SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) OCTOBER 3, 1996
INDUSTRIAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 1-9580
(State of other jurisdiction of (Commission File Number)
incorporation)
76-0289495
(IRS Employer Identification No.)
7135 ARDMORE HOUSTON, TEXAS 77054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 747-1025
____________________________________________________________
(Former name or former address, if changed since last report.)
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ITEM 2. ACQUISITION OF DISPOSITION OF ASSETS
On October 3, 1996, Industrial Holdings, Inc., a Texas corporation (the
"Company") executed a stock purchase agreement by and among the Company, Trust
"B" Under the Will of Bernard J. Bauer, Sr. ("Trust B"), and the Gertrude Bauer
Trust dated December 24, 1993 (the "G. Bauer Trust"), to purchase all the
outstanding capital stock (the "Shares") of American Rivet Company, Inc.
("American"). Trust B and the G. Bauer Trust are all of the shareholders
(collectively the "Shareholders") of American, an Illinois corporation.
The total purchase price (the "Purchase Price") of the Shares is
$11,125,000 as adjusted for certain purchase price adjustments and is payable at
closing. The Purchase Price will be adjusted on a dollar-for-dollar basis to
reflect net income or losses of American from July 31, 1996 through the date of
Closing and reduced for any dividends paid by American from July 31, 1996
through the date of Closing. Additionally, the G. Bauer Trust may receive
American's Florida real estate as partial payment of the Purchase Price.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements for Acquired Companies
At this time, it is impracticable to provide the required
financial statements for American Rivet Company, Inc. Therefore,
the required financial statements will be filed as soon as they
are available and in any event within sixty days after the
consummation of the acquisition.
(b) Proforma Financial Information
At this time, it is impracticable to provide the required pro
forma financial information for American Rivet Company, Inc.
Therefore, the required pro forma financial information will be
filed as soon as they are available and in any event within sixty
days after the consummation of the acquisition.
EXHIBITS
2.1 Purchase Agreement dated October 3, 1996 by and among Industrial
Holdings, Inc., Trust "B" Under the Will of Bernard J. Bauer, Sr. and
the Gertrude Bauer Trust Dated December 29, 1993.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed in its behalf by the
undersigned hereunto duly authorized.
INDUSTRIAL HOLDINGS, INC.
By: /s/ CHRISTINE A. SMITH
CHIEF FINANCIAL OFFICER
Date: October 15, 1996
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EXHIBIT INDEX
EXHIBIT NUMBER AND DESCRIPTION PAGE
2.1 Purchase Agreement dated October 3, 1996 by and among Industrial
Holdings, Inc., Trust "B" Under the Will of Bernard J. Bauer, Sr.
and the Gertrude Bauer Trust dated December 29, 1993 ............ Ex-1
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
INDUSTRIAL HOLDINGS, INC.,
TRUST "B" UNDER THE WILL OF
BERNARD J. BAUER, SR.
AND
THE GERTRUDE BAUER TRUST
DATED DECEMBER 24, 1993
COVERING THE STOCK OF
AMERICAN RIVET COMPANY, INC.
DATED OCTOBER 3, 1996
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") executed this 3rd day of
October, 1996, by and among INDUSTRIAL HOLDINGS, INC., a Texas corporation (the
"Purchaser"), TRUST "B" UNDER WILL OF BERNARD J. BAUER, SR. ("Trust B"), and THE
GERTRUDE BAUER TRUST DATED DECEMBER 24, 1993 (the "G. Bauer Trust"), Trust B and
the G. Bauer Trust being all of the shareholders, collectively (the
"Shareholders"), of AMERICAN RIVET COMPANY, INC., an Illinois corporation (the
"Corporation").
W I T N E S S E T H:
WHEREAS, the Shareholders are the collective owners of Seventy-eight
Thousand (78,000) shares of Common Stock, $10.00 par value per share, of the
Corporation, which shares represent one hundred (100%) percent of the issued and
outstanding shares of capital stock of the Corporation (herein collectively
referred to as the "Shares"), as follows:
SHAREHOLDER NO. OF SHARES OWNED PERCENTAGE OWNERSHIP
----------- ------------------- --------------------
Trust B 72,869 93.4217949%
G. Bauer Trust 5,131 6.5782051%
----- ------------
Total 78,000 100.00%; and
WHEREAS, the Shareholders desire to sell all of the Shares to the
Purchaser, and the Purchaser desires to purchase the Shares from the
Shareholders, all upon the terms and conditions set forth herein; and
WHEREAS, this Agreement sets forth the terms and conditions to which the
parties have agreed and further contemplates the execution and delivery of
certain collateral agreements and the consummation of certain related
transactions hereinafter described;
NOW, THEREFORE, in consideration of the mutual promises and covenants of
the parties, and subject to the terms and conditions set forth herein, the
parties agree as follows:
Section 1. SALE AND PURCHASE OF THE SHARES. The Shareholders, upon and
subject to the terms and conditions set forth herein, hereby agree to sell,
assign and convey to the Purchaser, free and clear of all security interests,
pledges, liens, charges and encumbrances, all the Shares, and the Shareholders
hereby agree to transfer and deliver to the Purchaser at the Closing the
certificates evidencing the Shares, duly endorsed in blank or accompanied by
stock powers duly executed in blank. The Purchaser, upon and subject to the
terms and
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conditions set forth herein, hereby agrees to purchase and accept the Shares for
the consideration set forth in Section 2 hereof.
Section 2. PURCHASE PRICE.
Section 2.1 The total purchase price for the Shares shall be ELEVEN
MILLION ONE HUNDRED TWENTY-FIVE THOUSAND AND NO/100 ($11,125,000.00)
DOLLARS, as adjusted pursuant to Section 2.2 below (the "Purchase Price")
payable at the Closing (as hereinafter defined) by the Purchaser to the
Shareholders by wire transfer in accordance with the Letter of Direction
delivered to the Purchaser from the Shareholders in the form of EXHIBIT
"A" attached hereto.
Section 2.2 Notwithstanding the provisions of Section 2.1 above, the
Purchase Price shall be adjusted on a dollar-for-dollar basis to reflect
the net income (upward adjustment) or net loss (downward adjustment)
generated by the Corporation from the date of the Interim Financial
Statements (as defined below) to the date of Closing. For the purpose of
calculating net income pursuant to this section, dividends shall be
treated as an expense to be deducted from net income.
Section 2.3 Notwithstanding the provisions of Section 2.1 above, the
G. Bauer Trust may receive the Corporation's Florida Real Estate (as
defined below) as partial payment of its allocable share of the Purchase
Price in lieu of immediately available funds, provided the Purchaser and
the Shareholders mutually agree on the fair market value of the Florida
Real Estate at or prior to the Closing in accordance with the provisions
hereinbelow stated or in accordance with a separate written agreement
between the G. Bauer Trust and the Corporation to purchase the Florida
Real Estate.
Section 3. REPRESENTATIONS AND WARRANTIES OF TRUST B. Trust B represents
and warrants to and agrees with the Purchaser that, except as contemplated in
this Agreement or as set forth in, or by reference in, the disclosure letter
delivered by Trust B to the Purchaser prior to the execution and delivery of
this Agreement (collectively, the "Shareholder's Disclosure Letter"), the form
of which is attached hereto as Exhibit "B":
Section 3.1. ORGANIZATION AND STANDING OF THE CORPORATION. The
Corporation is a corporation duly incorporated, organized, validly
existing and in good standing under the laws of the State of Illinois. The
Corporation has full corporate power and authority to conduct its business
as it is now being conducted and is not qualified to do business as a
foreign corporation in any other jurisdiction. Schedule 3.1 to the
Shareholder's Disclosure Letter contains complete and correct copies of
the Articles of Incorporation including any amendments thereto and By-Laws
of the Corporation as in effect on the date hereof.
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Section 3.2. SUBSIDIARIES. The Corporation has no subsidiaries.
