PROXY STATEMENT
Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
INDUSTRIAL HOLDINGS, INC.
(Name of Registrant as specified in its Charter)
INDUSTRIAL HOLDINGS, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(j)(2)
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement:
(3) Filing Party:
(4) Date Filed:
<PAGE>
INDUSTRIAL HOLDINGS, INC.
7135 ARDMORE
HOUSTON, TEXAS 77054
------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 28, 1996
------------------------------------
Notice is hereby given that the annual meeting of the shareholders of
Industrial Holdings, Inc. (the "Company") will be held at the Company's
principal offices at 7135 Ardmore, Houston, Texas 77054, at 10:00 a.m., Houston
time, on Friday, June 28, 1996, for the following purposes:
1. To elect two Class II directors, who will serve until the third
annual meeting of shareholders following their election or until their
successors are elected and qualified;
2. To consider and act upon such other business as may properly come
before the meeting.
A record of shareholders has been taken as of the close of business on
May 17, 1996 and only those shareholders of record on that date will be entitled
to notice of and to vote at the meeting. A shareholders' list will be available
commencing May 28, 1996, and may be inspected during normal business hours prior
to the annual meeting at the offices of the Company, 7135 Ardmore, Houston,
Texas 77054.
Your participation in the Company's affairs is important. To ensure
your representation if you do not expect to be present at the meeting, please
sign and date the enclosed proxy and return it promptly in the enclosed stamped
envelope. The prompt return of proxies will ensure a quorum and save the Company
the expense of further solicitation.
By Order of the Board of Directors
ROBERT E. CONE
President
May 26, 1996
INDUSTRIAL HOLDINGS, INC.
7135 ARDMORE
HOUSTON, TEXAS 77054
PROXY STATEMENT
This proxy statement is being mailed to shareholders on or about May
24, 1996, in connection with the solicitation of proxies by the Board of
Directors of Industrial Holdings, Inc. (the "Company") for use at the annual
meeting of Shareholders of the Company to be held at the Company's principal
offices at 7135 Ardmore, Houston, Texas 77054, at 10:00 a.m., Houston time, on
Friday, June 28, 1996, and at any adjournments thereof (the "Annual Meeting"),
for the purpose of considering and voting on the matters set forth in the
accompanying Notice of Annual Meeting of Shareholders. All shares represented by
properly executed proxies, unless such proxies previously have been revoked,
will be voted at the annual meeting in accordance with the directions on such
proxies. If no direction is indicated, the shares will be voted for the election
of each of the nominees named herein to the board of directors. A shareholder
may revoke a proxy by (a) delivering to the Company written notice of
revocation, (b) delivering to the Company a signed proxy bearing a later date or
(c) voting in person at the Annual Meeting.
At the close of business on May 17, 1996, the record date for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting and any adjournment thereof (the "record date"), there were issued,
outstanding and entitled to vote 3,611,062 shares of the Company's common stock,
par value $.01 per share ("Common Stock"). The presence, in person or by proxy,
of a majority of the shares of Common Stock outstanding on the record date is
necessary to constitute a quorum at the Annual Meeting. Each share of Common
Stock is entitled to one vote on all questions requiring a shareholder vote at
the Annual Meeting. Abstentions and broker non-votes will be treated as present
for purposes of determining a quorum. Abstentions will have the same legal
effect as votes against a proposal and broker non-votes will be disregarded.
ELECTION OF DIRECTORS
At the Annual Meeting, two Class II Directors are to be elected, each
to hold office until the third Annual Meeting of Shareholders following his
election.
The persons named in the accompanying proxy have been designated by the
Board of Directors and unless authority is withheld, they intend to vote for the
election of the nominees named below to the Board of Directors as Class II
Directors. All of the nominees previously have been elected by the shareholders
to serve as members of the Company's Board of Directors. Although the Board of
Directors of the Company does not contemplate that any of the nominees will
become unavailable for election, if such a situation arises prior to the Annual
Meeting, the persons named in the enclosed proxy will vote for the election of
such other person(s) as may be nominated by the Board of Directors or the Board
may be reduced accordingly.
