EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
INDUSTRIAL HOLDINGS, INC.,
AND
XXXXXX X. XXXXX
covering the stock of
LSS-LONE STAR-HOUSTON, INC.
Dated effective February 1, 1997
Ex-1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") executed effective
February 1, 1997, by and between INDUSTRIAL HOLDINGS, INC., a Texas corporation,
or its assigns (the "Purchaser"), and XXXXXX X. XXXXX, an individual, being the
sole shareholder (the "Shareholder"), in LSS-LONE STAR-HOUSTON, INC., a Texas
corporation (the "Corporation").
W I T N E S S E T H:
WHEREAS, the Shareholder is the owner of one thousand (1,000) shares of
Common Stock, $1.00 par value of the Corporation, which shares represent one
hundred (100%) percent of the issued and outstanding shares of capital stock of
the Corporation (herein collectively referred to as the "Shares"); and
WHEREAS, the Shareholder desires to sell all of the Shares to the
Purchaser, 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:
Section 1. SALE AND PURCHASE OF THE SHARES. The Shareholder, upon and
subject to the terms and conditions set forth herein, hereby agrees to sell,
assign and convey to the Purchaser, free and clear of all security interests,
pledges, liens, charges and encumbrances, all the Shares, and the Shareholder
hereby agrees to transfer and deliver to the Purchaser at the Closing the
certificates evidencing the Shares, duly endorsed in blank or accompanied by
stock powers duly executed in blank. The Purchaser, upon and subject to the
terms and conditions set forth herein, hereby agrees to purchase and accept the
Shares for the consideration set forth in Section 2 hereof.
Section 2. PURCHASE PRICE. The purchase price for the Shares shall be paid
to the Shareholder by the Purchaser as follows:
a. the sum of Three Million Five Hundred Thousand and No/100 Dollars
($3,500,000.00) shall be payable to the Shareholder at the Closing by
cashier's check or wire transfer;
b. the sum of Five Hundred Thousand and No/100 Dollars ($500,000.00)
shall be evidenced and paid in accordance with the terms of a promissory
note (the
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"Note"), payable to the Shareholder, such Note to be in substantially the
form of EXHIBIT "A" attached hereto with the blanks appropriately
completed and to be payable as follows: the Note shall bear interest at
the rate of eight (8%) percent per annum and be payable in twenty (20)
equal quarterly installments of principal and accrued interest each in the
amount of $30,574.86 (based upon a five [5] year amortization of the
Note), commencing on April 1, 1997, with a final payment of the unpaid
principal balance and accrued interest being due and payable on the
twentieth (20th) quarterly payment date; the Note shall be prepayable at
any time by the Purchaser without notice, penalty or fee; in the event
Shareholder dies prior to the final payment of the Note in full, Purchaser
shall continue to make such quarterly payments thereon to the
Shareholder's estate;
c. the Shareholders shall receive, as partial payment of the
Purchase Price, eighty-four thousand two hundred eleven (84,211) shares of
Purchaser's Common Stock, $0.01 par value per share (the "IHI Stock"). The
shares shall be issued in compliance with Regulation D of the Securities
Act of 1933, and the Shareholder hereby agrees to comply with Regulation D
and to execute and deliver such investment letters and other instruments
as the Purchaser's counsel shall reasonably request to insure compliance
with Regulation D. All shares of the IHI Stock issued to the Shareholder
pursuant to this subsection shall be stamped or otherwise imprinted with a
legend in substantially the following form: "The shares of Common Stock
represented by this certificate have not been registered under the
Securities Act of 1933, as amended, or the Securities Act of the State of
Texas. They may not be offered for sale, sold, transferred, pledged or
otherwise disposed of, unless (i) they are registered under the Securities
Act of 1933, as amended, or (ii) if the sale or transfer of such shares is
exempt from the registration provisions of the Securities Act of 1933, as
amended." IHI shall use its best efforts to file or cause to be filed a
Registration Statement on Form S-3 with the Securities and Exchange
Commission on or before June 1, 1997, which Registration Statement shall
include the IHI Stock.
2.1. ADDITIONAL CONSIDERATION. As additional consideration for the
purchase of the Shares for which the Shareholder shall receive direct benefit,
the Purchaser shall cause to be paid in full at Closing those certain financial
obligations of the Corporation listed on SCHEDULE 2.2-A to the Shareholder's
Disclosure Letter and Purchaser shall obtain, in conjunction therewith, a full
release of Shareholder from any personal liability on such financial
obligations. Listed on SCHEDULE 2.2-B to the Shareholder's Disclosure Letter
are, to the best of the Shareholder's knowledge, those liabilities and financial
obligations of the Corporation for which the Shareholder has personal liability,
but which are not to be paid in full by the Purchaser at Closing (the "Schedule
2.2-B Liabilities"). The Schedule 2.2-B Liabilities shall continue in effect
after the Closing and Purchaser shall assume the payment thereof in the ordinary
course. Subject to the provisions of Section 11 below, Purchaser hereby agrees
to indemnify and hold Shareholder harmless of and from any and all claims by the
obligees made against the Shareholder for not only the Schedule 2.2-B
Liabilities, but also for any other liabilities of the Corporation for which the
Shareholder has personal liability (which liabilities
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have not been disclosed herein to Purchaser) for sums owing thereon from and
after the Closing Date.
Section 3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER. The
Shareholder represents and warrants to and agrees with the Purchaser that,
except as contemplated in this Agreement or as set forth in, or by reference in,
the disclosure letter delivered by the Shareholder to the Purchaser prior to the
execution and delivery of this Agreement (collectively, the "Shareholder's
Disclosure Letter"):
Section 3.1. ORGANIZATION AND STANDING OF THE CORPORATION. The
Corporation is a corporation duly incorporated, organized, validly
existing and in good standing under the laws of the State of Texas. The
Corporation has full corporate power and authority to conduct its business
as it is now being conducted and is not qualified to do business as a
foreign corporation in any other jurisdiction. Schedule 3.1 to the
Shareholder's Disclosure Letter contains complete and correct copies of
the Articles of Incorporation including any amendments thereto and By-Laws
of the Corporation as in effect on the date hereof.
Section 3.2. SUBSIDIARIES. The Corporation has one (1) wholly-owned
subsidiary known as Amflow Master Environmental, Inc., a Texas corporation
("Amflow"). Amflow has no subsidiaries. The Corporation does not (i) own,
directly or indirectly, any of the outstanding capital stock or securities
convertible into capital stock of any other corporation (other than
Amflow), or (ii) own, directly or indirectly, any participating interest
in any partnership, joint venture or other business enterprise. The
Financial Statements described in Section 3.4 below include within them
Amflow's income, retained earnings, cash flows, assets and liabilities.
References hereinafter to the Corporation shall include Amflow.
