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) FEBRUARY 9, 1998
INDUSTRIAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
1-9580
(Commission File Number)
TEXAS 76-0289495
(State of other jurisdiction (IRS Employer Identification No.)
of incorporation)
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 OR DISPOSITION OF ASSETS
(a) ACQUISITION OF MINORITY INTEREST IN BUSINESS OF PHILFORM, INC.
On February 9, 1998, Industrial Holdings, Inc., a Texas corporation
(the "Company") acquired all the capital stock of Philform, Inc., a Michigan
corporation ("Philform"), (the "Acquisition"), pursuant to the terms of a stock
purchase agreement by and among the Company and Michael Powell, Phil Shaltz,
Phil Miller, and Michael Shirkey (the "Shareholders"), the shareholders of
Philform. Philform manufactures and sells forming and fastening systems
primarily for manufacturing companies in the United States.
The purchase price ("Purchase Price") of the capital stock was 375,692
shares of the Company's common stock (the "Common Stock"). The Purchase Price
was determined through arm's length negotiations between the Company and the
Shareholders, none of which had a pre-existing relationship with the Company or
any of the Company's affiliates.
Simultaneously and as a condition for the closing of the Acquisition on
February 9, 1998, the Company acquired for 44,081 shares of Common Stock an
undivided 8% interest in equipment used in the operations of Philform (the
"Equipment") from SMS Industries, Inc., a Michigan corporation ("SMS"). OF
Acquisition L.P., a Texas limited partnership (the "Partnership") acquired an
undivided 92% interest in the Equipment. Philform contributed the activities of
Philform and the 8% interest in the equipment to the Partnership in exchange for
a 49% limited partnership interest in the operating income of the Partnership.
The limited partnership interest was determined based on the relative fair
market value of assets (including intangibles) contributed to the Partnership.
As a result, the business and operations of Philform previously conducted by
Philform are now conducted through the Partnership.
The Partnership's general partner is St. James Management, L.L.C. (the
"General Partner"). The General Partner is owned by St. James Capital Corp., the
president of which is John Thompson, a director of the Company.
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EXHIBITS
2.1 Stock Purchase Agreement by and among Industrial Holdings, Inc. and
Michael Powell, Phil Shaltz, Phil Miller, Michael Shirkey and
Philform, Inc.
2.2 Agreement of Limited Partnership of OF Acquisition L.P.
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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: February 10, 1998
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INDEX TO EXHIBITS
2.1 Stock Purchase Agreement by and among Industrial Holdings, Inc. Ex-1
and Michael Powell, Phil Shaltz, Phil Miller, Michael Shirkey
and Philform, Inc.
2.2 Agreement of Limited Partnership of OF Acquisition L.P. Ex-2
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
INDUSTRIAL HOLDINGS, INC.
MICHAEL POWELL
PHIL SHALTZ
PHIL MILLER
MICHAEL SHIRKEY
AND
PHILFORM, INC.
AS OF JANUARY 26, 1998
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TABLE OF CONTENTS
ARTICLE I
PURCHASE AND SALE OF TARGET SHARES; CLOSING
1.1 PURCHASE AND SALE OF TARGET SHARES.....................................1
1.2 PURCHASE PRICE AND PAYMENT AT CLOSING..................................1
1.3 CLOSING; CLOSING DATE..................................................1
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE SELLERS
2.1 ORGANIZATION, STANDING AND QUALIFICATION...............................2
2.2 VALIDITY OF AGREEMENT..................................................2
2.3 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICT WITH INSTRUMENTS.........2
2.4 CAPITALIZATION.........................................................2
2.5 SUBSIDIARIES...........................................................3
2.6 TARGET SHARES..........................................................3
2.7 FINANCIAL STATEMENTS...................................................3
2.8 ABSENCE OF CHANGES.....................................................3
2.9 LIABILITIES............................................................4
2.10 TITLE TO ASSETS; ENCUMBRANCES..........................................5
2.11 ACCOUNTS RECEIVABLE; INVENTORY.........................................5
2.12 PROPERTIES, CONTRACTS, PERMITS AND OTHER DATA..........................5
2.13 TAXES AND RETURNS......................................................6
2.14 LITIGATION.............................................................6
2.15 LICENSES, PERMITS, AUTHORIZATIONS, ETC.................................7
2.16 INSURANCE..............................................................7
2.17 PATENTS, TRADEMARKS, ETC...............................................7
2.18 COMPLIANCE.............................................................7
2.19 ENVIRONMENTAL, HEALTH AND SAFETY COMPLIANCE............................7
2.20 LABOR MATTERS..........................................................8
2.21 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS................................9
2.22 TRANSACTIONS WITH AFFILIATES..........................................10
2.23 PRODUCT LIABILITY.....................................................10
2.24 INVESTMENT REPRESENTATIONS............................................11
2.25 DISCLOSURES...........................................................11
2.26 CERTAIN FEES..........................................................12
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 DUE ORGANIZATION; GOOD STANDING AND POWER.............................12
3.2 AUTHORIZATION AND VALIDITY OF AGREEMENT...............................12
3.3 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICT WITH INSTRUMENTS........12
3.4 INVESTMENT............................................................12
3.5 CERTAIN FEES..........................................................12
ARTICLE IV
COVENANTS; ACTIONS PRIOR TO CLOSING
4.1 ACCESS TO INFORMATION.................................................13
4.2 CONDUCT OF THE BUSINESS...............................................13
4.3 FURTHER ACTIONS.......................................................13
4.4 NOTIFICATION..........................................................14
4.5 NO INCONSISTENT ACTION................................................14
4.6 ACQUISITION PROPOSALS.................................................14
4.7 PUBLIC ANNOUNCEMENTS..................................................14
ARTICLE V
CONDITIONS TO CLOSING
5.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF ALL PARTIES....................14
5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER......................15
5.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS................16
ARTICLE VI
COVENANTS; ACTIONS SUBSEQUENT TO CLOSING
6.1 FURTHER ASSURANCES....................................................17
6.2 COMPLIANCE WITH RULE 144(C)...........................................17
ARTICLE VII
TERMINATION
7.1 GENERAL...............................................................17
7.2 NO LIABILITIES IN EVENT OF TERMINATION................................17
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ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY THE SELLERS........................................17
8.2 INDEMNIFICATION BY PURCHASER..........................................18
8.3 INDEMNIFICATION PROCEDURES............................................18
8.4 LIMIT ON INDEMNIFICATION LIABILITY....................................19
8.5 TIME LIMITS ON LIABILITY..............................................19
ARTICLE IX
GENERAL PROVISIONS
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS................19
9.2 PAYMENT OF CERTAIN FEES AND EXPENSES..................................19
9.3 NOTICES...............................................................19
9.4 SCHEDULES.............................................................20
9.5 PUBLICITY.............................................................20
9.6 ENTIRE AGREEMENT......................................................20
9.7 BINDING EFFECT; BENEFIT...............................................20
9.8 ASSIGNABILITY.........................................................20
9.9 SECTION HEADINGS; INDEX...............................................20
9.10 SEVERABILITY..........................................................21
9.11 COUNTERPARTS..........................................................21
9.12 APPLICABLE LAW........................................................21
9.13 DISPUTE RESOLUTION....................................................21
ARTICLE X
DEFINITIONS
10.1 DEFINED TERMS.........................................................22
10.2 CERTAIN ADDITIONAL DEFINED TERMS......................................23
EXHIBIT "A" - Allocation of IHI Shares Among Sellers
EXHIBIT "B" - Form of Non-Competition Agreement
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT"), is made and entered into
as of January 26, 1998, by and among MICHAEL POWELL, PHIL SHALTZ, PHIL MILLER
AND MICHAEL SHIRKEY, all residents of the State of Michigan, sometimes referred
to collectively as the "SELLERS"), PHILFORM, INC., a Michigan corporation (the
"TARGET"), and INDUSTRIAL HOLDINGS, INC., a Texas corporation ("PURCHASER").
W I T N E S S E T H:
WHEREAS, the Sellers own all of the issued and outstanding shares (the
"TARGET SHARES") of the capital stock of Target, which is engaged in the
business of the manufacture and sale of forming and fastening systems (the
"TARGET BUSINESS"); and
WHEREAS, the Sellers desire to sell to Purchaser and Purchaser desires to
acquire from the Sellers, all of the Target Shares, in consideration of the
delivery by Purchaser of the purchase price provided for herein, all upon the
terms and subject to the conditions hereinafter set forth; and
WHEREAS, Target joins in the execution of this Agreement for the purpose
of evidencing its consent to consummation of the foregoing transaction and for
the purpose of making certain representations and warranties to and covenants
and agreements with Purchaser.
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions of the parties
contained herein, it is hereby agreed as follows:
ARTICLE I
PURCHASE AND SALE OF TARGET SHARES; CLOSING
A. PURCHASE AND SALE OF TARGET SHARES. Subject to the terms and conditions
of this Agreement, at the Closing, the Sellers shall sell and deliver to
Purchaser and Purchaser shall purchase from Sellers all of the Target Shares,
free and clear of all Encumbrances. At the Closing, each of the Sellers shall
deliver to Purchaser certificates evidencing the Target Shares owned by such
Seller (which, in the aggregate, shall constitute all of the Target Shares),
duly endorsed for transfer or accompanied by duly executed stock powers.
B. PURCHASE PRICE AND PAYMENT AT CLOSING. The aggregate purchase price for
the Target Shares shall consist of the delivery at closing of 375,692 restricted
shares of Industrial Holdings, Inc. Common Stock (the "IHI SHARES"), allocated
to each of the Sellers as set forth on EXHIBIT A attached hereto.
Sellers acknowledge and agree that the allocation of the IHI Shares among
them as set forth on EXHIBIT A is the sole responsibility of the Sellers, and
Purchaser shall have no obligation or other responsibility with respect to such
allocation.
C. CLOSING; CLOSING DATE. The closing of the transactions provided for in
this Agreement (the "CLOSING") shall take place (i) at the offices of
Winegarden, Stedd, Haley, Lindholm & Robertson, P.L.C., 501 Citizens Bank Bldg.,
Flint, Michigan 48502, at 10:00 a.m., local time, on the later of (x) February
17, 1998, or (y) the third business day following the satisfaction or waiver
(subject to Applicable Law) of each of the conditions of the obligations of the
parties set forth in Article V, or (ii) at such other time or place or
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on such other date as the parties hereto shall agree. The date on which the
Closing is required to take place is herein referred to as the "CLOSING DATE."
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE SELLERS
The Company and the Sellers, jointly and severally, represent and warrant
to the Purchaser as follows:
A. ORGANIZATION, STANDING AND QUALIFICATION. The Target is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Michigan. The Target has the corporate power and authority to own,
lease and operate its respective assets and to conduct its respective business
as now conducted. The Target is duly authorized, qualified or licensed to do
business as a foreign corporation and is in good standing in each jurisdiction
in which their respective right, title or interest in or to any of their
respective assets, or the conduct of their respective business, requires such
authorization, qualification or licensing. The jurisdictions in which the Target
is qualified or licensed to do business, are set forth on SCHEDULE 2.1. No
actions or proceedings to dissolve the Target are pending. The Target has
delivered to the Purchaser true and complete copies of the minute books and
stock transfer books of the Target, each of which is accurate and complete.