-1-
Certain information concerning the nominees, together with comparable
information for the Class I and Class III Directors, whose terms are not
expiring at the Annual Meeting, is set forth below:
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
MAY 17, 1996(1)
------------------------------
PRINCIPAL POSITION DIRECTOR
NAME WITH THE COMPANY AGE SINCE SHARES PERCENT
<S> <C> <C> <C> <C> <C>
CLASS I DIRECTORS WHOSE TERM WILL EXPIRE IN 1998
Charles J. Anderson Director 74 1991 72,000(2) 2.0%
James W. Kenney Director 53 1992 15,000(2) .4%
CLASS II DIRECTORS WHOSE TERM (IF RE-ELECTED) WILL EXPIRE IN 1999
William J. Argeroplos Director 49 1989 141,541(2) 3.9%
John P. Madden Director 54 1992 175,083(3) 4.8%
CLASS III DIRECTORS WHOSE TERM WILL EXPIRE IN 1997
Robert E. Cone Chairman of the Board; 44 1989 337,548(4) 9.1%
President and Chief Executive
Officer; Director
James H. Brock, Jr. Executive Vice President and 58 1991 135,000(5) 3.6%
Chief Operating Officer;
Treasurer; Director
Barbara S. Shuler Secretary; Director 51 1991 77,393(2) 2.1%
</TABLE>
(1) Subject to community property laws where applicable, each person has
sole voting and investment power with respect to the shares listed,
except as otherwise specified. Each person is a United States citizen.
This table is based upon information supplied by officers, directors
and principal shareholders and Schedules 13D and 13G, if any, filed
with the Securities and Exchange Commission.
(2) Includes 15,000 shares that may be acquired upon the exercise of stock
options.
(3) Includes 10,000 shares that may be acquired upon the exercise of stock
options. Excludes 350,738 shares owned by persons related to Mr.
Madden, but as to which Mr. Madden disclaims beneficial ownership.
(4) Includes 115,000 shares that may be acquired upon the exercise of stock
options.
(5) Includes 25,000 shares that may be acquired upon the exercise of a
warrant, and 85,000 that may be acquired upon the exercise of stock
options.
-2-
ROBERT E. CONE has served as President, Chief Executive Officer and
Director of the Company since August 1989. From August 1987 to August 1989, Mr.
Cone served as Vice President of Broadcast Ventures, Inc ("BVI"), a partnership
formed to acquire radio stations through syndication. Mr. Cone's
responsibilities at BVI included the formation of business plans, corporate
development, financing and analysis of acquisition candidates. Mr. Cone received
a B.S. degree in accounting from the University of Houston - Downtown.
JAMES H. BROCK, JR. has served as Executive Vice President, Treasurer
and Chief Operating Officer since July 1991, as a Director of the Company since
September 1991 and as Chief Financial Officer from July 1991 through December
1994. Mr. Brock served as Executive Vice President and Chief Financial Officer
of DRCA Medical Corporation ("DRCA") from August 1988 to October 1990. DRCA, a
public corporation listed on the American Stock Exchange, is a health care
company specializing in the rehabilitation of injured workers. From December
1987 to July 1988, Mr. Brock acted as a consultant to DRCA and assisted in
formulating its business and financial plans. Mr. Brock served as Vice
President-Finance of National Healthcare Alliance, a full-service managed health
care service company, from November 1987 to May 1991. From 1977 to 1990, Mr.
Brock was Chairman of the Board of Directors of Quality Fasteners, Inc., a
distributor of construction supplies, and of Olde Time Ice, Inc., a manufacturer
and distributor of packaged ice. Mr. Brock has been engaged in the private
practice of public accounting since April 1972 and is a Certified Public
Accountant in Texas and Georgia.
BARBARA S. SHULER has served as Secretary of the Company since February
1992 and as a Director of the Company since September 1991. Since 1974, Ms.
Shuler has been self-employed in auction management, marketing, advertising and
promotional aspects of the equine industry, serving as President of Shuler, Inc.
Ms. Shuler received a degree in journalism from Northwestern University.
