of the Company, (ii)
fully paid and nonassessable, (iii) not issued in violation of any preemptive
rights, rights of first refusal or other similar rights and (iv) to our
knowledge, were issued in compliance with the applicable provisions of federal
and state securities laws; (c) except as disclosed pursuant to the Purchase
Agreement, no shares of capital stock of the Company were held in the treasury
of the Company; and (d) the Stockholders owned all of the issued and outstanding
shares of common stock of the
<PAGE> 108
Team, Inc.
April 9, 1999
Page 4
Company free and clear of any lien or adverse claim and, to our knowledge, any
pending or threatened claim.
9. To our knowledge, the representations and warranties of the Sellers
contained in Sections 3.1 and 5 of the Purchase Agreement are correct and
complete as of the date of the Purchase Agreement.
The foregoing opinion is predicated on and qualified in its entirety
by the following:
a. The foregoing opinion is based on and is limited to the law of the
State of Louisiana and the relevant law of the United States of America, and we
render no opinion with respect to the law of any other jurisdiction.
b. The opinions expressed in Paragraph 2 above are subject to the
additional qualification that we express no opinion as to the enforceability of
(i) any severability or reformation provisions contained in the Transaction
Documents, (ii) any provisions in the Transaction Documents which purport to
entitle a party to indemnification in respect of any matter arising under any
securities laws or to the extent indemnification in respect of any matter would
otherwise be against public policy, (iii) any provisions of the Transaction
Documents purporting to establish a right to enforce a covenant or restriction
by injunctions or restraining orders, (iv) any provisions of the Transaction
Documents that have the effect of prohibiting oral amendments or waivers of any
provisions of those documents, or (v) any noncompetition provisions of the
Transaction Documents.
c. The use of the words "to our knowledge" or "Known to us" herein
means that during the course of our representation of the Stockholders and the
Company relative to the transactions contemplated under the Transaction
Documents, no information has come to the attention of the attorneys of this
firm involved in the transactions described herein which could give such
attorneys current actual or constructive knowledge of the existence of facts or
circumstances contrary to the opinions so qualified. We have relied exclusively
upon certificates of the Stockholders and authorized representatives of the,
Company and/or the representations made by the Stockholders in the Transaction
Documents (after the discussion of the contents thereof with such persons) as to
the existence or nonexistence of certain facts and circumstances, as stated
therein, and, except as otherwise expressly set forth herein, we have not
undertaken any investigation whatsoever to determine the existence of such facts
or circumstances, and no inference as to our knowledge of such matters shall be
drawn from our representation of any party to this transaction or otherwise.
d. We express no opinion as to any matters other than as expressly set
forth above, and no opinion is to be otherwise implied or inferred herefrom.
This opinion and the matters addressed herein are as of the date
hereof, and we undertake no, and hereby disclaim any, obligation to advise you
of any change in any matter set forth herein occurring after the date hereof.
<PAGE> 109
Team, Inc.
April 9, 1999
Page 5
This opinion is being furnished to you and your counsel for use solely
in connection with the transactions being consummated pursuant to the
Transaction Documents. No other use or distribution of this opinion may be made
without our prior written consent, except that this opinion may be provided to
and relied upon by NationsBank, N.A., as agent, pursuant to that certain Credit
Agreement dated as of August 28, 1998, as amended from time to time.
Very truly yours,
Liskow & Lewis, a
professional law corporation
<PAGE> 110
EXHIBIT 2
EXHIBIT J
COUNTIES IN TEXAS WHICH COMPRISE "THE TERRITORIES"
<TABLE>
<S> <C> <C>
Harris Hidalgo Franklin
Robertson Orange Freestone
Brazoria Pecos Somerville
Calhoun Sabine Ward
San Patricio Grayson Lubbock
Montgomery Sutton Hemphill
Camp Nolan Neuces
Crane Wood Chambers
Dallas Kimble Cope
Dawson Angelina Crockett
Midland Gaines Upton
El Paso Potter Lee
Fort Bend Ector Eddy
Fisher Yoakum Cass
Kaufman Hockley Rusk
Galveston Panola Young
Gregg Atascosa Cherokee
