EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AMONG
INDUSTRIAL HOLDINGS, INC.
INDUSTRIAL HOLDINGS ACQUISITION THREE, INC.
UNITED WELLHEAD SERVICES, INC.
AND THE SHAREHOLDERS NAMED HEREIN
JULY 1, 1998
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is by and among
Industrial Holdings, Inc., a Texas corporation ("IHI"), Industrial Holdings
Acquisition Three, Inc., a Texas corporation and a wholly-owned subsidiary of
IHI ("Newco"), United Wellhead Services, Inc., a Texas corporation (the
"Company"), and Xxxxx X. Xxxxxx ("Xxxxxx"), Xxxxxx Xxxxxx ("Xxxxxx"), Xxxxxxxx
Investments, L.P., a Texas limited partnership ("Diamente"), Xxxxxxx X. Xxxxxxx
("Sellers"), Xxxxxxx Xxx Xxxxxx ("Xxxxxx"), J. Xxxxxxx Xxxxxxxx ("Xxxxxxxx"),
Xxxxxx Xxxxxxx ("Xxxxxxx"), Xxxx X. Xxxxxxx ("X. Xxxxxxx"), Xxxxx Xxxxxxxx ("X.
Xxxxxxxx"), Xxxx X. Xxxxxxx ("Xxxxxxx"), Xxxxx X. Xxxxxxx ("X. Xxxxxxx"), Xxxxxx
X. Xxxxx ("Pipes"), Hi-Tech Compressor Co., LC ("Hi-Tech") and Xxxx X. Wait
("Wait") (Dueitt, Tomlin, and Diamente collectively referred to as the
"Principal Shareholders," and Sellers, Duncan, Espinosa, Grummer, X. Xxxxxxx, S.
Sparkman, Briscoe, X. Xxxxxxx, Pipes, Hi-Tech and Wait collectively referred to
as the "Other Shareholders") (the Principal Shareholders and the Other
Shareholders sometimes individually referred to as a "Shareholder" and
collectively referred to as the "Shareholders"). The Company and Newco are
sometimes hereafter referred to as the "Constituent Corporations."
WHEREAS, the Boards of Directors of IHI, Newco and the Company have
each approved the merger of Newco with and into the Company (the "Merger") and
adopted this Agreement as a plan of reorganization under Sections 368(a)(1)(A)
and 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the "Code"),
upon the terms and subject to the conditions set forth herein;
WHEREAS, the Shareholders are the owners of all of the issued and
outstanding shares of capital stock of the Company and have approved the Merger,
upon the terms and conditions and subject to the conditions set forth herein;
and
WHEREAS, the approval of the shareholders of IHI is not required to
effect the Merger and IHI is the sole shareholder of Newco.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER AND THE SURVIVING CORPORATION; CONVERSION OF SHARES
1.1. THE MERGER. In accordance with the provisions of this Agreement
and the Texas Business Corporation Act ("TBCA"), as of the Effective Time (as
defined in Section 1.4), Newco shall be merged with and into the Company, and
the Company shall be the surviving corporation (hereinafter sometimes called the
"Surviving Corporation") and shall continue its corporate existence under the
laws of the State of Texas. At the Effective Time, the separate existence of
Newco shall cease and the Surviving Corporation shall possess all of the rights,
privileges and powers and all title and interest to all property of the Company
and Newco, and all and every other interest of or belonging to or due to the
Company and Newco shall be taken and deemed to be transferred to and vested in,
the Surviving Corporation, without further act or deed, and without any transfer
or
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assignment having occurred, but subject to all existing liens thereon. At the
Effective Time, all liabilities and obligations of Newco shall become the
liabilities and obligations of the Surviving Corporation, which shall be the
primary obligor therefor, and all liabilities and obligations of the Company
shall remain the liabilities and obligations of the Surviving Corporation.
1.2. ARTICLES OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION.
As a result of the Merger and at the Effective Time, (a) the Articles of
Incorporation of the Company as in effect immediately before the Effective Time,
shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended as provided by law; and (b) the Bylaws of the Company, as in
effect immediately before the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided by law.
