-----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, FtgEHrJ7z4wwVV7gpsbBqYKWa+g3zOZg52eXSgDRpeVcPySsdWOYZojBgAukd5ZH +gfaNDnk41x7lgfb+4Ji3A== 0000950129-97-003333.txt : 19970815 0000950129-97-003333.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950129-97-003333 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19970531 FILED AS OF DATE: 19970814 SROS: NONE 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-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-09950 FILM NUMBER: 97661185 BUSINESS ADDRESS: STREET 1: 1019 SOUTH HOOD STREET CITY: ALVIN STATE: TX ZIP: 77511 BUSINESS PHONE: 2813316154 MAIL ADDRESS: STREET 1: 1019 SOUTH HOOD STREET CITY: ALVIN STATE: TX ZIP: 77551 10-K405 1 TEAM, INC. - 5/31/97 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 --------------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MAY 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ____________ COMMISSION FILE NUMBER 0-9950 --------------------- TEAM, INC. (Exact name of registrant as specified in its charter) TEXAS 74-1765729 (State of incorporation) (I.R.S. Employer Identification No.) 1019 SOUTH HOOD STREET, ALVIN, TEXAS 77511 (Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (281) 331-6154 --------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- Common Stock, $.30 par value American Stock Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None --------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of August 6, 1997, 5,899,842 shares of the registrant's common stock were outstanding, and the aggregate market value of common stock held by non-affiliates of the registrant (based upon the closing sales price of common stock on the American Stock Exchange, Inc. on such date) was approximately $18,500,154. DOCUMENTS INCORPORATED BY REFERENCE Part III. Portions of the Definitive Proxy Statement for the 1997 Annual Meeting of Shareholders of Team, Inc. to be held October 30, 1997. ================================================================================ 2 FORM 10-K INDEX PART I
PAGE ---- Item 1. Business.................................................... 2 Item 2. Properties.................................................. 7 Item 3. Legal Proceedings........................................... 7 Item 4. Submission of Matters to a Vote of Security Holders......... 8 PART II Item 5. Market for Team's Common Equity and Related Stockholder Matters................................................... 8 Item 6. Selected Financial Data..................................... 10 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................. 11 Item 8. Consolidated Financial Statements and Supplementary Data.... 14 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................. 30 PART III Item 10. Directors and Executive and Other Officers of Team.......... 30 Item 11. Executive Compensation...................................... 30 Item 12. Security Ownership of Certain Beneficial Owners and Management................................................ 30 Item 13. Certain Relationships and Related Transactions.............. 30 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K....................................................... 30
3 PART I. ITEM 1. BUSINESS (a) General Development of Business Team, Inc. ("Team" or the "Company"), incorporated in 1973, is a professional full service provider of industrial repair services including leak repair, hot tapping, emissions control, concrete repair and energy management services. These services, which are the core of Team's operations, are provided by a subsidiary of the Company, Team Industrial Services, Inc. The Company, through its domestic subsidiaries, operates in 40 locations throughout the United States and two international subsidiaries in England and Trinidad. Additionally, certain industrial services are offered internationally by the Company through 14 licensees operating in 14 countries. The Company believes that the aging of industrial plants should result in increasing demand by the Company's customers for its industrial services. Additionally, the Company intends to expand its business by marketing more of its services to existing customers, marketing its services to new customers and expanding geographically, both domestically and internationally. Team may also increase its services through acquisitions or internal development of new services and technologies. In fiscal 1997, the Company's revenues were $43.7 million compared to $47.4 million in fiscal 1996. The Company's net profit from continuing operations net of income tax was $759,000 in fiscal 1997 as compared to a net loss from continuing operations of $8.7 million in the corresponding period of fiscal 1996. The prior year loss resulted primarily from a one-time after-tax charge of $8.5 million related to the writedown of certain assets as well as certain compensation arrangements with former employees. The improvement in net earnings from continuing operations reflects the continuing impact of cost reduction programs implemented in the prior year as well as the sale of the consulting and engineering division. The Company has extended and revised its bank credit agreement which provides a $10.0 million revolving line of credit of which $4.5 million was borrowed at May 31, 1997. See Note (7) of Notes to Consolidated Financial Statements for more detailed information concerning this credit facility and the Company's other indebtedness. The Company did not declare or pay a dividend in fiscal 1997. Pursuant to the Company's Credit Agreement, the Company may not pay quarterly dividends without the consent of its primary lender. Additionally, the declaration of future dividends will depend on the Company's financial condition, market conditions and other matters deemed relevant by the Board of Directors. (b) Narrative Description of Business INDUSTRIAL SERVICES General. The Company's industrial repair services are provided through Team Industrial Services, Inc. These services consist of leak repair, hot tapping, emissions control, concrete repair, as well as energy management. The Company is the leader in the industry in providing on-stream repairs of leaks in piping systems and related equipment. In conjunction with its leak repair services, the Company markets a line of products, which includes both standard and custom-designed clamps and enclosures for plant systems and pipelines. The Company's monitoring services provide fugitive emissions monitoring and reporting as required by the U.S. Environmental Protection Agency ("EPA") and state and local agencies. The Company provides these services for approximately 3,000 customers in the chemical, petrochemical, refining, pulp and paper, power, steel and other industries. 2 4 Below is a summary of revenues by service line as compared to the Company's consolidated revenues:
YEAR ENDED MAY 31, -------------------- 1997 1996 1995 ---- ---- ---- Leak Repair Services........................................ 69% 63% 60% Hot Tapping Services........................................ 12% 11% 7% Emissions Control Services.................................. 16% 24% 33% (Including consulting and engineering)
Team's industrial services operate through 40 domestic locations in 23 states and two international operating locations in England and Trinidad. In addition, certain services are offered by the Company internationally through licensees operating in 14 countries. Leak Repair Services. The Company's leak repair services consist of on-stream repairs of leaks in pipes, valves, flanges and other parts of piping systems and related equipment primarily in the chemical, refining and utility industries. The Company uses specially developed techniques, sealants and equipment for repairs. Many of the Company's repairs are furnished as interim measures which allow plant systems to continue operating until more permanent repairs can be made during scheduled plant shutdowns. The Company's leak repair services involve inspection of the leak by the Company's field crew who records pertinent information about the faulty part of the system and transmits the information to the Company's engineering department for determination of appropriate repair techniques. Repair materials such as clamps and enclosures are custom designed and manufactured at the Company's facility in Alvin, Texas and delivered to the job site. The Company maintains an inventory of raw materials and semi-finished clamps and enclosures to reduce the time required to manufacture the finished product. Installations of the clamps and enclosures for on-stream repair work are then performed by the field crew using, in large part, materials and sealants that are developed and produced by the Company. The Company's manufacturing center earned the international ISO-9001 certification for its engineering design and manufacturing operations this year. ISO-9001 is the most stringent of all ISO-9000 certification programs. The Company's non-destructive repair methods do not compromise the integrity of its customer's process system and can be performed in temperatures ranging from cryogenic to 1,700 degrees Fahrenheit and with pressures from vacuum to 6,000 pounds per square inch. The Company's proprietary sealants are specifically formulated to repair leaks involving over 300 different kinds of chemicals. Management attributes the success of its leak repair services to be substantially due to the quality and timely performance of its services by its highly skilled in-house trained technicians, its proprietary techniques and materials and its ability to repair leaks without shutting down the customer's operating system. On-stream repairs can prevent a customer's continued loss of energy or process materials through leaks, thereby avoiding costly energy and production losses that accompany equipment shutdowns, and also lessen fugitive emissions escaping into the atmosphere. The Company has continued to develop different types of standard and custom-designed clamps, enclosures and other repair products, which complement the Company's existing industrial market for leak repair services. The Company's leak repair services are supported by an in-house Quality Assurance/Quality Control program that monitors the design and manufacture of each product to assure material traceability on critical jobs and to ensure compliance with customers' requirements. Hot Tapping Services. The Company's hot tapping services consist primarily of hot tapping and Line-stop(R) services. Hot tapping services involve utilizing special equipment to cut a hole in an on-stream, pressurized pipeline so that a new line can be connected onto the existing line without interrupting operations. Hot tapping is frequently used for making branch connections into piping systems while the production process is operative. Line-stop(R) services permit the line to be depressurized downstream so that maintenance work can be performed on the piping system. The Company typically performs these services by mechanically drilling 3 5 and cutting into the pipeline and installing a device to stop the process flow. The Company also utilizes a line freezing procedure when applicable to stop the process flow using special equipment and techniques. Emissions Control Services. The Company also provides leak detection services that include fugitive emissions identification, monitoring, data management and reporting services primarily for the chemical, refining and natural gas processing industries. These services are designed to monitor and record emissions from specific process equipment components as requested by the customer, typically to assist the customer in establishing an ongoing maintenance program and/or complying with present and/or future environmental regulations. The Company prepares standard reports in conjunction with EPA requirements or can custom-design these reports to its customers' specifications. The Company is currently replacing the Teamware(R) software system with ELDAC's(R) to include new features that enhance the data management capabilities and allow for more useful customer interaction with their emissions program. Concrete Repair Services. Concrete repair is a complex process presenting unique challenges very different from those in new concrete construction. Concrete repairs must integrate new and old materials to form a composite capable of enduring the various exposures of use, the environment and time. Concrete repair is an integrative process of damage analysis, repair material and techniques selection and application. A thorough examination and evaluation of the concrete deterioration problem is performed by Team's highly trained and experienced concrete technician. Selection of the proper materials and methodology is custom designed to meet the specific requirements of each individual customer. Specialized crews are then assigned to perform the specified services, including general concrete surface repair, crack and expansion joint repair using chemical grouts, epoxy resins or sealants, and high-performance protective coating or lining systems. Energy Management Services. The Company's energy management procedures are performed by trained and experienced technicians. This program pinpoints energy losses as a result of failed or misapplied steam traps in a plant. In an analysis of a system, steam traps are tagged, monitored and surveyed using two of three methods -- visual, pyrometer or an ultrasonic listening device. The results of the analysis are reported in a detailed performance report that reflects the complete inventory, history, warranties, model, location, condition, etc. and inefficiencies for all the traps with the recommendation of an appropriate trap maintenance and corrective action, if necessary. The performance report can be customized to fit the needs of the facility. The Company's technicians provide complete turnkey maintenance programs and can pinpoint and quantify hidden, costly gas or vacuum leakage using a hand-held detector. Marketing and Customers. Team's industrial repair services are marketed principally by marketing and professional personnel based at the Company's various locations. These services are provided through the Company's 40 domestic locations. The Company has developed a cross-marketing program to utilize its sales personnel in offering many of the Company's services at its operating locations. Management believes that these operating and office locations are situated to facilitate timely response to customer needs, which is an important feature of its services. No customer accounted for 10% or more of consolidated Company revenues during any of the last three fiscal years. Generally, customers are billed on a time and materials basis although some work may be performed pursuant to a fixed-price bid. Emission control services are typically billed based on the number of components monitored. Services are usually performed pursuant to purchase orders issued under written customer agreements. While some purchase orders provide for the performance of a single job, others provide for services to be performed for a term of one year or less. In addition, Team is party to certain long-term contracts. Substantially all such agreements may be terminated by either party on short notice. The agreements generally specify the range of services to be performed and the hourly rates for labor. While contracts have traditionally been entered into for specific plants or locations over the past few years, the Company has entered into several regional or national contracts which cover multiple plants or locations. The Company's leak repair services are available 24 hours a day, seven days a week, 365 days a year. The Company typically provides various limited warranties for certain of its repair services. To date, there have been no significant warranty claims filed against the Company. 4 6 Business Strategy. The Company believes that the aging of its customers' plants should result in increasing demand for its industrial services. Additionally, the Company intends to expand its business by marketing more of its services to existing customers, new customers and expanding geographically, both domestically and internationally. Team may also increase its services through acquisitions, joint ventures, or internal development of new services and technologies. A variety of risks are inherent in this strategy. Marketing efforts may not generate increases in revenues as expected; although management believes sufficient qualified personnel are available in most areas, no assurance can be made that such personnel will be available when needed; growth may require additional capital that the Company may be unable to obtain; and the Company may be unable to develop profitable new services and technologies or acquire companies that provide such services on terms that permit an acceptable rate of return. Additionally, weak economics in the markets served by the Company may constrain market demand. Although the Company has a diversified customer base, a substantial portion of its business is dependent upon the chemical and refining industry sectors. No assurance can be given that the Company will be able to implement its business strategy. Competition. Competition in the Company's industrial services is primarily on the basis of service, product performance and price. In general, competition stems from other outside service contractors and customers' in-house maintenance departments. Team believes it has a competitive advantage due to its ability to perform quality leak repair services on a timely basis, using special techniques and materials, while the customers' equipment remains in service. Management believes Team has a competitive advantage over most outside service contractors due to its in-house and customer site-specific trained technicians who are approved for immediate entry into the customer's facility, proprietary sealant materials, 40 domestic locations and ISO-9001 quality procedures and specifications. If, however, customers emphasize price over service and product performance, the Company's competitive advantage may be impaired. Management knows of one outside service contractor of a similar size with which the Company generally competes for leak repair business. Other principal competitors are primarily regionally-based companies that compete within a certain geographical area. Miscellaneous. In general, the demand for the Company's leak repair services varies with the length of time between scheduled plant maintenance shutdowns. Also, the Company often experiences increased leak repair demand by customers in the winter due to the effect of weather conditions on piping systems and decreased leak repair demand in the late spring and summer due primarily to the timing of scheduled plant shutdowns. The demand for the Company's emissions control services varies with the level of regulatory requirements, operations of its customers and the energy or product cost savings that may result from the Company's services. To complement its leak repair operations in the United States, the Company has a wholly-owned subsidiary in the United Kingdom which operates as Team Industrial Services, Ltd. In addition, to date, the Company has entered into license agreements in North America, South America, Australia and the Pacific Rim and in Europe and the Mid-East through Teaminc Europe, B.V., a joint venture between Team and a Netherlands company, for the use of Team's leak repair technology. Most licensees are required to make a cash payment as initial consideration for the grant by the joint venture of the license. Substantially all licensees are required to make ongoing royalty payments, typically based on a percentage of its gross revenues from licensed operations. To date, revenues to the Company under these agreements have not been material. The Company is continuing to expand its services outside the United States and expects to pursue similar license agreements for the use of Company technology with other companies internationally. In addition, the Company is expanding the technology it provides under such license agreements to include fugitive emissions monitoring. Early during this fiscal year, the Company entered into a joint venture with a company in Trinidad and Tobago, West Indies to provide services to agrichemical, natural gas processing and oil refinery plants in Trinidad and anticipates expanding to neighboring islands of the Caribbean. Also, subsequent to year end, Team entered into a strategic business alliance with Armstrong International Inc. Armstrong is an important provider of specialized energy management technology around the world. Team will work with Armstrong on 5 7 specially engineered projects to provide the highly technical labor force needed to carry out these projects. The alliance thus blends the capabilities of one of the foremost equipment and technology suppliers with the expertise of the leading service provider, forming a market force with excellent potential for service and growth. From time-to-time in the operation of its environmental consulting and engineering services, the assets of which have been sold, the Company handled small quantities of certain hazardous wastes or other substances generated by its customers. Under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (the "Superfund Act"), the EPA is authorized to take administrative and judicial action to either cause parties who are responsible under the Superfund Act for cleaning up any unauthorized release of hazardous substances to do so, or to clean up such hazardous substances and to seek reimbursement of the costs thereof from the responsible parties, who are jointly and severally liable for such costs under the Superfund Act. The EPA may also bring suit for treble damages from responsible parties who unreasonably refuse to voluntarily participate in such a clean up or funding thereof. Responsible parties include anyone who owns or operates the facility where the release occurred (either currently and/or at the time such hazardous substances were disposed of), or who by contract arranges for disposal, treatment, or transportation for disposal or treatment of a hazardous substance, or who accepts hazardous substances for transport to disposal or treatment facilities selected by such person from which there is a release. Management believes that its risk of liability is minimized since its handling consisted solely of maintaining and storing small samples of materials for laboratory analysis that are classified as hazardous. The Company does not currently carry insurance to cover liabilities which the Company may incur under the Superfund Act or similar environmental statutes due to its prohibitive costs. MILITARY HOUSING PROJECTS The Company sold substantially all of the assets and liabilities of its Military Housing Projects to US National Housing Limited Partnership this year. The Military Housing Projects involved the development and construction of 150 single family homes in Portales, New Mexico, 300 units near Pensacola, Florida, and 250 units near Fort Bragg, North Carolina, for the Departments of the Air Force, Navy and Army, respectively. Management believes that with the sale of the Military Housing Projects, the Company can now concentrate on expanding and improving its core business, industrial services, and increasing its market share. The proceeds of the sale were used to reduce short and long-term debt as required by the Company's Credit Agreement. See Notes (2) and (7) of Notes to Consolidated Financial Statements for further information. GENERAL Employees. As of May 31, 1997, the Company and its subsidiaries had 486 employees in its operations, consisting of 189 salaried and 297 hourly personnel. The Company's employees are not unionized. There have been no employee work stoppages to date, and management believes its relations with its employees are good. Insurance. The Company carries insurance it believes to be appropriate for the businesses in which it is engaged. Under its insurance policies, the Company has per occurrence self-insured retention limits of $25,000 for general liability, $100,000 for professional liability, $250,000 for automobile liability and workers' compensation in most states. The Company has obtained fully insured layers of coverage above such self-retention limits. Since its inception, the Company has not been the subject of any significant liability claims not covered by insurance arising from the furnishing of its services or products to customers. However, because of the nature of the Company's business, there exists the risk that in the future such liability claims could be asserted which might not be covered by insurance. Regulation. Substantially all of the Company's business activities are subject to federal, state and local laws and regulations. These regulations are administered by various federal, state and local health and safety and environmental agencies and authorities, including the Occupational Safety and Health Administration ("OSHA") of the U.S. Department of Labor and the EPA. The Company's training programs are required to meet certain OSHA standards. Expenditures relating to such regulations are made in the normal course of the 6 8 Company's business and are neither material nor place the Company at any competitive disadvantage. The Company does not currently expect to expend material amounts for compliance with such laws during the ensuing two fiscal years. Patents. While the Company is the holder of various patents, trademarks, and licenses, the Company does not consider any individual property to be material to its consolidated business operations. ITEM 2. PROPERTIES Team and its subsidiaries own real estate and office facilities in the Alvin, Texas area totaling approximately 98,000 square feet of floor space. These facilities include administrative, manufacturing and training centers. The Company's manufacturing facility and training centers are pledged as security for a long-term note. See Note (7) of Notes to Consolidated Financial Statements for information regarding the term note. The Company and its subsidiaries also lease 32 office and/or plant and shop facilities at separate locations in 20 states. In addition, the Company owns real property and office facilities in Houston, Texas previously used in its discontinued infrastructure operations which is currently being leased to a third party pursuant to a long-term lease agreement. As of May 31, 1997, the Company owned or leased 201 light trucks which are primarily repair service trucks used in performing industrial repair services and 119 passenger cars used by the Company's salesmen, managers, officers and other employees primarily in sales, administrative and management functions. The Company believes that its property and equipment, as well as that of its subsidiaries, are adequate for its current needs, although additional investments are expected to be made in additional property and equipment for expansion, replacement of assets at the end of their useful lives and in connection with corporate development activities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note (9) of Notes to Consolidated Financial Statements for information regarding lease obligations on these properties. ITEM 3. LEGAL PROCEEDINGS Allstate Vacuum & Tanks, Inc. ("Allstate"), a former subsidiary of the Company, was identified in the mid-1980s as a potentially responsible party ("PRP") in connection with the Sheridan Disposal Superfund Site (the "Sheridan Site") near Hempstead, Texas. Allstate was ultimately classified as a PRP that had generated or delivered only de minimis amounts of waste to the Sheridan Site along with other small PRPs and was offered the opportunity to enter into a de minimis party settlement (the "Settlement Agreement") among various settling PRPs ("Settling PRPs"), including various small PRPs and the large waste volume PRPs (the "Major PRPs"). In September, 1989, the Company, on behalf of Allstate, entered into the Settlement Agreement and paid a total settlement amount of $101,700 to settle its liability and acquire indemnification from the Major PRPs against any remediation costs in excess of the settlement payment made by the Company. This Settlement Agreement remains in effect. The Settling PRPs also entered into a consent decree ("Consent Decree") with the EPA to resolve their liability in this matter in accordance with the Settlement Agreement. Such Consent Decree was filed in the United States District Court for the Southern District of Texas in December 1991. A Motion for Entry of the Consent Decree was filed by the EPA in March 1992, and various Amended Motions for Entry of Consent Decree were subsequently filed. One party, which was not a Settling PRP (the "Nonsettling PRP"), opposed the entry of the Consent Decree, principally because it had not been given the opportunity to join in the Consent Decree as a de minimis PRP. The waste allegedly generated by the Nonsettling PRP and disposed at the Sheridan Site allegedly contained PCBs, and the Settling PRPs wanted the Nonsettling PRP to pay a substantial share of the total Sheridan Site remediation costs because of the greater toxicity of PCB waste. In April 1996, the court rejected the Consent Decree. Notwithstanding the court's rejection of the Consent Decree, Allstate and the Company are of the opinion that they are indemnified under the Settlement Agreement for any potential liability remediation of the Sheridan Site in excess of the settlement payment 7 9 made in September 1989. To the Company's and Allstate's knowledge, no one, including any of the Settling PRPs, the EPA, or any third party, has asserted otherwise. On March 13, 1997, counsel for the Company had telephone conversations with an attorney in the Superfund Division of the EPA, Region 6, in Dallas, Texas and with an attorney who represents the Settling PRP group, both of whom confirmed that an agreement in principle has been reached with the Nonsettling PRP, whereby the Nonsettling PRP's potential liability for Sheridan Site remediation would be settled, the Nonsettling PRP would withdraw its objection to entry of the Consent Decree, and the Consent Decree would be resubmitted to the court for approval. In addition, the EPA informed the Company's counsel that the principal terms of the settlement agreement with the Nonsettling PRP have been outlined to the court and the judge has indicated that if the settlement agreement with the Nonsettling PRP is finalized and a Motion for Entry of the Consent Decree is refiled, the court will enter the Consent Decree. Based on all of the foregoing, the Company does not anticipate incurring any additional liability for the Sheridan Site. While the Company and certain subsidiaries are also involved in various lawsuits and subject to various claims and proceedings encountered in the normal conduct of business, in the opinion of management, any uninsured losses that might arise from these lawsuits and proceedings will not have a material adverse affect on the Company's consolidated financial statements. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of fiscal 1997. PART II. ITEM 5. MARKET FOR TEAM'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a) Market Information Team's common stock is traded on the American Stock Exchange, Inc. under the symbol "TMI". The table below reflects the high and low sales prices of the Company's common stock on the American Stock Exchange by fiscal quarter for the fiscal years ended May 31, 1997 and 1996, respectively.