WILLIAM J. ARGEROPLOS served as Secretary of the Company from August
1989 to February 1992 and has served as a Director of the Company since August
1989. Mr. Argeroplos was employed in the securities industry from October 1981
to December 1990. He served as Executive Vice President and national sales
manager of Equus Securities, Incorporated ("ESI") from February 1987 through
December 1990. ESI is a subsidiary of Equus Capital Corp., a company
participating in the merger, acquisition and management buy-out of companies.
His responsibilities at ESI included the supervision of six regional vice
presidents of sales, the development of broker-dealers and the provision of
sales assistance to individual branch offices and registered representatives.
CHARLES J. ANDERSON has served as a Director of the Company since
September 1991. For the last six years, Mr. Anderson has been engaged in private
business investments. From 1955 to 1985, Mr. Anderson served as Senior Sales
Vice President and Director of Sales and was a partner of the Delaware
Management Company, the manager of the Delaware Group of Mutual Funds and
certain other private pension funds. Mr. Anderson received an economics degree
from the University of Pennsylvania.
JOHN P. MADDEN has served as a Director of the Company since October
1992. From January 1992 to April 1993, Mr. Madden served as Chairman of the
Board of The Rex Group, Inc. ("RGI") and as its President and Chief Executive
Officer from June 1963 to January 1992 and from December 1992 to April 1993.
RGI, a private company based in Houston, Texas, which was acquired by the
Company in March 1993, is a distributor of new and used machine tool equipment
and used machines, conducts a machine moving operation and is engaged in the
international export crating business. Mr. Madden received a degree in finance
from the University of Notre Dame.
JAMES W. KENNEY has served as a Director of the Company since October
1992. Since October 1993, Mr. Kenney has served as Executive Vice President of
San Jacinto Securities, Inc. From February 1992 to September 1993, he served as
the Vice President of Renaissance Capital Group, Inc. Prior to that time, Mr.
Kenney served as Senior Vice President for Capital Institutional Services, Inc.
and in various executive positions with major southwest regional brokerage
firms, including Rauscher Pierce Refsnes Inc. and Weber, Hall, Sale and
Associates, Inc. Mr. Kenney is a director of AmeriShop Corporation, a company
that provides services to the retail industry; Consolidated Health Care
Associates, Inc., a company that operates physical rehabilitation centers; CCI
Coded Communications Corp., a manufacturer of digital data transmission
equipment; Prism Group, Inc., a company that duplicates disks and packages
software; Appoint Technologies, Inc., a company that develops input devices for
-3-
personal computers; and Tricom Corporation, a company that develops products and
services for the telecommunication industry.
BOARD AND COMMITTEE ACTIVITY: STRUCTURE AND COMPENSATION
The Company's operations are managed under the broad supervision of the
Board of Directors, which has ultimate responsibility for the establishment and
implementation of the Company's general operating philosophy, objectives, goals
and policies. During 1995, the Board of Directors convened on two regular
occasions. Each director attended all of the meetings held by the Board or
meetings of Board committees of which he was a member during his tenure in 1995,
except for Charles J. Anderson who attended no Board of Directors meetings and
all Committee meetings of which he was a member and Barbara Shuler who attended
one meeting of the Board of Driectors and all Committee meetings of which she
was a member. Directors receive no compensation for attendance at Board or
Committee meetings. Directors are, however, entitled to reimbursement for
reasonable travel expenses incurred in attending such meetings. Employee
directors are eligible to participate in the Company's 1994 Amended and Restated
Incentive Stock Plan (the "Plan"). Non-employee directors are entitled to
participate in the Company's 1995 Non-Employee Director Stock Option Plan (the
"Director Plan").
Pursuant to delegated authority, various Board functions are discharged
by the standing committees of the Board. The Audit Committee of the Board of
Directors, currently composed of Messrs. Brock and Anderson and Ms. Shuler,
makes recommendations to the Board of Directors concerning the selection and
engagement of the Company's independent public accountants and reviews the scope
of the annual audit, audit fees and results of the audit. The Audit Committee
also reviews and discusses with management and the Board of Directors such
matters as accounting policies, internal accounting controls and procedures for
preparation of financial statements. The Audit Committee convened on one
occasion in 1995. The Compensation Committee sets the compensation for
executive, managerial and technical personnel of the Company and administers the
Company's stock option and other compensation plans. The Compensation Committee
is currently composed of Ms. Shuler and Mr. Anderson and met on one occasion in
1995.