B. VALIDITY OF AGREEMENT. This Agreement has been duly executed and
delivered by the Sellers and constitute a legal, valid and binding obligation of
each of them, enforceable against them in accordance with its terms, except as
the same may be limited by bankruptcy, insolvency or other similar laws
affecting creditors' rights generally and by general equity principles.
C. NO APPROVALS OR NOTICES REQUIRED; NO CONFLICT WITH INSTRUMENTS. Except
as described in SCHEDULE 2.3 hereto, the execution, delivery and performance of
this Agreement by the Sellers and the Target and the consummation by them of the
transactions contemplated hereby (i) will not violate (with or without the
giving of notice or the lapse of time or both) or require any consent, approval,
filing or notice under, any provision of any Applicable Law and (ii) will not
result in the creation of any Encumbrance on the Target Shares under, conflict
with, or result in the breach or termination of any provision of, or constitute
a default under, or result in the acceleration of the performance of the
obligations of the Sellers, the Target under, or result in the creation of an
Encumbrance upon any portion of the assets of the Target pursuant to, the
charter or by-laws of the Target, or any indenture, mortgage, deed of trust,
lease, licensing agreement, contract, instrument or other agreement to which the
Sellers or the Target are a party or by which any of them or any of their assets
is bound or affected.
D. CAPITALIZATION. Target's authorized capital consists of 85,000 shares
of Class A Common Stock, $1.00 par value per share, of which 50,000 are issued
and outstanding and 15,000 shares of non-voting Class B Common Stock, $1.00 par
value per share, of which 5,000 are issued and outstanding. The record and
beneficial ownership of such shares is as set forth on SCHEDULE 2.4 hereto. All
of the issued and outstanding shares of each of the Target have been duly
authorized and validly issued, are fully paid and nonassessable, have not been
issued in violation of any preemptive or similar rights, and have been issued in
compliance with all Applicable Laws (including federal and state securities
laws). The Target Shares constitutes all shares of the outstanding capital stock
of Target. Except as set forth on SCHEDULE 2.4, there are outstanding (i) no
shares of capital stock or other voting securities of the Target, no securities
of the
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Target convertible into or exchangeable for shares of the capital stock or other
voting securities of the Target, (iii) no options, warrants or other rights to
acquire from the Target, and no obligation of the Target to issue or sell, any
shares of its capital stock or other voting securities or any securities of the
Target convertible into or exchangeable for such capital stock or voting
securities, (iv) no equity equivalents, interest in the ownership or earnings,
or other similar rights of or with respect to the Target, and (v) no shares of
any other entity owned by the Target. There are (and as of the Closing Date
there will be) no outstanding obligations of the Target to repurchase, redeem or
otherwise acquire any shares, securities, options, equity equivalents, interests
or rights.
E. SUBSIDIARIES. The Target does not have any Subsidiaries.
F. TARGET SHARES. Each Seller is the record and beneficial owner of, and
upon consummation of the transactions contemplated hereby Purchaser will
acquire, good, valid and marketable title to, the number of shares of Target
Shares set forth opposite the name of such Seller on SCHEDULE 2.4, free and
clear of all Encumbrances. None of the Seller's has entered into a shareholders'
agreement or any other agreement or arrangement regarding the Target Shares and
each of the Target Shares is transferable and assignable to Purchaser as
contemplated by this Agreement without the waiver of any right of first refusal
or the consent of any other party being obtained. There exists no preferential
right of purchase in favor of any person with respect of any of the Target
Shares or the Target Business or any of the assets of the Target.
G. FINANCIAL STATEMENTS. Set forth on SCHEDULE 2.7 are accurate and
complete copies of (i) each of the Target's audited consolidated balance sheets
as of December 31, 1996 and December 31, 1995, and the related audited
consolidated statements of income, stockholders' equity and cash flows for each
of the years then ended, and the notes and schedules thereto, prepared in
conformity with GAAP, together with the unqualified reports thereon of Kuhl &
Schultz, P.C., independent public accountants (the "AUDITED FINANCIAL
STATEMENTS"), and (ii) each of the Target unaudited consolidated balance sheet
as of October 31, 1997 (the "LATEST BALANCE SHEET"), and the related unaudited
statements of income, stockholders' equity and cash flows for the ten month
period then ended (together with the Latest Balance Sheet, the "UNAUDITED
FINANCIAL STATEMENTS") (collectively, the "FINANCIAL STATEMENTS"). The Financial
Statements are true and correct, and are in accordance with the books and
records of the Target, and present fairly, accurately and completely the
financial condition of Target as of the dates, and for the periods, indicated,
and have been prepared in accordance with GAAP consistently applied.
H. ABSENCE OF CHANGES. Except as disclosed on SCHEDULE 2.8, since the date
of the Latest Balance Sheet, there has not been nor will there be any change in
the assets, liabilities, financial condition, or operations of the Target from
that reflected in the Financial Statements, other than changes in the ordinary
course of business, none of which individually or in the aggregate have had or
will have a material adverse effect on such assets, liabilities, financial
condition, or operations. Without limiting any of the foregoing, since the date
of the Latest Balance Sheet, except as disclosed on SCHEDULE 2.8, the Target has
not:
1. incurred or become subject to, or agreed to incur or become
subject to, any obligation or liability, absolute or contingent, except
current liabilities incurred in the ordinary course of business;
2. mortgaged, pledged, or subjected to any Encumbrance (or agreed to
do so with respect to) any of their assets, or discharged or satisfied any
Encumbrance, or paid or satisfied any obligation or liability other than
in the ordinary course of business and consistent with past practice;
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3. sold or transferred, or agreed to sell or transfer, any of their
assets, or cancelled or agreed to cancel, any debts due them or claims
therefor, except, in each case, for full consideration and in the ordinary
course of business;
4. engaged in any transactions adversely affecting the Target
Business or its assets or suffered any extraordinary losses or waived any
rights of substantial value not in the ordinary course of business;
5. purchased or agreed to purchase any securities, bonds, or any
other capital stock or assets of any other entity with cash or liquid
assets, or used cash or liquid assets to incur debts, for matters not
within the ordinary course of business or not for appropriate corporate
purposes;
6. increased any salaries or granted or agreed to grant, or paid, or
agreed to pay, any bonus, loan, incentive payment or other item of value
or made any other similar agreement, to or with any of its directors,
officers or agents except as compensation in the ordinary course of
business for appropriate services performed;
7. declared or paid any dividend or made any other distribution to
their shareholders;
8. made or authorized any capital expenditure of more than $25,000
in the aggregate;
9. made or agreed to make any changes in their articles of
incorporation, bylaws, or capital structure;
10. entered into any representative, distributorship, service,
installation, support and maintenance, agency or other similar agreement;
11. incurred or suffered any damage, destruction, or loss, whether
or not covered by insurance, materially affecting the Target Business or
any of their respective assets;
12. made or applied to make any change in accounting methods or
practices, including for tax purposes; or
13. entered into any agreement, commitment or understanding, whether
or not in writing, with respect to any of the foregoing.
I. LIABILITIES. Except as set forth in SCHEDULE 2.9, the Target has no
liabilities or obligations, either accrued, absolute, contingent, or otherwise
that may have a material adverse effect on the financial condition, results of
operations or prospects of the Target Business other than those (a) reflected or
reserved against in the Latest Balance Sheet or (b) incurred in the ordinary
course of business since date of the Latest Balance Sheet.
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J. TITLE TO ASSETS; ENCUMBRANCES. Except as set forth in SCHEDULE 2.10:
(a) The Target has good and indefeasible title to its assets,
whether real, personal or intangible, free and clear of all Encumbrances,
except as reflected in the Financial Statements and liens granted or
incurred by Seller in the ordinary course of its business or financing of
equipment, office space, furniture and computers in the ordinary course of
its business (all of which have been disclosed to the Purchaser in
writing);
(b) There are no parties in possession of any of the assets of the
Target other than personal property held by third parties in the
reasonable and ordinary course of business. The Target enjoys full, free
and exclusive use and quiet enjoyment of its assets and its rights
pertaining thereto. The Target enjoys peaceful and undisturbed possession
under all leases under which it is a lessee, and all such leases are
legal, valid and binding obligations of the Target, enforceable against it
in accordance with its terms; and
(c) The Target owns all of the assets used in connection with the
conduct of the Target Business.
K. ACCOUNTS RECEIVABLE; INVENTORY. All accounts receivable reflected on
the Latest Balance Sheet or on the accounting records of the Target as of the
Closing Date (collectively, the "ACCOUNTS RECEIVABLE") represent or will
represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business. Unless paid prior to the
Closing Date, the Accounts Receivable are or will be as of the Closing Date
current and collectible net of the respective reserve shown on the Balance Sheet
or on the accounting records of the Target as of the Closing Date (which
reserves are adequate and calculated consistently with past practice). Subject
to such reserves, each of the Accounts Receivable either has been or will be
collected in full, without any setoff. The inventories and work in progress
reflected on the Latest Balance Sheet and those items of inventory constructed
or acquired by the Target and the work performed by the Target after the date of
the Latest Balance Sheet, except to the extent disposed of or billed since such
date in the ordinary conduct of the business by the Target, are, in the case of
such inventory, in good, merchantable and usable condition, and, in the case of
such work in progress, represent work completed in accordance with the
requirements of any applicable contract, and, in each case, have been reflected
on the books of the Target in accordance with GAAP. Except as set forth on
SCHEDULE 2.11 hereto, all such inventories and work in progress are owned by the
Target free and clear of any Encumbrances.
L. PROPERTIES, CONTRACTS, PERMITS AND OTHER DATA.
1. SCHEDULE 2.12 hereto contains a complete and correct list of, and
summaries of all the material specifications and details of, all
contracts, contract proposals, outstanding bids, maintenance and service
agreements, purchase commitments for materials and other services, leases
under which the Target is a lessor or lessee and other agreements
pertaining to the Target Business to which the Target or an affiliate of
the Target is a party, the benefits of which are enjoyed in the Target
Business or to which any of the assets of the Target is subject;
2. SCHEDULE 2.12 hereto contains a complete and correct list of the
real estate owned and leased by the Target (the "REAL ESTATE"); and
3. SCHEDULE 2.12 hereto contains a complete and correct list of all
Permits relating to the development, use, maintenance or occupation of the
properties or Real Estate owned or leased
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by the Target or used in the operation of the Target Business (other than
sales and use tax Permits and franchise tax registrations).
True and complete copies of all documents (including all amendments
thereto) referred to in SCHEDULE 2.12 hereto have been delivered to
Purchaser. All rights, licenses, leases, registrations, applications,
contracts, commitments, Permits and other arrangements by the Sellers or
the Target referred to in SCHEDULE 2.12 are in full force and effect and
are valid and enforceable in accordance with their respective terms,
except where the failure to be in full force and effect and valid and
enforceable would not in the aggregate have an adverse effect on the
assets of the Target or on their respective results of operations. The
Target and its affiliates are not in breach or default in the performance
of any material obligation thereunder and to the best knowledge of the
Sellers, no event has occurred or has failed to occur whereby any of the
other parties thereto have been or will be released therefrom or will be
entitled to refuse to perform thereunder. Except as set forth in SCHEDULE
2.12 hereto, there are no contracts, agreements, licenses, Permits,
franchises or rights to which the Target or any affiliate of the Target is
a party which are material to the ownership of any of the assets of the
Target, or to the conduct of the Target Business as conducted by the
Target. Except as described on SCHEDULE 2.12 hereto, the Target has and
will have following the Closing, all licenses, Permits, consents,
approvals, authorizations, qualifications and orders of Governmental
Entities required for the conduct of the business as presently conducted.
