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) MARCH 29, 1997
INDUSTRIAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 76-0289495
(State of other jurisdiction 1-9580 (IRS Employer
of incorporation) (Commission File Number) 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
(a) ACQUISITION OF MANIFOLD VALVE SERVICES, INC.
On March 29, 1997, Industrial Holdings, Inc., a Texas corporation
(the "Company") signed a definitive purchase agreement for the acquisition of
all the capital stock of Manifold Valve Services, Inc. ("MVS"), a Delaware
Corporation. The stock purchase agreement is by and among the Company and
Catalyst Energy Services, Inc. (the "Shareholder"), the sole shareholder of MVS.
The total purchase price (the "Purchase Price") of the capital
stock of MVS was 600,000 shares of Company common stock and a note in the amount
of $442,500, payable to the Shareholder. The Purchase Price was determined
through arm's length negotiations with the Shareholder. The Shareholder is a
wholly-owned subsidiary of Herlin Industries, Inc. whose majority shareholder is
St. James Capital Partners ("St. James"). St. James provided a portion of the
funding to the Company in connection with two previous acquisitions and in
February 1997, the President of St. James was appointed to the Board
of Directors of the Company to complete the unexpired term of a resigning board
member.
MVS, with revenues of $6.4 million in 1996, sells and repairs
high pressure valves that are used primarily in oil and gas drilling
applications. MVS is located in Jennings, Louisiana.
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 MVS. Therefore, the required
financial statements will be filed as soon as they are
available and in any event within seventy-five 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 MVS. Therefore, the
required pro forma financial information will be filed as
soon as they are available and in any event within
seventy-five days after the consummation of the
acquisition.
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EXHIBITS
2.1 Purchase Agreement by and among Industrial Holdings, Inc. (the
"Company") and Catalyst Energy Services, Inc. (the "Shareholder").
10.1 Note Payable to the Shareholder in the amount of $442,500.
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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: April 14, 1997
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EXHIBIT INDEX
EXHIBIT NUMBER AND DESCRIPTION PAGE
2.1 Purchase Agreement by and among Industrial Holdings, Inc. (the
"Company") and Catalyst Energy Services, Inc. (the "Shareholder") Ex-1
10.1 Note Payable to the Shareholder in the amount of $442,500. Ex-2
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") executed March 29, 1997
but is effective for all purposes as of March 1, 1997, by and between INDUSTRIAL
HOLDINGS, INC., a Texas corporation, or its assigns (the "Purchaser"), and
CATALYST ENERGY SERVICES, INC., a Delaware corporation ("Catalyst"), being the
sole shareholder of MANIFOLD VALVE SERVICES, INC., a Delaware corporation
("MVS").
W I T N E S S E T H:
WHEREAS, Catalyst is the owner of one hundred (100%) percent of the
issued and outstanding shares of capital stock of MVS (herein collectively
referred to as the "MVS Shares"); and
WHEREAS, pursuant to that certain Stock Purchase Agreement dated
November 18, 1996 (the "11/18 Agreement"), which 11/18 Agreement was effective
as of December 5, 1996 (the "Effective Date of the 11/18 Agreement"), Herlin
Industries, Inc., a Delaware corporation ("Herlin") acquired ninety-eight
percent (98%) of the issued and outstanding capital stock of Catalyst; and
WHEREAS, in the 11/18 Agreement, certain representations and warranties
were made to Herlin by the sellers of the Catalyst shares (the "Prior Catalyst
Owners") regarding MVS for the period up to the Effective Date of the 11/18
Agreement (the "Prior Owners' MVS Representations and Warranties"); and
WHEREAS, Catalyst desires to sell all of the MVS Shares to the
Purchaser, and the Purchaser desires to purchase the MVS Shares, all upon the
terms and conditions set forth herein; and
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 MVS SHARES. Catalyst hereby sells,
assigns and conveys to the Purchaser, free and clear of all security interests,
pledges, liens, charges and encumbrances, all the MVS Shares, and Catalyst
hereby transfers and delivers to the Purchaser contemporaneous with the
execution of this Agreement, the certificates evidencing the MVS Shares, duly
endorsed in blank or accompanied by stock powers duly executed in blank. The
Purchaser hereby purchases and accepts the MVS Shares for the consideration set
forth in Section 2 hereof.