1.3. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The officers
and directors of Newco immediately before the Effective Time shall be the
officers and directors of the Surviving Corporation, with such other officers as
the directors shall elect immediately after the Effective Time, each to hold
office in accordance with the Articles of Incorporation and Bylaws of the
Surviving Corporation.
1.4. EFFECTIVE TIME OF THE MERGER. The Merger shall become effective
when properly executed Articles of Merger relating to the Merger (the "Merger
Filings"), in the form attached as EXHIBIT A (together with any other documents
required by law to effectuate the Merger), have been filed with the Secretary of
State of the State of Texas. The Merger Filings shall be made simultaneously
with or as soon as practicable after the execution of this Agreement and the
closing of the transactions contemplated by this Agreement and in no event no
more than 24 hours thereafter. The date and time when the Merger shall become
effective is herein referred to as the "Effective Time."
1.5. CONVERSION OF COMPANY STOCK. By virtue of the Merger and without
any action on the part of the holder of the capital stock of the Company:
(a) Each share of common stock, no par value per share, of the
Company (the "Company Common Stock") issued and outstanding immediately before
the Effective Time (526,133 shares) shall be converted into 2.370423 shares of
the common stock, par value $0.01 per share, of IHI (the "IHI Shares"); and
(b) No fractional shares of IHI shall be issued to any holder of
Company Common Stock in the Merger. To the extent the application of the
conversion rate to all shares of Company Common Stock held by a Shareholder
would result in a fractional share of IHI being issued to such Shareholder in
the Merger, the number of IHI Shares issuable to such Shareholder shall, if less
than .5 of a share, be rounded down, and, if .5 of a share or more, be rounded
up, to the next whole number of IHI Shares.
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1.6. CONVERSION OF NEWCO STOCK. Each share of Newco common stock, no
par value per share (collectively, the "Newco Common Stock"), issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of IHI as the sole holder thereof, be
converted into and exchanged for one fully paid and nonassessable share of
common stock, no par value per share, of the Surviving Corporation (the
"Surviving Corporation Common Stock"). From and after the Effective Time, each
outstanding certificate that previously represented shares of Newco Common Stock
shall be deemed for all purposes to evidence ownership of and to represent the
number of shares of Surviving Corporation Common Stock into which such shares of
Newco Common Stock shall have been converted. Promptly after the Effective Time,
the Surviving Corporation shall issue to IHI a stock certificate or certificates
representing such shares of Surviving Corporation Common Stock in exchange for
the certificate or certificates that formerly represented outstanding shares of
Newco Common Stock, which shall be canceled.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF IHI AND NEWCO
In order to induce the Merger, IHI and Newco hereby jointly and
severally represent and warrant to the Company and to the Shareholders as
follows:
2.1 DUE ORGANIZATION. Each of IHI and Newco is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and each has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted, except whether the failure to be so authorized or qualified would not
have a material adverse effect on its business.
2.2. AUTHORIZATION. Each of IHI and Newco has full legal right, power
and authority to execute and deliver this Agreement and the other agreements
contemplated in connection with this Agreement to be executed by IHI, Newco or
the Company (collectively, the "Closing Agreements") and to consummate the
transactions contemplated thereby. The execution, delivery and performance of
the Closing Agreements have been approved by the Boards of Directors of IHI and
Newco, and no other corporate proceedings on the part of IHI or Newco are
necessary to authorize the execution and delivery of the Closing Agreements or
the consummation of the transactions contemplated thereby. The Closing
Agreements have been duly and validly executed and delivered by each of IHI
and/or Newco, as applicable, and constitute legal, valid and binding agreements
of IHI and Newco, as applicable, enforceable against each of them in accordance
with their respective terms, subject to the laws of general application relating
to bankruptcy, insolvency and relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
2.3. CAPITALIZATION. The authorized capital stock of IHI consists of
(a) 50,000,000 shares of common stock, par value $0.01 per share ("IHI Common
Stock") of which 10,925,589 are issued and outstanding as of June 26, 1998, and
(b) 7,500,000 shares of preferred stock, par value $ 0.01 per share, none of
which are issued and outstanding. The authorized capital stock of Newco consists
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of 600,000 shares of Newco Common Stock, of which 526,133 shares are issued and
outstanding and owned by IHI. All issued and outstanding shares of the IHI
Common Stock and Newco Common Stock are validly issued, fully paid and
non-assessable.