SALES PRICE -------------- HIGH LOW ---- --- Fiscal 1997 Quarter Ended: August 31.............................................. $2 5/8 $1 3/4 November 30............................................ 1 7/8 1 1/2 February 28............................................ 1 15/16 1 1/2 May 31................................................. 1 15/16 1 1/2 Fiscal 1996 Quarter Ended: August 31.............................................. $2 3/4 $1 5/8 November 30............................................ 3 2 1/4 February 29............................................ 2 3/8 1 3/4 May 31................................................. 2 5/8 1 1/4
(b) Holders There were 488 holders of record of Team's common stock as of August 6, 1997, excluding beneficial owners of stock held in street name. Although exact information is unavailable, the Company estimates there are approximately 1,000 additional beneficial owners based upon information gathered in connection with proxy solicitation. 8 10 (c) Dividends No dividends were declared or paid in fiscal 1997 or fiscal 1996. Pursuant to the Company's Credit Agreement, the Company may not pay quarterly dividends without the consent of its primary lender. Additionally, future dividend payments will continue to depend on Team's financial condition, market conditions and other matters deemed relevant by the Board of Directors. (d) Recent Sales of Unregistered Securities (i) On May 21, 1997, the Company issued to Guy E. Matthews 90,000 shares of Common Stock in satisfaction of legal services that Mr. Matthews and his wholly-owned firm, Matthews & Associates, L.L.P., had performed for the Company. On June 30, 1997, the Company issued to Armstrong International, Inc. 650,000 shares of Common Stock for $3.00 per share. (ii) The Company did not use underwriters in either the sale to Mr. Matthews or the sale to Armstrong International. Inc. (iii) Mr. Matthews and his wholly-owned firm, Matthews & Associates, L.L.P., performed legal services for the Company, for which Mr. Matthews billed the Company approximately $357,000. The company entered into a Satisfaction Agreement (the "Satisfaction Agreement"), effective as of April 15, 1997, under which the Company and Mr. Matthews agreed that the Company satisfy the outstanding invoices for such legal services by (i) issuing 90,000 shares of Common Stock to Mr. Matthews and (ii) paying Mr. Matthews $20,000 in cash. The Company issued 650,000 shares of Common Stock to Armstrong International, Inc. in exchange for cash in the amount of $3.00 per share, for a total of $1,950,000, in accordance with the terms and conditions of the Stock Purchase Agreement, effective as of June 30, 1997 (the "Stock Purchase Agreement"). The Company paid no underwriting discounts or commissions in either the sale to Mr. Matthews or the sale to Armstrong International, Inc. (iv) The shares of Common Stock issued to Mr. Matthews and Armstrong International, Inc. respectively, were each issued in a private transaction exempt from registration under the Securities Act of 1933, as amended (the "Act"), pursuant to Section 4(2) thereof as a "transaction by an issuer not involving any public offering" in accordance with the terms of the issuance as set forth in the Satisfaction Agreement and the Stock Purchase Agreement, respectively. In issuing such shares in reliance on such exemption, the Company is relying upon representations and warranties of Mr. Matthews and Armstrong International, Inc. with respect to (i) their financial capacity, business experience, and business and legal advisors; (ii) the fact that they acquired these shares for investment purposes only and understood the transfer restrictions thereon; and (iii) the fact that they reviewed the information and materials about the Company and its shares made available by the Company in connection with its acquisition of such shares, which was personally negotiated at arms-length between each of Mr. Matthews and Armstrong International, Inc., on the one hand, and the Company on the other hand. (v) None of the unregistered securities sold to Mr. Matthews or Armstrong International, Inc. are convertible or exchangeable into other equity securities, nor do such unregistered securities constitute warrants or options. 9 11 ITEM 6. SELECTED FINANCIAL DATA The following is a summary of certain consolidated financial information regarding the Company for the five years ended May 31, 1997.
YEAR ENDED MAY 31, ----------------------------------------------- 1997 1996 1995 1994 1993 ------- ------- ------- ------- ------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues......................................... $43,655 $47,449 $50,816 $56,891 $63,716 ======= ======= ======= ======= ======= Earnings (Loss) from Continuing Operations, Net of Income Taxes................................ $ 759 $(8,744) $(1,105) $ 935 $ 604 Earnings (Loss) from Discontinued Operations, Net of Income Taxes................................ 1 (534) (4,869) (1,254) 1,277 ------- ------- ------- ------- ------- Net Earnings (Loss).............................. $ 760 $(9,278) $(5,974) $ (319) $ 1,881 ======= ======= ======= ======= ======= Earnings (Loss) Per Common Share: Earnings (Loss) from Continuing Operations..... $ 0.15 $ (1.70) $ (0.22) $ 0.18 $ 0.12 Earnings (Loss) from Discontinued Operations... 0.00 (0.10) (0.94) (0.24) 0.25 ------- ------- ------- ------- ------- Net Earnings (Loss)............................ $ 0.15 $ (1.80) $ (1.16) $ (0.06) $ 0.37 ======= ======= ======= ======= ======= Weighted Average Shares Outstanding.............. 5,162 5,161 5,160 5,164 5,151 Funds Provided by (Used In) Continuing Operations (Net Earnings (Loss) Plus Depreciation, Amortization, Change in Non-current Deferred Taxes and Writedown of Assets)................. $ 2,529 $ (985) $ 2,391 $ 3,121 $ 2,833 Cash Dividend Declared Per Common Share.......... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.75
MAY 31, ----------------------------------------------- 1997 1996 1995 1994 1993 ------- ------- ------- ------- ------- (IN THOUSANDS) Balance Sheet Data Total Assets................................... $24,068 $28,926 $38,631 $58,855 $64,760 Long-term Debt................................. 7,601 11,754 13,627 21,001 22,156 Stockholders' Equity........................... 11,963 11,045 20,323 26,297 26,608 Working Capital................................ 11,509 10,644 14,874 11,044 10,029
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS "Management's Discussion and Analysis of Financial Condition and Results of Operations" has been restated for all periods discussed to exclude the Company's discontinued Military Housing Projects' operations. For information regarding dispositions made by the Company, refer to Note (2) of Notes to Consolidated Financial Statements. OVERVIEW Team, Inc. provides on-stream leak repair and related industrial services for piping systems and process equipment as well as environmental monitoring services primarily in the United States, the United Kingdom and Trinidad. With the completion of the sale of the Military Housing Projects' operations, the Company now operates as a single business segment. Net earnings from continuing operations for fiscal 1997 was $759,000 compared to a net loss of $8.7 million and $1.1 million for fiscal 1996 and 1995 respectively. Net income (loss) per common share from continuing operations was $0.15, $(1.70) and $(0.22) for fiscal 1997, 1996 and 1995, respectively. 10 12 The following table identifies certain relationships with consolidated revenue as percentages:
FISCAL YEAR --------------------------- 1997 1996 1995 ----- ----- ----- Revenue................................................. 100.0% 100.0% 100.0% Cost and Expenses: Cost of operations.................................... (56.4) (58.0) (56.7) ----- ----- ----- Gross profit.......................................... 43.6 42.0 43.3 Selling, general and administrative expenses.......... (38.0) (44.4) (40.1) Interest expense...................................... (2.1) (2.5) (2.9) Writedown of assets................................... -- (16.2) (2.8) ----- ----- ----- Earnings (loss) from continuing operations before income taxes................................................. 3.5 (21.1) (2.5) Income taxes (benefit).................................. 1.7 (2.7) (0.4) ----- ----- ----- Net earnings (loss) from continuing operation........... 1.8% (18.4)% (2.1)% ===== ===== =====
FISCAL 1997 COMPARED TO FISCAL 1996 The Company's revenues for fiscal 1997 totaled $43.7 million, 8% lower than revenues of $47.4 million reported in the prior fiscal year. This decline in revenues is primarily the result of the sale in May 1996 of the consulting and engineering division as well as lower demand for emissions monitoring services. These declines were partially offset by increases in the Company's leak repair, hot tapping, concrete repair and energy management services. Operating expenses declined by 10% from fiscal 1996 to fiscal 1997 primarily due to lower personnel costs as a result of the sale of the consulting and engineering division. Accordingly, gross margins improved from 42.0% to 43.6%. Excluding the $2.4 million non-recurring, pre-tax charge in the prior year (which related primarily to certain compensation agreements with former employees), selling, general and administrative expenses ("SG&A"), decreased $2.1 million, or 11%. This decrease in SG&A reflected the continuing impact of cost reduction programs implemented during the prior fiscal year as well as the sale of the consulting and engineering division where lower personnel, insurance and general expenses have occurred. The decline in interest expense resulted from reduced debt levels in fiscal year 1997. Net earnings from continuing operations for the 1997 fiscal year were $759,000, or $0.15 per share. This compares to the prior year net loss of $8.7 million, or $1.70 per share, of which $6.9 million was attributable to the writedown of assets and $1.6 million was attributable to non-recurring general and administrative expenses as mentioned above. The Company's effective income tax rate for the year ended May 31, 1997, was 49.9%. The effective tax rate was higher than the statutory federal rate of 34% primarily due to the effect of state income taxes and the non-deductibility of a portion of meal and entertainment expenses. FISCAL 1996 COMPARED TO FISCAL 1995 For the fiscal year ended May 31, 1996, the Company's revenues from continuing operations totaled $47.4 million, 7% lower than revenues of $50.8 million reported in the prior fiscal year. This decrease resulted from lower revenues from the Company's emissions monitoring and environmental consulting and engineering services primarily as a result of reduced reporting requirements by many of the Company's customers due to the slowdown in environmental regulatory activity. In addition, some of the Company's customers implemented internal reporting for emissions control services. The Company's leak repair services remained stable while its hot tapping services increased. Operating expenses declined by 4% from fiscal 1995 to fiscal 1996, primarily due to lower personnel related costs. Gross margins declined from 43.3% to 42.0%, as the Company was not able to reduce costs sufficiently to offset the decline in revenues. Selling, general and administrative expenses were $21.1 million for fiscal year 1996 compared to $20.4 million in the prior year. The Company incurred one-time charges of 11 13 approximately $2.4 million of general and administrative expenses that related primarily to certain compensation arrangements with former employees. This increase was somewhat offset by the restructuring and relocation of its corporate office which resulted in lower personnel and general office costs. Interest expense of $1.2 million was 20% lower than in fiscal 1995 due to reduced average borrowing levels as well as lower interest rates. The writedown of assets of $7.7 million primarily reflected a $5.3 million write-off of goodwill pertaining to the environmental engineering and consulting services business, a $400,000 write-off of obsolete inventory and a reserve of $1.7 million for a note receivable obtained in the sale of a former business segment. Including the effect of the $10.1 million writedown of assets and other one-time charges recorded in the third and fourth quarters of fiscal year 1996, the loss before taxes was $10.0 million compared to a $1.3 million loss in the prior year. The net loss from continuing operations for the 1996 fiscal year was $8.7 million of which $6.9 million is attributed to the writedown of assets and $1.6 million is attributed to non-recurring general and administrative expenses related primarily to compensation arrangements with former employees recorded in the third quarter. This compares to the net loss from continuing operations for the 1995 fiscal year of $1.1 million, of which $938,000 was attributed to the writedown of assets. The net loss for fiscal 1996 was $9.3 million compared to the overall net losses of $6.0 million in the prior year including the operating losses and losses on the sales of discontinued operations. MILITARY HOUSING PROJECTS -- DISCONTINUED OPERATIONS In the first quarter of fiscal 1997, the Company entered into an Agreement of Purchase and Sale with respect to the sale of the Company's 801 Military Housing Projects, recorded the segment as discontinued operations and reported a loss on the sale of $181,000, net of income taxes. In May 1997, the Company consummated the sale of substantially all of the assets and liabilities of its housing projects. Proceeds of this disposition amounted to approximately $3.2 million and were used primarily to reduce the Company's long-term debt. LIQUIDITY AND CAPITAL RESOURCES At May 31, 1997, the Company's working capital totaled $11.5 million, an increase of $865,000 from working capital of $10.6 million a year earlier. The Company has been able to finance its working capital requirements through its internally generated cash flow and the sale of its discontinued businesses and assets. In April 1997, the Company and its primary bank amended and extended the terms of its credit agreement effective February 28, 1997. The agreement, as amended, consisted of a $1.3 million term loan, payable in quarterly installments of $350,000 and a $10.0 million revolving line of credit due December 31, 1998. At May 31, 1997, the amount outstanding under the revolving line of credit was $4.5 million and $2.3 million was available for borrowing under the terms of the agreement. The company's indebtedness at May 31, 1997, showed significant improvement with total debt reductions of $5.6 million. The term loan was paid in full during the year. As of May 31, 1997, cash and cash equivalents totaled $1.7 million decreasing $365,000 from the prior year. This decrease in cash resulted mainly from $6.3 million used in the Company's financing activities, offset by $3.9 million provided by the Company's operating activities and $2.0 million provided by the Company's investing activities. See Team's "Consolidated Statements of Cash Flows" for additional detail. Management expects that capital expenditures which are intended to provide for normal replacement of assets and new assets to support planned growth will approximate $1.5 million for fiscal 1998. In the opinion of management, the Company currently has sufficient funds and adequate financial sources available to meet its anticipated liquidity needs. Management believes that cash flow from operations, cash balances and available borrowings will be sufficient for the foreseeable future to finance anticipated working capital requirements, capital expenditures and debt service requirements. 12 14 Subsequent to year-end, the Company completed the sale of 650,000 shares of Team's common stock for $3.00 per share to Armstrong International, Inc. ("Armstrong") in a private placement transaction. Armstrong now owns approximately 10% of the Company's outstanding common shares on a fully diluted basis. Proceeds from the sale were used to further reduce the Company's long-term debt. The Company also entered into an Alliance Agreement with Armstrong to provide certain specialized energy management and other industrial services to new and shared customers. 13 15 ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders of Team, Inc. Houston, Texas We have audited the accompanying consolidated balance sheets of Team, Inc. and subsidiaries as of May 31, 1997 and 1996, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended May 31, 1997. Our audits also included the financial statement schedule listed in the Index at Item 14(a)(2). These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Team, Inc. and subsidiaries as of May 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended May 31, 1997 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Houston, Texas July 10, 1997 14 16 TEAM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS
MAY 31, ----------------------------- 1997 1996 ------------- ------------- Current Assets: Cash and cash equivalents............................... $ 1,672,000 $ 2,037,000 Receivables............................................. 7,211,000 8,140,000 Materials and supplies.................................. 6,310,000 5,748,000 Prepaid expenses and other current assets............... 820,000 846,000 ------------- ------------- Total Current Assets............................ 16,013,000 16,771,000 Net Assets of Discontinued Operations..................... -- 3,503,000 Property, Plant and Equipment: Land and buildings...................................... 6,526,000 6,874,000 Machinery and equipment................................. 11,292,000 11,088,000 ------------- ------------- 17,818,000 17,962,000 Less accumulated depreciation and amortization.......... 12,010,000 12,197,000 ------------- ------------- 5,808,000 5,765,000 Other Assets.............................................. 2,247,000 2,887,000 ------------- ------------- Total Assets.................................... $ 24,068,000 $ 28,926,000 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt....................... $ 300,000 $ 1,735,000 Accounts payable........................................ 740,000 846,000 Other accrued liabilities............................... 3,298,000 3,546,000 Current income taxes payable............................ 166,000 -- ------------- ------------- Total Current Liabilities....................... 4,504,000 6,127,000 Long-term Debt and Other.................................. 7,601,000 11,754,000 Stockholders' Equity: Preferred stock, cumulative, par value $100 per share, 500,000 shares authorized, none issued............... -- -- Common stock, par value $.30 per share, 10,000,000 shares authorized and 5,259,542 and 5,169,542 shares issued at May 31, 1997 and 1996...................... 1,578,000 1,551,000 Additional paid-in capital.............................. 25,123,000 24,992,000 Accumulated deficit..................................... (14,641,000 (15,401,000) Less treasury stock at cost, 9,700 shares at May 31, 1997 and 1996........................................ (97,000) (97,000) ------------- ------------- Total Stockholders' Equity...................... 11,963,000 11,045,000 ------------- ------------- Total Liabilities and Stockholders' Equity...... $ 24,068,000 $ 28,926,000 ============= =============
See notes to consolidated financial statements. 15 17 TEAM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED MAY 31, ------------------------------------------- 1997 1996 1995 ------------ ------------- ------------ Revenues....................................... $ 43,655,000 $ 47,449,000 $ 50,816,000 Operating expenses............................. 24,634,000 27,523,000 28,801,000 Selling, general and administrative expenses... 16,579,000 21,084,000 20,401,000 Interest....................................... 927,000 1,188,000 1,485,000 Writedown of assets............................ -- 7,697,000 1,421,000 ------------ ------------- ------------ Earnings (loss) from continuing operations before income taxes.......................... $ 1,515,000 $ (10,043,000) $ (1,292,000) Provision (benefit) for income taxes........... 756,000 (1,299,000) (187,000) ------------ ------------- ------------ Earnings (loss) from continuing operations, net of income taxes.............................. 759,000 (8,744,000) (1,105,000) Earnings (loss) from discontinued operations, net of income taxes.......................... 1,000 (534,000) (4,869,000) ------------ ------------- ------------ Net earnings (loss)............................ $ 760,000 $ (9,278,000) $ (5,974,000) ============ ============= ============ Net earnings (loss) per common share: Net earnings (loss) from continuing operations................................ $ 0.15 $ (1.70) $ (0.22) Net earnings (loss) from discontinued operations................................ 0.00 (0.10) (0.94) ------------ ------------- ------------ Net earning (loss)............................. $ 0.15 $ (1.80) $ (1.16) ============ ============= ============ Weighted average number of shares outstanding.................................. 5,162,000 5,161,000 5,160,000 ============ ============= ============
See notes to consolidated financial statements. 16 18 TEAM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
MAY 31, ---------------------------------------------- 1997 1996 1995 ------------- ------------- ------------ COMMON STOCK: Balance at beginning of year................. $ 1,551,000 $ 1,551,000 $ 1,551,000 Shares exchanged for services................ 27,000 -- -- ------------- ------------- ------------ Balance at end of year....................... $ 1,578,000 $ 1,551,000 $ 1,551,000 ============= ============= ============ ADDITIONAL PAID-IN CAPITAL: Balance at beginning of year................. $ 24,992,000 $ 24,992,000 $ 24,992,000 Shares exchanged for services................ 131,000 -- -- ------------- ------------- ------------ Balance at end of year....................... $ 25,123,000 $ 24,992,000 $ 24,992,000 ============= ============= ============ RETAINED EARNINGS (ACCUMULATED DEFICIT): Balance at beginning of year................. $ (15,401,000) $ (6,123,000) $ (149,000) Net earnings (loss).......................... 760,000 (9,278,000) (5,974,000) ------------- ------------- ------------ Balance at end of year....................... $ (14,641,000) $ (15,401,000) $ (6,123,000) ============= ============= ============ TREASURY STOCK: Balance at beginning of year................. $ (97,000) $ (97,000) $ (97,000) ------------- ------------- ------------ Balance at end of year....................... $ (97,000) $ (97,000) $ (97,000) ============= ============= ============
See notes to consolidated financial statements 17 19 TEAM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED MAY 31, --------------------------------------------- 1997 1996 1995 ------------ ------------ ------------- Cash Flows From Operating Activities: Net earnings (loss)........................... $ 760,000 $ (9,278,000) $ (5,974,000) (Earnings) loss from discontinued operations................................. (1,000) 534,000 4,869,000 ------------ ------------ ------------- Net earnings (loss)from continuing operations................................. 759,000 (8,744,000) (1,105,000) Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization.............. 1,385,000 1,985,000 2,508,000 Provision for doubtful accounts............ -- -- 233,000 Gain on sale of assets..................... (21,000) (23,000) -- Writedown of assets........................ -- 7,697,000 1,421,000 Noncurrent deferred income taxes........... 385,000 (1,923,000) (433,000) Change in other long-term obligations...... (354,000) 1,782,000 -- Change in assets and liabilities: (Increase) decrease: Accounts receivable................... 929,000 261,000 1,762,000 Materials and supplies................ (562,000) 493,000 986,000 Prepaid expenses and other assets..... 26,000 528,000 (298,000) Increase (decrease): Accounts payable...................... (106,000) 119,000 (2,655,000) Other accrued liabilities............. (90,000) 686,000 (971,000) Income taxes payable.................. 166,000 -- (659,000) ------------ ------------ ------------- Net cash provided by continuing operating activities.................................... 2,517,000 2,861,000 789,000 Cash Flows From Discontinued Operations: Earnings (loss)............................... 1,000 (534,000) (4,869,000) Depreciation.................................. 1,336,000 1,458,000 2,217,000 Loss on sale of assets........................ -- -- 13,000 Writedown of assets........................... -- -- 5,423,000 (Increase) decrease in current assets......... (3,000) 139,000 831,000 Increase (decrease) in current liabilities.... 84,000 54,000 (1,972,000) ------------ ------------ ------------- Net cash provided by discontinued operating activities.................................... 1,418,000 1,117,000 1,643,000 ------------ ------------ ------------- Net cash provided by operating activities....... 3,935,000 3,978,000 2,432,000 Cash Flows From Investing Activities: Capital expenditures.......................... (1,393,000) (788,000) (413,000) Disposal of property and equipment............ 188,000 115,000 28,000 Decrease in other assets...................... 53,000 309,000 391,000 Capital expenditures -- discontinued operations................................. -- -- (198,000) Net proceeds from sale of discontinued operations................................. 3,127,000 -- 8,254,000 ------------ ------------ ------------- Net cash provided by (used in) investing activities.................................... $ 1,975,000 $ (364,000) $ 8,062,000