Section 2. PURCHASE PRICE. The purchase price for the MVS Shares paid to
Catalyst by the Purchaser contemporaneous with the execution of this Agreement
is as follows:
(a) Catalyst shall receive, as partial payment of the Purchase
Price, six hundred thousand (600,000) shares of Purchaser's Common
Stock, $0.01 par value per share (the "IHI Stock").
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(b) the sum of Four Hundred Forty-two Thousand Five Hundred and
No/100 Dollars ($442,500.00) shall be evidenced and paid in accordance
with the terms of a promissory note (the "Note"), payable to Catalyst,
such Note to be in substantially the form of EXHIBIT "A" attached hereto
be payable as follows: the Note shall be non-interest bearing and be
payable in six (6) equal monthly installments due on the fifteenth
(15th) day of each and every month during the term thereof and each
being in the amount of $73,750.00, commencing on May 1, 1997, with a
final payment being due and payable on October 1, 1997; the Note shall
be prepayable at any time by the Purchaser without notice, penalty or
fee.
Section 3. REPRESENTATIONS AND WARRANTIES OF CATALYST. Catalyst hereby
represents and warrants to Purchaser that:
Section 3.1. ORGANIZATION AND STANDING OF MVS. MVS is a
corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware, and has full corporate power
and authority to own and hold the properties and assets it now owns and
holds and to carry on its business as and where such properties and
assets are now owned or held and such business is now conducted. MVS is
duly licensed and qualified to do business as a foreign corporation in
those jurisdictions listed on SCHEDULE 3.1 hereto. SCHEDULE 3.1 hereto
contains complete and correct copies of the Articles of Incorporation
including any amendments thereto and By-Laws of MVS as in effect on the
date hereof.
Section 3.2. SUBSIDIARIES. MVS has no subsidiaries.
Section 3.3. CAPITAL STOCK. The authorized capital stock of MVS
consists of 10,000 shares of Common Stock, $0.01 par value, of which, on
the date of this Agreement 10,000 are validly issued and outstanding,
fully paid and nonassessable, one hundred (100%) percent of which are
owned by Catalyst, free and clear of all liens and encumbrances. MVS
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 unaudited
financial statements of MVS have been delivered to the Purchaser and
are attached hereto as SCHEDULE 3.4:
(a) the balance sheet of MVS as of December 31, 1996 (the
"Year-end Balance Sheet") and the related statements of income
and retained earnings and cash flows for the year then ended
(such balance sheets, the related statements of income and
retained earnings and cash flows being hereinafter together
referred to as the "Year-end Financial Statements"); and
(b) the unaudited balance sheet of MVS as of February 28,
1997 (the "Interim Balance Sheet") and the related statement of
income for the two (2) month period then ended (such balance
sheet and related statements of income being hereinafter together
referred to as the "Interim Financial Statements").
The Year-end Financial Statements and the Interim Financial
Statements (collectively, the "Financial Statements") have been prepared
from the books and records of MVS using accounting
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principles applied by MVS on a basis consistent with preceding years and
throughout the period involved, and present fairly the financial
position of MVS as of the dates of such statements, subject with respect
to the Interim Financial Statements to year-end adjustments and to the
absence of a physical inventory count and certain statements, notes and
schedules.
The trade accounts and other receivables of MVS which are
classified as current assets on the Year-end Balance Sheet and the
Interim Balance Sheet (collectively, the "Balance Sheets") are bona fide
receivables, were acquired in the ordinary course of business, and
subject to the reserve for doubtful accounts, are believed to be good
and collectible, and are not subject to any factoring arrangement.
The inventories of MVS reflected on the Balance Sheets are valued
at the lower of cost or market. There have been no write-ups of
inventories or other assets.
MVS has no liabilities of the type and in amounts required to be
reflected or disclosed in a balance sheet (or notes thereto) 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 schedules hereto, and
(iv) those referred to in this Agreement or that exist by reason
of this Agreement.
