-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R7CZZtJDo/Hd1tHt4gfW6LlRW96ajPVh8j6i9GS3TErljh+Q1UjdpfDD8wQNYHnH 7AKJ1U6YaNJTP+ulASlLHA== 0000950129-99-000155.txt : 19990115 0000950129-99-000155.hdr.sgml : 19990115 ACCESSION NUMBER: 0000950129-99-000155 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19981130 FILED AS OF DATE: 19990114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEAM INC CENTRAL INDEX KEY: 0000318833 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS REPAIR SERVICES [7600] IRS NUMBER: 741765729 STATE OF INCORPORATION: TX FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08604 FILM NUMBER: 99506599 BUSINESS ADDRESS: STREET 1: 200 HERMANN DRIVE CITY: ALVIN STATE: TX ZIP: 77056 BUSINESS PHONE: 2813316154 MAIL ADDRESS: STREET 1: 1019 SOUTH HOOD STREET CITY: ALVIN STATE: TX ZIP: 77551 10-Q 1 TEAM, INC. - DATED 11/30/98 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended NOVEMBER 30, 1998 ------------------------------------------------ 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 -------------------------------------------------------- TEAM, INC. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Texas 74-1765729 - ------------------------------------------ ----------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 200 Hermann Drive, Alvin, Texas 77511 - ------------------------------------------------------------------------------- (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 January 11, 1999, there were 7,573,352 shares of the Registrant's common stock outstanding. 2 TEAM, INC. INDEX
PART I. FINANCIAL INFORMATION Page No. -------- Item 1. Financial Statements Consolidated Condensed Balance Sheets -- 1 November 30, 1998 (Unaudited) and May 31, 1998 Consolidated Condensed Statements of Operations (Unaudited) -- 2 Three Months Ended November 30, 1998 and 1997 Six Months Ended November 30, 1998 and 1997 Consolidated Condensed Statements of Cash Flows (Unaudited)-- 3 Six Months Ended November 30, 1998 and 1997 Notes to (Unaudited) Consolidated Condensed Financial Statements 4 Item 2. Management's Discussion and Analysis 7 of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 10 Item 6. Exhibits and Reports on Form 8-K 11
3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS TEAM, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS
NOVEMBER 30, MAY 31, ASSETS 1998 1998 ------------- ------------- Current Assets: Cash and cash equivalents $ 1,030,000 $ 1,355,000 Accounts receivable, net of allowance for doubtful accounts of $237,000 and $247,000 10,062,000 9,564,000 Materials and supplies 8,672,000 6,801,000 Prepaid expenses and other current assets 908,000 862,000 ------------- ------------- Total Current Assets 20,672,000 18,582,000 Property, Plant and Equipment: Land and buildings 9,808,000 6,735,000 Machinery and equipment 15,528,000 11,746,000 ------------- ------------- 25,336,000 18,481,000 Less accumulated depreciation and amortization 12,590,000 11,833,000 ------------- ------------- 12,746,000 6,648,000 Goodwill 3,580,000 0 Other Assets 1,596,000 1,850,000 ------------- ------------- Total Assets $ 38,594,000 $ 27,080,000 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 425,000 $ 286,000 Accounts payable 1,779,000 1,416,000 Other accrued liabilities 4,438,000 3,483,000 Current income taxes payable 190,000 348,000 ------------- ------------- Total Current Liabilities 6,832,000 5,533,000 Long-term Debt and Other Obligations 11,590,000 5,966,000 Stockholders' Equity: Preferred stock, cumulative, par value $100 per share, 500,000 shares authorized, none issued 0 0 Common stock, par value $.30 per share, 30,000,000 shares authorized, 7,550,052 and 6,093,442 shares issued at November 30, 1998 and May 31, 1998, respectively 2,265,000 1,828,000 Additional paid-in capital 30,852,000 27,098,000 Accumulated deficit (12,848,000) (13,248,000) Treasury stock at cost, 9,700 shares (97,000) (97,000) ------------- ------------- Total Stockholders' Equity 20,172,000 15,581,000 ------------- ------------- Total Liabilities and Stockholders' Equity $ 38,594,000 $ 27,080,000 ============= =============
See notes to unaudited consolidated condensed financial statements. -1- 4 TEAM, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED NOVEMBER 30, NOVEMBER 30, ----------------------------- ----------------------------- 1998 1997 1998 1997 ------------- ------------- ------------- ------------- Revenues $ 13,892,000 $ 11,717,000 $ 25,260,000 $ 21,946,000 Operating expenses 8,142,000 6,587,000 14,634,000 12,639,000 ------------- ------------- ------------- ------------- Gross Margin 5,750,000 5,130,000 10,626,000 9,307,000 Selling, general and administrative expenses 5,302,000 4,215,000 9,543,000 7,998,000 Interest 210,000 104,000 305,000 235,000 ------------- ------------- ------------- ------------- Income before income taxes 238,000 811,000 778,000 1,074,000 Provision for income taxes 131,000 283,000 379,000 439,000 ------------- ------------- ------------- ------------- Net income $ 107,000 $ 528,000 $ 399,000 $ 635,000 ============= ============= ============= ============= Net income per common share: Basic $ 0.01 $ 0.09 $ 0.05 $ 0.11 ============= ============= ============= ============= Diluted $ 0.01 $ 0.09 $ 0.05 $ 0.11 ============= ============= ============= ============= Weighted average number of shares outstanding: Basic 7,509,000 5,972,000 7,350,000 5,833,000 ============= ============= ============= ============= Diluted 7,680,000 6,178,000 7,598,000 5,996,000 ============= ============= ============= =============
See notes to unaudited consolidated condensed financial statements. -2- 5 TEAM, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED NOVEMBER 30, -------------------------------- 1998 1997 -------------- -------------- Cash Flows from Operating Activities: Net income $ 399,000 $ 635,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,040,000 721,000 Gain on sale of assets (14,000) 0 Non-current deferred income taxes 0 349,000 Change in assets and liabilities, net of effects from purchase of Climax Portable Machine Tools, Inc.: (Increase) decrease: Accounts receivable 466,000 (1,780,000) Materials and supplies 253,000 (7,000) Prepaid expenses and other current assets 51,000 (78,000) Increase (decrease): Accounts payable 172,000 357,000 Other accrued liabilities 166,000 22,000 Income taxes payable (158,000) (75,000) -------------- -------------- Net cash provided by operating activities 2,375,000 144,000 Cash Flows From Investing Activities: Capital expenditures (1,790,000) (541,000) Cash received for disposal of property and equipment 74,000 5,000 Increase in other assets (374,000) (122,000) Acquisition of Climax, net of cash and equivalents acquired (6,746,000) 0 Payments of Climax notes payable at acquisition date (2,893,000) 0 -------------- -------------- Net cash used in investing activities (11,729,000) (658,000) Cash Flows From Financing Activities: Payments under debt agreements and capital lease obligations (5,070,000) (2,327,000) Proceeds from issuance of long-term debt 10,708,000 0 Issuance of common stock 3,391,000 2,101,000 -------------- -------------- Net cash provided by (used in) financing activities 9,029,000 (226,000) -------------- -------------- Net increase (decrease) in cash and cash equivalents (325,000) (740,000) Cash and cash equivalents at beginning of year 1,355,000 1,672,000 -------------- -------------- Cash and cash equivalents at end of period $ 1,030,000 $ 932,000 ============== ============== Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 235,000 $ 268,000 ============== ============== Income taxes paid $ 731,000 $ 167,000 ============== ==============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: In connection with the acquisition of Climax Portable Machine Tools, Inc., the Company issued 200,000 shares of its common stock with an assigned value of $4.00 per share. During the six months ended November 30, 1998, the Company received a $35,000 note receivable (in addition to $12,000 cash) in connection with the sale of land See notes to unaudited consolidated condensed financial statements. -3- 6 TEAM, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. Method of Presentation General The interim financial statements are unaudited, but in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of results for such periods. The consolidated condensed balance sheet at May 31, 1998 is derived from the May 31, 1998 audited consolidated financial statements. The results of operations for any interim period are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's annual report for the fiscal year ended May 31, 1998. 2. Dividends No dividends were paid during the first six months of fiscal 1999 or 1998. Pursuant to the Company's Credit Agreement, the Company may not pay quarterly dividends without the consent of its senior lender. Future dividend payments will depend upon the Company's financial condition and other relevant matters. 3. Acquisition Effective August 31, 1998 (the "Effective Date"), the Company acquired all of the outstanding capital stock of Climax Portable Machine Tools, Inc., an Oregon corporation ("Climax"), in exchange for cash in the amount of $6.4 million and 200,000 newly-issued shares of the Company's common stock, $0.30 par value per share (the "Common Stock"). Additionally, at the acquisition date, the Company refinanced the majority of Climax's notes payable in the amount of $2.9 million. Pursuant to the purchase agreement and based on the approximate market value of the Common Stock, a value of $4.00 per share was assigned to the Common Stock issued to the former shareholders of Climax. The Company also entered into employment agreements with three of the former shareholders, pursuant to which such persons were granted options to purchase up to an aggregate of 50,000 shares of Common Stock at an exercise price of $4.125 per share. The acquisition was accounted for using the purchase method of accounting, and accordingly, the consolidated financial statements subsequent to the Effective Date reflect the purchase price, including transaction costs. As the acquisition was effective August 31, 1998, the consolidated results of operations for the Company for the three months ended November 30, 1998 include the results for Climax for the period from September 1, 1998 to November 30, 1998. The purchase price was allocated to the assets and liabilities of Climax based on their estimated fair values. Based on preliminary purchase accounting, the goodwill associated with the Climax acquisition approximated $3.6 million, which is being amortized on a straight-line basis over forty years. In order to finance the acquisition of the Climax shares, future acquisitions, and operations the Company closed a credit facility with NationsBank, N.A. of Houston on August 26, 1998 in the amount of $24,000,000. See Note 5. Climax designs and manufactures portable, metal cutting machine tools for on-site maintenance and repair purposes. -4- 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.
Six Months Ended November 30, ------------------------------- 1998 1997 -------------- -------------- Net sales $ 27,591,000 $ 27,543,000 Net income $ 397,000 $ 719,000 Earnings per share: Basic $ 0.05 $ 0.12 Diluted $ 0.05 $ 0.12
4. Long-Term Debt and Other Obligations Long-term debt and other obligations consist of:
November 30, May 31, 1998 1998 --------------------------- Revolving credit $ 3,520,000 $ 2,500,000 Term notes 6,369,000 1,693,000 Capital lease obligations 284,000 340,000 Compensation agreements 1,343,000 1,418,000 Other 499,000 301,000 ------------ ------------ 12,015,000 6,252,000 Less current portion 425,000 286,000 ------------ ------------ Total $ 11,590,000 $ 5,966,000 ============ ============
Effective August 26, 1998, the Company entered into a new credit facility with a new primary lender in the amount of $24,000,000. This new facility provides for (i) a $12,500,000 revolving loan, (ii) $9,500,000 in term loans for business acquisitions and (iii) a $2,000,000 mortgage loan to refinance existing real estate indebtedness. Amounts borrowed under the revolving credit loan are due August 28, 2001. Amounts borrowed against the term loans are due August 8, 2003. Amounts outstanding under this facility bear interest at a marginal rate over the LIBOR rate or prime rate, depending upon the amount of funded debt to cash flow. The effective rate on outstanding borrowings under the new agreement is approximately 7%. In October 1998, the Company finalized the mortgage loan and borrowed $1.8 million to refinance the existing real estate. Additionally, in October 1998, the Company entered into an interest rate swap transaction on the $4.5 million term loan, exchanging a floating LIBOR rate of 5.3% at the time of the swap for a fixed LIBOR rate of 5.19% for a period of three years. In December 1998, the Company executed interest rate swap transactions for two years with respect to the $1.8 million mortgage loan and for $2 million of amounts outstanding under the revolver. At the time of the December swaps, the floating LIBOR was 5.25%. The fixed swap rates received in exchange are at 5.13%. At November 30, 1998, $3,520,000 in revolving loans and $6,369,000 in term loans (including the mortgage loan) were outstanding under the facility. A previously existing $10,000,000 revolving credit agreement that was due December 31, 1999, and bore interest at a rate not to exceed the bank's prime rate plus 0.5 percent, was terminated. -5- 8 Loans under the Company's bank credit facility are secured by substantially all of the assets of the Company. The terms of the agreement require the maintenance of certain financial ratios and limit investments, liens, leases and indebtedness, among other things. At November 30, 1998, the Company was in compliance with all credit facility covenants. 5. Earnings Per Share The following table is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations:
Three months ended November 30, 1998 Three months ended November 30, 1997 ------------------------------------- --------------------------------------- Income Shares Per-Share Income Shares Per-Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ----------- ------------- --------- ------------ ------------- ----------- Basic EPS: Net income $ 107,000 7,509,000 $ 0.01 $ 528,000 5,972,000 $ 0.09 Effect of Dilutive Securities: Options -- 171,000 -- 206,000 ----------- --------- ----------- --------- Diluted EPS: Net income $ 107,000 7,680,000 $ 0.01 $ 528,000 6,178,000 $ 0.09 =========== ========= =========== ========= Six months ended November 30, 1998 Six months ended November 30, 1997 ------------------------------------- --------------------------------------- Income Shares Per-Share Income Shares Per-Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ----------- ------------- --------- ------------ ------------- ----------- Basic EPS: Net income $ 399,000 7,350,000 $ 0.05 $ 635,000 5,833,000 $ 0.11 Effect of Dilutive Securities: Options -- 248,000 -- 163,000 ----------- --------- ----------- --------- Diluted EPS: Net income $ 399,000 7,598,000 $ 0.05 $ 635,000 5,996,000 $ 0.11 =========== ========= =========== =========
6. Subsequent Events On January 8, 1999, the Company reduced headquarters support staff by approximately 20% (19 individuals). A one-time charge of $425,000 will be made in the third quarter ending February 28, 1999, to provide for severance and related costs associated with the staffing reduction. Additionally, a one-time charge of $816,000 will be made in the third quarter to fully provide for the future payments due to two former officers under deferred compensation agreements that extend beyond the period in which services are expected to be rendered. Payments pursuant to that charge will be made through 2004. -6- 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS ENDED NOVEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED NOVEMBER 30, 1997 Revenues for the quarter ended November 30, 1998 were $13.9 million compared to $11.7 million for the corresponding period of the preceding year. The $2.2 million increase is primarily attributable to the inclusion of Climax Portable Machine Tools, Inc in Team's operating results for the 1998 period. Climax did not contribute to pre-tax income during the quarter, however, since profits on $300 thousand of inter-company sales from Climax to Team were eliminated in consolidation and because of less than expected third-party sales in the first three months since acquisition. Income before income taxes was $238 thousand for the 1998 quarter, a decrease of $573 thousand from the $811 thousand of pre-tax income reported in the same quarter of 1997. The decline in profitability for the quarter was directly attributable to increased operating and general and administrative expenses when compared to the same period of 1997, as well as $170 thousand of cost associated with international activities primarily related to timing and startup costs. Additionally, there was an increase in interest expense of $106 thousand resulting from the additional debt incurred in connection with the Climax acquisition. The Company has taken steps to reduce future costs through a staffing reduction implemented in January 1999 as described in Note 6 to the financial statements included in Item 1. SIX MONTHS ENDED NOVEMBER 30, 1998 COMPARED TO SIX MONTHS ENDED NOVEMBER 30, 1997 For the six months ended November 30, 1998, income before income taxes was $778 thousand or $296 less than the same period of 1997. The decline in pre tax income is a result of the factors occurring in the second quarter, as discussed above, which were somewhat mitigated by the strength of the operating results of the first three months of the current fiscal year, when compared to the same period of 1997. A summary of the six-month comparison is as follows: Revenues--1998 revenues of $25.3 million were 15% greater than the $21.9 million reported in 1997. The increase is attributable to the Climax revenues of $2.2 million included in the second quarter of 1998 as well as an increase of first quarter industrial service revenues of $1.14 million over the same period of 1997. Gross Margins--For the six months ended November 30, 1998, the gross operating margin was 42.1% of sales, which is consistent with the 42.4% achieved in the same period of 1997. However, second quarter 1998 margins for Team's industrial service group were 41.3% compared to 42.9% in the first quarter, reflecting the reduced second quarter profitability discussed above. Operating margins from Climax are consistent with Team's year to date results. Selling, General and Administrative Expenses--For the six months ended November 30, 1998, Selling, General and Administrative expenses were 37.8% of revenues, compared to 36.4% for the same period of 1997. This ratio is impacted by a disproportionately high administrative cost (44% of revenues) of Climax in the second quarter as a result of lower than expected sales. LIQUIDITY AND CAPITAL RESOURCES At November 30, 1998, the Company's working capital totaled $13.8 million, an increase of $800 thousand since May 31, 1998. The Company has been able to finance its working capital requirements primarily through its internally generated cash flow and through borrowings under a revolving credit facility. -7- 10 As of November 30, 1998, cash and cash equivalents totaled $1.0 million, a decrease of $325 thousand since May 31, 1998. This cash decrease is primarily reflective of a change in cash management features associated with the Company's new credit facility, whereby excess operating funds are automatically used to reduce the amount outstanding under the revolving facility. See "Consolidated Statements of Cash Flows" for additional detail. Effective August 31, 1998, the company acquired all of the outstanding capital stock of Climax Portable Machine Tools, Inc., an Oregon corporation ("Climax"), in exchange for cash in the amount of $6.4 million and 200,000 newly-issued shares of the Company's common stock, $0.30 par value per share (the "Common Stock"). Additionally, at the acquisition date, the Company refinanced the majority of Climax's notes payable in the amount of $2.9 million. Pursuant to the purchase agreement and based on the approximate market value of the Common Stock, a value of $4.00 per share was assigned to the Common Stock issued to the former shareholders of Climax. In order to finance the acquisition of the Climax shares, the Company closed a new credit facility with NationsBank, N.A on August 26, 1998 in the amount of $24,000,000. The new facility provides for (i) a $12,500,000 revolving loan, (ii) $9,500,000 in term loans for business acquisitions and (iii) a $2,000,000 mortgage loan to refinance existing real estate indebtedness. Amounts borrowed under the revolving credit loan are due August 28, 2001. Amounts borrowed against the term loans are due August 8, 2003. Amounts outstanding under the facility bear interest at a marginal rate over the LIBOR rate or prime rate, depending upon the amount of funded debt to cash flow. The effective rate on outstanding borrowings under the new agreement is approximately 7%. In October 1998 the Company finalized the mortgage loan and borrowed $1.8 million to refinance existing real estate. Additionally in October 1998, the Company entered into an interest rate swap transaction on the $4.5 million term loan, exchanging a floating LIBOR rate of 5.3% at the time of the swap for a fixed LIBOR rate of 5.19% for a period of three years. In December 1998, the Company executed interest rate swap transactions for two years with respect to the $1.8 million mortgage loan and for $2 million of amounts outstanding under the revolver. At the time of the December swaps, the floating LIBOR was 5.25%. The fixed swap rates received in exchange are at 5.13%. At November 30, 1998, $3,520,000 in revolving loans and $6,369,000 in term and mortgage loans were outstanding under the facility. At November 30, approximately $5.5 million was available under the revolving credit facility. In June 1998, the Company completed the sale of 1,200,000 shares of Team's common stock for $2.75 per share to Houston Post Oak Partners ("Houston Partners") in a private placement transaction. Houston Partners then owned approximately 17% of the Company's outstanding common shares on a fully diluted basis. Proceeds from the sale were used to reduce the Company's long-term debt. YEAR 2000 COMPLIANCE The Company, like other businesses, is facing the Year 2000 issue. Many computer systems and equipment with embedded chips or processors use only two digits to represent the calendar year. This could result in computational or operational errors as dates are compared across the century boundary causing possible disruptions in business operations. The year 2000 issue can arise at any point in the Company's supply, manufacturing, processing, distribution, and financial chains. -8- 11 State of Readiness--The Company began addressing the Year 2000 issue in 1997, with an initial assessment of Year 2000 readiness. Based on the assessment, a Year 2000 Plan was developed. By January 1998, a Year 2000 Plan had been completed that included the following components: 1) Assessment of all systems for Year 2000 compliance, 2) Development of a schedule for replacement of non-compliant systems, 3) Obtaining manufacturers certification of Year 2000 compliance, 4) Developing a list of significant vendors/suppliers for surveying their Year 2000 readiness efforts. The Year 2000 issue is being addressed within the Company by its Year 2000 compliance team and progress is reported periodically to management. The Company has committed resources to conduct risk assessment and to take corrective action, where required, with a target date of becoming Year 2000 ready for the most critical systems by the third quarter of calendar year 1999. The Company is currently engaged in a comprehensive project to upgrade its information, technology, and manufacturing facilities computer hardware and software to programs that will address the year 2000 problem. In connection with this project, new hardware and packaged software have been recently purchased from large vendors who have represented that the systems are already Year 2000 compliant. With respect to the plant systems, including automation and embedded chips used in manufacturing operations, the manufacturing plant is in the process of completing their inventory and assessment reviews. The Company is relying on vendor certification and testing. Assessment and testing, with corrective action as required, is expected to be completed by the third quarter of calendar year 1999. With respect to the external parties, including suppliers and customers, the Company's Year 2000 compliance team is in the process of surveying the Year 2000 readiness efforts of critical external parties. Risk assessment is expected to be completed by June 1999 and monitoring risk in this area will continue into the third quarter of calendar year 1999, as many external parties will not have completed their Year 2000 readiness efforts. Cost--The total estimated cost for the Company's Year 2000 readiness efforts is $835,000 which consist primarily of a new management information system that will be implemented in February 1999. As of November 30, 1998 approximately $460,000 of the $835,000 has been incurred. Risks--The Company relies on third party suppliers for raw materials, water, utilities, transportation and other key services. Interruption of supplier operations due to Year 2000 issues could affect the Company's operations. While the project team will evaluate the status of its major suppliers' Year 2000 readiness efforts and develop contingency plans to manage the risk, it can not eliminate the potential for disruption due to third party failures. The Company is also dependent upon its customers for sales and cash flow. Year 2000 interruptions in the operations of its major customers could result in reduced sales, increased inventory or receivable levels and cash flow reductions. The Company is in the process of surveying its major customers' Year 2000 readiness efforts to assess risk and develop plans with an intent to minimize the impact on its operations. The Company believes that it is taking all reasonable steps to ensure Year 2000 readiness. It's ability to meet the projected goals, including the costs of addressing the Year 2000 issue and the dates upon which compliance will be attained, depends on the Year 2000 readiness of its key suppliers and customers, the completion of its final remediation and testing efforts and the successful development and implementation of contingency plans. The Company currently has not yet developed any contingency plans. These and other unanticipated Year 2000 issues could have a material adverse effect on the results of operations or financial condition. -9- 12 DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS Certain forward-looking information contained herein is being provided in accordance with the provisions of the Private Securities Litigation Reform Act. Such information is subject to certain assumptions and beliefs based on current information known to the Company and is subject to factors that could result in actual results differing materially from those anticipated in the forward-looking statements contained herein. Such factors include domestic and international economic activity, interest rates, market conditions for the Company's customers, regulatory changes and legal proceedings, and the Company's successful implementation of its internal operating plans. Accordingly, there can be no assurance that the forward-looking statements contained herein will occur or that objectives will be achieved. PART II -OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The 1998 Annual Meeting of Shareholders of the Company was held on October 16, 1998. At the meeting, Messrs. George W. Harrison and Sidney B. Williams were reelected to serve as Class III Directors for a term of three years. Louis A. Waters was elected to serve as a Class I Director for a term of one year. The votes with respect to the election of each such director were as follows:
NAME FOR WITHHELD - ------------------------------------------------------------------- Mr. George W. Harrison 5,793,623 522,260 - ------------------------------------------------------------------- Mr. Sidney B. Williams 5,730,781 585,102 - ------------------------------------------------------------------- Mr. Louis A. Waters 5,886,013 429,870 - -------------------------------------------------------------------
The three directors continuing in office until the expiration of their respective terms are Messrs. William A. Ryan, Jack M. Johnson, Jr. and E. Theodore Laborde. The shareholders approved a proposed amendment to the articles of incorporation to increase the number of authorized shares of Common Stock from 10,000,000 to 30,000,000 by the following vote:
FOR AGAINST ABSTAIN - ------------------------------------------------------------------- 5,650,271 644,995 20,617 - -------------------------------------------------------------------
The shareholders considered and approved the adoption of the 1998 Incentive Stock Option Plan by the following vote:
FOR AGAINST ABSTAIN - ------------------------------------------------------------------- 3,856,270 394,144 61,095 - -------------------------------------------------------------------
The shareholders also approved the appointment of Deloitte & Touche as independent certified public accountants to audit the Company's accounts for the fiscal year ending May 31, 1999 by the following vote:
FOR AGAINST ABSTAIN - ------------------------------------------------------------------- 6,240,083 31,932 43,868 - -------------------------------------------------------------------
-10- 13 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit Index
Exhibit Number Description - ------- ----------- 3.1 Second Restated Articles of Incorporation of the Company, as amended on October 23, 1998. 10.1 Employment Agreement by and between Philip J. Hawk and Team, Inc. dated November 2, 1998. 10.2 Incentive Stock Option Award Agreement by and between Philip J. Hawk and Team, Inc. dated November 2, 1998. 10.3 Standard Restricted Stock Option Award Agreement by and between Philip J. Hawk and Team, Inc. dated November 2, 1998. 10.4 Price Vested Restricted Stock Option Award Agreement by and between Philip J. Hawk and Team, Inc. dated November 2, 1998. 10.5 Stock Purchase Agreement by and between Philip J. Hawk and Team, Inc. dated November 2, 1998. 10.6 Employment Termination and Consulting Agreement by and between Team, Inc. and William A. Ryan dated November 1, 1998. 27 Financial Data Schedule
(b) Reports on Form 8-K A current report on Form 8-K dated August 26, 1998, as amended by a Form 8-K/A dated September 9, 1998, was filed during the quarter ended November 30, 1998, reporting under Items 2 and 7 thereof, the acquisition of all the outstanding capital stock of Climax Portable Machine Tools, Inc. Item 7 of Form 8-K/A included the following financial statements: (i) Consolidated Financial Statements of Climax Portable Machine Tools, Inc. Independent Auditors' Report Consolidated Financial Statements Consolidated Balance Sheets as of December 31, 1997 and 1996 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1997 and 1996 Consolidated Statements of Operations for the Years Ended December 31, 1997 and 1996 Consolidated Statements of Cash Flow for the Years Ended December 31, 1997 and 1996 Notes to Financial Statements Interim Consolidated Financial Statements (Unaudited) Consolidated Balance Sheet as of June 30, 1998 Consolidated Statement of Shareholders' Equity for the Six-Month Period Ended June 30, 1998 Consolidated Statements of Operations for the Six-Month Periods Ended June 30, 1998 and 1997 Consolidated Statements of Cash Flows for the Six-Month Periods Ended June 30, 1998 and 1997 Notes to Financial Statements (ii) Pro Forma Consolidated Financial Information of Team, Inc. (Unaudited) Pro Forma Consolidated Financial Statements Pro Forma Consolidated Statement of Operations - Year Ended May 31, 1998 Pro Forma Consolidated Statement of Operations - Three Months Ended August 31, 1998 Notes to Pro Forma Consolidated Financial Statements -11- 14 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. TEAM, INC (Registrant) Date: January 14, 1999 /s/PHILIP J. HAWK --------------------------------------------- Philip J. Hawk Chief Executive Officer and Director /s/TED W. OWEN --------------------------------------------- Ted W. Owen, Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) -12- 15 EXHIBIT INDEX
Exhibit Number Description - ------- ----------- 3.1 Second Restated Articles of Incorporation of the Company, as amended on October 23, 1998. 10.1 Employment Agreement by and between Philip J. Hawk and Team, Inc. dated November 2, 1998. 10.2 Incentive Stock Option Award Agreement by and between Philip J. Hawk and Team, Inc. dated November 2, 1998. 10.3 Standard Restricted Stock Option Award Agreement by and between Philip J. Hawk and Team, Inc. dated November 2, 1998. 10.4 Price Vested Restricted Stock Option Award Agreement by and between Philip J. Hawk and Team, Inc. dated November 2, 1998. 10.5 Stock Purchase Agreement by and between Philip J. Hawk and Team, Inc. dated November 2, 1998. 10.6 Employment Termination and Consulting Agreement by and between Team, Inc. and William A. Ryan dated November 1, 1998. 27 Financial Data Schedule
EX-3.1 2 SECOND RESTATED ARTICLES OF INCORPORATION 1 EXHIBIT 3.1 ARTICLES OF INCORPORATION OF TEAM, INC. AS AMENDED ARTICLE I. The name of the Corporation is TEAM, INC. ARTICLE II. The period of its duration is perpetual. ARTICLE III. The purpose for which the Corporation is organized is to transact any and all lawful business for which corporations may be incorporated under the Texas Business Corporation Act. ARTICLE IV. The aggregate number of shares which the Corporation shall have the authority to issue is Thirty Million Five Hundred Thousand (30,500,000) shares, of which Thirty Million (30,000,000) shares shall be common shares of Thirty Cents ($0.30) par value each and Five Hundred Thousand (500,000) shares shall be preferred shares of One Hundred Dollars ($100) par value each, issuable in series. The Board of Directors is hereby authorized from time to time to divide all or any part of the preferred shares into series thereof and to fix and determine variations, if any, between any series so established as to any one or more of the following matters: (i) The rate of dividends; (ii) The price at and the terms and conditions under which shares may be redeemed; (iii) The amount payable upon shares in the event of voluntary liquidation; (iv) The amount payable upon shares in the event of involuntary liquidation; (v) Sinking fund provisions for the redemption or purchase of shares; 2 (vi) The terms and conditions on which shares may be converted, if the shares of any series are issued with the privilege of conversion; (vii) Voting rights; and (viii) Any and all such other provisions as may be fixed or determined by the Board of Directors of the Corporation pursuant to Texas law. All shares of preferred stock shall be identical except as to the relative rights and preferences fixed and determined from time to time by the Board of Directors with respect to different series of shares when each such series is established in accordance with the Articles of Incorporation, as amended, and the Texas Business Corporation Act. The following provisions set forth the preferences, limitations and relative rights of the classes of shares: (1) Preferred Dividends. The holders of all preferred shares, regardless of series, at the time outstanding shall be entitled to receive, when and as declared to be payable by the Board of Directors, out of any funds legally available for the payment thereof, dividends at the rate theretofore fixed by the Board of Directors for each series of such preferred shares that have theretofore been established, and no more, with dividend payment dates at such intervals as the Board of Directors shall determine. (2) Dividends Other Than Preferred Dividends. After adequate provision has been made for payment of full dividends on all preferred shares then outstanding for all past dividend periods and for the current dividend period, the Board of Directors may declare such further dividends as are permitted by law, and the Board of Directors shall have the absolute discretion of fixing the fashion in which holders of preferred shares and holders of common shares shall participate in such further dividends, with provision being made for one class participating more fully than the other or to the total exclusion of the other. (3) Cumulativeness of Preferred Dividends. Dividends on all preferred shares, regardless of series, shall be cumulative. No dividends shall be declared on any shares of any series of preferred shares for any dividend period unless all dividends accumulated for all prior dividend periods shall have been declared or shall then be declared at the same time upon all preferred shares then outstanding. No dividends shall be declared on shares of any series of preferred shares unless a dividend for the same period shall be declared at the same time upon all preferred shares outstanding at the time of such declaration in like proportion to -2- 3 the dividend rate then declared. No dividends shall be declared or paid on the common shares unless full dividends on all the preferred shares then outstanding for all past dividend periods and for the current dividend period shall have been declared and the Corporation shall have paid such dividends or shall have set apart a sum sufficient for the payment thereof. (4) Preferences on Liquidation. In the event of any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, the holders of each series of the then outstanding preferred shares shall be entitled to receive the amount fixed for such purpose in the resolution or resolutions of the Board of Directors establishing the respective series of preferred shares that might then be outstanding, together with a sum equal to the amount of all accumulated and unpaid dividends thereon at the dividend rate fixed therefor in the aforesaid resolution or resolutions. After such payment to such holders of preferred shares, the remaining assets and funds of the Corporation shall be distributed pro rata among the holders of the common shares. A consolidation, merger or other reorganization of the Corporation with any other corporation or corporations or a sale of all or substantially all of the assets of the Corporation shall not be considered a dissolution, liquidation or winding up of the Corporation within the meaning of these provisions. (5) Redemption Privileges of the Corporation. The whole or any part of the outstanding preferred shares or the whole or any part of any series thereof may be called for redemption and redeemed at any time at the option of the Corporation, exercisable by the Board of Directors upon thirty (30) days' notice by mail to the holders of such shares as are to be redeemed, by paying therefor in cash the redemption price fixed for such shares in the resolution or resolutions of the Board of Directors establishing the respective series of which the shares to be redeemed are a part, together with a sum equal to the amount of all accumulated and unpaid dividends thereon at the dividend rate fixed therefor in the aforesaid resolution or resolutions to the date fixed for such redemption. The Corporation may redeem the whole or any part of the shares of any series without redeeming the whole or any part of the shares of any other series; provided, however, that if at any time less than the whole of the preferred shares of any particular series then outstanding shall be called for redemption, the particular shares called for redemption shall be determined by lot or by such other equitable method as may be determined by the Board of Directors. The Corporation may, on or prior to the date fixed for redemption of redeemable shares as specified in the notice, deposit with any bank or trust company in the City of Houston, Texas, or any bank or trust company in the United States duly appointed and acting as transfer agent for such Corporation, as a trust fund, a sum sufficient to redeem shares called for redemption, with irrevocable -3- 4 instructions and authority to such bank or trust company to give or complete the notice of redemption thereof and to pay, on or after the date fixed for such redemption, to the respective holders of shares, as evidenced by a list of holders of such shares certified by the corporation by its President or a Vice President and by its Secretary or an Assistant Secretary, the redemptive price upon the surrender of their respective share certificates. Thereafter, from and after the date fixed for redemption, such shares shall be deemed to be redeemed and dividends thereon shall cease to accrue after such date fixed for redemption. Such deposit shall be deemed to constitute full payment of such shares to their holders. Thereafter, such shares shall no longer be deemed to be outstanding, and the holders thereof shall cease to be shareholders with respect to such shares, and shall have no rights with respect thereto except the right to receive from the bank or trust company payment of the redemptive price of such shares without interest, upon the surrender of their respective certificates therefor, and any right to convert such shares which may exist. In case the holders of such shares shall not, within six (6) years after such deposit, claim the amount deposited for redemption thereof, such bank or trust company shall upon demand pay over to the Corporation the balance of such amount so deposited to be held in trust and such bank or trust company shall thereupon be relieved of all responsibility to the holders thereof. (6) Conversion Privilege. The Board of Directors is authorized to grant or to deny to the holders of shares of one or more of the series of preferred shares the right to convert such preferred shares into common shares with par value of thirty cents ($0.30) a share, and the Board of Directors is further authorized to fix and determine the terms and conditions on which such preferred shares may be so converted into common shares. The conversion rights granted, fixed and determined pursuant to the preceding sentence, along with the terms and conditions thereof, shall be set forth in the resolution or resolutions in which the Board of Directors establishes the respective series of preferred shares. (7) Preemptive Rights Denied. No shareholder of the Corporation shall have any preemptive right to acquire any additional unissued or treasury shares of the Corporation of any class now or hereafter authorized or held. (8) Voting Rights. The holders of common shares shall vote one (1) vote for each share of common stock with respect to all of the affairs of the Corporation. The Board of Directors is authorized to fix and determine or to deny voting rights with respect to one or more series of the preferred shares, and such voting rights shall be fixed and determined or denied in the resolution or resolutions adopted by the Board of Directors by which such respective series of preferred shares is established. Except as required by law, the -4- 5 holders of preferred shares having voting rights and the holders of common shares shall vote together as one class. Shareholders of this Corporation shall not have the right to accumulate their votes at any election of directors. ARTICLE V. The Corporation will not commence business until it has received for the issuance of its shares consideration of a value of at least $1,000, consisting of money, labor done or property actually received. ARTICLE VI. A director of the Corporation is not liable to the Corporation or its shareholders for monetary damages for an act or omission in the director's capacity as a director except for liability for: (i) a breach of a director's duty of loyalty to the Corporation or its shareholders; (ii) an act or omission not in good faith or that involves intentional misconduct or a knowing violation of the law; (iii) a transaction from which a director received improper benefit, whether or not the benefit resulted from an action taken with the scope of the director's office; (iv) an act or omission for which the liability of a director is expressly provided for by statute; or (v) an act related to an unlawful stock repurchase or payment of a dividend. ARTICLE VII. -- Deleted -- ARTICLE VIII. The Corporation shall have the power to indemnify directors, officers, employees and agents pursuant to applicable law. ARTICLE IX. No contract or other transaction between the Corporation and any other corporation shall be affected by the fact that one or more of the directors or officers of this Corporation is interested in or is a director or officer of such other Corporation, and any director or officer individually may be a party to or may be interested in any contract or transaction of this Corporation. No contract or transaction of this Corporation with any person or persons, firm or association shall be affected by the fact that any director or officer of this Corporation is a party to or interested -5- 6 in such contract or transaction, or in any way connected with such person or persons, firm or association, provided that the interest in any such contract or other transaction of any such director or officer shall be fully disclosed and that such contract or other transaction shall be authorized or ratified by the vote of a sufficient number of directors of the company not so interested. In the absence of fraud, no director or officer having such adverse interest shall be liable to the Corporation or to any shareholder or creditor thereof, or to any other person, for any loss incurred by it under or by reason of such contract or transaction, nor shall any such director or officer be accountable for any gains or profits realized thereon. In any case described in this Article IX, any such director may be counted in determining the existence of a quorum at any meeting of the Board of Directors which shall authorize or ratify any such contract or transaction. ARTICLE X. The address of the initial registered office of the Corporation is 1930 Two Shell Plaza, Houston, Texas. The name of the initial registered agent of the Corporation at such address is Sidney B. Williams. ARTICLE XI. 1. Number and Classification of Company's Board of Directors. The number of directors which shall constitute the whole Board of Directors of the Corporation shall be not less than six (6) nor more than nine (9) as specified from time to time by action of the Board of Directors pursuant to the Bylaws. The directors shall be classified into three classes: Class I, Class II and Class III. Such classes shall be as nearly equal in number of directors as possible. Each director shall serve for a term ending on the third annual meeting following the annual meeting at which such director was elected; provided, however, that the directors originally elected to Class I shall serve for a term expiring at the annual meeting of shareholders to be held in 1990, the directors originally elected to Class II shall serve for a term expiring at the annual meeting of shareholders to be held in 1991 and the directors originally elected to Class III shall serve for a term expiring at the annual meeting of shareholders to be held in 1992. The foregoing notwithstanding, each director shall serve until his successor shall have been duly elected and qualified, unless he shall resign, become disqualified or disabled, or shall otherwise be removed. At each annual election, the directors chosen to succeed those whose terms then expire shall be of the same class as the directors -6- 7 they succeed, unless, by reason of any intervening changes in the authorized number of directors, the Board of Directors shall designate one or more directorships whose term then expires as directorships of another class in order more nearly to achieve equality of number of directors among the classes. Notwithstanding the rule that the three classes shall be as nearly equal in number of directors as possible, in the event of any change in the authorized number of directors, each director then continuing to serve as such shall nevertheless continue as a director of the class of which he is a member until the expiration of his current term, or his prior death, resignation or removal. If any newly created directorship may, consistent with the rule that the three classes shall be as nearly equal in number of directors as possible, be allocated to one or two or more classes, the Board of Directors shall allocate it to that of the available classes whose terms of office are due to expire at the earliest date following such allocation. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. 2. Removal. No director of the Corporation shall be removed from his office as a director by vote or other action of shareholders or otherwise except for cause. 3. Newly Created Directorships and Vacancies. Newly created directorships resulting from any increase in the number of directors may be filled by the affirmative vote of a majority of the directors for a term of office continuing only until the next election of one or more directors by the shareholders entitled to vote thereon; provided, however, that the Board of Directors shall not fill more than two such directorships during the period between two successive annual meetings of shareholders. Any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. Any director elected to fill any such vacancy shall hold office for the remainder of the full term of the director whose departure from the Board of Directors created the vacancy and until such newly elected director's successor shall have been elected and qualified. 4. Provision, Repeal, Etc. Notwithstanding anything contained in these Articles of Incorporation to the contrary, the affirmative vote of the holders of at least eighty percent (80%) of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote on the election of directors, voting together as a single class, shall be required to alter, amend or repeal, or adopt any provision inconsistent with, this Article XI or any -7- 8 parallel or similar provision contained in the Bylaws of the Corporation. ARTICLE XII. 1. Vote Required for Certain Business Combinations. In addition to any affirmative vote required by law or these Articles of Incorporation or the Bylaws of the Corporation, and except as otherwise expressly provided in Section 2 of this Article XII, a Business Combination (as hereinafter defined) with, or proposed by or on behalf of, any Related Person (as hereinafter defined) or any Affiliate or Associate (as hereinafter defined) of any Related Person or any person who thereafter would be an Affiliate or Associate of such Related Person, shall require the affirmative vote of not less than eighty percent (80%) of the votes entitled to be cast by the holders of all of the then outstanding shares of Voting Stock (as hereinafter defined), voting together as a single class, and the affirmative vote of not less than a majority of the votes entitled to be cast by the Voting Stock beneficially owned by persons other than such Related Person. Each share of Voting Stock shall have the number of votes granted to it in, or duly fixed by the Board of Directors pursuant to, Article IV of these Articles of Incorporation. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage or separate class vote may be specified, by law, or in any agreement with any national securities exchange or otherwise. 