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) AUGUST 17, 1998
INDUSTRIAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 1-9580 76-0289495
(State of other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
7135 ARDMORE HOUSTON, TEXAS 77054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 747-1025
________________________________________________________________
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) Acquisition of A&B Bolt and Supply, Inc.
On August 17, 1998, Industrial Holdings, Inc. (the "Company")
acquired all of the outstanding capital stock of A&B Bolt and Supply, Inc.
("A&B") from its shareholders (the "Shareholders") for $10 million cash and
808,081 shares of Company common stock. A&B distributes fastener related
products, pipe, valves, fittings and other supplies to companies in the oil and
gas and industrial fabrication industries along the gulf coast of Louisiana. A&B
operates out of locations in Lafayette, Houma and Harvey, Louisiana. The
purchase price was determined through arm's length negotiations between the
Company and the Shareholders which had no pre-existing relationship with the
Company or any of its affiliates, directors, officers or associates. The cash
portion of the purchase price was financed using the Company's revolving credit
facility with Comerica Bank.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements for Acquired Companies
At this time, it is impracticable to provide the required
financial statements for A&B. Therefore, the required financial
statements will be filed as soon as they are available and in any
event within seventy-five days after the consummation of the
acquisition.
(b) Pro Forma Financial Information
At this time, it is impracticable to provide the required pro
forma financial information for A&B. Therefore, the required pro
forma financial information will be filed as soon as they are
available and in any event within seventy-five days after the
consummation of the acquisition.
(c) Exhibits
Exhibit No.
2 Stock Purchase Agreement by and between Industrial
Holdings, Inc. and Brandon Alan Dawes, David Scott
Dawes, and Jimmy M. Dawes being the shareholders of A&B
Bolt & Supply, Inc.
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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
VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
Date: August 24, 1998
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EXHIBIT INDEX
Exhibit No.
2 Stock Purchase Agreement by and between Industrial Holdings,
Inc. and Brandon Alan Dawes, David Scott Dawes, and Jimmy M.
Dawes being the shareholders of A&B Bolt & Supply, Inc.
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EXHIBIT 2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT dated as of August 14, 1998, by and among
INDUSTRIAL HOLDINGS, INC., a Texas corporation (the "Purchaser"), and BRANDON
ALAN DAWES, DAVID SCOTT DAWES, and JIMMY M. DAWES, being the shareholders
(herein collectively referred to as the "Shareholders"), of A & B BOLT & SUPPLY,
INC., a Louisiana corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Shareholders are the owners of one hundred (100%) percent
of the issued and outstanding shares of capital stock of the Company, such
shares being of the class and par value as set forth in Table I, and the
Shareholders desire to sell all of such shares to the Purchaser (all of such
shares of capital stock to be sold hereunder herein collectively referred to as
the "Shares"), and the Purchaser desires to purchase the Shares, all upon the
terms and conditions set forth herein; and
WHEREAS, this Agreement sets forth the terms and conditions to which
the parties have agreed and further contemplates the execution and delivery of
certain collateral agreements and the consummation of certain related
transactions hereinafter described;
NOW, THEREFORE, in consideration of the mutual promises and covenants
of the parties, and subject to the terms and conditions set forth herein, the
parties agree as follows:
1. SALE AND PURCHASE OF THE SHARES. Each of the Shareholders agrees,
subject to the conditions to the Shareholder's obligations herein set forth, to
sell, assign and convey to the Purchaser on the Closing Date (as hereinafter
defined), free and clear of all security interests, pledges, liens, charges and
encumbrances, the number of Shares set opposite the name of such Shareholder in
Table I, and to transfer and deliver to the Purchaser the certificates
evidencing such Shares, duly endorsed in blank or accompanied by stock powers
duly executed in blank. The Purchaser agrees, subject to the conditions to its
obligations herein set forth, on the Closing Date, to purchase and accept the
Shares for the consideration set forth in Section 2(a) hereof.
2. PURCHASE PRICE AND PAYMENT. The total purchase price (the "Purchase
Price") for the Shares shall be as follows:
(a) CASH CONSIDERATION. The sum of TEN MILLION AND NO/100
($10,000,000.00) DOLLARS, payable by the Purchaser to the Shareholders
on the Closing Date by wire transfer as follows:
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NAME OF SHAREHOLDER WIRE TRANSFER AMOUNT
Brandon Alan Dawes $ 3,300,000.00
David Scott Dawes $ 3,300,000.00
Jimmy M. Dawes $ 3,400,000.00
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Total $ 10,000,000.00
(b) IHI STOCK. The balance of the Purchase Price shall be paid by the
Purchaser to the Shareholders at Closing on the Closing Date in shares
of Common Stock, $.01 par value per share, of the Purchaser
("Purchaser's Stock") (the Purchaser's Stock to be paid to the
Shareholders pursuant to the transaction contemplated by this Agreement
being hereinafter referred to as the "IHI Shares") as follows:
The Shareholders shall receive that number of shares calculated
by dividing $10,000,000.00 by the average closing price of
Purchaser's Stock for the following five (5) business days:
August 10, 1998 through and including August 14, 1998. No
fractional shares shall be issued. The shares shall be issued in
compliance with Regulation D of the Securities Act of 1933, and
the Shareholders hereby agree to comply with such Regulation D
and to execute and deliver such investment letters and other
instruments as the Purchaser's counsel shall reasonably request
to insure compliance with Regulation D.
The IHI Shares shall be allocated among the Shareholders in accordance
with their respective ownership percentages listed on Schedule I
hereto.
(c) ALLOCATION OF PURCHASE PRICE TO NON-COMPETE. ONE THOUSAND AND
NO/100 ($1,000.00) DOLLARS of the aggregate amount of the Purchase
Price set forth in this Section 2 is hereby allocated to the covenant
against competition of the Shareholders set forth in Section 5(c)
hereof. The Purchaser and Shareholders agree to reflect the foregoing
allocation in their respective income tax returns.
(d) FURTHER ASSURANCES. Each of the Shareholders hereby agrees to
execute and deliver from time to time at the request of the Purchaser
and without further consideration, such additional instruments of
conveyance and transfer and to take such other action as the Purchaser
may reasonably require more effectively to convey, assign, transfer and
deliver the Shares to the Purchaser.
3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. The
Shareholders, jointly and severally, represent and warrant to and agree with the
Purchaser that:
(a) ORGANIZATION AND STANDING OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under
the laws of the State
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of Louisiana. The Company has full corporate power and authority to
conduct its business as it is now being conducted and is qualified to
do business as a foreign corporation in each jurisdiction where the
character of its properties or the nature of its business requires it
to be so qualified. Attached hereto as SCHEDULE 3(A) are true, correct
and complete copies of the Company's Articles of Incorporation (duly
certified by the Secretary of State of the State of Louisiana) and
By-Laws (certified by the Secretary of the Company) as in effect on the
date hereof.
(b) POWER AND AUTHORITY; ENFORCEABILITY. The Company has all requisite
corporate power and authority to enter into this Agreement and all
other documents to be entered into by the Company in connection with
the consummation of the transactions contemplated hereby and to perform
its obligations hereunder and thereunder. Each Shareholder has all
requisite authority to enter into this Agreement and all other
documents to be entered into by such Shareholder in connection with the
consummation of the transactions contemplated hereby. This Agreement
and all other documents entered into by the Company in connection with
the Consummation of the transactions contemplated hereby have been duly
authorized, executed and delivered on behalf of the Company and,
assuming due authorization, execution and delivery by Buyer,
constitutes a legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, except that (i) such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting creditors' rights
generally and (ii) the remedy of specific performance and injunction
and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought.
(c) SUBSIDIARIES. The Company has no subsidiaries. Further, the Company
does not (i) own, directly or indirectly, any of the outstanding
capital stock or securities convertible into capital stock of any other
corporation, or (ii) own, directly or indi rectly, any participating
interest in any partnership, joint venture or other business
enterprise.