2.4. IHI SHARES. The issuance by IHI of the IHI Shares has been duly
and validly authorized by all necessary corporate action on the part of IHI. At
the Effective Time, such shares shall be validly issued, fully paid and
nonassessable and duly listed for trading on the Nasdaq National Market.
2.5. NONCONTRAVENTION; APPROVALS. The execution and delivery of the
Closing Agreements by IHI do not, and the consummation of the transactions
contemplated thereby will not, conflict with or result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, or result in the creation of a lien, security interest, charge or
encumbrance upon any of the properties or assets of IHI under any of the terms,
conditions or provisions of (a) the Restated Articles of Incorporation or
By-laws of IHI; (b) any statute, rule, regulation, order or decree of any public
body or authority by which IHI or any of its properties or assets may be bound;
or (c) any note, bond, mortgage, indenture, license, franchise, permit,
agreement or other instrument or obligation to which IHI is a party, or by which
it or its properties or assets may be bound, excluding from the foregoing
clauses (b) and (c) violations, breaches and defaults that, and filings,
permits, consents and approvals the absence of which, either individually or in
the aggregate, would not have a material adverse effect on the business,
operations, financial condition, results of operations or prospects of IHI.
Except for the Merger Filings and such filings as may be required under
federal or state securities laws, no declaration, filing or registration with,
or notice to, or authorization, consent or approval of, any governmental or
regulatory body or authority is necessary for the execution and delivery of this
Agreement by IHI or the consummation by IHI of the transactions contemplated
hereby, other than such declarations, filings, registrations, notices,
authorizations, consents or approvals which, if not made or obtained, as the
case may be, would not, in the aggregate, have a material adverse effect on the
business, operations, properties, assets, financial condition results of
operations or prospects of IHI.
2.6. FINDERS AND INVESTMENT BANKERS. Except for Xxxxxxx & Co.,
Incorporated and the fees payable to it by IHI as a result of the consummation
of the Merger, neither IHI nor Newco nor any of their officers or directors has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
hereby.
2.7. SEC FILINGS; DISCLOSURE. IHI 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 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
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which complied when filed (as amended if applicable) in all material respects
with all applicable requirements of the appropriate Act and the rules and
regulations thereunder. IHI has delivered to the Company a disclosure
memorandum, dated June 22, 1998 (the "IHI Disclosure Memorandum"), containing
true and correct copies of IHI Financial Statements and IHI's Annual Report on
Form 10-K for the year ended December 31, 1997 and IHI's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998. No representations or warranties
by IHI and Newco in this Agreement and no statement by IHI and Newco contained
herein or in the IHI Disclosure Memorandum, contains any untrue statement of a
material fact or 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 IHI and its subsidiaries (including Newco) taken as
a consolidated whole.
The audited balance sheet of IHI at December 31, 1997 and the related
statements of income, cash flows and shareholders' equity, together with the
notes thereto, were prepared from the books of account and records of IHI in
accordance with generally accepted accounting principles applied on a basis
consistent with preceding years and throughout the periods involved and present
fairly the consolidated financial position of IHI at the dates indicated and the
results of operations, shareholders' equity and cash flows for the periods then
ended.