APPROVAL
The two nominees for election as directors at the Annual Meeting who
receive the greatest number of votes cast for election by the holders of Common
Stock entitled to vote at the Annual Meeting, shall be the duly elected Class II
Directors (as set forth in the accompanying proxy) upon completion of the vote
tabulation at the Annual Meeting, provided a majority of the outstanding shares
as of the record date are present in person or by proxy at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF
THE NOMINEES LISTED ABOVE.
-4-
OTHER INFORMATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth certain information regarding the beneficial
ownership of Common Stock at May 17, 1996 by (i) each person known to the
Company to beneficially own more than 5% of its Common Stock, (ii) each
director, (iii) each executive officer and (iv) all directors and executive
officers as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENTAGE OF
BENEFICIAL OWNER BENEFICIALLY OWNED(1) CLASS
<S> <C> <C>
Renaissance Capital Partners, II, Ltd.
8080 North Capital Expressway
Suite 210, LB 59
Dallas, TX 75206-1857................................. 625,153(2) 14.8%
St. James Capital Partners, L.P.
5599 San Felipe Suite 300
Houston, Texas 77056................................. 275,000(3) 7.5%
DIRECTORS AND EXECUTIVE OFFICERS:
Robert E. Cone........................................ 337,548(4) 9.1%
James H. Brock, Jr.................................... 135,000(5) 3.6%
Christine A. Smith.................................... 55,081(6) 1.5%
William J. Argeroplos................................. 141,541(7) 3.9%
Charles J. Anderson................................... 72,000(7) 2.0%
Barbara S. Shuler..................................... 77,393(7) 2.1%
John P. Madden........................................ 175,083(8) 4.8%
James W. Kenney....................................... 15,000(7) .4%
All officers and directors
as a group (8 persons) (4) - (8).................... 993,646 25.2%
</TABLE>
(1) Subject to community property laws where applicable, each person has
sole voting and investment power with respect to the shares listed,
except as otherwise specified. Each person is a Untied States citizen.
This table is based upon information supplied by officers, directors
and principal shareholders and Schedules 13D and 13G, if any, filed
with the Securities and Exchange Commission.
(2) These shares may be acquired on the conversion of a $1.875 million
convertible debenture and the exercise of 50,000 warrants.
(3) Includes 60,000 shares that may be acquired upon the exercise of
warrants.
(4) Includes 115,000 shares that may be acquired upon the exercise of stock
options.
(5) Includes 25,000 shares that may be acquired upon the exercise of a
warrant and 85,000 that may be acquired upon the exercise of stock
options.
(6) Includes 45,000 shares that may be acquired upon the exercise of stock
options.
(7) Includes 15,000 shares that may be acquired upon the exercise of stock
options.
(8) Includes 10,000 shares that may be acquired upon the exercise of stock
options. Excludes 350,738 shares owned by persons related to Mr.
Madden, but as to which Mr. Madden disclaims beneficial ownership.
-5-
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table provides certain
summary information covering compensation paid or accrued during the fiscal
years ended December 31, 1995, 1994 and 1993 to the Company's Chief Executive
Officer and the other executive officers, whose annual compensation, determined
as of the end of the last fiscal year, exceeds $100,000.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ------------
OPTION EXERCISE
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER AWARDS PRICE
- - ------------------------- -------- ---------- --------- ------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Cone.......... 1995 $160,000 -- -- -- --
President and 1994 $146,250 -- -- 50,000 $2.375
Chief Executive Officer 1993 $126,749 $10,000 -- 65,000 $3.125
James H. Brock, Jr...... 1995 $150,000 -- -- -- --
Executive Vice President and 1994 $135,000 -- -- 20,000 $2.375
Chief Operating Officer 1993 $110,433 $7,500 -- 65,000 $3.125
</TABLE>
STOCK COMPENSATION TABLE. The following table provides certain information
with respect to options granted to the executive officers during the fiscal year
ended December 31, 1995, under the Company's stock option plans:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------
NUMBER OF POTENTIAL REALIZABLE
SHARES OF VALUE AT ASSUMED
COMMON PERCENT OF TOTAL ANNUAL RATES OF STOCK
STOCK OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERMS(2)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION --------------------------
NAME GRANTED(1) FISCAL YEAR PRICE DATE 5% 10%
- - --------------------- ------------ -------------- -------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Christine A. Smith 25,000 10.0% $3.31 01/01/05 $52,041 $131,882
Vice President and
Chief Financial
Officer
</TABLE>
(1) The options are fully vested at December 31, 1995.