Further, the Corporation does not, except for investments with Stein Roe
and Farnham Mutual Funds made in the ordinary course of business, (i) own,
directly or indirectly, any of the outstanding capital stock or securities
convertible into capital stock of any other corporation, or (ii) own,
directly or indirectly, any participating interest in any partnership,
joint venture or other business enterprise.
Section 3.3. CAPITAL STOCK. The authorized capital stock of the
Corporation consists of One Million (1,000,000) shares of Common Stock,
$10.00 par value per share, of which, on the date of this Agreement
Seventy-eight Thousand (78,000) shares are validly issued and outstanding,
fully paid and nonassessable and one hundred (100%) percent of which are
owned by the Shareholders. There are 22,000 shares of the Corporation's
Common Stock, $10.00 par value, held in treasury stock. The Corporation
does not have any outstanding subscriptions, options or other agreements
or commitments obligating it to issue shares of capital stock.
Section 3.4. FINANCIAL STATEMENTS, ETC. The following audited and
unaudited financial statements of the Corporation have been delivered to
the Purchaser and are attached as Schedule 3.4 to the Shareholder's
Disclosure Letter:
(a) the audited consolidated balance sheet of the Corporation
as of August 31, 1995 and August 31, 1994 (the "Audited Balance
Sheet") and the audited statements of income and retained earnings
and cash flows for the years ended August 31, 1995, August 31, 1994
and August 31, 1993 (together with related notes and schedules),
which financial statements contain a report of the Corporation's
independent auditors, reporting thereon (such balance sheets, the
related statements of income and retained earnings and cash flows,
and the related notes and schedules, being hereinafter together
referred to as the "Audited Financial Statements"); and
(b) the unaudited consolidated balance sheet of the
Corporation as of July 31, 1996 (the "Interim Balance Sheet") and
the related unaudited statement of income for the eleven (11) month
period then ended (together with related notes and schedules) (such
balance sheet and related statements of income, and the related
notes and schedules, being hereinafter together referred to as the
"Interim Financial Statements").
The Audited Financial Statements and the Interim Financial
Statements (collectively, the "Financial Statements"), including the
related notes and schedules, have been prepared from the books and records
of the Corporation in conformity with generally accepted accounting
principles ("GAAP") applied by the Corporation on a basis consistent with
preceding years and in the case of the Interim Financial Statements, the
preceding months, and present fairly the financial position of the
Corporation as of the dates of such statements, subject with respect to
the Interim
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Financial Statements to year-end adjustments and to the absence of a
physical inventory and certain statements, notes and schedules.
The trade accounts and other receivables of the Corporation which
are classified as current assets on the Audited Balance Sheet and the
Interim Balance Sheet (collectively, the "Balance Sheets") are bona fide
receivables, were acquired in the ordinary course of business, are stated
in accordance with GAAP and, subject to the reserve for doubtful accounts,
are believed to be good and collectible, and are not subject to any
factoring arrangement.
The LIFO and FIFO inventories of the Corporation reflected on the
Balance Sheets have been valued in accordance with GAAP. There have been
no write-ups of inventories or other assets except as set forth in the
Shareholder's Disclosure Letter.
The Corporation has no material liabilities of the type and in
amounts required to be reflected or disclosed in a balance sheet (or notes
thereto) prepared in accordance with GAAP other than:
(i) those set forth or reserved against in the Interim Balance
Sheet,
(ii) those incurred since the date of the Interim Balance Sheet in
the ordinary course of business,
(iii) those disclosed in the Shareholder's Disclosure Letter, and
(iv) those referred to in this Agreement or that exist by reason of
this Agreement.
The Corporation's books of account have been kept in all material
respects in the ordinary course of business in accordance with GAAP, the
transactions entered therein represent bona fide transactions, and the
revenues, expenses, assets and liabilities of the Corporation have been
properly recorded in such books in all material respects.
Section 3.5. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since August 31,
1995, the Corporation has not:
(a) issued, delivered or agreed to issue or deliver any stock,
bonds or other corporate securities (whether authorized and unissued
or held in the treasury) or granted or agreed to grant any options,
warrants or other rights calling for the issuance thereof;
(b) borrowed or agreed to borrow any funds or incurred, or
become
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subject to, any obligation or liability (absolute or contingent)
except in the ordinary course of business;
(c) paid any obligation or liability (absolute or contingent)
other than current liabilities reflected in or shown on the
Corporation's Financial Statements (or the notes thereto) and
obligations or liabilities incurred since the date thereof and
permitted to be so incurred by the foregoing clause (b) of this
Section 3.5;
(d) except as specifically approved in writing by the
Purchaser or disclosed on the Interim Financial Statements, declared
or made, or agreed to declare or make, any payment of dividends or
distribution of any assets of any kind whatsoever to the
Shareholders (except the Florida Real Estate which shall be conveyed
to the G. Bauer Trust at Closing in lieu of that portion of the
Purchase Price equal to the fair market value of such Florida Real
Estate on or about the Closing Date), or purchased or redeemed any
shares of its capital stock;
(e) sold or transferred, or agreed to sell or transfer, any of
its assets, properties or rights, or cancelled or agreed to cancel,
any debts or claims, in each case except in the ordinary course of
business;
(f) except for this Agreement, entered or agreed to enter into
any agreement or arrangement granting any preferential rights to
purchase substantially all of the assets, properties or rights of
the Corporation (including management and control thereof), or
requiring the consent of any party to the transfer and assignment of
such assets, properties or rights (or changes in management or
control thereof), or providing for the merger or consolidation of
the Corporation with or into another corporation;
(g) suffered any material losses or waived any rights of
material value;
(h) except in the ordinary course of business, made or
permitted any amendment or termination of any contract, agreement or
license to which it is a party;
(i) except as otherwise disclosed in writing to Purchaser or
in the ordinary course of business consistent with past practices,
made any accrual or arrangement for a payment of bonuses or special
compensation of any kind or any severance or termination pay to any
present or former officer or employee;
(j) except with respect to the newly-elected President and
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Secretary of the Corporation in December of 1995, increased the rate
of compensation payable or to become payable by it to any of its
officers or key employees compensated at a rate in excess of $15,000
per annum; or made any increase in any profit sharing, bonus,
incentive, deferred compensation, insurance, pension, retirement or
other employee benefit plan, payment or arrangement made to, for or
with any such officers or key employees;
(k) except as otherwise disclosed in writing to Purchaser or
in the Interim Financial Statements, made any capital expenditures
or commitments therefor aggregating more than $10,000, or committed
to purchase inventories, parts, supplies or other items in excess of
its normal, ordinary and usual requirements or at excessive prices,
all computed based on historical practices of the Corporation;
(l) experienced any significant labor trouble;
(m) suffered any damage, destruction or loss, whether or not
covered by insurance, which materially and adversely affects its
assets or business, or had any material adverse change in the
business, operations, financial condition or prospects of the
Corporation; or
(n) made any loan or advance to any shareholder, officer,
director or employee;
Between the date hereof and the Closing, Trust B shall not permit
the Corporation to do any of the things listed in Clauses (a) through (n)
of this Section 3.5 without the prior written consent of the Purchaser,
which consent will not be unreasonably withheld, except as otherwise
permitted by this Agreement.