There are no outstanding powers of attorney relating to or affecting the
Target. The Target is not a guarantor for or otherwise liable for any
liability or obligation (including indebtedness of any other person).
M. TAXES AND RETURNS. The Target and the Sellers have caused to be timely
filed with appropriate federal, state, local and other Governmental Entities all
Tax Returns required to be filed with respect to the Target or the conduct of
the Target Business and have paid, caused to be paid, or adequately reserved in
the Financial Statements all Taxes due or claimed to be due from or with respect
to such Tax Returns. Except as set forth on SCHEDULE 2.13, no extension of time
has been requested or granted with respect to the filing of any Tax Return or
payment of any Taxes, and no issue has been raised or adjustment proposed by the
IRS or any other taxing authority in connection with any of the Target's Tax
Returns, and there are no outstanding agreements or waivers that extend any
statutory period of limitations applicable to any federal, state or local Tax
Returns that include or reflect the use and operation of the Target or the
conduct of the Target Business. Except as set forth on SCHEDULE 2.13, neither
the Sellers nor the Target have received or have knowledge of any notice of
deficiency, assessment, audit, investigation, or proposed deficiency, assessment
or audit with respect to the Target or the conduct of the Target Business from
any taxing authority. The Target has not taken action which is not in accordance
with past practice that could defer any liability for Taxes from any taxable
period ending on or before the Closing Date to any taxable period ending after
such date.
N. LITIGATION. Except as described in SCHEDULE 2.14 hereto, (i) there is
no litigation, proceeding, claim or governmental investigation pending or, to
the knowledge of any of the Sellers or the Target, threatened seeking relief or
damages which, if granted, would adversely affect the Target or any of its
assets, or the ability of Purchaser to use and operate the assets of the Target
or which would prevent the consummation of the transactions contemplated by this
Agreement and (ii) neither the Sellers nor the Target has been charged with any
violation of or, to the knowledge of the Sellers, threatened with, a charge or
violation of, nor are the Sellers aware of any facts or circumstances that, if
discovered by third parties, could give rise to a charge or a violation of, any
provision of Applicable Law or regulation which charge or violation, if
determined adversely to either the Sellers or the Target, would adversely affect
the Target Business or the results of operations of the Target or that might
reasonably be expected to affect the right of Purchaser to own the Target Shares
or operate the Target Business after the Closing Date in substantially the
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manner in which it is currently operated. Neither the Target nor any director,
officer, employee or agent of the Target has, directly or indirectly, paid or
delivered any fee, commission or other sum of money or item of property however
characterized to any broker, finder, agent, governmental official or other
person, in any matter related to the Target Business which the Sellers, or any
director, officer, employee or agent of the Target knows or has reason to
believe to have been illegal under any Applicable Law.
O. LICENSES, PERMITS, AUTHORIZATIONS, ETC. The Target hold all of the
Permits of any type required to operate its business as presently conducted. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in any revocation,
cancellation, suspension or modification of any Permit.
P. INSURANCE. SCHEDULE 2.16 hereto sets forth a list and brief description
of the insurance policies relating to the insurable properties of the Target and
the conduct of the Target Business. All premiums due and arising thereon have
been paid and such policies are in full force and effect.
Q. PATENTS, TRADEMARKS, ETC. Attached hereto as SCHEDULE 2.17 is a
schedule of all patents, trademarks, service marks, works of authorship,
tradenames, brandnames and copyrights, and licenses or other rights with respect
to any of the foregoing, and other licenses, rights or permits, owned or
possessed by the Target, all of which are in good standing, in full force and
effect, and are free and clear of all Encumbrances and of all patent
applications of the Target presently on file and pending or which are presently
being prepared for filing. SCHEDULE 2.17 lists all intellectual property
necessary for the Target Business as now conducted and as proposed to be
conducted. No patent or patent application of the Target is involved in any
interference proceeding. The Target is not using, and does not have any plan to
manufacture, use or sell, anything which would violate or infringe on any patent
or proprietary right of any other person, firm or corporation or which would
require a license under any such patent or proprietary right. The Target has not
received any communications alleging that the Target has violated or, by
conducting its business as proposed, would violate any of the patents,
trademarks, service marks, tradenames, copyrights, works of authorship or trade
secrets or other proprietary rights in processes of any other person or entity.
R. COMPLIANCE. The Target has complied in all material respects with all
laws, and is not in violation of any charter or other corporate restrictions or
any law, ordinance, requirement, regulation, judgment, injunction, award,
decree, or other order applicable to its business, the violation of which would
be likely to have a material adverse effect on the Target or the Target
Business. There is no term or provision of any mortgage, indenture, contract,
agreement or instrument to which the Target is a party or by which it is bound,
any provision of any federal and state judgment, decree, order, injunction,
writ, statute, rule or regulation applicable to or binding upon Target, which
materially adversely affects or, in the future is reasonably likely to affect
materially and adversely the business, prospects, condition, affairs or
operations of the Target or any of its properties or assets.
S. ENVIRONMENTAL, HEALTH AND SAFETY COMPLIANCE. To the best of each
Seller's knowledge, after due inquiry, and except as described on SCHEDULE 2.19
hereto:
1. the Target is, and has continuously been, in compliance with all
Environmental Laws;
2. all material notices, Permits, licenses or similar
authorizations, if any, required to be obtained or filed under any
Environmental Law in connection with the operation of the Target Business
have been obtained or filed;
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3. there are no past, pending or threatened investigations,
proceedings or claims against the Target relating to the presence, release
or remediation of any Hazardous Material or for non-compliance with any
Environmental Law;
4. Hazardous Materials have not been treated, stored or disposed of
on, to or from any property relating in any way to the Target or that is
or was owned or leased by the Target;
5. none of the properties owned, leased or operated by the Target
have been used as landfill or waste disposal sites or contain any
underground storage tanks;
6. no conditions or circumstances are known to the Target or the
Sellers to exist or to have existed with respect to the Target, including
without limitation the off-site disposal of Hazardous Materials, that
could give rise to any remedial action under, or impose any liability on
the Target or Purchaser with respect to any Environmental Law;
7. neither the Sellers nor the Target has received any notice or
claim, and none of them is aware of any facts suggesting that the Target
is or may be liable to any person as a result of any Hazardous Material
generated, treated or stored at any real estate at any time owned or
leased by the Target or discharged, emitted, released or transported from
any real estate at any time owned or leased by the Target or any other
source in the conduct of the business of the Target;
8. no conditions or circumstances exist or have existed, and no
activities are occurring or have occurred, that are resulting or have
resulted in the exposure of any person or property to a Hazardous Material
such that the owner of the Real Estate or of the Target Business may in
the future be liable to such persons or to the owners of such property for
personal or other injuries or damages resulting from such exposure; and
9. there are no federal or state air emission credits or air or
water discharge Permits related to the Real Estate.
For purposes of this Agreement, the term "Environmental Laws" shall mean,
as to any given asset or operation of the Target, all applicable laws,
statutes, ordinances, rules and regulations of any Governmental Entity
pertaining to protection of the environment in effect as of the Closing
Date. For purposes of this Agreement, the term "Hazardous Material" shall
mean any substance which is listed or defined as a hazardous substance,
hazardous constituent or solid waste pursuant to any Environmental Law.
T. LABOR MATTERS. The Target has not suffered any strike, slowdown,
picketing or work stoppage by any union or other group of employees. The Target
is not a party to any collective bargaining agreement; no such agreement
determines the terms and conditions of employment of any employee of the Target;
no collective bargaining agent has been certified as a representative of any of
the employees of the Target; and no representation campaign or election is now
in progress with respect to any of the employees of the Target. Neither the
Sellers nor the Target has taken or failed to take any action that would cause
Purchaser to incur any liability in the event Purchaser chooses to dismiss from
its employment any of the Target's employees following the Closing. The Target
has complied in all material respects with all laws relating to the employment
of labor in the conduct of the Target Business, including provisions thereof
relating to wages, hours, equal opportunity and the payment of pension
contributions, social security and other taxes.
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U. EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS.
1. SCHEDULE 2.21 hereto lists all employee benefit plans and
collective bargaining, labor and employment agreements and severance
agreements or other similar arrangements, whether or not in writing
(together with all documents or instruments establishing or constituting
any related trust, annuity contract or other funding instrument) to which
the Target is (or ever has been) a party or by which the Target is (or
ever has been) bound, including, without limitation, (1) any
profit-sharing, deferred compensation, bonus, stock option, stock
purchase, pension, retainer, consulting, retirement, severance, or
incentive compensation plan, agreement or arrangement, (2) any welfare
benefit plan, agreement or arrangement or any plan, agreement or
arrangement providing for "fringe benefits" or perquisites to employees,
officers, directors or agents, including but not limited to benefits
relating to automobiles, clubs, vacation, child care, parenting or
maternity leave, sabbaticals, sick leave, medical expenses, dental
expenses, disability, accidental death or dismemberment, hospitalization,
life insurance and other types of insurance, (3) any employment agreement,
or (4) any other "employee benefit plan" (within the meaning of Section
3(3) of ERISA).
2. The Sellers and the Target have delivered to Purchaser true,
correct and complete copies of all plan documents and/or contracts
(including, where applicable, any documents and/or instruments
establishing or constituting any related trust, annuity contract or
funding instrument) and summary plan descriptions with respect to the
plans, agreements and arrangements listed in SCHEDULE 2.21 hereto, or
summary descriptions of any such plans, agreements or arrangements not
otherwise in writing. The Sellers and the Target have provided Purchaser
with true, correct and complete copies of the Form 5500 filed with respect
to each plan identified in SCHEDULE 2.21 hereto that was required to file
an annual report for the plan year immediately preceding the Closing Date.
Each of such Forms 5500 accurately reflects the financial status of the
plan to which it relates as of the dates specified therein. In addition,
the Sellers and the Target have provided Purchaser with (a) true, correct
and complete copies of any and all written communications notices or
claims that the Sellers or the Target have received from the IRS, the
Department of Labor and/or the Pension Benefit Guaranty Corporation
concerning any plan, arrangement or agreement identified in SCHEDULE 2.21
hereto that give notice of possible imposition of a fine, penalty or
liability with respect to such plan, arrangement or agreement and (b)
true, correct and complete copies of any complaints, petitions, claims or
other notices of liability relating to any such plan, arrangement or
agreement that have been filed by any other party.
3. For each of the plans, agreements and arrangements identified in
SCHEDULE 2.21 hereto, there are no negotiations, demands or proposals that
are pending or have been made since the dates of the respective items
furnished pursuant to SECTION 2.21(B) hereto which concern matters now
covered, or that would be covered, by plans, agreements or arrangements of
the type described in this Section.