Section 3.3. CAPITAL STOCK. The authorized capital stock of the
Corporation consists of one thousand (1,000) shares of Common Stock, $1.00
par value, of which, on the date of this Agreement all one thousand
(1,000) shares are validly issued and outstanding, fully paid and
nonassessable, one hundred (100%) percent of which are owned by the
Shareholder, free and clear of all liens and encumbrances. The Corporation
has no shares of treasury stock. The Corporation does not have any
outstanding subscriptions, options or other agreements or commitments
obligating it to issue shares of capital stock.
Section 3.4. FINANCIAL STATEMENTS, ETC. The following audited and
unaudited financial statements of the Corporation (which include Amflow)
have been delivered to the Purchaser and are attached as Schedule 3.4 to
the Shareholder's Disclosure Letter:
a. the reviewed (unaudited) balance sheet of the Corporation
(including Amflow) as of December 31, 1995 and 1994 (the "Reviewed
Balance Sheet") and the related statements of income and retained
earnings and cash flows for the years then ended (together with
related notes and schedules), (such balance sheets, the related
statements of income and retained earnings and cash flows, and the
related notes and
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schedules, being hereinafter together referred to as the "Reviewed
Financial Statements"); and
b. the unreviewed, unaudited balance sheet of the Corporation
(including Amflow) as of November 30, 1996 (the "Interim Balance
Sheet") and the related unreviewed, unaudited statement of income
for the eleven (11) month period then ended (together with related
notes and schedules) (such balance sheet and related statements of
income, and the related notes and schedules, being hereinafter
together referred to as the "Interim Financial Statements").
The Reviewed Financial Statements and the Interim Financial Statements
(collectively, the "Financial Statements"), including the related notes and
schedules, have been prepared from the books and records of the Corporation
(including Amflow) in conformity with generally accepted accounting principles
applied by the Corporation (including Amflow) on a basis consistent with
preceding years and throughout the periods involved ("GAAP") and present fairly
the financial position of the Corporation (including Amflow) as of the dates of
such statements, subject with respect to the Interim Financial Statements to
year-end adjustments and to the absence of a physical inventory count and
certain statements, notes and schedules.
The trade accounts and other receivables of the Corporation (including
Amflow) which are classified as current assets on the Reviewed 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 Corporation (including Amflow) reflected on the
Balance Sheets have been valued in accordance with GAAP. There have been no
write-ups of inventories or other assets except as set forth in the
Shareholder's Disclosure Letter.
The Corporation (including Amflow) 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 Shareholder's Disclosure Letter,
and
(iv) those referred to in this Agreement or that exist by
reason of this Agreement.
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The Corporation's (including Amflow's) books of account have been kept in
all material respects in the ordinary course of business in accordance with
GAAP, the transactions entered therein represent bona fide transactions, and the
revenues, expenses, assets and liabilities of the Corporation (including Amflow)
have been properly recorded in such books in all material respects.
Section 3.5. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since November
30, 1996, the Corporation has not:
a. issued, delivered or agreed to issue or deliver any stock,
bonds or other corporate securities (whether authorized and unissued
or held in the treasury) or granted or agreed to grant any options,
warrants or other rights calling for the issuance thereof;
b. borrowed or agreed to borrow any funds or incurred, or
become subject to, any obligation or liability (absolute or
contingent) except in the ordinary course of business;
c. paid any obligation or liability (absolute or contingent)
other than current liabilities reflected in or shown on the
Corporation's Financial Statements (or the notes thereto) and
obligations or liabilities incurred since the date thereof and
permitted to be so incurred by the foregoing clause (b) of this
Section 3.5;
d. declared or made, or agreed to declare or make, any payment
of dividends or distribution of any assets of any kind whatsoever to
the Shareholder, or purchased or redeemed any shares of its capital
stock;
e. sold or transferred, or agreed to sell or transfer, any of
its assets, properties or rights, or cancelled or agreed to cancel,
any debts or claims, in each case except in the ordinary course of
business;
f. entered or agreed to enter into any agreement or
arrangement granting any preferential rights to purchase
substantially all of the assets, properties or rights of the
Corporation (including management and control thereof), or requiring
the consent of any party to the transfer and assignment of such
assets, properties or rights (or changes in management or control
thereof), or providing for the merger or consolidation of the
Corporation with or into another corporation;
g. suffered any material losses or waived any rights of
material value, except for those losses suffered in the months of
November and December of 1996 which have been disclosed to the
Purchaser in the Interim Financial Statements;
h. except in the ordinary course of business, made or
permitted any amendment or termination of any contract, agreement or
license to which it is a party;
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i. other than making year-end bonus payments totaling
$78,000.00 to the Corporation's employees for 1996, the Corporation
has not made any accrual or arrangement for a payment of bonuses or
special compensation of any kind or any severance or termination pay
to any present or former officer or employee;
j. increased the rate of compensation payable or to become
payable by it to any of its officers or key employees compensated at
a rate in excess of $15,000 per annum; or made any increase in any
profit sharing, bonus, incentive, deferred compensation, insurance,
pension, retirement or other employee benefit plan, payment or
arrangement made to, for or with any such officers or key employees;
k. made any capital expenditures or commitments therefor
aggregating more than $10,000, or committed to purchase inventories,
parts, supplies or other items in excess of its normal, ordinary and
usual requirements or at excessive prices, all computed based on
historical practices of the Corporation;
l. experienced any significant labor trouble; or
m. suffered any damage, destruction or loss, whether or not
covered by insurance, which materially and adversely affects its
assets or business, or had any material adverse change in the
business, operations, financial condition or prospects of the
Corporation.
Between the date hereof and the Closing, the Shareholder shall not permit
the Corporation to do any of the things listed in Clauses (a) through (m)
of this Section 3.5 without the prior written consent of the Purchaser,
which consent will not be unreasonably withheld, except as otherwise
permitted by this Agreement.
Section 3.6. TAX MATTERS. The Corporation has filed when due,
including any extensions, all federal, state, county and local income,
payroll, corporate franchise, sales, excise and use and ad valorem tax
(collectively, "Tax") reports and returns in connection with the
Corporation's business, assets and employees, and has paid and discharged
all Taxes related to the assets or the business of the Corporation for the
periods covered by such returns shown thereon to be due. The Corporation
has made available to the Purchaser, to the extent requested by the
Purchaser, all Tax reports and returns of the Corporation for all periods
ending prior to the date hereof. The current liability for Federal, state
and local taxes reflected on the Financial Statements, if any, represents
at the date thereof, reasonable and adequate provision for the payment of
all accrued and unpaid current Federal, state and local taxes of the
Corporation based upon the Corporation's tax structure. No assessments of
defi ciencies have been made against the Corporation, and no extensions of
time are in effect for the filing of any returns or the assessment of
deficiencies. No examinations by the Internal Revenue Service of the
Federal income tax returns of the Corporation for any taxable year are
presently pending. In the event that after the Closing, a deficiency is
determined in the
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amount of Federal, state or local tax payable by the Corporation, which
deficiency relates to periods prior to the Effective Date of Closing, then
in that event, the Shareholder, in the manner set forth in Section 10
hereof, shall be fully responsible for and shall indemnify and hold the
Purchaser and the Corporation harmless from the payment of any such
deficiency, tax liability, penalty, interest, loss, costs, expenses or
claim (including attorney and accoun tant fees) with respect thereto.