(d) CAPITALIZATION. The authorized capital stock of the Company
consists of one hundred (100) shares of Common Stock, no par value, of
which, on the date hereof, one hundred (100) shares are duly
authorized, validly issued, outstanding, fully paid and nonassessable,
one hundred (100%) percent of which are owned by the Shareholders as
set forth on TABLE I, and none of which were issued in violation of any
preemptive or other rights of any person to acquire securities of the
Company. The Company has no treasury shares, outstanding subscriptions,
options or other agreements or commitments obligating it to issue
shares of capital stock. Between the date hereof and the Closing Date,
the Shareholders will not, and will not permit the Company to issue or
enter into any subscriptions, options,
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agreements or other commitments in respect of the issuance, transfer,
sale, repurchase or encumbrance of any shares of capital stock.
(e) FINANCIAL STATEMENTS. The following audited financial statements of
the Corporation have been delivered to the Purchaser and are attached
as SCHEDULE 3(E) hereto:
(i) the audited balance sheet of the Company as of December 31,
1997 (the "Audited Balance Sheet") and the related audited statements
of income and retained earnings and cash flows for the years then ended
(together with related notes and schedules), which financial statements
contain a report of Arsement Redd & Morella, L.L.C., independent
auditors, reporting thereon (such balance sheets, the related
statements of income and retained earnings and cash flows, and the
related notes and schedules, being hereinafter together referred to as
the "Audited Financial Statements"); and
(ii) the unaudited balance sheet of the Company as of June 30,
1998 (the "Interim Balance Sheet") and the related unaudited statement
of income for the six (6) month period then ended (such balance sheet
and related statements of income being hereinafter together referred to
as the "Interim Financial Statements").
The Audited Financial Statements and the Interim Financial Statements
(collectively, the "Financial Statements"), including the related notes
and schedules, have been prepared from the books and records of the
Company in conformity with generally accepted accounting principles
applied by the Company on a basis consistent with preceding years and
throughout the periods involved ("GAAP") (except as noted in the
independent auditor's report issued in connection with the Audited
Financial Statements) and present fairly the financial position of the
Company as of the dates of such statements, subject with respect to the
Interim Financial Statements to year-end adjustments and to the absence
of an inventory and certain statements, notes and schedules.
The trade accounts and other receivables of the Company which are
classified as current assets on the Audited Balance Sheet and the
Interim Balance Sheet (collectively, the "Balance Sheets") are bona
fide receivables, were acquired in the ordinary course of business, are
stated in accordance with GAAP and, subject to the reserve for doubtful
accounts, are believed to be good and collectible, and are not subject
to any factoring arrangement.
The inventories of the Company reflected on the Balance Sheets have
been valued in accordance with GAAP. There have been no write-ups of
inventories or other assets that are not in accordance with GAAP and
reflect normal book to physical adjustments.
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The Company has no liabilities of the type and in amounts required to
be reflected or disclosed in a balance sheet (or notes thereto)
prepared in accordance with GAAP other than:
(i) those set forth or reserved against in the Interim Balance
Sheet,
(ii) those incurred since the date of the Interim Balance Sheet
in the ordinary course of business,
(iii) those disclosed in the schedules attached hereto, and
(iv) those referred to in this Agreement or that exist by reason
of this Agreement.
The Company's books of account have been kept in all material respects
in the ordinary course of business in accordance with GAAP, the
transactions entered therein represent bona fide transactions, and the
revenues, expenses, assets and liabilities of the Company have been
properly recorded in such books in all material respects.
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in any
Schedule delivered to the Purchaser pursuant to this Section 3 or
except as contemplated by this Agreement, since the date of the Audited
Financial Statements, the Company has not:
(i) issued, delivered or agreed to issue or deliver any stock,
bonds or other corporate securities (whether authorized and
unissued or held in the treasury) or granted or agreed to grant
any options, warrants or other rights calling for the issuance
thereof;
(ii) borrowed or agreed to borrow any funds or incurred, or
become subject to, any obligation or liability (absolute or
contingent) except in the ordinary course of business in
customary amounts;
(iii) paid any obligation or liability (absolute or contingent)
except in the ordinary course of business in customary amounts;
(iv) paid any obligation or liability (absolute or contingent)
other than current liabilities reflected in or shown on the
Company's Financial Statements (or the notes thereto) and
obligations or liabilities incurred since the date thereof and
permitted to be so incurred by the foregoing clause (ii) of this
Section (f);
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(v) except as otherwise permitted herein, declared or made, or
agreed to declare or make, any payment of dividends or
distribution of any assets of any kind whatsoever to the
Shareholders, or purchased or redeemed any shares of its capital
stock;
(vi) except as otherwise permitted herein, sold or transferred,
or agreed to sell or transfer, any of its assets, properties or
rights (except sales in the ordinary course of business) or
canceled or agreed to cancel, any debts or claims;
(vii) entered or agreed to enter into any agreement or
arrangement granting any preferential rights to purchase
substantially all of the assets, properties or rights of the
Company (including management and control thereof), or requiring
the consent of any party to the transfer and assignment of such
assets, properties or rights (or changes in management or control
thereof), or providing for the merger or consolidation of the
Company with or into another corporation;
(viii) suffered any material losses or waived any rights of
material value;
(ix) except in the ordinary course of business, made or permitted
any amendment or termination of any contract, agreement or
license to which it is a party;
(x) made any accrual or arrangement for a payment of bonuses or
special compensation of any kind or any severance or termination
pay to any present or former officer or employee;
(xi) increased the rate of compensation payable or to become
payable by it to any of its officers or key employees not in the
ordinary course of business; or made any increase in any profit
sharing, bonus, incentive, deferred compensation, insurance,
pension, retirement or other employee benefit plan, payment or
arrangement made to, for or with any such officers or key
employees;
(xii) made any capital expenditures not in the ordinary course of
business or commitments since June 30, 1998 aggregating more than
$25,000.00 therefor or committed to purchase inventories, parts,
supplies or other items in excess of its normal, ordinary and
usual requirements or at excessive prices, all computed based on
historical practices of the Company;
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(xiii) experienced any significant labor trouble; or
(xiv) suffered any damage, destruction or loss, whether or not
covered by insurance, which materially and adversely affects its
assets or business, or had any material adverse change in the
business, operations, financial condition or prospects of the
Company.
Between the date hereof and the Closing Date, the Shareholders shall
not permit the Company to do any of the things listed in Clauses (i)
through (xii) of this Section (f) without the prior written consent of
the Purchaser, which consent will not be unreasonably withheld, except
as otherwise permitted by this Agreement.
(g) TAX MATTERS. (i) The Company has made an election to be treated for
federal income tax purposes as a Subchapter "S" corporation, within the
meaning of Internal Revenue Code Sections 1361 et seq., for the
respective periods shown on SCHEDULE 3(G)(I) hereto through the Closing
Date (the "S Period"). (ii) During the S Period, each Shareholder has
duly and timely filed all tax reports and returns required to be filed
by them. All such tax returns were consistent with the tax returns
filed by the Company. The Shareholders have timely paid in full all
taxes shown on their tax returns. The Shareholders shall bear full
responsibility for the payment of any and all taxes which are owed by
them. There are no currently pending audits, inquiries, investigations
or examinations relating to any of the Shareholders' tax returns
pending, and there are no claims which have been asserted relating to
any of the Shareholders' tax returns which if determined adversely
would result in the assertion by any governmental entity of any tax
deficiency against the Company. Since acquiring the Shares of the
Company, there have been no waivers or extensions of statutes of
limitations by the Shareholders. All other state, county and local and
other taxes, including without limitation, income taxes, payroll taxes,
corporate franchise taxes, sales, excise and use taxes and ad valorem
taxes, due and payable by the Company for the periods ended prior to
the Closing Date have been paid (or reserved for) and there is no
further liability other than the reserve (whether or not disclosed on
its returns) for any taxes relating to such periods, and no interest or
penalties have accrued or are accruing with respect thereto. All United
States, state, county and local and other taxes, including without
limitation, income taxes, payroll taxes, corporate franchise taxes,
sales, excise and use taxes and ad valorem taxes, due and payable by
the Company for the periods ended prior to the date hereof, have been
paid and there is no further liability (whether or not disclosed on its
returns) for any taxes relating to such periods, and no interest or
penalties have accrued or are accruing with respect thereto. The
Company has timely filed in correct form all tax returns and reports
required to be filed by it on or before the date of this Agreement with
all such taxing authorities. The current liability for Federal, state
and local taxes
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reflected on the Company's Financial Statements, if any, represents at
the date thereof, reasonable and adequate provision for the payment of
all accrued and unpaid current Federal, state and local taxes of the
Company. No assessments of deficiencies have been made against the
Company, and no extensions of time are in effect for the filing of any
returns or the assessment of deficiencies. No examinations by the
Internal Revenue Service ("IRS") of the Federal income tax returns of
the Company for any taxable year are presently pending. The
Shareholders have delivered to the Purchaser true and complete copies
of all of the Company's Federal and state Income Tax Returns of the
Company for each of its fiscal years since 1994. In the event that
after the Effective Date a deficiency is determined in the amount of
Federal tax payable by the Company, which deficiency relates to periods
prior to the Effective Date, then in that event, the Shareholders, in
the manner and to the extent set forth in Section 10 hereof, shall be
fully responsible for and shall indemnify and hold the Purchaser and
the Company harmless from the payment of any such deficiency, tax
liability, penalty, interest, loss, costs, expenses or claim (including
attorney and accountant fees) with respect thereto.