4. The Target and each of the plans, agreements and arrangements
identified in SCHEDULE 2.21 hereto are in full compliance with the
applicable provisions of the Code and ERISA, the regulations and published
authorities thereunder, and all other laws applicable with respect to all
such employee benefit plans, agreements and arrangements. The Sellers and
the Target have performed all of their respective obligations under all
such plans, agreements and arrangements including, but not limited to, the
full payment when due of all amounts required to be made as contributions
thereto or otherwise. There are no actions, suits or claims (other than
routine claims for benefits) pending or threatened against such plans or
their assets, or arising out of such plans, agreements or arrangements,
and, to the best knowledge of the Sellers and the Target, no facts exist
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which could give rise to any such actions, suits or claims that might have
a material adverse effect on such plans, agreements or arrangements.
5. Except as specified in SCHEDULE 2.21 hereto, each of the plans,
agreements or arrangements can be terminated by the Target within a period
of 60 days, without payment of any additional compensation or amount or
the additional vesting or acceleration of any such benefits.
6. With respect to each plan identified in SCHEDULE 2.21 hereto
which is an "employee benefit plan" (within the meaning of Section 3(3) of
ERISA) or a "plan" (within the meaning of Section 4975(e)(1) of the Code),
no transaction has occurred which is prohibited by Section 406 of ERISA or
which could give rise to a material liability under Section 4975 of the
Code or Sections 502(i) or 409 of ERISA.
a. QUALIFIED PLANS. Except as specifically identified in
SCHEDULE 2.21 hereto, the Target has not now, or has at any time
previously maintained, a stock bonus, pension or profit-sharing plan
which is or was intended to meet the requirements of Section 401(a)
of the Code.
b. TITLE IV PLANS. Except as specifically identified in
SCHEDULE 2.21 hereto, the Target does not have, and has not at any
time previously maintained, a plan subject to Title IV of ERISA.
c. MULTIEMPLOYER PLANS. No plan listed in SCHEDULE 2.21 hereto
is or ever has been a "multiemployer plan" (within the meaning of
Section 3(37) of ERISA).
d. WELFARE BENEFIT PLANS. All group health plans of the Target
have been operated in compliance with the group health plan
continuation coverage requirements of Sections 601 through 608 of
ERISA and 4980B of the Code to the extent such requirements are
applicable. Except to the extent required under Section 4980B of the
Code, the Target does not provide health or welfare benefits
(through the purchase of insurance or otherwise) for any retired or
former employees.
e. FINES AND PENALTIES. There has been no act or omission by
the Target or the Sellers or any ERISA affiliate that has given rise
to or may give rise to fines, penalties, taxes, or related charges
under Sections 502 and 4071 of ERISA or Chapter 43 of the Code.
V. TRANSACTIONS WITH AFFILIATES. Except as set forth on SCHEDULE 2.22, no
stockholder, officer, director or employee of Sellers or the Target, nor any
affiliate or "associate" of such persons (as such terms are defined in the rules
and regulations promulgated under the Securities Act), is presently a party to
any transaction with any of the Sellers or the Target, including without
limitation, any contract, agreement or other arrangement providing for the
employment of, furnishing of services by, rental of real or personal property
from or otherwise requiring payments to, any such person or entity.
W. PRODUCT LIABILITY. The Target does not have any liability, whether
known or unknown, asserted or unasserted, absolute or contingent, liquidated or
unliquidated, and whether due or to become due, arising out of any injury to
individuals or property as a result of the ownership, possession or use of any
product manufactured, sold, leased or delivered by any Target.
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X. INVESTMENT REPRESENTATIONS.
1. Each Seller is acquiring the IHI Shares for his own account for
investment and not with a view to, or for sale or other disposition in
connection with, any distribution of all or any part thereof, except
pursuant to an applicable exemption under the Securities Act. In acquiring
the IHI Shares, each Seller is not offering or selling, and will not offer
or sell, for Purchaser in connection with any distribution of the IHI
Shares and each Seller does not have a participation and will not
participate in any such undertaking or in any underwriting of such an
undertaking except in compliance with applicable federal and state
securities laws.
2. Each Seller further represents that he has had an opportunity to
ask questions of and receive answers from Purchaser regarding Purchaser
and its business, assets, results of operations and financial condition
and the terms and conditions of the issuance of the IHI Shares. The
foregoing, however, shall not limit or modify the representations and
warranties of Purchaser in Article III, shall not limit the rights of a
Seller prior to and in anticipation of any issuance of the IHI Shares
pursuant hereto, and shall not limit the disclosure requirements of
applicable federal and state securities laws.
3. Each Seller acknowledges that he is able to fend for himself, can
bear the economic risk of his investment in the IHI Shares, and has such
knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of an investment in the IHI
Shares and, other than Michael Powell, is an "accredited investor" as
defined in Regulation D under the Securities Act.
4. Each Seller understands that the IHI Shares, when issued to such
Seller, will not have been registered pursuant to the Securities Act or
any applicable state securities laws, that the IHI Shares will be
characterized as "restricted securities" under federal securities laws,
and that under such laws and applicable regulations the IHI Shares cannot
be sold or otherwise disposed of without registration under the Securities
Act or an exemption therefrom. In this connection, each Seller represents
that he is familiar with Rule 144 promulgated under the Securities Act, as
currently in effect, and understands the resale limitations imposed
thereby and by the Securities Act. Stop transfer instructions may be
issued accordingly to the transfer agent for the IHI Shares.
5. It is agreed and understood by each Seller that the certificates
representing the IHI Shares shall each conspicuously set forth on the face
or back thereof, in addition to any legends required by Applicable Law or
other agreement, a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED UNLESS THEY ARE FIRST REGISTERED PURSUANT TO THAT ACT
AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE CORPORATION
RECEIVES A WRITTEN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL ARE
SATISFACTORY TO THE CORPORATION, TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED.
Y. DISCLOSURES. Neither this Agreement nor any Exhibit or Schedule hereto,
nor any certificate or other instrument furnished to Purchaser or its counsel by
Seller in connection with the transactions contemplated hereby, contains any
untrue statement of a material fact or omits to state a material fact
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necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which they were made, not misleading.
Z. CERTAIN FEES. Neither the Sellers nor the Target, nor any of the
officers, directors or employees of the Target on its behalf, have employed any
broker or finder or incurred any other liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Sellers as follows:
A. DUE ORGANIZATION; GOOD STANDING AND POWER. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas. Purchaser has all power and authority to enter into this
Agreement (and each other agreement expressly provided for herein) and to
perform its respective obligations hereunder and thereunder.
B. AUTHORIZATION AND VALIDITY OF AGREEMENT. The execution, delivery and
performance of this Agreement by the Purchaser and the consummation by the
Purchaser of the transactions contemplated hereby have been duly authorized by
all requisite action on its part. No other action is necessary for the
authorization, execution, delivery and performance by the Purchaser of this
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Purchaser and
constitutes a legal, valid and binding obligation of Purchaser enforceable
against it in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency or other similar laws affecting creditors' rights
generally and by general equity principles.
C. NO APPROVALS OR NOTICES REQUIRED; NO CONFLICT WITH INSTRUMENTS. Except
as disclosed on SCHEDULE 3.3, the execution, delivery and performance of this
Agreement by the Purchaser and the consummation by it of the transactions
contemplated hereby (i) will not violate (with or without the giving of notice
or the lapse of time or both), or require any consent, approval, filing or
notice under any provision of any law, rule or regulation, court order, judgment
or decree applicable to the Purchaser and (ii) will not conflict with, or result
in the breach or termination of any provision of, or constitute a default under,
or result in the acceleration of the performance of the obligations of the
Purchaser under, the charter or bylaws of the Purchaser or any indenture,
mortgage, deed of trust, lease, licensing agreement, contract, instrument or
other agreement to which the Purchaser is a party or by which the Purchaser or
any of its assets or properties is bound.
D. INVESTMENT. Purchaser is not acquiring the Target Shares with a view to
or for sale in connection with any distribution within the meaning of the
Securities Act.
E. CERTAIN FEES. Neither the Purchaser nor any of its respective officers,
directors or employees, on behalf of the Purchaser, has employed any broker or
finder or incurred any other liability for any brokerage fees, commissions or
finders' fees in connection with the transactions contemplated hereby.
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ARTICLE IV
COVENANTS; ACTIONS PRIOR TO CLOSING
A. ACCESS TO INFORMATION. During the period beginning on the date hereof
and ending on the Closing Date, the Sellers and the Target will (a) give or
cause to be given to Purchaser and its representatives such access, during
normal business hours, to the plant, properties, books and records of the Target
as Purchaser shall from time to time reasonably request and (b) furnish or cause
to be furnished to Purchaser such financial and operating data and other
information with respect to the Target as Purchaser shall from time to time
reasonably request. Purchaser and its representatives shall be entitled, in
consultation with the Sellers, to such access to the representatives, officers
and employees of the Target as Purchaser may reasonably request. The Sellers
shall permit Purchaser and its representatives to confirm, on reasonable notice
and on the basis of agreed methods, with the Target's principal vendors,
customers, and trade affiliates, that the acquisition by Purchaser of the Target
will be acceptable to such vendors, customers, and trade affiliates and that the
acquisition will not adversely effect the relationship of such vendors,
customers and trade affiliates with the Business.
B. CONDUCT OF THE BUSINESS. Except as specifically required or
contemplated by this Agreement or otherwise consented to or approved in writing
by Purchaser, during the period commencing on the date hereof and ending on the
Closing Date, the Target will and the Sellers will cause the Target to:
1. conduct the Target Business only in the usual, regular and
ordinary manner consistent with current practice and, to the extent
consistent with such operation, use its reasonable best efforts to keep
available the services of the present employees of the Target and preserve
the Target's present relationships with persons having business dealings
with the Target;
2. maintain the Target's books, accounts and records in the usual,
regular and ordinary manner, on a basis consistent with past practice, and
comply in all material respects with all Applicable Laws and other
obligations of the Target;
3. not (i) sell, lease or otherwise dispose of any of the assets of
the Target, (ii) modify or change in any material respect any contract of
the Target, other than in the ordinary course of business or (iii) agree,
whether in writing or otherwise, to do any of the foregoing; and
4. not (i) permit or allow any of the assets of the Target to become
subject to any liens or Encumbrances, (ii) waive any claims or rights
relating to the Target Business, except in the ordinary course of business
and consistent with past practice, (iii) grant any increase in the
compensation of any employees employed in the conduct of the Target
Business, except for reasonable increases in the ordinary course of
business and consistent with past practice or as required by contractual
arrangements existing on the date hereof, and reasonable payments in
normal sales compensation plans, including bonuses, (iv) enter into any
agreements giving rise to trade and barter obligations relating to the
assets of the Target, or (v) agree, whether in writing or otherwise, to do
any of the foregoing.
C. FURTHER ACTIONS. Subject to the terms and conditions hereof, the
Sellers, Target and Purchaser will each use their reasonable best efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement, including using reasonable best
efforts: (i) to obtain prior to the Closing Date all licenses, Permits,
consents, approvals, authorizations, qualifications and orders of Governmental
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Entities and parties to contracts with the Target as are necessary for the
consummation of the transactions contemplated hereby; (ii) to effect all
necessary registrations and filings; and (iii) to furnish to each other such
information and assistance as reasonably may be requested in connection with the
foregoing. Where the consent of any third party is required under the terms of
any of the Target's leases or contracts to the transactions contemplated by this
Agreement, the Sellers and the Target will use reasonable best efforts to obtain
such consent on terms and conditions not less favorable than as in effect on the
date hereof. The Sellers and Purchaser shall cooperate fully with each other to
the extent reasonably required to obtain such consents.