Gray Taylor Winkler
Hardin Tarrant Scurry
Howard Van Zant Matagorda
Hutchinson Moore Bexar
Jefferson Morris Victoria
Karnes Marion Andrews
Lavaca Harrison Smith
Liberty Henderson
</TABLE>
PARISHES IN LOUISIANA WHICH COMPRISE "THE TERRITORIES"
<TABLE>
<S> <C> <C>
Ascension Landry Ouachita
East Baton Rouge St. Mary Webster
East Feliciana, Vernon Lafourche
Iberia Washington Orleans
Iberville West Baton Rouge Plaquemine
St. James West Feliciana Terrebonne
Jefferson Bossier Vermillion
Krotz Springs Caddo Acadia
Livingston Claiborne Allen
Pointe Coupee Grant Beauregard
St. Bernard Lincoln Calcasieu
St. Charles Morehouse Rapides
St. John the Baptist Natchitoches Desoto
</TABLE>
COUNTIES IN MISSISSIPPI WHICH COMPRISE "THE TERRITORIES"
<TABLE>
<S> <C> <C>
Adams Hancock Monroe
Forrest Jackson Smith
Grenada Lowndes Warren
</TABLE>
COUNTIES IN ALABAMA WHICH COMPRISE "THE TERRITORIES"
<TABLE>
<S> <C> <C>
Mobile Dallas Madison
Calhoun Escambia Morgan
Jackson Greene Shelby
Tuscaloosa Houston Walker
Choctaw Jefferson Washington
Wilcox Limestone Talladega
Colbert Lowndes Claiborne
Autauga Lawrence Cullman
</TABLE>
<PAGE> 111
EXHIBIT 2
EXHIBIT K (PAGE 1 OF 3)
ILLUSTRATIVE EXAMPLES OF EARN-OUT CALCULATION
(EXAMPLES #1-#4 PRESENTS VARIOUS ASSUMPTIONS OF RESULTS FOR 14 MONTH
PERIOD ENDING MAY 31, 2003)
<TABLE>
<CAPTION>
EXAMPLE #1 EXAMPLE #2 EXAMPLE #3 EXAMPLE #4
<S> <C> <C> <C> <C>
Operating Results
Revenues 10,000,000 10,000,000 10,000,000 12,000,000
Cost of Sales 5,100,000 5,000,000 4,800,000 8,000,000
---------- ---------- ---------- ----------
Gross Margin 4,900,000 5,000,000 5,200,000 6,000,000
---------- ---------- ---------- ----------
SGA 2,800,000 2,700,000 2,700,000 3,000,000
---------- ---------- ---------- ----------
EBIT 2,100,000 2,300,000 2,500,000 3,000,000
========== ========== ========== ==========
Base EBIT 2,275,000 2,275,000 2,275,000 2,275,000
========== ========== ========== ==========
Floor 1,925,000 1,925,000 1,925,000 1,925,000
========== ========== ========== ==========
Calculation:
Applicable Sub Paragraph of
2.2.4.3 ii iii iii iii
numerator 2,100,000 N/A N/A N/A
----------
denominator 2,275,000
fraction 92%(x)
Difference between Actual and Floor EBIT 175,000(y) 25,000 225,000 725,000
Payout % 50%(z) 50% 50% 50%
---------- ---------- ---------- ----------
Earnout 80,769(x)(2)(y)(2)(z) 12,500 112,500 362,500
========== ========== ========== ==========
Minimum Earnout Payable 150,000 150,000 N/A
========== ==========
</TABLE>
<PAGE> 112
EXHIBIT K (PAGE 2 OF 3)
ILLUSTRATIVE EXAMPLES OF EARN-OUT CALCULATION
(EXAMPLE #5 IS ILLUSTRATIVE OF CUMULATIVE CALCULATION PROVISIONS OF 2.2.4.4)
(ASSUMES BELOW FLOOR PERFORMANCE IN YEAR ONE,
WHICH IMPACT CUMULATIVE CALCULATIONS)
EXAMPLE #5
<TABLE>
<CAPTION>
14 MONTHS
5/11/00 5/31/01 5/31/02 5/31/03 TOTALS
<S> <C> <C> <C> <C> <C>
Operating Results
Revenues 10,500,000 11,500,000 15,000,000 16,500,000 53,500,000
Cost of Sales 6,000,000 6,000,000 7,500,000 8,250,000 27,750,000
---------- ---------- ---------- ---------- ----------
Gross Margin 4,500,000 5,500,000 7,500,000 8,250,000 25,750,000
---------- ---------- ---------- ---------- ----------
SGA 3,000,000 3,000,000 3,500,000 3,750,000 13,250,000
---------- ---------- ---------- ---------- ----------
Annual EBIT 1,500,000 2,500,000 4,000,000 4,500,000 12,500,000
---------- ---------- ---------- ---------- ----------
Cumulative EBIT 1,500,000 4,000,000 8,000,000 12,500,000
---------- ---------- ---------- ----------
Base EBIT 2,275,000 2,350,000 2,900,000 3,500,000 11,025,000
Floor EBIT 1,925,000 2,050,000 N/A N/A
Cumulative Base 4,625,000 7,525,000 11,025,000
Cumulative Floor 3,975,000 N/A N/A
Annual Calculation:
Actual less Base or Floor (425,000) 450,000 1,100,000 1,000,000
50% of Above (212,500) 225,000 550,000 500,000
Annual Payout -- 10,811 (1) 228,669 (2) 500,000 737,500
---------- ---------- ---------- ---------- ----------
Cumulative Payout 10,811 237,500 737,500
---------- ---------- ----------
Cumulative Calculation:
Numerator (a) 4,000,000 N/A N/A
Denominator (b) 4,825,000
Fraction (a)/(b) 0.88 (x) 100%(x) 100%(x)
Cumulative Actual EBIT 4,000,000 8,000,000 12,580,000
Cumulative Base or floor EBIT 3,975,000 7,525,000 11,025,000
---------- ---------- ----------
Cumulative Excess 25,000 (y) 475,000 (y) 1,475,000 (y)
---------- ---------- ----------
Percentage Payout 21,672 (x)(y) 475,000 (x)(y) 1,475,000 (x)(y)
Cumulative Payout Limited to
50% of Above -- 10,811 237,500 737,500
========== ========== ========== ==========
</TABLE>
(1) and (2)--Annual Payout would be limited by cumulative provisions
of 2.2.4.4.