(2) These calculations are based on the market value of the Common Stock on
the date of grant. The market value is calculated by averaging the
closing bid and ask price for the stock as quoted by NMS on the date of
grant. The exercise price is determined by the same method which is
equal to the market value on the date of grant.
-6-
OPTION EXERCISES AND YEAR END VALUES
The following table sets forth information with respect to the
unexercised options to purchase shares of Common Stock which were granted to the
executive officers in 1995 or prior years under the Company's stock option
plans. The executive officers did not exercise any options outstanding under the
Company's stock option plans during the fiscal year ended December 31, 1995.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
HELD AT FISCAL YEAR END YEAR END(1)
------------------------------ -----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert E. Cone 115,000 -- $152,500 --
James H. Brock, Jr. 85,000 -- $100,000 --
Christine A. Smith 25,000 -- $ 20,375 --
</TABLE>
(1) Represents the difference between the average of the closing bid and
ask price for the Common Stock as quoted by NMS on December 31, 1995
and any lesser exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
For the fiscal year ended December 31, 1995, Mr. Madden, Mr. Anderson
and Ms. Shuler served on the Compensation Committee of the Board of Directors
(the "Committee"). Ms. Shuler has served as the Company's Secretary since
February 1992.
EMPLOYMENT AGREEMENTS
Effective July 1, 1991, the Company entered into employment agreements
with Messrs. Cone and Brock, which agreements were subsequently amended and
extended. Mr. Cone's amended employment agreement provides for a 1996 base
salary of $175,000, a 1997 base salary of $185,000, and a base salary of
$200,000 for 1998 through 2000. Mr. Brock's amended employment agreement
provides for a 1996 base salary of $160,000, a 1997 base salary of $170,000, and
a 1998 base salary of $180,000.
-7-
PERFORMANCE GRAPH
The following performance graph compares the performance of the
Company's Common Stock to the National Association of Securities Dealers
Automated Quotation System Composite Index and to the Index of Non-Financial
Companies. The graph covers the period from January 16, 1992 (the date on which
the Company's Common Stock was registered under Section 12(g) of the Securities
Exchange Act of 1934, as amended) to December 31, 1995.
[LINEAR GRAPH PLOTTED FROM POINTS IN TABLE BELOW]
Nasdq Nasdq
Stock Mkt Non-financial IHII
Jan. 16, 1992 100.000 100.000 100.000
Jan. 31, 1992 99.602 99.483 89.189
Dec. 31, 1992 110.567 103.898 86.486
Dec. 31, 1993 126.925 119.966 89.189
Dec. 31, 1994 124.070 114.970 77.038
Dec. 31, 1995 175.321 158.082 89.189
-8-
BOARD COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation for 1995:
Under the supervision of the Committee, the Company has developed and
implemented compensation policies, plans and programs designed to enhance the
profitability of the Company, and therefore shareholder value, by aligning
closely the financial interests of the Company's senior executives with those of
its shareholders. The Committee has adopted the following objectives as
guidelines for making its compensation decisions:
o Provide a competitive total compensation package that enables
the Company to attract and retain key executives.
o Integrate all compensation programs with the Company's annual
and long-term business objectives and strategy and focus
executive behavior on the fulfillment of those objectives.
o Provide variable compensation opportunities that are directly
linked to the performance of the Company and that align
executive remuneration with the interests of shareholders.
Executive base compensation for senior executives is intended to be
competitive with that paid in comparably situated industries and to provide a
reasonable degree of financial security and flexibility to those individuals who
the Board of Directors regards as adequately performing the duties associated
with the various senior executive positions. In furtherance of this objective,
the Committee periodically, though not necessarily annually, reviews the salary
levels of a sampling of companies that are regarded by the Committee as having
sufficiently similar financial and operational characteristics to provide a
reasonable basis for comparison. Although the Committee does not attempt to
specifically tie executive base pay to that offered by any particular sampling
of companies, the review provides a useful gauge in administering the Company's
base compensation policy. In general, however, the Committee considers the
credentials, length of service, experience, and consistent performance of each
individual senior executive when setting compensation levels.