D. NOTIFICATION. The Sellers and the Target shall promptly notify the
Purchaser in writing and keep it advised as to (i) any litigation or
administrative proceeding filed or pending against the Target or, to their
knowledge, threatened against any of them, including any such litigation or
administrative proceeding that challenges the transactions contemplated hereby;
(ii) any material damage or destruction of any of the assets of the Target;
(iii) any material adverse change in the results of operations of the Target;
and (iv) any variance from the representations and warranties contained in
Article II hereof or of any failure or inability on the part of the Sellers or
the Target to comply with any of their respective covenants contained in this
Article IV.
E. NO INCONSISTENT ACTION. Subject to SECTIONS 7.1 and 7.2 hereof, no
party hereto shall take any action inconsistent with its obligations under this
Agreement or which could materially hinder or delay the consummation of the
transactions contemplated by this Agreement.
F. ACQUISITION PROPOSALS. None of the Sellers, the Target, or any
affiliate, director, officer, employee or representative of any of them shall,
directly or indirectly (i) solicit, initiate or knowingly encourage any
Acquisition Proposal or (ii) engage in discussions or negotiations with any
person that is considering making or has made an Acquisition Proposal. Sellers
and the Target shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any persons conducted heretofore
with respect to any Acquisition Proposal and shall promptly request each such
person who has heretofore entered into a confidentiality agreement in connection
with Acquisition Proposal to return to Sellers and the Target all confidential
information hereto furnished to such person by or on behalf of any Seller or the
Target. The term "Acquisition Proposal," as used herein, means any offer or
proposal for or any indication of interest in, a merger or other business
combination involving the Target or any of its affiliates, or the acquisition of
an equity interest in or substantial portion of the assets of, the Target or
affiliate of the Target, other than the transactions contemplated by this
Agreement.
G. PUBLIC ANNOUNCEMENTS. Except as may be required by Applicable Law, the
Purchaser on the one hand, and the Sellers and the Target, on the other, shall
not issue any press release or otherwise make any public statements with respect
to this Agreement or the transactions contemplated hereby without the prior
written consent of the other party.
ARTICLE V
CONDITIONS TO CLOSING
A. CONDITIONS PRECEDENT TO OBLIGATIONS OF ALL PARTIES. The respective
obligations of the parties to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction (or waiver by all parties) at or
prior to the Closing Date of each of the following conditions:
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1. No action of any private party or Governmental Entity shall have
been taken or threatened and no statute, rule, regulation or executive
order shall have been proposed, promulgated or enacted by any Governmental
Entity which seeks to restrain, enjoin or otherwise prohibit or to obtain
damages or other relief in connection with this Agreement or the
transactions contemplated hereby.
2. The Target and each Seller, other than Mike Powell, shall have
entered into a Non-Competition Agreement in substantially the form
attached hereto as EXHIBIT B.
3. The closing of the transactions pursuant to which substantially
all of the assets of SMS Industries, Inc., a Michigan corporation, that
are used in the Target Business are sold to a party identified by
Purchaser.
B. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER. The obligations of
Purchaser under this Agreement are subject to the satisfaction (or waiver by
Purchaser) at or prior to the Closing Date of each of the following conditions:
1. All representations and warranties of the Sellers and the Target
contained herein or in any certificate or document delivered to Purchaser
pursuant hereto shall be true and correct in all material respects on and
as of the Closing Date, with the same force and effect as though such
representations and warranties had been made on and as of the Closing
Date, except as contemplated or permitted by this Agreement.
2. The Sellers and the Target shall have, in all material respects,
performed all obligations and agreements, and complied with all covenants
and conditions, contained in this Agreement to be performed or complied
with by them prior to or at the Closing Date.
3. All corporate actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental thereto and all other related legal matters shall be reasonably
satisfactory to counsel for Purchaser, and such counsel shall have been
furnished with such certified copies of such corporate actions and
proceedings and such other instruments and documents as it shall have
reasonably requested.
4. The Sellers shall have delivered to the Purchaser a certificate
to the effect that each of the conditions specified in Section 5.2(a)-(c)
above is satisfied in all respects.
5. On the Closing Date, Purchaser shall be satisfied in its
reasonable discretion as to the Sellers' ownership of the Target Shares,
free and clear of all Encumbrances.
6. On the Closing Date, Purchaser shall be satisfied in its
reasonable discretion that the Target owns all of its assets free and
clear of all Encumbrances, other than those specifically identified in the
Schedules to this Agreement.
7. All licenses, Permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities (including, without
limitation, any air and water discharge permits required by the United
States Environmental Protection Agency) which are reasonably necessary to
enable Purchaser to own the assets of the Target and conduct the Target
Business after the Closing in substantially the same manner as the assets
of the Target are owned and the Target Business is being conducted as of
the date hereof shall be in full force and effect.
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8. Purchaser shall have received the resignations, effective as of
the Closing, of each director and officer of the Target other than those
whom the Purchaser shall have specified in writing at least five business
days prior to the Closing.
9. Winegarden, Shedd, Haley, Lindholm & Robertson, P.L.C., counsel
for the Sellers and the Target, shall have furnished to Purchaser its
written opinion, dated the Closing Date, as set as to the matters set
forth in SECTIONS 2.1, 2.2, 2.3, 2.4, 2.5 and 2.6.
10. The Board of Directors of Purchaser shall have approved this
Agreement and the transactions contemplated hereby.
11. The Target Business shall have been operated and maintained
substantially in the manner in which it has been operated and maintained
previously in the ordinary course of business and the Target shall not
enter into or renew any material agreements or other commitments extending
a substantial term beyond the Closing Date or take any action which is not
in the ordinary course of business, except for the transactions otherwise
contemplated herein, without the prior written approval of Purchaser.
12. Purchaser shall be satisfied with the content of all Schedules
attached hereto pursuant to Article II.
13. There shall have been no material adverse change in the Target
Business from the date of this Agreement until the Closing Date.
14. Purchaser shall not have discovered any fact or omission
materially adverse to the condition, results of operations or prospects of
the Target or the Target Business.
C. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS. The obligations
of the Sellers under this Agreement are subject to the satisfaction (or waiver
by the Sellers) at or prior to the Closing Date of each of the following
conditions:
1. All representations and warranties of Purchaser contained herein
or in any certificate or document delivered to the Sellers pursuant hereto
shall be true and correct on and as of the Closing Date, with the same
force and effect as though such representations and warranties had been
made on and as of the Closing Date, except as contemplated or permitted by
this Agreement.
2. Purchaser shall have performed all obligations and agreements,
and complied with all covenants and conditions contained in this Agreement
to be performed or complied with by it prior to or at the Closing Date.
3. All corporate actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental thereto and all other related legal matters shall be reasonably
satisfactory to counsel for the Sellers, and such counsel shall have been
furnished with such certified copies of such corporate actions and
proceedings and such other instruments and documents as it shall have
reasonably requested.
4. Gardere Wynne Sewell & Riggs, general counsel for Purchaser,
shall have furnished to Sellers his written opinion, dated the Closing
Date, as to the matters set forth in SECTIONS 3.1 and 3.2.
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ARTICLE VI
COVENANTS; ACTIONS SUBSEQUENT TO CLOSING
A. FURTHER ASSURANCES. From time to time after the Closing, the Sellers
will execute and deliver, or cause to be executed and delivered, without further
consideration, such other instruments of conveyance, assignment, transfer and
delivery and will take such other actions as Purchaser may reasonably request in
order to more effectively transfer, convey, assign and deliver to Purchaser, and
to place Purchaser in possession and control of any of the Target Shares or to
enable Purchaser to exercise and enjoy all rights and benefits of the Sellers
with respect thereto.
B. COMPLIANCE WITH RULE 144(C). Purchaser hereby covenants and agrees that
it will cause the Purchaser to timely file all documents and reports required so
that the Purchaser shall be deemed to have made available "adequate current
public information" with respect to the Purchaser under Rule 144(c) of the
General Rules and Regulations under the Securities Act of 1933.
ARTICLE VII
TERMINATION
A. GENERAL. This Agreement may be terminated and the transactions
contemplated herein may be abandoned (a) by mutual consent of Purchaser and the
Sellers or (b) by any party by notice to the other parties in the event that the
Closing Date shall not have occurred on or before February 17, 1998; provided,
however, that if the Closing Date shall not have occurred on or before such date
due to a breach of this Agreement by one of the parties or an affiliate of such
party, that party may not terminate this Agreement.
B. NO LIABILITIES IN EVENT OF TERMINATION. In the event of any termination
of this Agreement as provided above, this Agreement shall forthwith become
wholly void and of no further force or effect and there shall be no liability on
the part of Purchaser, the Sellers or their respective officers, directors, or
agents, except that the provisions of Sections 9.3 and 9.13 hereof shall remain
in full force and effect, and provided that nothing contained herein shall
release any party from liability for any failure to comply with any provision,
covenant or agreement contained herein.
ARTICLE VIII
INDEMNIFICATION
A. INDEMNIFICATION BY THE SELLERS. Subject to the provisions of this
Article VIII, the Sellers, jointly and severally, shall protect, indemnify and
hold harmless the Purchaser, each officer, director and agent of the Purchaser
and each person who controls the Purchaser in respect of any losses, claims,
damages, liabilities, deficiencies, delinquencies, defaults, assessments, fees,
penalties or related costs or expenses, including, but not limited to, court
costs and attorneys', and accountants' fees and disbursements, and any federal,
state or local income or franchise taxes payable in respect of the receipt of
cash or money in discharge of the foregoing, but reduced by any net amount paid
to the Purchaser on account of such loss by any insurance policies (collectively
referred to herein as "DAMAGES") to which Purchaser may become subject if such
Damages arise out of or are based upon the breach of any of the representations
and warranties,
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covenants or agreements made by the Sellers or the Target in this Agreement,
including the Exhibits and Schedules hereto, or in any certificate or instrument
delivered by or on behalf of the Sellers or the Target.
B. INDEMNIFICATION BY PURCHASER. Subject to the provisions of this Article
VIII, the Purchaser shall protect, indemnify and hold harmless the Sellers, in
respect of any Damages to which the Sellers may become subject if such Damages
arise out of or are based upon the breach of any of the representations,
warranties, covenants or agreements made by the Purchaser in this Agreement,
including the Exhibits and Schedules hereto, or in any certificate delivered by
or on behalf of the Purchaser pursuant to this Agreement.
C. INDEMNIFICATION PROCEDURES. The obligations and liabilities of each
indemnifying party hereunder with respect to claims resulting from the assertion
of liability by the other party or third parties shall be subject to the
following terms and conditions:
(a) If any person shall notify an indemnified party (the
"INDEMNIFIED PARTY") with respect to any matter which may give rise to a
claim for indemnification (a "CLAIM") against the Purchaser or the Sellers
(the "INDEMNIFYING PARTY") under this Article VIII, then the Indemnified
Party shall promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party so long as (i) the Indemnifying
Party notifies the Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Claim that the Indemnifying
Party will indemnify the Indemnified Party from and against the entirety
(subject to any limitations contained in Article VIII) of any Damages the
Indemnified Party may suffer resulting from, arising out of, relating to,
in the nature of or caused by the Claim, (ii) the Indemnifying Party
provides the Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the financial
resources to defend against the Claim and fulfill its indemnification
obligations hereunder, (iii) the Claim involves only money damages and
does not seek an injunction or other equitable relief, (iv) settlement of,
or an adverse judgment with respect to, the Claim is not, in the good
faith judgment of the Indemnifying Party, likely to establish a
precedential custom or practice materially adverse to the continuing
business interests of the Indemnified Party, and (v) the Indemnifying
Party conducts the defense of the Claim actively and diligently and in
good faith.