(Table continued on following page) See notes to consolidated financial statements. 18 20 TEAM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
YEAR ENDED MAY 31, --------------------------------------------- 1997 1996 1995 ------------ ------------ ------------- Cash Flows From Financing Activities: Payments under debt agreements and capital lease obligations -- continuing operations................................. $ (5,234,000) $ (3,759,000) $ (10,391,000) Proceeds from issuance of debt................ -- -- 204,000 Principal payments under debt agreements -- discontinued operations.................... (1,041,000) (957,000) (881,000) ------------ ------------ ------------- Net cash used in financing activities........... (6,275,000) (4,716,000) (11,068,000) ------------ ------------ ------------- Net decrease in cash and cash equivalents....... (365,000) (1,102,000) (574,000) Cash and cash equivalents at beginning of year.......................................... 2,037,000 3,139,000 3,713,000 ------------ ------------ ------------- Cash and cash equivalents at end of year........ $ 1,672,000 $ 2,037,000 $ 3,139,000 ============ ============ ============= Supplemental disclosure of cash flow information: Cash paid during the period for interest: Operating.................................. $ 929,000 $ 1,201,000 $ 1,667,000 Discontinued............................... 3,274,000 3,376,000 3,433,000 ------------ ------------ ------------- $ 4,203,000 $ 4,577,000 $ 5,100,000 ============ ============ ============= Income taxes paid............................... $ 84,000 $ 31,000 $ 645,000 ============ ============ ============= Income taxes refunded........................... $ 4,000 $ 797,000 $ 875,000 ============ ============ =============
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: During 1997, 90,000 shares of the Company's common stock valued at $158,000 were exchanged for services rendered. During 1996 and 1995 equipment and software acquired under capital lease obligations were $495,000 and $254,000, respectively. During 1995 the Company received $1,700,000 in promissory notes in connection with the sale of Infrastructure Services, Inc. See notes to consolidated financial statements. 19 21 TEAM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements of Team, Inc. (the "Company") include the financial statements of the Company and its subsidiaries. All significant intercompany transactions have been eliminated. Use of Estimates in Financial Statement Preparation The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company's financial statements include amounts that are based on management's best estimates and judgments. Actual results could differ from those estimates. Materials and Supplies Materials and supplies are stated at the lower of cost (first-in, first-out method) or market. Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization of assets are computed by the straight-line method over the following estimated useful lives:
CLASSIFICATION LIFE -------------- ---- Buildings................................................... 20-25 years Machinery and equipment..................................... 2-10 years
Revenue Recognition The Company recognizes revenue when services are rendered. Income Taxes The Company accounts for taxes on income using the asset and liability method wherein deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities using enacted rates. Concentration of Credit Risk The Company provides services to the chemical, petrochemical, refining, pulp and paper, power and steel industries throughout the United States. Although the Company has a diversified customer base, a substantial portion of its business is dependent upon the chemical and refining industry sectors. Earnings Per Share Earnings per common and common equivalent share for fiscal 1997, 1996 and 1995 were computed using 5,162,000, 5,160,000 and 5,160,000 weighted average common shares outstanding during each of the respective years plus 0, 1,000 and 0 weighted average shares applicable to common stock equivalents, respectively. Common stock equivalents are based on the assumed issuance of common stock for dilutive options, net of assumed repurchase of common shares based on the treasury stock method. 20 22 TEAM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Statement of Cash Flows For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Dividends No dividends were paid during the current or prior two fiscal years. 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. Fair Value of Financial Instruments The fair value of cash and cash equivalents, receivables and accounts payable approximate their carrying amounts because of the short maturity of those instruments. The fair value of the Company's long-term debt is estimated based on the current rates available to the Company for instruments with similar terms and maturities. Accounting Changes The Company will adopt SFAS No. 128, "Earnings per Share" in 1998. Issued in February 1997, SFAS No. 128 specifies the computation, presentation and disclosure requirements for earnings per share. The adoption of the new standard is not expected to have a material impact on the Company's earnings per share calculation. Restatement The financial statements and related footnotes have been restated to reflect the Military Housing Projects segment as discontinued operations. See Note (2). Also, certain amounts from previous years have been reclassified to conform to the 1997 presentation. 2. DIVESTITURES AND DISCONTINUED OPERATIONS In May 1997, the Company sold substantially all of the assets of its Military Housing Projects segment. Proceeds of this divestiture amounted to approximately $3.2 million and were used primarily to reduce the Company's long-term debt. A summary of the discontinued Military Housing Projects' assets and liabilities as of May 31, 1997 and 1996 follows:
MAY 31 ----------------------------- 1997 1996 ------------- ------------- Assets: Current assets.................................. $ -- $ 2,890,000 Land and buildings, net......................... -- 41,123,000 ------------- ------------- -- 44,013,000 Liabilities: Current liabilities............................. -- 1,745,000 Long-term debt.................................. -- 38,765,000 ------------- ------------- -- 40,510,000 ------------- ------------- Net Assets...................................... $ -- $ 3,503,000 ============= =============
21 23 TEAM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A summary of the results of discontinued Military Housing Projects' operations for each of the three years ended May 31, 1997, 1996 and 1995 are as follows:
MAY 31, ----------------------------------------- 1997 1996 1995 ----------- ----------- ----------- Revenues.................................... $ 5,005,000 $ 5,036,000 $ 4,914,000 Operating expenses.......................... (2,136,000) (2,198,000) (2,061,000) General and administrative expenses......... (85,000) (415,000) (1,357,000) Interest expense............................ (3,172,000) (3,359,000) (3,405,000) Writedown of assets......................... -- -- (4,832,000) Interest and other income................... 664,000 126,000 160,000 ----------- ----------- ----------- Earnings (loss) before income taxes......... 276,000 (810,000) (6,581,000) Provision (benefit) for income taxes........ 94,000 (276,000) (2,238,000) ----------- ----------- ----------- Net earnings (loss)......................... $ 182,000 $ (534,000) $(4,343,000) =========== =========== ===========
The loss charged to current year earnings in connection with the sale of the Military Housing Projects was $181,000, net of income tax benefit. Effective May 31, 1996, the Company sold substantially all of the assets of its Environmental Engineering and Consulting Division, which had a carrying value of approximately $111,000 with no gain or loss being recognized. In April 1995, the Company sold substantially all of the assets of its Transportation Services segment and recognized a gain of $444,000 net of income taxes of $287,000. Proceeds from this divestiture amounted to approximately $3.7 million and were used primarily to reduce the Company's long-term debt. In July 1994, the Company sold substantially all of the assets of Infrastructure Services, Inc. The purchase price consisted of $4,550,000 in cash and a subordinated promissory note in the principal amount of $1,700,000. The cash proceeds from the sale were used to reduce the Company's term loan with its primary lender. In the second quarter of fiscal 1995 the Company recognized an additional loss of $457,000 net of income tax benefit of $236,000 for the disposition of this discontinued operation. As of May 31, 1996, the full amount of the note and all unpaid accrued interest were fully reserved. (See Note 3) 3. PRE-TAX CHARGES For fiscal year 1996, the loss from continuing operations included pre-tax charges of $7,697,000 representing writedowns in the carrying value of certain of the Company's assets. This charge primarily reflected the $5,347,000 write-off of goodwill as it pertained to the Environmental Consulting and Engineering Division and a $400,000 write-off of obsolete inventory. The charge also included the reserve of a $1,700,000 note receivable obtained in the sale of a former business segment. In addition, the Company recorded $2,423,000 of additional general and administrative expenses which relate primarily to certain compensation arrangements with former employees and reversed $57,000 of accrued but unpaid interest receivable on the above mentioned note receivable. The loss from continuing operations for fiscal 1995 included pre-tax charges of $1,421,000 which were primarily to write down the value of certain assets and to record provisions for certain deferred charges and account receivable losses. 22 24 TEAM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4. RECEIVABLES Receivables consist of:
MAY 31, ------------------------ 1997 1996 ---------- ---------- Trade accounts receivable................................... $7,079,000 $8,049,000 Other receivables........................................... 193,000 262,000 Allowance for doubtful accounts............................. (61,000) (171,000) ---------- ---------- Total............................................. $7,211,000 $8,140,000 ========== ==========
5. OTHER ACCRUED LIABILITIES Other accrued liabilities consist of:
MAY 31, ------------------------ 1997 1996 ---------- ---------- Payroll and other compensation expenses..................... $1,452,000 $1,448,000 Insurance accruals.......................................... 992,000 1,096,000 Other....................................................... 854,000 1,002,000 ---------- ---------- Total............................................. $3,298,000 $3,546,000 ========== ==========
6. INCOME TAXES The provisions for federal and state income taxes attributable to pre-tax earnings from continuing operations are as follows:
YEAR ENDED MAY 31, ------------------------------------ 1997 1996 1995 -------- ----------- --------- Federal income taxes: Current....................................... $ 63,000 $ 235,000 $ 533,000 Deferred...................................... 586,000 (1,525,000) (867,000) State income taxes: Current....................................... 162,000 -- 68,000 Deferred...................................... (55,000) (9,000) 79,000 -------- ----------- --------- Total................................. $756,000 $(1,299,000) $(187,000) ======== =========== =========
A reconciliation between income taxes related to earnings from continuing operations before income taxes and income taxes computed by applying the statutory federal income tax rate to such earnings follows:
YEAR ENDED MAY 31, ----------------------------------------- 1997 1996 1995 ---------- ------------ ----------- Earnings (loss) from continuing operations before federal income taxes............... $1,515,000 $(10,043,000) $(1,292,000) ========== ============ =========== Computed income taxes at statutory rate..... $ 515,000 $ (3,414,000) $ (439,000) Goodwill amortization....................... -- 1,843,000 147,000 State income taxes, net of federal tax benefit................................... 71,000 (6,000) 97,000 Other....................................... 170,000 278,000 8,000 ---------- ------------ ----------- Total............................. $ 756,000 $ (1,299,000) $ (187,000) ========== ============ ===========
23 25 TEAM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A summary of the significant components of the Company's deferred tax assets and liabilities follows:
YEAR ENDED MAY 31, ------------------------- 1997 1996 ---------- ----------- Accounts receivables....................................... $ (52,000) $ (15,000) Tax over book depreciation................................. 145,000 (1,271,000) Other...................................................... (148,000) (49,000) ---------- ----------- Gross deferred liabilities................................. (55,000) (1,335,000) ---------- ----------- Note Receivable............................................ -- 559,000 Non-deductible accrued expenses............................ 1,163,000 1,399,000 Inventory.................................................. 182,000 95,000 Net operating loss carry over.............................. 456,000 1,356,000 AMT and foreign tax credit................................. 138,000 73,000 Other...................................................... -- 268,000 ---------- ----------- Gross deferred assets...................................... 1,939,000 3,750,000 ---------- ----------- Net deferred taxes......................................... $1,884,000 $ 2,415,000 ========== ===========
No valuation account is required for the deferred tax assets as the Company is projecting profitable fiscal years in the future thereby utilizing the net operating loss carryforward asset. Also, most of the asset represents timing differences on certain accruals that will reverse over a period of less than 10 years. Net deferred tax assets are classified in the consolidated balance sheets as follows:
YEAR ENDED MAY 31, ------------------------ 1997 1996 ---------- ---------- Prepaid expenses and other current assets................... $ 258,000 $ 404,000 Other assets................................................ 1,626,000 2,011,000 ---------- ---------- Net deferred tax assets..................................... $1,884,000 $2,415,000 ========== ==========
The Company has a net operating loss carryforward of $1,342,000 at May 31, 1997, which expires in fiscal years 2010 and 2011. 7. LONG-TERM OBLIGATIONS Long-term obligations consist of:
YEAR ENDED MAY 31, ------------------------- 1997 1996 ---------- ----------- Term loan.................................................. $ -- $ 2,900,000 Revolving Credit agreement................................. 4,500,000 6,500,000 Term note.................................................. 1,274,000 1,416,000 Capital lease obligations.................................. 363,000 556,000 Compensation agreements.................................... 1,567,000 1,717,000 Other...................................................... 197,000 400,000 ---------- ----------- 7,901,000 13,489,000 Less current portion....................................... 300,000 1,735,000 ---------- ----------- Total............................................ $7,601,000 $11,754,000 ========== ===========
24 26 TEAM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) LONG-TERM DEBT: Effective February 28, 1997, the Company extended and amended its bank credit agreement. The agreement provides for a $1,294,000 term loan and a $10,000,000 revolving line of credit. The term loan was subsequently paid in full prior to year-end. The revolving line of credit, which is due December 31, 1998, bears interest at a rate not to exceed the bank's prime rate of interest (8.50 percent at May 31, 1997) plus one-half of one percent. A commitment fee of 0.375 percent is payable on the daily average unused amount of the revolving line of credit, less the aggregate amount of all outstanding letters of credit. At May 31, 1997, the Company had no letter of credit outstanding against the revolving line of credit. Amounts outstanding under the revolving line of credit were $4,500,000 and $6,500,000 at May 31, 1997 and 1996, respectively. Amounts outstanding on the term loan were $0 and $2,900,000 at May 31, 1997 and 1996, respectively. Under the terms of the agreement, $2,290,000 was available for borrowing at May 31, 1997. Loans under the Company's bank credit agreement are secured by substantially all of the assets of the Company. The terms of the agreement, as amended, require the maintenance of certain financial ratios and limit investments, advances, liens, leases and indebtedness, among other things. At May 31, 1997, the Company was in compliance with all credit agreement covenants. In addition to the loan under the credit agreement with its primary lender, the Company has a term note with a bank that is due June 15, 1999, bears interest at prime plus 1.25 percent and provides for sixty-six installments, the first six of which were interest only, the next fifty-nine of which will be even monthly installments of principal and interest, and the final installment being all unpaid principal and accrued interest. This loan is secured by land and buildings. Based on the borrowing rates currently available to the Company for bank loans with terms and maturities similar to the Company's long-term debt, the fair value of such debt is estimated to approximate its carrying value at May 31, 1997. COMPENSATION AGREEMENTS: During the year ended May 31, 1996, the Company accrued for compensation to be paid to former employees of the Company beyond the period in which services are expected to be rendered. At May 31, 1997, these long-term obligations totaled $1,567,000. Maturities of long-term obligations are as follows:
YEAR ENDING MAY 31 ----------- 1998........................................................ $ 300,000 1999........................................................ 4,950,000 2000........................................................ 1,274,000 2001........................................................ 307,000 2002........................................................ 246,000 Thereafter.................................................. 824,000 ---------- Total............................................. $7,901,000 ==========
8. STOCK OPTIONS AND EMPLOYEE BENEFIT PLANS AND SHAREHOLDER RIGHTS PLAN The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related interpretations in accounting for its employee stock options. Under APB 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. 25 27 TEAM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Pursuant to option plans, the Company has granted options to purchase common stock to officers, directors and employees at prices equal to or greater than the market value of the common stock on the date of grant. The exercise price, terms and other conditions applicable to each option granted under the Company's plans are generally determined by the Compensation Committee at the time of grant of each option and may vary. During the year ended May 31, 1996, all options were re-priced to $2.125, the market value of the common stock on the date the shares were re-priced. Transactions under all plans are summarized below:
YEAR ENDED MAY 31, --------------------------------- 1997 1996 1995 -------- -------- --------- Shares under option, beginning of year............ 511,700 512,050 559,750 Changes during the year: Granted........................................... 30,000 70,000 65,400 Exercise.......................................... -- -- -- Canceled.......................................... (25,700) (70,350) (113,100) -------- -------- --------- Shares under option, end of year.................. 516,000 511,700 512,050 ======== ======== ========= Average option price per share.................... $ 2.12 $ 2.125 $ 5.28 ======== ======== ========= Exercisable at end of year........................ 503,500 459,000 398,350 ======== ======== ========= Available for future grant........................ 377,000 336,300 250,950 ======== ======== =========
Pro forma information regarding net income and earnings per share is required by SFAS No. 123, which also requires that the information be determined as if the Company has accounted for its employee stock options granted subsequent to December 31, 1994 under the fair value method of that Statement. The fair value for the options granted after this date was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions: risk-free interest rate of 6.4% and 5.7%; volatility factor of the expected market price of the Company's common stock of 65.8% and 52.4%; and a weighted average expected life of the option of three and eight years for 1997 and 1996, respectively. No options were granted for the applicable period in fiscal year 1995. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized over the options' vesting period. The Company's pro forma information follows:
YEAR ENDED MAY 31, ----------------------- 1997 1996 -------- ----------- Pro forma net earnings (loss)from continuing operations..... $747,000 $(8,797,000) Net earnings (loss) from discontinued operations............ 1,000 (534,000) -------- ----------- Pro forma net earnings (loss)............................... $748,000 $(9,331,000) ======== =========== Pro forma earnings (loss) per share from continuing operations................................................ $ 0.14 $ (1.71) Net earnings (loss) per share from discontinued operations................................................ 0.00 (0.10) -------- ----------- Pro forma earning (loss) per share.......................... $ 0.14 $ (1.81) ======== ===========
26 28 TEAM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Under the Team, Inc. Salary Deferral Plan, contributions are made by qualified employees at their election and matching Company contributions are made at specified rates. Company contributions in fiscal 1997, 1996 and 1995 were $104,000, $167,000 and $214,000, respectively. Employer contributions for the Team, Inc. Employee Stock Ownership Plan are determined at the discretion of the Company's Board of Directors. The Plan does not allow for employee contributions. No contributions were made in 1997, 1996 or 1995. On October 24, 1990, the Board of Directors of the Company adopted a Shareholder Rights Plan ("Rights Plan"). Pursuant to the Rights Plan, the Board of Directors declared a dividend distribution of one right ("Right") for each outstanding share of the Company's common stock ("Common Stock"), and on each share subsequently issued until separate Rights are distributed, or the Rights expire or are redeemed. Under the Rights Plan, each Right entitles the registered holder to purchase from the Company a unit consisting of one-hundredth of a share (a "Unit") of Series A Participatory Preferred Stock, $100.00 par value ("Preferred Stock") at a purchase price of $100.00 per Unit, subject to adjustment. Under certain circumstances, the Company may substitute an equivalent value of other securities of the Company, property or cash or any combination thereof in lieu of the Preferred Stock. Until exercisable, the Rights will not be transferable apart from the Common Stock. The Rights will be exercisable only after an individual or group acquires or obtains the right to acquire 15 percent or more of the outstanding shares of Common Stock or commencement of a tender offer or exchange offer for 15 percent or more of the outstanding shares of Common Stock. If, at any time after certain events occur which result in the Rights becoming exercisable, the Company is acquired in a merger or other business combination transaction, or more than 50 percent of the Company's assets, cash flow or earnings power is sold or transferred, each Right will entitle its holder to receive, upon exercise of the Right, common stock of the acquiring company having a market value at the time of such transaction equal to two times the exercise price of the Right. In the event that an individual or group has acquired, or obtains the right to acquire 15 percent or more of the outstanding shares of Common Stock, each holder of a Right would thereafter have the right to receive, upon exercise of such Right, that number of shares of Common Stock having a value of twice the exercise price of the Right. This Right would not arise in the event of a tender offer or exchange offer for all of the outstanding Common Stock at a price and on terms which the Board of Directors determines to be fair to and otherwise in the best interest of the Company and its shareholders. The Company may redeem the Rights in whole, but not in part, at a price of $0.01 per Right (subject to adjustment) prior to the time they become exercisable. The Rights will expire at the close of business on October 1, 2000, unless earlier redeemed. At no time will the Rights have any voting privileges. 9. COMMITMENTS AND CONTINGENCIES Lease Commitments The Company's capital leases relate to certain computer equipment and software. Property, plant and equipment include assets under capital lease in the amount of $464,000 at May 31, 1997 and 1996, before accumulated amortization of $149,000 and $45,000, respectively. Other assets include software under capital lease in the amount of $281,000 at May 31, 1997 and 1996, before accumulated amortization of $143,000 and $71,000, respectively. The Company also has operating leases which relate to facilities and transportation and other equipment which are leased over terms ranging from one to five years with typical renewal options and escalation clauses. Rental payments on operating leases charged against earnings were $1,950,000, $1,898,000 and $1,735,000 in 1997, 1996 and 1995, respectively. 27 29 TEAM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Minimum rental commitments for future periods are as follows:
OPERATING YEAR ENDING MAY 31, CAPITAL LEASES LEASES TOTAL ------------------- -------------- ---------- ---------- 1998.......................................... $186,000 $1,568,000 $1,754,000 1999.......................................... 108,000 885,000 993,000 2000.......................................... 76,000 246,000 322,000 2001.......................................... 44,000 50,000 94,000 2002.......................................... 0 28,000 28,000 -------- ---------- ---------- Total minimum lease payments.................. 414,000 $2,777,000 $3,191,000 ========== ========== Less: amount representing interest............ 51,000 -------- Present value of net minimum lease payments... $363,000 ========
Legal Proceedings Allstate Vacuum & Tanks, Inc. ("Allstate"), a former subsidiary of the Company, was identified in the mid-1980s as a potentially responsible party ("PRP") in connection with the Sheridan Disposal Superfund Site (the "Sheridan Site") near Hempstead, Texas. Allstate was ultimately classified as a PRP that had generated or delivered only de minimis amounts of waste to the Sheridan Site along with other small PRPs and was offered the opportunity to enter into a de minimis party settlement (the "Settlement Agreement") among various settling PRPs ("Settling PRPs"), including various small PRPs and the large waste volume PRPs (the "Major PRPs"). In September, 1989, the Company, on behalf of Allstate, entered into the Settlement Agreement and paid a total settlement amount of $101,700 to settle its liability and acquire indemnification from the Major PRPs against any remediation costs in excess of the settlement payment made by the Company. This Settlement Agreement remains in effect. The Settling PRPs also entered into a consent decree ("Consent Decree") with the EPA to resolve their liability in this matter in accordance with the Settlement Agreement. Such Consent Decree was filed in the United States District Court for the Southern District of Texas in December 1991. A Motion for Entry of the Consent Decree was filed by the EPA in March 1992, and various Amended Motions for Entry of Consent Decree were subsequently filed. One party, which was not a Settling PRP (the "Nonsettling PRP"), opposed the entry of the Consent Decree, principally because it had not been given the opportunity to join in the Consent Decree as a de minimis PRP. The waste allegedly generated by the Nonsettling PRP and disposed at the Sheridan Site allegedly contained PCBs, and the Settling PRPs wanted the Nonsettling PRP to pay a substantial share of the total Sheridan Site remediation costs because of the greater toxicity of PCB waste. In April 1996, the court rejected the Consent Decree. Notwithstanding the court's rejection of the Consent Decree, Allstate and the Company are of the opinion that they are indemnified under the Settlement Agreement for any potential liability remediation of the Sheridan Site in excess of the settlement payment made in September 1989. To the Company's and Allstate's knowledge, no one, including any of the Settling PRPs, the EPA, or any third party, has asserted otherwise. On March 13, 1997, counsel for the Company had telephone conversations with an attorney in the Superfund Division of the EPA, Region 6, in Dallas, Texas and with an attorney who represents the Settling PRP group, both of whom confirmed that an agreement in principle has been reached with the Nonsettling PRP, whereby the Nonsettling PRP's potential liability for Sheridan Site remediation would be settled, the Nonsettling PRP would withdraw its objection to entry of the Consent Decree, and the Consent Decree would be resubmitted to the court for approval. In addition, the EPA informed the Company's counsel that the 28 30 TEAM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) principal terms of the settlement agreement with the Nonsettling PRP have been outlined to the court and the judge has indicated that if the settlement agreement with the Nonsettling PRP is finalized and a Motion for Entry of the Consent Decree is refiled, the court will enter the Consent Decree. Based on all of the foregoing, the Company does not anticipate incurring any additional liability for the Sheridan Site. While the Company and certain subsidiaries are also involved in various lawsuits and subject to various claims and proceedings encountered in the normal conduct of business, in the opinion of management, any uninsured losses that might arise from these lawsuits and proceedings will not have a material adverse affect on the Company's consolidated financial statements. 10. SUBSEQUENT EVENT Subsequent to year-end, the Company completed the sale of 650,000 shares of Team's common stock for $3.00 per share to Armstrong International, Inc. ("Armstrong") in a private placement transaction. Armstrong now owns approximately 10% of the Company's outstanding common shares on a fully diluted basis. Proceeds from the sale were used to further reduce the Company's long-term debt. The Company also entered into an Alliance Agreement with Armstrong to provide certain specialized energy management and other industrial services to shared customers 11. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The Company's consolidated results of operations by quarter for the fiscal years ended May 31, 1997 and 1996 were as follows: (in thousands except per share amounts)
FISCAL 1997 ------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- Revenues.................................................. $10,155 $11,271 $11,305 $10,924 ======= ======= ======= ======= Gross Profit.............................................. $ 4,439 $ 5,010 $ 4,868 $ 4,704 ======= ======= ======= ======= Earnings from Continuing Operations, Net of Income Taxes................................................... $ 10 $ 310 $ 210 $ 229 Earnings from Discontinued Operations, Net of Income Taxes................................................... 1 -- -- -- ------- ------- ------- ------- Net Earnings.............................................. $ 11 $ 310 $ 210 $ 229 ======= ======= ======= ======= Net Earnings per Share: Earnings from Continuing Operations..................... $ 0.00 $ 0.06 $ 0.04 $ 0.04 Earnings from Discontinued Operations................... 0.00 0.00 0.00 0.00 ------- ------- ------- ------- Net Earnings.............................................. $ 0.00 $ 0.06 $ 0.04 $ 0.04 ======= ======= ======= =======
FISCAL 1996 ------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- Revenues.................................................. $12,117 $11,475 $11,747 $12,110 ======= ======= ======= ======= Gross Profit.............................................. $ 5,527 $ 4,431 $ 4,931 $ 5,037 ======= ======= ======= ======= Earnings (Loss) from Continuing Operations, Net of Income Taxes................................................... $ 159 $ (420) $(7,493) $ (990) Loss from Discontinued Operations, Net of Income Taxes.... (126) (128) (223) (57) ------- ------- ------- ------- Net Earnings (Loss)....................................... $ 33 $ (548) $(7,716) $(1,047) ======= ======= ======= ======= Net Earnings (Loss) per Share: Earnings (Loss) from Continuing Operations.............. $ 0.03 $ (0.08) $ (1.46) $ (0.19) Loss from Discontinued Operations....................... (0.02) (0.03) (0.04) (0.01) ------- ------- ------- ------- Net Earnings (Loss)....................................... $ 0.01 $ (0.11) $ (1.50) $ (0.20) ======= ======= ======= =======
29 31 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no disagreements concerning accounting and financial disclosures with the Company's independent accountants within the past two years. PART III. THE INFORMATION CONTAINED IN ITEMS 10, 11, 12 AND 13 OF PART III HAS BEEN OMITTED FROM THIS REPORT ON FORM 10-K SINCE THE COMPANY WILL FILE, NOT LATER THAN 120 DAYS FOLLOWING THE CLOSE OF ITS FISCAL YEAR ENDED MAY 31, 1997, ITS DEFINITIVE PROXY STATEMENT. THE INFORMATION REQUIRED BY PART III WILL BE INCLUDED IN THAT PROXY STATEMENT AND SUCH INFORMATION IS HEREBY INCORPORATED BY REFERENCE, WITH THE EXCEPTION OF THE INFORMATION UNDER THE HEADINGS "COMPENSATION COMMITTEE REPORT" AND "COMPARISON OF TOTAL SHAREHOLDERS' RETURN." PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A) 1. FINANCIAL STATEMENTS The following consolidated financial statements of Team, Inc. and its subsidiaries are included in Part II, Item 8.
PAGE ---- Independent Auditors' Report................................ 14 Consolidated Balance Sheets -- May 31, 1997 and 1996........ 15 Consolidated Statements of Operations -- Years ended May 31, 1997, 1996 and 1995....................................... 16 Consolidated Statements of Stockholders' Equity -- Years ended May 31, 1997, 1996 and 1995......................... 17 Consolidated Statements of Cash Flows -- Years ended May 31, 1997, 1996 and 1995....................................... 18 Notes to Consolidated Financial Statements.................. 20
2. FINANCIAL STATEMENT SCHEDULES Schedule II -- Valuation and Qualifying Accounts............ S-1
All other schedules are omitted because they are not applicable or because the required information is included in the Consolidated Financial Statements or Notes thereto. 3. EXHIBITS 3(a)* Second Restated Articles of Incorporation of the Company (filed as Exhibit 4.1 to the Company's Registration Statement on Form S-2, File No. 33-31663). 3(b)* Bylaws of the Company (filed as Exhibit 4.2 to the Company's Registration Statement on Form S-2, File No. 33-31663). 4(a)* Certificate representing shares of common stock of Company (filed as Exhibit 4(1) to the Company's Registration Statement on Form S-1, File No. 2-68928). 4(b)* Statement of Relative Rights and Preferences of Series A Participatory Preferred Stock of Team, Inc. (filed as Exhibit 2.2 to the Company's Form 8-A with the Securities and Exchange Commission on October 26, 1990). 4(c)* Rights Agreement dated as of October 24, 1990 between Team, Inc. and Ameritrust Company National Association as Rights Agent (filed as Exhibit 2.1 to the Company's Form 8-A with the Securities and Exchange Commission on October 26, 1990).
30 32 10(a)* Construction Loan Agreement between Team, Inc. and Sterling Bank dated November 15, 1993 (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1993). 10(b)* Amended and Restated Credit Agreement among Texas Commerce Bank, N.A. and Team, Inc. and its subsidiaries dated August 24, 1995 (filed as Exhibit 10(p) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1995). 10(c)* First Amendment and Supplement to Amended and Restated Credit Agreement and Note Modification Agreement by and between Team, Inc. and Texas Commerce Bank Association effective as of September 13, 1995 (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended February 29, 1996). 10(d)* Second Amendment and Supplement to Amended and Restated Credit Agreement, and Revolving Credit Note Modification and Term Note Modification Agreement effective as of May 31, 1996 by and between Texas Commerce Bank N.A. and Team, Inc. (filed as Exhibit 10(q) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1996). 10(e)* 1987 Amended and Restated Stock Option Plan dated December 16, 1991 (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1994). 10(f)* Fourth Amendment to Team, Inc. Amended and Restated 1987 Restricted Stock Option Plan (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1995). 10(g)*+ Employment Agreements and Consulting and Salary Continuation Agreements between the Company and certain of its executive officers (filed as Exhibit 10(f) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1988, as Exhibit 10 to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1989, as amended by Form 8 dated October 19, 1989, and Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1990). 10(h)* Fifth Amendment and Restatement of the Team, Inc. Salary Deferral Plan dated March 26, 1991 (filed as Exhibit 10(f) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1992). 10(i)* Sixth Amendment to Salary Deferral Plan dated as of October 10, 1991. (filed as Exhibit 10(l) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1992). 10(j)* Ninth Amendment and Restatement of the Team, Inc. Salary Deferral Plan (filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended February 29, 1996). 10(k)* Team, Inc. Employee Stock Ownership Plan, as amended by First Amendment thereto, Second Amendment thereto and by two Third Amendments thereto adopted in the alternative (filed as Exhibit 10(h) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1989), and by Fourth Amendment dated as of December 31, 1991 (filed as Exhibit 10(m) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1992) and by Sixth Amendment (filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended February 29, 1996). 10(l)*+ Team, Inc. Restated Non-Employee Directors' Stock Option Plan as amended through March 28, 1996 filed as Exhibit 10(z) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1996). 10(m)+ Amendment dated January 9, 1997, to the Team, Inc. Non-Employee Directors Stock Option Plan. 31 33 10(n)* Team, Inc. 1992 Stock Option Plan for Key Employees of Acquired Business effective January 1992 (filed as Exhibit 10(r) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1992). 10(o)*+ Team, Inc. Officers' Restricted Stock Option Plan dated December 14, 1995. 10(p)*+ First Amendment to the Consulting and Salary Continuation Agreement by and between Team, Inc. and George W. Harrison dated December 24, 1990 (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the Quarter ended November 30, 1996). 10(q)* Letter Agreement dated April 10, 1997, by and between Texas Commerce Bank National Association and Team, Inc. (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the Quarter ended February 28, 1997). 10(r)* Agreement of Purchase and Sale, dated September 13, 1996, among Registrant and Ft. Bragg 801, Inc. and Pensacola 801, Inc. and Portales 801, Inc., collectively as Seller, and U.S. National Housing, L.L.C. as Purchaser (filed as Exhibit 2.1 to the Company's Form 8-K dated May 23, 1997). 10(s)* Assignment and Assumption Agreement, dated May 8, 1997, between U.S. National Housing, LLC and U.S. National Housing Limited Partnership (filed as Exhibit 2.2 to the Company's Form 8-K dated May 23, 1997). 10(t)* First Amendment to Purchase and Sale Agreement, dated as of May 8, 1997, among Registrant and Ft. Bragg 801, Inc. and Pensacola 801, Inc. and Portales 801, Inc. and First American Capital Corporation, collectively as Seller, and U.S. National Housing Limited Partnership, as Purchaser (filed as Exhibit 2.3 to the Company's Form 8-K dated May 23, 1997). 10(u) Stock Purchase Agreement by and between Team, Inc. and Armstrong International, Inc. dated June 30, 1997. 10(v) Registration Rights Agreement by and between Team, Inc. and Armstrong International, Inc. dated June 30, 1997. 10(w) Standstill and Voting Agreement by and between Team, Inc. and Armstrong International, Inc. dated June 30, 1997. 10(x)+ Employment and Consulting Agreement by and between William A. Ryan and Team, Inc. dated July 29, 1997. 11 Statement re Computation of Per Share Earnings. 21 Subsidiaries of the Company. 23 Consent of Deloitte & Touche LLP. 27 Financial Data Schedule. - --------------- * Incorporated herein by reference to the respective filing identified above. + Management contracts and/or compensation plans required to be filed as an exhibit to this Form 10-K pursuant to Item 14(c) of Form 10-K. (B) REPORTS ON FORM 8-K. The Company filed one report on Form 8-K since the beginning of the fourth quarter of fiscal 1997. (i) On June 6, 1997, the Company filed a Form 8-K reporting on the disposition by certain of the Company's wholly-owned subsidiaries of substantially all of the assets of the Section 801 Military Housing Projects to U.S. National Housing Limited Partnership, an Alaska limited partnership ("Buyer"). The consideration given by the Buyer consisted of $3,200,000 in immediately available funds and the assumption of the indebtedness remaining on each of the Section 801 Military Housing Projects. 32 34 (ii) The Company reported the following financial information on Form 8-K: Pro Forma Consolidated Balance Sheet as of February 28, 1997; Pro Forma Consolidated Statement of Earnings for the Year ended May 31, 1996 and the Nine Months ended February 28, 1997; and Notes to Pro Forma Consolidated Financial Statements. 33 35 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized August 14, 1997. Team, Inc. By: /s/ WILLIAM A. RYAN ------------------------------- William A. Ryan President and Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacity and on the dates indicated. /s/ WILLIAM A. RYAN President, Chief Executive August 14, 1997 - ----------------------------------------------------- Officer and Director William A. Ryan /s/ GEORGE W. HARRISON Director August 14, 1997 - ----------------------------------------------------- George W. Harrison /s/ SIDNEY B. WILLIAMS Director August 14, 1997 - ----------------------------------------------------- Sidney B. Williams /s/ JACK M. JOHNSON, JR. Director August 14, 1997 - ----------------------------------------------------- Jack M. Johnson, Jr. /s/ E. THEODORE LABORDE Director August 14, 1997 - ----------------------------------------------------- E. Theodore Laborde /s/ MARGIE E. ROGERS Vice President Chief August 14, 1997 - ----------------------------------------------------- Financial Officer (Principal Margie E. Rogers Financial Officer and Principal Accounting Officer)
34 36 SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
BALANCE AT CHARGED TO CHARGED BALANCE BEGINNING COST AND TO OTHER (A) AT END CLASSIFICATION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD -------------- ---------- ---------- -------- ---------- --------- (IN THOUSANDS) Deducted from assets to which they apply: Allowance for doubtful accounts: Year ended May 31, 1997.......... $ 171 $ -- $ -- $110 $ 61 Year ended May 31, 1996.......... 204 -- -- 33 171 Year ended May 31, 1995.......... 242 205 -- 243 204 Allowance for notes receivable: Year ended May 31, 1997.......... $2,025 $ -- $ -- $ -- $2,025 Year ended May 31, 1996 (B)...... 268 1,757 -- -- 2,025 Year ended May 31, 1995.......... 77 28 163 -- 268
- --------------- (A) Net write-off bad debt (B) $1,700 included in writedown and $57 included in general and administrative expenses. S-1 37 INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION ----------- ----------- 3(a)* Second Restated Articles of Incorporation of the Company (filed as Exhibit 4.1 to the Company's Registration Statement on Form S-2, File No. 33-31663). 3(b)* Bylaws of the Company (filed as Exhibit 4.2 to the Company's Registration Statement on Form S-2, File No. 33-31663). 4(a)* Certificate representing shares of common stock of Company (filed as Exhibit 4(1) to the Company's Registration Statement on Form S-1, File No. 2-68928). 4(b)* Statement of Relative Rights and Preferences of Series A Participatory Preferred Stock of Team, Inc. (filed as Exhibit 2.2 to the Company's Form 8-A with the Securities and Exchange Commission on October 26, 1990). 4(c)* Rights Agreement dated as of October 24, 1990 between Team, Inc. and Ameritrust Company National Association as Rights Agent (filed as Exhibit 2.1 to the Company's Form 8-A with the Securities and Exchange Commission on October 26, 1990). 10(a)* Construction Loan Agreement between Team, Inc. and Sterling Bank dated November 15, 1993 (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1993). 10(b)* Amended and Restated Credit Agreement among Texas Commerce Bank, N.A. and Team, Inc. and its subsidiaries dated August 24, 1995 (filed as Exhibit 10(p) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1995). 10(c)* First Amendment and Supplement to Amended and Restated Credit Agreement and Note Modification Agreement by and between Team, Inc. and Texas Commerce Bank Association effective as of September 13, 1995 (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended February 29, 1996). 10(d)* Second Amendment and Supplement to Amended and Restated Credit Agreement, and Revolving Credit Note Modification and Term Note Modification Agreement effective as of May 31, 1996 by and between Texas Commerce Bank N.A. and Team, Inc. (filed as Exhibit 10(q) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1996). 10(e)* 1987 Amended and Restated Stock Option Plan dated December 16, 1991 (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1994). 10(f)* Fourth Amendment to Team, Inc. Amended and Restated 1987 Restricted Stock Option Plan (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1995). 10(g)*+ Employment Agreements and Consulting and Salary Continuation Agreements between the Company and certain of its executive officers (filed as Exhibit 10(f) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1988, as Exhibit 10 to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1989, as amended by Form 8 dated October 19, 1989, and Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1990). 10(h)* Fifth Amendment and Restatement of the Team, Inc. Salary Deferral Plan dated March 26, 1991 (filed as Exhibit 10(f) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1992). 10(i)* Sixth Amendment to Salary Deferral Plan dated as of October 10, 1991. (filed as Exhibit 10(l) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1992).
38
EXHIBIT NO. DESCRIPTION ----------- ----------- 10(j)* Ninth Amendment and Restatement of the Team, Inc. Salary Deferral Plan (filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended February 29, 1996). 10(k)* Team, Inc. Employee Stock Ownership Plan, as amended by First Amendment thereto, Second Amendment thereto and by two Third Amendments thereto adopted in the alternative (filed as Exhibit 10(h) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1989), and by Fourth Amendment dated as of December 31, 1991 (filed as Exhibit 10(m) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1992) and by Sixth Amendment (filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended February 29, 1996). 10(l)*+ Team, Inc. Restated Non-Employee Directors' Stock Option Plan as amended through March 28, 1996 filed as Exhibit 10(z) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1996). 10(m)+ Amendment dated January 9, 1997, to the Team, Inc. Non-Employee Directors Stock Option Plan. 10(n)* Team, Inc. 1992 Stock Option Plan for Key Employees of Acquired Business effective January 1992 (filed as Exhibit 10(r) to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1992). 10(o)*+ Team, Inc. Officers' Restricted Stock Option Plan dated December 14, 1995. 10(p)*+ First Amendment to the Consulting and Salary Continuation Agreement by and between Team, Inc. and George W. Harrison dated December 24, 1990 (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the Quarter ended November 30, 1996). 10(q)* Letter Agreement dated April 10, 1997, by and between Texas Commerce Bank National Association and Team, Inc. (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the Quarter ended February 28, 1997). 10(r)* Agreement of Purchase and Sale, dated September 13, 1996, among Registrant and Ft. Bragg 801, Inc. and Pensacola 801, Inc. and Portales 801, Inc., collectively as Seller, and U.S. National Housing, L.L.C. as Purchaser (filed as Exhibit 2.1 to the Company's Form 8-K dated May 23, 1997). 10(s)* Assignment and Assumption Agreement, dated May 8, 1997, between U.S. National Housing, LLC and U.S. National Housing Limited Partnership (filed as Exhibit 2.2 to the Company's Form 8-K dated May 23, 1997). 10(t)* First Amendment to Purchase and Sale Agreement, dated as of May 8, 1997, among Registrant and Ft. Bragg 801, Inc. and Pensacola 801, Inc. and Portales 801, Inc. and First American Capital Corporation, collectively as Seller, and U.S. National Housing Limited Partnership, as Purchaser (filed as Exhibit 2.3 to the Company's Form 8-K dated May 23, 1997). 10(u) Stock Purchase Agreement by and between Team, Inc. and Armstrong International, Inc. dated June 30, 1997. 10(v) Registration Rights Agreement by and between Team, Inc. and Armstrong International, Inc. dated June 30, 1997. 10(w) Standstill and Voting Agreement by and between Team, Inc. and Armstrong International, Inc. dated June 30, 1997. 10(x)+ Employment and Consulting Agreement by and between William A. Ryan and Team, Inc. dated July 29, 1997.