Section 3.6. TAX MATTERS. The Corporation has filed when due,
including any extensions, all federal, state, county and local income,
payroll, corporate franchise, sales, excise and use and ad valorem tax
(collectively, "Tax") reports and returns in connection with the
Corporation's business, assets and employees, and has paid and discharged
all Taxes related to the assets or the business of the Corporation for the
periods covered by such returns shown thereon to be due. The Corporation
has made available to the Purchaser, to the extent requested by the
Purchaser, all Tax reports and returns of the Corporation for all periods
ending prior to the date hereof. The current liability for Federal, state
and local taxes reflected on the Financial Statements, if any, represents
at the date thereof, reasonable and adequate provision for the payment of
all accrued and unpaid current Federal, state and local taxes of the
Corporation based upon the Corporation's tax structure. No assessments of
deficiencies have been made against the Corporation, and no extensions of
time are in effect for the filing of any returns or the assessment of
deficiencies. No examinations by the Internal Revenue Service of the
Federal income tax returns of the Corporation
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for any taxable year are presently pending. In the event that after the
Closing, a deficiency is determined in the amount of Federal, state or
local tax payable by the Corporation, which deficiency relates to periods
prior to the Effective Date of Closing, then in that event, Trust B, in
the manner set forth in Section 9 hereof, shall be fully responsible for
and shall indemnify and hold the Purchaser and the Corporation harmless
from the payment of any such deficiency, tax liability, penalty, interest,
loss, costs, expenses or claim (including reasonable attorney and
accountant fees) with respect thereto.
Except as set forth on Schedule 3.6 to the Shareholder's Disclosure
Letter, the Corporation has not received notice of any Tax deficiency
outstanding, proposed or assessed against or allocable to the Corporation,
nor has the Corporation executed any waiver of any statute of limitations
on the assessment or collection of any Tax.
Section 3.7. CONTRACTS AND COMMITMENTS. Schedule 3.7 to the
Shareholder's Disclosure Letter is a complete and accurate listing of all
mortgages, liens, licenses, leases, sales representation agreements,
purchase orders (with unexpired terms of more than 12 months) and all
other executory contracts, undertakings, commitments and agreements of the
Corporation, to which or by which it is bound, whether written or oral,
(i) entered into in the ordinary course of business involving the payment
by or to the Corporation of more than $20,000.00 in the aggregate with
respect to any such contract, undertaking, commitment or agreement, (ii)
entered into other than in the ordinary course of business, or (iii) with
any of the Corporation's or Shareholders' Affiliates (the "Contracts").
For the purposes of this Agreement, the term "Corporation's and
Shareholders' Affiliates" shall include all "affiliates" of the
Corporation and the Shareholders as such term is defined in the rules and
regulations promulgated by the Securities and Exchange Commission under
the Securities Act of 1933, as amended. All of the Contracts have been
duly executed by the Corporation, are currently in effect, are valid and
binding upon the Corporation and are enforceable in accordance with their
terms. Neither the Corporation nor the Shareholders are aware of any facts
that would prevent the performance of any of the Contracts. To the best of
Trust B's knowledge, neither the Corporation nor any other party is in
default under any one or more of the Contracts. No claim of default has
been asserted by the Corporation or any such other party. To the best of
Trust B's knowledge, the Corporation has committed no act and there has
been no omission which will result in the breach by it of any Contract. To
the best of Trust B's knowledge, there has been no occurrence which will
give rise to product liability or breach of warranty, not covered in full
by insurance, on the part of the Corporation arising out of products sold,
designed, manufactured, assembled, repaired, maintained, delivered or
installed or services rendered by the Corporation prior to the Closing.
Section 3.8. REAL AND PERSONAL PROPERTY AND RELATED MATTERS.
Schedule 3.8 to the Shareholder's Disclosure Letter is a complete list of
all real property and improvements, and all personal property (including
all major items of furnishings,
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equipment and automobiles) owned by the Corporation. The assets reflected
in Schedule 3.8 to the Shareholder's Disclosure Letter and in the
Corporation's Financial Statements were, at the date thereof, and, except
for assets consumed or disposed of in the ordinary course of business
since the date thereof, are now owned by the Corporation by good and
marketable title, free and clear from all security interests, mortgages,
liens, claims, defects and encumbrances except liens, charges or
encumbrances discussed or referred to in the Corporation's Financial
Statements, the related notes or schedules thereto or in Schedule 3.8 to
the Shareholder's Disclosure Letter. All such assets are in good operating
condition and repair, subject to ordinary wear and tear. All of such
assets (including the Real Estate, as hereinafter defined) have been
properly maintained, with no extraordinary maintenance planned or
anticipated, and are adequate and sufficient for the operation of the
Corporation's business as historically operated by the Corporation. There
are no material capital expenditures currently contemplated or necessary
to maintain the current operation of the Corporation's business. It is
contemplated that the real estate and improvements thereon owned by the
Corporation located at 12658 Buttonbush Place, Bonita Springs, Florida
33923 (the "Florida Real Estate") may be distributed to the G. Bauer Trust
as set forth in Section 2.3 hereinabove.
Section 3.9. LITIGATION AND PROCEEDINGS. Except as set forth in
Schedule 3.9 to the Shareholder's Disclosure Letter, there are no actions,
suits or proceedings pending or, to the knowledge of Shareholders,
threatened against or affecting the Corporation or the Shareholders, at
law or in equity, or before or by any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, or before
any arbitrator of any kind, which involve the possibility of any judgment
or liability not fully covered by casualty or liability insurance; and the
Corporation is not in default with respect to any judgment, order, writ,
injunction, decree, award, rule or regulation of any court, arbitrator or
governmental department, commission, board, bureau, agency or
instrumentality. To the best of Trust B's knowledge, the Corporation has
complied in all respects with all applicable Federal, state, municipal and
other political subdivision or governmental agency statutes, ordinances
and regulations, including without limitation, those imposing taxes, in
every applicable jurisdiction, in respect of the ownership of its
properties and the conduct of its business.
Section 3.10. INSURANCE COVERAGE. Schedule 3.10 to the Shareholder's
Disclosure Letter is a list of all policies and contracts of insurance,
including hospitalization, life, property, liability and worker's
compensation, showing policy limits, expiration dates, types of coverage
and names of insured. The Corporation maintains policies of casualty,
liability, use and occupancy, and other forms of insurance with reputable
and financially sound insurers, covering its properties and assets in
amounts and against such losses and risks as the Corporation believes are
adequate for its business and properties, and valid policies for such
insurance are now duly in force.
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Section 3.11. EMPLOYEES, COMPENSATION AND BENEFITS. Schedule 3.11 to
the Shareholder's Disclosure Letter is a list of all bonus, incentive,
compensation, disability pension, profit sharing, group insurance or
employee welfare plans of any nature whatsoever (collectively, the
"Plans"); and all employment contracts and all other contracts, agreements
or commitments to or with individual employees or agents extending for a
period of more than thirty (30) days from the date thereof or providing
for earlier termination only upon the payment of a penalty, severance pay
or an equivalent thereof.
(a) Except as set forth on Schedule 3.11(a) to the
Shareholder's Disclosure Letter, there are no written employment
agreements in effect between the Corporation and any of its
employees and no collective bargaining agreements covering any such
employees. The Corporation's employees are not members of a
collective bargaining group and, to the best of Trust B's knowledge
and belief, no union organizing activities are in process or
contemplated. The only pension, profit sharing or other retirement
plans, whether or not qualified, in effect by the Corporation are
the deferred compensation plans of James T. Bauer and Anthony W.
Reibel (more fully described in Subsection 3.11[f] below), the
Corporation's 401(k) Plan, qualified profit sharing plan and
officer's non-qualified profit sharing bonus plan, a true and
complete copy of each of which have been provided to the Purchaser.
The Corporation does not contribute or have any obligation to make
any payments or contributions to a multi-employer plan, as that term
is defined in Section 3(37) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the Corporation does
not have any actual or potential liability under Section 4201 of
ERISA for any complete or partial withdrawal from a multi-employer
plan.
(b) The Corporation is in material compliance with all
applicable laws respecting employment and employment practices,
terms and conditions of employment and wages and hours of employees,
and there is no labor strike, dispute, slowdown or representation
campaign or work-stoppage pending or threatened with respect to
employees of the Corporation, nor has the Corporation experienced
any of the foregoing within the preceding three (3) years.