The Shareholders hereby represent, warrant and covenant that they shall
file or cause to be filed a Section 338(h)(10) election (the
"Election") with the IRS in connection with the transaction
contemplated by this Agreement. The Shareholders hereby covenant and
agree with Purchaser that (i) the Shareholders shall file the short
period federal corporation income tax return for the Company for the
period January 1, 1998 through the Effective Date (the "Short Period
Tax Return"), (ii) the Shareholders shall pay all tax with the filing
of the Short Period Tax Return, and (iii) the Shareholders shall cause
a copy of the Short Period Tax Return, as filed, to be delivered to
Purchaser on or about the date of its filing with the IRS. Purchaser
shall provide the Shareholders with any and all information necessary
in order that the Shareholders are able to comply with their covenant
to file the above tax return.
(h) CONTRACTS AND OPERATING AGREEMENTS. SCHEDULE 3(H) hereto is a
complete and accurate listing of all mortgages, liens, licenses,
leases, sales representation agreements, purchase orders (with
unexpired terms of more than thirty [30] days) and all other executory
contracts, undertakings, commitments and agreements of the Company, as
hereinafter defined), to which or by which it is bound, whether written
or oral, (x) entered into in the ordinary course of business involving
the payment by or to the Company of more than $10,000.00 per year with
respect to any such contract, undertaking, commitment or agreement, (y)
entered into other than in the ordinary course of business, or (z) with
any of Shareholders' Affiliates (the "Contracts"). For the purposes of
this Agreement, the term "Shareholders' Affiliates" shall include all
"affiliates" of the Shareholders as such terms are defined in the rules
and regulations promulgated by the Securities and Exchange
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Commission under the Securities Act of 1933, as amended. Each and all
of the Contracts have been duly executed by, or assigned to, the
Company, are currently in effect, are valid and binding upon the
parties thereto and are enforceable in all material respects in
accordance with their terms. Neither the Company nor the Shareholders
are aware of any facts that would prevent the performance of any of the
Contracts. Neither the Company nor any other party is in default under
any one or more of the Contracts nor has any claim of default been
asserted by the Company or any such other party. The Company has
committed no act and there has been no omission which will result in
the breach by it of any Contract.
(i) TITLE TO PROPERTIES AND RELATED MATTERS. SCHEDULE 3(I) hereto is a
complete list of all real property and improvements, and all personal
property (including all major items of furnishings, equipment and
automobiles) owned by the Company. The assets reflected in SCHEDULE
3(I) and in the Company's Financial Statements, were at the date
thereof, and, except for assets consumed or disposed of in the ordinary
course of business since the date thereof (or distributed to the
Shareholders as permitted hereunder), are now owned by the Company by
good and marketable title, free and clear from all security interests,
mortgages, liens, claims, defects and encumbrances except liens,
charges or encumbrances discussed or referred to in the Company's
Financial Statements, the related notes or schedules thereto or in
SCHEDULE 3(I) delivered to the Purchaser pursuant to this Section 3.
Except as disclosed in SCHEDULE 3(I), all such assets are in good
operating condition and repair, subject to ordinary wear and tear. All
of such assets have been properly maintained, with no extraordinary
maintenance planned or anticipated, and are adequate and sufficient for
the operation of the Company's business as historically operated by the
Company. There are no material capital expenditures currently
contemplated or necessary to maintain the current operation of the
Company's business.
(j) CONSENTS. Prior to Closing the Company shall have obtained all
approvals or consents which must be obtained in order to effectuate the
transaction contemplated hereby and to satisfy the terms and conditions
of this Agreement.
(k) RECEIVABLES. All notes receivable, contracts receivable and
accounts receivable included in the Company's Financial Statements or
which have arisen since the date of the Company's Financial Statements
are valid, have arisen in the ordinary course of business, and are
collectible and will be paid no later than ninety (90) days after the
Closing Date. None of such receivables have been the subject of any
factoring by the Company.
(l) LITIGATION AND PROCEEDINGS. Except as described in SCHEDULE 3(L),
there are no actions, suits or proceedings pending or, to the knowledge
of the Shareholders, threatened against or affecting the Company or the
Shareholders, at law or in
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equity, or before or by any governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, or before any
arbitrator of any kind, which involve the possibility of any judgment
or liability not fully covered by casualty or liability insurance; and
the Company is not in default with respect to any judgment, order,
writ, injunction, decree, award, or, to the best of the Shareholders'
knowledge and belief, in default with respect to any rule or regulation
of an court, arbitrator or governmental department, commission, board,
bureau, agency or instrumentality.
(m) INSURANCE COVERAGE. Attached as SCHEDULE 3(M) is a list of all
policies and contracts of insurance, including hospitalization, life,
property or liability, showing policy limits, expiration dates, types
of coverage and names of insured. The Company maintains policies of
casualty, liability, use and occupancy, and workmen's compensation and
other forms of insurance with reputable and financially sound insurers,
covering its properties and assets in amounts and against such losses
and risks as are generally maintained for comparable businesses and
properties, and valid policies for such insurance are now duly in
force. To the best of the Shareholders' knowledge, after due inquiry,
for the five (5) year period immediately preceding the date hereof,
other than in the ordinary course of business, there have been no
claims made on any of the Company's currently existing or previously
effective policies of insurance, including those policies described in
this Section 3(m).
(n) EMPLOYEE RELATIONS. Attached as SCHEDULE 3(N) is a list of all
bonus, incentive, compensation, disability pension, profit sharing,
group insurance or employee welfare plans of any nature whatsoever
(collectively, the "Plans"); all employment contracts and all other
contracts, agreements or commitments to or with individual employees or
agents extending for a period of more than thirty (30) days from the
date thereof or providing for earlier termination only upon the payment
of a penalty, severance pay or an equivalent thereof;
(i) Except as set forth in SCHEDULE 3(N), there are no written
employment agreements in effect between the Company and any of
its employees and no collective bargaining agreements covering
any such employees. The Company's employees are not members of a
collective bargaining group and no union organizing activities
are in process or contemplated. The only pension, profit sharing
or other retirement plan, whether or not qualified, in effect is
the Company's 401(k) Profit Sharing Plan described on SCHEDULE
3(N) (the "401(k) Plan"). The Company does not contribute or have
any obligation to make any payments or contributions to a
multi-employer plan, as that term is defined in Section 3(37) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Company does
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not have any actual or potential liability under Section 4201 of
ERISA for any complete or partial withdrawal from a
multi-employer plan.
(ii) The Company is in compliance with all applicable laws
respect ing employment and employment practices, terms and
conditions of employment and wages and hours of employees, and
there is no labor strike, dispute, slowdown or representation
campaign or work-stoppage pending or threatened with respect to
employees of the Company.
(iii) There is not, pending or threatened, any unfair labor
practice complaint against the Company pending before any
relevant authority or union representation petition respecting
the employees of the Company.
(iv) The Plans comply in all material respects with the
requirements of all applicable laws. There are no actions, suits,
claims or investigations pending or threatened with respect to
any Plan. There is no liability required to be accrued under the
Plans except to the extent reflected in the Company's Financial
Statements. The Company has made or set aside funds to make full
payment of all amounts which the Company is required to pay prior
to the date hereof under the terms of each Plan (including,
without limitation, the 401(k) Plan), or under any governmental
rule or regulation relating to employment matters. All Plans,
including the 401(k) Plan, shall be terminated by the Company
promptly after the Closing Date. The termination of any Plan by
the Company will not result in the imposition of any liability on
the Company or the Purchaser, and the Shareholders, in the manner
and to the extent set forth in Section 10 hereof, shall be fully
responsible for and shall indemnify and hold the Purchaser and
the Company harmless from the payment of any such liability,
penalty, loss, costs, expenses or claims (including attorney and
accountant's fees) with respect thereto.