To ensure retention of qualified management, the Company has entered
into employment agreements with its key management personnel. The employment
agreements establish annual base salary amounts that the Committee may increase
based on the foregoing criteria. Pursuant to his employment agreement the annual
base salary of the Chief Executive Officer was increased from $146,250 in 1994
to $160,000 in 1995. During 1995, no cash bonuses or options were awarded to the
Chief Executive Officer. See " -- Employment Agreements."
The Plan is intended to provide key employees, including the Chief
Executive Officer and other executive officers of the Company and its
subsidiaries, with a continuing proprietary interest in the Company, with a view
to increasing the interest in the Company's welfare of those personnel who share
the primary responsibility for the management and growth of the Company.
Moreover, the Plan provides a significant non-cash form of compensation that is
intended to benefit the Company by enabling it to continue to attract and to
retain qualified personnel.
The Compensation Committee is authorized to make incentive equity
awards ("Incentive Awards") under the Plan to key employees, including officers
(whether or not they are also directors), of the Company and its subsidiaries.
Although the Incentive Awards are not based on any one criterion, the
-9-
Committee will direct particular attention to management's ability to implement
the Company's strategy of geographic expansion through acquisition followed by
successful integration and assimilation of the acquired companies. In making
Incentive Awards, the Committee will also consider margin improvements achieved
through management's realization of operational efficiencies, as well as revenue
and earnings growth.
1995 COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Charles J. Anderson
Barbara S. Shuler
John P. Madden
CERTAIN TRANSACTIONS
The Company enters into transactions with related parties only with the
approval of a majority of the independent and disinterested directors and only
on terms the Company believes to be comparable to or better than those that
would be available from unaffiliated parties. In the Company's view, all of the
transactions described below meet that standard.
In April 1993, the Company acquired The Rex Group, Inc. ("RGI") for a
purchase price consisting of an aggregate of 450,606 shares of Common Stock.
John Madden, a member of the Company's Board of Directors since October 1992,
served as the President and Chief Executive Officer of RGI from June 1963 to
January 1992 and from December 1992 to April 1993 and as Chairman of RGI's Board
of Directors from January 1992 to April 1993. Of the aggregate consideration
paid by the Company to the former shareholders of RGI, Mr. Madden received
99,868 shares of Common Stock, and members of Mr. Madden's family received
350,738 shares of Common Stock, as to which Mr. Madden disclaims beneficial
ownership. In addition to the aggregate consideration paid by the Company for
RGI, an "earn-out" provision allows the prior owners of RGI in the aggregate to
earn additional shares of Common Stock of the Company based on the performance
of RGI through 1995. The number of shares earned is also dependent upon the
Company's share price during such period. During 1993, the prior owners of RGI
earned an additional 55,276 shares of Common Stock. No shares were earned for
fiscal 1994 and 1995. The Company also entered into a two-year employment
agreement with Mr. Madden which expired April 1995, pursuant to which the
Company paid Mr. Madden compensation in the amount of $16,154 in 1995. Under the
terms of his employment agreement with the Company, Mr. Madden received an
additional 15,000 shares of Common Stock in March 1995.
In connection with the acquisition of PVS in January 1992, Mr. Jimmy W.
Ray acquired 115,650 shares of Common Stock and Mr. Rex W. Terry acquired
115,650 shares of Common Stock. In connection with their acquisition of these
shares at the time the Company completed its initial public offering, Messrs.
Terry and Ray contractually agreed (i) not to sell any shares of Common Stock
until January 1993 and (ii) not to sell more than an aggregate of 6,425 shares
in any 90-day period beginning January 1993. If either of Mr. Terry or Mr. Ray
gives the Company written notice of his intention to sell shares of Common Stock
no less than 10 days prior to the beginning of each 90-day period and in the
event that the closing bid price of the Common Stock on the trading day
preceding notice is less than or equal to $5.00 per share, the Company is
obligated to pay such holder the difference between $5.00 and the sale price of
the shares of Common Stock actually sold during each particular 90-day period.