(c) There is not, to the best of Trust B's knowledge, any
pending or threatened, unfair labor practice complaint against the
Corporation pending before any relevant authority or union
representation petition respecting the employees of the Corporation.
Trust B shall be fully responsible for and shall indemnify and hold
the Purchaser and the Corporation harmless from any and all losses,
damages, claims, costs, and expenses (including reasonable attorney
and accountant fees) with respect to any such complaints which
complaints are filed prior to the Closing or which arise directly
from actions of the
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Corporation or the Shareholders prior to the Closing.
(d) The Plans comply in all respects with the requirements of
all applicable laws. There are no actions, suits, claims or
investigations pending or threatened with respect to any Plan. There
is no liability required to be accrued under the Plans except to the
extent reflected in the Corporation's Financial Statements. The
Corporation has made, set aside or provided accrual for, funds to
make full payment of all amounts which the Corporation is required
to pay prior to the date hereof under the terms of each Plan, or
under any governmental rule or regulation relating to employment
matters. The present value of the vested accrued benefits, if any,
under each Plan does not exceed the current value of the assets of
each Plan. To the best of Trust B's knowledge, no termination of any
Plan by the Corporation at or prior to the Closing has resulted or
will result in the imposition of any liability on the Corporation.
(e) Each "Group Health Plan" (within the meaning of Section
162(i)(3) of the Internal Revenue Code of 1986) maintained by the
Corporation has, as of the first day of each Group Health Plan's
first plan year beginning on or after September 1, 1987, been
administered in good faith compliance with the reasonable
interpretation of the continuation coverage requirements contained
in Title X of the Consolidated Omnibus Budget Reconciliation Act of
1985 (COBRA).
(f) The Corporation is obligated to pay to Anthony W. Reibel
and James T. Bauer, and their respective spouses upon each of their
respective retirements or deaths, certain deferred compensation
amounts described and detailed on Schedule 3.11(f) to the
Shareholder's Disclosure Letter (the "Deferred Compensation"). The
amount of the present value of the future payments, which totals not
more than $300,000.00 to each person, has been accrued by the
Corporation on its books for payment of the Deferred Compensation,
and constitutes an obligation of the Corporation, which by its
execution of this Agreement, the Purchaser hereby acknowledges.
Section 3.12. PATENTS, TRADEMARKS AND LICENSES. Schedule 3.12 to the
Shareholder's Disclosure Letter contains a complete and accurate list of
all domestic and foreign patents, patent applications, licenses,
trademarks, trademark applications, trade names, trade name applications,
copyrights and copyright applications owned by or licensed to the
Corporation or in which the Corporation has any right or interest
whatsoever, all of which are valid and in good standing. The Corporation
owns or has all rights necessary to use all patents, inventions,
trademarks and copyrights necessary for the conduct of its business as
currently conducted, and the conduct of such business does not, to the
best of Trust B's knowledge, conflict with or infringe upon any patent,
trademark, trade name, trade secret or copyright of
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others. The Corporation has received no notice of any claim of
infringement or other complaint that its operations conflict with or
infringe upon the patents, trade names, trademarks, trade secrets or
copyrights of others.
Section 3.13. ENVIRONMENT AND HEALTH.
(a) To the best of Trust B's knowledge and belief after
diligent investigation and inquiry, and except as disclosed in the
Phase II (as defined in Section 5.3 below), the real estate and
improvements thereon owned and/or leased by the Corporation located
at 11333 West Melrose Street, Franklin Park, Illinois, more
particularly described in Schedule 3.13 of the Shareholder's
Disclosure Letter (hereinafter collectively referred to as the "Real
Estate") and its existing uses comply, and except for the
Corporation's liability with respect to the "Midco Site" in Indiana
(which has been previously disclosed to Purchaser and accrued for on
the Corporation's Financial Statements), the Corporation is not in
violation of, and has not violated, in connection with the
ownership, use, maintenance or operation of the Real Estate and the
conduct of the Corporation's business operations, any applicable
statutes, laws, rules, regulations, ordinances, codes, licenses or
permits of any governmental authorities relating to environmental
matters including without limitation the Comprehensive Response,
Compensation and Liability Act of 1980, the Resource Conservation
and Recovery Act of 1976, and the Toxic Substance Control Act of
1976.
(b) To the best of Trust B's knowledge and belief after
diligent investigation and inquiry, and except as disclosed in the
Phase II, the Corporation has (i) operated the Real Estate and has
at all times received, handled, used, stored, treated, shipped and
disposed of all hazardous and toxic substances, petroleum products
and waste in compliance with all applicable environmental, health or
safety statutes, ordinances, orders, rules, regulations and
requirements, and (ii) removed from and off the Real Estate all
hazardous or toxic substances, petroleum products and waste.
(c) To the best of Trust B's knowledge and belief after
diligent investigation and inquiry, and except as disclosed in the
Phase II, there are no statutes, orders, rules or regulations
relating to environmental matters requiring any work, repairs,
construction or capital expenditures with respect to any of the Real
Estate. The Corporation has not received any notice of any of the
same.
(d) To the best of Trust B's knowledge and belief after
diligent investigation and inquiry, and except as disclosed in the
Phase II, and further except in compliance with all applicable
environmental health or safety statutes, ordinances, rules or
regulations, no hazardous or toxic materials,
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substances, pollutants, contaminants or wastes have been released
into the environment, or deposited, discharged, placed or disposed
of at, on or near the Real Estate by the Corporation, nor has the
Real Estate been used at any time by the Corporation as a landfill
or a waste disposal site. To the best of Trust B's knowledge and
belief after diligent investigation and inquiry, and except as
disclosed in the Phase II, no asbestos, urea formaldehyde or
polychlorinated biphenyls are present on the Real Estate. To the
best of Trust B's knowledge and belief after diligent investigation
and inquiry, and except as disclosed in the Phase II, there have
never been any underground storage tanks located at the Real Estate.
(e) Except with respect to the "Midco Site" as previously
disclosed, no notices of any violation of any of the matters
referred to in subsections (a) through (d) of this Section 3.13
relating to Real Estate or its use have been received by the
Corporation. Except with respect to the "Midco Site" as previously
disclosed, there are no writs, injunctions, decrees, orders or
judgments outstanding and no lawsuits, claims, proceedings or
investigations pending or threatened, relating to the ownership,
use, maintenance or operation of any of the Real Estate and, to the
best of Trust B's knowledge, there is no basis for the institution
of filing of any such lawsuit, claim, proceeding or investigation.
(f) No employee of the Corporation has submitted a claim to
the Corporation or filed suit alleging that such employee suffers
from chronic injury or illness resulting from exposure to toxic
substances, hazardous substances or manufacturing processes used in
connection with the Corporation's business or present at the place
of business of the Corporation.
Section 3.14. LICENSES, PERMITS AND AUTHORIZATIONS. Schedule 3.14 to
the Shareholder's Disclosure Letter is a list of each permit, license or
similar authorization from any governmental authority issued with respect
to the operation or ownership of the Corporation, and which is material to
the operation or ownership of such properties with the expiration dates of
each. All such licenses, permits, approvals, consents and other
governmental or regulatory authorizations held by the Corporation are
valid and sufficient for all business conducted by it (including all
permits necessary for the operation and use of the Real Estate and for the
disposal of any wastes or other substances generated or used in the
operation of the Corporation's business or the Real Estate). The
Corporation has not received notice of any violation by the Corporation,
and to the best of Trust B's knowledge, the Corporation's business is
being conducted in compliance with all applicable laws, ordinances, rules
and regulations of all governmental authorities, including, without
limitation, export rules and regulations.
Section 3.15. AMERICANS WITH DISABILITIES ACT. The Corporation has
not
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received notice of any violation by the Corporation, and to the best of
Trust B's knowledge, the Corporation is not in violation of and has not
been in violation of, the Americans with Disabilities Act, including rules
and regulations thereunder, or any other federal, state, local or foreign
laws, including rules and regulations thereunder, regulating or otherwise
affecting persons with disabilities.