Since the Effective Date of the 11/18 Agreement, MVS's books of
account have been kept in all material respects in the ordinary course
of business in a manner consistent with prior periods, the transactions
entered therein represent bona fide transactions, and the revenues,
expenses, assets and liabilities of MVS have been properly recorded in
such books in all material respects.
Section 3.5. TAX MATTERS. MVS 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 MVS's
business, assets and employees, and has paid and discharged all Taxes
related to the assets or the business of MVS for the periods covered by
such returns shown thereon to be due. MVS has made available to the
Purchaser, to the extent requested by the Purchaser, all Tax reports and
returns of MVS 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 MVS based upon MVS's tax structure.
Since the Effective Date of the 11/18 Agreement, no assessments of
deficiencies have been made against MVS, 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 MVS for any taxable year are presently
pending. In the event that after the Effective Date, a deficiency is
determined in the amount of Federal, state or local tax payable by MVS,
which deficiency relates to periods prior to the Effective Date, then in
that event, Catalyst, in the manner set forth in Section 9 hereof, shall
be fully responsible for and shall
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indemnify and hold the Purchaser and MVS harmless from the payment of
any such deficiency, tax liability, penalty, interest, loss, costs,
expenses or claim (including attorney and accountant fees) with respect
thereto.
MVS has not received notice of any Tax deficiency outstanding,
proposed or assessed against or allocable to MVS, nor has MVS executed
any waiver of any statute of limitations on the assessment or collection
of any Tax.
Section 3.6. ACTS SUBSEQUENT TO THE EFFECTIVE DATE OF 11/18
AGREEMENT. Since the Effective Date of the 11/18 Agreement, MVS 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 subject to, any obligation or liability (absolute or
contingent) except in the ordinary course of business;
(c) purchased or redeemed any shares of its capital
stock;
(d) 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 MVS
(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 MVS
with or into another corporation;
(e) suffered any material losses or waived any rights of
material value;
(f) 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;
(g) 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;
(h) 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;
(i) 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 MVS;
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(j) experienced any significant labor trouble;
(k) 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 MVS; or
(l) taken any action, or permitted any non-action, which
would cause the material inaccuracy of any of the Prior Owner's
MVS Representations and Warranties.
Section 3.7. LITIGATION AND PROCEEDINGS. There are no actions,
suits or proceedings pending or, to the knowledge of Catalyst,
threatened against or affecting MVS, which involve the possibility of
any judgment or liability not fully covered by casualty or liability
insurance.
Section 3.8. ENVIRONMENT AND HEALTH.
(a) Since the Effective Date of the 11/18 Agreement, (i)
the real estate and improvements thereon owned and/or leased by
MVS located at I-10 Service Road South, Jennings, LA 70546
(hereinafter referred to as the "Real Estate") and its existing
uses comply, and (ii) MVS 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 MVS'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, which violations
would cause a material adverse effect to the business,
properties, assets or condition, financial or otherwise, of MVS.
(b) Since the Effective Date of the 11/18 Agreement, MVS
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
material compliance with all applicable environmental, health or
safety statutes, ordinances, orders, rules, regulations and
requirements.
(c) To the best of Catalyst's knowledge, 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, nor has MVS
received any notice of any of the same.
(d) Since the Effective Date of the 11/18 Agreement, and
except in compliance with all applicable environmental health or
safety statutes, ordinances, rules or regulations, no hazardous
or toxic materials, 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 MVS, nor has the Real Estate been used at any time by MVS as a
landfill or a waste disposal site. No asbestos, urea formaldehyde
or polychlorinated biphenyls are present on the Real Estate. To
the best of Catalyst's knowledge, there have never been any
underground storage tanks located at the Real Estate.
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(e) Since the Effective Date of the 11/18 Agreement, no
notices of any violation of any of the matters referred to in
subsections (a) through (d) of this Section 3.11 relating to Real
Estate or its use have been received by MVS. To the best of
Catalyst's knowledge, 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 there is no basis for the institution of filing of any
such lawsuit, claim, proceeding or investigation.
(f) Since the Effective Date of the 11/18 Agreement, no
employee of MVS has submitted a claim to MVS 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
MVS's business or present at the place of business of MVS.