<PAGE> 113
EXHIBIT K (PAGE 3 OF 3)
ILLUSTRATIVE EXAMPLES OF EARN-OUT CALCULATION
(EXAMPLE #6 IS ILLUSTRATIVE OF CUMULATIVE CALCULATION PROVISIONS OF 2.2.4.4)
(ASSUMES PAYOUT ON BASIS OF FLOOR IN FIRST TWO YEARS)
EXAMPLE #6
<TABLE>
<CAPTION>
14 MONTHS
5/31/00 5/31/01 5/31/02 5/31/03 TOTALS
<S> <C> <C> <C> <C> <C>
Operating Results
Revenues 11,000,000 11,500,000 15,000,000 16,600,000 54,000,000
Cost of Sales 5,900,000 6,000,000 7,500,000 8,250,000 27,650,000
---------- ---------- ---------- ---------- ----------
Gross Margin 5,100,000 5,500,000 7,500,000 8,250,000 26,350,000
---------- ---------- ---------- ---------- ----------
SGA 2,900,000 3,000,000 3,500,000 3,760,000 13,150,000
---------- ---------- ---------- ---------- ----------
Annual EBIT 2,200,000 2,500,000 4,000,000 4,500,000 13,200,000
---------- ---------- ---------- ---------- ----------
Cumulative EBIT 2,200,000 4,700,000 8,700,000 13,200,000
---------- ---------- ---------- ----------
Base EBIT 2,275,000 2,350,000 2,900,000 3,500,000 11,025,000
Floor EBIT 1,925,000 2,050,000 N/A N/A
Cumulative Base 2,275,000 4,625,000 7,525,000 11,025,000
Cumulative Floor 1,925,000 3,975,000 N/A N/A
Annual Calculation:
Actual less Base or Floor 275,000 150,000 1,100,000 1,000,000 2,175,000
50% of Above 137,500 75,000 550,000 500,000 1,087,500
Annual Payout 150,000 (1) 150,000 (1) 287,500 (2) 600,000 1,087,500
---------- ---------- ---------- ---------- ----------
Cumulative Payout 150,000 300,000 587,500 1,087,500
---------- ---------- ---------- ----------
Cumulative Calculation:
Numerator (a) N/A N/A N/A
Denominator (b)
Fraction (a)/(b) 100%(x) 100%(x) 100%(x)
Cumulative Actual EBIT 2,200,000 4,700,000 8,700,000 13,200,000
Cumulative Base or Floor EBIT 1,025,000 4,625,000 7,525,000 11,025,000
---------- ---------- ----------
Cumulative Excess 275,000 75,000 (y) 1,175,000 (y) 2,175,000 (y)
---------- ---------- ----------
Percentage Payout 137,500 75,000 (x)(y) 1,175,000 (x)(y) 2,175,000 (x)(y)
Cumulative Payout Limited to
50% of Above 150,000 300,000 587,500 1,087,500
========== ========== ========== ==========
</TABLE>
(1) Minimum Provisions of 2.2.4.4 (III) apply.
(2) Year Three payment limited due to excess payments being made in years one
and two.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements and related notes of Team, Inc. and
Subsidiaries for the nine months ended February 28, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-END> FEB-28-1999
<CASH> 300,000
<SECURITIES> 0
<RECEIVABLES> 10,925,000
<ALLOWANCES> 225,000
<INVENTORY> 8,406,000
<CURRENT-ASSETS> 20,583,000
<PP&E> 25,090,000
<DEPRECIATION> 13,102,000
<TOTAL-ASSETS> 38,566,000
<CURRENT-LIABILITIES> 5,760,000
<BONDS> 13,556,000<F1>
0
0
<COMMON> 2,275,000
<OTHER-SE> 17,401,000
<TOTAL-LIABILITY-AND-EQUITY> 38,566,000
<SALES> 0
<TOTAL-REVENUES> 39,679,000
<CGS> 0
<TOTAL-COSTS> 23,248,000
<OTHER-EXPENSES> 15,839,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 543,000
<INCOME-PRETAX> 49,000
<INCOME-TAX> 207,000
<INCOME-CONTINUING> (158,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (158,000)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
<FN>
<F1>Includes $1,768,000 for compensation accruals of former employees.
</FN>
</TABLE>