2.8. ABSENCE OF MATERIAL ADVERSE CHANGE. Except as disclosed in Section
2.8 of the IHI Disclosure Memorandum, since the date of the most recent
financial statements described in Section 2.7. above, there has not been any (a)
material adverse change in the business, operations, properties, assets,
liabilities or condition (financial or otherwise) of IHI, taken as a
consolidated whole with its subsidiaries; (b) damage or loss, whether covered by
insurance or not, materially or adversely affecting the business, properties or
financial condition of IHI, taken as a consolidated whole with its subsidiaries,
or Newco, (c) material change by IHI or Newco in accounting methods or
principles used for financial reporting purposes, except as required by a change
in generally accepted accounting principles; or (d) agreement, whether in
writing or otherwise, to take any action described in this Section 2.8.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS
In order to induce the Merger, the Company, the Subsidiary and the
Principal Shareholders hereby severally represent and warrant (and with respect
to the statements referring to the Shareholders contained in Sections 3.3, 3.5
and 3.30, the Other Shareholders severally represent and warrant) to IHI and
Newco as follows:
3.1. DUE ORGANIZATION AND RELATED MATTERS. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas and has all requisite corporate power and authority necessary to
own, lease and operate its properties and assets and to carry on its business as
now being conducted. The Company is duly qualified and in good standing in every
jurisdiction in which it is required by the nature of its businesses or the
ownership
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or leasing of its properties to so qualify, as shown in Section 3.1 of the
Disclosure Memorandum of the Company, dated June __, 1998 delivered to IHI (the
"Company Disclosure Memorandum"), except to the extent that any failure to be so
qualified or in good standing would not have a material adverse effect on the
business, operations or financial condition of the Company. Section 3.1 of the
Company Disclosure Memorandum also correctly lists the officers of the Company.
The copies of the Articles of Incorporation and the Bylaws of the Company
contained in Section 3.1 of the Company Disclosure Memorandum are complete and
correct copies of such documents as in effect as of the date of this Agreement.
Except as set forth in Section 3.1 of the Company Disclosure Memorandum, the
Company has never conducted business under any name except the legal name set
forth in its certificate or articles of incorporation. The respective books,
records and stock ledgers of the Company that have been made available to IHI
have been properly kept and are up-to-date, complete and accurate in all
material respects, and all registrations and filings requirements under any
applicable federal, state or local law have been complied with if the failure so
to comply would have a material adverse effect on the continued existence,
corporate powers or business of such corporation.
3.2 SUBSIDIARIES AND OTHER OWNERSHIP INTERESTS. Except as disclosed in
Section 3.2 of the Company Disclosure Memorandum and except for its wholly-owned
subsidiary, Wellhead Recycling, Inc. (the "Subsidiary"), the Company does not
own, directly or indirectly, any interest or investment (whether equity or debt)
in any other corporation, partnership, joint venture or other entity, or have
any outstanding contractual obligations to repurchase, redeem or otherwise
acquire any outstanding shares of capital stock or other ownership interests of
any of the foregoing. The Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and is duly
qualified as a foreign corporation and is in good standing in all jurisdictions
in every jurisdiction in which it is required by the nature of its business to
so qualify. Section 3.2 of the Company Disclosure Memorandum correctly lists the
officers and directors of the Subsidiary and contains true and correct copies of
the Articles of Incorporation and Bylaws of the Subsidiary.
3.3. AUTHORIZATION. The Company has full legal right, power and
authority to execute and deliver the Closing Agreements and to consummate the
transactions contemplated thereby. The execution and delivery of the Closing
Agreements and the consummation of the transactions contemplated thereby have
been duly and validly authorized and approved by the Company's Board of
Directors and by the Shareholders. The Shareholders are the owners of all of the
issued and outstanding capital stock of the Company and each Shareholder has the
full legal right, power and authority to execute and deliver the Closing
Agreements and to consummate the transactions contemplated thereby. No other
corporate proceedings on the part of the Company or any of the Shareholders are
necessary to authorize the Closing Agreements and the Merger or the consummation
of the transactions contemplated hereby or thereby. The Closing Agreements have
been duly and validly executed and delivered by the Company and the
Shareholders, as applicable, and constitute legal, valid and binding agreements
of the Company and the Shareholders, as applicable, enforceable against them in
accordance with their respective terms subject to the laws of general
application
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relating to bankruptcy, insolvency and relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.