The Corporation has not received notice of any Tax deficiency
outstanding, proposed or assessed against or allocable to the Corporation,
nor has the Corporation executed any waiver of any statute of limitations
on the assessment or collection of any Tax.
Section 3.7. CONTRACTS AND COMMITMENTS. Schedule 3.7 to the
Shareholder's Disclosure Letter is a complete and accurate listing of all
mortgages, liens, licenses, leases, sales representation agreements,
purchase orders (with unexpired terms of more than 12 months) and all
other executory contracts, undertakings, commitments and agreement of the
Corporation, to which or by which it is bound, whether written or oral,
(i) entered into in the ordinary course of business involving the payment
by or to the Corporation of more than $20,000.00 in the aggregate with
respect to any such contract, undertaking, commitment or agreement, (ii)
entered into other than in the ordinary course of business, or (iii) with
any of Shareholder's Affiliates (the "Contracts"). For the purposes of
this Agreement, the term "Shareholder's Affiliates" shall include all
"affiliates" of the Shareholder as such term is defined in the rules and
regulations promulgated by the Securities and Exchange Commission under
the Securities Act of 1933, as amended. All of the Contracts have been
duly executed by the Corporation, are currently in effect, are valid and
binding upon the Corporation and are enforceable in accordance with their
terms. Neither the Corporation nor the Shareholder is aware of any facts
that would prevent the performance of any of the Contracts. Neither the
Corporation 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 Corporation or
any such other party. The Corporation has committed no act and there has
been no omission which will result in the breach by it of any Contract and
there has been no occurrence which will give rise to product liability or
breach of warranty, not covered in full by insurance, on the part of the
Corporation arising out of products sold, designed, manufactured,
assembled, repaired, maintained, delivered or installed or services
rendered by the Corporation prior to the Closing.
Section 3.8. REAL AND PERSONAL PROPERTY AND RELATED MATTERS.
Schedule 3.8 to the Shareholder's Disclosure Letter is a complete list of
all real property and improvements, and all personal property (including
all major items of furnishings, equipment and automobiles) owned by the
Corporation. The assets reflected in Schedule 3.8 to the Shareholder's
Disclosure Letter and in the Corporation's Financial Statements were, at
the date thereof, and, except for assets consumed or disposed of in the
ordinary course of business since the date thereof, are now owned by the
Corporation by good and marketable title, free and clear from all security
interests, mortgages, liens, claims, defects and encumbrances except
liens, charges or encumbrances discussed or referred to in the
Corporation's Financial Statements, the
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related notes or schedules thereto or in Schedule 3.8 to the Shareholder's
Disclosure Letter. All such assets are in good operating condition and
repair, subject to ordinary wear and tear. All of such assets (including
the Real Estate, as hereinafter defined) have been properly maintained,
with no extraordinary maintenance planned or anticipated, and are adequate
and sufficient for the operation of the Corporation's business as
historically operated by the Corporation. There are no material capital
expenditures currently contemplated or necessary to maintain the current
operation of the Corporation's business. Schedule 3.8-1 to the
Shareholder's Disclosure Letter lists those certain motor vehicles
currently used in the operation of the Corporation's business but which
are titled in the Shareholder's name personally. Shareholder agrees that
prior to the Closing, she shall convey title to such motor vehicles to the
Corporation.
Section 3.9. LITIGATION AND PROCEEDINGS. There are no actions, suits
or proceedings pending or, to the knowledge of the Shareholder, threatened
against or affecting the Corporation or the Shareholder, at law or in
equity, or before or by any governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, or before any
arbitrator of any kind, which involve the possibility of any judgment or
liability not fully covered by casualty or liability insurance; and the
Corporation is not in default with respect to any judgment, order, writ,
injunction, decree, award, rule or regulation of an court, arbitrator or
governmental department, commission, board, bureau, agency or
instrumentality. The Corporation has complied in all respects with all
applicable Federal, state, municipal and other political subdivision or
governmental agency statutes, ordinances and regulations, including
without limitation, those imposing taxes, in every applicable
jurisdiction, in respect of the ownership of its properties and the
conduct of its business.
Section 3.10. INSURANCE COVERAGE. Schedule 3.10 to the Shareholder's
Disclosure Letter is a list of all policies and contracts of insurance,
including hospitalization, life, property, liability and worker's
compensation, showing policy limits, expiration dates, types of coverage
and names of insured. The Corporation maintains policies of casualty,
liability, use and occupancy, and other forms of insurance with reputable
and financially sound insurers, covering its properties and assets in
amounts and against such losses and risks as are generally maintained for
comparable businesses and properties, and valid policies for such
insurance are now duly in force.
Section 3.11. EMPLOYEES, COMPENSATION AND BENEFITS. Schedule 3.11 to
the Shareholder's Disclosure Letter is a list of all bonus, incentive,
compensation, disability pension, profit sharing, group insurance or
employee welfare plans of any nature whatsoever (collectively, the
"Plans"); and all employment contracts and all other contracts, agreements
or commitments to or with individual employees or agents extending for a
period of more than thirty (30) days from the date thereof or providing
for earlier termination only upon the payment of a penalty, severance pay
or an equivalent thereof.
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a. There are no written employment agreements in effect
between the Corporation and any of its employees and no collective
bargaining agreements covering any such employees. The Corporation's
employees are not members of a collective bargaining group and no
union organizing activities are in process or contemplated. The only
pension, profit sharing or other retirement plan, whether or not
qualified, in effect by the Corporation is the Corporation's 401(k)
Plan, a true and complete copy of this has been provided to the
Purchaser. The Corporation does not contribute or have any
obligation to make any payments or contributions to a multi-employer
plan, as that term is defined in Section 3(37) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and
the Corporation does not have any actual or potential liability
under Section 4201 of ERISA for any complete or partial withdrawal
from a multi-employer plan.
b. The Corporation is in compliance with all applicable laws
respecting employment and employment practices, terms and conditions
of employment and wages and hours of employees, and there is no
labor strike, dispute, slowdown or representation campaign or
work-stoppage pending or threatened with respect to employees of the
Corporation, nor has the Corporation experienced any of the
foregoing within the preceding three (3) years.
c. There is not any, pending or threatened, any unfair labor
practice complaint against the Corporation pending before any
relevant authority or union representation petition respecting the
employees of the Corporation. The Shareholder shall be fully
responsible for and shall indemnify and hold the Purchaser and the
Corporation harmless from any and all losses, damages, claims,
costs, and expenses (including attorney and accountant fees) with
respect to any such complaints.
d. The Plans comply in all respects with the requirements of
all applicable laws. There are no actions, suits, claims or
investigations pending or threatened with respect to any Plan. There
is no liability required to be accrued under the Plans except to the
extent reflected in the Corporation's Financial Statements. The
Corporation has made or set aside funds to make full payment of all
amounts which the Corporation is required to pay prior to the date
hereof under the terms of each Plan, or under any governmental rule
or regulation relating to employment matters. No termination of any
Plan by the Corporation at or prior to the Closing has resulted or
will result in the imposition of any liability on the Corporation.
e. Each "Group Health Plan" (within the meaning of Section
162(i)(3) of the Internal Revenue Code of 1986) maintained by the
Corporation has, as of the first day of each Group Health Plan's
first plan year beginning on or after September 1, 1987, been
administered in good faith compliance with the reasonable
interpretation of the continuation coverage requirements contained
in Title X of the Consolidated Omnibus Budget Reconciliation Act of
1985 (COBRA).