2. Exceptions to Higher Vote Requirement. The provisions of Section 1 of this Article XII shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote, if any, as is required by law or by any other provision of these Articles of Incorporation or the Bylaws of the Corporation, or any agreement with any national securities exchange, if all of the conditions specified in either of the following Paragraphs (a) or (b) are met or, in the case of a Business Combination not involving the payment of consideration to the holders of the Corporation's outstanding Capital Stock (as hereinafter defined), if the condition specified in the following Paragraph (a) is met: (a) The Business Combination shall have been approved either specifically or as a transaction which is within an approved category of transactions, by a majority (whether such approval is made prior to or subsequent to the acquisition of or announcement or public disclosure of the intention to acquire, beneficial ownership of the Voting Stock that caused the Related Person to become a Related Person) of the Continuing Directors (as hereinafter defined). -8- 9 (b) All of the following conditions shall have been met: (i) The aggregate amount of cash and the Fair Market Value (as hereinafter defined), as of the date of the consummation of the Business Combination, of consideration other than cash to be received per share by holders of common stock of the Corporation in such Business Combination shall be at least equal to the higher amount determined under clauses (A) and (B) below: (A) (If applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of the Related Person for any share of common stock of the Corporation in connection with the acquisition by the Related Person of beneficial ownership of shares of common stock, (x) within the two-year period immediately prior to the first public announcement of the proposed Business Combination (the "Announcement Date"), or (y) in the transaction in which it became a Related Person, whichever is higher, in either case as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to the common stock of the Corporation; and (B) The Fair Market Value per share of common stock of the Corporation on the Announcement Date or on the date (the "Determination Date") on which the Related Person became a Related Person, whichever is higher, as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to the common stock of the Corporation. (ii) The aggregate amount of cash and the Fair Market Value, as of the date of the consummation of the Business Combination, of consideration other than cash to be received per share by holders of shares of any class or series of outstanding Capital Stock, other than common stock of the Corporation, shall be at least equal to the highest amount determined under clauses (A), (B) and (C) below: (A) (If applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of the Related Person for any share of such class or series of Capital Stock in connection with the acquisition by the Related Person of beneficial ownership of shares of such class or series of Capital Stock, -9- 10 (x) within the two-year period immediately prior to the Announcement Date, or (y) in the transaction in which it became a Related Person, whichever is higher, in either case as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such class or series of Capital Stock; (B) The Fair Market Value per share of such class or series of Capital Stock on the Announcement Date or on the Determination Date, whichever is higher, as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such class or series of Capital Stock; and (C) (If applicable) the highest preferential amount per share to which the holders of shares of such class or series of Capital Stock would be entitled, as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such class or series of Capital Stock, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation regardless of whether the Business Combination to be consummated constitutes such an event. The provisions of this Paragraph (b) shall be required to be met with respect to every class or series of outstanding Capital Stock, whether or not the Related Person has previously acquired beneficial ownership of any shares of a particular class or series of Capital Stock. (iii) The consideration to be received by holders of a particular class or series of outstanding Capital Stock shall be in cash or in the same form as previously has been paid by or on behalf of the Related Person in connection with its direct or indirect acquisition of beneficial ownership of shares of such class or series of Capital Stock. If the consideration so paid for shares of any class or series of Capital Stock varies as to form, the form of consideration for such class or series of Capital Stock shall be either cash or the form used to acquire beneficial ownership of the largest number of shares of such class or series of Capital Stock previously acquired by the Related Person. (iv) After the Determination Date and prior to the consummation of such Business Combination: (A) Except as approved by a majority of the Continuing Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends -10- 11 (whether or not cumulative) payable in accordance with the terms of any outstanding Capital Stock; (B) There shall have been no reduction in the annual rate of dividends paid on the common stock of the Corporation (except as necessary to reflect any stock split, stock dividend or subdivision of the common stock of the Corporation), except as approved by a majority of the Continuing Directors; (C) There shall have been an increase in the annual rate of dividends paid on the common stock of the Corporation as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction that has the effect of reducing the number of outstanding shares of common stock of the Corporation, unless the failure to increase such annual rate is approved by a majority of the Continuing Directors; and (D) Such Related Person shall not have become the beneficial owner of any additional shares of Capital Stock except as part of the transaction that results in such Related Person becoming a Related Person and except in a transaction that, after giving effect thereto, would not result in any increase in the Related Person's percentage beneficial ownership of any class or series of Capital Stock. (v) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the "Act") (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to all shareholders of the Corporation at least thirty (30) days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). The proxy or information statement shall contain on the first page thereof, in a prominent place, any statement as to the advisability (or inadvisability) of the Business Combination that the Continuing Directors, or any of them, may choose to make and, if deemed advisable by a majority of the Continuing Directors, the opinion of an investment banking firm selected by a majority of the Continuing Directors as to the fairness (or lack of fairness) of the terms of the Business Combination from the financial point of view of the holders of the outstanding shares of Capital Stock other than the Related Person and its Affiliates or Associates, such investment banking firm to be furnished with all information it reasonably requests and to be paid a reasonable fee for its services by the Corporation. -11- 12 (vi) Such Related Person shall not have made any major change in the Corporation's business or equity capital structure without the approval of a majority of the Continuing Directors. (vii) After the Determination Date, the Related Person shall not have received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise. 3. Certain Definitions. The following definitions shall apply with respect to this Article XII: (a) The term "Business Combination" shall mean: (i) Any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (A) any Related Person or (B) any other company (whether or not itself a Related Person) which is, or after such merger or consolidation would be, an Affiliate or Associate of a Related Person; or (ii) Any sale, lease, exchange, mortgage, pledge, transfer or other disposition or security arrangement, investment, loan, advance, guarantee, agreement to purchase, agreement to pay, extension of credit, joint venture participation or other arrangement (in one transaction or a series of transactions) to, with or for the benefit of any Related Person or any Affiliate or Associate of any Related Person involving any assets, securities or commitments of the Corporation, any Subsidiary or any Related Person or any Affiliate or Associate of any Related Person which (except for any arrangement, whether as employee, consultant or otherwise, other than as a director, pursuant to which any Related Person or any Affiliate or Associate thereof shall, directly or indirectly, have any control over or responsibility for the management of any aspect of the business or affairs of the Corporation, with respect to which arrangements the value tests set forth below shall not apply), together with all other such arrangements (including all contemplated future events), has an aggregate Fair Market Value and/or involves aggregate commitments of $2,500,000 or more or constitutes more than five percent (5%) of the book value of the total assets (in the case of transactions involving assets or commitments other than capital stock) or five percent (5%) of the shareholders' equity (in the case of transactions in capital stock) of the entity in question (the "Substantial Part"), as reflected in the most recent fiscal year-end consolidated balance sheet of such entity existing at the time the shareholders of the Corporation would be required to -12- 13 approve or authorize the Business Combination involving the assets, securities and/or commitments constituting any Substantial Part; or (iii) The adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of any Related Person or any Affiliate or Associate of any Related Person; or (iv) Any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with, into or otherwise involving a Related Person) that has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of Equity Security (as hereinafter defined) of the Corporation or any Subsidiary, that is beneficially owned by any Related Person or any Affiliate or Associate of any Related Person; or (v) Any agreement, contract or other arrangement providing for any one or more of the actions specified in the foregoing clauses (i) to (iv). (b) The term "Capital Stock" shall mean all capital stock of the Corporation authorized to be issued from time to time under Article IV of these Articles of Incorporation, and the term "Voting Stock" shall mean all Capital Stock which by its terms may be voted on all matters submitted to the shareholders of the Corporation generally. (c) The term "person" shall mean any individual, firm, company or other entity and shall include any group comprised of any person and any other person with whom such person or any Affiliate or Associate of such person has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of Capital Stock. (d) The term "Related Person" shall mean any person (other than the Corporation or any Subsidiary and other than any profit-sharing, employee stock ownership or other employee benefit plan of the Corporation or any Subsidiary or any trustee of or fiduciary with respect to any such plan when acting in such capacity and other than any person who on the date of adoption by the Corporation's Board of Directors of this Article XII was the holder of five percent (5%) of more of the outstanding shares of common stock of the Corporation) who or which (i) is or has announced or publicly disclosed a plan or intention to become the beneficial owner of Voting Stock representing ten percent (10%) of more of the votes entitled to be cast by the holders of all the then outstanding shares of Voting Stock; or (ii) is an Affiliate or -13- 14 Associate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner of Voting Stock representing ten percent (10%) of more of the votes entitled to be cast by the holders of all the then outstanding shares of Voting Stock; or (iii) is an assignee of or has otherwise succeeded to any shares of Voting Stock that were at any time within the two-year period immediately prior to the date in question beneficially owned by any Related Person, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933, as amended. (e) A person shall be a "beneficial owner" of any Capital Stock (i) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; (ii) which such person or any of its Affiliates or Associates has, directly or indirectly, (A) the right to Acquire (whether such right is exercisable immediately or only after the passage of time and notwithstanding that Rule 13d-3 under the Act deems such shares to be beneficially owned only if such right may be exercised within sixty (60) days), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding; or (iii) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Capital Stock. For the purposes of determining whether a person is a Related Person pursuant to Paragraph (d) of this Section 3, the number of shares of Capital Stock deemed to be outstanding shall include shares deemed beneficially owned by such person through application of this Paragraph (e) of Section 3, but shall not include any other shares of Capital Stock that may be issuable pursuant to any arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. (f) The terms "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 under the Act as in effect on September 1, 1989 (the term "registrant" in said Rule 12b-2 meaning, in this case, the Corporation). (g) The term "Subsidiary" means any company of which a majority of any class of Equity Security is beneficially owned by the Corporation; provided, however, that for the purposes of the definition of Related Person set forth in Paragraph (d) of this Section 3, the term "Subsidiary" shall mean only a company of which a majority of each class of Equity Security is beneficially owned by the Corporation. -14- 15 (h) The term "Continuing Director" means any member of the Board of Directors of the Corporation, while such person is a member of the Board of Directors, who is not an Affiliate or Associate or representative of the Related Person and was a member of the Board of Directors prior to the Determination Date, and any successor of a Continuing Director, while such successor is a member of the Board of Directors, who is not an Affiliate or Associate or representative of the Related Person and is recommended or elected to succeed the Continuing Director by a majority of Continuing Directors. (i) The term "Fair Market Value" means (i) in the case of stock, the highest closing sales price during the 30-day period immediately preceding the date in question of a share of such stock on the principal United States securities exchange registered under the Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any similar system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Continuing Directors in good faith; and (ii) in the case of property other than stock, ,the fair market value of such property on the date in question as determined by a majority of the Continuing Directors in good faith. (j) In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in Paragraphs (b)(i) and (b)(ii) of Section 2 of this Article XII shall include the shares of common stock of the Corporation and/or the shares of any other class or series of Capital Stock retained by the holders of such shares. (k) The term "Equity Security" shall have the meaning ascribed to such term in Section 3(a)(11) of the Act, as in effect on September 1, 1989. 4. Powers of Continuing Directors. A majority of the Continuing Directors shall have the power and duty to determine for the purposes of this Article XII, on the basis of information known to them after reasonable inquiry, any and all questions, interpretations and determinations arising under, or with regard to the application of, this Article XII, including, without limitation, (a) whether a person is a Related Person, (b) the number of shares of Capital Stock or other securities beneficially owned by any person, (c) whether a person is an Affiliate or Associate of another, (d) whether a Business Combination is with, or proposed by, or on behalf of a Related Person or an Affiliate or Associate of a Related Person, (e) whether the assets that are the -15- 16 subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $2,500,000 or more, and (f) whether the assets or securities that are the subject of any Business Combination constitute a Substantial Part. Any such determination made in good faith shall be binding and conclusive on all parties. 5. No Effect on Fiduciary Obligations of Related Persons. Nothing contained in this Article XII shall be construed to relieve any Related Person from any fiduciary obligation imposed by law. 6. Compliance with this Article XII. The fact that any Business Combination complies with the provisions of Section 2 of this Article XII shall not be construed to impose any fiduciary duty, obligation or responsibility on the Board of Directors, or any member thereof, to approve such Business Combination or recommend its adoption or approval to the shareholders of the Corporation, nor shall such compliance limit, prohibit or otherwise restrict in any manner the Board of Directors, or any member thereof, with respect to evaluations of or actions and responses taken with respect to such Business Combination. 7. Business Combinations Proposed by a Related Person. For the purposes of this Article XII, a Business Combination is presumed to have been proposed by, or on behalf of, a Related Person or an Affiliate or Associate of a Related Person or a person who thereafter would become such if (a) after the Related Person became such, the Business Combination is proposed following the election of any director of the Corporation who with respect to such Related Person, would not qualify to serve as a Continuing Director or (b) such Related Person, Affiliate, Associate or person votes for or consents to the adoption of any such Business Combination, unless as to such Related Person, Affiliate, Associate or person a majority of the Continuing Directors makes a good faith determination that such Business Combination is not proposed by or on behalf of such Related Person, Affiliate, Associate or person, based on information known to them after reasonably inquiry. 8. Provision, Repeal, Etc. Notwithstanding anything contained in these Articles of Incorporation to the contrary, the affirmative vote of the holders of at least eight percent (80%) of the voting power of all outstanding shares of Voting Stock, voting together as a single class, and the affirmative vote of the holders of at least a majority of the voting power of all outstanding shares of Voting Stock, voting together as a single class, excluding the Voting Stock beneficially owned by a Related Person, shall be required to alter, amend or repeal, or adopt any provision inconsistent with, this Article XII. -16- EX-10.1 3 EMPLOYMENT AGREEMENT - PHILIP J. HAWK 1 EXHIBIT 10.1 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into by and between PHILIP J. HAWK, an individual ("Hawk"), and TEAM, INC., a Texas corporation ("Team"), to be effective as of the date appearing on the signature pages hereof (the "Effective Date"). INTRODUCTION Team desires to employ Hawk as its Chief Executive Officer and Hawk desires to serve as Team's Chief Executive Officer. The parties desire to enter into this Agreement to set forth the terms and conditions of Hawk's employment relationship with Team. NOW, THEREFORE, in consideration of the premises, and the covenants herein set forth and for other good and valuable consideration, the receipt and sufficiency and adequacy of which are hereby acknowledged, the parties hereto agree as follows: AGREEMENT 1. EMPLOYMENT AS CHIEF EXECUTIVE OFFICER. Subject to the terms and conditions hereinafter stated, Team shall employ Hawk and Hawk shall serve as Chief Executive Officer of Team with the duties specified in Section 2 below throughout the Term (defined in Section 7 below). 2. DUTIES AS CHIEF EXECUTIVE OFFICER. Hawk agrees to serve throughout the Term as Chief Executive Officer of Team, subject to the Team Bylaws and management policies, and to perform such other duties as shall from time to time be reasonably assigned to Hawk by the Board of Directors of Team ("Board") which are consistent with Hawk's position as Chief Executive Officer. Hawk shall, as consideration for serving hereunder as Team's Chief Executive Officer, be compensated in the manner provided in Section 3 below. No change in the duties of Hawk which are consistent with his position as Chief Executive Officer shall result in a termination or rescission of this Agreement. Hawk acknowledges that the position of Chief Executive Officer is a full-time position, and he shall devote such time and attention to perform his duties hereunder as is consistent with such full-time position. Hawk shall be permitted to serve on the Boards of Directors of Highlands Insurance Group and of such other corporations as may be approved by the Board from time to time. The foregoing notwithstanding, the parties recognize and agree that Hawk may engage in personal investments and other business activities that do not conflict with the business of and affairs of Team or interfere with Hawk's performance of his duties as a full-time employee hereunder. Hawk shall make available to Team any and all business opportunities that become available to Hawk which involve an area of business in which Team or any Affiliate thereof conducts business. Any such business opportunities shall be the property of Team. 2 3. COMPENSATION. a. CHIEF EXECUTIVE OFFICER. Throughout the Term, Hawk shall be paid not less than Two Hundred Twenty Five Thousand Dollars ($225,000.00) per year ("Base Compensation"), in equal and consecutive monthly installments of not less than Eighteen Thousand Seven Hundred Fifty Three Dollars ($18,753.00), as that sum may increase from time to time ("Monthly Salary Payments"). b. PERFORMANCE BONUS. As promptly as practical hereafter, the Board, acting in its sole discretion, will establish performance goals for Hawk for Team's current fiscal year which ends on May 31, 1999. As promptly as practical following the end of each of Team's fiscal years thereafter during which Hawk serves as Team's Chief Executive Officer, the Board, acting in its sole discretion, will likewise meet and confer with Hawk to establish performance goals for Hawk for the next fiscal year. Hawk shall receive a performance bonus with respect to each such fiscal period during which he achieves Board-established performance goals, which bonus shall be equal to up to fifty percent (50%) of the Base Compensation that he earns during such fiscal year or part thereof, assuming that he fully achieves the Board-established performance goals. In establishing such performance goals, the Board shall meet and confer with Hawk. c. DEFERRAL OPTION. Hawk shall have the right to defer all or a portion of the Base Compensation and bonuses due to him under this Section 3. At such time as Hawk elects to defer any compensation, Hawk and Team shall enter into a Salary Deferred Compensation Agreement in substantially the form attached hereto as Exhibit "A," except that under such agreement Hawk may make an election to defer all or a portion of his Base Compensation and/or bonus for a calendar year at any time prior to the beginning of such year. In addition, Team shall pay such deferred compensation to a trust to be created with terms substantially the same as the form of the Deferred Compensation Trust Agreement attached hereto as Exhibit "B." The trustee of such trust shall be a trustee possessing corporate trust powers under the laws of the State of Texas and acceptable to Hawk. 4. STOCK PURCHASE AND SALE. Team hereby grants to Hawk an option to purchase up to 65,000 shares of Team common stock, $0.30 par value per share ("Common Stock"), at a purchase price equal to the market price for Team Common Stock trading on the American Stock Exchange as of the close of business on the date of exercise of such option right by Hawk, less that number of shares of Common Stock of which Hawk is the Beneficial Owner as of the date of exercise of such option right by Hawk. Hawk shall have the right to exercise the option granted under this Section 4 in whole or in part at any time within thirty (30) days after the Effective Date by delivery of written notice to Team. Payment for such shares shall be due three (3) business days after the date Hawk delivers written notice of exercise to Team, and such sale of Team Common Stock to Hawk shall be consummated as promptly as practicable thereafter. To the extent that Hawk does not exercise this option granted under this Section 4 in full within thirty (30) days of the Effective Date, then the remainder of this option shall lapse. The Team Common Stock that Hawk receives under this Section 4 shall be "restricted stock" under SEC Rule 144. 2 3 5. STOCK OPTIONS. a. INCENTIVE STOCK OPTIONS. Pursuant to a separate award agreement to be executed simultaneously with this Agreement, Team shall issue to Hawk incentive stock options ("ISOs") to purchase that number of shares of Team Common Stock that is equal to the quotient of $400,000.00 divided by the market price for Team Common Stock trading on the American Stock Exchange as of the close of business on the Effective Date, less 1,000 shares and rounded to the nearest whole share. Such award of ISOs to Hawk shall be in accordance with Team's incentive stock option plan now in effect (the "ISO Plan"). One-fourth of the ISOs shall become exercisable as of the end of each of the three (3) succeeding annual anniversary dates of the Effective Date with the last one-fourth becoming exercisable as of January 30, 2002. b. STANDARD NON-QUALIFIED OPTIONS. Pursuant to a separate award agreement to be executed simultaneously with this Agreement, Team shall issue to Hawk standard non-qualified options ("SNOs") to purchase that number of shares of Team Common Stock equal to 150,000 less the number of ISOs issued to Hawk under Section 5(a) herein. One-third of the SNOs shall become exercisable as of the end of each of the three succeeding annual anniversary dates of the Effective Date and shall generally be subject to the same exercise price, conditions and restrictions as the ISOs under the ISO Plan; provided, however, that (i) in the event that this Agreement is terminated as provided in Section 8(a) herein or as provided in Section 8(c) herein, the SNOs shall become fully vested as of the effective date of such termination, and (ii) in the event a "Change of Control" of Team (as that term is defined in Section 25(b) of this Agreement) occurs in a transaction which is not recommended by the Board, then all the SNOs shall become fully vested immediately prior to consummation of such transaction, irrespective of any termination of this Agreement. In addition, upon the occurrence of any of the events causing acceleration of the vesting of any of the SNOs as provided above in this Section 5(b), Team shall, simultaneously with such event causing acceleration, issue to Hawk more SNOs (the "Additional SNOs") in addition to the SNOs issued to Hawk as of the Effective Date (the "Original SNOs"). The number of shares of Team Common Stock purchasable under the Additional SNOs shall equal the number of shares of Team Common Stock that would have become vested under the ISOs had such event causing acceleration of vesting of the Original SNOs applied to the remaining non-vested ISOs. Such Additional SNOs shall be immediately exercisable at the same exercise price as the Original SNOs and shall otherwise be subject to the same terms and conditions as the Original SNOs. The remaining non-vested ISOs as of the date of such acceleration shall be reduced by the same number of shares as are included in the Additional SNOs. c. PRICE-VESTED OPTIONS. Pursuant to a separate award agreement to be executed simultaneously with this Agreement, Team shall issue price vested options ("PVOs") to Hawk to purchase 200,000 shares of Team Common Stock. The PVOs shall be generally subject to the same conditions and restrictions as the SNOs; provided, however, that (i) in the event that this Agreement is terminated as provided in Section 8(a) herein or as provided in Section 8(c) herein, the PVOs shall become fully vested as of the effective date of such termination, and (ii) in the event a "Change of Control" of Team (as that term is defined in Section 25(b) of this Agreement) occurs in a transaction which is not recommended by the Board, then all the PVOs 3 4 shall, notwithstanding anything to the contrary herein, become fully vested immediately prior to consummation of such transaction, irrespective of any termination of this Agreement. Further provided and subject to the vesting acceleration provisions in this Section 5(c), that the vesting for the PVOs shall occur in three vesting levels ("Vesting Levels"): vesting for 33 1/3% of the PVOs shall occur at the end of any consecutive six-month period during which the average market price of Team Common Stock is $7.00 per share (as adjusted for any splits, stock dividends and the like), provided that the market price is also at least that high at the end of such six-month period; the next 33 1/3% of the PVOs shall vest at the end of any consecutive six-month period during which the average market price of Team Common Stock is $10.50 per share (as adjusted for any splits, stock dividends and the like) provided that the market price is also at least that high at the end of such six-month period; and the last 33 1/3% of the PVOs shall vest when the average market price of Team Common Stock is $14.00 per share (as adjusted for any splits, stock dividends and the like), provided that the market price is also at least that high at the end of such six-month period. If the market price requirements for two or more previously unachieved Vesting Levels are achieved in a single six-month period, then the vesting of PVOs for all such Vesting Levels achieved in such single six-month period shall occur. d. Team shall, at its sole expense, cause to be filed within a reasonable time after the date of this Agreement and cause to become and remain effective with the Securities and Exchange Commission, a Registration Statement on Form S-8 or the equivalent with respect to the shares of Common Stock underlying the ISOs, SHOs and PVOs. 6. OTHER BENEFITS AS CHIEF EXECUTIVE OFFICER. While serving as Team's Chief Executive Officer, Hawk shall be entitled to paid vacations (up to five (5) weeks per year), expense reimbursements, automobile allowances and similar perquisites incidental or necessary to the performance of his duties or in accordance with the policies and procedures established by Team from time to time. Team shall pay Hawk's YPO membership and meeting expenses, not to exceed $6,000.00 per year. Hawk shall further be entitled to participate in each plan established to provide fringe benefits or insurance benefits to employees of Team at the time and for so long as he meets the eligibility criteria established for the plan and shall receive benefits thereunder based on the terms of the plan. Hawk's eligibility and benefit level shall be determined separately for each plan and all determinations shall be made by the parties charged with responsibility for such determinations in the plan. Team is under no obligation to establish any plan or plans to provide benefits for its employees and this provision shall not be interpreted to require the establishment of any benefit plan. The terms of any benefit plans existing, established, or provided hereafter do not constitute a part of this Agreement and are not incorporated herein for any purpose. 