Section 3.16. INVENTORIES. No material amount of the inventories of
the Corporation are obsolete, defective or otherwise not saleable in the
ordinary course of business. The levels of the inventories currently on
hand are not in excess of or less than that necessary for the operation of
the Corporation's business in the ordinary course of business consistent
with past practices of the Corporation.
Section 3.17. NON-OWNED PROPERTY. All tangible personal property
located at the Corporation's facility situated at 11333 W. Melrose Street,
Franklin Park, Illinois and on the Florida Real Estate is owned by the
Corporation and has been included in the Corporation's Financial
Statements.
Section 3.18. GUARANTEES, ETC. BY THE CORPORATION. The Corporation
has not given any guarantee, indemnity, warranty or bond, or incurred any
other similar obligation or created any security for or in respect of,
liabilities, actual or contingent, of any other person.
Section 3.19. OSHA. The Corporation has not received notice of any
violation by the Corporation, and to the best of Trust B's knowledge, the
Corporation is not in violation of and has not been in violation of, the
Occupational Safety and Health Act of 1970, including rules and
regulations thereunder, or any other federal, state, local or foreign
laws, including rules and regulations thereunder, regulating or otherwise
affecting employee health and safety.
Section 3.20. CUSTOMERS. Trust B has no knowledge or information or
reason to believe that any of the Corporation's customers has ceased, or
intends to cease, to acquire products or services from the Corporation or
has reduced, or intends to reduce, the use of the products or services
sold by the Corporation for any reason or as a result of the transaction
contemplated by this Agreement.
Section 3.21. OFFICERS, DIRECTORS AND EMPLOYEES. Schedule 3.21 to
the Shareholder's Disclosure Letter contains a list of all officers and
directors of the Corporation, and all employees whose aggregate
remuneration is in excess of $20,000.00 per year. There are no amounts
owed to any officer, director or employee of the Corporation other than as
reflected in the Corporation's Financial Statements or on Schedule 3.21 to
the Shareholder's Disclosure Letter for the periods covered thereby. To
the best of Trust B's knowledge, no officer, director or employee of the
Corporation, or any affiliate of the Corporation, owns, directly or
indirectly, beneficially or otherwise, any interest in, or is an employee,
officer or director of, or
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a consultant, agent for or representative of, any customer, competitor or
supplier of the Corporation, except for purchases from Bartlett Sports,
Inc. (an entity owned by Bernard J. Bauer, III) in an amount less than
$10,000.00 per year.
Section 3.22. ABSENCE OF ADVERSE AGREEMENTS. The Corporation is not
a party to any instrument or subject to any charter or other corporate
restriction or any judgment, order, writ, injunction, decree, award, rule
or regulation which materially and adversely affects the business,
properties, assets or condition, financial or otherwise, of the
Corporation.
Section 3.23. NO DEFAULTS. The Corporation is not in default under,
nor has any event occurred which with notice or lapse of time or both,
could result in a waiver of any material right or default under, any
outstanding indenture, mortgage, contract or agreement to which the
Corporation is a party or by which the Corporation or its assets may be
bound, or under any provision of the Corporation's Articles of
Incorporation or By-Laws (or comparable instruments).
Section 3.24. BANKS AND SIGNATORIES. Schedule 3.24 to the
Shareholder's Disclosure Letter contains a list setting forth the name of
each bank, savings and loan or other financial institution in which the
Corporation has any account or safe deposit box, the style and number of
each such account or safe deposit box and the names of all persons
authorized to draw thereon or to have access thereto.
Section 3.25. NO CONFLICTS. The execution and performance of this
Agreement and the transactions contemplated hereby will not violate any
provision of or result in a breach of or constitute a default under the
Articles of Incorporation or By-Laws of the Corporation, or under any law,
or any order, writ, injunction or decree of any court, governmental agency
or arbitration tribunal, or under any contract, agreement or instrument to
which the Corporation is a party or by which its properties may be bound.
Section 3.26. BOOKS AND RECORDS. The books and records of the
Corporation are in all material respects complete and correct and have
been maintained in accordance with good business practice and reflect a
true record of all meetings or proceedings of the Board of Directors and
shareholders of the Corporation.
Section 3.27. BROKERS. Trust B is obligated under a contract or
other agreement for the payment to American National Bank and Trust
Company ("Trust B's Broker") of a broker's or finder's fees in connection
with the origin, negotiation, execution or performance of this Agreement.
The Corporation is not obligated to pay any such fee to Trust B's Broker
or to any other broker in connection with the origin, negotiation,
execution or performance of this Agreement. Trust B warrants to Purchaser
that Trust B shall pay Trust B's Broker as and when such Broker's fee
become due and payable, and shall indemnify and hold the Purchaser
harmless of and
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from any claim by Trust B's Broker for payment of any portion of such fee.
The G. Bauer Trust is not obligated under any contract or other
agreement for the payment of a broker's or finder's fee in connection with
the origin, negotiation, execution or performance of this Agreement, and
shall indemnify and hold the Purchaser harmless of and from any claim by
any person claiming to be a broker for the G. Bauer Trust for payment of
any portion of such broker's fee.
Section 3.28. INSPECTIONS. Subject to the continuing obligations of
the parties under the existing nondisclosure agreement, between the date
hereof and the date of Closing, the Shareholders shall afford the
Purchaser and its agents the opportunity to make full and complete
inspection of (i) the Corporation's books and records (including without
limitation, the Corporation's customer list, Financial Statements, tax
returns, accounts receivable, accounts payable, etc.), (ii) the
Corporation's assets (including without limitation, the inventory and
tangible and intangible personal property) and (iii) the Real Estate
(including all mechanical equipment, the roof, the structural integrity of
the improvements on the Real Estate, the interior of the improvements and
the environmental condition of the Real Estate).
Section 3.29. TITLE TO SHARES AND AUTHORITY. The Shareholders have
valid and marketable title to the Shares, free and clear of any security
interests, pledges, liens or similar encumbrances, and the Shareholders
have full right, power and authority and due authorization to sell and
transfer such Shares hereunder, and upon the delivery of and payment for
such Shares the Shareholders will transfer to the Purchaser valid and
marketable title thereto, free and clear of any security interests,
pledges, liens or similar encumbrances. This Agreement constitutes the
valid and legally binding obligation of the Shareholders, enforceable in
accordance with its terms.
Section 3.30. DISCLOSURE. Neither this Agreement, the Schedules
attached hereto, the minute books of the Corporation, nor any other
document furnished by the Corporation or the Shareholders to the Purchaser
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained herein and
therein not misleading, and except as disclosed herein or therein, there
is no fact (other than matters of a general economic or a political nature
which do not effect the business of the Corporation uniquely) known to the
Shareholders which materially adversely effects or in the future can be
reasonably expected to materially adversely effect the properties,
business, operations or financial condition or prospects of the
Corporation.
Section 3.31. CONDUCT OF BUSINESS. Except as otherwise contemplated
by this Agreement, from the date hereof until the date of Closing, the
business of the Corporation will be conducted diligently and only in the
ordinary course. For purposes of this Section, the phrase "ordinary
course" shall mean the conduct of the
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business of the Corporation in the manner which the Corporation conducted
its business in the last fiscal year ended prior to the execution of this
Agreement.
Section 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants to and agrees with the Shareholders that:
Section 4.1. ORGANIZATION, STANDING AND AUTHORITY OF THE PURCHASER.
The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas, and has full corporate
power and authority to conduct its business as it is now being conducted,
to enter into and carry out the provisions of this Agreement.
Section 4.2. NO VIOLATION. Neither the execution and delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any provision of the Articles of Incorporation or
By-Laws of the Purchaser, (ii) violate any provision of any agreement or
other obligation to which the Purchaser is a party or by which the
Purchaser is bound or to which its assets are subject, or (iii) violate or
result in a breach of, constitute a default under, any judgment, order,
decree, rule or regulation of any court or governmental agency to which
the Purchaser is subject.