(c) So long as the Indemnifying Party is conducting the defense of
the Claim in accordance with SECTION 8.3(B) above, (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Claim, (ii) the Indemnified Party will
not consent to the entry of any judgment or enter into any settlement with
respect to the Claim without the prior written consent of the Indemnifying
Party (not to be withheld unreasonably), and (iii) the Indemnifying Party
will not consent to the entry of any judgment or enter into any settlement
with respect to the Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in SECTION 8.3(B) above is or
becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain
any consent from, any
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Indemnifying Party in connection therewith), (ii) the Indemnifying Party
will remain responsible for any damages the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused
by the Claim to the fullest extent provided in this Article VIII.
D. LIMIT ON INDEMNIFICATION LIABILITY. Notwithstanding any other
provisions to the contrary contained in this Agreement, the liability under
Section 8.1 of all of the Sellers shall be limited to the Purchase Price.
E. TIME LIMITS ON LIABILITY. Anything contained in this Agreement to the
contrary notwithstanding, the indemnity liability of any party for indemnity
shall only extend to matters for which a bona fide claim has been asserted by
written notice of such claim delivered to the Indemnifying Party on or before
the second anniversary of the Closing Date.
ARTICLE IX
GENERAL PROVISIONS
A. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties and agreements contained in this Agreement shall
survive the Closing.
B. PAYMENT OF CERTAIN FEES AND EXPENSES. Each of the parties hereto shall
pay the fees and expenses incurred by it in connection with the negotiation,
preparation, execution and performance of this Agreement, including, without
limitation, brokers' fees, attorneys' fees and accountants' fees; provided,
however, that Sellers shall be responsible for all such fees and expenses
incurred by Target.
C. NOTICES. All notices, requests, demands and other communications which
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given if delivered personally or mailed, first class
mail, postage prepaid, return receipt requested, or by fascimile, but only if
confirmed by a return receipt, as follows:
1. If to Sellers:
c/o Phil Shaltz
Shaltz Fluid Power, Inc.
P.O. Box 4151
Flint, Michigan 48504
with a copy to:
Winegarden, Shedd, Haley, Lindholm & Robertson, P.L.C.
501 Citizens Bank Building
Flint, Michigan 48502
Attention: John T. Lindholm
Facsimile: (810) 767-8776
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<PAGE>
2. If to Purchaser:
Industrial Holdings, Inc.
7135 Ardmore
Houston, Texas 77054
Attention: Chief Financial Officer
Facsimile: (713) 749-9642
with a copy to:
Gardere Wynne Sewell & Riggs, L.L.P.
333 Clay, Suite 800
Houston, Texas 77002
Attention: Eric A. Blumrosen
Facsimile: (713) 308-5555
or to such other address as either party shall have specified by notice in
writing to the other party. All such notices, requests, demands and
communications shall be deemed to have been received on the earlier of the date
of delivery or on the fifth business day after the mailing thereof.
D. SCHEDULES. All statements contained in any exhibit, schedule, appendix,
certificate or other instrument delivered by or on behalf of the parties hereto,
or in connection with the transactions contemplated hereby, are an integral part
of this Agreement and shall be deemed representations and warranties hereunder.
E. PUBLICITY. Sellers shall promptly advise and cooperate with the
Purchaser prior to the issuance by the Target or any of the Target's directors,
officers, employees or agents of any press release with respect to this
Agreement or the transactions contemplated hereby. Notwithstanding the
foregoing, without the prior consent of Purchaser, neither Sellers nor any of
their affiliates shall issue any press release which includes the name of any of
the Purchaser or their affiliates.
F. ENTIRE AGREEMENT. This Agreement (including the Exhibits and Schedules
hereto) constitutes the entire agreement between the parties hereto and
supersedes all prior agreements and understandings, oral and written, between
the parties hereto with respect to the subject matter hereof.
G. BINDING EFFECT; BENEFIT. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective permitted heirs,
personal representatives, successors and assigns. Nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective heirs, personal representatives, successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
H. ASSIGNABILITY. This Agreement shall not be assignable by the Sellers
without the prior written consent of Purchaser or by Purchaser without the prior
written consent of the Sellers; provided, however, that Purchaser shall be
entitled to assign this Agreement to an affiliate of such Purchaser without the
consent of Sellers.
I. SECTION HEADINGS; INDEX. The section headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
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J. SEVERABILITY. If any provision of this Agreement shall be declared by
any court of competent jurisdiction to be illegal, void or unenforceable, all
other provisions of this Agreement shall not be affected and shall remain in
full force and effect.
K. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
L. APPLICABLE LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of State of Michigan.
M. DISPUTE RESOLUTION. Any dispute, difference or question ("DISPUTE")
between Buyer and the Sellers ("DISPUTING PARTIES"), shall be resolved in
accordance with the following dispute resolution procedures:
1. GOOD FAITH NEGOTIATIONS. The Disputing Parties shall endeavor, in
good faith, to resolve the Dispute through negotiations. If the Parties
fail to resolve the Dispute within a reasonable time, each Party shall
nominate a senior officer or officers of its management to meet at any
mutually agreed location to resolve the Dispute.
2. MEDIATION. In the event that the negotiations do not result in a
mutually acceptable resolution, either Disputing Party may require that
the Dispute shall be referred to mediation in Flint, Michigan . One
mediator shall be appointed by the agreement of the Parties. The mediator
shall be suitably qualified person having no direct or personal interest
in the outcome of the Dispute. Mediation shall be held within thirty (30)
days of referral to mediation. In the event the Disputing Parties are
unable to agree on a mediator, the Parties agree to the appointment of a
mediator pursuant to the Commercial Mediation Rules of the American
Arbitration Association.
3. ARBITRATION. In the event the Parties are unsuccessful in their
mediation of the Dispute, either Disputing Party may request that the
Dispute be settled by arbitration by an arbitrator mutually acceptable to
the Disputing Parties in an arbitration proceeding conducted in the City
of Flint, Michigan in accordance with the rules existing at the date
hereof of the American Arbitration Association. If the Disputing Parties
hereto cannot agree on an arbitrator within ten (10) business days of the
initiation of the arbitration proceeding, an arbitrator shall be selected
for the Disputing Parties by the American Arbitration Association. The
Disputing Parties shall use their reasonable best efforts to have the
arbitral proceeding concluded and a judgment rendered by the arbitrator
within forty (40) business days of the initiation of the arbitration
proceeding. The decision of such arbitrator shall be final, and judgment
upon the award rendered by the arbitration may be entered in any court
having jurisdiction thereof, and the costs (including, without limitation,
reasonable fees and expenses of counsel and experts for the Disputing
Parties) of such arbitration (including the costs to enforce or preserve
the rights awarded in the arbitration) shall be borne by the Disputing
Party whom the decision of the arbitrator is against. If the decision of
the arbitrator is not clearly against one of the disputing Parties or the
decision of the arbitrator is against more than one Disputing Party on one
or more issues, the costs of such arbitration shall be borne equally by
the Disputing Parties.
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ARTICLE X
DEFINITIONS
A. DEFINED TERMS. As used in this Agreement, each of the following terms
has the meaning given it below:
"affiliate" means, with respect to any person, any other person
that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such person.
"Applicable Law" means any statute, law, rule or regulation or any
judgment, order, writ, injunction or decree of any Governmental Entity to
which a specified person or property is subject.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect on the Closing Date.
"Encumbrances" means liens, charges, pledges, options, mortgages,
deeds of trust, security interests, claims, restrictions (whether on
voting, sale, transfer, disposition or otherwise), licenses, sublicenses,
easements and other encumbrances of every type and description, whether
imposed by law, agreement, understanding or otherwise.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"GAAP" means generally accepted accounting principles as in effect
on the date of this Agreement.
"Governmental Entity" means any court or tribunal in any
jurisdiction (domestic or foreign) or any public, governmental or
regulatory body, agency, department, commission, board, bureau or other
authority or instrumentality (domestic or foreign).
"IHI" means Industrial Holdings, Inc., a Texas corporation.
"IHI Common Stock" means the common stock, $0.01 par value per
share, of IHI.
"Intellectual Property" means patents, trademarks, service marks,
trade names, copyrights, trade secrets, know-how, inventions, and similar
rights, and all registrations, applications, licenses and rights with
respect to any of the foregoing.
"IRS" means the Internal Revenue Service.
"Permits" means licenses, permits, franchises, consents, approvals
and other authorizations of or from Governmental Entities.
"person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, enterprise,
unincorporated organization or Governmental Entity.
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"Proceedings" means all proceedings, actions, claims, suits,
investigations and inquiries by or before any arbitrator or Governmental
Entity.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means any corporation more than 30 percent of whose
outstanding voting securities, or any partnership, joint venture, or other
entity more than 30 percent of whose total equity interests is owned,
directly or indirectly, by Target.
"Taxes" means any income taxes or similar assessments or any sales,
excise, occupation, use, ad valorem, property, production, severance,
transportation, employment, payroll, franchise or other tax imposed by any
federal, state or local (or any foreign or provincial) taxing authority,
including any interest, penalties or additions attributable thereto.
"Tax Return" means any return or report, including any related or
supporting information, with respect to Taxes.
B. CERTAIN ADDITIONAL DEFINED TERMS. In addition to such terms as are
defined in Section 10.1, the following terms are used in this Agreement as
defined in the Sections of this Agreement referenced opposite such terms:
DEFINED TERMS REFERENCE
------------- ---------
Accounts Receivable Section 2.11
Agreement Preamble
Audited Financial Statements Section 2.7
Claim Section 8.3
Closing Section 1.3
Closing Date Section 1.3
Damages Section 8.1
Dispute Section 9.13
Disputing Parties Section 9.13
Environmental Laws Section 2.20
Escrow Termination Date Section 1.4
Escrowed Stock Section 1.4
Financial Statements Section 2.7
Hazardous Material Section 2.19
IHI Shares Section 1.2(b)
Indemnified Party Section 8.3
Indemnifying Party Section 8.3
Latest Balance Sheet Section 2.7
Purchaser Preamble
Real Estate Section 2.12
Sellers Preamble
Target Recitals
Target Business Recitals
Target Shares Recitals
Unaudited Financial Statements Section 2.7
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the date first above written.
SELLERS:
________________________________
Michael Powell
________________________________
Phil Shaltz
________________________________
Phil Miller
________________________________
Michael Shirkey
TARGET:
PHILFORM, INC.
By:______________________________
Name:____________________________
Title:___________________________
PURCHASER:
INDUSTRIAL HOLDINGS, INC..
By:______________________________
Name:____________________________
Title:___________________________
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EXHIBIT 2.2
AGREEMENT OF LIMITED PARTNERSHIP
OF
OF ACQUISITION L.P.