(v) To the best of the Shareholders' knowledge, each "Group
Health Plan" (within the meaning of Section 162(i)(3) of the
Internal Revenue Code of 1986) maintained by the Company has been
administered in good faith compliance with the reasonable
interpretation of the continuation coverage requirements
contained in Title X of the Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA).
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(o) PATENTS, TRADEMARKS AND LICENSES. SCHEDULE 3(O) contains a complete
and accurate list of all domestic and foreign patents, patent
applications, licenses, trademarks, trademark applications, trade
names, trade name applications, copy rights and copyright applications
owned by or licensed to the Company or in which the Company has any
right or interest whatsoever, all of which are in good standing. The
Company owns or has all rights necessary to use all patents,
inventions, trademarks and copyrights necessary for the conduct of its
business as currently conducted, and the conduct of such business does
not conflict with or infringe upon any patent, trademark, trade name,
trade secret or copyright of others. The Company has received no notice
of any claim of infringement or other complaint that its operations
conflict with or infringe upon the patents, trade names, trademarks,
trade secrets or copyrights of others.
(p) APPROVALS, PERMITS, AUTHORIZATIONS AND REGULATIONS. The Company's
business is being conducted in compliance with all applicable laws,
ordinances, rules and regulations of all governmental authorities, and
within the past six (6) years, neither the Company nor any officer,
director, stockholder, agent or employee has violated, in any material
respect, any law, ordinance, rule or regulation in connection with the
Company's business. Further, the Company has not received, within the
past six (6) years, any notice (written or otherwise) from any
governmental authority asserting or investigating any alleged failure
to comply with any applicable law, ordinance or regulation.
(q) INVENTORY. None of the inventories of the Company are obsolete,
defective or otherwise not saleable or usable other than that
reasonably anticipated in the normal course of business. The levels of
inventories currently on hand are not in excess of or less than that
necessary for the operation of the Company's business in the ordinary
course of business consistent with past practices of the Company.
(r) GUARANTEES, ETC. Except those which are required in the ordinary
course of business, the Company has not given any guarantee, indemnity,
warranty or bond, or incurred any other similar obligation or created
any security for or in respect of, liabilities, actual or contingent,
of any other person.
(s) OSHA AND ADA. The Company has not received notice of any violation
by the Company, and the Company is not in violation of and has not been
in violation of, either the Occupational Safety and Health Act of 1970
or the Americans With Disabilities Act, including rules and regulations
thereunder, or any other federal, state, local or foreign laws,
including rules and regulations there under, regulating or otherwise
affecting employee health and safety or persons with disabilities.
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(t) CUSTOMERS. The Shareholders have no knowledge or information or
reason to believe that any of the Company's customers has ceased, or
intends to cease, to acquire products or services from the Company or
has reduced, or intends to materially reduce, the use of the products
or services sold by the Company for any reason or as a result of the
transaction contemplated by this Agreement.
(u) OFFICERS, DIRECTORS AND EMPLOYEES. Attached hereto as SCHEDULE 3(U)
is a list of all officers and directors of the Company, and all
employees whose aggregate remuneration is in excess of $20,000.00 per
year. There are no amounts owed to any officer, director or employee of
the Company other than as reflected in the Company's Financial
Statements. No officer, director or employee of the Company, or any
affiliate of the Company, owns, directly or indirectly, beneficially or
otherwise, any material interest in, or is an employee, officer or
director of, or a consultant, agent for or representative of, any
customer, competitor or supplier of the Company.
(v) ABSENCE OF ADVERSE AGREEMENTS. The Company is not a party to any
instrument or agreement or subject to any charter or other corporate
restriction or any judgment, order, writ, injunction, decree, award,
rule or regulation which materially and adversely affects the business,
properties, assets or condition, financial or otherwise, of the
Company.
(w) NO DEFAULTS. The Company is not in default under, nor has any event
occurred which with notice or lapse of time or both, could result in a
waiver (except caused by the statute of limitations) of any material
right or default under, any outstanding indenture, mortgage, lease,
contract or agreement to which the Company is a party or by which the
Company or its assets may be bound, or under any provision of the
Company's Articles of Incorporation or By-Laws (or comparable
instruments). All liabilities of the Company are, and will be on the
Closing Date, current and not in default.
(x) BANKS, SIGNATORIES. SCHEDULE 3(X) is a list setting forth the name
of each bank, savings and loan or other financial institution in which
the Company has any account or safe deposit box, the style and number
of each such account or safe deposit box and the names of all persons
authorized to draw thereon or to have access thereto.
(y) NO CONFLICTS. The execution and performance of this Agreement and
the transactions contemplated hereby will not violate any provision of
or result in a breach of or constitute a default under the Articles of
Incorporation or By-Laws of the Company, or under any order, writ,
injunction or decree of any court, governmental agency or arbitration
tribunal, or under any contract, agreement or
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instrument to which the Company is a party or by which its properties
may be bound, or any law, statute or regulation.
(z) BOOKS AND RECORDS. The books and records of the Company are in all
material respects complete and correct and have been maintained in
accordance with good business practice and reflect a true record of all
meetings or proceedings of the Board of Directors and Shareholders of
the Company.
(aa) BROKERS. Neither the Company nor the Shareholders are a party to
or in any way obligated under a contract or other agreement, and there
are no outstanding claims against any of them, for the payment of any
broker's or finder's fees in con nection with the origin, negotiation,
execution or performance of this Agreement.
(bb) ENVIRONMENT AND HEALTH.
(i) The real estate and improvements thereon leased by the
Company located at (A) 341 Queens Row, Lafayette Parish, Louisiana, (B)
2020 Grand Caillou Road, Houma, Terrebonne Parish, Louisiana, and (C)
501 Bark Street, Harvey, Jefferson Parish, Louisiana, more particularly
described in SCHEDULE 3(BB) hereto (hereinafter collectively referred
to as the "Real Estate") and its existing uses comply, in all material
respects, and the Company is not in violation of, and has not violated,
in connection with the ownership, use, maintenance or operation of the
Real Estate and the conduct of the Company's business operations, in
any material respect, any applicable statutes, laws, rules,
regulations, ordinances, codes, licenses or permits of any governmental
authorities relating to environmental matters including without
limitation the Comprehensive Response, Compensation and Liability Act
of 1980, the Resource Conservation and Recovery Act of 1976, and the
Toxic Substance Control Act of 1976, except that the Shareholder makes
no representation regarding any violation or liability that might be
asserted based on activities or conditions on the Real Estate prior to
the Company's occupancy thereof.
(ii) The Company has (i) operated the Real Estate and has at all
times received, handled, used, stored, treated, shipped and disposed of
all hazardous and toxic substances, petroleum products and waste, in
all material respects, in compliance with all applicable environmental,
health or safety statutes, ordinances, orders, rules, regulations and
requirements, and (ii) removed from and off the Real Estate all
hazardous or toxic substances, petroleum products and waste brought
onto or produced on the Real Estate by the Company (other than products
and substances presently being used and disposed of in accordance with
law in customary amounts in the ordinary course of business).
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(iii) There are no statutes, orders, rules or regulations
relating to environmental matters requiring any material work, repairs,
construction or capital expenditures with respect to any of the Real
Estate, nor has the Company received any notice of any of the same.
(iv) Except in compliance in all material respects with all
applicable environmental health or safety statutes, ordinances, rules
or regulations, no hazardous or toxic materials, substances,
pollutants, contaminants or wastes have been released into the
environment, or deposited, discharged, placed or disposed of at, on or
near the Real Estate by the Company, nor has the Real Estate been used
at any time by the Company as a landfill or a waste disposal site. No
asbestos, urea formaldehyde or polychlorinated biphenyls are present on
the Real Estate. There have not been any underground storage tanks
located at the Real Estate during the Company's occupancy thereof.