Section 4.3. CORPORATE PROCEEDINGS OF THE PURCHASER. The execution,
delivery and performance of this Agreement has been authorized by the
Board of Directors of the Purchaser, and this Agreement constitutes the
valid and legally binding obligation of the Purchaser, enforceable in
accordance with its terms.
Section 4.4. BROKERS. The Purchaser warrants to the Shareholders
that the Purchaser shall pay Purchaser's broker such broker's fee or
finder's fees in connection with the origin, negotiation, execution or
performance of this Agreement as and when such fee(s) become due and
payable, and Purchaser shall indemnify and hold the Shareholders harmless
of and from any claim by Purchaser's broker for payment of any portion of
such fee. The Purchaser further represents and warrants to Trust B that no
employee, officer, beneficiary or associated party of the Corporation or
the G. Bauer Trust is acting as a broker for Purchaser in connection with
the origin, negotiation, execution or performance of this Agreement.
Section 5. CONDITIONS TO OBLIGATIONS OF THE PURCHASER. The obligations of
the Purchaser to consummate the transaction contemplated hereby shall be subject
to the satisfaction, on or before the Closing, of all of the following
conditions unless expressly waived in writing by the Purchaser:
Section 5.1. REPRESENTATIONS AND COVENANTS. All representations and
warranties of Trust B contained in this Agreement shall be true in all
respects on and as of the Closing as if such representations and
warranties were made on and as of
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such date (except to the extent any such representation or warranty is
made as of a specified date), and the Shareholders shall have performed
all agreements and covenants to be performed by them, respectively, on or
prior to the Closing.
Section 5.2. OTHER LEGAL MATTERS. Legal matters in connection with
this Agreement and the transaction contemplated hereby shall have been
approved by Stumpf Falgout Craddock & Massey, counsel for the Purchaser,
and the Shareholders shall have furnished to such counsel originals of
such corporate records of the Corporation and copies of such other
documents as such counsel may reasonably have requested for such purpose.
Section 5.3. ENVIRONMENTAL CONDITION. The environmental condition of
the Real Estate shall have been approved by the Purchaser, its lenders and
advisors. In the event the environmental condition of the Real Estate, as
disclosed in the Phase II environmental study to be conducted by Trust B
and Purchaser on the Real Estate (the "Phase II"), is such that any
remediation is required in order to make the Real Estate acceptable to the
Purchaser, its lenders and advisors, then prior to Closing, the Purchaser
and the Shareholders shall have agreed upon a mutually acceptable
mechanism pursuant to which the Shareholders, at their sole cost and
expense, shall formulate, effect and complete a "Response Action" to
remediate the contamination and implement the recommendations stated in
the Phase II.
Section 5.4. ABSENCE OF LITIGATION. Except as previously disclosed
to the Purchaser in writing, no litigation, governmental action,
insolvency, receivership or other proceeding shall have been threatened,
asserted or commenced with respect to the transaction contemplated herein.
Section 5.5. CLOSING RESPONSIBILITIES. The Shareholders shall have
delivered or caused to be delivered each of the items described in Section
7.3 hereof.
Section 5.6. REGULATORY APPROVAL. Purchaser, Shareholders and the
Corporation shall have received from appropriate third parties and
regulatory agencies, any and all approvals necessary to consummate the
transaction evidenced by this Agreement.
Section 5.7. NO DAMAGE OR DESTRUCTION. Prior to the Closing Date,
there shall not have occurred any casualty to any facility, property,
equipment or inventory owned or used by the Corporation as a result of
which either (a) the monetary amount of damage or destruction aggregates
five (5%) percent or more of the aggregate book value shown on the books
of account of the entire facilities, properties, equipment and inventory
of the Corporation, or (b) the total monetary amount of damage or
destruction is less than five (5%) percent of the aggregate book value
shown on the books of account of the entire facilities, properties,
equipment and inventory of the Corporation, but more than $140,000, and
such loss shall not be
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substantially covered by valid, existing insurance underwritten by
responsible insurers.
Section 6. CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS. The obligation
of the Shareholders to consummate the transaction contemplated hereby shall be
subject to the satisfaction, on or before the Closing, of all of the following
conditions, unless expressly waived in writing by the Shareholders:
Section 6.1. REPRESENTATIONS AND COVENANTS. All representations and
warranties of the Purchaser contained in this Agreement shall be true in
all material respects on and as of the Closing as if such representations
and warranties were made on and as of such date and the Purchaser shall
have performed all agreements and covenants to be performed by it on or
prior to the Closing.
Section 6.2. OTHER LEGAL MATTERS. Legal matters in connection with
this Agreement and the transaction contemplated hereby shall have been
approved by Chapman & Cutler, counsel for Trust B and the Corporation, and
the Purchaser shall have furnished to such counsel originals of such
corporate records of the Purchaser and copies of such other documents as
such counsel may reasonably have requested for such purpose.
Section 6.3. CLOSING RESPONSIBILITIES. The Purchaser shall have
delivered or caused to be delivered each of the items described in Section
7.4 hereof.
Section 7. THE CLOSING.
Section 7.1. DATE, TIME AND PLACE. Except as otherwise mutually
agreed by the Purchaser and the Shareholders, the closing (the "Closing")
shall occur at the offices of Chapman & Cutler, 111 West Monroe Street,
Chicago, Illinois 60603, at 10:00 a.m. local time, on October __, 1996, or
at such other time and place as the parties may mutually agree upon, but
in no event shall Closing occur prior to the satisfaction of the
conditions set forth in Section 5 above.
Section 7.2. EFFECTIVE DATE OF CLOSING. The Closing shall be
effective as of 12:01 a.m. on October __, 1996 (the "Effective Date of
Closing").
Section 7.3. THE SHAREHOLDERS' RESPONSIBILITIES AT CLOSING. At the
Closing, the Shareholders shall deliver, or cause to be delivered, to the
Purchaser the following:
(a) STOCK CERTIFICATES. The certificates evidencing the
Shares, duly endorsed in blank, or accompanied by stock powers duly
executed in blank.
(b) RESIGNATIONS. The resignations of those officers and
directors
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of the Corporation as may be requested by the Purchaser, which shall
be specified by Purchaser to Trust B at least five (5) days prior to
Closing.
(c) TERMINATION OF EMPLOYMENT CONTRACT WITH JIM BAUER. An
instrument duly executed by the Corporation and James T. Bauer ("J.
Bauer") terminating that certain Employment Agreement dated January
15, 1982 (the "J. Bauer Employment Contract") between the
Corporation and J. Bauer, and in which instrument of termination, J.
Bauer releases the Corporation from any further obligations under
the J. Bauer Employment Contract from and after the effective date
of termination.
(d) CORPORATE RECORDS. The minute books, stock certificate
books, corporate seals and other corporate books, records, data and
papers of the Corporation, and the original Owner Policy of Title
Insurance for the Real Estate.
(e) CERTIFICATE OF TRUST B. A Certificate executed by Trust B
confirming the satisfaction of the conditions set forth in Section
5.1.
(f) OPINION OF COUNSEL. (i) The opinion of Chapman & Cutler,
counsel for Trust B and the Corporation, dated the Closing Date, in
the form attached as Exhibit "C" to this Agreement; and (ii) the
opinion of Tom Metskas, counsel for the G. Bauer Trust, dated the
Closing Date, with respect to the representation and warranty set
forth in Section 3.29 above, but solely as it relates to the shares
of the Corporation held by the G. Bauer Trust.