Section 3.9. INSURANCE COVERAGE. Since the Effective Date of the
11/18 Agreement, MVS has maintained 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 are generally maintained
for comparable businesses and properties, and valid policies for such
insurance are now duly in force.
Section 3.10. LICENSES, PERMITS AND AUTHORIZATIONS. Since the
Effective Date of the 11/18 Agreement, MVS'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 3.11. AMERICANS WITH DISABILITIES ACT. Since the
Effective Date of the 11/18 Agreement, MVS has not received notice of
any violation by MVS, and MVS is not currently 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 3.12. GUARANTEES, ETC. BY MVS. Since the Effective Date
of the 11/18 Agreement, MVS 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 3.13. OSHA. Since the Effective Date of the 11/18
Agreement, MVS has not received notice of any violation by MVS, and MVS
is not currently 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 3.14. ABSENCE OF ADVERSE AGREEMENTS. Since the Effective
Date of the 11/18 Agreement, MVS has not been 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 MVS.
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Section 3.15. NO DEFAULTS. Since the Effective Date of the 11/18
Agreement, MVS has not been 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 MVS is a party or by which MVS
or its assets may be bound, or under any provision of MVS's Articles of
Incorporation or By-Laws (or comparable instruments).
Section 3.16. 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 MVS, 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 MVS is a party or by which its properties may be bound.
Section 3.17. BOOKS AND RECORDS. The books and records of MVS 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 MVS.
Section 3.18. TITLE TO MVS SHARES AND AUTHORITY. Catalyst has
valid and marketable title to the MVS Shares, free and clear of any
security interests, pledges, liens or similar encumbrances, and Catalyst
has full right, power and authority and due authorization to sell and
transfer such MVS Shares hereunder, and upon the delivery of and payment
for such MVS Shares Catalyst 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 Catalyst, enforceable in
accordance with its terms.
Section 3.19. DISCLOSURE. Neither this Agreement, the Schedules
attached hereto, nor any other document furnished by MVS or Catalyst 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 MVS uniquely) known
to Catalyst 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 MVS.
Section 3.20. BROKERS. Catalyst has no outstanding claims against
it for the payment of any broker's or finder's fees in connection with
the origin, negotiation, execution or performance of this Agreement.
Section 3.21. CORPORATE PROCEEDINGS OF CATALYST. The execution,
delivery and performance of this Agreement has been authorized by the
Board of Directors of Catalyst, and this Agreement constitutes the valid
and legally binding obligation of Catalyst, enforceable in accordance
with its terms.
Section 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The
Purchaser represents and warrants to and agrees with Catalyst that:
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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. Purchaser has no outstanding claims against
it for the payment of any broker's or finder's fees in connection with
the origin, negotiation, execution or performance of this Agreement.
Section 4.5. REGARDING THE IHI STOCK.
(a) The IHI Stock described in Section 2(a) shall be issued in
compliance with Regulation D of the Securities Act of 1933, and
Catalyst hereby agrees to comply with Regulation D and to execute
and deliver such investment letters and other instruments as the
Purchaser's counsel shall reasonably request to insure compliance
with Regulation D. All shares of the IHI Stock issued to Catalyst
pursuant to this subsection shall be stamped or otherwise
imprinted with a legend in substantially the following form: "The
shares of Common Stock represented by this certificate have not
been registered under the Securities Act of 1933, as amended, or
the Securities Act of the State of Texas. They may not be offered
for sale, sold, transferred, pledged or otherwise disposed of,
unless (i) they are registered under the Securities Act of 1933,
as amended, or (ii) if the sale or transfer of such shares is
exempt from the registration provisions of the Securities Act of
1933, as amended." Purchaser shall use its best efforts to file
or cause to be filed a Registration Statement on Form S-3 with
the Securities and Exchange Commission (the "Registration
Statement") on or before June 1, 1997, which Registration
Statement shall include the IHI Stock.
(b) From the Effective Date of this Agreement through the end of
the twenty-four (24) month period after the Registration
Statement's Effective Date (the "Put Period"), Catalyst shall
have the right (the "Put"), exercisable at any time during the
Put Period, to require the Purchaser to purchase, and the
Purchaser shall be obligated to purchase from Catalyst any or all
of the IHI Stock at a price equal to $10.00 per share.