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Section 3.12. PATENTS, TRADEMARKS AND LICENSES. Schedule 3.12 to the
Shareholder's Disclosure Letter contains a complete and accurate list of
all domestic and foreign patents, patent applications, licenses,
trademarks, trademark applications, trade names, trade name applications,
copyrights and copyright applications owned by or licensed to the
Corporation or in which the Corporation has any right or interest
whatsoever, all of which are valid and in good standing. The Corporation
owns or has all rights necessary to use all patents, inventions,
trademarks and copyrights necessary for the conduct of its business as
currently conducted, and the conduct of such business does not conflict
with or infringe upon any patent, trademark, trade name, trade secret or
copyright of others. The Corporation has received no notice of any claim
of infringement or other complaint that its operations conflict with or
infringe upon the patents, trade names, trademarks, trade secrets or
copyrights of others.
Section 3.13. ENVIRONMENT AND HEALTH.
a. The real estate and improvements thereon owned and/or
leased by the Corporation located at 00000 Xxxxx Xxxx, Xxxxxx, Xxxxx
00000, more particularly described in Schedule 3.13 of the
Shareholder's Disclosure Letter (hereinafter collectively referred
to as the "Real Estate") and its existing uses comply, and the
Corporation is not in violation of, and has not violated, in
connection with the ownership, use, maintenance or operation of the
Real Estate and the conduct of the Corporation's business
operations, any applicable statutes, laws, rules, regulations,
ordinances, codes, licenses or permits of any governmental
authorities relating to environmental matters including without
limitation the Comprehensive Response, Compensation and Liability
Act of 1980, the Resource Conservation and Recovery Act of 1976, and
the Toxic Substance Control Act of 1976.
b. The Corporation has (i) operated the Real Estate and has at
all times received, handled, used, stored, treated, shipped and
disposed of all hazardous and toxic substances, petroleum products
and waste in compliance with all applicable environmental, health or
safety statutes, ordinances, orders, rules, regulations and
requirements, and (ii) removed from and off the Real Estate all
hazardous or toxic substances, petroleum products and waste.
c. There are no statutes, orders, rules or regulations
relating to environmental matters requiring any work, repairs,
construction or capital expenditures with respect to any of the Real
Estate, nor has the Corporation received any notice of any of the
same.
d. Except in compliance with all applicable environmental
health or safety statutes, ordinances, rules or regulations, no
hazardous or toxic materials, substances, pollutants, contaminants
or wastes have been released into the environment, or deposited,
discharged, placed or disposed of at, on or near the Real Estate by
the
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Corporation, nor has the Real Estate been used at any time by the
Corporation as a landfill or a waste disposal site. No asbestos,
urea formaldehyde or polychlorinated biphenyls are present on the
Real Estate. There have never been any underground storage tanks
located at the Real Estate.
e. No notices of any violation of any of the matters referred
to in subsections (a) through (d) of this Section 3.13 relating to
Real Estate or its use have been received by the Corporation. There
are no writs, injunctions, decrees, orders or judgments outstanding
and no lawsuits, claims, proceedings or investigations pending or
threatened, relating to the ownership, use, maintenance or operation
of any of the Real Estate and there is no basis for the institution
of filing of any such lawsuit, claim, proceeding or investigation.
f. No employee of the Corporation has submitted a claim to the
Corporation or filed suit alleging that such employee suffers from
chronic injury or illness resulting from exposure to toxic
substances, hazardous substances or manufacturing processes used in
connection with the Corporation's business or present at the place
of business of the Corporation.
Section 3.14. LICENSES, PERMITS AND AUTHORIZATIONS. Schedule 3.14 to
the Shareholder's Disclosure Letter is a list of each permit, license or
similar authorization from any governmental authority issued with respect
to the operation or ownership of the Corporation, and which is material to
the operation or ownership of such properties with the expiration dates of
each. All such licenses, permits, approvals, consents and other
governmental or regulatory authorizations held by the Corporation are
valid and sufficient for all business conducted by it (including all
permits necessary for the operation and use of the Real Estate and for the
disposal of any wastes or other substances generated or used in the
operation of the Corporation's business or the Real Estate). The
Corporation's business is being conducted in compliance with all
applicable laws, ordinances, rules and regulations of all governmental
authorities, including, without limitation, export rules and regulations.
Section 3.15. AMERICANS WITH DISABILITIES ACT. The Corporation has
not received notice of any violation by the Corporation, and the
Corporation is not in violation of and has not been in violation of, the
Americans with Disabilities Act, including rules and regulations
thereunder, or any other federal, state, local or foreign laws, including
rules and regulations thereunder, regulating or otherwise affecting
persons with disabilities.
Section 3.16. INVENTORIES. None of the inventories of the
Corporation are obsolete, defective or otherwise not saleable in the
ordinary course of business. The levels of the inventories currently on
hand are not in excess of or less than that necessary for the operation of
the Corporation's business in the ordinary course of business consistent
with past practices of the Corporation.
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Section 3.17. NON-OWNED PROPERTY. All tangible personal property
located at the Corporation's facility situated on the Real Estate is owned
by the Corporation and has been included in the Corporation's Financial
Statements.
Section 3.18. GUARANTEES, ETC. BY THE CORPORATION. The Corporation
has not given any guarantee, indemnity, warranty or bond, or incurred any
other similar obligation or created any security for or in respect of,
liabilities, actual or contingent, of any other person.
Section 3.19. OSHA. The Corporation has not received notice of any
violation by the Corporation, and the Corporation is not in violation of
and has not been in violation of, the Occupational Safety and Health Act
of 1970, including rules and regulations thereunder, or any other federal,
state, local or foreign laws, including rules and regulations thereunder,
regulating or otherwise affecting employee health and safety.
Section 3.20. CUSTOMERS. The Shareholder does not have any knowledge
or information or reason to believe that any of the Corporation's
customers has ceased, or intends to cease, to acquire products or services
from the Corporation or has reduced, or intends to reduce, the use of the
products or services sold by the Corporation for any reason or as a result
of the transaction contemplated by this Agreement.