(g) CLOSING FINANCIAL STATEMENTS. The audited consolidated
balance sheet of the Corporation as of August 31, 1996 (the "Audited
8/31/96 Balance Sheet") and the audited statements of income and
retained earnings and cash flows for the year ended August 31, 1996
(together with related notes and schedules), which financial
statements contain a report of the Corporation's independent
auditors, reporting thereon (such balance sheets, the related
statements of income and retained earnings and cash flows, and the
related notes and schedules, being hereinafter together referred to
as the "Audited 8/31/96 Financial Statements"); and the unaudited
consolidated balance sheet of the Corporation for the period from
August 31, 1996 through the date of Closing (the "Closing Balance
Sheet") and the related unaudited statement of income for the period
from August 31, 1996 through the date of Closing (together with
related notes and schedules) (such balance sheet and related
statements of income, and the related notes and schedules, being
hereinafter together referred to as the "Closing Financial
Statements"). The Audited 8/31/96 Financial Statements and the
Closing Financial Statements, including the related notes and
schedules, shall be prepared from the books and records of the
Corporation in conformity with GAAP and shall present
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fairly the financial position of the Corporation as of the dates of
such statements.
Section 7.4. THE PURCHASER'S RESPONSIBILITIES AT CLOSING. At the
Closing, the Purchaser shall deliver, or cause to be delivered, to the
Shareholders:
(a) PURCHASE PRICE. The Purchase Price in the amount and in
the manner set forth in Section 2 hereof.
(b) OPINION OF COUNSEL. The opinion of Stumpf Falgout Craddock
& Massey, counsel for the Purchaser, in the form of Exhibit "D" to
this Agreement.
Section 8. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Section 8.1. NATURE OF STATEMENTS. All statements contained in any
schedule or any certificate or other instrument delivered by or on behalf
of the Shareholders or the Purchaser pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be deemed
representations and warranties made by the Shareholders or the Purchaser,
as the case may be.
Section 8.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations, warranties, covenants, agreements and undertakings
contained herein or in any Schedule, Certificate or other document shall
remain operative and in full force and effect, and shall survive the
Closing and the delivery of all consideration and documents pursuant to
this Agreement, and shall continue in effect until the close of business
on the two hundred seventieth (270th) day from and after the date of
Closing (the "Indemnification Cutoff Date"). No claim may be made by the
Purchaser or the Shareholders for indemnification pursuant to Section 9 or
10 of this Agreement or otherwise, or for any other relief pursuant to
this Agreement or otherwise, in respect of any breach or failure of any
representation or warranty on or after the Indemnification Cutoff Date.
Section 9. INDEMNIFICATION BY TRUST B AND RELATED MATTERS.
Section 9.1. INDEMNIFICATION BY TRUST B. Trust B agrees to defend,
indemnify and hold harmless the Purchaser and the Corporation, and their
respective successors and assigns, from, against and in respect of any and
all loss or damage resulting from:
(a) the breach by the Shareholders of any of the warranties,
representations, covenants, agreements or undertakings contained
herein;
(b) any Federal, state or local income tax liability
(including any
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penalty and interest thereon) of the Corporation for which Trust B
is obligated to indemnify the Purchaser and the Corporation pursuant
to Section 3.6 hereof;
(c) the amount of any notes receivable, contracts receivable
and accounts receivable (less the allowance for doubtful accounts
set forth in the Corporation's Interim Balance Sheet) included in
the Corporation's Financial Statements which have not been collected
by the Corporation by February 28, 1997 (and Trust B shall have the
right to collect any indemnified amount hereunder);
(d) any liabilities of the Corporation which are not included
in the Corporation's Financial Statements as of the Effective Date
of Closing;
(e) any liability arising out of any and all actions, suits,
proceedings, claims, demands, judgments, costs and expenses
(including reasonable legal and accounting fees) incident to any of
the foregoing.
Section 9.2. ENVIRONMENTAL INDEMNIFICATION BY TRUST B. Trust B
agrees to defend, indemnify and hold harmless the Purchaser and the
Corporation, and their respective successors and assigns (collectively,
the "Indemnified Parties"), from, against and in respect of any and all
loss or damage resulting from any claims, demands, obligations, penalties,
fines, suits, liabilities, settlements, damages, losses, costs or expenses
(including, without limitation, attorney consultant fees and expenses,
investigations and laboratory fees and expenses, clean up costs, and court
costs and other litigation expenses) of whatever kind or nature, known or
unknown, contingent or otherwise, arising out of or in any way related to
the presence, disposal, release, threatened release, removal or production
of any hazardous substances, solid wastes or other substances known or
suspected to pose a threat to health or the environment which are on any
portion of the Real Estate on the date of Closing, which were not
disclosed in the Phase II and of which Trust B had or reasonably should
have had knowledge of and did not disclose to Purchaser prior to Closing.
Section 9.3. PROCEDURE FOR MAKING CLAIMS. If and whenever the
Purchaser desires to claim indemnification by Trust B pursuant to the
provisions of Section 9, the Purchaser shall promptly deliver to Trust B a
certificate signed by the Chairman of the Board, President or Vice
President of the Purchaser (the "Notice of Claim") (i) stating that the
Purchaser or the Corporation, their successors and assigns, has paid or
properly accrued losses, damages or expenses in an aggregate stated amount
to which the Purchaser is entitled to indemnification pursuant to this
Section 9, and (ii) specifying the individual items of loss, damage or
expense included in the amount so stated, the date each such item was paid
or properly accrued and the nature of the misrepresentation, breach of
warranty or claim to which such item is related, provided, however,
failure to notify Trust B shall relieve Trust B from liability only
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if it is prejudiced thereby. Trust B shall have the right to defend any
claim by a third party at the expense of Trust B. The Purchaser and the
Corporation, as the case may be, shall provide to Trust B prompt and
complete disclosure of all pertinent information in the possession of or
available to the Purchaser or the Corporation and shall extend full and
timely assistance in the cooperation in the investigation of the defense
of the claim, suit or action, with respect to which such indemnification
is claimed. Trust B, in the defense of any such suit, action or
proceeding, shall not consent to the entry of any judgment or decree
except with the written consent of the Purchaser and the Corporation, nor
enter into any settlement (except the written consent of the Purchaser and
the Corporation) which does not include as an unconditional term thereof
the giving by the claimant or plaintiff to the Purchaser and the
Corporation of a release from every liability in respect of such claim,
suit, action or proceeding. In any defense of any claim by a third party,
the Purchaser and the Corporation shall have the right (but shall not be
obligated) to participate in such defense through counsel of its own
selection and at its own expense.
Section 9.4. AGGREGATE LIMITATION ON INDEMNIFICATION.
Notwithstanding anything to the contrary contained in this Section 9,
Trust B shall not be obligated to indemnify the Purchaser or the
Corporation, or their respective successors and assigns, from the
following:
(a) any claims resulting in loss, damage or costs to the
Purchaser or the Corporation which, in the aggregate, do not exceed
the sum of ONE HUNDRED FIFTY THOUSAND AND NO/100 ($150,000.00)
DOLLARS (the "Aggregate Threshold"); and
(b) any claim arising after the Indemnification Cutoff Date.
Section 9.5. LIMITATION ON INDEMNIFICATION FOR MATTERS COVERED BY
INSURANCE. Notwithstanding anything to the contrary contained in this
Section 9, Trust B will not be required to indemnify the Corporation and
the Purchaser to the extent that such matter requiring indemnification is
covered and paid by the Corporation's or the Purchaser's insurance
carrier(s). The Purchaser waives all rights of subrogation to the extent
of the coverage and payments made by such insurance carrier(s) on an
indemnity item hereunder, provided, however, such waiver of subrogation
shall be inapplicable and void if it would cancel or void the
Corporation's or the Purchaser's insurance coverage for an item subject to
indemnity hereunder.
The Purchaser represents to Trust B that waiver of subrogation under
the Purchaser's current insurance coverage would not void any such
coverage and the Purchaser will use its best efforts to continue coverage
which permits the waiver of subrogation. In the event the Purchaser cannot
obtain such coverage, it will promptly notify Trust B in writing so that
it may attempt to obtain coverage for its potential liability at
Purchaser's expense.