(v) No notices of any violation of any of the matters referred to
in subsections (i) through (iv) of this Section 3(bb) relating to Real
Estate or its use have been received by the Company. There are no
writs, injunctions, decrees, orders or judgments outstanding and no
lawsuits, claims, proceedings or investigations pending or threatened,
relating to the ownership, use, maintenance or operation of any of the
Real Estate.
(vi) No employee of the Company has submitted a claim to the
Company or filed suit alleging that such employee suffers from chronic
injury or illness resulting from exposure to toxic substances,
hazardous substances or manufacturing processes used in connection with
the Company's business or present at the place of business of the
Company.
(cc) DISCLOSURE. Neither this Agreement, the Schedules attached hereto,
nor any other document furnished by the Company or the Shareholders to
Purchaser, taken as a whole, contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
contained herein and therein not misleading, and except as disclosed
herein or therein, there is no fact (other than matters of a general
economic or a political nature which do not effect the business of the
Company uniquely) known to the Shareholders which materially adversely
effects or in the future can be reasonably expected to materially
adversely effect the properties, business, operations or financial
condition or prospects of the Company.
(dd) NON-OWNED PROPERTY. All tangible personal property located on the
Real Estate is owned by the Company and has been included in the
Company's Financial Statements.
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<PAGE>
(ee) INSPECTIONS. Between the date hereof and the date of Closing, the
Shareholders shall afford the Purchaser and its agents the opportunity
to make full and complete inspection of (i) the Company's books and
records (including without limitation, the Company's Financial
Statements, tax returns, accounts receivable, accounts payable, etc.),
(ii) the Company's assets (including without limitation, the inventory
and tangible and intangible personal property) and (iii) the Real
Estate (including all mechanical equipment, the roof, the structural in
tegrity of the improvements on the Real Estate, the interior of the
improvements and the environmental condition of the Real Estate).
Except as required by law or with respect to litigation under this
Agreement, the parties to this Agreement agree that they shall not
disclose to anyone other than another party and hold in strictest
confidence any and all confidential, non-public data and information
(the "Confidential Information") within its or his knowledge concerning
the Company. Purchaser and Shareholders shall use commercially
reasonable efforts to insure that all employees, agents and authorized
representatives will keep the Confidential Information confidential,
and shall take all reasonable measures to protect their own
Confidential Information.
(ff) INVESTMENT REPRESENTATIONS OF THE SHAREHOLDERS.
Each Shareholder hereby represents and warrants to Purchaser as
follows:
(1) He fully understands the nature, scope and duration of
limitations on transfer of the IHI Shares included in this
Agreement.
(2) He has such knowledge and experience in financial and
business matters generally, and in the industry engaged in
by Purchaser specifically, as to be capable of evaluating
the risks and merits of an investment in the IHI Shares.
(3) He has received and reviewed such of the instruments and
documents pertaining to the formation, organization,
governance, operation and business of Purchaser
(collectively, "Documents") as he has deemed necessary. In
making his decision to invest in IHI Shares, he has not
relied upon any oral representation by any representative
of Purchaser or anyone acting on its behalf.
(4) He acknowledges that he has had an adequate opportunity to
ask questions of the officers and directors of Purchaser
and receive answers from them concerning the Documents and
the business plan and corporate governance of Purchaser.
He has asked any and all
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<PAGE>
questions in the nature described in the preceding
sentence and has had all such questions answered to his
satisfaction.
(5) He recognizes that the offer and sale by Purchaser to him
of IHI Shares has not been and will not be registered
under the Securities Act in reliance upon the exemptions
from registration afforded by Section 4(2) thereof and the
rules and regulations promulgated thereunder, and have not
been and will not be registered under the Securities Act
or any other state or federal securities or blue sky laws
(collectively, the "Securities Laws") in reliance upon
exemptions from the registration requirements thereof. He
is acquiring IHI Shares not with a view to, or for offer
or resale connection with, a distribution thereof in
violation of any Securities Laws. He understands that the
effect of such representation and warranty is that IHI
Shares must be held indefinitely unless the sale or
transfer thereof is subsequently registered under the
Securities Laws or an exemption from such registration is
available at the time of any proposed sale or other
transfer thereof. He acknowledges that any resale of IHI
Shares by him must be in compliance with Rule 145 under
the Securities Act. He also understands that Purchaser is
under no obligation to file a registration statement under
the Securities Act covering the sale or transfer of any of
the Securities. He acknowledges that Purchaser is and will
be relying upon the truth and accuracy of the
representations and warranties contained herein in issuing
IHI Shares to him without first filing a registration
statement with respect thereto under the Securities Laws.
(6) He acknowledges that legends will be placed on the
certificates representing IHI Shares in substantially the
form set out below:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES
HAVE BEEN ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933 OR AN OPINION OF COMPANY'S COUNSEL THAT
REGISTRATION IS NOT REQUIRED.
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<PAGE>
(7) He acknowledges that stop transfer instructions have been
or will be placed with respect to IHI Shares so as to
restrict his resale or distribution thereof.
(8) He represents that he has no contract, undertaking,
agreement or arrangement, written or oral, with any other
person to sell, transfer or grant participation in any of
IHI Shares to be acquired by him.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants to the Shareholders that:
(a) ORGANIZATION, STANDING AND AUTHORITY OF THE PURCHASER. The
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas, and has full corporate
power and authority to conduct its business as it is now being
conducted, to enter into and carry out the provisions of this
Agreement.
(b) CAPITALIZATION. The authorized capital stock of Purchaser consists
of (i) 50,000,000 shares of common stock, par value $0.01 per share
("IHI Common Stock") of which 10,922,239 are issued and outstanding as
of June 30, 1998, and (ii) 7,500,000 shares of preferred stock, par
value $0.01 per share, none of which are issued and outstanding. All
issued and outstanding shares of IHI Common Stock are validly issued,
fully paid and non-assessable.
(c) IHI SHARES. The issuance by Purchaser of IHI Shares has been duly
and validly authorized by all necessary corporate action on the part of
Purchaser. On the Closing Date, the IHI Shares shall be validly issued,
fully paid and nonassessable
(d) SEC FILINGS; DISCLOSURE. Purchaser has filed with the Securities
and Exchange Commission (the "SEC") all material forms, statements,
reports and documents required to be filed by it under the Securities
Exchange Act of 1933, as amended (the "1933 Act"), the Securities
Exchange Act of 1934, as amended (the "1934 Act") and the respective
rules and regulations thereunder, all of which complied when field (as
amended if applicable) in all material respects with all applicable
requirements of the appropriate Act and the rules and regulations
thereunder. Purchaser has delivered to the Shareholders a disclosure
memorandum dated August 3, 1998 (the "IHI Disclosure Memorandum"),
containing true and correct copies of Purchaser's Financial Statements
and Purchaser's Annual Report on Form 10-K for the year ended December
31, 1997, and Purchaser's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1998 and June 30, 1998. No representations or
warranties by Purchaser in this Agreement and no statement by Purchaser
contained herein contains any untrue statement of a material fact or
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<PAGE>
omits any material fact necessary to make the statements herein or
therein not misleading, it being understood that as used in this
section "material" means material to Purchaser and it subsidiaries as a
consolidated whole.
(e) FINANCIAL STATEMENTS. Purchaser has furnished to the Shareholders
true and complete copies of the following (collectively, the "IHI
Financial Statements"): (i) the audited balance sheet of Purchaser at
December 31, 1997 and the related statements of operations,
shareholders' equity and cash flows, together with the notes thereto;
and (ii) the unaudited balance sheets of Purchaser at March 31, 1998
and June 30, 1998, and the related unaudited statement of operations
and shareholders' equity for the respective three (3) month period then
ended. The IHI Financial Statements were prepared from the books of
account and records of Purchaser in accordance with GAAP applied on a
basis consistent with preceding years and throughout the periods
involved and present fairly the consolidated financial position of
Purchaser at the dates indicated and the results of operations,
shareholders' equity and cash flows for the periods then ended.
The IHI Financial Statements were prepared for use by general purpose
users and accordingly reflect assessments of materiality that
management of Purchaser considered to be reasonable and appropriate for
such use. The Shareholders have conducted their own examination of such
financial statements and supporting information and have made their own
independent determination that these materiality levels are appropriate
and reasonable for their purposes.