This Agreement of Limited Partnership of OF Acquisition L.P. is entered
into by St. James Capital Corp., a Delaware corporation, and CDI Holdings, Inc.,
a Delaware corporation.
W I T N E S S E T H:
In consideration of the mutual covenants expressed herein, the parties
hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
The definitions set forth in this Article shall apply throughout this
Agreement unless the context clearly indicates otherwise.
"AGREEMENT" - This Agreement and any modifications or amendments to this
Agreement.
"AFFILIATE" of a person (the "first person") means any other person (the
"second person") controlled by, controlling or under common control with the
first person. As used in this definition, "control" (and all variations of the
word) of a person means power to direct the affairs of that person.
"CODE" - The Internal Revenue Code of 1986, as amended, including
corresponding provisions of any subsequent federal tax law.
"GENERAL PARTNER" - A general partner of the Partnership.
"LIMITED PARTNER" - A limited partner of the Partnership.
"PARTNER" - A General partner or a Limited Partner.
"PARTNERSHIP" - The limited partnership existing pursuant to this
Agreement.
"PERSON" - Any individual, corporation, partnership, limited partnership,
limited liability partnership, limited liability company, professional
corporation, trust, estate; custodian, trustee, executor, administrator,
nominee, or other entity in its own or a representative capacity.
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"PRINCIPAL OFFICE" - As specified in Section 2.04.
"TEXREVLPA" - The Texas Revised Limited Partnership Act, as amended.
ARTICLE II
FORMATION AND INITIAL ORGANIZATION
2.1 FORMATION. The parties hereto hereby form the Partnership as a limited
partnership under TexRevLPA upon, and only upon, filing the certificate of
limited partnership which is required by the TexRevLPA.
2.2 NAME. The Partnership shall conduct its business and affairs under the
name of OF Acquisition L.P.
2.3 REGISTERED OFFICE AND REGISTERED AGENT. The Partnership's registered
office in Texas is located at 1980 Post Oak Boulevard, Suite 2030, Houston,
Texas 77056 and the Partnership's registered agent at that address is John L.
Thompson. The General Partner may change the registered office and registered
agent as the General Partner alone determines to be appropriate.
2.4 PRINCIPAL OFFICE. The principal office of the Partnership (the
"Principal Office") shall be located at 1980 Post Oak Boulevard, Suite 2030,
Houston, Texas 77056; PROVIDED that the General Partner may change the Principal
Office to any other location in the United States as the General Partner alone
determines to be appropriate.
2.5 PURPOSES. The purpose of the Partnership is to conduct any business
which lawfully may be conducted in limited partnership form.
ARTICLE III
MANAGEMENT
3.1 POWERS OF THE GENERAL PARTNER. The General Partner shall have the
power to take any action in managing the Partnership's business and affairs as
may be necessary or appropriate to conduct its business including the power:
3.1(a) to acquire, invest in or otherwise participate in other
partnerships, corporations or other entities;
3.1(b) to purchase or otherwise acquire, construct, deal in, sell,
lease or otherwise dispose of full or fractional interests in real
property, depreciable property or personal property of any kind and to buy
or hold insurance of any kind;
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3.1(c) to provide or contract for services of any kind; to make,
enter into, deliver and perform contract, agreements and other
undertakings; to contract for the services of accountants, lawyers,
investment managers, appraisers, contractors, or other service providers
and to delegate powers to any such person; to retain or employ employees;
3.1(d) to lend money with or without security to any person,
including any partner or an Affiliate of a Partner, on any commercially
reasonable terms;
3.1(e) without limitation as to amount or terms, to borrow and raise
moneys, to issue, accept endorse and execute promissory notes, drafts,
bills of exchange, warrants, bonds, debentures and other negotiable or
nonnegotiable instruments and evidences of indebtedness, and to secure the
payment of any such indebtedness and any interest in any such indebtedness
by mortgage, pledge, transfer or assignment in trust of all or any part of
the Partnership assets, whether owned at the time of any such transactions
or acquired thereafter, and, in particular, to use the assets of the
Partnership to secure borrowings the proceeds of which may be used to
acquire companies or interests in companies in the fastener industry, and
to sell, pledge or otherwise dispose of any such obligations of the
Partnership;
3.1(f) to guarantee any financial transactions of any kind with or
without charging a fee therefor;
3.1(g) to have and maintain one or more offices and to rent or
acquire office space, engage personnel, purchase equipment and supplies
and do anything else which may be appropriate in connection with the
maintenance of offices;
3.1(h) to pay any expenses related to any of the Partnership's
businesses or affairs;
3.1(i) to compromise claims against the Partnership;
3.1(j) to establish bank accounts and other similar accounts for the
Partnership; to make or delegate the authority to make withdrawals from
such accounts by check or electronic transfer in the name of the
Partnership; and
3.1(k) to acquire real and personal property, arrange financing,
enter contracts and complete any other arrangements on behalf of the
Partnership, in the name of the Partnership or in the name of a nominee
without having to disclose the existence of the Partnership;
PROVIDED, however, that without the prior written consent of all of the
Partners, the General Partner shall not cause the Partnership to (i) file a
petition for relief in bankruptcy under any federal bankruptcy law or any other
jurisdiction's debtor relief law; or (ii) make any decision or take any action
which would make it impossible to carry on the Partnership's business and
affairs.
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3.2 RELIANCE BY THIRD PARTIES ON GENERAL PARTNER. The Partnership shall be
liable for any transaction with any third party who relies on the authority of
the General Partner if the General Partner communicates to the third party that
the actions taken by the General Partner are taken on behalf of the Partnership,
and the third party shall not be deemed to have any duty to determine whether
the General Partner has the authority to take the action.
3.3 DELEGATION BY GENERAL PARTNER. The General Partner may delegate any
power under this Agreement to any employee of the Partnership or an agent,
attorney or attorney-in-fact of the Partnership.
3.4 TIME AND EFFORT REQUIRED OF GENERAL PARTNER. The General Partner shall
devote an amount of time and effort to the Partnership which it determines in
good faith to be necessary to conduct the business of the Partnership; PROVIDED
that nothing in this Agreement shall be deemed to restrict the freedom of the
General Partner to conduct any business activity separate and apart from the
Partnership.
3.5 DUTIES OF GENERAL PARTNER; LIMITATION. Any obligation of the General
Partner under this Agreement or by operation of law shall be performable only to
the extent that the Partnership has funds available therefor, and the General
Partner shall not be liable personally with respect to any such obligation.
3.6 INDEMNIFICATION OF GENERAL PARTNER.
To the fullest extent permitted by law, the General Partner shall be
indemnified and held harmless by the Partnership from and against any and
all losses, claims damages, liabilities, joint or several, expenses
(including, without limitation, legal fees and expenses), judgments,
fines, penalties, interest and other amounts arising from any and all
claims, demands, actions, suits or proceedings, whether civil, criminal,
administrative or investigative, in which the General Partner may be
involved, or is threatened to be involved, as a party or otherwise, by
reason of its status as a general partner of the Partnership, PROVIDED,
that in each case the General Partner acted in good faith and in a manner
which the General Partner reasonably believed to be in the best interests
of the Partnership and, with respect to any criminal proceeding, had no
reasonable cause to believe its conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction
or upon a plea of nolo contendere, or its equivalent shall not create a
presumption that the General Partner acted in a manner contrary to that
specified above.
To the fullest extent permitted by law, expenses (including, without
limitation, legal fees and expenses) incurred by a General Partner in
defending any claim, demand, action suit or proceeding shall, from time to
time, be advanced by the Partnership prior to the final disposition of
such claim, demand, action, suit or
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proceeding upon receipt by the Partnership of an undertaking by or on
behalf of such General Partner to repay such amount if it shall be
determined that such General Partner is not entitled to be indemnified as
authorized in this Section.
3.7 LIMITED PARTNERS.
3.7(a) NO CONTROL OVER MANAGEMENT. Except as may be provided herein
to the contrary, no Limited Partner shall have any authority to
participate in the control of the Partnership's business or affairs.
3.7(b) LIMITED LIABILITY. A Limited Partner shall not be personally
liable for any debts or obligations of the Partnership.
3.7(c) NO RETURN OF CONTRIBUTIONS. A Limited Partner shall have no
right to withdraw from the Partnership and shall have no right to a return
of any contributions to the Partnership made by him or her except to the
extent of distributions made to him or her as provided herein.
3.8 TRANSACTIONS WITH PARTNERSHIP. Any Partner and any Affiliate of a
Partner may transact business of any kind with the Partnership.
3.9 COMPETITION. A Partner and its Affiliates may own, operate or invest
in any property or business venture which is not owned or operated by the
Partnership and without allowing the participation of the Partnership or the
other Partners, such that neither the Partnership nor any Partner shall have any
rights with respect to any such properties or business ventures nor any claims
with respect to their effect on the Partnership.
ARTICLE IV
PARTNERS AND CAPITALIZATION
4.1 PARTNERS. St. James Capital Corp., a Delaware corporation, is the
general partner of the Partnership. CDI Holdings, Inc., a Delaware corporation,
is the limited partner of the Partnership.
4.2 CONTRIBUTIONS. Contemporaneously with the execution hereof, St. James
Capital Corp., a Delaware corporation, will contribute $1,000 to the
Partnership, and CDI Holdings, Inc., a Delaware corporation will contribute
600,000 shares of common stock of Industrial Holdings, Inc., a Texas
corporation, with an agreed value of $______.1 Each Partner is to own one Common
Unit
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1 To be completed as the fair market value of such 600,000 shares of
common stock as determined by an appraiser or as otherwise determined by the
Partners.
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for each dollar contributed or for each dollar of agreed value of the property
which was so contributed.
4.3 SOURCES OF ADDITIONAL FUNDS.
4.3(a)ADDITIONAL CONTRIBUTIONS. The General Partner may cause the
Partnership to issue additional Units, or classes or series of such Units,
or options, rights, warrants, or appreciation rights relating thereto, or
any other type of equity security that the Partnership may lawfully issue,
any secured or unsecured debt obligation of the Partnership convertible
into or exchangeable or exercisable for any class or series of equity
security of the Partnership (each a "Partnership Security") at any time or
from time to time to such Person or Persons and on such terms as the
General Partner may determine all without the approval of any other
Partner. Any Person to whom such a Partnership Security is issued shall
become a limited partner of the Partnership.
Any such Partnership Security shall be issuable with such
designations, preferences, and relative, participating, optional or other
special rights, powers or duties as may be fixed by the General Partner
including the right of the holder of each such Partnership Security to
share in distributions whether before or during winding up of the
Partnership, whether such Partnership Security is redeemable and if so the
conditions of any such redemption, whether such Partnership Security is
convertible or exchangeable and if so the terms of any such conversion or
exchange, and the right of the holder of any such Partnership Security to
vote on matters relating to the Partnership. After the issuance of any
such Partnership Security, the General Partner shall amend the provisions
of this Agreement to provide for the allocation for federal, state and
local income tax purposes of the Partnership's items of income, gain, loss
and deduction in accordance with applicable law.
No Partner shall have any preemptive, preferential or similar right
with respect to the issuance of any such Partnership Security by the
Partnership.