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(c) In the event Catalyst exercises the Put, the Purchaser shall
have the obligation to purchase such shares of the IHI Stock as
specified in a written notice delivered by Catalyst to the
Purchaser in accordance with the provisions of subparagraph (e)
below.
(d) The Purchase Price for the IHI Stock to be purchased by the
Purchaser hereunder upon Catalyst's exercise of the Put shall be
paid in cash.
(e) The closing of the purchase and sale of the IHI Stock upon
Catalyst's exercise of the Put pursuant to this Section 4.5 shall
take place at the offices of Purchaser, 7135 Ardmore, Houston,
Texas 77054, on a business day mutually agreed upon by the
parties not less than ten (10), nor more than fifteen (15)
business days after receipt of the notice referred to in
subparagraph (c) of this Section 4.5 (the "Closing"). At the
Closing, the Purchaser shall deliver to Catalyst immediately
available funds in the amount of the Purchase Price, and Catalyst
shall deliver to the Purchaser a certificate or certificates
evidencing such shares of the IHI Stock together with stock
powers duly executed in blank by Catalyst attached to such
certificate(s).
(f) The parties hereto agree and represent to each other that no
commission, brokerage or finder's fee or other like payment with
respect to this Section 4.5 or the transactions contemplated
hereby is due or payable by any party hereto to any person. The
Purchaser will pay all fees and expenses incurred by it and
Catalyst in connection with the transactions contemplated by this
Section 4.5, including fees and expenses of counsel, accountants,
auditors and other independent parties engaged by the parties
hereto.
Section 5. EFFECTIVE DATE. The Effective Date of this Agreement shall be
effective as of 12:01 a.m. on the Effective Date.
Section 6. CATALYST'S DELIVERIES. Contemporaneous with the execution of
this Agreement, Catalyst shall deliver to the Purchaser the following:
(a) STOCK CERTIFICATES. The certificates evidencing the MVS
Shares, duly endorsed in blank, or accompanied by stock powers duly
executed in blank.
(b) RESIGNATIONS. The resignations of those officers and
directors of MVS as may be requested by the Purchaser.
(c) CORPORATE RECORDS. The minute books, stock certificate books,
corporate seals and other corporate books, records, data and papers of
MVS.
(d) AGREEMENT OF HERLIN. The agreement of Herlin, dated the
Effective Date, in the form attached as EXHIBIT "B" to this Agreement,
to pursue, on behalf of and at the request of Purchaser, in accordance
with the terms of Article X of the 11/18 Agreement, the Prior Catalyst
Owners for indemnification for any damages, penalties, losses,
deficiencies, costs, expenses, obligations, fines, expenditures, claims
and liabilities, including counsel fees and expenses of investigation,
defending and prosecuting litigation, which are incurred by Purchaser as
a result of
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any breach or misrepresentation of any of the Prior Catalyst Owners' MVS
Representations and Warranties in the 11/18 Agreement.
Section 7. THE PURCHASER'S DELIVERIES. Contemporaneous with the
execution of this Agreement, the Purchaser shall deliver, or cause to be
delivered, to Catalyst:
(a) PROMISSORY NOTE. The Promissory Note in accordance with the
provisions of Section 2 hereof.
(b) IHI STOCK. The IHI Stock in accordance with the provisions of
Section 2 hereof.
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 Catalyst or the Purchaser pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be deemed
representations and warranties made by Catalyst 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 April 5, 1998;
provided, however, that any such representation, warranty, covenant,
agreement or undertaking as to which a bona fide claim shall have been
asserted during such survival period shall continue in effect until such
time as such claim shall have been resolved in accordance with the terms
of this Agreement.
Section 9. INDEMNIFICATION BY CATALYST AND RELATED MATTERS.