39
EXHIBIT NO. DESCRIPTION ----------- ----------- 11 Statement re Computation of Per Share Earnings. 21 Subsidiaries of the Company. 23 Consent of Deloitte & Touche LLP. 27 Financial Data Schedule.
- --------------- * Incorporated herein by reference to the respective filing identified above. + Management contracts and/or compensation plans required to be filed as an exhibit to this Form 10-K pursuant to Item 14(c) of Form 10-K. EX-10.M 2 AMENDMENT NON-EMPLOYEE DIRECTORS' STOCK PLAN 1 AMENDMENT OF JANUARY 9, 1997 TO TEAM, INC. RESTATED NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN (As amended through March 28, 1996) WHEREAS, the Board of Directors of Team, Inc. during a meeting held on January 9, 1997, adopted a resolution amending the Team, Inc. Restated Non-Employee Directors' Stock Option Plan ("Plan") to increase the maximum number of shares which may be offered pursuant to the Plan from 220,000 to 265,000. NOW, THEREFORE, by order of the Board of Directors, Paragraph 4 of the Plan has been amended in its entirety to read as follows: "4. Common Stock Subject to Options. The aggregate number of shares of the Company's Common Stock which may be issued upon exercise of Options granted under the Plan shall not exceed 265,000, subject to adjustment under the provisions of Paragraph 7. The shares of Common Stock to be issued upon the exercise of Options may be authorized but unissued shares, shares issued and reacquired by the Company or shares bought on the market for the purposes of the Plan. In the event any Option shall, for any reason, terminate or expire or be surrendered without having been exercised in full, the shares subject to such Option but not purchased thereunder shall again be available for Options to be granted under the Plan." EFFECTIVE as of January 9, 1997. EX-10.U 3 STOCK PURCHASE AGREEMENT 1 EXHIBIT 10(u) STOCK PURCHASE AGREEMENT BY AND BETWEEN TEAM, INC. AND ARMSTRONG INTERNATIONAL, INC. JUNE 30, 1997 2 TABLE OF CONTENTS
Page ---- 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 (a) "Accredited Investor" . . . . . . . . . . . . . . . . . . . . 1 (b) "Adverse Consequences" . . . . . . . . . . . . . . . . . . . . 1 (c) "Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . 1 (d) "Buyer" . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 (e) "Closing" . . . . . . . . . . . . . . . . . . . . . . . . . . 1 (f) "Closing Date" . . . . . . . . . . . . . . . . . . . . . . . . 1 (g) "Common Stock" . . . . . . . . . . . . . . . . . . . . . . . . 1 (h) "Confidential Information" . . . . . . . . . . . . . . . . . . 2 (i) "Indemnified Party" . . . . . . . . . . . . . . . . . . . . . 2 (j) "Indemnifying Party" . . . . . . . . . . . . . . . . . . . . 2 (k) "Knowledge" . . . . . . . . . . . . . . . . . . . . . . . . . 2 (l) "Ordinary Course of Business" . . . . . . . . . . . . . . . . 2 (m) "Party" . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (n) "Person" . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (o) "Purchase Price" . . . . . . . . . . . . . . . . . . . . . . 2 (p) "SEC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (q) "Securities Act" . . . . . . . . . . . . . . . . . . . . . . 2 (r) "Securities Exchange Act" . . . . . . . . . . . . . . . . . . 2 (s) "Seller" . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (t) "Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (u) "Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . 2 (v) "Third Party Claim" . . . . . . . . . . . . . . . . . . . . . 2 2. Purchase and Sale of Shares . . . . . . . . . . . . . . . . . . . . . 2 (a) Basic Transaction . . . . . . . . . . . . . . . . . . . . . . 3 (b) Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . 3 (c) The Closing . . . . . . . . . . . . . . . . . . . . . . . . . 3 (d) Deliveries at the Closing . . . . . . . . . . . . . . . . . . 3 3. Representations and Warranties of the Seller . . . . . . . . . . . . 3 (a) Organization, Qualification, and Corporate Power . . . . . . . 3 (b) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 4 (c) Authorization of Transaction . . . . . . . . . . . . . . . . . 4 (d) Noncontravention . . . . . . . . . . . . . . . . . . . . . . . 4 (e) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . 5 (f) Investment Disclosure . . . . . . . . . . . . . . . . . . . . 5 (g) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 5 (h) Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . 5
3 (i) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 5 (j) Section 801 Military Housing Projects . . . . . . . . . . . . 5 (k) Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 6 4. Representations and Warranties of the Buyer . . . . . . . . . . . . . 6 (a) Organization of the Buyer . . . . . . . . . . . . . . . . . . 6 (b) Authorization of Transaction . . . . . . . . . . . . . . . . . 6 (c) Noncontravention . . . . . . . . . . . . . . . . . . . . . . . 6 (d) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . 6 (e) Investment . . . . . . . . . . . . . . . . . . . . . . . . . . 7 5. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . 7 (a) Further Actions . . . . . . . . . . . . . . . . . . . . . . . 7 (b) Confidential Information . . . . . . . . . . . . . . . . . . . 7 6. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . . 7 (a) Survival of Representations and Warranties . . . . . . . . . . 7 (b) Indemnification Provisions for Benefit of the Buyer . . . . . 8 (c) Indemnification Provisions for Benefit of the Seller . . . . . 8 (d) Matters Involving Third Parties . . . . . . . . . . . . . . . 8 (e) Determination of Adverse Consequences . . . . . . . . . . . . 9 (f) Other Indemnification Provisions . . . . . . . . . . . . . . . 9 7. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 (a) Press Releases and Public Announcements . . . . . . . . . . . 9 (b) No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . 9 (c) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 9 (d) Succession and Assignment . . . . . . . . . . . . . . . . . . 10 (e) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 10 (f) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 (g) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 (h) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 11 (i) Amendments and Waivers . . . . . . . . . . . . . . . . . . . . 11 (j) Severability . . . . . . . . . . . . . . . . . . . . . . . . . 11 (k) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 (l) Construction . . . . . . . . . . . . . . . . . . . . . . . . . 12 (m) Incorporation of Exhibits and Schedules . . . . . . . . . . . 12
4 EXHIBITS AND SCHEDULES: Exhibit A - Registration Rights Agreement Exhibit B - Standstill and Voting Agreement Schedule I - Exceptions to Representations and Warranties Concerning the Seller and Its Subsidiaries Schedule II - Exceptions to the Buyer's Representations and Warranties Concerning the Transaction 5 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into on this the 30th day of June, 1997, by and between Team, Inc. (the "Seller") and Armstrong International, Inc. (the "Buyer"). The Buyer and the Seller are referred to collectively herein as the "Parties." INTRODUCTION The Parties have entered into that certain Alliance Agreement, dated June 30, 1997 (the "Alliance Agreement"). Buyer is to purchase from the Seller, and the Seller is to issue to the Buyer, 650,000 newly issued shares of Common Stock of the Seller in return for cash, and this Agreement sets forth the terms and conditions of such purchase of shares. AGREEMENT Now, therefore, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows. 1. Definitions. (a) "Accredited Investor" has the meaning set forth in Regulation D promulgated under the Securities Act. (b) "Adverse Consequences" means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, liabilities, obligations, taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys' fees and expenses. (c) "Affiliate" has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act. (d) "Buyer" has the meaning set forth in the preface above. (e) "Closing" has the meaning set forth in Section 2(c) below. (f) "Closing Date" has the meaning set forth in Section 2(c) below. Stock Purchase Agreement/Page 1 6 (g) "Common Stock" means Seller's common stock, $0.30 par value per share. (h) "Confidential Information" means any information concerning the businesses and affairs of the Seller and its Subsidiaries that is not already generally available to the public. (i) "Indemnified Party" has the meaning set forth in Section 6(d) below. (j) "Indemnifying Party" has the meaning set forth in Section 6(d) below. (k) "Knowledge" means actual knowledge without independent investigation. (l) "Ordinary Course of Business" means the ordinary course of business consistent with pas custom and practice (including with respect to quantity and frequency). (m) "Party" has the meaning set forth in the preface above. (n) "Person" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof). (o) "Purchase Price" has the meaning set forth in Section 2(b) below. (p) "SEC" means the Securities Exchange Commission. (q) "Securities Act" means the Securities Act of 1933, as amended. (r) "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended. (s) "Seller" has the meaning set forth in the preface above. (t) "Shares" means 650,000 shares of Common Stock. (u) "Subsidiary" means any corporation with respect to which a specified Person (or a Subsidiary thereof) owns a majority of the common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors. (v) "Third Party Claim" has the meaning set forth in Section 6(d) below. Stock Purchase Agreement/Page 2 7 2. Purchase and Sale of Shares. (a) Basic Transaction. On and subject to the terms and conditions of this Agreement, the Buyer hereby purchases from the Seller, and the Seller hereby sells to the Buyer, Shares for the consideration specified below in this Section 2. (b) Purchase Price. The Buyer agrees to pay to the Seller at the Closing a purchase price equal to $1,950,000 (the "Purchase Price") in cash payable by wire transfer or delivery of other immediately available funds. (c) The Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place simultaneously with execution of this Agreement at the offices of Chamberlain, Hrdlicka, White, Williams & Martin in Houston, Texas, commencing at 10:00 a.m. local time on the date first above written or such other date as the Buyer and the Seller may mutually determine (the "Closing Date"). The Closing is conditioned on receipt of approval from the American Stock Exchange for the listing of the Shares. (d) Deliveries at the Closing. At the Closing, (i) the Parties will mutually execute and deliver the Registration Rights Agreement in substantially the form of Exhibit A hereto and the Standstill and Voting Agreement in substantially the form of Exhibit B hereto and (ii) the Buyer will deliver to the Seller the consideration specified in Section 2(b) above in the manner described below. The Seller will deliver to the Buyer stock certificates representing the Shares immediately after its receipt of approval from the American Stock Exchange for the listing of the Shares. On the date hereof, Buyer shall deliver the consideration specified in Section 2(b) above to the trust account of Chamberlain, Hrdlicka, White, Williams & Martin, which shall hold such amount in escrow pending delivery by Seller to Buyer of stock certificates representing the Shares. Such delivery of certificates shall occur no later than five business days after the date hereof. 3. Representations and Warranties of the Seller. The Seller represents and warrants to the Buyer that the statements contained in this Section 3 are correct and complete as of Closing Date, except as set forth in the Schedule I attached hereto. (a) Organization, Qualification, and Corporate Power. Each of the Seller and its Subsidiaries is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. Each of the Seller and its Subsidiaries is duly authorized to conduct business and is in good standing under the laws of each jurisdiction where such qualification is required, except where the lack of such qualification would not have a material adverse effect on the financial condition of the Seller and its Subsidiaries taken as a whole. Each of the Seller and its Subsidiaries has full corporate Stock Purchase Agreement/Page 3 8 power and authority to carry on the businesses in which it is engaged and to own and use the properties owned and used by it. (b) Capitalization. The entire authorized capital stock of the Seller consists of 10,000,000 shares of Common Stock, of which 5,169,542 shares are issued and outstanding and 9,700 are held in treasury and 500,000 shares of preferred stock, $100 par value per share, none of which is issued and outstanding. Upon consummation of the transactions contemplated herein, the Shares shall constitute duly authorized, validly issued, fully paid, and nonassessable shares of Common Stock. Except as disclosed on Section 3(b) of the Schedule I, there are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that could require the Seller to issue, sell, or otherwise cause to become outstanding any of its capital stock. Except as disclosed on Section 3(b) of the Schedule I, there are no outstanding or authorized stock appreciation, phantom stock, profit participation, or similar rights with respect to the Seller. (c) Authorization of Transaction. The Seller has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Seller, enforceable in accordance with its terms and conditions. (d) Noncontravention. To the Knowledge of the Seller, neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which any of the Seller and its Subsidiaries is subject or any provision of the charter or bylaws of any of the Seller and its Subsidiaries, or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement contract, lease, license, instrument, or other arrangement to which the Seller or the Subsidiaries is a party or by which it is bound or to which any of its respective assets is subject, except where such violation would not have a material adverse effect on the financial condition of the Seller and its Subsidiaries taken as a whole or on the ability of the Parties to consummate the transactions contemplated by this Agreement. To the Knowledge of any of the Seller, except for appropriate reports to the SEC pursuant to the Securities Exchange Act and the rules and regulations thereunder, none of the Seller and its Subsidiaries needs to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any person in order for the Parties to consummate the transactions contemplated by this Agreement, except where the failure to give notice, to file, or to obtain any authorization, consent, or approval would not have any adverse effect on the financial condition of the Stock Purchase Agreement/Page 4 9 Seller and its Subsidiaries taken as a whole or on the ability of the Parties to consummate the transactions contemplated by this Agreement. (e) Brokers' Fees. The Seller has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement. (f) Investment Disclosure. Included in Section 3(f) of Schedule I are copies of the Seller's most recent Form 10-K Report to the SEC and Proxy Statement pursuant to the Securities Exchange Act and all reports that Seller has filed with the SEC pursuant to the Securities Exchange Act since its most recent Form 10-K. Such forms are true and correct in all material respects both as of the dates that Seller filed such forms and as of the date hereof, except as otherwise disclosed on Schedule I. (g) Subsidiaries. All of the issued and outstanding shares of capital stock of each Subsidiary of the Seller have been duly authorized and are validly issued, fully paid, and nonassessable. One of the Seller and its Subsidiaries holds of record and owns beneficially all of the outstanding shares of each Subsidiary of the Seller. (h) Legal Compliance. To the knowledge of the Seller, each of the Seller and its Subsidiaries has complied with all applicable laws (including statutes, rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings and charges thereunder) of federal, state, local, and foreign governments (and all agencies thereof) and including without limitation, laws relating to the generation, management, handling, transportation, treatment, storage, disposal, delivery, discharge, release or emission of any "hazardous waste," "hazardous substance," or "pollutant" under any such laws, including the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) and/or the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), except where the failure to comply would not have a material adverse effect upon the financial condition of the Seller and its Subsidiaries taken as a whole. (i) Litigation. To the knowledge of the Seller, except as set forth on Schedule I attached hereto, there is no suit, action, proceeding, investigation or inquiry pending or threatened (or any basis therefore), at law or in equity or before any court, tribunal, governmental department, commission, board, body, agency or instrumentality, domestic or foreign, against Seller which affects or could have a material adverse effect on the financial condition of Seller and its Subsidiaries as a whole. (j) Section 801 Military Housing Projects. Seller has no indebtedness associated with the Property as that term is defined in that certain Agreement of Sale, dated September 13, 1996, by and among Fort Bragg 801, Inc., Pensacola 801, Inc., Portales 801, Stock Purchase Agreement/Page 5 10 Inc., and U.S. National Housing L.L.C. ( the "801 Agreement"). To the knowledge of the Seller, Seller (as defined in this Agreement) and "Seller," as defined in the 801 Agreement, are in compliance with all of the representations and warranties in the 801 Agreement (but only to the extent such warranties and representations are applicable and survive the closing of the sale of the Property under the terms of the 801 Agreement), except where the failure to comply would not have a material adverse effect upon the financial condition of the Seller and its Subsidiaries taken as a whole. (k) Disclosure. The representations and warranties contained in this Agreement and the information contained in Schedule I attached hereto are true and correct in all material respects and do not contain any untrue statement of a material fact or omit to state a fact necessary to make the statements contained therein and herein not misleading. Except as set forth herein, in the financial statements provided to Buyer, or in Schedule I attached hereto, there is no fact known to Seller which causes or could have a material adverse effect on the financial condition of Seller and its Subsidiaries taken as a whole. 4. Representations and Warranties of the Buyer. The Buyer represents and warrants to the Sellers that the statements contained in this Section 4 are correct and complete as of the Closing Date. (a) Organization of the Buyer. The Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. (b) Authorization of Transaction. The Buyer has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Buyer, enforceable in accordance with its terms and conditions. The Buyer need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement, other than any reports to the SEC required pursuant to the Securities Exchange Act and the rules and regulations thereunder. (c) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Buyer is subject or any provision of its charter or bylaws or conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which the Buyer is a party or by which it is bound or to which any of its assets is subject. Stock Purchase Agreement/Page 6 11 (d) Brokers' Fees. The Buyer has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which any Seller could become liable or obligated. (e) Investment. Except as otherwise specifically provided in the Registration Rights Agreement, the Buyer (A) understands that the Shares have not been, and will not be, registered under the Securities Act, or under any state securities laws, and are being offered and sold in reliance upon federal and state exemptions for transactions not involving any public offering, (B) is acquiring the Shares solely for its own account for investment purposes, and not with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act, (C) is a sophisticated investor with knowledge and experience in business and financial matters, (D) has been represented by independent attorneys, accountants, and knowledgeable advisors who are sophisticated and knowledgeable with respect to business and financial matters, (E) has agreed to purchase the Shares through arms-length negotiations between Buyer and Seller, (F) has received certain information concerning the Seller and has had the opportunity to obtain additional information as desired in order to evaluate the merits and the risks inherent in holding the Shares, and (G) is able to bear the economic risk and lack of liquidity inherent in holding the Shares. 5. Post-Closing Covenants. (a) Further Actions. In case at any time after the Closing any further action is necessary to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request, all at the sole cost and expense of the requesting Party (unless the requesting Party is entitled to indemnification therefor under Section 6 below). (b) Confidential Information. In furtherance of the Alliance Agreement and this Agreement, the Seller and its Subsidiaries have permitted the Buyer to have access to certain personnel and other information pertaining to each of the Seller and its Subsidiaries. The Buyer will treat and hold as such any Confidential Information it has received or receives in the future in connection with this Agreement or the other agreements contemplated hereunder, and it will not use any of the Confidential Information except in connection with this Agreement and the agreements contemplated hereunder, and, if this Agreement or the agreements contemplated hereunder are terminated, it will return to the Seller all tangible embodiments (and all copies) of the Confidential Information which are in its possession. Stock Purchase Agreement/Page 7 12 6. Remedies for Breaches of This Agreement. (a) Survival of Representations and Warranties. All of the representations and warranties of the Parties contained in Sections 3 and 4 above shall survive the Closing (unless the damaged Party knew of any misrepresentation or breach of warranty at the time of Closing) and continue in full force and effect for a period of two years. (b) Indemnification Provisions for Benefit of the Buyer. In the event the Seller breaches any of its representations, warranties, and covenants contained herein and, if there is an applicable survival period pursuant to Section 6(a) above, provided that the Buyer makes a written claim for indemnification against the Seller pursuant to Section 7(g) below within such survival period, then the Seller agrees to indemnify the Buyer from and against any Adverse Consequences the Buyer shall suffer through and after the date of the claim for indemnification caused proximately by the breach. To the extent the Adverse Consequences the Buyer has suffered by reason of all such breaches reaches an aggregate ceiling equal to the Purchase Price, the Seller will have no obligation to indemnify the Buyer from and against further such Adverse Consequences. (c) Indemnification Provisions for Benefit of the Seller. In the event the Buyer breaches any of its representations, warranties, and covenants contained herein, and, if there is an applicable survival period pursuant to Section 6(a) above, provided that the Seller makes a written claim for indemnification against the Buyer pursuant to Section 7(g) below within such survival period, then the Buyer agrees to indemnify the Seller from and against the entirety of any Adverse Consequences the Seller shall suffer through and after the date of the claim for indemnification (but excluding any Adverse Consequences the Seller shall suffer after the end of any applicable survival period) caused proximately by the breach. (d) Matters Involving Third Parties. (i) If any third party shall notify any Party (the "Indemnified Party") with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against any other Party (the "Indemnifying Party") under this Section 6, then the Indemnified Party shall promptly (and in any event within five business days after receiving notice of the Third Party Claim) notify each Indemnifying Party thereof in writing. (ii) Any Indemnifying Party will have the right to assume and thereafter conduct the defense of the Third Party Claim with counsel of his or its choice reasonably satisfactory to the Indemnified Party; provided, however, that the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of Stock Purchase Agreement/Page 8 13 the Indemnified Party (not to be withheld unreasonably) unless the judgment or proposed settlement involves only the payment of money damages and does not impose an injunction or other equitable relief upon the Indemnified Party. (iii) Unless and until an Indemnifying Party assumes the defense of the Third Party Claim as provided in Section 6(d)(ii) above, however, the Indemnified Party may defend against the Third Party Claim in any manner it reasonably may deem appropriate. (iv) In no event will the Indemnified Party consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of each of the Indemnifying Parties (not to be withheld unreasonably). (e) Determination of Adverse Consequences. The Parties shall make appropriate adjustments for tax benefits and insurance coverage in determining Adverse Consequences for purposes of this Section 6. All indemnification payments under this Section 6 shall be deemed adjustments to the Purchase Price. (f) Other Indemnification Provisions. The indemnification provisions in this Section 6 are in addition to, and not in derogation of, any statutory, equitable, or common law remedy any Party may have for breach of representation, warranty, or covenant; provided, however, that the Buyer acknowledges and agrees that the foregoing indemnification provisions in this Section 6 shall be the exclusive remedy of the Buyer for any breach of the representations and warranties in Section 4 above provided further, however, that nothing in this Section 6(f) shall be construed to limit Buyer's rights and remedies under the Securities Act and the Securities Exchange Act. 7. Miscellaneous. (a) Press Releases and Public Announcements. No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement prior to the Closing without the prior written approval of the Buyer and the Seller; provided, however, that any Party may make any public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its publicly-traded securities (in which case the disclosing Party will use its reasonable efforts to advise the other Parties prior to making the disclosure). (b) No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. Stock Purchase Agreement/Page 9 14 (c) Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they have related in any way to the subject matter hereof. (d) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of his or its rights, interests, or obligations hereunder without the prior written approval of the Buyer and the Seller. (e) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. (f) Headings. The Section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (g) Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below. If to the Seller: Team, Inc. P.O. Box 123 Alvin, Texas 77512-0123 Attn: William A. Ryan, President Telephone: (281) 331-6154 Facsimile: (281) 331-4107 Copy to: Chamberlain, Hrdlicka, White, Williams & Martin 1200 Smith Street, Suite 1400 Houston, Texas 77002-4310 Attn: Sidney B. Williams Telephone: (713) 658-1818 Facsimile: (713) 658-2553 Stock Purchase Agreement/Page 10 15 If to the Buyer: Armstrong International, Inc. 2081 SE Ocean Blvd., 4th Floor Stuart, Florida 34996-3376 Attn: M.H. Armstrong, President Telephone: (561) 286-7175 Facsimile: (561) 286-1001 Copy to: J. Thomas Morris, Esq. General Counsel Armstrong International, Inc. 2081 SE Ocean Blvd., 4th Floor Stuart, Florida 34996-3376 Telephone: (561) 286-7175 Facsimile: (561) 286-1001 Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth. (h) Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Texas without giving effect to any choice or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas. (i) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyer and the Seller. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. Stock Purchase Agreement/Page 11 16 (j) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. (k) Expenses. Each of the Parties will bear its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. (l) Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. (m) Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date first above written. SELLER: TEAM, INC. By: /s/ William A. Ryan ------------------------------------------ William A. Ryan, Chairman of the Board and President Stock Purchase Agreement/Page 12 17 BUYER: ARMSTRONG INTERNATIONAL, INC. By: /s/ Merrill H. Armstrong ------------------------------------------ Merrill H. Armstrong, President and Chief Executive Officer Stock Purchase Agreement/Page 13 18 EXHIBIT A REGISTRATION RIGHTS AGREEMENT 19 EXHIBIT B STANDSTILL AND VOTING AGREEMENT EX-10.V 4 REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 10(v) REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made and entered into as of June 30, 1997 by and between TEAM, INC., a Texas corporation (the "Company"), and ARMSTRONG INTERNATIONAL, INC., a Michigan corporation (the "Holder"). The Company and Holder are referred to collectively herein as the "Parties." In consideration of the mutual covenants and promises stated in this Agreement, the Company and Holder agree as follows: 1. Certain Definitions. As used in this Agreement: (a) "Alliance Agreement" means this certain Alliance Agreement, by and between Team Industrial Services, Inc., a Texas corporation and wholly-owned subsidiary of the Company, and Holder, dated June 30, 1997. (b) "Common Stock" means the Common Stock, $0.30 par value, of the Company. (c) "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. (d) "Holder" means the undersigned or any other Person to which or whom Registrable Shares or rights to issuance of Registrable Shares have been assigned or transferred, in accordance with this Agreement. (e) "Person" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or a department, agency, or political subdivision thereof). (f) "Register," "Registered" and "Registration" mean a registration effected by preparing and filing a Registration Statement in compliance with the Securities Act and a declaration or ordering of effectiveness of such Registration Statement. (g) "Registrable Shares" means the shares of Common Stock acquired by Holder pursuant to the Stock Purchase Agreement and all securities of the Company issued in replacement of such shares of Common Stock. (h) "Registration Statement" means any registration statement of the Company which covers any of the Registrable Shares pursuant to the provisions of this 2 Agreement, including the prospectus, amendments and supplements to such Registration Statement (including post-effective amendments), all exhibits and all material incorporated by reference in such Registration Statement. All Registration Statements hereunder shall be filed on Form S-3 or another available form if Form S-3 is unavailable. (i) "SEC" means the Securities and Exchange Commission or any successor thereof. (j) "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. (k) "Standstill and Voting Agreement" means that certain Standstill and Voting Agreement, by and between the Company and Holder, of even date herewith, pursuant to which Holder has granted to the Company a right of first refusal (i) to acquire shares of Common Stock that the Holder has acquired pursuant to the Stock Purchase Agreement, and (ii) to acquire additional shares of Common Stock that the Holder may acquire in the future, in accordance with the terms and conditions contained in the Standstill and Voting Agreement. (l) "Stock Purchase Agreement" means that certain Stock Purchase Agreement, by and between the Company and Holder, of even date herewith, pursuant to which Holder has acquired shares of Common Stock, as more particularly described therein 2. Demand Registration Rights. (a) At any time beginning six months after Team Industrial Services, Inc. has terminated the Alliance Agreement, Holder may request by written notice that the Company register under the Securities Act all or any portion of the Registrable Shares held by Holder for sale. (b) After the first anniversary of this Agreement, Holder may request by written notice that the Company register under the Securities Act up to 50% of the Registrable Shares held by Holder for sale. (c) After the second anniversary of this Agreement, Holder may request by written notice that the Company register under the Securities Act up to 100% of the Registrable Shares held by Holder for sale. (d) Notwithstanding anything to the contrary contained herein, no request may be made under this Section 2 within 180 days after the effective date of a Registration Statement filed by the Company covering a firm commitment underwritten public offering Registration Rights Agreement/Page 2 3 in which Holder of Registrable Shares would have been entitled to join pursuant to Section 3 hereof. (e) Following receipt of any notice under this Section 2, the Company shall use its commercially reasonable efforts to file, as expeditiously as reasonably possible (but in no event later than 45 days after receipt of any notice under this Section 2), a Registration Statement under the Securities Act for sale in an underwritten public offering by a managing underwriter (chosen by Holder and reasonably acceptable to the Company) under an underwriting agreement consented to by the Company and Holder, which consent shall not be unreasonably withheld by the Company, the number of Registrable Shares specified in such notice. The Company shall be obligated to register Registrable Shares pursuant to Section 2 on two occasions only during each year following the date of the Company's receipt of any notice under Section 2. Such obligation shall be satisfied only when a Registration Statement covering all Registrable Shares specified in notices received in the manner indicated above, for sale in an underwritten public offering, shall have become effective and all such shares shall have been sold pursuant thereto. (f) The Company shall be entitled to defer for a reasonable period of time, but not in excess of 90 days, the filing of any Registration Statement otherwise required to be prepared and filed by it under this Section 2 if the Company notifies Holder within 10 business days after it requested registration under this Section 2 that the Company (i) is at such time conducting or about to conduct an underwritten public offering of its securities for its own account and the Board of Directors determines in good faith that such offering would be materially adversely affected by such registration requested by Holder or (ii) would, in the opinion of its counsel, be required to disclose in such registration statement information not otherwise then required by law to be publicly disclosed and, in the good faith judgment of the Board of Directors, such disclosure might adversely affect any material business transaction or negotiation in which the Company is then engaged. (g) The Company shall be entitled to include in any Registration Statement referred to in this Section 2, for sale in accordance with the method of disposition specified by Holder, shares of Common Stock to be sold by the Company for its own account. If, however, Holder concludes before the effectiveness of such Registration Statement that to include all or part of the shares of Common Stock to be sold by the Company for its own account in such Registration would be detrimental to any offering of securities by Holder, the number of shares of Common Stock to be included in the Registration may be reduced (or eliminated) to the extent deemed appropriate in the discretion of Holder, in good faith, after using its commercially reasonably efforts to cause to be included all or as many as possible of the shares of Common Stock requested by the Company. Registration Rights Agreement/Page 3 4 3. Piggyback Registration Rights. (a) If the Company proposes to file a Registration Statement under the Securities Act (other than a Registration Statement on Forms S-8 or S-4) at any time, the Company shall give written notice thereof to Holder. Upon written notice from Holder, received by the Company within the time period (not fewer than ten days) specified in the Company's notice to Holder, that Holder desires that the Company include the Registrable Shares in such Registration Statement (which request shall specify the number of Registrable Shares that Holder desires to include in the Registration Statement), the Company shall use its commercially reasonable efforts to include all or a portion of the Registrable Shares in the Registration Statement, subject to such reasonable conditions as may be determined by the Company. Holder shall be permitted to withdraw all or any part of the Registrable Shares from such Registration Statement prior to the effective date of Registration. If the Registration Statement is filed in connection with an underwritten offering on behalf of the Company (a "Primary Registration"), Holder may sell all or part of the Registrable Shares included in the Registration Statement on the same terms and conditions that apply to the other securities being issued and sold by the Company. If the Registration Statement is filed in connection with an underwritten secondary Registration on behalf of other holders of the Company's securities (a "Secondary Registration"), Holder may sell all or part of the Registrable Shares included in the Registration Statement on the same terms and conditions that apply to the securities being sold by the Person or Persons who initiated the Secondary Registration. (b) If, however, the Company concludes before the effectiveness of such Registration Statement that to include all or part of the Registrable Shares requested by Holder in such Registration would be detrimental to any offering of securities by the Company, the number of Registrable Shares to be included in the Registration may be reduced (or eliminated) to the extent deemed appropriate in the reasonable discretion of the Company, in good faith, after using its commercially reasonable efforts to include all or as many as possible of the Registrable Shares requested by Holder. 4. Covenants of the Company. In connection with any offering of Registrable Shares pursuant to this Agreement, the Company shall: (a) Subject to subparagraph (i) below, until the earlier of (i) such time as all of the Registrable Shares being offered have been disposed of in accordance with the intended method of disposition by Holder set forth in the Registration Statement or other offering document (and the expiration of any prospectus delivery requirements in connection therewith) or (ii) the expiration of four months after such Registration Statement or other offering document becomes effective (unless the offering is a continuous offering of securities under Rule 415, in which case until the earliest of the date the offering is Registration Rights Agreement/Page 4 5 completed and the 12-month anniversary of such effective date), keep effective and maintain any registration, qualification or approval obtained in connection with the offering of the Registrable Shares, and amend or supplement the Registration Statement or prospectus or other offering document used in connection therewith to the extent necessary to comply with applicable securities laws; (b) Furnish to Holder and to each managing underwriter, (i) as soon as reasonably practicable prior to filing with the SEC, a substantially complete draft of a Registration Statement covering Registrable Shares, any amendment or supplement thereto, and any prospectus used in connection therewith, which documents will be subject to the reasonable review of Holder and such underwriter; and (ii) if requested, a copy of any and all transmittal letters or other correspondence with the SEC or any other body having jurisdiction (including any domestic or foreign securities exchange) relating to such offering of Registrable Shares; (c) Furnish to Holder and each managing underwriter, such number of copies of the Registration Statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein) and the prospectus included in such Registration Statement (including each preliminary prospectus and prospectus supplement) as Holder or such underwriter may reasonably request to facilitate the sale of the Registrable Shares; (d) After the filing of such registration statement, promptly notify Holder of any stop order issued or, to the knowledge of the Company, threatened to be issued by the SEC and promptly take all reasonable actions to prevent the entry of such stop order or to obtain its withdrawal if entered; (e) Use its commercially reasonable efforts to qualify such Registrable Shares for offer and sale under the securities, "blue sky" or similar laws of such jurisdictions (including any foreign country or any political subdivision thereof in which shares of Common Stock are then listed) as Holder or any underwriter shall reasonably request and use its commercially reasonable efforts to obtain all appropriate registrations, permits and consents required in connection therewith, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it is not so qualified, or to subject itself to taxation or to file a general consent to service of process in any such jurisdiction; (f) Furnish to each managing underwriter, an opinion of counsel for the Company addressed to each of them, dated as of the date of the closing of the offering of Registrable Shares, and a "comfort" letter or letters signed by the Company's independent public accountants, each in reasonable and customary form and covering such matters of the Registration Rights Agreement/Page 5 6 type customarily covered by opinions or comfort letters delivered by such parties in underwritten public offerings; (g) Furnish unlegended certificates representing ownership of the Registrable Shares being sold in such denominations as shall be requested by Holder or the managing underwriter, provided such request is made at least two business days prior to the closing of the sale of such shares; (h) Promptly inform Holder (i) in the case of any offering of Registrable Shares in respect of which a Registration Statement is filed under the Securities Act, of the date on which such Registration Statement or any post-effective amendment thereto becomes effective and, if applicable, of the date of filing a Rule 430A prospectus (and, in the case of an offering abroad of Registrable Shares, of the date when any required filing under the securities and other laws of such foreign jurisdictions shall have been made and when the offering may be commenced in accordance with such laws) and (ii) of any request by the SEC, any securities exchange, government agency, self- regulatory body or other body having jurisdiction for any amendment of or supplement to any Registration Statement or preliminary prospectus or prospectus included therein or any offering memorandum or other offering document relating to such offering; (i) As promptly as practicable, notify Holder at any time when a prospectus relating to the sale of the Registrable Shares is required by law to be delivered in connection with sales by an underwriter or dealer, of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such shares, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statement therein, in light of the circumstances under which they were made, not misleading, and as promptly as practicable make available to Holder and to each managing underwriter, if any, any such supplement or amendment; if the Company shall give such notice, the Company shall extend the period during which such Registration Statement shall be maintained effective as provided in Section 2(a) by the number of days during the period from and including the date of the giving of such notice to the date when the Company shall make available to Holder such supplemented or amended prospectus; (j) Make available for inspection during the normal business hours of the Company by Holder, any underwriter participating in such offering, and any attorney, accountant or other agent retained by any Holder or any such underwriter in connection with the sale of Registrable Shares (collectively, the "Inspectors"), all relevant financial and other records, pertinent corporate documents and properties of the Company as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the officers, directors and employees of the Company to supply all information reasonably requested by Registration Rights Agreement/Page 6 7 any such Inspector in connection with such Registration Statement; provided, however, that (i) in connection with any such inspection, any such Inspectors shall cooperate to the extent reasonably practicable to minimize any disruption to the operation by the Company of its business and (ii) any records, information or documents shall be kept confidential by such Inspectors, unless (1) such records, information or documents are in the public domain or otherwise publicly available or (2) disclosure of such records, information or documents is required by a court or administrative order or by applicable law (including the Securities Act); (k) Enter into usual and customary agreements (including an underwriting agreement in usual and customary form) and take such other actions as are reasonably required to expedite or facilitate the sale of the Registrable Shares; (l) Make "generally available to its security holders" (within the meaning of Rule 158 of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder no later than 45 days after the end of the 12-month period beginning with the first day of the Company's first fiscal quarter commencing after the effective date of the Registration Statement, which earnings statement shall cover said 12-month period; (m) If requested by the managing underwriter or underwriters or Holder, promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter or underwriters or Holder, as the case may be, reasonably requests to be included therein, including information with respect to the number of Registrable Shares being sold by Holder to any underwriter or underwriters, the purchase price being paid therefor by such underwriter or underwriters and with respect to any other terms of an underwritten offering of the Registrable Shares to be sold in such offering, and promptly make all required filings of such prospectus by supplement or post-effective amendment; (n) As promptly as practicable after filing with the SEC of any document which is incorporated by reference in a prospectus contained in a Registration Statement, deliver a copy of such document to Holder; and (o) Take all other steps necessary to effect the registration of the Registrable Shares contemplated hereby. 5. Covenant of Holder. Holder agrees and covenants that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4(a), Holder will forthwith discontinue disposition of Registrable Shares pursuant to the Registration Statement covering such Registrable Shares until Holder's receipt of the copies Registration Rights Agreement/Page 7 8 of the supplemented or amended prospectus contemplated by Section 4(a), and, if so directed by the Company, Holder will deliver to the Company all copies, other than permanent file copies, then in Holder's possession of the prior prospectuses covering such Registerable Securities at the time of receipt of such notice. 6. Expenses. All expenses reasonably and customarily incurred in connection with the registration of Registrable Shares, including all filing fees, escrow fees, fees and expenses of compliance with securities or blue sky laws (including fees and disbursements of the Company's counsel in connection with blue sky qualifications of the Registrable Shares), rating agency fees, printing expenses, messenger and delivery expenses, internal expenses, the fees and expenses incurred in connection with the listing of the securities to be registered on each securities exchange on which similar securities issued by the Company are then listed, and fees an disbursements of counsel for the Company and the Company's independent certified public accountants (including the expenses of any special audit or "cold comfort" letters required by or incident to such performance) directly attributable to the registration of securities, Securities Act liability insurance (if the Company elects to obtain such insurance), and the fees and expenses of any special experts or other persons retained by the Company will be borne by the Company in connection with registrations under Section 3 and by Holder in connection with registrations under Section 2. The Company shall have no obligation to pay and shall not pay any underwriting fees, discounts or commissions in connection with any Registrable Shares registered pursuant to this Agreement or any out-of-pocket expenses of Holder, including legal fees, in connection therewith. 7. Indemnification. (a) Indemnification by the Company. The Company agrees to indemnify and hold harmless Holder, its officers, directors and agents, and will agree to indemnify and hold harmless any underwriter of Registrable Shares, and each person, if any, who controls any of the foregoing persons within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (individually, a "Loss"; collectively, "Losses") arising from or caused by (x) any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or prospectus relating to the Registrable Shares (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by any omission or alleged omission to the state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and (y) any violation or alleged violation by the Company of the Securities Act, any blue sky laws, securities laws or other applicable laws of any state in which Registrable Shares are offered and relating to action or inaction required of the Company in connection with such offering; and will reimburse each such person for any legal or other out-of-pocket Registration Rights Agreement/Page 8 9 expenses reasonably incurred in connection with investigating, or defending against, any such Loss (or any proceeding in respect thereof), subject to Section 7(c), except that the indemnification provided for in this Section 7(a) shall not apply to Losses that are caused by any such untrue statement or omission or alleged untrue statement or omission based upon and in conformity with information furnished in writing to the Company by or on behalf of Holder expressly for use therein. Notwithstanding the foregoing, the Company shall not be liable in any such case to the extent that any such Loss arises out of, or is based upon, an untrue statement or alleged untrue statement or omission or alleged omission made in any preliminary prospectus if (i) Holder failed to send or deliver a copy of the prospectus included in the relevant Registration Statement at the time it became effective (the "Prospectus") with or prior to the delivery of written confirmation of the sale of Registrable Shares to the person asserting such Loss or who purchased such Registrable Shares which are the subject thereof if, in either case, such delivery is required by the Securities Act and (ii) the Prospectus would have corrected such untrue statement or omission or alleged untrue statement or alleged omission; and the Company shall not be liable in any such case to the extent that any such Loss arises out of, or is based upon, an untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact in the Prospectus, if such untrue statement or alleged untrue statement or omission or alleged omission is corrected in any amendment or supplement to the Prospectus and if, having previously been furnished by or on behalf of the Company with copies of the Prospectus as so amended or supplemented, Holder thereafter fails to deliver such Prospectus as so amended or supplemented prior to or concurrently with the sale of Registrable Shares if such delivery is required by the Securities Act. (b) Indemnification by Holder. Holder agrees to indemnify and hold harmless the Company, its officers and directors, and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the indemnity made pursuant to clause (x) of Section 7(a) from the Company to Holder, but only with reference to information furnished in writing by or on behalf of Holder expressly for use in any Registration Statement or prospectus relating to Registrable Shares, or any amendment or supplement thereto, or any preliminary prospectus. (c) Conduct of Indemnification Proceedings. In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Sections 7(a) or 7(b), such person (the "Indemnified Party") shall promptly notify the person against whom such indemnity may be sought (the "Indemnifying Party") in writing, provided that the omission to so notify the Indemnifying Party will not relieve the Indemnifying Party of any liability it may have under this Agreement or otherwise except to the extent of any loss, damage, liability or expense arising from such omission. The Indemnifying Party, upon the request of the Indemnified Registration Rights Agreement/Page 9 10 Party, shall retain counsel reasonably satisfactory to such Indemnified Party to represent such Indemnified Party and any others the Indemnifying Party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention (ii) the Indemnifying Party shall have failed to comply with its obligations under the preceding sentence or (iii) the Indemnified Party shall have been advised by its counsel in writing that actual or potential differing interests exist between the Indemnifying Party and the Indemnified Party. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld. The Indemnifying Party shall not agree to any settlement as the result of which any remedy or relief, other than monetary damages for which the Indemnified Party shall be fully responsible, shall be applied to or against an Indemnified Party without the prior written of such Indemnified Party. (d) If the indemnification provided for in this Section 7 from the Indemnifying Party is unavailable to an Indemnified Party hereunder in respect of any Losses referred to therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 7(c), any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. No party shall be liable for contribution with respect to any action or claim settled without its written consent, which consent shall not be unreasonably withheld. Notwithstanding the provisions of this paragraph, Holder shall not be required to contribute any amount in excess of the amount by which the total price at which the Registrable Shares of Holder was sold to the public exceeds the amount of any damages which Holder has otherwise been required to pay due to such untrue or alleged untrue statement or omission of alleged omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 7(d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations Registration Rights Agreement/Page 10 11 referred to in the immediately preceding paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 8. Termination. This Agreement will terminate on the tenth anniversary of this Agreement. Notwithstanding the foregoing, the Company's and Holder's rights, duties and obligations under Section 6 and Section 7 shall survive the termination of this Agreement. 9. Available Information. The Company shall take such reasonable actions and file such information, documents and reports as shall be required by the SEC as a condition to the availability of Form S-3. 10. Miscellaneous. (a) Provision of Information. Holder shall, and shall cause its officers, directors employees and agents to complete and execute all such questionnaires as the Company shall reasonably request in connection with any registration pursuant to this Agreement. (b) Injunctions. Irreparable damage would occur if any of the provisions of this Agreement were not performed in accordance with its specified terms or were otherwise breached. Therefore, the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically the terms of provisions hereof in any court having jurisdiction, such remedy being in addition to any other remedy to which they may be entitled at law or in equity. (c) No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. (d) Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they have related in any way to the subject matter hereof. (e) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of his or its rights, interests, or obligations hereunder without the prior written approval of the Company and Holder, which approval shall not be unreasonably withheld. Registration Rights Agreement/Page 11 12 (f) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. (g) Headings. The Section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (h) Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below. If to the Company: Team, Inc. P.O. Box 123 Alvin, Texas 77512-0123 Attn: William A. Ryan, President Telephone: (281) 331-6154 Facsimile: (281) 331-4107 Copy to: Chamberlain, Hrdlicka, White, Williams & Martin 1200 Smith Street, Suite 1400 Houston, Texas 77002-4310 Attn: Sidney B. Williams Telephone: (713) 658-1818 Facsimile: (713) 658-2553 If to Holder: Armstrong International, Inc. 2081 SE Ocean Blvd., 4th Floor Stuart, Florida 34996-3376 Attn: M. H. Armstrong, President Telephone: (561) 286-7175 Facsimile: (561) 286-1001 Registration Rights Agreement/Page 12 13 Copy to: J. Thomas Morris, Esq. Armstrong International, Inc. 2081 SE Ocean Blvd., 4th Floor Stuart, Florida 34996-3376 Telephone: (561) 286-7175 Facsimile: (561) 286-1001 Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth. (i) Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Texas without giving effect to any choice or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas. (j) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Parties. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. (k) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. (l) Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations Registration Rights Agreement/Page 13 14 promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above. COMPANY: TEAM, INC. By: /s/ William A. Ryan ------------------------------------------------- William A. Ryan, Chairman of the Board and President HOLDER: ARMSTRONG INTERNATIONAL, INC. By: /s/ Merrill H. Armstrong ------------------------------------------------- Merrill H. Armstrong, President and CEO Registration Rights Agreement/Page 14 EX-10.W 5 STANDSTILL & VOTING AGREEMENT 1 EXHIBIT 10(w) STANDSTILL AND VOTING AGREEMENT THIS STANDSTILL AND VOTING AGREEMENT (the "Agreement"), is entered into on this the 30th day of June, 1997, by and between Team, Inc., a Texas corporation ("Team") and Armstrong International, Inc., a Michigan corporation ("Shareholder"). Team and the Shareholder are referred to collectively herein as the "Parties." INTRODUCTION Pursuant to a Stock Purchase Agreement of even date herewith ("Stock Purchase Agreement"), Shareholder is acquiring 650,000 shares ("Shares") of the common stock, $0.30 par value per share ("Common Stock"), of Team and the Shareholder has agreed to execute this Agreement as additional consideration to Team under the Stock Purchase Agreement. The Shareholder and Team have agreed that this Agreement shall be executed as a condition precedent to the closing of the transactions contemplated by the Stock Purchase Agreement, in order to promote the stability of the management of Team, in recognition that such stability is necessary and desirable for Team, and for the Shareholder as a result of its substantial investment in Team represented by the Shares, to promote stable relationships with customers, suppliers and lenders, to assist in recruiting key employees and to avoid contributing to excessive volatility in the market price of Team Common Stock. AGREEMENT NOW, THEREFORE, in consideration of the premises and the mutual promises herein made and in consideration of the representations, warranties and covenants herein contained, the Parties agree as follows: Section 1 Standstill Agreement. 1.1 Shareholder agrees that, except to the extent provided in Section 1.2, during the period beginning on the date of this Agreement and ending on the date five years after the date of this Agreement ("Standstill Term"), it will not acquire or agree to acquire, or cause or permit any "Affiliate" (as hereinafter defined) or any Group (as hereinafter defined) of which Shareholder is a member to acquire or agree to acquire, (a) any Common Stock, or any other securities ("Other Voting Securities") of Team that entitle the holder thereof to vote or may entitle the holder thereof to vote under certain circumstances (including but not limited to the right to vote on matters as to which the Texas Business Corporation Act ("TBCA") and/or the articles of incorporation or bylaws of Team require or permit voting by a class of securities that ordinarily does not have the right to vote on matters submitted to a vote of Shareholder), (b) any option, warrant or other right to acquire Common Stock or Other Voting Securities, (c) any option, warrant or other right to acquire securities or other rights convertible into or exchangeable for Common Stock or Other Voting Securities, or (d) any right or power ("Voting Right") to vote, or to control, direct or influence the manner of voting of, Common Stock or Other Voting Securities, or any option or other right to acquire a Voting Right. The ownership or possession of, or right to acquire ownership or possession of, Common Stock, 2 Other Voting Securities or Voting Rights (collectively, "Team Voting Securities") as covered in items (a), (b), (c) and (d) above are sometimes collectively referred to hereinafter as "Voting Power." 1.2 The restrictions set forth in Section 1.1 shall not apply to Shareholder or its Affiliate or Group if (a) at the time of a proposed transaction otherwise subject to Section 1.1 the Shareholder and its Affiliates and any Group of which it is a member collectively have Voting Power with respect to no more than 30% of the issued and outstanding shares of Team Voting Securities, and (b) upon consummation of the proposed transaction the Shareholder and Affiliates and any Group of which it is a member will continue to have Voting Power with respect to no more than 30% of the issued and outstanding shares of Team Voting Securities, determined on a Fully Diluted Basis. "Fully Diluted Basis" means, with respect to calculating percentage ownership of the Common Stock, treating as currently issued and outstanding all shares of Common Stock that Team may be required to issue in the future in connection with currently valid, binding and enforceable options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that could require Team to issue, sell, or cause to become outstanding, any of its Common Stock. 1.3 As used in this Agreement, (a) an "Affiliate" of, or person "Affiliated" with, a specified person, is a person or entity that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified, and shall include (without limitation of the foregoing) any entity of which Shareholder and/or any of the beneficial owners of Shareholder's outstanding shares of stock own 10% or more of the outstanding voting securities and/or voting rights, and (b) the term "Group" means a person and entities and persons under Shareholder's direct or indirect control or acting on Shareholder's behalf or with whom Shareholder or such other person in a control relationship to Shareholder and/or any member of a group of persons is acting together to accomplish the same or similar objective or bring about the same events, including by example, objectives which would usurp the limitations of this Agreement. 1.4 Under that certain Rights Agreement ("Rights Agreement"), by and between Team and Ameritrust Company, N.A., dated October 24, 1990, the acquisition by any shareholder or group of shareholders and/or their affiliates of 15% of the Common Stock triggers certain rights of other holders of the Common Stock. Accordingly, if during the Standstill Term Shareholder or an Affiliate or a member of a Group of which Shareholder is a member proposes to enter into an agreement to acquire or to acquire Common Stock, Other Voting Securities or Voting Rights representing Voting Power over 2 1/2% or more of the issued and outstanding Common Stock of Team such Shareholder or Affiliate or Group member shall give Team not less than 5 days written notice prior to entering into such agreement or making such acquisition, which notice shall describe in reasonable detail the proposed acquisition. Team shall, promptly after receipt of such notice, take such actions as reasonably necessary to terminate the Rights Agreement. 1.5 During the Standstill Term, sales or other dispositions of Common Stock by Shareholder or any Affiliate or a member of a Group of which Shareholder is a member shall be made only (a) by means of a firm commitment underwriting pursuant to the registration rights provided in that certain Registration Rights Agreement, of even date herewith, by and between Team and Shareholder (the "Registration Rights Agreement") or (b) in "brokers' transactions", as such term is defined in Rule 144(g) under the Securities Act of 1933, as amended ("Act") or (c) in Standstill and Voting Agreement/Page 2 3 accordance with Section 6 of this Agreement. Shares of Common Stock sold pursuant to (a) or (b) above shall pass to the purchaser free of this Agreement, and Team shall execute such acknowledgments thereof as the selling Shareholder or purchaser may reasonably request at the time of sale. Section 2. Voting Agreement. 2.1 Shareholder agrees with Team that during the Standstill Term all shares of Team Common Stock owned by Shareholder or any Affiliate or any Group of which it is a member shall be voted in the manner recommended to Shareholder by a majority of the members of the Board of Directors of Team as to (a) any election of a director or directors of Team, and (b) any merger, consolidation, dissolution, or a sale of all or substantially all of the assets of Team; provided, however, that Shareholder (or any Affiliate or Group as the case may be) shall be permitted in its sole discretion, to vote its shares of Common Stock against any merger, consolidation, dissolution, or sale of all or substantially all of the assets of Team. On all other matters submitted to a vote of shareholders, Shareholder shall be entitled to direct the vote of its shares of Team Voting Securities, in the manner provided in Section 2.3. 2.2 Shareholder hereby grants proxy ("Proxy") to William A. Ryan or Marge Rogers ("Proxy Agents"), with full power of substitution, to vote all of the shares of Team Common Stock owned by Shareholder on each and every matter covered by Section 2.1(a) or (b) submitted to a vote of the Team Shareholder during the Standstill Term. Shareholder further agrees that Team shall have the right in its sole discretion to remove and replace such Proxy Agents or appoint additional Proxy Agents, without notice to or consent of the Shareholder. Such Proxies shall expire at the end of the Standstill Term. SHAREHOLDER ACKNOWLEDGES AND AGREES THAT THE PROXIES GRANTED PURSUANT TO THIS SECTION 2.2 ARE COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE. Shareholder further agrees to execute, and to cause any Affiliate or member of a Group of which it is a member that in the future acquires any Voting Power with respect to Team Common Stock to execute, a proxy covering the Team Common Stock or other rights giving rise to such Voting Power, on the same terms as provided in this Section 2. 2.3 With respect to any matter covered by Section 2.1(a) or (b), the Shareholder and Team hereby agree that the Proxy Agents shall vote its Proxy in the manner provided in Sections 2.1 and 2.2, and each of the Proxy Agents is hereby irrevocably so instructed. With respect to any matter submitted to a vote of Shareholder and which is not covered by the terms of Section 2.1(a) or (b), the Proxy Agents shall vote such shares in the manner instructed in writing from time to time by the Shareholder, or, in the absence of written instructions, in the manner recommended to Shareholder by a majority of the Board of Directors of Team. 2.4 Shareholder agrees that neither it nor any Affiliate or Group of which it is a member that has granted or in the future grants a Proxy pursuant to this Section 2 shall have any right to challenge, contest or object to any procedural or other matter relating to the recommendations to Shareholder made by the Team Board of Directors as to the voting of Common Stock as to matters detailed in Section 2.1(a) and 2.1(b) above. Standstill and Voting Agreement/Page 3 4 Section 3. Legend, Stop Order, Etc.. 3.1 The Shareholder and Team acknowledge and agree that the provisions of Sections 1.5 and 6 hereof constitute reasonable restrictions on transfer of the shares of Common Stock of the Shareholder within the meaning of Article 2.22 of the TBCA, and that the provisions of Section 2 hereof constitute a voting agreement within the meaning of Article 2.30B of the TBCA. 3.2 The Shareholder and Team agree that each certificate issued to Shareholder or an Affiliate or a Group of which it is a member representing shares of Team Common Stock shall bear the following legend, which legend shall not be included on certificates issued upon receipt of cancelled certificates in respect of a transfer in compliance with the terms hereof: THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF AN AGREEMENT BETWEEN TEAM, INC. AND ARMSTRONG INTERNATIONAL, INC., AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN ACCORDANCE WITH SUCH AGREEMENT. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO THE PROVISIONS OF A VOTING AGREEMENT SET FORTH IN SUCH AGREEMENT, A COUNTERPART OF WHICH HAS BEEN DEPOSITED WITH THE CORPORATION AT ITS PRINCIPAL OFFICE, AND A COPY OF WHICH WILL BE PROVIDED TO ANY SHAREHOLDER UPON WRITTEN REQUEST. 3.3 The Shareholder and Team acknowledge and agree that a counterpart of this Agreement shall be deposited with Team at its principal office. 3.4 The Shareholder consents to the entry of a stop transfer order with the transfer agent or agents of Team securities against the transfer of Team Voting Securities except in compliance with the requirements of this Agreement, or if Team is its own transfer agent with respect to any Team Voting Securities, to the refusal by Team to transfer any such securities except in compliance with the requirements of this Agreement. Section 4. Certain Other Agreements of Shareholder. The Shareholder or its Affiliates or any Group of which it is a member shall not, unless the prior written consent of Team has been obtained (and then only to the extent express written consent has been obtained): (a) solicit proxies or become a "participant" in a "solicitation" (as such terms are defined in Regulation 14A under the Act) in opposition to the recommendation of the majority of the directors of Team with respect to any matter; or (b) join or permit any Affiliate of them to join a partnership, limited partnership, syndicate, or other group for the purpose of acquiring, holding or disposing of Team Voting Securities within the meaning of Section 13(d) of the Act; or (c) initiate, propose or otherwise solicit shareholders for any matter at any time or induce or attempt to induce any other person to initiate any shareholder proposal or a tender offer for shares of Team securities or any change of control of Team, or for the purpose of convening a shareholders' meeting of Team; or (d) subject to the limitation contained in Section 1.2, acquire or permit any entity under their control to acquire, by purchase or otherwise, more than five percent of any class of equity securities of any entity which, prior to the time they acquire more than five percent of such class, is publicly disclosed (by filing with the Securities and Exchange Commission or otherwise) to be the beneficial owner of more than five percent of any class of Team Voting Securities; provided that if Shareholder and/or its Affiliates Standstill and Voting Agreement/Page 4 5 or a member of a Group of which it is a member acquires control of such entity, Team shall have the right to purchase the Team Voting Securities owned by such entity in accordance with Section 6. Section 5. Representations and Warranties of Shareholder. Shareholder hereby represents and warrants to Team that: (a) Except for the Common Stock being acquired by it pursuant to the Stock Purchase Agreement, neither of it nor any of its Affiliates nor any member of a Group, if any, directly or indirectly, owns (or has any option or other right to acquire) any Common Stock, and (b) it is not acting in concert with any person with respect to the Common Stock. Section 6. Right of First Refusal. 6.1 During the Standstill Term, sales or other dispositions of Common Stock by Shareholder or any Affiliate or a member of a Group of which Shareholder is a member shall be made only (a) by means of a firm commitment underwriting pursuant to the registration rights provided in the Registration Rights Agreement or (b) in "brokers' transactions", as such term is defined in Rule 144(g) under the Securities Act of 1933, as amended ("Act") or (c) in accordance with the terms of this Section 6. Simultaneously with notifying Team of the exercise of its right to sell shares pursuant to subsection (a) of this Section 6.1, Shareholder shall offer to sell Team all of the shares which Shareholder wishes to sell pursuant to subsection 6.1(a) for a price per share which is equal to the average closing price of Team shares as reported by the Wall Street Journal for each of the ten trading days immediately preceding the date of Shareholder's notice to Team. 6.2 If Shareholder shall receive a bona fide offer from a third party or parties to purchase or otherwise acquire Common Stock therefrom at any time, it shall have the right to sell or dispose of the amount of Common Stock which is the subject of such offer by such third party or parties if, prior to such sale, transfer or other disposition, Team shall have been given the opportunity, in the following manner, to purchase such Common Stock: (a) Shareholder shall give notice (the "Transfer Notice") to Team in writing of such intention, specifying the name of the proposed purchaser or transferor, the number of shares of Common Stock proposed to be transferred, the proposed price therefor and the other material terms upon which such disposition is proposed to be made. (b) Team shall have the right, exercisable by written notice given by Team within 20 business days after receipt of such Transfer Notice to purchase (or to cause a corporation, entity, person or group designated by Team to purchase) all, but not a part of, the shares of Common Stock specified in such Transfer Notice for cash at the price set forth therein. If Team exercises its right of first refusal hereunder, the closing of the purchase of the shares of Common Stock with respect to which such right has been exercised shall take place within the later to occur of 30 business days after the date of the notice by Team or seven business days after receipt by Team of any required governmental or Shareholder' approvals and any necessary financing is approved and obtained (which must be obtained, if at all, within 45 days of Team's receipt of the Transfer Notice). Upon exercise of its right of first refusal, Team shall be legally obligated to use its best efforts to secure all approvals required in connection therewith and shall be liable in damages to the selling party if any failure of Team to perform its obligations hereunder shall result in the failure of such purchase to occur. Standstill and Voting Agreement/Page 5 6 If the purchase price specified in the Transfer Notice includes any property other than cash, such purchase price shall be deemed to be the amount of any cash included in the purchase price plus the value (as jointly determined by nationally recognized investment banking firms selected by each party or, in the event such firms are unable to agree, a third nationally recognized investment banking firm to be selected by them) of such other property including in such price. For this purpose: (1) The parties shall use their best efforts to cause any determination of the value of any property included in the purchase price to be made within seven days after the date of delivery of the Transfer Notice; if the firms selected by the selling party and Team are unable to agree upon the value of any such property within such seven day period, the firms shall promptly select a third firm whose determination shall be conclusive; and (2) the date on which Team must exercise its right of first refusal shall be extended until seven days after the determination of the value of property included in the purchase price. (c) If Team does not exercise its right of first refusal hereunder within the time specified for such exercise, the party giving the Transfer Notice shall be free during the period of 90 calendar days following the expiration of such time for exercise to sell the shares of Common Stock specified in such Notice to the person and at the price specified therein or at any price in excess thereof and, if such sale is consummated, such shares of Common Stock shall be transferred free of the terms and provisions of this Agreement. 6.3 In the event that any person shall make a tender or exchange offer ("Tender Offer") for more than 20% of the outstanding Common Stock of Team prior to the termination of this Agreement, Shareholder shall not tender any Common Stock pursuant to such Tender Offer unless it gives notice to Team no later than six days prior to the last day when securities may be tendered in order to be accepted under such offer or to qualify for any proration applicable to such offer (the "Tender Date") that it intends to tender a specified number of shares of Common Stock pursuant to such offer. For purposes hereof a Tender Offer to purchase shares of Common Stock shall be deemed to be an offer at the price specified therein, without regard to any provisions thereof with respect to proration or conditions to the offeror's obligation to purchase. If notice is given, Team shall have the right, exercisable by giving notice to Shareholder at least two days prior to the Tender Date, to purchase or cause its designee to purchase the number of shares of Common Stock specified in Shareholder's notice for cash. If Team exercises such right by giving such notice, the closing of the purchase of the Common Stock shall take place not later than one day prior to the Tender Date; provided, however, that if the purchase price specified in the Tender Offer includes any property other than cash, the closing shall occur within 30 calendar days after Team gives notice of the exercise of its right of first refusal hereunder, and the value of any property included in the purchase price shall be determined pursuant to the provisions of Section 6.2(b). If Team does not exercise such right by giving such notice, then Shareholder shall be free to accept the Tender Offer with respect to which such notice of exercise was given. Shareholder shall have the right to withdraw such notice (whether or not Team shall have theretofore given notice of withdrawal to Team at any time up to the earlier of the closing of any purchase by Shareholder) or its designee or the Tender Date. At any time on or before the day prior to the Tender Date, Team shall have the right to withdraw its notice to Stockholder and decline to purchase the common Stock in which event Shareholder shall be free to tender its Common Stock pursuant to such offer. The purchase price to be paid by Team or its designee pursuant to this Section 6.3 shall be (i) if such Tender Offer is consummated, the purchase price that Shareholder would have received if it had tendered its Common Stock and such Common Stock had been purchased in such Tender Offer, including any Standstill and Voting Agreement/Page 6 7 increase in the price paid by the tender offeror after exercise by Team of its right of first refusal hereunder, or (ii) if such Tender Offer is not consummated, the highest price offered pursuant thereto, in each case with property, if any, to be valued pursuant to the provisions of Section 6.2(b). In the event that a Tender Offer is consummated, shares transferred to the tender offeror in accordance with this Section 6.3 shall be transferred free of the terms of this Agreement. 6.4 In the event that Team elects to exercise its rights of first refusal under this Section 6, Team may specify in its notice of intention to exercise such right another person as its designee to purchase the Common Stock to which such notice relates. If Team shall designate another person as the purchaser pursuant to this Section 6, this giving of notice of acceptance of the right of first refusal by Team shall constitute a legally binding obligation of Team to complete such purchase if such person shall fail to do so; provided, however, that Team shall have its rights to withdrawal provided for in this Section 6. 