7. TERM. The Term ("Term") of this Agreement commenced as of the Effective Date and, unless sooner terminated by the parties pursuant to Section 8, shall terminate on January 31, 2002. The Term shall also include any renewal, extension or continuation of this Agreement. Should this Agreement not be extended beyond the Term by mutual agreement of Hawk and Team, then this Agreement shall renew on a month-to-month basis, and all provisions of this Agreement shall continue to apply in full force and effect, specifically including all acceleration rights for the PVOs as provided in Section 5(c) herein, except that the employment relationship 4 5 between Hawk and Team shall be terminable at any time upon thirty (30) days' prior written notice by either Hawk or Team for any reason whatsoever, with or without cause. However, if Hawk's employment beyond the Term continues on a month-to-month basis, and this Agreement is terminated for any of the reasons or purposes set forth in Section 8(a) herein or Section 8(c) herein, then Hawk shall be entitled to receive the following benefits: (i) Monthly Salary Payments for each of the twelve (12) consecutive months following the effective date of such termination, (ii) a pro rata bonus payment pursuant to Section 3(b) with respect to the portion of the fiscal year actually worked for the fiscal year in which effective date of such termination occurred, and (iii) the provisions in Section 5(c) herein regarding the acceleration of vesting of the PVOs shall continue to apply. 8. TERMINATION. a. WITHOUT CAUSE. Team shall not terminate this Agreement "without cause"; provided, however, that Team shall be permitted to so terminate Hawk's employment hereunder by giving Hawk at least thirty (30) days' prior written notice of such termination. Hawk shall be entitled to receive a pro-rata bonus payment pursuant to Section 3(b) with respect to the portion of the fiscal year actually worked for the fiscal year in which this Agreement is terminated. Hawk shall, immediately after this Agreement is terminated pursuant to this Section 8(a), continue to receive Monthly Salary Payments for each of the twelve (12) consecutive months following his termination under this Section 8(a), and Hawk shall be entitled to all acceleration of vesting of the options granted pursuant to Section 5 herein. For purposes of this Agreement, Hawk's death or permanent disability (as reasonably determined by the Board after conferring with Hawk and whatever medical doctors Hawk may select, provided such medical doctors are reasonably acceptable to the Board, to assist in such determination) shall be deemed a termination without cause and shall be subject to all of the provisions of this Section 8(a). b. FOR CAUSE. Notwithstanding anything to the contrary contained or implied herein, Team may terminate this Agreement and all of its continuing obligations to Hawk hereunder "for cause" by giving written notice of such termination "for cause" to Hawk. For purposes of Section 8(b) this Agreement, the phrase "for cause" shall mean the good faith determination by the Board one of the following events has occurred: (i) Hawk has knowingly committed acts involving fraud, dishonesty or violations of criminal or other statutes involving moral turpitude; or (ii) Hawk's material breach of any material provision of this Agreement which remains uncorrected for thirty (30) days following written notice to Hawk by Team of such breach. At least ten (10) days prior to making a final determination that "cause" exists for termination of the employment relationship between Team and Hawk, the Board shall provide Hawk written notice as to the facts and circumstances which are the basis for a possible determination that "cause" exists and shall provide an opportunity for Hawk to meet with and be heard by the entire Board prior to making such final determination; In making the determinations described in Section 8(b) above, Team shall act reasonably and in good faith and any such determination shall be required to be made by the affirmative vote of a majority of the members of the Board. In the event that Team terminates this Agreement for cause as specified above, Hawk shall not be entitled to receive any further compensation under this Agreement from and after the date of such termination for cause. 5 6 c. HAWK'S TERMINATION RIGHTS FOR CAUSE. Hawk may terminate this Agreement "for cause" after the occurrence of one or more of the following events: (i) Team's assignment to Hawk of duties inconsistent with the duties of Chief Executive Officer of Team; (ii) the failure of Team to maintain Hawk in the position of Chief Executive Officer; (iii) the removal or non-election of Hawk to Team's Board of Directors as its Chairman; (iv) the reduction in Hawk's Base Compensation; (v) the failure of Team to provide Hawk the performance goals and bonus opportunities as set forth in Section 3(b), which failure continues for thirty (30) days following written notice to Team by Hawk; (vi) a material breach by Team of any material provision of this Agreement which remains uncorrected for thirty (30) days following written notice to Team by Hawk of such breach; or (vii) the change of the location for the primary performance of Hawk's services under this Agreement from Alvin, Texas to a city which is more than fifty (50) miles away from such location, which change is not approved by Hawk. Hawk shall, immediately after termination of this Agreement pursuant to this Section 8(c), continue to receive Monthly Salary Payments for each of the twelve (12) consecutive months following termination of this Agreement under this Section 8(c), and Hawk shall be entitled to all acceleration of vesting of the options granted pursuant to Section 5 herein. Hawk shall also be entitled to receive a pro-rata bonus payment pursuant to Section 3(b) with respect to the portion of the fiscal year actually worked for the fiscal year in which this Agreement is terminated. d. HAWK'S TERMINATION RIGHTS WITHOUT CAUSE. Hawk may terminate this Agreement without cause upon thirty (30) days' prior written notice to Team. In such event, Hawk shall be entitled to receive as his total remaining entitlements hereunder the Monthly Salary Payments through the last date Hawk actually works and shall not be entitled to receive any further compensation from and after such date. e. REEMPLOYMENT. Hawk shall not be under any duty or obligation to seek or accept other employment following any termination of this Agreement, and the amounts due Hawk hereunder shall not be reduced or suspended if Hawk accepts subsequent employment thereafter. 9. PROTECTION OF CONFIDENTIAL INFORMATION AND GOODWILL. Hawk hereby covenants and agrees as follows: 6 7 a. While serving as Team's Chief Executive Officer, Hawk shall have access to confidential or proprietary information or trade secrets of Team, including, but not limited to, information with respect to Team or its Affiliates (as hereinafter defined) as follows: the identity, lists, and/or descriptions of any customers of Team; financial statements, cost reports, and other financial information; product or service pricing information; contracts, contract proposals and bidding information; policies and procedures developed as part of a confidential business plan; and management systems and procedures, including manuals and supplements thereto (collectively, "Trade Secrets"). Notwithstanding the foregoing, Trade Secrets shall not include any data or information that (i) has been voluntarily disclosed to the general public by the Team or its Affiliates; (ii) has been independently developed and disclosed to the general public by others; or (iii) otherwise enters the public domain through lawful means. b. Hawk shall not use or disclose, directly or indirectly, for any reason whatsoever or in any way the Trade Secrets, other than (i) at the direction of Team during the course of Hawk's employment, (ii) after receipt of the prior written consent of Team, (iii) as required by any court or governmental regulatory agency having competent jurisdiction over Team or its business or over Hawk, or (iv) information made public by Team or information known or generally available within Team's industry. c. During the Term and for a period of two (2) years after the termination of Hawk's employment with Team, Hawk shall not, directly or indirectly, either as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director, or in any other individual or representative capacity, engage or participate in any business that is in competition in any manner whatsoever with the business of Team or any Affiliate of Team (as defined in Paragraph 14 hereof) as such business is presently conducted and as conducted during the Term; provided, however, that following the Term, the covenant contained in this subsection shall not pertain to activities which occur more than one hundred (100) miles from any operating facility of Team or any Affiliate of Team. d. During the Term and for a period of two (2) years following the termination of Hawk's employment with Team, Hawk shall not solicit or negotiate, directly or indirectly, any contract or agreement that constitutes or would constitute engaging in competition with the business of Team or any Affiliate of Team as presently conducted and as conducted during the Term; provided, however, that following the Term, the covenant contained in this subsection shall not pertain to activities which occur more than one hundred (100) miles from any operating facility of Team or any Affiliate of Team. e. During the Term and for a period of two (2) years following the termination of Hawk's employment with Team, Hawk shall not solicit for employment or employ, directly or indirectly, any employee employed by Team or any Affiliate within the one (1) year period immediately prior to such solicitation for employment. f. Hawk shall not use the name of Team or any Affiliate of Team in connection with any business that is in competition in any manner whatsoever with the business of Team or any Affiliate of Team as presently conducted and as conducted during the Term. 7 8 g. Team and Hawk agree that the covenants set forth in this Section 9 shall accrue to the benefit of Team, irrespective of the reason for termination of the other provisions of this Agreement and the corresponding employment relationship created herein, or Hawk's performance hereunder. h. In connection with the limited protection afforded Team by the covenants contained within this Section 9, Hawk recognizes that Team's need for the covenants is based on the following: i. Team has spent and will expend substantial time, money and effort in developing (x) its maintenance, repair and energy management businesses and (y) valuable Trade Secrets, including, without limitation, a valuable list of customers and information about their requirements and needs, purchasing patterns and internal purchasing procedures; ii. Hawk, in the course of the Term, has been and will be compensated to help develop, and has been and will be personally entrusted with and exposed to, the Trade Secrets, including, without limitation, Team's contract, business development plans and opportunities, trade secrets and other confidential and proprietary information; iii. Team, during the Term and after its termination, will be engaged in the highly competitive maintenance, repair and energy management businesses in which many firms, including Team, compete; iv. Team provides and will provide services throughout the United States and Hawk will be involved in providing such services through operating facilities and Affiliates of Team; V. Hawk could, after having access to the Trade Secrets, including, without limitation, Team's financial records, contracts, technology and associated trade secrets and know-how and receiving further training by and experience with Team, and after reviewing Team's trade secrets and confidential information, become a competitor; and vi. Team will suffer great loss and irreparable harm if, during or after the Term, Hawk enters directly or indirectly into competition with Team. vii. Hawk hereby specifically acknowledges and agrees that the temporal, geographical and other restrictions contained in this Section 9 are reasonable and necessary to protect the business and prospects of Team, and that the enforcement of the provisions of this Section 9 will not work an undue hardship on him. viii. Hawk further agrees that in the event either the length of time, geographical or any other restrictions, or portion thereof, set forth in this Section 9 is overly restrictive and unenforceable in any court proceeding, the court may reduce or modify such restrictions to those which it deems reasonable and enforceable under the 8 9 circumstances and the parties agree that the restrictions of this Section 9 will remain in full force and effect as reduced or modified. i. Hawk further agrees and acknowledges that Team does not have an adequate remedy at law for the breach or threatened breach by him of the covenants contained in this Section 9 and Hawk therefore specifically agrees that Team, in the event of the breach or threatened breach by Hawk of any of the Hawk's covenants contained in Section 9 of this Agreement, in addition to other remedies which may be available to it hereunder, may file a suit in equity to enjoin Hawk from such breach or threatened breach. j. Nothing in this Section 9 shall be deemed to prevent Hawk from acquiring through market purchases and owning, solely as an investment, less than one percent (1%) in the aggregate of the equity or debt securities of any class of any issuer whose shares are registered under Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934, as amended, and are listed or admitted for trading on any United States national securities exchange or are quoted on the National Association of Securities Dealers Automated Quotations System, or any similar system of automated dissemination of quotations of securities prices in common use of any such issuer. Hawk further agrees, in the event that any provision of this Section 9 is held to be invalid or against public policy, the remaining provisions of this Section 9 and the remainder of this Agreement shall not be affected thereby. 10. PROPERTY OF TEAM. Hawk agrees that, upon the termination of the Term, he will immediately surrender to Team all property, equipment, funds, lists, books, records, and other materials of Team in the possession of or provided to Hawk. 11. INDEMNIFICATION. Team and its Affiliates shall indemnify Hawk to the maximum extent allowed or provided in the Articles of Incorporation and/or Bylaws of Team and its Affiliates and also to the maximum extent provided for in any agreement containing indemnification provisions between Team, its Affiliates and any other director or officer of Team and/or its Affiliates. Hawk shall be entitled to such insurance coverages to secure Team's indemnity obligations described herein as are afforded to other Team officers and directors. 12. GOVERNING LAW. This Agreement and all issues relating to the validity, interpretation, and performance hereof shall be governed by and interpreted under the laws of the State of Texas, without regard to any law, whether of Texas or any other jurisdiction, that would apply the laws of any jurisdiction other than Texas. The parties hereby consent to jurisdiction and venue in any court of competent jurisdiction in Harris County, Texas, or the United States District Court for the Southern District of Texas, Houston Division, and either party may bring any suit that they desire to institute upon this Agreement in any such court. 13. ARBITRATION. If a dispute arises out of or related to this Agreement, or its breach, and if the dispute cannot be settled through direct discussion, then Team and Hawk agree that any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration administered in Houston, Texas by the American Arbitration Association 9 10 under its commercial arbitration rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. 14. REMEDIES. With respect to each and every breach, violation, or threatened breach or violation by either party of any of the covenants set forth herein, the other party, in addition to all other remedies available at law or in equity, including specific performance of the provisions hereof, shall be entitled to enjoin the commencement or continuance thereof and, without notice to the other party, may apply for entry of an immediate restraining order or injunction. In addition, each party agrees, upon demand, to immediately account for and pay over to the other party an amount equal to all compensation, commissions, bonuses, salary, gratuities, or other emoluments of any kind directly or indirectly received by, or for the use or benefit of, the other party resulting from any activity, transaction, or employment in breach or violation of any of the covenants set forth in this Agreement, such amount being agreed to constitute liquidated damages because the exact amount of actual damages to be sustained on account of any such breach or violation cannot be determined with complete accuracy. In addition, each party agrees to pay the other party a reasonable sum as and for his or its attorneys' fees and costs of litigation should such other party bring an action against the breaching party for breach of this Agreement and prevail in such action. Each party may pursue any of the remedies described in this Section 14 concurrently or consecutively, in any order, as to any such breach or violation, and the pursuit of one of such remedies at any time will not be deemed an election of remedies or waiver of the right to pursue any of the other such remedies. 15. NOTICES. Any notice or request herein required or permitted to be given to any party hereunder shall be given in writing and shall be personally delivered or sent to such party by United States mail, certified or registered mail, return receipt requested, with postage prepaid, at the address set forth below the signature of such party hereto or at such other address as such party may designate by written communication to the other party pursuant to, and in accordance with, this Paragraph 15. Each notice given in accordance with this Paragraph 15 shall be deemed to have been given, if personally delivered, on the date personally delivered, or, if mailed, on the day on which it is deposited in the United States mail, and shall be deemed to be received or delivered, if personally delivered, on the date personally delivered, or, if mailed, on the third business day following the day on which it is deposited in the United States mail. 16. HEADINGS. The headings of the paragraphs of this Agreement have been inserted for convenience of reference only and shall not be construed or interpreted to restrict or modify any of the terms or provisions hereof. 17. SEVERABILITY. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws effective during the term hereof, such provision shall be fully severable, and this Agreement and each separate provision hereof shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement. In addition, in lieu of such illegal, invalid, or unenforceable provision, there shall be added automatically as a part of this Agreement, a provision as similar in terms to 10 11 such illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable, if such reformation is allowable under applicable law. 18. BINDING EFFECT. This Agreement shall be binding upon and shall inure to the benefit of each party hereto and each party's respective successors, heirs, permitted assigns, and legal representatives. 19. DEFINITION OF "AFFILIATE." For purposes of this Agreement, the term "Affiliate" means any subsidiary of Team. For purposes of this definition, a subsidiary of Team means any corporation or other entity whose outstanding equity interest are more than fifty percent (50%) directly owned by Team and shall further mean any corporation or other entity whose outstanding equity interest are at least fifty percent (50%) owned through an unbroken chain of ownership through other subsidiaries of Team. 20. ASSIGNMENT. This Agreement and any interest herein or rights, duties, or obligations hereunder may be assigned or delegated by Team without the prior written consent of the Hawk, but no such assignment may be made by Hawk. 21. SEPARATE AGREEMENTS. The provisions of Section 9 shall be construed as a separate agreement in each of the separate geographical areas, if any, referred to in Section 9, and to the extent that it may be found to be illegal and/or unenforceable in any of said geographical areas, this Agreement shall not be affected thereby with respect to each other geographical area. 22. TEAM POLICIES, REGULATIONS, AND GUIDELINES FOR EMPLOYEES. Team may issue policies, rules, regulations, guidelines, procedures, or other informational material, whether in the form of handbooks, memoranda, or otherwise, relating to its employees. These materials are general guidelines for Hawk's information and shall not be construed to alter, modify, or amend this Agreement for any purpose whatsoever. 23. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter hereof, unless expressly provided otherwise herein. No amendment, modification, or termination of this Agreement, unless expressly provided otherwise herein, shall be valid unless made in writing and signed by each of the parties whose rights, duties, or obligations hereunder would in any way be affected by an amendment, modification, or termination. Unless expressly set forth herein, no representations, inducements, or agreements have been made to induce either Hawk or Team to enter into this Agreement. This Agreement is the sole source of rights and duties as between Team and Hawk relating to the subject matter of this Agreement. 24. KEY-MAN INSURANCE. Team shall be entitled to own, purchase and maintain life or other insurance on the life or disability of the Hawk for Team's exclusive benefit. Hawk shall execute all documents and perform all acts necessary to enable Team to effect such insurance. 11 12 25. MISCELLANEOUS DEFINITIONS. a. "Beneficial Owner" shall be defined by reference to Rule 13(d)-3 under the Securities Exchange Act of 1934; provided, however, and without limitation, any individual, corporation, partnership, group, association or other person or entity which has the right to acquire any Voting Stock at any time in the future, whether such right is contingent or absolute, pursuant to any agreement, arrangement or understanding or upon exercise of conversion rights, warrants or options, or otherwise, shall be the Beneficial Owner of such Voting Stock. b. "Change of Control" shall mean the occurrence of any of the following: (i) the consummation of any Business Combination, as such term is defined in the Restated Articles of Incorporation of Team filed with the Secretary of State of Texas on November 15, 1989; (ii) Team merges or consolidates with any other entity other than a merger or consolidation of Team which would result in the Voting Stock of Team outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 70% of the total voting power represented by the voting securities of Team or such surviving entity immediately after, (iii) Team sells all or substantially all of its assets to any other person or entity or group or persons acting in concert, or (iv) Team is dissolved, or if (v) any third person or entity together with its affiliated or subsidiary entities shall become, directly or indirectly, the Beneficial Owner of at least 30% of the Voting Stock of Team, or if (vi) the individuals who constituted the members of Team's Board of Directors as of the Effective Date ("Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any person becoming a director whose election or nomination for election by Team's stockholders was approved by a vote of eighty percent (80%) of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of Team in which such person is named as a nominee for director, without objection to such nomination) shall be, for purposes of this clause (vi), considered as though such person were a member of the Incumbent Board. c. "Voting Stock" shall mean all outstanding shares of capital stock of Team entitled to vote generally in elections for directors, considered as one class; provided, however, that if Team has shares of Voting Stock entitled to more or less than one vote for any such share, each reference to a proportion of shares of Voting Stock shall be deemed to refer to such proportion of the Votes entitled to be cast by such shares. 