4.3(b)LOANS AND GUARANTEES BY PARTNERS AND AFFILIATES. No Partner
shall be obligated to contribute any additional funds or properties to the
Partnership. Nor shall any Partner be obligated to loan funds to the
Partnership, to guarantee loans to the Partnership or otherwise to incur
personal liability with respect to any loan to the Partnership.
If a Partner or any Affiliate of a Partner chooses to loan funds to
the Partnership, the terms of the loan shall be no less favorable to the
Partnership than the terms which could be obtained from a third-party
lender. If a Partner chooses to guarantee a loan to the Partnership or
otherwise to incur personal liability with respect to a loan to the
Partnership, in each case, with the consent of the General Partner, the
Partnership shall pay the Partner fair and reasonable compensation
therefor and shall reimburse, indemnify and hold the Partner harmless for
any loss, cost or expense incurred by the Partner with respect to the
loan.
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ARTICLE V
ACCOUNTING AND TAX MATTERS
5.1 BOOKS AND RECORDS. The General Partner shall keep and maintain the
books and records of the Partnership at the Principal Office, which books and
records shall be kept in accordance with accounting principles which the General
Partner determines to be appropriate for the business and affairs of the
Partnership.
ARTICLE VI
TAX MATTERS
6.1 TAX ELECTIONS. The General Partner shall determine whether the
Partnership shall make any election (including any election which may be
permitted with respect to the Partnership's method of accounting and any
election for which provision is made in Section 168 and Section 754 of the Code)
which is available to the Partnership for federal, state or local tax purposes.
6.2 PREPARATION OF TAX RETURNS. The General Partner shall use its
reasonable efforts to arrange, at the expense of the Partnership, for the
preparation and timely filing of all tax returns of the Partnership for federal,
state or local tax purposes and shall furnish to the Partners a copy of any
income tax returns so filed within a reasonable time after the filing thereof.
In addition, the General Partner shall furnish to the Partners such other tax
information as is reasonably required for federal, state and local tax reporting
purposes.
6.3 TAX MATTERS PARTNER. The General Partner is the tax matters partner,
within the meaning of Section 6231(a)(7) of the Code, and is authorized to
represent the Partnership (at the Partnership's expense) in connection with any
examination of the Partnership's affairs by any tax authority, including
administrative and judicial proceedings, and to expend Partnership funds for
professional services and the costs associated therewith.
6.4 TAX ALLOCATIONS. Unless the General Partner determines that another
allocation is required by applicable law (such as Section 704(c) of the Code)
each item of income, gain, loss, deduction and credit recognized by the
Partnership for federal, state or local income tax purposes shall be allocated
among the holders of Common Units in proportion to the number of such Common
Units which are so held.
ARTICLE VII
DISTRIBUTIONS
7.1 DISTRIBUTIONS. The General Partner shall from time to time cause the
Partnership to make such distributions to the Partners as the General Partner
may determine in its sole discretion,
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and any amount so distributed, whether prior to or during the winding up of the
Partnership, shall be divided amount the holders of Common Units in proportion
to the number of Common Units held by them.
ARTICLE VIII
ASSIGNMENTS
8.1 NEW PARTNERS. Except as otherwise provided herein, no person shall
become a Partner without the written consent of the General Partner.
8.2 ASSIGNMENT PREREQUISITES; REMEDIES FOR BREACH. No interest in the
Partnership shall be assigned, or otherwise transferred, except in compliance
with all applicable laws including federal and state securities laws.
ARTICLE IX
DISSOLUTION, WINDING UP AND LIQUIDATION
9.1 DISSOLUTION. The Partnership shall be dissolved on the first to occur
of
9.01(a)July 1, 2038 or
9.01(b)an event of withdrawal of the General Partner, as defined in
Section 4.02 of the TexRevLPA.
9.2 LIQUIDATOR. If the Partnership is dissolved, the Partnership's affairs
shall be wound up and the Partnership shall be liquidated by the General
Partner.
9.3 CONVERSION OF ASSETS TO CASH. After the Partnership is dissolved, the
assets of the Partnership shall be liquidated and converted to cash to the
extent necessary to pay all creditors of the Partnership, including Partners to
the extent allowed by Section 8.05(1) of the TexRevLPA. Any of the assets of the
Partnership which remain after the above-described assets are converted to cash
may be liquidated and converted to cash or retained for distribution in kind to
the Partners as the General Partner determines to be appropriate. The Partners
shall allow a reasonable
ARTICLE X
MISCELLANEOUS
10.1 MODIFICATION, TERMINATION AND WAIVER. This Agreement may be modified,
terminated or waived only by written agreement among all parties affected by the
modification, termination or waiver.
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10.2 ESTOPPEL CERTIFICATE. Within twenty days after receiving a written
request from another Partner, any Partner receiving the request shall return a
written, acknowledged statement which, to the extent of the Partner's knowledge,
(a) either states that this Agreement has not been modified or describes any
modifications which have been made, and (b) sates whether or not any Partner is
in default with respect to any obligation under this Agreement and describes the
default.
10.3 FURTHER ACTIONS. Each party to this Agreement shall execute and
deliver any documents and take any further actions which may be necessary to
effect the purposes and objectives of this Agreement.
10.4 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the parties to this Agreement and their respective successors and
assigns; provided that no interest in or under this Agreement may be assigned
except as provided by this Agreement.
10.5 CREDITORS. No provision in this Agreement shall be enforceable by,
nor construed for the benefit of, any creditors of the Partnership.
10.6 ENTIRE AGREEMENT. This Agreement represents the entire agreement of
the parties to this Agreement with respect to the Partnership and supersedes any
prior understandings between or among them. There are no oral or written
representations, agreements, arrangements or understandings between or among the
parties to this Agreement which relate to the Partnership other than those
contained in this Agreement.
10.7 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Texas and the rights and obligations of the parties to
this Agreement shall be governed by the laws of the State of Texas.
10.8 NOTICES. Except as otherwise provided, all notices and other
communications which may be required under this Agreement shall be submitted in
writing and shall be effective when received by the party to be notified. As
long as all costs are prepaid by the sender, notices may be sent by any
reasonable method, including hand delivery, mail (whether certified, overnight
or otherwise), air courier, facsimile transmission, Telex or cable.
10.9 FORMAT OF AGREEMENT; HEADINGS. The format of this Agreement and the
headings used throughout this Agreement are intended only for convenience of
reference and shall not affect the meaning of any provision in this Agreement.
10.10 CROSS-REFERENCES. Unless the context clearly indicates otherwise,
any references in this Agreement to an "Article" or "Section" are references to
articles or sections of this Agreement.
10.11 PLURALS, ETC. Pronouns, nouns and other terms used in this Agreement
shall be construed as necessary to include their masculine, feminine, neuter,
singular and plural forms.
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10.12 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original of this Agreement but all of
which, taken together, shall constitute one and the same Agreement.
IN WITNESS OF THIS AGREEMENT, the parties to this Agreement have executed,
and delivered this Agreement on the 20th day of November, 1997.
ST. JAMES CAPITAL CORP.,
a Delaware corporation
By:/s/JOHN L. THOMPSON
John L. Thompson, President
CDI HOLDINGS, INC.,
a Delaware corporation
By:/s/JOHN L. THOMPSON
John L. Thompson, President
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FIRST AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
OF
OF ACQUISITION L.P.
February 9, 1998
This First Amendment dated as of February 9, 1998 ("Amendment"), to the
Agreement of Limited Partnership of OF Acquisition L.P., a Texas limited
partnership, dated November 20, 1997 (the "Agreement"), is made and entered into
between St. James Management, L.L.C., a Delaware limited liability company, as
General Partner, and CDI Holdings, Inc., a Delaware corporation, as Limited
Partner. Defined terms used herein shall have the meaning attributed to them in
the Agreement, unless otherwise defined herein.
WHEREAS, the Partners desire to amend the Agreement as hereinafter
provided; WHEREAS, St. James Management, L.L.C. has heretofore replaced
St. James Capital Corp. as the General Partner of the Partnership; and
WHEREAS, the Partners desires to admit an additional Limited Partner; NOW,
THEREFORE, the Partners hereby agree as follows:
1. Section 3.03 shall be amended to read in its entirety as follows:
3.03 DELEGATION BY GENERAL PARTNER. The General Partner may, in its
sole discretion, delegate any power under this Agreement to any
employee of the Partnership, or an agent, attorney or
attorney-in-fact of the Partnership. The Partnership may employ a
"General Manager", which position will not, in and of itself, mean
that such person is a partner in the Partnership or an officer,
director or member of the General Partner.
2. Section 6.04 shall be amended to read in its entirety as follows:
6.04 TAX ALLOCATIONS. Unless the General Partner determines that
another allocation is required by applicable law (such as Section
7.04(c) of the Code), each item of income, gain, loss, deduction and
credit recognized by the Partnership for federal, state or local
income tax purposes shall be allocated among the holders of Common
Units in proportion to the number of such Common Units which are so
held; provided, however, that all items of income, gain, loss,
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deduction and credit attributable to the 644,250 shares of common
stock of Industrial Holdings, Inc. (the "IHI Stock") held by the
Partnership shall be specially allocated to CDI Holdings, Inc.
3. Section 7.01 shall be amended to read in its entirety as follows:
7.01 DISTRIBUTIONS. The General Partner shall from time to time
cause the Partnership to make such distributions to the Partners as
the General Partner may determine in its sole discretion, and any
amount so distributed shall be distributed as follows:
(a) First, cash attributable to the ownership, sale, or
disposition of the IHI Stock, including dividends and
cash proceeds from any sale or disposition of the IHI
Stock, shall be distributed to CDI Holdings, Inc.
(b) All other distributions shall be made to the holders of
Common Units in proportion to the number of Common Units
held by them.
4. Section 9.03 shall be amended to read in its entirety as follows:
9.03 CONVERSION OF ASSETS TO CASH. After the Partnership is
dissolved, the assets of the Partnership shall be liquidated and
converted to cash to the extent necessary to pay all creditors of
the Partnership, including Partners to the extent allowed by Section
8.05(1) of the TEX REV LPA. Any of the assets of the Partnership
which remain after the above-described assets are converted to cash
may be liquidated and converted to cash or retained for distribution
in kind to the Partners as the General Partner determines to be
appropriate; provided, however, that any distribution in kind of the
IHI Stock shall be made to CDI Holdings, Inc. The Partners shall
allow a reasonable time for the orderly liquidation of the
Partnership in order to avoid losses to the extent possible.
5. St. James Management, L.L.C., as the General Partner of the
Partnership, and CDI Holdings, Inc., as the sole limited partner of
the Partnership, hereby agree to and consent to Philform, Inc.
becoming a new Limited Partner in the Partnership.
6. St. James Management, L.L.C., CDI Holdings, Inc. and Philform, Inc.
hereby agree that, after the admission of Philform, Inc. as a new
Limited Partner, they shall own, 1,000 Common Units, 14,114,969
Common Units and 13,562,401 Common Units, respectively.
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DATED as of the first above written.
ST. JAMES MANAGEMENT, L.L.C.
By:/s/JAY BROWN
Jay Brown, President
CDI HOLDINGS, INC.
By:/s/JAY BROWN
Name: JAY BROWN
Title: SECRETARY
PHILFORM, INC.
By:/s/CHRISTINE A. SMITH
Christine A. Smith, Vice President
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