(f) NO VIOLATION. Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (i)
violate any provision of the Articles of Incorporation or By-Laws of
the Purchaser, (ii) violate any provision of any agreement or other
obligation to which the Purchaser is a party or by which the Purchaser
is bound or to which its assets are subject, or (iii) violate or result
in a breach of, constitute a default under, any judgment, order,
decree, rule or regulation of any court or governmental agency to which
the Purchaser is subject.
(g) CORPORATE PROCEEDINGS OF THE PURCHASER. The execution, delivery and
performance of this Agreement has been authorized by the Board of
Directors of the Purchaser, and this Agreement constitutes the valid
and legally binding obligation of the Purchaser, enforceable in
accordance with its terms.
(h) BROKERS. The Purchaser is not a party to or in any way obligated
under a contract or other agreement, and there are no outstanding
claims against it, for the payment of any broker's or finder's fees in
connection with the origin, negotiation, execution or performance of
this Agreement other than as disclosed to Seller.
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<PAGE>
(i) INVESTMENT. The Shares will be acquired for investment and not with
a view to distribution thereof, nor with any intention of distributing
or selling or otherwise disposing of the Shares.
(j) REGISTRATION OF IHI SHARES. Purchaser shall use its best efforts to
cause ninety thousand (90,000) of the IHI Shares to be included in its
next registration statement filed with the Securities and Exchange
Commission.
5. ADDITIONAL COVENANTS AND AGREEMENTS OF SHAREHOLDERS.
(a) RESIGNATIONS. The Shareholders agree to deliver to the Purchaser at
Closing (effective as of the Effective Date) the resignations of those
officers and directors of the Company as may be requested by the
Purchaser.
(b) DELIVERY OF STOCK CERTIFICATES AND OTHER MATERIALS. At the Closing,
the Shareholders shall deliver to the Purchaser the certificates
evidencing the Shares duly endorsed and accompanied by executed Stock
Powers, as well as all minute books, stock certificate books, corporate
seals and other corporate books, records, data and papers of the
Company.
(c) COVENANT AGAINST COMPETITION. Each of the Shareholders agree that
from and after the Effective Date, they will not, directly or
indirectly, for a period of two(2) years, but not to exceed the maximum
period allowed by law, (1) own, operate, engage in or be interested in,
affiliated or connected with (other than by purchasing securities on a
national securities exchange or established over-the-counter market)
any person, firm, corporation or other entity (except for the Purchaser
or any subsidiary thereof) operating or purporting to operate any
business in the States of Louisiana, Mississippi and Texas (but not to
exceed the maximum area permitted by law) which competes in any manner
with the business of the Company, including the distribution and sale
of nuts, bolts, valves, pipe and other supplies to companies affiliated
with the oil and gas and industrial fabrication industries (the
"Subject Business"); or (2) solicit or accept (either on his own
account or as the agent of another person) the business of any person
in connection with the Subject Business in the States of Louisiana,
Mississippi and Texas who has been a customer of the Company for such
goods or services during the period of two (2) years prior to the
Effective Date; (3) induce, solicit or endeavor to entice any person to
leave the service or employment of the Company; or (4) use any trade
name (including the expression "A & B Bolt") (or any other name
intended or likely to be confused with such trade name) used by the
Company at any time during the two (2) immediately preceding the
Effective Date. Each of the Shareholders hereby acknowledge that the
foregoing restrictions are reasonable in scope and necessary for the
protection of the goodwill of the Company and that a breach of this
covenant would cause Purchaser and the Company substantial
20
<PAGE>
damage impossible of precise determination. Accordingly, in addition to
such other rights and remedies as may be available to the Purchaser and
the Company in the event of any breach, actual or threatened, of the
foregoing provisions of this Section 5(c), the Purchaser and the
Company (or any successor or successors thereof), shall be entitled to
enjoin such breach, actual or threatened. Each of the Shareholders
further agree that should any portion of the foregoing covenant be
unenforceable because of the scope thereof or the period covered
thereby or otherwise, the covenant shall be deemed to be reduced and
limited to enable it to be enforced to the extent permissible under the
laws and public policies in the jurisdiction in which enforcement is
sought.
(d) CONSENTS. The Shareholders and the Company shall obtain all
approvals and consents which must be obtained in order to effectuate
the transaction contemplated hereby and to satisfy the terms and
conditions of this Agreement.
6. CONDITIONS TO OBLIGATIONS OF THE PURCHASER. The obligations of the
Purchaser to consummate the transaction contemplated hereby shall be subject to
the satisfaction, on or before the Closing Date, of all of the following
conditions unless expressly waived in writing by the Purchaser:
(a) REPRESENTATIONS AND COVENANTS. All representations and warranties
of the Shareholders contained in this Agreement shall be true in all
material respects on and as of the Closing Date as if such
representations and warranties were made on and as of such date (except
to the extent any such representation or warranty is made as of a
specified date), and the Shareholders shall have performed all
agreements and covenants to be performed by them on or prior to the
Closing Date, and the Purchaser shall have received a certificate dated
the Closing Date, signed by the Shareholders, to the effect that such
is the case.
(b) GOVERNMENTAL APPROVALS. The Purchaser shall have received all final
governmental approvals necessary for the consummation of the
transactions contemplated by this Agreement including, but not limited
to approvals of the Federal Trade Commission required under the
Hart-Scott-Rodino Act (15 U.S.C.
ss.ss. 1311 et seq.).
(c) OPINION OF COUNSEL. The Purchaser shall have received the opinion
of Barry J. Sallinger, counsel for the Shareholders and the Company,
dated the Closing Date, to the effect that:
(i) the Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Louisiana,
and has corporate power to carry on its business as it is now
being conducted;
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<PAGE>
(ii) the authorized capital stock and the outstanding shares of
the Company are as set forth in Schedule I hereof, and the Shares
are duly and validly issued, fully paid, non-assessable and
outstanding;
(iii) this Agreement has been duly executed and delivered by the
Shareholders and, assuming the legal competency of the
Shareholders, constitutes the valid and binding obligation of the
Shareholders enforceable in accordance with its terms (except as
otherwise limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and
except that such counsel need not express an opinion as to
whether any covenant contained herein is specifically
enforceable);
(iv) the transfer of the Shares from the Shareholders shall vest
in the Purchaser valid ownership in the Shares, free and clear of
all security interests, pledges, liens, encumbrances, charges or
assessments, and no other endorsement is required to transfer
such ownership to the Purchaser, and such counsel is not aware of
any adverse claim with respect to any Shares;
(v) except as stated in such opinion or in any Schedule delivered
to the Purchaser pursuant to Section 3 of this Agreement, such
counsel does not know of any litigation, proceeding or
governmental investigation pending or threatened against or
relating to the Company or to the properties or business of the
Company or against the Shareholders relating to the transactions
contemplated by this Agreement;
(vi) no authorization, consent or approval of any court or
governmental body or authority is necessary to the validity of
the transfer by the Shareholders of the Shares to the Purchaser
as provided in this Agreement; and
(vii) the consummation of the transaction contemplated by this
Agreement will not result in the breach of or constitute a
default under the Articles of Incorporation or By-Laws of the
Company, or any loan, credit or similar agreement or any court
decree to which the Company or the Shareholders are a party and
of which such counsel has knowledge, or by which any of them or
their properties may be bound.
(d) OTHER LEGAL MATTERS. Legal matters in connection with this
Agreement and the transaction contemplated hereby shall have been
approved by Stumpf Falgout
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<PAGE>
Craddock & Massey, P.C., counsel for the Purchaser, and the
Shareholders shall have furnished to such counsel originals of such
corporate records of the Company and copies of such other documents as
such counsel may reasonably have reques ted for such purpose.
(e) NO DAMAGE OR DESTRUCTION. Prior to the Closing Date, there shall
not have occurred any casualty to any facility, property, equipment or
inventory owned or used by the Company as a result of which either (i)
the monetary amount of damage or destruction aggregates five (5%)
percent or more of the aggregate book value shown on the books of
account of the entire facilities, properties, equipment and inventory
of the Company, or (ii) the total monetary amount of damage or
destruction is less than five (5%) percent of the aggregate book value
shown on the books of account of the entire facilities, properties,
equipment and inventory of the Company, but more than $50,000, and such
loss shall not be substantially covered by valid, existing insurance
underwritten by responsible insurers.