Section 3.21. OFFICERS, DIRECTORS AND EMPLOYEES. Schedule 3.21 to
the Shareholder's Disclosure Letter contains a list of all officers and
directors of the Corporation, and all employees whose aggregate
remuneration is in excess of $20,000.00 per year. There are no amounts
owed to any officer, director or employee of the Corporation other than as
reflected in the Corporation's Financial Statements for the periods
covered thereby. No officer, director or employee of the Corporation, or
any affiliate of the Corporation, owns, directly or indirectly,
beneficially or otherwise, any interest in, or is an employee, officer or
director of, or a consultant, agent for or representative of, any
customer, competitor or supplier of the Corporation.
Section 3.22. ABSENCE OF ADVERSE AGREEMENTS. The Corporation is not
a party to any instrument or subject to any charter or other corporate
restriction or any judgment, order, writ, injunction, decree, award, rule
or regulation which materially and adversely affects the business,
properties, assets or condition, financial or otherwise, of the
Corporation.
Section 3.23. NO DEFAULTS. The Corporation is not in default under,
nor has any event occurred which with notice or lapse of time or both,
could result in a waiver of any material right or default under, any
outstanding indenture, mortgage, contract or agreement to which the
Corporation is a party or by which the Corporation or its assets may be
bound, or under any provision of the Corporation's Articles of
Incorporation or By-Laws (or comparable instruments).
12
Section 3.24. BANKS AND SIGNATORIES. Schedule 3.24 to the
Shareholder's Disclosure Letter contains a list setting forth the name of
each bank, savings and loan or other financial institution in which the
Corporation has any account or safe deposit box, the style and number of
each such account or safe deposit box and the names of all persons
authorized to draw thereon or to have access thereto.
Section 3.25. NO CONFLICTS. The execution and performance of this
Agreement and the transactions contemplated hereby will not violate any
provision of or result in a breach of or constitute a default under the
Articles of Incorporation or By-Laws of the Corporation, or under any law,
or any order, writ, injunction or decree of any court, governmental agency
or arbitration tribunal, or under any contract, agreement or instrument to
which the Corporation is a party or by which its properties may be bound.
Section 3.26. BOOKS AND RECORDS. The books and records of the
Corporation are in all material respects complete and correct and have
been maintained in accordance with good business practice and reflect a
true record of all meetings or proceedings of the Board of Directors and
shareholders of the Corporation.
Section 3.27. BROKERS. The Corporation and/or the Shareholder is a
party to and is obligated only under a contract for the payment of a
broker's or finder's fee to Mezzanine Financial Relations, Inc. (the
"Shareholder's Broker") in connection with the origin, negotiation,
execution or performance of this Agreement. The Purchaser hereby agrees to
assume the full payment obligation, and shall pay at the Closing, for the
benefit of the Corporation and/or Shareholder, the broker's or finder's
fee due to Shareholder's Broker.
Section 3.28. INSPECTIONS. Between the date hereof and the date of
Closing, the Shareholder shall afford the Purchaser and its agents the
opportunity to make full and complete inspection of (i) the Corporation's
books and records (including without limitation, the Corporation's
Financial Statements, tax returns, accounts receivable, accounts payable,
etc.), (ii) the Corporation's assets (including without limitation, the
inventory and tangible and intangible personal property) and (iii) the
Real Estate (including all mechanical equipment, the roof, the structural
integrity of the improvements on the Real Estate, the interior of the
improvements and the environmental condition of the Real Estate).
Section 3.29. TITLE TO SHARES AND AUTHORITY. The Shareholder has
valid and marketable title to the Shares, free and clear of any security
interests, pledges, liens or similar encumbrances, and the Shareholder has
full right, power and authority and due authorization to sell and transfer
such Shares hereunder, and upon the delivery of and payment for such
Shares the Shareholder will transfer to the Purchaser valid and marketable
title thereto, free and clear of any security interests, pledges, liens or
similar encumbrances. This Agreement constitutes the valid and legally
binding obligation of the Shareholder, enforceable in accordance with its
terms.
13
Section 3.30. DISCLOSURE. Neither this Agreement, the Schedules
attached hereto, nor any other document furnished by the Corporation or
the Shareholder to the Purchaser contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements contained herein and therein not misleading, and except as
disclosed herein or therein, there is no fact (other than matters of a
general economic or a political nature which do not effect the business of
the Corporation uniquely) known to the Shareholder which materially
adversely effects or in the future can be reasonably expected to
materially adversely effect the properties, business, operations or
financial condition or prospects of the Corporation.
Section 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants to and agrees with the Shareholder that:
Section 4.1. ORGANIZATION, STANDING AND AUTHORITY OF THE PURCHASER.
The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas, and has full corporate
power and authority to conduct its business as it is now being conducted,
to enter into and carry out the provisions of this Agreement.
Section 4.2. NO VIOLATION. Neither the execution and delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any provision of the Articles of Incorporation or
By-Laws of the Purchaser, (ii) violate any provision of any agreement or
other obligation to which the Purchaser is a party or by which the
Purchaser is bound or to which its assets are subject, or (iii) violate or
result in a breach of, constitute a default under, any judgment, order,
decree, rule or regulation of any court or governmental agency to which
the Purchaser is subject.
Section 4.3. CORPORATE PROCEEDINGS OF THE PURCHASER. The execution,
delivery and performance of this Agreement has been authorized by the
Board of Directors of the Purcha ser, and this Agreement constitutes the
valid and legally binding obligation of the Purchaser, enforceable in
accordance with its terms.
Section 4.4. BROKERS. Except as set forth in Section 3.27 above, the
Purchaser has no outstanding claims against it for the payment of any
broker's or finder's fees in connection with the origin, negotiation,
execution or performance of this Agreement.
Section 5. CONDITIONS TO OBLIGATIONS OF THE PURCHASER. The obligations of
the Purchaser to consummate the transaction contemplated hereby shall be subject
to the satisfaction, on or before the Closing, of all of the following
conditions unless expressly waived in writing by the Purchaser:
Section 5.1. REPRESENTATIONS AND COVENANTS. All representations and
warranties of the Shareholder contained in this Agreement shall be true in
all respects on and as of the Closing as if such representations and
warranties were made on and as of such date (except to the extent any such
representation or warranty is made as of a specified date), and the
14
Shareholder shall have performed all agreements and covenants to be
performed by him on or prior to the Closing.
Section 5.2. OTHER LEGAL MATTERS. Legal matters in connection with
this Agreement and the transaction contemplated hereby shall have been
approved by Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, counsel for the Purchaser,
and the Shareholder shall have furnished to such counsel originals of such
corporate records of the Corporation and copies of such other documents as
such counsel may reasonably have requested for such purpose.