26. PARACHUTE TAX. In the event that any amount payable to Hawk under this Agreement or as a result of the acceleration of the vesting of any stock option granted to Hawk shall constitute "excess parachute payments" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and any regulations thereunder, and Hawk becomes liable for any excise tax penalties ("Parachute Tax Amount") that are imposed on excess parachute payments" pursuant to Section 4999 of the Code, Team shall make a cash payment to Hawk in an amount equal to the result obtained by multiplying the Parachute Tax Amount by a fraction, the numerator of which is one and the denominator of which is one minus the sum of the "parachute tax rate" (as such term is hereinafter defined) and the "regular tax rate" (as such term is hereinafter defined). As used herein, the term "parachute tax rate" shall mean the maximum rate of tax imposed under Section 4999 of the Code or the corresponding provision of any 12 13 successor statute and the term "regular tax rate" shall mean the maximum statutory rate of federal income tax imposed on individuals under Section 1 of the Code or the corresponding provision of any successor statute (disregarding any tax rate imposed on limited amounts of income as a phase-out of a lower tax rate). 27. EXECUTION. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Any telecopied signature shall be deemed a manually executed and delivered original. IN WITNESS WHEREOF, the parties have executed this Agreement on this the 16th day of November, 1998, TO BE EFFECTIVE as of November 2, 1998. /s/ PHILIP J. HAWK ------------------------------------------------- PHILIP J. HAWK Address: 4 Bradfield Ct. ------------------------- Houston, TX 77024 ------------------------- TEAM, INC. By: /s/ SIDNEY B. WILLIAMS ------------------------------------------------- Printed Name: Sidney B. Williams ------------------------------------------------- Title: Director and Member of Executive Committee ------------------------------------------------- Address: 200 Hermann Drive Alvin, TX 77511 13 14 EXHIBIT "A" SALARY DEFERRED COMPENSATION AGREEMENT 15 1998 SALARY DEFERRED COMPENSATION AGREEMENT THIS 1998 SALARY DEFERRED COMPENSATION AGREEMENT ("Agreement") is entered into this ______ day of ______________________, 1998, by and between Team, Inc. (the "Company"), a Delaware corporation, and ___________________, a resident of Harris County, Texas (the "Employee") effective beginning on _________________, in order to revise certain administrative features requested by the Trustee of the Trust established under this Agreement to coordinate the administrative features of this Agreement with the Trust Agreement. WHEREAS, the Employee performs valued services for the Company; and WHEREAS, the Company and Employee both desire that payment of the Employee's compensation be deferred in accordance with a formal agreement between them; THEREFORE, in consideration of the foregoing and other good and valuable consideration, as more fully set forth herein, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows: Section 1. Employee's Services. The Employee is an employee of the Company. Except as otherwise expressly provided herein, this Agreement does not alter or affect the Employee's employment agreement or relations with the Company or any of the Company's subsidiaries. 16 Section 2. Deferral of Employee's Compensation. 2.1 Prior to the beginning of each calendar year the Employee may elect on the form prescribed by the Company to defer the payment to him of a percentage of the basic salary (not in excess of one hundred (100%) percent) due and payable to him for such calendar year. For the first year of this Agreement, this election may be made no later than the date which is 30 days following the date this Agreement is executed and shall only apply to the pro rata portion of the annual salary following the date of this Agreement. The salary to be deferred pursuant to this election for each year shall be deducted and withheld from the Employee's paycheck on a uniform basis each payroll period unless otherwise designated by the Employee on the election form. 2.2 Any amounts deferred in accordance with Section 2.1 above shall be currently paid to the trustee (the "Trustee") of the trust (the "Trust") established or to be established by the Company (known as the "Team, Inc. 1998 Salary Deferred Compensation Trust") to be held in the Employee's account (the "Account") in accordance with the terms of such Trust and this Agreement or any other trust established by the Company for this purpose which conforms to the terms of the Internal Revenue Service model trust prescribed in Rev. Proc. 92-64. 2.3 The deferral percentage in effect for a calendar year shall continue in effect for the succeeding calendar year until -2- 17 otherwise designated by the Employee in a new election form prior to the beginning of such succeeding calendar year. 2.4 In lieu of filing an election form for the first year in which this Agreement is effective, the Employee may designate the deferral percentage here: ---------- percentage (up to maximum 100%) ---------- Employee's initials Section 3. Investment of Account. 3.1 The Account shall be invested in any assets determined by the Trustee in the sole discretion of the Trustee in accordance with the terms of the Trust after consultation with the Employee as to any investment recommendations of the Employee; provided such recommendations shall be merely advisory and not binding on the Trustee. The Company shall cooperate in communicating any exchange of investment information between the Trustee and the Employee and in communicating any investment recommendations of the Employee. 3.2 Any earnings (or losses), net of any expenses charged to the Trust in accordance with the provisions of the Trust Agreement on the assets realized by the Trust in the Account, shall be added to (or subtracted from) the balance in the Account and as part of such balance shall be distributed in accordance with Section 4 below. Any income tax imposed on the Company attributable to such earnings shall be paid by the Company and not charged against or paid from the Account. -3- 18 Section 4. Payment of Account. 4.1 The balance of the amount in the Account shall be paid at the time or times set forth below in this Section 4, in cash unless the Employee requests, subject to the consent of the Trustee, to pay such amounts in kind (in the form of the assets held as investments). 4.2 The distribution of the balance of the Account shall be made to the Employee in ________________ substantially equal quarterly installments over the __________-year period beginning with the calendar quarter in which the earlier of the following occurs: (a) the Employee's death or Disability; or (b) the Employee's termination of employment with the Company (including subsidiaries thereof) for any reason (other than death or Disability). Subsequent installments shall be paid in succeeding calendar quarters until the amounts in the Employee's Account have been paid in full. Payment of the distribution shall commence within 30 days following the operative date in Section 4.2(a) and (b) above. In the event of the Employee's death while receiving payments hereunder, the Designated Beneficiary (as defined in Section 5 below) shall receive any remaining (as of the date of death) amounts due hereunder either (at the Company's sole discretion) in -4- 19 the same manner and to the same extent as the deceased Employee would have received had the Employee not died or in a lump sum. If the Designated Beneficiary dies following the death of the Employee before all amounts otherwise payable to the Employee have been paid, the balance remaining in the Account shall be paid in one lump sum to the estate of such Designated Beneficiary. If no Designated Beneficiary survives the Employee, payments otherwise payable hereunder to a Designated Beneficiary shall be paid in one lump sum to the Employee's estate. Payments under the preceding two sentences shall be made as soon as practicable after the Employee's death (or the Designated Beneficiary's death, as the case may be) in an amount equal to the value of the Account as of the last day of the calendar quarter in which such death occurred. 4.3 Notwithstanding any other provision of this Agreement, payment of the balance of the Account shall be made in a single lump sum during the month of January immediately following the calendar year in which occurs the operative date specified in the first sentence of Section 4.2 above, if the Employee so elects at the time of execution of this Agreement. This election shall be signified by the Employee's initials in the following space: Lump Sum Elected __________ 4.4 For purposes of this Agreement the Employee shall be considered Disabled if a qualified physician selected by the Company determines that the Employee is unable due to physical or mental illness or other impairment, to perform the majority of the -5- 20 Employee's customary duties with the Company (including subsidiaries thereof) and that such condition will likely be permanent or of indefinite duration. 4.5 Notwithstanding any other provision of this Section 4, in the event of an unforeseeable emergency of the Employee, the Employee shall have the right to receive an immediate payment under this Agreement from his Account subject to the following terms and conditions. The term "unforeseeable emergency" shall mean: (a) an unanticipated emergency that is caused by an event beyond the control of the Employee or the Designated Beneficiary that would result in severe financial hardship to the individual if a distribution or early withdrawal were not permitted; or (b) a severe financial hardship to the Employee resulting from a sudden and unexpected illness or accident of the Employee or of a dependent (for income tax purposes) of the Employee, loss of the Employee's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Employee. (c) Examples of what are not considered to be unforeseeable emergencies include the need to send an Employee's child to college or the desire to purchase a home. -6- 21 (d) The amount distributed to the Employee under this Agreement pursuant to the preceding provisions of this Section 4.5 shall only be made following the review and approval by the Company of the claim of the Employee (or Designated Beneficiary) for early withdrawal pursuant to this provision and shall be limited to an amount reasonably necessary to satisfy the unforeseeable emergency. The Company shall administer this provision in accordance with the limitations of the provisions of this Section 4.5. The determination by the Company of an unforeseeable emergency shall, in accordance with the provisions of Rev. Proc. 92-65ss.3.01(c) (or any successor later ruling guidelines or regulations of the Internal Revenue Service), be limited to cases involving an "unforeseeable emergency" as defined above. The circumstances that will constitute an unforeseeable emergency will depend upon the facts of each case, but, in any case, payment may not be made to the extent that the severe financial hardship is or may be relieved -- (i) Through reimbursement or compensation by insurance or otherwise, -7- 22 (ii) By liquidation of the Employee's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship, or (iii) By cessation of deferrals under this Agreement. 4.6 The participant shall have the right at any time to make an election to receive the entire remaining amount in the participant's account, and as soon as practicable (but generally no later than 30 days) following the making and filing with the Committee of such a withdrawal election, 90 percent of the entire amount of the account shall be paid to the participant in a single sum, and the remaining 10 percent shall be forfeited. Following such a withdrawal election and distribution, the participant shall not be eligible to thereafter again participate in the Plan. 4.7 Unless the Committee otherwise determines, for the Plan as a whole, Employee shall be given the right to make a one time change in the method of payment elected in each deferral election with respect to Section 4.2 above, provided such change is made at least two years prior to the participant's retirement date. -8- 23 Section 5. Designation of Beneficiary. The Employee designates the person(s) listed on Exhibit A as the beneficiary or beneficiaries ("Designated Beneficiary") to receive payments under this Agreement in the event of the Employee's death. The Employee may change the Designated Beneficiary without the consent of any prior Designated Beneficiary by notifying the Company of such change on a form provided by the Company for this purpose. The Company shall promptly deliver a copy of the current beneficiary designation to the Trustee. Section 6. Facility of Payment. If the Trustee determines that a payee under this Agreement is unable to care for his own affairs because of physical or mental condition or minority, any such payment may be made in accordance with the terms of Section 13(c) of the Trust or comparable provisions of whichever trust is in effect or in the event the trust in effect has no such comparable provisions, then to the payee's guardian or spouse, or to any descendant, parent, relative, or other person determined by the Trustee to be trustworthy to utilize the payment for the benefit of the payee. Section 7. Nonassignability by Employee. The Employee shall not have the right to assign, anticipate, sale, transfer, pledge, encumber, or create a security interest in, or dispose of any right or interest provided for in this Agreement, -9- 24 including, without limitation, the right to receive any severance, retirement, disability, or death payment or benefit, and no right of the Employee or the Designated Beneficiary to any such payment or benefit shall be subject to attachment or garnishment by any of the creditors of the Employee or of the Designated Beneficiary. Section 8. Continuation as Employee. Nothing contained in this Agreement or in the Trust, nor the payment of any contributions to the Trust, nor the payment of any benefits under this Agreement or the Trust shall be construed to grant the Employee any right to be retained in the service of the Company or to restrict the right of the Company to discharge the Employee regardless of the effects such discharge would have upon the Employee or upon any other person as a Beneficiary of the Trust. The Company expressly reserves the right to hire and discharge persons providing services as if neither this Agreement nor the Trust had been entered into or established. For purposes of this Section 8, the term "Company" shall include any subsidiaries which are, directly or indirectly, 50 percent or more owned by the Company. Section 9. Status of Account. Notwithstanding any other provision of this Agreement, and regardless of the extent amounts deferred by the Employee or payable to Employee have been transferred to and are held in the -10- 25 Trust, the Employee's rights to all such amounts whether or not held in the Trust, are that of a general unsecured creditor of the Company and such amounts represent nothing more than a mere promise by the Company to pay such amounts at the future time or times provided in this Agreement. The Employee shall have a right only to the balance of the Account including earnings or losses thereon as provided under Section 3.2, and shall have no right against the Company under this Agreement with respect to amounts properly contributed to the Account, beyond payment of the balance in the Account. Notwithstanding the preceding sentence, the Company shall remain liable to the Employee for payment of the balance in the Account - (a) in the event of any noninvestment loss to the Account while in the Trust for any reason including failure, receivership, liquidation, bankruptcy or fraud or embezzlement of or by the Trustee, without regard to any such noninvestment loss to the Account; and (b) to the extent that amounts in the Account become unavailable for payment under this Agreement in the event such amounts pursuant to the terms of the Trust are paid or otherwise become subject to the creditors of the Company. Section 10. Miscellaneous. 10.1 The Company, acting in good faith, shall have the sole right and absolute discretion to interpret and administer this -11- 26 Agreement. The Company's interpretation and actions hereunder, including the computation of payments or the determination of the proper recipient of payments if made in good faith, shall be conclusive and binding upon all persons for all purposes. An appropriate procedure shall be established under this Agreement for the submission for a claim for benefits by the Employee or Designated Beneficiary for amounts due under this Agreement and the review and determination by the Company of such claims, and in cases of denial of a claim, a review of any request for reconsideration. 10.2 This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns, and the Employee, his heirs, executors, administrators, and legal representatives. 10.3 This Agreement (along with the existing provisions of the Trust) embodies the full understanding of the parties and may not be amended or modified except in writing signed by the party to be charged. This Agreement may be amended by mutual agreement of the Company and the Employee; provided that no such amendment shall become effective with respect to the Trustee until the Trustee has received notice of such amendment and that no such amendment shall alter the duties or obligations of the Trustee without its written consent. 10.4 The laws of Texas shall govern the validity, interpretation, construction, and performance of this Agreement. -12- 27 10.5 This Agreement is intended to comply with the law and rulings under Sections 83, 402(b), 451 and 671 of the Internal Revenue Code of 1986 as amended (the "Code" or corresponding provisions of future laws) and the economic benefit and constructive receipt doctrines thereunder, including the ruling positions and criteria of the Internal Revenue Service as in effect from time to time and the related rulings and regulations which result in a deferral of income tax to the Employee (or the Designated Beneficiary). This Agreement is also intended to comply with Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended and the related rules and regulations thereunder applying to unfunded plans maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. This Agreement shall be deemed to be automatically amended to comply with the law, rules and regulations referred to in this Section 10.5 except to the extent that the Trustee or Company objects in writing to such amendment within sixty (60) days from the date of the receipt of notice from the Company of any such amendment. 10.6 Payment of amounts or benefits to the Employee under this Agreement shall be subject to any applicable tax withholding including federal income tax withholding, by the Trustee, the Company or the other payor. The Company and the Trustee may -13- 28 allocate or delineate the tax withholding responsibilities in a separate letter agreement. 10.7 The Company shall deliver the original or a certified copy of this Agreement to the Trustee within 10 days of the date of execution hereof, and the Employee shall become a beneficiary of the Trust on the later of the date of delivery as aforesaid or on the date of the first contribution made to the Trust by the Company on behalf of the Employee pursuant to this Agreement. 10.8 This Agreement may be executed in any number of counterparts and each executed counterpart shall be deemed an original and such counterpart shall constitute one and the same instrument which may be sufficiently evidenced by any one counterpart. IN WITNESS WHEREOF, the parties hereto have caused the Amendment and Restatement of the Agreement to be executed on the day and year first above written. ATTEST TEAM, INC. [Affix Corporate Seal] By: ----------------------------------- Kenneth H. Tholan, President EMPLOYEE: ----------------------------------- Philip J. Hawk -14- 29 EXHIBIT "A" DESIGNATED BENEFICIARY PRIMARY: Name: -------------------------------------------------------- Relationship: -------------------------------------------------------- Percentage: -------------------------------------------------------- SECONDARY ALTERNATES (in the event the primary does not survive me) the following alternates in equal vested shares per stirpes: Name: -------------------------------------------------------- Relationship: -------------------------------------------------------- Percentage: -------------------------------------------------------- Name: -------------------------------------------------------- Relationship: -------------------------------------------------------- Percentage: -------------------------------------------------------- Name: -------------------------------------------------------- Relationship: -------------------------------------------------------- Percentage: -------------------------------------------------------- Name: -------------------------------------------------------- Relationship: -------------------------------------------------------- Percentage: -------------------------------------------------------- -15- 30 EXHIBIT "B" DEFERRED COMPENSATION TRUST AGREEMENT 31 TEAM, INC. 1998 DEFERRED COMPENSATION TRUST AGREEMENT For The 1998 Salary Deferred Compensation Agreement (a) This Team, Inc. 1998 Deferred Compensation Trust Agreement ("Trust Agreement") is made this ______ day of ____________, 199_, to be effective as of _____________ by and between Team, Inc. ("Company") and _________________________ ("Trustee") for use in conjunction with the 1998 Salary Deferred Compensation Agreement. (b) WHEREAS, Company has adopted the nonqualified deferred compensation agreement listed in Appendix I hereto (the "Agreement"); (c) WHEREAS, Company has incurred or expects to incur liability under the terms of such Agreement with respect to the individual employee participating in the Agreement (the "Participant"); (d) WHEREAS, Company wishes to establish a trust (hereinafter called "Trust") and to contribute to the Trust assets that shall be held therein, subject to the claims of Company's creditors in the event of Company's Insolvency, as herein defined, until paid to the Participant and his beneficiaries in such manner and at such times as specified in the Agreement; 32 (e) WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Agreement as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974; (f) WHEREAS, it is the intention of Company to make contributions to the Trust to provide itself with a source of funds to assist it in the meeting of its liability under the Agreement; NOW THEREFORE, this Trust Agreement, is hereby made by and between the Company and the Trustee with provisions as follows: SECTION 1. ESTABLISHMENT OF TRUST. (a) Company has deposited with Trustee in trust an amount equal to or no less than $500, which shall become the principal of the Trust to be held, administered and disposed of by Trustee as provided in this Trust Agreement. (b) The Trust hereby established shall be irrevocable. -2- 33 (c) The Trust is intended to be a grantor trust, of which Company is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly. (d) The principal of the Trust, and any earnings thereon shall be held separate and apart from other funds of Company and shall be used exclusively for the uses and purposes of the Participant and general creditors of the Company as herein set forth. The Participant and his beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Agreement and this Trust Agreement shall be mere unsecured contractual rights of Participant and his beneficiaries against Company. Any assets held by the Trust will be subject to the claims of Company's general creditors under federal and state law in the event of Insolvency, as defined in Section 3(a) herein. (e) After the Trust has become irrevocable pursuant to Section 1(b) hereof, Company shall be required in accordance with the terms of the Agreement to make periodic (but no less frequently than quarterly) contributions of cash or other property to the Trust in an amount sufficient to pay the Participant or beneficiary the benefits payable pursuant to the terms of the Agreement. -3- 34 SECTION 2. PAYMENTS TO THE PARTICIPANT AND HIS BENEFICIARIES. (a) Company shall deliver to Trustee a copy of the executed Agreement. The Agreement shall provide the time and manner of payment to the Participant of funds from the Trust. Except as otherwise provided herein, Trustee shall make payments in cash or in kind to the Participant and his beneficiaries in accordance with the Agreement. Trustee shall, unless otherwise agreed with Company, report and withhold any federal, state or local taxes that may be required to be withheld with respect to the accumulation of funds in the Trust and the payment of funds from the Trust. (b) The determination of "unforeseeable emergency" under Section 4.5 of the Agreement shall be solely made by Company and not Trustee. SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY WHEN COMPANY IS INSOLVENT. (a) Trustee shall cease payment of benefits to the Participant and his beneficiaries if Company is Insolvent. Company shall be considered "Insolvent" for purposes of this Trust Agreement if (i) Company is unable to pay its debts as they become due, or (ii) Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. (b) At all times during the continuance of this Trust, as provided in Section 1(d) hereof, the principal and income of the Trust shall be subject to claims of general creditors of Company under federal and state law