6.5 The pledge by Shareholder of its Common Stock to secure indebtedness incurred by Shareholder or its Affiliates to a lending institution not Affiliated with Shareholder shall not constitute a sale or other disposition under Section 6.1 so long as no event of default has occurred under such pledge or the underlying indebtedness; provided, however, that the instruments creating such lending institution's security interest shall provide that such lending institution shall notify the Company upon the occurrence of any event of default under such instruments, and such instruments shall include the agreement of such lending institution to comply with the provisions of this Section 6 in its sale or disposition of the Shares under such instruments. The Parties hereby agree that, in the event of a sale or a disposition of shares in accordance with this Section 6, such shares shall be transferred free of the terms of this Agreement and such lending institution is a permitted assignee of Shareholder's rights under Section 10(e) of the Registration Rights Agreement. Section 7. Miscellaneous Provisions. 7.1 The Parties acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state thereof having jurisdiction, this being in addition to any other remedy to which they may be entitled at law or equity. 7.2 No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement prior to the Closing without the prior written approval of Team and Shareholder; provided, however, that any Party may make any public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its publicly-traded securities (in which case the disclosing Party will use its reasonable efforts to advise the other Parties prior to making the disclosure). 7.3 This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. Standstill and Voting Agreement/Page 7 8 7.4 This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they have related in any way to the subject matter hereof. 7.5 This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of his or its rights, interests, or obligations hereunder without the prior written approval of the Buyer and the Seller. 7.6 This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. 7.7 The Section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. 7.8 All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below. If to Team: Team, Inc. P.O. Box 123 Alvin, Texas 77512-0123 Attn: William A. Ryan, President Telephone: (281) 331-6154 Facsimile: (281) 331-4107 Copy to: Chamberlain, Hrdlicka, White, Williams & Martin 1200 Smith Street, Suite 1400 Houston, Texas 77002-4310 Attn: Sidney B. Williams Telephone: (713) 658-1818 Facsimile: (713) 658-2553 If to Shareholder: Armstrong International, Inc. 2081 SE Ocean Blvd., 4th Floor Stuart, Florida 34996-3376 Attn: M. H. Armstrong, President Telephone: (561) 286-7175 Facsimile: (561) 286-1001 Standstill and Voting Agreement/Page 8 9 Copy to: J. Thomas Morris, Esq. General Counsel Armstrong International, Inc. 2081 SE Ocean Blvd., 4th Floor Stuart, Florida 34996-3376 Telephone: (561) 286-7175 Facsimile: (561) 286-1001 Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth. 7.9 This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Texas without giving effect to any choice or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas. 7.10 No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by Team and Shareholder. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. 7.11 Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. 7.12 Each of the Parties will bear its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. 7.13 The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. Section 8. Termination. Team and the Shareholder acknowledge and agree that in the event that at any election of directors of Team, directors other than directors nominated or Standstill and Voting Agreement/Page 9 10 recommended by the Board of Directors of Team are elected with the result that after such election (including after any challenges, objections or disputes regarding the solicitation or validity of proxies relating to such election or any other matter relating to such election have been fully and finally resolved with no further right of appeal) directors other than directors nominated or recommended by the Board of Directors of Team constitute a majority of the Board of Directors (such event being referred to hereinafter as a "Change in Control"), then the objective of this Agreement of promoting management stability will not have been accomplished and will not be further served by this Agreement. Therefore, Team and the Shareholder agree that this Agreement shall terminate upon a Change of Control. Section 9. Conduct with Respect to Employees. Except with the written consent of the other Party, neither Party nor any of its Affiliates shall employ, during the Standstill Term and for six months thereafter, any person employed by the other Party or any of its Affiliates at or at any time within six months prior to the date on which such Party proposes to employ such person, unless such person was previously terminated by the other Party. IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first above written. SHAREHOLDER: ARMSTRONG INTERNATIONAL, INC. By: /s/ Merrill H. Armstrong ------------------------------------------------ Merrill H. Armstrong, President and Chief Executive Officer TEAM, INC. By: /s/ William A. Ryan ------------------------------------------------- William A. Ryan, Chairman of the Board and President Standstill and Voting Agreement/Page 10 EX-10.X 6 EMPLOYMENT & CONSULTING AGREEMENT 1 EXHIBIT 10(x) EMPLOYMENT AND CONSULTING AGREEMENT THIS AGREEMENT ("Agreement") is made and entered into by and between WILLIAM A. RYAN, an individual ("Ryan"), and TEAM, INC., a Texas corporation ("Team") to be effective as of June 1, 1997 (the "Effective Date"). R E C I T A L S: WHEREAS, Team employed Ryan as its President and Chief Executive Officer and entered into an employee agreement (the "Employment Agreement") with Ryan which was made effective as of August 31, 1995; and, WHEREAS, Ryan voluntarily agreed, effective January 1, 1997, to reduce his base compensation from $300,000, as provided in the Employment Agreement, to one hundred thousand dollars ($100,000) per annum together with such annual performance bonus compensation awards as Team's Board of Directors(the "Board") acting in its sole discretion determines; and, WHEREAS, the Board awarded Ryan a performance bonus in the amount of $50,000 during a scheduled meeting which was held on June 26, 1997 in recognition of his outstanding performance through the period ended May 31, 1997 and also awarded Ryan options to acquire 50,000 shares of Team stock during such meeting in recognition of his past performance and as an incentive for future performance; and, WHEREAS, Team and Ryan have agreed to terminate the Employment Agreement dated August 25, 1995 and enter into this Agreement to set forth the current terms and conditions of Ryan's employment and consulting relationship with Team; NOW, THEREFORE, in consideration of the premises, and the covenants herein set forth, the continued employment of Ryan by Team and for other good and valuable consideration, the receipt and sufficiency and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 2 A G R E E M E N T S: 1. EMPLOYMENT AND CONSULTING. Subject to the terms and conditions hereinafter stated, Ryan shall serve as Chief Executive Officer of Team with the duties specified in section 1(a) below throughout the period ("Employment Period") beginning as of the Effective Date and ending on the earlier date to occur of: (i) the date that the Team Board of Directors ("Board") adopts a resolution designating a new Chief Executive Officer, (ii) the ninetieth (90th) day following the delivery to Team of Ryan's written notice of resignation, or (iii) May 31, 2002. From and after the date that Ryan ceases to serve as Team's Chief Executive Officer, and through May 31, 2002, Ryan shall serve as a Consultant to Team with the duties specified in subsection 1(b) below. The Employment Agreement dated August 25, 1995 is hereby cancelled and all of the rights and obligations of the parties thereunder are hereby terminated. In the event that Ryan is serving as a member of the Board at the time that he ceases to serve as Team's Chief Executive Officer, he will continue to serve at the pleasure of the Team shareholders as a non-employee director of Team and shall be entitled to the compensation and other benefits which are then made available to the other non-employee Team directors. (a) DUTIES AS CHIEF EXECUTIVE OFFICER. Ryan agrees to serve throughout the Employment Period as defined above 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 assigned to Ryan by the Board which are consistent with Ryan's position as President and Chief Executive Officer. Ryan shall as consideration for serving hereunder as Team's Chief Executive Officer be compensated in the manner provided in subsections 2(a) and 2(b) below. No change in the duties of Ryan which are consistent with his position as President and Chief Executive Officer shall result in a termination or rescission of this Agreement. Ryan shall devote such time and attention as may be reasonably necessary to perform his duties hereunder. Ryan shall be permitted to serve on the Boards of Directors of other corporations and/or to engage in other business activities for his own account, provided that none of such other business activities shall be inconsistent with the terms of Section 6 hereof and provided further that such activities do not materially interfere with the performance of Ryan's duties hereunder. By way of 2. 3 expression and not of limitation, Ryan shall make available to Team any and all business opportunities that become available to Ryan 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. (b) CONSULTING DUTIES. From and after the end of the Employment Period as defined above and through May 31, 2002, Ryan covenants that he will make himself reasonably available to consult with the Board and Team's officers at Team's principal offices in Texas; provided, however, that Ryan shall not be required to expend more than ten (10) hours a month in performing consulting services to Team and he shall not be required to perform any services which would be impossible or impractical for him to perform or would likely damage his health. As consideration for agreeing to serve as a Consultant to Team hereunder, Ryan shall be compensated in accordance with the provisions of subsection 2(d) below. 2. COMPENSATION. (a) CHIEF EXECUTIVE OFFICER. Throughout the Employment Period as defined above and for a period of one full year thereafter ("POST EMPLOYMENT TERM"), Ryan shall be paid One Hundred Thousand Dollars ($100,000) per year ("Base Compensation"), in equal and consecutive monthly installments ("Monthly Salary Payments") of eight thousand three hundred thirty three dollars and thirty three cents ($8,333.33). (b) PERFORMANCE BONUS. As promptly as practical following the end of each fiscal (or any portion thereof) during which Ryan serves as Team's Chief Executive Officer pursuant to this Agreement, the Board shall review Ryan's performance during such fiscal year and ,the Board acting in its sole discretion shall award Ryan a performance bonus based upon Ryan' performance as Team's Chief Executive Officer during such fiscal year or any part thereof; provided, however, that such bonus shall not be less than the product of fifty thousand dollars($50,000) multiplied times that percentage of such fiscal year during which Ryan served as Team's Chief Executive Officer. (c) OTHER BENEFITS AS CHIEF EXECUTIVE OFFICER. While serving as Team's Chief Executive Officer, Ryan shall be entitled to paid vacations, 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. Ryan shall further be entitled to 3. 4 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. Ryan'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. (d) CONSULTANT. After the conclusion of the Post Employment Period and for the remainder of the Term as herein defined Team shall pay Ryan the sum of fifty thousand dollars per year in consecutive, equal monthly installments of four thousand one hundred sixty six dollars and sixty six cents ($4,166.66) each as consideration for agreeing herein to consult with Team following the Employment Period. As a Consultant, Ryan shall also be entitled to reimbursement for travel and other expenses reasonably incurred in carrying out his consulting duties. 4. TERM. The Term ("Term") of this Agreement commenced effective June 1, 1997 and unless sooner terminated by mutual agreement of the parties or by termination "for cause" pursuant to Section 5(b), shall terminate at the close of business on the 31st day of May, 2002. 5. TERMINATION. (a) WITHOUT CAUSE. Team may terminate Ryan's employment as its Chief Executive Officer at any time "without cause" by giving Ryan written notice of such termination, and Ryan may terminate his employment as Chief Executive Officer without cause upon ninety (90) days' prior written notice to Team. Ryan shall be entitled to receive a bonus payment pursuant to section 2(b) with respect to the fiscal year during which he ceases to serve as Team's Chief Executive Officer. Subject to the limitations contained in subsection 5(b) hereof, Ryan shall immediately after he ceases to be Team's Chief Executive Officer continue to receive Monthly Salary Payments in the amount of eight thousand three hundred thirty three dollars and thirty three cents ($8333.33) throughout the Post Employment Period as provided above, and after the conclusion of the Post 4. 5 Employment Period, Ryan shall receive the sum of four thousand one hundred sixty-six dollars and sixty-six cents($4,166.66) a month through May 31, 2002 as provided in subsection 2(d) as his total remaining entitlements under this Agreement. (b) FOR CAUSE. Notwithstanding anything to the contrary contained or implied herein, Team may terminate this Agreement and all of its continuing obligations to Ryan hereunder "for cause" by giving written notice of such termination "for cause" to Ryan. For purposes of section 5(a) this Agreement, the phrase "for cause" shall exclusively mean the occurrence of one of the following events: (i) Ryan shall be determined by Team to be guilty of fraud, dishonesty, or violations of criminal statutes; or, (ii) Ryan shall be determined by Team to have materially violated the provisions of section 6 of this Agreement. In making the determinations described in Section 5(b)(i) and (ii) 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, Ryan shall not be entitled to receive any further compensation under this Agreement from and after the date of such termination for cause. Notwithstanding anything to the contrary contained or implied herein, Ryan's death or disability during the Term shall not be "cause" for terminating Ryan's entitlements under this Agreement. Entitlements to which Ryan is entitled pursuant to this Agreement shall in the event of Ryan's death during the Term be paid to his estate. 6. PROTECTION OF CONFIDENTIAL INFORMATION AND GOODWILL. Ryan hereby covenants and agrees as follows: (a) Ryan shall not use or disclose, directly or indirectly, for any reason whatsoever or in any way any 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, other than (i) at the direction of Team during the course of Ryan's employment, (ii) after receipt of the prior written 5. 6 consent of Team, (iii) as required by any court or governmental regulatory agency having competent jurisdiction over Team or its business or over Ryan, or (iv) information made public by Team or information known or generally available within Team's industry. (b) During the Term and for a period of two (2) years thereafter, Ryan 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 two hundred fifty (250) miles from any operating facility of Team or any Affiliate of Team. (c) During the Term and for a period of two (2) years following the termination of the Term, Ryan 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 two hundred fifty (250) 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 Term, Ryan 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. (e) Ryan 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. (f) Team and Ryan agree that the covenants set forth in this Paragraph 6 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 Ryan's performance hereunder. 6. 7 (g) In connection with the limited protection afforded Team by the covenants contained within this Paragraph 6, Ryan 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) a valuable list of customers and information about their requirements and needs, purchasing patterns and internal purchasing procedures; (ii) Ryan, 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, 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 State of Texas and Ryan will be involved in providing such services through operating facilities and affiliates of Team; (v) Ryan could, after having access to 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, Ryan enters directly or indirectly into competition with Team. (h) Ryan hereby specifically acknowledges and agrees that the temporal, geographical and other restrictions contained in this Section 6 are reasonable and necessary to protect the business and prospects of Team, and that the enforcement of the provisions of this Section 6 will not work an undue hardship on him. (i) Ryan further agrees that in the event either the length of time, geographical or any other restrictions, or portion thereof, set forth in this Section 6 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 circumstances 7. 8 and the parties agree that the restrictions of this Section 6 will remain in full force and effect as reduced or modified. (j) Ryan 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 6 and Ryan therefore specifically agrees that Team, in the event of the breach or threatened breach by Ryan of any of the Ryan's covenants contained in Section 6 of this Agreement, in addition to other remedies which may be available to it hereunder, may file a suit in equity to enjoin Ryan from such breach or threatened breach. Ryan further agrees, in the event that any provision of this Section 6 is held to be invalid or against public policy, the remaining provisions of this Section 6 and the remainder of this Agreement shall not be affected thereby. 7. PROPERTY OF TEAM. Ryan 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 Ryan. 8. LAW GOVERNING. 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. 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, and either party may bring any suit that they desire to institute upon this Agreement in any such court. 9. 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 8. 9 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 Paragraph 9 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. 10. 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 10. Each notice given in accordance with this Paragraph 10 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 day following the day on which it is deposited in the United States mail. 11. 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. 12. 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 9. 10 unenforceable provision, there shall be added automatically as a part of this Agreement, a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable, if such reformation is allowable under applicable law. 13. 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. 14. DEFINITION OF "AFFILIATE". For purposes of this Agreement, the term "Affiliate" means any subsidiary corporation of Team. For purposes of this definition, a subsidiary of Team means any corporation whose outstanding common shares are more than fifty percent (50%) directly owned by Team and shall further mean any corporation whose outstanding common shares are at least fifty percent (50%) owned through an unbroken chain of ownership through other subsidiaries of Team. 15. 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 Ryan, but no such assignment may be made by Ryan. 16. SEPARATE AGREEMENTS. The provisions of Paragraph 6 shall be construed as a separate agreement in each of the separate geographical areas, if any, referred to in Paragraph 6, 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. 17. 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 Ryan's information and shall not be construed to alter, modify, or amend this Agreement for any purpose whatsoever. 18. 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 10. 11 agreements have been made to induce either Ryan or Team to enter into this Agreement. This Agreement is the sole source of rights and duties as between Team and Ryan relating to the subject matter of this Agreement. 19. KEY-MAN INSURANCE. Team shall be entitled to own, purchase and maintain life or other insurance on the life or disability of the Ryan for Team's exclusive benefit. Ryan shall execute all documents and perform all acts necessary to enable Team to effect such insurance. IN WITNESS WHEREOF, the parties have executed this Agreement on this the 29th day of July, 1997, to be EFFECTIVE as of June 1, 1997. /s/ William A. Ryan ------------------------------------------ WILLIAM A. RYAN Address: 1550 Tower Winnetka, IL 60093 TEAM, INC. By: /s/ Kenneth M. Tholan --------------------------------------- Kenneth M. Tholan Senior Vice President Address: 1019 S. Hood Street Alvin, TX 77511 11. EX-11 7 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS 1 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11
YEAR ENDED MAY 31, ---------------------------------------- 1997 1996 1995 ----------- ----------- ----------- PRIMARY EARNINGS (LOSS) PER COMMON SHARE: Net Earnings (Loss) Earnings (loss) from continuing operations $ 759,000 $(8,744,000) $(1,105,000) Earnings (loss) from discontinued operations 1,000 (534,000) (4,869,000) ----------- ----------- ----------- Net Earnings (Loss) $ 760,000 $(9,278,000) $(5,974,000) =========== =========== =========== Weighted Average Shares Outstanding: Outstanding shares at beginning of period 5,160,000 5,160,000 5,160,000 Assumed exercise of employee stock options, net of shares repurchased with proceeds -- 1,000 -- Issuance of shares in exchange for services 2,000 -- -- ----------- ----------- ----------- 5,162,000 5,161,000 5,160,000 =========== =========== =========== Net Earnings (Loss) Per Common Share: Earnings (loss) from continuing operations $ 0.15 $ (1.70) $ (0.22) Earnings (loss) from discontinued operations 0.00 (0.10) (0.94) ----------- ----------- ----------- Net Earnings (Loss) $ 0.15 $ (1.80) $ (1.16) =========== =========== =========== FULLY DILUTED EARNINGS (LOSS) PER COMMON SHARE: Net Earnings (Loss) Earnings (loss) from continuing operations $ 759,000 $(8,744,000) $(1,105,000) Earnings (loss) from discontinued operations 1,000 (534,000) (4,869,000) ----------- ----------- ----------- Net Earnings (Loss) $ 760,000 $(9,278,000) $(5,974,000) =========== =========== =========== Weighted Average Shares Outstanding: Outstanding shares at beginning of period 5,160,000 5,160,000 5,160,000 Assumed exercise of employee stock options -- 71,000 -- net of shares repurchased with proceeds Issuance of shares in exchange for services 2,000 -- -- ----------- ----------- ----------- 5,162,000 5,231,000 5,160,000 =========== =========== =========== Net Earnings (Loss) Per Common Share: Earnings (loss) from continuing operations $ 0.15 $ (1.67) $ (0.22) Loss from discontinued operations 0.00 (0.10) (0.94) ----------- ----------- ----------- Net Earnings (Loss) $ 0.15 (1.77) $ (1.16) =========== =========== ===========
EX-21 8 SUBSIDIARIES OF THE COMPANY 1 EXHIBIT 21 SUBSIDIARIES OF REGISTRANT
COMPANY JURISDICTION / STATE - ------- OF INCORPORATION ------------------- Team, Inc....................................................................... Texas Leak Repairs, Inc........................................................ Delaware Team Environmental Services, Inc......................................... Texas Team Industrial Services, Inc. (formerly Team Environmental Services, Inc).................................................... Texas TeamCam Limited................................................... Trinidad, West Indies Team Industrial Services, Ltd............................................ United Kingdom Teaminc Europe........................................................... The Netherlands Teco Manufacturing, Inc.................................................. Texas Pipe Repairs, Inc. (formerly Paisano, Inc.).............................. Texas Hellums Services, Inc.................................................... Texas Beacon Services, Inc.............................................. Texas Composite Pole Repair, Inc............................................... Texas First America Capital Corporation........................................ Texas Portales 801, Inc................................................. Texas Pensacola 801, Inc................................................ Texas Ft. Bragg 801, Inc................................................ Texas Ft. Stewart 801, Inc.............................................. Texas First America Development Corporation.................................... Texas USA Public Services, Inc. (formerly Infrastructure Services, Inc.).......................... Texas USA Maintenance and Repair Services, Inc. (formerly Universal Services Co., Inc)............................ Texas USA Federal Services, Inc. (formerly Universal Federal Services, Inc).................. Texas USA Water Consulting Services, Inc. (formerly Water Company of America)......................... Texas USA Gunite Services, Inc. (formerly General Gunite & Construction Co., Inc.)................ Alabama
2 EXHIBIT 21 (continued) Following is a list of the Company's subsidiaries which are also operating under assumed names: Team Industrial Services, Inc. in the State of Texas and Harris County: d/b/a Marbo d/b/a Team Environmental Services d/b/a Leak Repairs USA Maintenance and Repairs Services, Inc. (formerly Universal Services Co., Inc.) In the State of Florida: d/b/a Infrastructure Services, Inc. d/b/a Mariner Village Maintenance Co. EX-23 9 CONSENT OF DELOITTE & TOUCHE LLP 1 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements Nos. 33-20198, 33-35780, 2-92811, 333-3003 and 333-29997 of Team, Inc. on Form S-8 of our report dated July 10, 1997, appearing in this annual report on Form 10-K of Team, Inc. for the fiscal year ended May 31, 1997. DELOITTE & TOUCHE LLP Houston, Texas August 12, 1997 EX-27 10 FINANCIAL DATA SCHEDULE
5 YEAR MAY-31-1997 MAY-31-1997 1,672,000 0 7,272,000 61,000 6,310,000 16,013,000 17,818,000 12,010,000 24,068,000 4,504,000 7,601,000 0 0 1,578,000 10,385,000 24,068,000 0 43,655,000 0 24,634,000 16,579,000 0 927,000 1,515,000 756,000 759,000 1,000 0 0 760,000 0.15 0.15
-----END PRIVACY-ENHANCED MESSAGE-----