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Section 10. INDEMNIFICATION BY THE PURCHASER. The Purchaser agrees to
defend, indemnify and hold harmless the Shareholders and their respective
successors, assigns and personal representatives from, against and in respect of
any and all loss or damage resulting from:
(a) any breach of the Purchaser's warranties and
representations, or any misstatement or omission of facts, or
failure to state facts necessary to make those statements made not
misleading, under this Agreement, or from the breach of any
covenant, agreement or undertaking contained herein; and
(b) any liability arising out of any and all actions, suits,
proceedings, claims, demands, judgments, costs and expenses
(including reasonable legal and accounting fees) incident to any of
the foregoing.
Section 11. EXPENSES. The Shareholders and the Purchaser shall pay their
own respective expenses (including without limitation counsel and accounting
fees and expenses) incident to the preparation and carrying out of this
Agreement and the consummation of the transactions contemplated hereby. Trust B
and the G. Bauer Trust shall divide all expenses, costs and fees in connection
with the transaction evidenced by this Agreement, including but not limited to
the costs associated with Section 5.3, the fees contemplated in Section 3.27,
all as set forth in the Letter of Direction, the form of which is attached
hereto as Exhibit "A". Such fees, expenses and costs shall be paid prior to the
distribution of proceeds to Trust B and the G. Bauer Trust.
Section 12. NOTICES. All notices, demands and requests which may be given
or which are required to be given by either party to the other, and any exercise
of a right of termination provided by this Agreement, shall be in writing and
be: (i) sent by certified or registered mail, return receipt requested,
addressed to the intended recipient at the address specified for such party
herein; or (ii) deposited into the custody of a nationally recognized overnight
delivery service such as Federal Express, addressed to such party at the address
specified herein. Notices shall be effective on the date of delivery or receipt,
or if delivery is not accepted, on the earlier of the date that delivery is
refused or three (3) days after the notice is mailed pursuant to (i) preceding
or the day after deposited into the custody of an overnight delivery service
pursuant to (ii) preceding. For purposes hereof, the addresses of the parties
for all notices are as follows (unless changed by similar notice in writing
given by the particularly person whose address is to be changed):
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(a) if to Trust B:
Mr. Reinhold Groh, Trustee
301 East Main Street, Suite 115
Barrington, IL 60010-3271
Telephone: (847) 382-1590
Facsimile: (847) 382-9375
with a copy to:
Kevin Kalinich, Esq.
Chapman & Cutler
111 W. Monroe
Chicago, IL 60603
Telephone: (312) 845-2968
Facsimile: (312) 701-2361
(b) if to the G. Bauer Trust,
c/o Doris B. Hester, Trustee
1701 Habberton
Park Ridge, Illinois 60068
with a copy to:
Tom Metskas
35 West Wacker Drive, Suite 3700
Chicago, IL 60601
(c) if to the Purchaser,
Industrial Holdings, Inc.
7135 Ardmore
Houston, TX 77054
Attention: Robert Cone, C.E.O.
Telephone: (713) 747-7287
Facsimile: (713) 747-1025
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with a copy to:
Michael B. Massey, Esq.
Stumpf Falgout Craddock & Massey
1400 Post Oak Boulevard, Suite 400
Houston, Texas 77056
Telephone: (713) 871-0919
Facsimile: (713) 871-0408
Section 13. SATISFACTION OF CONDITIONS; TERMINATION.
Section 13.1. BEST EFFORTS TO SATISFY CONDITIONS. The Shareholders
agree to use their best efforts to bring about the satisfaction of the
conditions specified in Section 5 hereof, and the Purchaser agrees to use
its best efforts to bring about the satisfaction of the conditions
specified in Section 6 hereof.
Section 13.2. TERMINATION. This Agreement may be terminated, without
liability on the part of any party hereto to any other party hereto, by:
(a) the Board of Directors of the Purchaser, if a material,
uncured (after notice) default shall be made by the Shareholders in
the observance or in the due and timely performance by the
Shareholders of any of the covenants of the Shareholders herein
contained, or if there shall have been a material breach by the
Shareholders of any of the warranties and representations of the
Shareholders herein contained, or if the conditions of this
Agreement to be complied with or performed at or before the Closing
shall not have been complied with or performed at the time required
for such compliance or performance and such non-compliance or
non-performance shall not have been waived by the Purchaser; or
(b) the Shareholders, if a material, uncured (after notice)
default shall be made by the Purchaser in the observance or in the
due and timely performance by the Purchaser of any of the covenants
of the Purchaser herein contained, or if there shall have been a
material breach by the Purchaser of any of its warranties and
representations herein contained, or if the conditions of this
Agreement to be complied with or performed by the Purchaser at or
before the Closing shall not have been complied with or performed at
the time required for such compliance or performance and such
non-compliance or non-performance shall not have been waived by the
Shareholders. In the event of termination by the Purchaser or the
Shareholders as provided above, written notice shall forthwith be
given to the other party.
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Section 14. MISCELLANEOUS.
Section 14.1. FURTHER ASSURANCES. The Shareholders hereby agree to
execute and deliver from time to time at the request of the Purchaser and
without further consideration, such additional instruments of conveyance
and transfer and to take such other action as the Purchaser may reasonably
require more effectively to convey, assign, transfer and deliver the
Shares to the Purchaser, and to effectuate the terms, agreements and
covenants contained in this Agreement.
Section 14.2. ASSIGNMENT. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns.
Section 14.3. SECTION AND PARAGRAPH HEADINGS. The Section and
Paragraph headings of this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement.
Section 14.4. AMENDMENT. This Agreement may be amended only by an
instrument in writing executed by the parties hereto.
Section 14.5. ENTIRE AGREEMENT. This Agreement and the exhibits,
schedules, certificates and documents referred to herein constitute the
entire agreement of the parties, and supersede all understandings with
respect to the subject matter hereof.
Section 14.6. PUBLIC ANNOUNCEMENTS. No publication and/or press
release of any nature shall be issued pertaining to this Agreement or the
transactions contemplated hereby without the prior written approval of the
Purchaser, except as may be required by law. Subsequent to the Closing,
the broker for Trust B may public tombstones and advertisements describing
the services it provided to Trust B, subject to the prior approval of
Purchaser and Trust B (which shall not be unreasonably withheld). Nothing
contained in this Section 14.6 however shall prohibit or in any manner
limit the Purchaser from satisfying its public disclosure obligations
required under any applicable federal or state securities laws to which
Purchaser is subject.
Section 14.7. U.S. DOLLARS. All monetary amounts referred to in this
Agreement are stated in U.S. Dollars.
Section 14.8. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
Section 14.9. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS.
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Section 14.10. TRUSTEE. This Agreement is executed by the
Shareholders solely as Trustees and not in their individual capacities and
no personal liability shall be asserted or enforceable against said
Trustees in their individual capacities by virtue of this Agreement or its
execution.
[SIGNATURES TO FOLLOW ON PAGES 24, 25 AND 26]
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IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
as of the date and year first above written.
PURCHASER:
INDUSTRIAL HOLDINGS, INC.
By: /s/ ROBERT CONE
Robert Cone, Chief Executive Officer
[signature of Shareholder Trust B continued on next page]
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SHAREHOLDERS:
TRUST B:
TRUST "B" UNDER THE WILL OF BERNARD J. BAUER, SR.
By: /s/ REINHOLD GROH
Reinhold Groh, Trustee
[signature of Shareholder the G. Bauer Trust continued on next page]
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THE G. BAUER TRUST:
THE GERTRUDE BAUER TRUST
DATED DECEMBER 24, 1993
By: /s/ DORIS B. HESTER
Doris B. Hester, Trustee
By: /s/ JAMES T. BAUER, SR.
James T. Bauer, Sr., Trustee
30