as set forth below. -4- 35 (1) The Board of Directors and an officer (other than the Participant) designated by the Company shall have the duty to inform Trustee in writing of Company's Insolvency. If a person claiming to be a creditor of Company alleges in writing to Trustee that Company has become Insolvent, Trustee shall determine whether Company is Insolvent and, pending such determination, Trustee shall discontinue payment of benefits to the Participant or his beneficiaries. (2) Unless Trustee has actual knowledge of Company's Insolvency, or has received notice from Company or a person claiming to be a creditor alleging that Company is Insolvent, Trustee shall have no duty to inquire whether Company is Insolvent. Trustee may in all events rely on such evidence concerning Company's solvency as may be furnished to Trustee and that provides Trustee with a reasonable basis for making a determination concerning Company's solvency. (3) If at any time Trustee has determined that Company is Insolvent, Trustee shall discontinue payments to the Participant or his beneficiaries and shall hold the assets of the Trust for the benefit of Company's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of the Participant or his beneficiaries to pursue their rights as general creditors of Company with respect to benefits due under the Agreement or otherwise. -5- 36 (4) Trustee shall resume the payment of benefits to the Participant or his beneficiaries in accordance with Section 2 of this Trust Agreement only after Trustee has determined that Company is not Insolvent (or is no longer Insolvent). (c) For purposes of this Section 3, the Trustee shall have the right as a reimbursable administration cost and expense under this Trust Agreement to retain any outside counsel and experts it reasonably believes is necessary or appropriate to assist it with regard to the determination of insolvency and to commence a judicial interpleader or declaratory judgment or other appropriate action for direction regarding this determination. SECTION 4. PAYMENTS TO COMPANY. Except as provided in Section 3 hereof, after the Trust has become irrevocable, Company shall have no right or power to direct Trustee to return to Company or to divert to others any of the Trust assets before all payment of benefits have been made to the Participant and his beneficiaries pursuant to the terms of the Agreement. -6- 37 SECTION 5. INVESTMENT AUTHORITY. Trustee may invest in securities (including stock or rights to acquire stock) or obligations issued by Company (or affiliated corporations within the same commonly controlled group). All rights associated with assets of the Trust shall be exercised by Trustee or the person designated by Trustee, and shall in no event be exercisable by or rest with the Participant. SECTION 5A. POWERS AND DUTIES OF TRUSTEE. All investment and disbursement powers over all property held in this Trust shall be vested exclusively in the Trustee. Except as provided in the Trust Agreement to the contrary, Trustee shall have all the rights, powers and duties granted trustees under the Texas Trust Code, as amended from time to time, and shall have the power and authority to perform every act necessary or appropriate to carry out the terms of this Trust to the maximum extent permitted by law, including, without limitation, the following: (a) The receipt of contributions or funding under the Agreement; (b) To hold, manage, invest, reinvest, sell and exchange all property of the Trust, together with any additional property which may from time to time be transferred to the Trustee as herein provided; to collect, invest and reinvest -7- 38 any and all income resulting from all such Trust property; to accumulate and distribute the income and principal of the Trust in accordance with this Trust Agreement, after deducting expenses properly payable from trust income; (c) The entering into and performance of any agreement; (d) Subject to the provisions of Section 3 hereof, the undertaking of any legal action, whether as plaintiff or defendant, on behalf of the Trust; (e) The employment of any person, including attorneys, accountants, investment managers and agents, to advise and assist Trustee in the performance of its duties; (f) The execution and delivery of all instruments necessary or appropriate to accomplishing or facilitating the exercise of Trustee's powers; (g) To release, in the discretion of Trustee, any fiduciary power at any time, in whole or in part, temporarily or permanently, whenever Trustee may deem it advisable, by acknowledged instrument; (h) To keep any and all securities or other assets of the Trust in the name of some other person or entity with a power of attorney for the transfer attached or in bearer or Federal Reserve Book Entry form or in the name of Trustee without disclosing the fiduciary capacity of Trustee; -8- 39 (i) To vote, either in person or by proxy, any share of stock held as part of the assets of the Trust; (j) To invest and reinvest Trust property and the income therefrom in a money market fund or other mutual fund from which the Trustee or an affiliate of the Trustee may receive advisory fees or other remuneration; (k) To hold cash uninvested at any time and in any amount pending investment pursuant to the terms of this Trust Agreement. When Trustee acts in good faith, Trustee, in all matters pertaining to Trustee's management and investment of the Trust, may rely upon any notice, resolution, instruction, direction, order, certificate, opinion, letter, telegram or other document believed by Trustee to be genuine, to have been signed by a proper representative of the Participant or beneficiary, Company or any investment manager or third party recordkeeper, if one is appointed, and to be the act of the Participant or beneficiary, Company or the investment manager or third party recordkeeper, as the case may be. Trustee may accept any certificate or other instrument duly signed by a proper representative of the Participant or beneficiary, Company or the investment manager or third party recordkeeper, if one is appointed which purports to evidence an instruction, -9- 40 direction or order of the Participant or beneficiary, Company, the investment manager or third party recordkeeper, as the case may be, as conclusive evidence thereof; and (l) Any person dealing in good faith with Trustee or in good faith assisting Trustee in conducting a transaction shall be entitled to rely without inquiry upon the representation that Trustee has the power Trustee purports to exercise and has exercised such power in accordance with the provisions of this Trust Agreement, and in such event such person shall not be responsible for the application of money or property paid or delivered to Trustee. Trustee may solicit from time to time from Company and take into account in Trustee's sole discretion, an investment objective or objectives of the Company, in managing the investments of the Trust. [With respect to the holding of any life insurance policy or separate account, variable annuity or mutual fund generally described in Appendix II to this Trust Agreement, the Company shall have the right to select any one or more life insurance carriers as the issuer or manager of such holdings, and direct the Trustee to accept such holdings for the Trust.] -10- 41 SECTION 6. DISPOSITION OF INCOME. During the term of this Trust, all income received by the Trust, net of expenses, shall be accumulated and reinvested. SECTION 7. ACCOUNTING BY TRUSTEE. (a) Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and all other transactions required to be made, including such specific records as shall be agreed upon in writing between Company and Trustee. Within 60 days after the removal or resignation of Trustee, Trustee shall deliver to Company a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being shown separately), and showing all cash, securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be. (b) Trustee shall keep and maintain complete and accurate records of the Trust and all transactions involving any property of the Trust. Such records shall be available for inspection by -11- 42 Company or Participant at all times during normal business hours. Trustee shall produce and furnish to Company quarterly (or monthly if the Company or Beneficiary requests) annual itemized statements identifying all transactions of the Trust and generally reflecting the condition of the Trust. SECTION 8. RESPONSIBILITY OF TRUSTEE. (a) Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, provided, however, that Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by Company which is contemplated by, and in conformity with, the terms of the Agreement or this Trust and is given in writing by Company. In the event of a dispute between Company and a party, Trustee may apply to a court of competent jurisdiction to resolve the dispute. (b) Company shall indemnify and hold harmless Trustee for any damages, expenses, liabilities or losses, incurred or sustained by or imposed on Trustee, arising in connection with the Trust or the Agreement (including reasonable attorneys' fees), including any litigation that the Trustee defends against or initiates in connection with the administration of Trustee's powers and duties under the Trust or the Agreement. If Company does not pay such costs, expenses and liabilities in a reasonably timely manner, Trustee may obtain payment by withdrawing funds from the Trust. -12- 43 (c) Trustee may consult with legal counsel (who may also be counsel for Company generally) with respect to any of its duties or obligations hereunder. (d) Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations hereunder. (e) Trustee shall have, without exclusion, all powers conferred on trustees by applicable law, unless expressly provided otherwise herein. (f) Notwithstanding any powers granted to Trustee pursuant to this Trust Agreement or to applicable law, Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code. (g) Notwithstanding any provisions of this Trust Agreement or the Agreement to the contrary, Trustee may in good faith fully rely on any representations or directions given to Trustee by Company (or its officers and employees designated to Trustee for this purpose) under this Trust Agreement or the Agreement. -13- 44 (h) Notwithstanding any provisions of this Trust Agreement or the Agreement to the contrary, Trustee shall not be liable for any action taken or omitted as Trustee of this Trust unless such action or omission constitutes bad faith, gross negligence or willful disregard for the provisions of this Trust Agreement. (i) The Trustee shall be responsible and liable for the assets in the Trust including assets accepted as contributions to the Trust from the Company. The Trustee shall be under no obligation and shall not have the duty to collect or recover any funds or assets that have not yet been contributed to the Trust until those funds and assets have both been contributed by the Company and accepted by the Trustee. SECTION 9. COMPENSATION AND EXPENSES OF TRUSTEE. For its services hereunder, Trustee shall receive reasonable annual compensation in accordance with its standard fee schedule in effect at the time that such services are furnished to the Trust. Except to the extent otherwise provided in Section 6 hereof, Company shall pay all reasonable or agreed upon administrative and Trustee's fees and expenses, including any expenses attributable to the payment of persons engaged or expenses paid in accordance with the provisions of Sections 3(c), 5A and 8 above. The Trustee shall -14- 45 periodically (but no less frequently than quarterly) submit its statements of account to the Company. Payment shall be made by Company in a prompt manner. If not so paid, the fees and expenses shall be paid from the Trust. SECTION 10. RESIGNATION AND REMOVAL OF TRUSTEE. (a) Trustee may resign at any time by written notice to Company, which shall be effective 7 days after receipt of such notice unless Company and Trustee agree otherwise. (b) Trustee may be removed by Company on 30 days written notice or upon shorter notice accepted by Trustee. (c) Upon resignation or removal of Trustee and appointment of a successor Trustee, all assets shall subsequently be transferred to the successor Trustee. The transfer shall be completed within 120 days after receipt of written notice of resignation, removal or transfer, unless Company extends the time limit. (d) If Trustee resigns or is removed, a successor shall be appointed, in accordance with Section 11 hereof, by the effective date of resignation or removal under paragraph (a) or (b) of this section. If no such appointment has been made, Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust. -15- 46 SECTION 11. APPOINTMENT OF SUCCESSOR. (a) If Trustee resigns or is removed in accordance with Section 10(a) or (b) hereof, Company may appoint any qualified corporate fiduciary, such as a bank trust department or other party that may be granted corporate trustee powers under state law, as a successor to replace Trustee upon resignation or removal. The appointment shall be effective when accepted in writing by the new Trustee, who shall have all of the rights and powers of the former Trustee, including ownership rights in the Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by Company or the successor Trustee to evidence the transfer. (b) The successor Trustee need not examine the records and acts of any prior Trustee and may retain or dispose of existing Trust assets, subject to Sections 7 and 8 hereof. The successor Trustee shall not be responsible for and Company shall indemnify and defend the successor Trustee from any claim or liability resulting from any action or inaction of any prior Trustee or from any other past event, or any condition existing at the time it becomes successor Trustee. -16- 47 SECTION 12. AMENDMENT OR TERMINATION. (a) This Trust Agreement may be amended by a written instrument executed by Trustee and Company. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the Agreement or shall make the Trust revocable after it has become irrevocable in accordance with Section 1(b) hereof. (b) The Trust shall not terminate until the date on which the Participant and his beneficiaries are no longer entitled to benefits pursuant to the terms of the Agreement. Upon termination of the Trust any assets remaining in the Trust shall be returned to Company. (c) Upon written approval of the Participant (or his beneficiaries) entitled to payment of benefits pursuant to the terms of the Agreement, Company may terminate this Trust prior to the time all benefit payments under the Agreement have been made. In such case, all assets in the Trust at termination shall be returned to Company. (d) Notwithstanding the preceding provisions of this Section 12, the Trust shall terminate (to the extent required under the applicable rule against perpetuities) one day prior to the last day of the period ending 21 years after the death of the Participant. -17- 48 SECTION 13. MISCELLANEOUS. (a) Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. (b) Benefits payable to the Participant and his beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process. (c) For purposes of facility of payment, in the event that the Participant or beneficiary to receive a payment or distribution from the Trust is incompetent or otherwise incapacitated in a manner that the Trustee can reasonably question that individual's ability to manage his own affairs, the Trustee may make the payment to (i) such individual's guardian or other legal representative; (ii) the person responsible for the support and care of such individual if the trustee can reasonably determine that such person is trustworthy; or (iii) any other person a court with proper jurisdiction may direct. Notwithstanding the preceding provisions of this Section 13(c), if in the judgment of Trustee, the Participant becomes incapacitated, Trustee shall have full discretionary authority to utilize the income and principal of the Trust for the health, education, maintenance, support and other needs of the Participant, as determined by Trustee in its sole -18- 49 discretion. No judicial determination shall be required and the Trustee shall incur no liability to any person whatsoever for making such distributions to or for the benefit of the Participant. (d) This Trust Agreement shall be governed by and construed in accordance with the laws of Texas. (e) Any provision or requirement for notice to be made under this Trust Agreement shall mean written notice. Written notice may be delivered in hand (i.e., personal hand delivery) or by certified mail with a return receipt to the current address of the person to receive the notice. Telecopy or electronic facsimile transmissions of notice shall not be binding. (j) In the event of any inconsistency or conflict between the terms of this Trust Agreement and the Plan, the Trustee shall be bound and obligated only to follow the terms of this Trust Agreement, which shall be controlling. SECTION 14. EFFECTIVE DATE. The effective date of this Trust Agreement shall be January 1, 1996. -19- 50 In witness whereof, this Trust Agreement has been entered into and is effective on the dates first set forth hereinabove. TRUSTEE: TEAM, INC. By: By: --------------------------- --------------------------- , Trust Officer ---------- THE STATE OF TEXAS ss. ss. COUNTY OF HARRIS ss. BEFORE ME, the undersigned authority, on this day personally appeared ____________, known to me to be the person whose name is subscribed to the foregoing instrument as Vice President & Trust Officer of ________________________, a banking institution, and acknowledged to me that he/she executed the same for the purposes and consideration therein expressed, in the capacity therein stated, and as the act and deed of said banking institution. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the _____ day of _______________, 199_. ------------------------------ NOTARY PUBLIC IN AND FOR THE STATE OF T E X A S Printed Name: ----------------- My commission expires: -------- -20- 51 THE STATE OF TEXAS ss. ss. COUNTY OF HARRIS ss. BEFORE ME, the undersigned authority, on this day personally appeared_________________, known to me to be the person whose name is subscribed to the foregoing instrument as ___________________ of Team, Inc., a Delaware state corporation, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, in the capacity therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the _____ day of _______________, 199_. ------------------------------ NOTARY PUBLIC IN AND FOR THE STATE OF T E X A S Printed Name: ----------------- My commission expires: -------- -21- 52 APPENDIX I "Agreement" 1998 Salary Deferred Compensation Agreement executed by and between Philip J. Hawk and Team, Inc. on ________________. -22- EX-10.2 4 INCENTIVE STOCK OPTION AWARD AGREEMENT 1 EXHIBIT 10.2 TEAM, INC. INCENTIVE STOCK OPTION AWARD AGREEMENT THIS INCENTIVE STOCK OPTION AWARD AGREEMENT (the "Agreement") is made effective as of November 2, 1998 between Team, Inc., a Texas corporation (the "Company"), and PHILIP J. HAWK (the "Option Holder"). 1. GRANT OF OPTION. Subject to the terms and conditions of this Agreement and the Team, Inc., 1998 Incentive Stock Option Plan (the "Plan"), a copy of which is annexed to and made a part of this Agreement, the Company with the unanimous authorization and approval of the members of its Board of Directors hereby grants to the Option Holder effective as of the date hereof (the "Grant Date") an option (the "Option") to purchase 105,666 shares of the common stock of the Company, $0.30 par value ("Common Stock") at a price of $3.75 per share (the "Option Price") which was the per share Fair Market Value (as defined by the Plan) of the Common Stock as of the Grant Date. This Agreement and the purchase of the shares of Common Stock hereunder is intended and should be interpreted to qualify as an Incentive Stock Option as that term is used in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and any provisions of this Agreement are hereby amended in their entirety to any extent necessary to permit all Common Stock purchased hereunder to qualify for treatment as such under Section 422 of the Code. In the event that the Option Holder is or becomes a longer term employee, an extension of the option expiration period provided in Section 5 below has been provided from three months to six months following termination of employment. However, if the Option Holder is not totally and permanently disabled (as defined in Section 422(c)(6) of the Code) and if the option is exercised after three months, such exercise will no longer be qualifying for purposes of Section 421(a) of the Code and the option so exercised shall be treated as a nonqualified option instead of an incentive stock option. Notwithstanding anything to the contrary contained herein, the number of Shares of Common Stock for which the Option is granted pursuant to Section 1 of this Agreement shall automatically be decreased by the number, if any, of Additional SNO Shares (as that term is defined in the Employment Agreement) by which the SNO Option (as that term is defined in the Employment Agreement) is automatically increased pursuant to Section 5.b. of the Employment Agreement and Section 1 of the Standard Restricted Stock Option Award Agreement dated as of November 2, 1998 between Hawk and the Company. 2. OPTION PERIOD. The Option granted herein may be exercised by the Option Holder in whole or in part, subject to the limitation that said Option shall be exercisable in increments ratably - ---------------------------- Incentive Stock Option Award Agreement - Team, Inc. 2 as set forth in Exhibit A hereto (the "Vesting Schedule") determined by the continuous employment of the Option Holder with the Company from the Grant Date to the date of exercise. Notwithstanding anything in this Agreement to the contrary, the Vesting Schedule is subject to Section 5 herein and the Committee, in its sole discretion, may waive the Vesting Schedule and, upon written notice to the Option Holder, accelerate the earliest date or dates in which any of the Options granted hereunder are exercisable. 3. METHOD FOR EXERCISING THE OPTION. The vested portion of the Option may be exercised in whole or in part only by delivery in person or through certified or registered mail to the Company at its principal office in Alvin, Texas (attention: Corporate Secretary) of written notice specifying the Option that is being exercised and the number of shares of Common Stock with respect to which the Option is being exercised. The notice must be accompanied by payment of the Option Price for the portion of the Option being exercised. Payment of this portion of the Option Price for the Common Stock shall be made in full by any of the following methods or any combination of the following methods: a. In cash or by certified or cashier's check payable to Team, Inc.; b. The delivery to the Company of certificates representing the number of shares of Common Stock then owned by the Option Holder, the Designated Value (defined below) of which equals the Option Price of the Common Stock purchased pursuant to the Option, properly endorsed for transfer to the Company. (For purposes of this Agreement, the Designated Value of any shares of Common Stock delivered in payment of the Option Price upon exercise of the Option shall be the Designated Value as of the exercise date, and the exercise date shall be the day of delivery of the certificates for the Common Stock used as payment of the Option Price); or c. The delivery to the Company of a properly executed notice of exercise together with irrevocable instructions to a broker to deliver promptly to the Company, in payment of the Option Price, the amount of the cash proceeds of the sale of shares of Common Stock or a loan from the broker to the Option Holder sufficient, in each case, to pay the Option Price, and in a form satisfactory to the Corporate Secretary. Upon such notice to the Corporate Secretary and payment in full of the amount of the Option Price being exercised, the exercise of the Option shall be deemed to be effective, and a properly executed certificate or certificates representing the Common Stock so purchased shall be issued by the Company and delivered to the Option Holder or the agent designated by the Option Holder. For purposes of this Agreement, the "Designated Value" of the shares of Common Stock on a given date shall be determined in the same manner that fair market value is determined pursuant to Section 2(j) of the Plan. 4. ADJUSTMENTS. In the event of an adjustment (as defined in Section 7 of the Plan), the Committee or the Board of Directors of the Company (as the case may be), in its discretion, shall act to effect one or more of the alternatives set forth in Section 7 of the Plan. 2 - ---------------------------- Incentive Stock Option Award Agreement - Team, Inc. 3 5. EXPIRATION AND TERMINATION OF THE OPTION. The Option shall expire at 5:00 p.m. Houston, Texas time on the tenth annual anniversary of the Grant Date or prior to such time as follows (the period from the Grant Date to the date of the expiration of the Option is defined as the "Option Period"): a. Upon termination of the employment of the Option Holder for any reason other than death, the Options exercisable as of the date of termination may be exercised by Option Holder within three months after the date of the termination of employment of the Option Holder. If, as of the date of termination of employment, the Option Holder has completed at least five full years of continuous service with the Company, the three month period provided for in the preceding sentence shall be increased to six months. The determination of whether the Option Holder has completed such period of service shall be made by the Committee. b. Upon termination of the employment of the Option Holder by reason of the death of the Option Holder, all the shares under the Option without regard to whether exercisable as of the date of the Option Holder's death, may be exercised by the personal representative of the deceased Option Holder, within 12 months of the date of the Option Holder's death. 6. TRANSFERABILITY. The Option may not be transferred except by will or pursuant to the laws of descent and distribution, and it shall be exercisable during the Option Holder's life only by him, and after his death, only by those entitled to do so under his will or the applicable laws of descent and distribution. 7. COMPLIANCE WITH SECURITIES LAWS. Upon the acquisition of any shares of Common Stock pursuant to the exercise of the Option herein granted, the Option Holder or any person acting under Section 5(b) will enter into such written representations, warranties and agreements as the Company may reasonably request in order to comply with applicable securities laws or with this Agreement. 