Section 5.3. ENVIRONMENTAL CONDITION. The environmental condition of
the Real Estate has been approved by the Purchaser and its advisors.
Section 5.4. 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.
Section 5.5. CLOSING RESPONSIBILITIES. The Shareholder shall have
delivered or caused to be delivered each of the items described in Section
7.3 hereof.
Section 5.6. REGULATORY APPROVAL. Purchaser, Shareholder and the
Corporation shall have received from appropriate third parties and
regulatory agencies, any and all approvals necessary to consummate the
transaction evidenced by this Agreement.
Section 5.7. APPROVAL OF PURCHASER'S BOARD OF DIRECTORS. Purchaser's
Board of Directors shall have formally approved the terms of this
Agreement.
Section 5.8. NO DAMAGE OR DESTRUCTION. Prior to the Closing Date,
there shall not have occurred any casualty to any facility, property,
equipment or inventory owned or used by the Corporation as a result of
which either a. the monetary amount of damage or destruction aggregates
five (5%) percent or more of the aggregate book value shown on the books
of account of the entire facilities, properties, equipment and inventory
of the Corporation, or b. the total monetary amount of damage or
destruction is less than five (5%) percent of the aggregate book value
shown on the books of account of the entire facilities, properties,
equipment and inventory of the Corporation, but more than $50,000, and
such loss shall not be substantially covered by valid, existing insurance
underwritten by responsible insurers.
Section 6. CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDER. The obligation of
the Shareholder to consummate the transaction contemplated hereby shall be
subject to the satisfaction, on or before the Closing, of all of the following
conditions, unless expressly waived in writing by the Shareholder:
15
Section 6.1. REPRESENTATIONS AND COVENANTS. All representations and
warranties of the Purchaser contained in this Agreement shall be true in
all material respects on and as of the Closing as if such representations
and warranties were made on and as of such date and the Purchaser shall
have performed all agreements and covenants to be performed by it on or
prior to the Closing.
Section 6.2. OTHER LEGAL MATTERS. Legal matters in connection with
this Agreement and the transaction contemplated hereby shall have been
approved by O'Donnell, Ferebee, XxXxxxxxx & Stone, counsel for the
Shareholder and the Corporation, and the Purchaser shall have furnished to
such counsel originals of such corporate records of the Purchaser and
copies of such other documents as such counsel may reasonably have
requested for such purpose.
Section 6.3. CLOSING RESPONSIBILITIES. The Purchaser shall have
delivered or caused to be delivered each of the items described in Section
7.4 hereof.
Section 7. COVENANT AGAINST COMPETITION. The Shareholder agrees that from
and after the Effective Date of Closing, it will not, directly or indirectly,
except on behalf of the Purchaser, for a period ending two (2) years after the
date on which Shareholder's employment by the Corporation and/or the Purchaser
pursuant to the terms of the Shareholder's Employment Agreement (as hereinafter
defined) is terminated (but not to exceed the maximum period allowed by law):
a. own, operate, engage in or be interested, affiliated or connected
with (other than by purchasing securities on a national security exchange
or established over the counter market) any person, firm, the Corporation
or other entity (except the Purchaser, the Corporation or any subsidiary
thereof) operating or purporting to operate a business within the State of
Texas which is engaged in the manufacture or distribution to third parties
of fasteners of the type currently being produced by the Corporation or of
a type which may be produced by the Corporation during the Shareholder's
tenure as its President;
b. solicit or accept (either on his own account or as the agent of
another person) the business of any person in the state of Texas who has
been a customer of the Corporation for such goods or services during the
period of twelve (12) months prior to the Closing Date, in connection with
holding of inventory, manufacturing or distributing to third parties of
fasteners of the type currently being produced by the Corporation or of a
type which may be produced by the Corporation during the Shareholder's
tenure as its President;
c. induce, solicit or endeavor to entice any person to leave the
service or employment of the Corporation; or
d. use any trade name used by the Corporation at any time during the
four (4) years immediately preceding the Closing Date or any other name
intended or likely to be confused with such trade name.
16
For the purposes of this Section 7, the term "Affiliates" shall include
all "affiliates" of the Purchaser and/or the Corporation as such terms are
defined in the rules and regulations promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, as amended.
Upon Purchaser's default in the repayment of the Note, which default is
not cured after written notice to Purchaser from Shareholder and the expiration
of a reasonable period of time within which Purchaser has not cured or made a
good faith attempt to cure such default (not less than 30 days), then the
foregoing covenants of Shareholder shall be of no further force or effect.
Provided however, in the event Purchaser later cures such default, then the
foregoing covenants shall also be automatically reinstated as if no default
under the Note had occurred.
The Shareholder hereby acknowledges that the foregoing time and area
restrictions are reasonable in scope and necessary for the protection of the
goodwill of the Corporation and that a breach of this covenant would cause the
Purchaser and the Corporation substantial damage impossible of precise
determination. Accordingly, in addition to such other rights and remedies as may
be available to the Purchaser and the Corporation in the event of any breach,
actual or threatened, of the foregoing provisions of this Section 7, the
Purchaser and the Corporation (or any successor or successors thereof), shall be
entitled to enjoin such breach, actual or threatened. The Shareholder further
agrees 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 anything to the contrary stated in this Section
7, the Purchaser hereby acknowledges that the Shareholder is and shall continue
to be the sole shareholder of Lone Star Screw Company of Houston, Inc., a herms
of this Agreement. Purchaser agrees that the Shareholder and Lone Star Screw
shall be permitted to continue to conduct business with those certain specified
customers of Lone Star Screw listed on Schedule 7 to the Shareholder's
Disclosure Letter (the "Specified Customers") and that such activity shall not
be considered a violation of the provisions of Section 7 above, but only on the
condition that all products sold by Lone Star Screw and the Shareholder to the
Specified Customers shall be purchased by Lone Star Screw from the Corporation
on terms satisfactory to the Corporation.
Section 8. THE CLOSING.
Section 8.1. DATE, TIME AND PLACE. Except as otherwise mutually
agreed by the Purchaser and the Shareholder, the closing (the "Closing")
shall occur at the offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, 0000 Xxxx
Xxx Xxxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000 at 4:00 p.m. local time, on
February 6, 1997, or at such other time and place as the
parties may mutually agree upon.
Section 8.2. EFFECTIVE DATE OF CLOSING. The Closing shall be
effective as of 12:01 a.m. February 1, 1997 (the "Effective Date of
Closing").