Except for the Merger Filings and such filings as may be required under
federal or state securities laws, no declaration, filing or registration with,
or notice to, or authorization, consent, or approval of, any governmental or
regulatory body or authority is necessary for the execution and delivery of this
Agreement by the Company and the Shareholders or the consummation by the Company
and the Shareholders of the transactions contemplated hereby.
3.4. CAPITALIZATION. The authorized capital stock of the Company
consists of (a) 1,000,000 shares of Common Stock, of which there are 526,133
shares issued and outstanding, and owned of record and beneficially by the
Shareholders in the respective amounts set forth in Section 3.4 of the Company
Disclosure Memorandum; and (b) 202,960 shares of preferred stock, $4.73 par
value per share ("Preferred Stock"), none of which are issued and outstanding.
50,000 shares of Common Stock are held in treasury. All issued and outstanding
shares of Company Common Stock have been duly authorized and are validly issued,
fully paid, and nonassessable and are owned free and clear of all pre-emptive
rights, liens, claims, charges, options or encumbrances of any kind. Except as
set forth in the Company Disclosure Memorandum (i) no shares of Company Common
Stock were issued in violation of rights of any past or present shareholder;
(ii) there are no existing options, warrants, calls, subscriptions, or other
rights or other agreements or commitments obligating the Company to issue,
transfer or sell any shares of capital stock of the Company; and (iii) the
Company has no outstanding bonds, debentures, notes or other indebtedness having
the right to vote (or that is convertible into securities having the right to
vote).
The Subsidiary's authorized capitalization consists of 100,000 shares
of common stock, no par value per share, of which 1,000 shares (the "Subsidiary
Shares") are issued and outstanding and owned by the Company, free and clear of
all liens, encumbrances and claims. All of the Subsidiary Shares are validly
issued, fully paid and nonassessable. There are no options, calls, warrants or
other securities or rights outstanding that are convertible into, exercisable
for or that relate to any shares of capital stock of the Subsidiary.
3.5. NONCONTRAVENTION; APPROVALS. The execution and delivery of the
Closing Agreements by the Company and the Shareholders do not, and the
consummation of the transactions contemplated thereby will not, conflict with or
result in a violation or breach of, or constitute a default (or an event that,
with notice or lapse of time or both, would constitute a default) under or
result in any right of termination, cancellation or acceleration under, or in
the creation of a lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company, the Subsidiary or the Shareholders where
such event would have a material adverse impact on the business of the Company
under any of the terms, conditions or provisions of (a) the Articles of
Incorporation or Bylaws of the Company or the Subsidiary; (b) any statute, rule,
regulation, order or decree of any public body or authority by which the
Company, the Subsidiary or the Shareholders or any of their respective
properties or assets may be bound; or (c) except as disclosed in Section 3.5 of
the Company Disclosure Memorandum, any note, bond, mortgage, indenture, lease,
license, franchise, permit,
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contract, agreement or other instrument or obligation to which the Company, the
Subsidiary or the Shareholders is a party, or by which either of them or any of
their respective properties or assets may be bound.
3.6. POOLING-OF-INTERESTS ACCOUNTING. The Company has never been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded and, within the past two years, there has not been any sale
or spin-off of a significant amount of assets of the Company or any affiliate of
the Company other than in the ordinary course of business. The Company owns no
capital stock of IHI. Except as indicated in Section 3.6 of the Company
Disclosure Memorandum, the Company has not acquired any of its capital stock
during the past two years. Except as indicated in Section 3.6 of the Company
Disclosure Memorandum, the Company has no obligation (contingent or otherwise)
to purchase, redeem or otherwise acquire any of the Company Common Stock or any
interest therein or to pay any dividend or make any distribution in respect
thereof. Except as indicated in Section 3.6 of the Company Disclosure
Memorandum, neither the voting stock structure of the Company nor the relative
ownership of shares among any of the Company's shareholders has been altered or
changed within the last two years in contemplation of the Merger. None of the
shares of Company Common Stock was issued pursuant to awards, grants or bonuses.