(f) NO MATERIAL ADVERSE CHANGES. The Shareholders shall have delivered
to the Purchaser their certificate stating that there has been no
material adverse change in the business, operations, financial
condition or properties of the Company since the date of the Company's
Audited Financial Statements.
(g) ABSENCE OF LITIGATION. No litigation, governmental action,
insolvency, receivership or other proceeding shall have been
threatened, asserted or commenced with respect to the transaction
contemplated herein or otherwise.
(h) ENVIRONMENTAL CONDITION. The environmental condition of the Real
Estate has been approved by the Purchaser and its advisors.
(i) CONSENTS. The Shareholders and the Company shall have obtained all
approvals and consents which must be obtained in order to effectuate
the transaction contemplated hereby and to satisfy the terms and
conditions of this Agreement, including the approvals of all regulatory
and governmental agencies which have jurisdiction over the transactions
contemplated by this Agreement.
(j) EMPLOYMENT AGREEMENTS. Shareholders Brandon Alan Dawes and David
Scott Dawes shall have executed and delivered to the Purchaser
employment agreements in the form attached hereto as EXHIBIT "A".
(k) RESOLUTIONS OF THE COMPANY. The Shareholders shall furnish
Purchaser with certified copies of resolutions duly adopted by the
Board of Directors of the Company authorizing the execution, delivery
and performance of this Agreement.
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<PAGE>
(l) COMPANY CORPORATE DOCUMENTS. The Shareholders shall deliver to
Purchaser (1) the Stock and Minute Books and Corporate Seal of the
Company, (2) certified copies of the certificate of incorporation and
bylaws of the Company, and (3) certificates of good standing from the
state of Louisiana and all states where the Company is qualified to do
business as a foreign corporation.
(m) STOCK CERTIFICATES. The Shareholders shall surrender their Company
stock certificates to Purchaser duly endorsed or with a blank stock
power attached thereto in the form of EXHIBIT "B" attached hereto.
(n) DIRECTORS AND OFFICERS. The Shareholders shall furnish Purchaser
with written resignations of such directors and officers of the Company
required by Purchaser in forms of EXHIBIT "C" attached hereto.
(o) LEASE AGREEMENTS FOR LAFAYETTE AND HOUMA REAL ESTATE. Each of (i)
Shareholder Jimmy M. Dawes, the owner of the Lafayette, Louisiana Real
Estate, and (ii) Dawes Brothers, L.L.C., the owner of the Houma,
Louisiana Real Estate, shall have agreed to execute and deliver a lease
agreement with the Company (as the lessee thereunder) on terms and in
forms acceptable to Purchaser in its sole discretion on the Lafayette
Real Estate and the Houma Real Estate whereby the Company shall be
permitted to continue to operate its business thereon. The forms of
lease agreement contemplated by this subparagraph (o) are attached
hereto as EXHIBIT "D".
(p) DUE DILIGENCE. The completion of all due diligence review and
examination of the Company by Purchaser and its representatives.
7. CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS. The respective
obligations of the Shareholders to consummate the transaction contemplated
hereby shall be subject to the satisfaction, on or before the Closing Date, of
all of the following conditions, unless expressly waived in writing by the
Shareholders:
(a) REPRESENTATIONS AND COVENANTS. All representations and warranties
of the Purchaser contained in this Agreement shall be true in all
material respects on and as of the Closing Date as if such
representations and warranties were made on and as of such date and the
Purchaser shall have performed all agreements and covenants to be
performed by it on or prior to the Closing Date, and the Shareholders
shall have received a certificate dated the Closing Date, signed by the
President or a Vice President of the Purchaser, to the effect that such
is the case.
(b) PAYMENT OF CONSIDERATION. Purchaser shall pay to the Shareholders
the Purchase Price described in Section 2.
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(c) RESOLUTIONS OF PURCHASER. Purchaser shall furnish the Shareholders
with certified copies of resolutions duly adopted by its Board of
Directors authorizing the execution, delivery and performance of this
Agreement.
8. THE CLOSING AND THE EFFECTIVE DATE. The execution and delivery of
the instruments, certificates and other documents required in order to
consummate the transactions contemplated by this Agreement (the "Closing") shall
take place at the offices of Stumpf Falgout Craddock & Massey, 1400 Post Oak
Boulevard, Suite 400, Houston, Texas 77056, on the date on which the Purchaser
receives the approvals specified in Section 6(b) above, or at such other time
and day or other location as may be mutually agreed upon by the Purchaser and
the Shareholders. The date and time of such execution and delivery is herein
called the "Closing Date." On or effective as of 12:01 a.m., Houston, Texas,
time on August 1, 1998, the sale and exchange of the Shares as contemplated
hereunder shall be effective (the "Effective Date"). On the Closing Date,
certificates representing the Shares, the minute books, stock certificate books,
corporate seals and other corporate books, records, data and papers of the
Corporation (including any documents pertaining to the Real Estate) shall be
delivered by the Shareholders against delivery of the Purchase Price pursuant to
Section 2 hereof.
9. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) NATURE OF STATEMENTS. All statements contained in any schedule or
any certificate or other instrument delivered by or on behalf of the
Shareholders or the Purchaser pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be deemed
representations and warranties made by the Shareholders or the
Purchaser, as the case may be.
(b) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties, covenants, agreements and undertakings contained herein or
in any Schedule, certificate or other document shall remain operative
and in full force and effect, and shall survive the Closing Date and
the delivery of all consideration and documents pursuant to this
Agreement, and shall continue in effect for a period of two (2) years
after the Closing Date and, as to representations made by the
Shareholders concerning or affecting any tax liability of the Company,
until a date which is six (6) months after the statute of limitations
has run against the Federal, state and local government; provided,
however, that any such representation, warranty, covenant, agreement or
undertaking as to which a bona fide claim shall have been asserted
during such survival period shall continue in effect until such time as
such claim shall have been resolved in accordance with the terms of
this Agreement.
10. INDEMNIFICATION BY SHAREHOLDERS AND RELATED MATTERS.
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(a) INDEMNIFICATION BY SHAREHOLDERS. The Shareholders, jointly and
severally, agree to defend, indemnify and hold harmless the Purchaser
and the Company, and their respective successors and assigns, from,
against and in respect of any and all loss or damage resulting from:
(i) the breach by the Shareholders of any of the warranties, rep
resentations, covenants, agreements or undertakings contained
herein, except that the breach of the covenant not to compete
shall be the sole liability of the particular Shareholder
responsible;
(ii) any Federal, state or local income tax liability (including
any penalty and interest thereon) of the Company which the
Shareholders are obligated to indemnify Purchaser and the Company
pursuant to Section 3(g) hereof, or any liability relating to the
401(k) Plan which the Shareholders are obligated to indemnify the
Purchaser and the Company pursuant to Section 3(n) hereof (but
only after Purchaser has unsuccessfully pursued all potentially
liable third parties for any such 401(k) Plan liability);
(iii) any pending, threatened or other litigation against the
Company which relates to the time period prior to the Effective
Date not disclosed to Purchaser herein or the Schedules attached
hereto;
(iv) any liabilities of the Company which are not included in the
Financial Statements; and
(v) any liability arising out of any and all actions, suits,
proceedings, claims, demands, judgments, costs and expenses
(including reasonable legal and accounting fees) incident to any
of the foregoing (collectively, the "Losses").
(b) PROCEDURE FOR MAKING CLAIMS. If and whenever the Purchaser desires
to claim indemnification by the Shareholder pursuant to the provisions
of this Section 10, the Purchaser shall promptly deliver to the
Shareholders a certificate signed by the Chairman of the Board, Chief
Executive Officer, President or Vice President of the Purchaser (the
"Notice of Claim") (i) stating that the Purchaser or the Company, their
successors and assigns, has paid or properly accrued losses, damages or
expenses in an aggregate stated amount to which the Purchaser is
entitled to indemnification pursuant to this Section 10, provided,
however, such notice shall be given prior to the payment of an
indemnity item if reasonable in light of the circumstances causing, or
threatening to cause, a loss, and (ii) specifying the individual items
of loss, damage or expense included in the amount so stated, the date
each such item was paid or properly accrued and the nature of
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the misrepresentation, breach of warranty or claim to which such item
is related, provided, however, failure to notify the Shareholders shall
relieve the Shareholders from liability only if they are prejudiced
thereby. The Shareholders shall have the right to defend any claim by a
third party at the expense of the Shareholders. The Purchaser and the
Company, as the case may be, shall provide to the Shareholders prompt
and complete disclosure of all pertinent information in the possession
of or available to the Purchaser or the Company and shall extend full
and timely assistance in the cooperation in the investigation of the
defense of the claim, suit or action, with respect to which such
indemnification is claimed. The Shareholders, in the defense of any
such suit, action or proceeding, shall not con sent to the entry of any
judgment or decree except with the written consent of the Purchaser and
the Company, nor enter into any settlement (except the written consent
of the Purchaser and the Company) which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
the Purchaser and the Company of a release from every liability in
respect of such claim, suit, action or proceeding. In any defense of
any claim by a third party, the Purchaser and the Company shall have
the right (but shall not be obligated) to participate in such defense
through counsel of its own selection and at its own expense.