17
Section 8.3. THE SHAREHOLDER'S RESPONSIBILITIES AT CLOSING. At the
Closing, the Shareholder shall deliver, or cause to be delivered, to the
Purchaser the following:
a. STOCK CERTIFICATES. The certificates evidencing the Shares,
duly en dorsed in blank, or accompanied by stock powers duly
executed in blank.
b. RESIGNATIONS. The resignations of those officers and
directors of the Corporation as may be requested by the Purchaser.
c. CORPORATE RECORDS. The minute books, stock certificate
books, corporate seals and other corporate books, records, data and
papers of the Corporation, and the original deed and Owner's Policy
of Title Insurance for the Real Estate.
d. CERTIFICATE OF THE SHAREHOLDER. A Certificate executed by
the Shareholder confirming the satisfaction of the conditions set
forth in Section 6.1.
e. EMPLOYMENT AGREEMENTS. An employment agreement between the
Shareholder and the Corporation in the form attached hereto as
EXHIBIT "B-1" (the "Shareholder's Employment Agreement"), and an
employment agreement between Xxxxxx X. Xxxxx and the Corporation in
the form attached hereto as EXHIBIT "B-2" (the "Xxxxxx Xxxxx
Employment Agreement").
f. OPINION OF COUNSEL. The opinion of O'Donnell, Ferebee,
XxXxxxxxx & Xxxxx, counsel for the Shareholder and the Corporation,
dated the Closing Date, in the form attached as EXHIBIT "C" to this
Agreement.
Section 8.4. THE PURCHASER'S RESPONSIBILITIES AT CLOSING. At the
Closing, the Purchaser shall deliver, or cause to be delivered, to the
Shareholder:
a. PURCHASE PRICE. The Purchase Price in the amount and in the
manner set forth in Section 2.1 hereof.
b. PROMISSORY NOTE. The Promissory Note in accordance with the
provisions of Section 2 hereof.
c. IHI STOCK. The IHI Stock in accordance with the provisions
of Section 2 hereof.
d. EMPLOYMENT AGREEMENTS. The Shareholder's Employment
Agreement and the Xxxxxx Xxxxx Employment Agreement.
18
e. OPINION OF COUNSEL. The opinion of Xxxxxx Xxxxxxx Xxxxxxxx
& Xxxxxx, counsel for the Purchaser, in the form of EXHIBIT "D" to
this Agreement.
f. DISCHARGE OF INDEBTEDNESS. Evidence satisfactory to the
Shareholder that the Purchaser, at Purchaser's expense and without
any adjustment of the Purchase Price or other cost to the
Shareholder, has paid or otherwise discharged at or prior to Closing
all indebtedness and other obligations of the Corporation to (i) the
Shareholder and (ii) lenders, lessors and other persons on which the
Shareholder is a guarantor or otherwise contingently liable which
are listed on SCHEDULE 2.2-A to the Shareholder's Disclosure Letter.
Section 9. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Section 9.1. NATURE OF STATEMENTS. All statements contained in any
schedule or any certificate or other instrument delivered by or on behalf
of the Shareholder or the Purchaser pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be deemed
representations and warranties made by the Shareholder or the Purchaser,
as the case may be.
Section 9.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations, warranties, covenants, agreements and undertakings
contained herein or in any Schedule, Certificate or other document shall
remain operative and in full force and effect, and shall survive the
Closing and the delivery of all consideration and documents pursuant to
this Agreement, and shall continue in effect until the second (2nd)
anniversary date of the Closing (the "Indemnification Cutoff Date"). No
claim may be made by the Purchaser or the Shareholder for indemnification
pursuant to Section 10 or 11 of this Agreement or otherwise, or for any
other relief pursuant to this Agreement or otherwise, in respect of any
breach or failure of any representation or warranty on or after the
Indemnification Cutoff Date.
Section 10. INDEMNIFICATION BY SHAREHOLDER AND RELATED MATTERS.
Section 10.1. INDEMNIFICATION BY SHAREHOLDER. Subject to the
limitations set forth in Section 10.3 below, Shareholder agrees to defend,
indemnify and hold harmless the Purchaser and the Corporation, and their
respective successors and assigns, from, against and in respect of any and
all loss or damage resulting from:
a. the breach by the Shareholder of any of the warranties,
representations, covenants, agreements or undertakings contained
herein;
b. any Federal, state or local income tax liability (including
any penalty and interest thereon) of the Corporation which the
Shareholder is obligated to indemnify the Purchaser and the
Corporation pursuant to Section 3.6 hereof;
19
c. any liabilities of the Corporation which are not included
in the Corporation's Financial Statements as of the Effective Date
of Closing;
d. any liability arising out of any and all actions, suits,
proceedings, claims, demands, judgments, costs and expenses
(including reasonable legal and accounting fees) incident to any of
the foregoing.
Section 10.2. PROCEDURE FOR MAKING CLAIMS. If and whenever the
Purchaser desires to claim indemnification by the Shareholder pursuant to
the provisions of Section 10, the Purchaser shall promptly deliver to the
Shareholder a certificate signed by the Chairman of the Board, President
or Vice President of the Purchaser (the "Notice of Claim") (i) stating
that the Purchaser or the Corporation, their successors and assigns, has
paid or properly accrued losses, damages or expenses in an aggregate
stated amount to which the Purchaser is entitled to indemnification
pursuant to this Section 10, and (ii) specifying the individual items of
loss, damage or expense included in the amount so stated, the date each
such item was paid or properly accrued and the nature of the
misrepresentation, breach of warranty or claim to which such item is
related, provided, however, failure to notify the Shareholder shall
relieve the Shareholder from liability only if he is prejudiced thereby.
The Shareholder shall have the right to defend any claim by a third party
at the expense of the Shareholder. The Purchaser and the Corporation, as
the case may be, shall provide to the Shareholder prompt and complete
disclosure of all pertinent information in the possession of or available
to the Purchaser or the Corporation and shall extend full and timely
assistance in the cooperation in the investigation of the defense of the
claim, suit or action, with respect to which such indemnification is
claimed. The Shareholder, in the defense of any such suit, action or
proceeding, shall not consent to the entry of any judgment or decree
except with the written consent of the Purchaser and the Corporation, nor
enter into any settlement (except the written consent of the Purchaser and
the Corporation) which does not include as an unconditional term thereof
the giving by the claimant or plaintiff to the Purchaser and the
Corporation of a release from every liability in respect of such claim,
suit, action or proceeding. In any defense of any claim by a third party,
the Purchaser and the Corporation shall have the right (but shall not be
obligated) to participate in such defense through counsel of its own
selection and at its own expense.
Section 10.3. THRESHOLD AND AGGREGATE LIMITATIONS ON
INDEMNIFICATION. Notwithstanding anything to the contrary contained in
Section 10.1, the Shareholder shall not be obligated to indemnify the
Purchaser or the Corporation, or their respective successors and assigns,
from the following:
a. any claim resulting in loss, damage or costs to the
Purchaser or the Corporation of ONE THOUSAND AND NO/100 ($1,000.00)
DOLLARS, or less ("Nominal Claims");
20
b. any claims resulting in loss, damage or costs to the
Purchaser or the Corporation which in the aggregate do not exceed
the sum of SEVENTY-FIVE THOUSAND AND NO/100 ($75,000.00) DOLLARS
(the "Aggregate Threshold"); Nominal Claims shall not be included in
calculating the Aggregate Threshold; and
c. any claim arising after the Indemnification Cutoff Date.