Section 9.1. INDEMNIFICATION BY CATALYST. Subject to the
limitations set forth in Section 9.3 below, Catalyst agrees to defend,
indemnify and hold harmless the Purchaser and MVS, and their respective
successors and assigns, from, against and in respect of any and all loss
or damage suffered by MVS or the Purchaser resulting from, caused by,
arising out of, or in any way relating to any misrepresentation, breach
of warranty, or nonfulfillment of any agreement or covenant on the part
of Catalyst under this Agreement or any misrepresentation in or omission
from any list, schedule, certificate, or other instrument furnished or
to be furnished to the Purchaser by Catalyst or MVS pursuant to the
terms of this Agreement, together with 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. PROCEDURE FOR MAKING CLAIMS. If and whenever the
Purchaser desires to claim indemnification by Catalyst pursuant to the
provisions of Section 9, the Purchaser shall promptly deliver to
Catalyst 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 MVS, 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
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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 Catalyst shall relieve
Catalyst from liability only if he is prejudiced thereby. Catalyst shall
have the right to defend any claim by a third party at the expense of
Catalyst. The Purchaser and MVS, as the case may be, shall provide to
Catalyst prompt and complete disclosure of all pertinent information in
the possession of or available to the Purchaser or MVS 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. Catalyst, 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 MVS, nor
enter into any settlement (except the written consent of the Purchaser
and MVS) which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to the Purchaser and MVS 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 MVS 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 9.3. THRESHOLD AND AGGREGATE LIMITATIONS ON
INDEMNIFICATION. Notwithstanding anything to the contrary contained in
Section 9.1, Catalyst shall not be obligated to indemnify the Purchaser
or MVS, or their respective successors and assigns, unless the aggregate
amount of such loss, damage or cost referred to in Section 9.1 ("Loss")
for which Catalyst would, but for the provisions of this Section 9.3, be
liable exceeds, on an aggregate basis, $50,000.00 at which time
Catalyst's indemnification obligation shall be for the entire amount in
excess of $50,000.00; provided however, that such $50,000.00 threshold
amount shall not limit any Catalyst's liability for a knowing and
intended breach of a representation, warranty or covenant of such party
hereunder. The liability of Catalyst for breach of its representations,
warranties, covenants and agreements hereunder shall be limited to
$150,000.00. Provided however, the threshold and aggregate limitations
on indemnification by Catalyst set forth in this Section 9.3 shall not
be applicable to the obligations of Herlin to pursue, on behalf of and
for the monetary benefit of Purchaser, the Prior Catalyst Owners for
indemnification under the 11/18 Agreement as set forth in that certain
letter agreement executed contemporaneously herewith pursuant to Section
6(d) above. Likewise, no sums claimed or received by Purchaser through
Herlin from the Prior Catalyst Owners pursuant to the Letter Agreement
shall be subject to the threshold and aggregate limitations set forth
above; it being understood, however, that the 11/18 Agreement contains,
within its indemnification provisions, certain threshold and aggregate
limitations on indemnification which may be applicable to claims made by
Herlin on behalf of and for the benefit of Purchaser.
Section 10. INDEMNIFICATION BY THE PURCHASER. Purchaser, from and after
the Effective Date, agrees to defend, indemnify and hold harmless Catalyst, and
its and assigns, from, against and in respect of any and all loss or damage
suffered by Catalyst resulting from, caused by, arising out of, or in any way
relating to any misrepresentation, breach of warranty, or nonfulfillment of any
agreement or covenant on the part of the Purchaser under this Agreement or any
misrepresentation in or omission from any list, schedule, certificate, or other
instrument furnished or to be furnished to Catalyst by the Purchaser pursuant to
the terms of this Agreement, together with 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. The liability of the Purchaser for breach of its representations,
warranties, covenants and agreements hereunder shall be limited to $150,000.00
(it being specifically understood that Purchaser's
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liability for any breach of or nonfulfillment of any of its agreements or
covenants hereunder is excluded form such limitation).
Section 11. EXPENSES. Catalyst and the Purchaser shall pay its 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.
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):
(a) if to Catalyst, to Catalyst Energy Services, Inc., c/o 1980
Post Oak Blvd., Suite 2030 Houston, Texas 77056, Attn: Mr.
Charles Underbrink; and
(b) if to the Purchaser, to Industrial Holdings, Inc., 7135
Ardmore Street, Houston, TX 77054, Attention: Robert E. Cone,
Chief Executive Officer; with a copy to: Lawrence J. Fontana,
Stumpf Falgout Craddock & Massey, 1400 Post Oak Blvd., Suite
400, Houston, Texas 77056.