8. LEGENDS ON CERTIFICATES. The Certificates representing the shares of Common Stock purchased by exercise of an Option will be stamped or otherwise imprinted with legends in such form as the Company or its counsel may require with respect to any applicable restrictions on sale or transfer and the stock transfer records of the Company will reflect stock-transfer instructions with respect to such shares. 9. WITHHOLDING. a. Arrangement for Withholding. The Option Holder hereby agrees to make appropriate arrangements with the Company to provide for the amount of additional tax withholding under Sections 3102 and 3402 of the Internal Revenue Code and applicable state income tax laws, if any, resulting from the exercise of the Option. If such arrangements are not made, the Company may refuse to issue any Common Stock to the Option Holder. 3 - ---------------------------- Incentive Stock Option Award Agreement - Team, Inc. 4 b. Withholding Election. The Option Holder may elect to pay all such amounts of tax withholding, or any part thereof, by electing to transfer to the Company, or to have the Company withhold from shares otherwise issuable to the Option Holder, shares of Common Stock having a value equal to the amount required to be withheld or such lesser amount as may be elected by the Option Holder provided that all such elections shall be subject to the approval or disapproval of the Committee. The value of shares of Common Stock to be withheld shall be based on the Designated Value of the Common Stock on the date that the amount of tax to be withheld is to be determined. 10. ACKNOWLEDGMENT OF OPTION HOLDER. The Option Holder acknowledges having received and read a copy of the Plan and this Agreement and agrees to comply with all laws, rules and regulations applicable to the grant and exercise of the Option and the sale or other disposition of the Common Stock. 11. MISCELLANEOUS. a. Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be given by first class registered or certified mail, postage prepaid, or by personal delivery to the appropriate party, addressed: i. If to the Company, to the Company at its principal place of business at Alvin, Texas (Attention: Corporate Secretary) or at such other address as may have been furnished to the Option Holder in writing by the Company; or ii. If to the Option Holder, to the Option Holder at his address on file with the Company, or at such other address as may have been furnished to the Company by the Option Holder. Any such notice shall be deemed to have been given as of the fourth day after deposit in the United States Postal Service, postage prepaid, properly addressed as set forth above, in the case of mailed notice, or as of the date delivered in the case of personal delivery. b. Amendment. The Board of Directors may make any adjustment in the Option Price, the number of shares of Common Stock subject to, or the terms of the Option by amendment or by substitution of an outstanding Option. Such amendment or substitution may result in terms and conditions (including Option Price, the number of shares of Common Stock covered, Vesting Schedule or Option Period) that differ from the terms and conditions of this Option. The Board of Directors may not, however, adversely affect the rights of the Option Holder without the consent of the Option Holder. If such action is effective by amendment, the effective date of such amendment will be the date of the original grant of this Option. Except as provided herein, this Agreement may not be amended or otherwise modified unless evidenced in writing and signed by the Company and the Option Holder. c. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law. 4 - ---------------------------- Incentive Stock Option Award Agreement - Tean, Inc. 5 d. Waiver. Any provision contained in this Agreement may be waived, either generally or in any particular instance, by the Company. e. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Option Holder and their respective heirs, executors, administrators, legal representatives, successors and assigns. f. Rights to Employment. Nothing contained in this Agreement shall be construed as giving the Option Holder any right to be retained in the employ of the Company and this Agreement is limited solely to governing the rights and obligations of the Option Holder with respect to the Common Stock and the Option. g. Gender and Number. Except when otherwise indicated by the context, the masculine gender shall also include the feminine gender, and the definition of any term herein in the singular shall also include the plural. h. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. i. Committee. The Committee appointed under the Plan shall have full discretion to administer the Plan. IN WITNESS WHEREOF, the parties have executed this Agreement on the date(s) set forth below. TEAM, INC. By: /s/ SIDNEY B. WILLIAMS ------------------------------------------------ Name: Sidney B. Williams Title: Director and Member of Executive Committee OPTION HOLDER /s/ PHILIP J. HAWK --------------------------------------------------- Philip J. Hawk 5 - ---------------------------- Incentive Stock Option Award Agreement - Team, Inc. 6 EXHIBIT A Vesting Schedule CONDITIONS TO VESTING AMOUNT EXERCISABLE Upon the continuous employment CUMULATIVE PROPORTION OF THE by Option Holder through the COMMON STOCK AS TO ALL OR PART OF applicable date indicated below: WHICH THE OPTION CAN BE EXERCISED AFTER SATISFACTION OF THE RESPECTIVE - -------------------------------- CONDITIONS TO VESTING: ------------------------------------ 1. NOVEMBER 2, 1999 25% 2. NOVEMBER 2, 2000 50% 3. NOVEMBER 2, 2001 75% 4. JANUARY 30, 2002 100%
- ---------------------------- Incentive Stock Option Award Agreement - Team, Inc. EX-10.3 5 STANDARD RESTRICTED STOCK OPTION AWARD AGREEMENT 1 EXHIBIT 10.3 TEAM, INC. STANDARD RESTRICTED STOCK OPTION AWARD AGREEMENT ("SNOS") THIS STANDARD RESTRICTED STOCK OPTION AWARD AGREEMENT (the "Agreement") is made effective as of November 2, 1998 (the "Grant Date") between Team, Inc., a Texas corporation (the "Company"), and PHILIP HAWK ("Hawk" or "Option Holder"). WHEREAS, Hawk and the Company have entered into an employment agreement the ("Employment Agreement") which is dated as of the Grant Date which provides in section 5.b. thereof for the grant of an option (the "Option" or "SNO Option") to purchase shares ("Shares") of the common stock of the Company, $0.30 par value subject among other things to a stated vesting schedule with respect to the exercise of such options ; and, WHEREAS, the Company and Hawk have entered into an Incentive Stock Option Award Agreement (the "ISO Agreement") which is also dated as of the Grant Date which grants to Hawk an option ("ISO Option") to acquire 105,666 Shares (Shares which are acquired pursuant to the ISO Option is referred to herein as the " ISO Shares"); and, WHEREAS, the Employment Agreement provides that Hawk's right to exercise the SNO Option will fully vest immediately in the event that: (i) Hawk's employment with the Company is terminated pursuant to Sections 8.a. or 8c. of the Employment Agreement or (ii) a "Change of Control" occurs while Hawk is an employee of the Company in a transaction which is not recommended by the Company's Board of Directors (the aforesaid events which give rise to immediate vesting shall be referred to herein as an "Accelerating Event"); WHEREAS, the Employment Agreement also provides that if an Accelerating Event occurs, the number of Shares covered by this Agreement will be automatically increased by the number of the - --------------------------------- Standard Restricted Stock Option Award Agreement - Team, Inc. 2 ISO Shares (the "Additional SNO Shares") that would have become vested under the ISO Option had such Accelerating Event provisions that applied to the SNO Options applied to the ISO Options.; NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the receipt and sufficiency and adequacy of which are hereby acknowledged, the parties agree as follows: 1. GRANT OF OPTION. Subject to the terms and conditions of this Agreement, the Company, with the unanimous authorization and approval of its Board of Directors, hereby grants to Hawk effective as of the Grant Date this SNO Option to purchase 44,334 Shares at a price of $3.625 per share (the "Option Price") which is the mean of the opening price ($3.50) and the closing price of the Shares as traded on the American Stock Exchange on the Grant Date. This Agreement and the purchase of Shares hereunder is not intended to be and should not be interpreted to qualify as an Incentive Stock Option as that term is used in Section 422 of the Internal Revenue Code of 1986. Immediately following the occurrence of an Accelerating Event and without further action on behalf of the Company or Hawk, this SNO Option shall be automatically amended to increase the number of Shares which may be acquired through the exercise of this SNO Option by the number of the Additional SNO Shares as provided in Section 5.b. of the Employment Agreement. 2. OPTION PERIOD. The SNO Option granted herein may be exercised in whole or in part at any time prior to the termination of the Option Period as determined pursuant to Section 5 below, subject however to the limitation that said SNO Option shall be exercisable in increments ratably as set forth in Exhibit A hereto (the "Vesting Schedule"); provided, however, that notwithstanding the Vesting Schedule, this SNO Option shall become fully vested with respect to all Shares covered by this Agreement (including the Additional SNO Shares) upon the occurrence of an Accelerating Event; and, provided further, the Board of Directors of the Company, in its sole discretion, may waive the Vesting Schedule and, upon written notice to the Option Holder, accelerate the earliest date or dates in which the Option granted hereunder is exercisable. The SNO Option granted by this Agreement is the Option described in Section 5.b of the Employment Agreement. 3. METHOD FOR EXERCISING THE OPTION. The vested portion of the Option may be exercised in whole or in part only by delivery in person or through certified or registered mail to the Company at its principal office in Alvin, Texas (attention: Corporate Secretary) of written notice specifying the Option that is being exercised and the number of Shares with respect to which the Option is being exercised. The notice must be accompanied by payment of the Option Price for the portion of the Option being exercised. Payment of this portion of the Option Price for the Shares shall be made in full by any of the following methods or any combination of the following methods: a. In cash or by certified or cashier's check payable to Team, Inc.; b. The delivery to the Company of certificates representing the number of Shares then owned by the Option Holder, the Fair Market Value (defined in Section 11(i) below) of which equals the Option Price of the Shares purchased pursuant to the Option, properly endorsed for - --------------------------------- Standard Restricted Stock Option Award Agreement - Team, Inc. 2 3 transfer to the Company. (For purposes of this Agreement, the Fair Market Value of any Shares delivered in payment of the Option Price upon exercise of the Option shall be the Fair Market Value as of the exercise date, and the exercise date shall be the day of delivery of the certificates for the Shares used as payment of the Option Price); or c. The delivery to the Company of a properly executed notice of exercise together with irrevocable instructions to a broker to deliver promptly to the Company, in payment of the Option Price, the amount of the cash proceeds of the sale of Shares or a loan from the broker to the Option Holder sufficient, in each case, to pay the Option Price, and in a form satisfactory to the Corporate Secretary. Upon such notice to the Corporate Secretary and payment in full of the amount of the Option Price being exercised, the exercise of the Option shall be deemed to be effective, and a properly executed certificate or certificates representing the Shares so purchased shall be issued by the Company and delivered to the Option Holder or the agent designated by the Option Holder. 4. ADJUSTMENTS. (a) In the event that the outstanding Shares of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation, by reason of a recapitalization, reclassification, stock split-up, combination of shares, or dividend or other distribution payable in capital stock, appropriate adjustment shall be made by the Board in the number and kind of shares as to which the outstanding Option, or portions thereof then unexercised, shall be exercisable, to the end that the proportionate interest of the holder of the Option shall, to the extent practicable, be maintained as before the occurrence of such event. Such adjustment in outstanding Option shall be made without change in the total price applicable to the unexercised portion of the Option but with a corresponding adjustment in the Option price per share. (b) In the event that the Board shall adopt resolutions recommending the dissolution or liquidation of the Company, any Option granted under this Agreement shall terminate as of a date to be fixed by the Board, provided that not less than thirty (30) days' written notice of the date so fixed shall be given to each Optionee and each such Optionee shall have the right during such period to exercise his Option as to all or any part of the shares covered thereby, including shares as to which such Option would not otherwise be exercisable by reason of an insufficient lapse of time. (c) In the event of a Reorganization (as hereinafter defined) in which the Company is not the surviving or acquiring company, or in which the Company is or becomes a wholly owned subsidiary of another company after the effective date of the Reorganization, then - --------------------------------- Standard Restricted Stock Option Award Agreement - Team, Inc. 3 4 (i) If there is no plan or agreement respecting the Reorganization ("Reorganization Agreement") or if the Reorganization Agreement does not specifically provide for the change, conversion or exchange of the Shares under outstanding and unexercised stock options for securities of another corporation, then the Board shall take such action, and the Option shall terminate, as provided in subparagraph (b) of this Paragraph 4; or (ii) If there is a Reorganization Agreement and if the Reorganization Agreement specifically provides for the change, conversion, or exchange of the Shares under outstanding and unexercised stock options for securities of another corporation, then the Board shall adjust the Shares under such outstanding and unexercised stock options in a manner not inconsistent with the pro visions of the Reorganization Agreement for the adjustment, change, conversion, or exchange of such Shares and such Option. (d) The term "Reorganization" as used in subparagraph (c) of this Paragraph 4 shall mean any statutory merger, statutory consolidation, sale of all or substantially all of the assets of the Company, or sale, pursuant to an agreement with the Company, of securities of the Company pursuant to which the Company is or becomes a wholly owned subsidiary of another company after the effective date of the Reorganization. (e) Adjustments and determinations under this Paragraph 4 shall be made by the Board, whose decisions shall be final, binding, and conclusive. 5. EXPIRATION AND TERMINATION OF THE OPTION. This SNO Option shall expire at 5:00 p.m. Houston, Texas time on November 2, 2008 or prior to such time as follows (the period from the Grant Date to the date of the expiration of the SNO Option is defined herein as the "Option Period"): a. Upon termination of the employment of the Option Holder for any reason other than death, the Option exercisable as of the date of termination may be exercised by Option Holder within three months after the date of the termination of employment of the Option Holder. If, as of the date of termination of employment, the Option Holder has completed at least five full years of continuous service with the Company, the three month period provided for in the preceding sentence shall be increased to six months. The determination of whether the Option Holder has completed such period of service shall be made by the Company's Board of Directors. b. Upon termination of the employment of the Option Holder by reason of the death of the Option Holder, all the shares under the Option without regard to whether exercisable as of the date of the Option Holder's death, may be exercised by the personal representative of the deceased Option Holder, within 12 months of the date of the Option Holder's death. - --------------------------------- Standard Restricted Stock Option Award Agreement - Team, Inc. 4 5 6. TRANSFERABILITY. The Option may not be transferred except by will or pursuant to the laws of descent and distribution, and it shall be exercisable during the Option Holder's life only by him, and after his death, only by those entitled to do so under his will or the applicable laws of descent and distribution. 7. COMPLIANCE WITH SECURITIES LAWS. Upon the acquisition of any Shares pursuant to the exercise of the Option herein granted, the Option Holder or any person acting under Section 5(b) will enter into such written representations, warranties and agreements as the Company may reasonably request in order to comply with applicable securities laws or with this Agreement. 8. LEGENDS ON CERTIFICATES. The Certificates representing the Shares purchased by exercise of an Option will be stamped or otherwise imprinted with legends in such form as the Company or its counsel may require with respect to any applicable restrictions on sale or transfer and the stock transfer records of the Company will reflect stock-transfer instructions with respect to such shares. 9. WITHHOLDING. a. Arrangement for Withholding. The Option Holder hereby agrees to make appropriate arrangements with the Company to provide for the amount of additional tax withholding under Sections 3102 and 3402 of the Internal Revenue Code and applicable state income tax laws, if any, resulting from the exercise of the Option. If such arrangements are not made, the Company may refuse to issue any Common Stock to the Option Holder. b. Withholding Election. The Option Holder may elect to pay all such amounts of tax withholding, or any part thereof, by electing to transfer to the Company, or to have the Company withhold from shares otherwise issuable to the Option Holder, Shares having a value equal to the amount required to be withheld or such lesser amount as may be elected by the Option Holder provided that all such elections shall be subject to the approval or disapproval of the Company's Board of Directors. The value of Shares to be withheld shall be based on the Designated Value of the Common Stock on the date that the amount of tax to be withheld is to be determined. 10. ACKNOWLEDGMENT OF OPTION HOLDER. The Option Holder acknowledges having received and read this Agreement and agrees to comply with all laws, rules and regulations applicable to the grant and exercise of the Option and the sale or other disposition of the Common Stock. 11. MISCELLANEOUS. a. Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be given by first class registered or certified mail, postage prepaid, or by personal delivery to the appropriate party, addressed: i. If to the Company, to the Company at its principal place of business at Alvin, Texas (Attention: Corporate Secretary) or at such other address as may have been furnished to the Option Holder in writing by the Company; or - --------------------------------- Standard Restricted Stock Option Award Agreement - Team, Inc. 5 6 ii. If to the Option Holder, to the Option Holder at his address on file with the Company, or at such other address as may have been furnished to the Company by the Option Holder. Any such notice shall be deemed to have been given as of the fourth day after deposit in the United States Postal Service, postage prepaid, properly addressed as set forth above, in the case of mailed notice, or as of the date delivered in the case of personal delivery. b. Amendment. The Board of Directors may make any adjustment in the Option Price, the number of Shares subject to, or the terms of the Option by amendment or by substitution of an outstanding Option. Such amendment or substitution may result in terms and conditions (including Option Price, the number of Shares covered, Vesting Schedule or Option Period) that differ from the terms and conditions of this Option. The Board of Directors may not, however, adversely affect the rights of the Option Holder without the consent of the Option Holder. If such action is made by amendment, the effective date of such amendment will be the date of the original grant of this Option. Except as provided herein, this Agreement may not be amended or otherwise modified unless evidenced in writing and signed by the Company and the Option Holder. c. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law. d. Waiver. Any provision contained in this Agreement may be waived, either generally or in any particular instance, by the Company. e. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Option Holder and their respective heirs, executors, administrators, legal representatives, successors and assigns. f. Rights to Employment. Nothing contained in this Agreement shall be construed as giving the Option Holder any right to be retained in the employ of the Company and this Agreement is limited solely to governing the rights and obligations of the Option Holder with respect to the Common Stock and the Option. g. Gender and Number. Except when otherwise indicated by the context, the masculine gender shall also include the feminine gender, and the definition of any term herein in the singular shall also include the plural. h. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. i. "Fair Market Value" means the closing price of the Common Stock reported on the composite tape or other reporting medium (for securities listed on the American Stock Exchange or other primary market or exchange on which the Common Stock is traded) as of the - --------------------------------- Standard Restricted Stock Option Award Agreement - Team, Inc. 6 7 relevant date; provided, however, that if the Common Stock does not trade on the relevant date, such price shall be determined based upon the closing price of the Common Stock on the next preceding date on which trades occurred; and provided further, however, that should the primary market or exchange on which the Common Stock is traded adopt a continuous twenty-four hour trading policy, "Fair Market Value" for purposes of this Plan shall mean the price of the Common Stock on the last trade prior to 4:30 p.m., New York time, on any relevant date. j. Employment Agreement Controls. To the extent a conflict exists between the terms of this Agreement and the terms of the Employment Agreement, the terms of the Employment Agreement shall control. IN WITNESS WHEREOF, the parties have executed this Agreement on the date(s) set forth below. TEAM, INC. By: /s/ SIDNEY B. WILLIAMS --------------------------------- Name: Sidney B. Williams Title: Director and Member of Executive Committee OPTION HOLDER /s/ PHILIP J. HAWK ------------------------------------ Philip J. Hawk 7 8 EXHIBIT A Vesting Schedule
CONDITIONS TO VESTING AMOUNT EXERCISABLE Upon the continuous employment cumulative proportion of the by Option Holder through the common stock as to all or part applicable date indicated below: of which the option can be - -------------------------------- exercised after satisfaction of the respective conditions to vesting: ------------------------------- 1. NOVEMBER 2, 1999 331/3% 2. NOVEMBER 2, 2000 662/3% 3. NOVEMBER 2, 2001 100%