The Shareholder's liability to indemnify the Purchaser and/or the
Corporation pursuant to the terms of this Agreement shall be limited to
the aggregate sum of ONE MILLION AND NO/100 ($1,000,000.00) DOLLARS (the
"Maximum Indemnity").
Section 10.4.LIMITATION ON INDEMNIFICATION FOR MATTERS COVERED BY
INSURANCE. Notwithstanding anything to the contrary contained in this
Section 10, the Shareholder will not be required to indemnify the
Corporation and the Purchaser to the extent that such matter requiring
indemnification is covered and paid by the Corporation's or the
Purchaser's insurance carrier(s). The Purchaser waives all rights of
subrogation to the extent of the coverage and payments made by such
insurance carrier(s) on an indemnity item hereunder, provided, however,
such waiver of subrogation shall be inapplicable and void if it would
cancel or void the Corporation's or the Purchaser's insurance coverage for
an item subject to indemnity hereunder. The Purchaser shall cause the
Corporation to maintain, for a period of time not less two (2) years from
the Closing Date, insurance coverages of the type and with limits
comparable to those in effect on the Closing Date.
The Purchaser represents to the Shareholder that waiver of
subrogation under the Purchaser's current insurance coverage would not
void any such coverage and the Purchaser will use its best efforts to
continue coverage which permits the waiver of subrogation. In the event
the Purchaser cannot obtain such coverage, it will promptly notify the
Shareholder in writing so that they may attempt to obtain coverage for
their potential liability.
Section 11. INDEMNIFICATION BY THE PURCHASER. The Purchaser agrees to
defend, indemnify and hold harmless the Shareholder and his respective
successors, assigns and personal representatives from, against and in respect of
any and all loss or damage resulting from:
a. any breach of the Purchaser's warranties and
representations, or any misstatement or omission of facts, or
failure to state facts necessary to make those statements made not
misleading, under this Agreement, or from the breach of any
covenant, agreement or undertaking contained herein; and
b. any liability arising out of any and all actions, suits,
proceedings, claims, demands, judgments, costs and expenses
(including reasonable legal and accounting fees) incident to any of
the foregoing.
21
Section 12. EXPENSES. Except for the Purchaser's agreement to pay the fee
of the Shareholder's broker provided for hereinabove, the Shareholder and the
Purchaser shall pay 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.
Section 13. NOTICES. All notices, demands and requests which may be given
or which are required to be given by either party to the other, and any exercise
of a right of termination provided by this Agreement, shall be in writing and
be: (i) sent by certified or registered mail, return receipt requested,
addressed to the intended recipient at the address specified for such party
herein; or (ii) deposited into the custody of a nationally recognized overnight
delivery service such as Federal Express, addressed to such party at the address
specified herein. Notices shall be effective on the date of delivery or receipt,
or if delivery is not accepted, on the earlier of the date that delivery is
refused or three (3) days after the notice is mailed pursuant to (i) preceding
or the day after deposited into the custody of an overnight delivery service
pursuant to (ii) preceding. For purposes hereof, the addresses of the parties
for all notices are as follows (unless changed by similar notice in writing
given by the particularly person whose address is to be changed):
a. if to the Shareholder:
Xxxxxx X. Xxxxx
10907 Sweetspire
Xxx Xxxxxxxxx, Xxxxx 00000
Telephone: (281) ____________
with a copy to:
Xxxxxxx X'Xxxxxxx
O'Donnell, Ferebee, XxXxxxxxx & Xxxxx
Paragon Center One
000 Xxxxx, Xxxxx Xxxxx
Xxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
22
b. if to the Purchaser,
Industrial Holdings, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx,
Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxx X. Xxxxxxx
Stumpf Xxxxxxx Xxxxxxxx & Xxxxxx
0000 Xxxx Xxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Section 14. SATISFACTION OF CONDITIONS; TERMINATION.
Section 14.1. BEST EFFORTS TO SATISFY CONDITIONS. The Shareholder
agrees to use its best efforts to bring about the satisfaction of the
conditions specified in Section 5 hereof, and the Purchaser agrees to use
its best efforts to bring about the satisfaction of the conditions
specified in Section 6 hereof.
Section 14.2.TERMINATION. This Agreement may be terminated, without
liability on the part of any party hereto to any other party hereto, by:
a. the Board of Directors of the Purchaser, if a default shall
be made by the Shareholder in the observance or in the due and
timely performance by the Shareholder of any of the covenants of the
Shareholder herein contained, or if there shall have been a material
breach by the Shareholder of any of the warranties and
representations of the 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
b. the Shareholder, 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,
23
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 Shareholder.
In the event of termination by the Purchaser or the Shareholder as
provided above, written notice shall forthwith be given to the other
party.
Section 15. MISCELLANEOUS.
Section 15.1.FURTHER ASSURANCES. The Shareholder 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, and to effectuate the terms, agreements and
covenants contained in this Agreement.
Section 15.2.ASSIGNMENT. Purchaser may assign its rights and
obligations under this Agreement to any of its affiliates. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns.
Section 15.3.SECTION AND PARAGRAPH HEADINGS. The Section and
Paragraph headings of this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement.
Section 15.4.AMENDMENT. This Agreement may be amended only by an
instrument in writing executed by the parties hereto.
Section 15.5. ENTIRE AGREEMENT. This Agreement and the exhibits,
schedules, certificates and documents referred to herein constitute the
entire agreement of the parties, and supersede all understandings with
respect to the subject matter hereof.
Section 15.6.PUBLIC ANNOUNCEMENTS. No publication and/or press
release of any nature shall be issued pertaining to this Agreement or the
transactions contemplated hereby without the prior written approval of the
Purchaser, except as may be required by law.
Section 15.7.U.S. DOLLARS. All monetary amounts referred to in this
Agreement are stated in U.S. Dollars.
Section 15.8.COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
24
Section 15.9.GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
TEXAS.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
as of the date and year first above written.
PURCHASER:
INDUSTRIAL HOLDINGS, INC.
By: /s/ XXXXXX X. XXXX
Xxxxxx X. Xxxx, President
and Chief Executive Officer
SHAREHOLDER:
/s/ XXXXXX X. XXXXX
XXXXXX X. XXXXX
25
EXHIBIT "A"
[form of Promissory Note]
(see attached)
26
EXHIBIT "B-1"
[form of Shareholder's Employment Agreement]
(see attached)
27
EXHIBIT "B-2"
[form of Xxxxxx Xxxxx'x Employment Agreement]
(see attached)
28
EXHIBIT "C"
[form of opinion of counsel to Shareholder and Corporation]
(see attached)
29
EXHIBIT "D"
[form of opinion of counsel to Purchaser]
(SEE ATTACHED)
30