Section 13. MISCELLANEOUS.
Section 13.1. FURTHER ASSURANCES. Catalyst hereby agrees 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 MVS Shares to the Purchaser, and to effectuate the terms,
agreements and covenants contained in this Agreement.
Section 13.2. ASSIGNMENT. Purchaser may assign its rights and
obligations under this Agreement to any of its affiliates. This
Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns.
Section 13.3. 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 13.4. AMENDMENT. This Agreement may be amended only by an
instrument in writing executed by the parties hereto.
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Section 13.5. 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 13.6. 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.
Section 13.7. U.S. DOLLARS. All monetary amounts referred to in
this Agreement are stated in U.S. Dollars.
Section 13.8. 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 13.9. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
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 E. CONE
Robert E. Cone, President
and Chief Executive Officer
CATALYST:
CATALYST ENERGY SERVICES, INC.
By: /S/JOHN L. THOMPSON
Name:John L. Thompson
Chairman
EXHIBIT "A" - form of Promissory Note EXHIBIT "B" - form of agreement with
Herlin
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EXHIBIT 10.1
PROMISSORY NOTE
$442,500.00 Houston, Texas Effective March 1, 1997
FOR VALUE RECEIVED, after date, without grace, in the manner, on the
dates and in the amount herein stipulated, INDUSTRIAL HOLDINGS, INC., a Texas
corporation (the "Maker") promises to pay to the order of CATALYST ENERGY
SERVICES, INC., a Delaware corporation (the "Payee", together with any and all
subsequent owners and holders of this Note), at 1980 Post Oak Boulevard, Suite
2030, Houston, Texas 77056, or such other place as the Payee shall designate in
writing to the Maker, which at the time of payment is legal tender of the United
States of America for the payment of public and private debts, the sum of FOUR
HUNDRED FORTY-TWO THOUSAND FIVE HUNDRED AND NO/100 DOLLARS ($442,500.00). This
Note shall be non-interest bearing.
This Note shall be due and payable in monthly installments of
Seventy-Three Thousand Seven Hundred Fifty and No/100 DOLLARS ($73,750.00) each,
payable on the fifteenth (15th) day of each and every calendar month, beginning
on May 1, 1997, and continuing regularly thereafter until October 1, 1997, when
the entire amount then remaining unpaid, shall be due and payable. If any
payment on this Note shall become due on a day which is not a Business Day (as
hereinafter defined), such payment shall be made on the next succeeding Business
Day. As used herein, the term "Business Day" shall mean any day other than a day
on which commercial banks in the State of Texas are authorized to be closed. The
Maker shall have the privilege to prepay at any time, and from time to time, all
or any part of this Note, without notice, penalty or fee. Such advances or
prepayments will be applied to the payment of the installments in the inverse
order of maturity.
Notwithstanding anything in this Note to the contrary, in the event of
the Maker's failure to pay any installment payment when due, the maturity of
this Note may be accelerated by the Payee only after notice of such default
shall have been sent to the Maker and such default shall not have been cured
within fifteen (15) days following the date such notice is given or served by
the Payee as provided below.
In the event default is made in the prompt payment of this Note when due
or declared due, and the same is placed in the hands of an attorney for
collection, or suit is brought on same, or the same is collected through any
Probate, Bankruptcy Court, or any judicial proceeding whatsoever, then the Maker
agrees and promises to pay the Payee's reasonable attorney's fees.
All notice required or permitted under this Note shall be in writing and
shall be deemed to have been sufficiently given or served for all purposes when
presented personally or deposited with the United States Postal Service, postage
prepaid, certified mail, return receipt requested, to the Maker at the address
set forth below, or at such other address of which the Maker shall have notified
the President or any Vice President of the Payee in writing at least thirty (30)
days prior to the date of the Payee giving such notice. Where appropriate, any
pertinent noun, verb or pronoun shall be construed and interpreted to include
both the proper number and gender. This Note shall not be renewed, extended, or
modified except by a written instrument evidencing the same.
ADDRESS: INDUSTRIAL HOLDINGS, INC.
7135 Ardmore
Houston, Texas 77054 By:/S/ROBERT E. CONE
Robert E. Cone, President
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