EX-10.4 6 PRICE VESTED RESTRICTED STOCK OPTION AWARD AGMT 1 EXHIBIT 10.4 TEAM, INC. PRICE VESTED RESTRICTED STOCK OPTION AWARD AGREEMENT ("PVOS") THIS PRICE VESTED RESTRICTED STOCK OPTION AWARD AGREEMENT (the "Agreement") is made effective as of November 2, 1998 between Team, Inc., a Texas corporation (the "Company"), and PHILIP J. HAWK (the "Option Holder"). WHEREAS, Hawk and the Company have entered into an employment agreement the ("Employment Agreement") which is dated as of the Grant Date which provides in section 5.c. thereof for the grant of an option (the "Option" or "PVO Option") to purchase 200,000 shares ("Shares") of the common stock of the Company, $0.30 par value subject among other things to a vesting schedule with respect to the exercise of such options ; and, WHEREAS, the Employment Agreement provides that Hawk's right to exercise the PVO Option will fully vest immediately in the event that: (i) Hawk's employment with the Company is terminated pursuant to Sections 8.a. or 8c. of the Employment Agreement or (ii) a "Change of Control" occurs while Hawk is an employee of the Company in a transaction which is not recommended by the Company's Board of Directors (the aforesaid events which give rise to immediate vesting shall be referred to herein as an "Accelerating Event"); NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the receipt and sufficiency and adequacy of which are hereby acknowledged, the parties agree as follows: 1. GRANT OF OPTION. Subject to the terms and conditions of this Agreement, the Company, with the unanimous authorization and approval of its Board of Directors, hereby grants to Hawk effective as of the Grant Date this PVO Option to purchase 200,000 Shares at a price of $3.625 per share (the "Option Price") which is the mean of the opening price ($3.50) and the closing price of the Shares as traded on the American Stock Exchange on the Grant Date. This Agreement and the purchase of Shares hereunder is not intended to be and should not be interpreted to qualify as an Incentive Stock Option as that term is used in Section 422 of the Internal Revenue Code of 1986, as amended. 2. OPTION PERIOD. The PVO Option granted herein may be exercised in whole or in part at any time prior to the termination of the Option Period as determined pursuant to Section 5 below, 2 subject however to the limitation that said PVO Option shall be exercisable in increments ratably as set forth in Exhibit A hereto (the "Vesting Schedule"); provided, however, that notwithstanding the Vesting Schedule, this PVO Option shall become fully vested with respect to all Shares covered by this Agreement upon the occurrence of an Accelerating Event; and, provided further, the Board of Directors of the Company, in its sole discretion, may waive the Vesting Schedule and, upon written notice to the Option Holder, accelerate the earliest date or dates in which the Option granted hereunder is exercisable. The PVO Option granted by this Agreement is the Option described in Section 5.c of the Employment Agreement. 3. METHOD FOR EXERCISING THE OPTION. The vested portion of the Option may be exercised in whole or in part only by delivery in person or through certified or registered mail to the Company at its principal office in Alvin, Texas (attention: Corporate Secretary) of written notice specifying the Option that is being exercised and the number of Shares with respect to which the Option is being exercised. The notice must be accompanied by payment of the Option Price for the portion of the Option being exercised. Payment of this portion of the Option Price for the Shares shall be made in full by any of the following methods or any combination of the following methods: a. In cash or by certified or cashier's check payable to Team, Inc.; b. The delivery to the Company of certificates representing the number of Shares then owned by the Option Holder, the Fair Market Value (defined in Section 11(i) below) of which equals the Option Price of the Shares purchased pursuant to the Option, properly endorsed for transfer to the Company. (For purposes of this Agreement, the Fair Market Value of any Shares delivered in payment of the Option Price upon exercise of the Option shall be the Fair Market Value as of the exercise date, and the exercise date shall be the day of delivery of the certificates for the Shares used as payment of the Option Price); or c. The delivery to the Company of a properly executed notice of exercise together with irrevocable instructions to a broker to deliver promptly to the Company, in payment of the Option Price, the amount of the cash proceeds of the sale of Shares or a loan from the broker to the Option Holder sufficient, in each case, to pay the Option Price, and in a form satisfactory to the Corporate Secretary. Upon such notice to the Corporate Secretary and payment in full of the amount of the Option Price being exercised, the exercise of the Option shall be deemed to be effective, and a properly executed certificate or certificates representing the Shares so purchased shall be issued by the Company and delivered to the Option Holder or the agent designated by the Option Holder. 4. ADJUSTMENTS. (a) In the event that the outstanding Shares are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation, by reason of a recapitalization, reclassification, stock split-up, combination of shares, or dividend or other distribution payable in capital stock, appropriate adjustment shall be made by the Board in the number and kind of shares as to which outstanding Option, or 2 3 portions thereof then unexercised, shall be exercisable, to the end that the proportionate interest of the holder of the Option shall, to the extent practicable, be maintained as before the occurrence of such event. Such adjustment in outstanding Option shall be made without change in the total price applicable to the unexercised portion of the Option but with a corresponding adjustment in the Option price per share. (b) In the event that the Board shall adopt resolutions recommending the dissolution or liquidation of the Company, any Option granted under this Agreement shall terminate as of a date to be fixed by the Board, provided that not less than thirty (30) days' written notice of the date so fixed shall be given to each Optionee and each such Optionee shall have the right during such period to exercise his Option as to all or any part of the Shares covered thereby, including Shares as to which such Option would not otherwise be exercisable by reason of an insufficient lapse of time. (c) In the event of a Reorganization (as hereinafter defined) in which the Company is not the surviving or acquiring company, or in which the Company is or becomes a wholly owned subsidiary of another company after the effective date of the Reorganization, then (i) If there is no plan or agreement respecting the Reorganization ("Reorganization Agreement") or if the Reorganization Agreement does not specifically provide for the change, conversion or exchange of the Shares under outstanding and unexercised stock options for securities of another corporation, then the Board shall take such action, and the Option shall terminate, as provided in subparagraph (b) of this Paragraph 4; or (ii) If there is a Reorganization Agreement and if the Reorganization Agreement specifically provides for the change, conversion, or exchange of the Shares under outstanding and unexercised stock options for securities of another corporation, then the Board shall adjust the Shares under such outstanding and unexercised stock options in a manner not inconsistent with the pro visions of the Reorganization Agreement for the adjustment, change, conversion, or exchange of such Shares and such Option. (d) The term "Reorganization" as used in subparagraph (c) of this Paragraph 4 shall mean any statutory merger, statutory consolidation, sale of all or substantially all of the assets of the Company, or sale, pursuant to an agreement with the Company, of securities of the Company pursuant to which the Company is or becomes a wholly owned subsidiary of another company after the effective date of the Reorganization. (e) Adjustments and determinations under this Paragraph 4 shall be made by the Board, whose decisions shall be final, binding, and conclusive. 3 4 5. EXPIRATION AND TERMINATION OF THE OPTION. This PVO Option shall expire at 5:00 p.m. Houston, Texas time on November 2, 2008 or prior to such time as follows (the period from the Grant Date to the date of the expiration of the PVO Option is defined herein as the "Option Period"): a. Upon termination of the employment of the Option Holder for any reason other than death, the Option exercisable as of the date of termination may be exercised by Option Holder within three months after the date of the termination of employment of the Option Holder. If, as of the date of termination of employment, the Option Holder has completed at least five full years of continuous service with the Company, the three month period provided for in the preceding sentence shall be increased to six months. The determination of whether the Option Holder has completed such period of service shall be made by the Company's Board of Directors. b. Upon termination of the employment of the Option Holder by reason of the death of the Option Holder, all the shares under the Option without regard to whether exercisable as of the date of the Option Holder's death, may be exercised by the personal representative of the deceased Option Holder, within 12 months of the date of the Option Holder's death. 6. TRANSFERABILITY. The Option may not be transferred except by will or pursuant to the laws of descent and distribution, and it shall be exercisable during the Option Holder's life only by him, and after his death, only by those entitled to do so under his will or the applicable laws of descent and distribution. 7. COMPLIANCE WITH SECURITIES LAWS. Upon the acquisition of any Shares pursuant to the exercise of the Option herein granted, the Option Holder or any person acting under Section 5(b) will enter into such written representations, warranties and agreements as the Company may reasonably request in order to comply with applicable securities laws or with this Agreement. 8. LEGENDS ON CERTIFICATES. The Certificates representing the Shares purchased by exercise of an Option will be stamped or otherwise imprinted with legends in such form as the Company or its counsel may require with respect to any applicable restrictions on sale or transfer and the stock transfer records of the Company will reflect stock-transfer instructions with respect to such shares. 9. WITHHOLDING. a. Arrangement for Withholding. The Option Holder hereby agrees to make appropriate arrangements with the Company to provide for the amount of additional tax withholding under Sections 3102 and 3402 of the Internal Revenue Code and applicable state income tax laws, if any, resulting from the exercise of the Option. If such arrangements are not made, the Company may refuse to issue any Shares to the Option Holder. b. Withholding Election. The Option Holder may elect to pay all such amounts of tax withholding, or any part thereof, by electing to transfer to the Company, or to have the Company withhold from shares otherwise issuable to the Option Holder, Shares having a value equal 4 5 to the amount required to be withheld or such lesser amount as may be elected by the Option Holder provided that all such elections shall be subject to the approval or disapproval of the Company's Board of Directors. The value of Shares to be withheld shall be based on the Designated Value of the Common Stock on the date that the amount of tax to be withheld is to be determined. 10. ACKNOWLEDGMENT OF OPTION HOLDER. The Option Holder acknowledges having received and read this Agreement and agrees to comply with all laws, rules and regulations applicable to the grant and exercise of the Option and the sale or other disposition of the Common Stock. 11. MISCELLANEOUS. a. Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be given by first class registered or certified mail, postage prepaid, or by personal delivery to the appropriate party, addressed: i. If to the Company, to the Company at its principal place of business at Alvin, Texas (Attention: Corporate Secretary) or at such other address as may have been furnished to the Option Holder in writing by the Company; or ii. If to the Option Holder, to the Option Holder at his address on file with the Company, or at such other address as may have been furnished to the Company by the Option Holder. Any such notice shall be deemed to have been given as of the fourth day after deposit in the United States Postal Service, postage prepaid, properly addressed as set forth above, in the case of mailed notice, or as of the date delivered in the case of personal delivery. b. Amendment. The Board of Directors may make any adjustment in the Option Price, the number of Shares subject to, or the terms of the Option by amendment or by substitution of an outstanding Option. Such amendment or substitution may result in terms and conditions (including Option Price, the number of Shares covered, Vesting Schedule or Option Period) that differ from the terms and conditions of this Option. The Board of Directors may not, however, adversely affect the rights of the Option Holder without the consent of the Option Holder. If such action is made by amendment, the effective date of such amendment will be the date of the original grant of this Option. Except as provided herein, this Agreement may not be amended or otherwise modified unless evidenced in writing and signed by the Company and the Option Holder. c. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law. d. Waiver. Any provision contained in this Agreement may be waived, either generally or in any particular instance, by the Company. 5 6 e. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Option Holder and their respective heirs, executors, administrators, legal representatives, successors and assigns. f. Rights to Employment. Nothing contained in this Agreement shall be construed as giving the Option Holder any right to be retained in the employ of the Company and this Agreement is limited solely to governing the rights and obligations of the Option Holder with respect to the Common Stock and the Option. g. Gender and Number. Except when otherwise indicated by the context, the masculine gender shall also include the feminine gender, and the definition of any term herein in the singular shall also include the plural. h. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. (i) "Fair Market Value" means the closing price of the Common Stock reported on the composite tape or other reporting medium (for securities listed on the American Stock Exchange or other primary market or exchange on which the Common Stock is traded) as of the relevant date; provided, however, that if the Common Stock does not trade on the relevant date, such price shall be determined based upon the closing price of the Common Stock on the next preceding date on which trades occurred; and provided further, however, that should the primary market or exchange on which the Common Stock is traded adopt a continuous twenty-four hour trading policy, "Fair Market Value" for purposes of this Plan shall mean the price of the Common Stock on the last trade prior to 4:30 p.m., New York time, on any relevant date. (j) Employment Agreement Controls. To the extent a conflict exists between the terms of this Agreement and the terms of the Employment Agreement, the terms of the Employment Agreement shall control. IN WITNESS WHEREOF, the parties have executed this Agreement on the date(s) set forth below. TEAM, INC. By: /s/ SIDNEY B. WILLIAMS ------------------------------------ Name: Sidney B. Williams Title: Director and Member of Executive Committee OPTION HOLDER /s/ PHILIP J. HAWK --------------------------------------- Philip J. Hawk 6 7 EXHIBIT A Vesting Schedule Vesting of the PVO Option covered by this Agreement shall occur when the public market price of the Shares achieves the following price levels:
LEVELS OPTION VESTED ------ ------------- LEVEL 1: - -------- At the end of any consecutive six (6) month period during which the average Closing Price (as hereafter defined) of the Common Stock throughout 331/3% such six (6) month period is $7.00 per share, provided that the Closing Price is also at least $7.00 per share at the end of such six (6) month period. LEVEL 2: - -------- At the end of any consecutive six (6) month period during which the average Closing Price (as hereafter defined) of the 662/3% Common Stock throughout such six (6) month period is $10.50 per share, provided that the Closing Price is also at least $10.50 per share at the end of such six (6) month period. LEVEL 3: - -------- At the end of any consecutive six (6) month period during which the average Closing Price (as hereafter 100% defined) of the Common Stock throughout such six (6) month period is $14.00 per share, provided that the Closing Price is also at least $14.00 per share at the end of such six (6) month period.
8 For purposes of this Agreement, "Closing Price" means the closing price of the Common Stock reported on the composite tape or other reporting medium (for securities listed on the American Stock Exchange or other primary market or exchange on which the Common Stock is traded), provided, however, that should the primary market or exchange on which the Common Stock is traded adopt a continuous twenty-four hour trading policy, "Fair Market Value" for purposes of this Agreement shall mean the price of the Common Stock on the last trade prior to 4:30 p.m., New York time, on any relevant date. In the event that an adjustment to the Option Price per share is made or required to be made pursuant to Section 4(a) of this Agreement, then the price level requirements in this Exhibit A shall also be appropriately adjusted. If the market price requirements for two or more previously unachieved vesting levels are achieved in a single six-month period, then the vesting of PVO Options for all such vesting levels achieved in such six-month period shall occur. 8 EX-10.5 7 STOCK PURCHASE AGREEMENT, DATED 11/02/98 1 EXHIBIT 10.5 STOCK PURCHASE AGREEMENT The undersigned, Team, Inc., a Texas corporation ("Team"), and Philip J. Hawk, an individual ("Hawk"), enter into this Stock Purchase Agreement to be effective as of the 2nd day of November, 1998 ("Effective Date"). WHEREAS, Team and Hawk (collectively, the "Parties") entered into a binding employment agreement (the "Employment Agreement") effective November 2, 1998 pursuant to which Team agreed to grant Hawk an option to purchase from Team up to 65,000 shares of Team's common stock, $0.30 par value ("Common Stock"), at a purchase price equal to the average of the high and low trading prices for Team Common Stock on the American Stock Exchange on November 2, 1998, less the number of shares of Common Stock of which Hawk is the Beneficial Owner after the consummation of this Agreement; and, WHEREAS, the high trading price for Team Common Stock on the American Stock Exchange on November 2, 1998 was $3.75 per share, the low trading price was $3.50 per share, and the average of the high and low trading prices is $3.625 per share (the "Purchase Price"); and, WHEREAS, in accordance with the Employment Agreement, Hawk has delivered notice to Team of his desire to purchase 45,000 shares of Common Stock (the "Team Stock") at the Purchase Price, for an aggregate amount of $163,125 to be paid in full upon the consummation of this Agreement (the "Transaction"); and, WHEREAS, the Parties hereby enter into this agreement ("Agreement") for the purpose of setting forth more fully their understandings with respect to the Transaction; NOW, THEREFORE, in consideration of the recitals, the mutual promises of the Parties and other good and valid consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows: 1. PURCHASE AND SALE OF TEAM STOCK. Upon the execution of this Agreement, Hawk shall purchase from Team and Team shall sell to Hawk the Team Stock for the aggregate amount of $163,125. Hawk shall deliver to Team payment of $163,125, and Team shall deliver to Hawk a Certificate for the Team Stock. 2. TEAM'S REPRESENTATIONS AND WARRANTIES. Team hereby represents and warrants to Hawk as follows: (a) Team has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of Team, enforceable in accordance with its terms and conditions. The Team Stock, when issued, shall be validly issued, fully paid and non-assessable; 2 (b) Team's most recent Form 10-K Report to the Securities Exchange Commission ("SEC"), its most recent Proxy Statement, and all reports filed by Team with the SEC since its most recent Form 10-K are true and correct in all material respects as of the date hereof. 3. HAWK'S REPRESENTATIONS AND WARRANTIES. Hawk represents and warrants to Team as follows: (a) Hawk is an "accredited investor" as such term is used in Regulation D of the Securities Act of 1933, as amended (the "Act") and hereby acknowledges that Team has delivered to him a copy of the Team documents mentioned in Section 2(b) above. (b) Hawk is acquiring the Team Stock for investment and not with a view to the distribution thereof; and, (c) Hawk has been represented by independent counsel in connection with this Agreement and the Transaction. 4. REGISTRATION RIGHTS. (a) Until the Team Stock is transferable pursuant to Rule 144 under the Act without the volume limitations set forth in such rule, Hawk shall have the right to include the Team Stock in any registration statement filed by Team for an underwritten public offering; provided, however, that the right of Hawk to include such Team Stock in such registration statement shall be conditioned upon Hawk's entering into such reasonable underwriting arrangements as Team and the underwriters shall make regarding the offering, including limiting the number of shares which may be sold in such offering if the underwriters deem such a limitation advisable, and provided further that, if such limitation is imposed, Team shall then reduce the number of shares of Team Stock being registered by Hawk on a pro rata basis with other holders of similar registration rights. Hawk shall pay his pro rata portion of the out-of-pocket registration and selling expenses in connection with the piggy-back rights exercised pursuant to this paragraph 4(a). (b) Hawk may at any time after the eighteenth (18th) month following the Closing Date make a one-time demand upon Team to file within 90 days after such written demand is made a shelf registration statement with the SEC on Form S-3 (or the comparable successor form to Form S-3) covering the resale of the shares of Team Stock owned by Hawk. The right to make such demand for registration is referred to herein as the "Demand Registration". Team shall use its reasonable best efforts to cause such registration statement to become effective as soon as practicable after the filing thereof. Team can defer the registration for an additional 90 days if the Team Board of Directors determines that such deferral would be in Team's best interest. Team agrees to take all reasonable steps necessary to keep the registration statement effective until the lesser of (A) two years after the effective date of the shelf registration or (B) until the shares of Team Stock covered by such registration statement are transferable pursuant to Rule 144 under the Act without the volume 2 3 limitations set forth in such rule. Hawk shall pay for all reasonable out-of-pocket expenses incurred in connection with any Demand Registration pursuant to this paragraph 4(b). 5. CONFIDENTIALITY. Each Party agrees to keep the terms of this Agreement confidential except to the extent that such Party shall be required by law to make disclosure hereof. 6. ENTIRE AGREEMENT. This Agreement sets forth the full agreement of the Parties and supersedes all other Agreements of the Parties concerning the subject matter hereof. 7. APPLICABLE LAWS. This Agreement shall be construed and enforceable under the laws of the State of Texas. In witness whereof the Parties have signed this Agreement as of the date first above written. TEAM, INC. By /s/ SIDNEY B. WILLIAMS ---------------------- /s/ Director ---------------------- /s/ PHILIP J. HAWK ---------------------- Philip J. Hawk 3 EX-10.6 8 EMPLOYMENT TERMINATION & CONSULTING AGREEMENT 1 EXHIBIT 10.6 EMPLOYMENT TERMINATION AND CONSULTING AGREEMENT This Employment Termination and Consulting Agreement ("Agreement") is entered into on the date set forth on the signature page hereof ("Effective Date"), by and between WILLIAM A. RYAN, an individual ("Ryan"), and TEAM, INC., a Texas corporation ("Team"). R E C I T A L S: WHEREAS, Ryan and Team are parties to that certain Employment and Consulting Agreement, dated effective as of June 1, 1997, as amended by that certain First Amendment to Employment Agreement, dated August 12, 1998, but effective as of June 1, 1998 (collectively, the "Employment Agreement"); and WHEREAS, Ryan and Team have mutually concluded that Ryan shall cease to serve as Team's Chief Executive Officer and as an employee of Team as of the Effective Date but that he shall continue to serve as a Director through the remainder of his current term and that he shall serve as a consultant to Team as provided more fully hereinafter. They have further agreed that, as of the Effective Date, the Employment Agreement shall be terminated in its entirety by this Agreement, except for the provisions of the Employment Agreement that are specifically preserved by this Agreement; NOW, THEREFORE, in consideration of the premises and the mutual promises set forth herein, and for other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, Ryan and Team hereby agree as follows: 2 A G R E E M E N T S: 1. TERMINATION OF EMPLOYMENT - SEVERANCE COMPENSATION. As of the Effective Date, Ryan shall cease to be an officer and employee of Team and its subsidiary companies. Ryan shall continue to receive monthly salary payments of $16,666.66 for the months of November and December, 1998, and for the month of January, 1999, but shall not thereafter be entitled to receive "Monthly Salary Payments" as that term is defined in Paragraph 1(a) of the Employment Agreement. 2. BONUS COMPENSATION - STOCK AWARD. Ryan shall in recognition of his past service to Team, as well as in recognition of his services in facilitating the smooth succession of Team to a new Chief Executive Officer, receive bonus compensation in the amount of $100,000, which sum will be paid on or before May 31, 1999 ("Bonus Date") if the Board of Directors determines that Ryan has cooperated with Team management and the Board of Directors in the transition to a new Chief Executive Officer. In addition, Ryan shall further be issued 15,000 shares of Team common stock, $0.30 par value per share, in recognition of his services as Chief Executive Officer of Team during the period commencing August 31, 1995 through the Effective Date. 3. POST EMPLOYMENT CONSULTING TERM. During the period commencing with the Effective Date and for a period of twelve (12) months thereafter, Team shall pay Ryan the sum of $8,333.33 per month and then for each of the next thirty-six (36) months thereafter shall make monthly payments to Ryan in the amount of 2 3 $6,250.00 each. Ryan hereby agrees to cooperate with Team's management and Board of Directors and to be available to Team's management and its Board of Directors throughout the period during which the payments are made under this Paragraph for the purposes of consulting about Team and its business. The payments due hereunder shall be due to Ryan's estate or personal representative in the event of his death or legal disability. 4. SURVIVAL OF PARAGRAPH 6 OF EMPLOYMENT AGREEMENT. Paragraph 6 of the Employment Agreement shall remain in full force and effect from and after the Effective Date until the expiration of the period provided in Paragraph 6. For purposes of this provision, the "Term" as used in Paragraph 6 of the Employment and in the paragraphs in the Employment Agreement that are covered by Paragraph 5 of this Agreement shall be deemed to terminate as of the Effective Date. 5. SURVIVAL OF OTHER PROVISIONS OF THE EMPLOYMENT AGREEMENT. Paragraphs 7 through 18 of the Employment Agreement are incorporated in this Agreement and shall remain in full force and effect from and after the Effective Date. Except as provided in Paragraph 4 hereof and this Paragraph 5, the Employment Agreement is hereby terminated in its entirety. 3 4 IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as of the 1st day of November, 1998. /s/ WILLIAM A. RYAN --------------------------------------- WILLIAM A. RYAN Address: 1410 SHERIDAN RD. -------------------------------------- WILMETTE, IL. 60091 -------------------------------------- TEAM, INC. By: /s/ SIDNEY B. WILLIAMS ----------------------------------- Name: Sidney B. Williams --------------------------------- Title: Director and Member of Executive -------------------------------- Committee -------------------------------- Address: 200 Hermann Drive Alvin, TX 77511 4 EX-27 9 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES OF TEAM, INC. AND SUBSIDIARIES FOR THE SIX MONTHS ENDED NOVEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS MAY-31-1999 JUN-01-1998 NOV-30-1998 0 0 10,299,000 237,000 8,672,000 20,672,000 25,336,000 12,590,000 38,594,000 6,832,000 11,590,000 0 0 2,265,000 17,907,000 38,594,000 0 25,260,000 0 14,634,000 9,543,000 0 305,000 778,000 379,000 399,000 0 0 0 399,000 0.05 0.05 Includes $1,343,000 for compensation accruals of former employees.
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