As of March 31, 1996, Mr. Ray and Mr. Terry sold all shares of Common Stock
under this agreement and there is no further obligation on the part of the
Company to make any payments under the agreement.
-10-
COST OF SOLICITATION
The Company will bear the costs of the solicitation of proxies from its
shareholders. In addition to the use of mail, proxies may be solicited by
directors, officers and regular employees of the Company in person or by
telephone or other means of communication. The directors, officers and employees
of the Company will not be compensated additionally for such solicitation but
may be reimbursed for out-of-pocket expenses in connection with the
solicitation. The Company is also making arrangements with brokerage houses and
other custodians, nominees and fiduciaries for the delivery of solicitation
material to the beneficial owners of Common Stock and the Company will reimburse
the brokers, custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses in connection with such services.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than 10%
of a registered class of the Company's equity securities, to file reports of
ownership and changes of ownership with the Commission. Officers, directors and
greater than 10% shareholders are required to furnish the Company with copies of
all Section 16(a) reports they file. Based solely on its review of the forms
received by it, the Company believes that during the year ended December 31,
1995 all filing requirements applicable to the Company's officers, directors and
greater than 10% shareholders were met.
-11-
SHAREHOLDER PROPOSALS
Proposals by shareholders intended to be presented at the 1997 Annual
Meeting of Shareholders must be received by the Company for inclusion in the
Company's proxy statement and form of proxy relating to that meeting not later
than January 20, 1997.
OTHER MATTERS
The annual report to shareholders covering the fiscal year ended
December 31, 1995 has been mailed to each shareholder entitled to vote at the
Annual Meeting.
Price Waterhouse LLP, the Company's independent accountant for the
fiscal year ended December 31, 1995, is not expected to be present at the Annual
Meeting.
Management is not aware of any other matters to be presented for action
at the Annual Meeting. However, if any other matter is properly presented, it is
the intention of the persons named in the enclosed proxy form to vote in
accordance with their best judgment on such other matters.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT E. CONE, President
May 26, 1996
-12-
INDUSTRIAL HOLDINGS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 28, 1996
This undersigned shareholder of Industrial Holdings, Inc. (the "Company")
hereby appoints Robert E. Cone and James H. Brock, Jr., or any one or both of
them, attorneys and proxies of the undersigned, each with full power of
substitution, to vote on behalf of the undersigned at the Annual Meeting of
Shareholders of INDUSTRIAL HOLDINGS, INC. to be held at the Company's principal
offices at 7135 Ardmore, Houston, Texas 77054, on June 28, 1996, at 10:00 a.m.
(Houston time), and at any adjournments of said meeting, all of the shares of
common stock in the name of the undersigned or which the undersigned may be
entitled to vote.
The Board of Directors recommends a vote FOR the proposals on the reverse
side hereof and if no specification is made, the shares will be voted for such
proposals.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders and the Proxy Statement furnished herewith.
(Continued and to be dated and signed on the reverse side)
<TABLE>
<S> <C> <C> <C>
1. Election of Class II FOR all nominees WITHHOLD AUTHORITY to vote *EXCEPTIONS [ ]
Directors listed below [ ] for all nominees listed below [ ]
</TABLE>
Nominees: William J. Argeroplos and John P. Madden
(INSTRUCTIONS; TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
*Exceptions _______________________________________________________________
2. In their discretion, on such other matters as may properly come before the
meeting; hereby revoking any proxy or proxies heretofore given by the
undersigned.
CHANGE OF ADDRESS OR
COMMENTS MARK HERE [ ]
Signature should agree with name
printed hereon. If stock is held in the
name of more than one person. EACH
joint owner should sign. Executor,
administrator, trustees, guardians, and
attorneys should indicate the capacity
in which they sign. Attorneys should
submit powers of attorney.
Dated---------------------------, 1996
--------------------------------------
Shareholder's Signature
--------------------------------------
Shareholder's Signature
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK. [X]
(PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PREPAID
ENVELOPE.)