(c) LIMITATIONS ON LIABILITY OF THE SHAREHOLDERS.
(1) Notwithstanding any of the provisions of Section 10,
Purchaser agrees not to make claims for Losses hereunder unless
and until the aggregate of such claims exceeds Seventy-five
Thousand and No/100 Dollars ($75,000.00) (the "Indemnification
Threshold"); provided however, that (i) the Indemnification
Threshold shall not be applicable to claims by Purchaser or the
Company for Losses arising from a breach by any Shareholder of
Sections 3(a), 3(b), 3(d) and 3(g), and any claim arising from a
breach of any provision of any such Section shall not be taken
into account for purposes of determining when the Indemnification
Threshold has been met; and (ii) in no event shall the
Shareholders' joint and several liability under Section 10 exceed
the aggregate sum of Three Million Five Hundred Thousand Dollars
($3,500,000.00); and (iii) the Shareholders' liability under
Section 10 applies only to claims made against IHI and/or the
Company on or before two (2) years from and after the Closing
Date (the "Expiration Date").
(2) Any claim for indemnification for damages resulting from
Losses ("Damages") hereunder shall be offset or reduced by the
amount of any tax or insurance proceeds received by the
indemnified person as a result of the event giving rise to such
Damages, even though such benefit may arise after the Expiration
Date. The indemnified person shall act in good faith and in
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a commercially reasonably manner to mitigate any Damages for
which it may seek indemnification under this Section 10.
(d) OTHER RIGHTS AND REMEDIES NOT AFFECTED. The foregoing
indemnification provisions are in addition to any statutory equitable
or common law remedy Purchaser may have for breach of representations,
warranties, covenants or agreements.
11. EXPENSES. The Shareholders and the Purchaser shall pay their or its
own expenses (including without limitation counsel and accounting fees and
expenses) incident to the preparation and carrying out of this Agreement and the
consummation of the transactions contemplated hereby.
12. NOTICES. All notices, demands and requests which may be given or
which are required to be given by either party to the other, and any exercise of
a right of termination provided by this Agreement, shall be in writing and shall
be deemed effective when either: (i) personally delivered to the intended
recipient; (ii) sent by certified or registered mail, return receipt requested,
addressed to the intended recipient at the address specified below; (iii)
delivered in person to the address set forth below for the party to which the
notice was given; (iv) deposited into the custody of a nationally recognized
overnight delivery service such as Federal Express Corporation, Emery or
Purolator, addressed to such party at the address specified below; or (v) sent
by facsimile, telegram or telex, provided that receipt for such facsimile,
telegram or telex is verified by the sender and followed by a notice sent in
accordance with one of the other provisions set forth above. Notices shall be
effective on the date of delivery or receipt, of, if delivery is not accepted,
on the earlier of the date that delivery is refused or three (3) days after the
date the notice is mailed. For purposes of this Paragraph, the addresses of the
parties for all notices are as follows (unless changes by similar notice in
writing are given by the particular person whose address is to be changed):
(a) if to the Shareholders, to the address of such Shareholders as
shown in Table I with a copy to: Barry J. Sallinger, 820 East St. Mary
Blvd., Suite 1, Lafayette, Louisiana 70503;
(b) or if to the Purchaser, to 7135 Ardmore, Houston, Texas 77054,
Attn: Christine A. Smith, Vice President, with a copy to: Lawrence J.
Fontana, Stumpf Falgout Craddock & Massey, P.C., 1400 Post Oak
Boulevard, Suite 400, Houston, Texas 77056.
Any party hereto may designate a different address by written notice given to
the other parties.
13. SATISFACTION OF CONDITIONS; TERMINATION.
(a) BEST EFFORTS TO SATISFY CONDITIONS. The Shareholders agree to use
their best efforts to bring about the satisfaction of the conditions
specified in Section 6
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hereof, and the Purchaser agrees to use its best efforts to bring about
the satisfaction of the conditions specified in Section 7 hereof.
(b) TERMINATION. This Agreement may be terminated, without liability on
the part of any party hereto to any other party hereto, by:
(i) the Board of Directors of the Purchaser, if a material
default shall be made by any Shareholder in the observance or in
the due and timely performance by such Shareholder of any of the
covenants of such Shareholder herein contained, or if there shall
have been a material breach by any Shareholder of any of the
warranties and representations of such Shareholder herein
contained, or if the conditions of this Agreement to be complied
with or performed at or before the Closing shall not have been
complied with or performed at the time required for such
compliance or performance and such non-compliance or
non-performance shall not have been waived by the Purchaser; or
(ii) the Shareholders, if a material default shall be made by the
Purchaser in the observance or in the due and timely performance
by the Purchaser of any of the covenants of the Purchaser herein
contained, or if there shall have been a material breach by the
Purchaser of any of its warranties and representations herein
contained, or if the conditions of this Agreement to be complied
with or performed by the Purchaser at or before the Closing shall
not have been complied with or performed at the time required for
such compliance or performance and such non-compliance or
non-performance shall not have been waived by the Shareholders.
In the event of termination by the Purchaser or the Shareholders as provided
above, written notice shall forthwith be given to the other party.
14. MISCELLANEOUS.
(a) ASSIGNMENT. This Agreement may not be assigned by any party hereto
without the prior written consent of the other parties, provided,
however, the Purchaser shall have the right at any time prior to
Closing to assign this Agreement to a corporation wholly-owned by the
Purchaser. Subject to the foregoing, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns and the heirs, executors,
administrators and personal representatives of the Shareholders.
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(b) SECTION AND PARAGRAPH HEADINGS. The Section and Paragraph headings
of this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
(c) AMENDMENT. This Agreement may be amended only by an instrument in
writing executed by the parties hereto.
(d) ENTIRE AGREEMENT. This Agreement and the exhibits, Schedules,
certificates and documents referred to herein constitute the entire
agreement of the parties, and supersede all understandings with respect
to the subject matter hereof.
(e) PUBLIC ANNOUNCEMENTS. No publication and/or press release of any
nature shall be issued pertaining to this Agreement or the transaction
contemplated hereby without the prior written approval of the
Purchaser, except as may be required by law.
(f) COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which shall constitute
one and the same instrument.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS, AND VENUE FOR ANY
DISPUTE ARISING HEREUNDER SHALL BE IN HARRIS COUNTY, TEXAS, AND THE
PARTIES HERETO IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURTS OF
THE STATE OF TEXAS.
(h) JOINDER OF SPOUSES. The Shares owned by each Shareholder constitute
the separate property of each such Shareholder, however, their spouses
join herein pro forma, to acknowledge that they are fully aware of,
understand and fully consent to the provisions of this Agreement and
its binding effect on the community property interests, if any, they
may own in the Shares owned by their respective spouse, and that their
respective awareness, understanding and agreement is evidenced by their
respective signatures to this Agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties as of the date and year first above written.
PURCHASER:
INDUSTRIAL HOLDINGS, INC.
By: /S/ CHRISTINE A. SMITH
Christine A. Smith, Vice
President
SPOUSES: SHAREHOLDERS:
/S/ JUDY DAWES /S/ BRANDON ALAN DAWES
JUDY DAWES BRANDON ALAN DAWES
/S/ MINDY DAWES /S/ DAVID SCOTT DAWES
MINDY DAWES DAVID SCOTT DAWES
/S/ THERESA DAWES /S/ JIMMY M. DAWES
THERESA DAWES JIMMY M. DAWES
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