To the Principal Shareholders' best knowledge, except as set forth in Section
3.6 of the Company Disclosure Memorandum, there has been no transaction or
action taken with respect to the equity ownership of the Company in
contemplation of the Merger that would prevent IHI from accounting for the
Merger under the pooling-of-interests method of accounting in accordance with
Opinion No. 16 of the Accounting Principles Board ("Opinion No. 16"). If
required, the Shareholders and the President or Chief Financial Officer of the
Company will execute any documentation reasonably required by IHI's independent
public accountants to enable IHI to account for the Merger as a
pooling-of-interests.
3.7. FINANCIAL STATEMENTS. The Company has previously furnished to IHI
true and complete copies of the following (collectively, the "Company Financial
Statements"):
(a) the consolidated balance sheets of the Company and the
Subsidiary as of December 31, 1996 and 1997 and the related statements of income
and cash flows for the fiscal years then ended, audited by Karlins, Xxxxxx,
Xxxxxx & Klodosky, P.C.; and
(b) the consolidated unaudited balance sheet of the Company and
the Subsidiary at April 30, 1998 (the "Company Balance Sheet," April 30, 1998
being the "Balance Sheet Date") and the related unaudited statement of income
for the four-month period then ended.
The Company Balance Sheet is also included in Section 3.7 of the Company
Disclosure Memorandum.
The Company Financial Statements are true and correct and fairly
present on a consolidated basis, in conformity with generally accepted
accounting principles applied on a basis consistent with preceding years and
throughout the periods involved ("GAAP") (subject, in the case of the unaudited
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financial statements, to normal recurring year-end adjustments and the absence
of notes), the financial position of the Company and the Subsidiary as of the
dates indicated and the results of their operations and cash flows for the
periods then ended. The books of account of the Company and the Subsidiary have
been kept accurately in all material respects and the transactions entered into
represent bona fide transactions, and the revenues, expenses, assets and
liabilities of the Company and the Subsidiary have been properly recorded
therein in all material respects.
3.8. LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed
and adequately provided for in the Company Financial Statements or in Section
3.8 of the Company Disclosure Memorandum, and except for liabilities and
obligations that have arisen since the Balance Sheet Date in the ordinary course
of business consistent with past practices, neither the Company nor the
Subsidiary has incurred any liabilities of a type required by GAAP to be
reflected on a balance sheet, whether accrued, absolute, secured or unsecured,
contingent or otherwise. Section 3.8 of the Company Disclosure Memorandum
contains a reasonable estimate by the Principal Shareholders of the maximum
amount which may be payable with respect to liabilities which are not fixed. For
each such liability for which the amount is not fixed or is contested, the
Principal Shareholders have provided to IHI a summary description of the
liability.
3.9. ACCOUNTS AND NOTES RECEIVABLE. Disclosed in Section 3.9 of the
Company Disclosure Memorandum is an accurate list and description of all
accounts and notes receivable owed to the Company and the Subsidiary at April
30, 1998. Receivables from and advances to employees, any Shareholder or any
entity or person related to any Shareholder are separately identified in Section
3.9 of the Company Disclosure Memorandum, and such section also contains an
accurate aging analysis of all accounts as of April 30, 1998, showing amounts
due in 30-day aging categories. Except to the extent collected or for which a
reserve is recorded in the Company Balance Sheet, all notes and accounts
receivable reflected on the Company Balance Sheet and in Section 3.9 of the
Company Disclosure Memorandum are, and those accruing from after such date and
through the Effective Time will be, (a) bona fide claims against debtors for
sales of products or deliveries of services or for other charges, (b) subject to
no known defenses, set-offs or counterclaims, and (c) collectible in full,
except to the extent reserved against on the Company Balance Sheet.
3.10. NO VIOLATION. The business of the Company and the Subsidiary is
and has been in full compliance with all applicable laws, ordinances,
regulations, judgments, decrees, injunctions, orders or statutes, except for
violations that, individually or in the aggregate, do not and are not expected
to have a material adverse effect on the operations, business or financial
condition of the Company or the Subsidiary.
3.11. INVESTIGATIONS; LITIGATION. Except as disclosed in Section 3.11
of the Company Disclosure Memorandum, (a) neither the Company nor the Subsidiary
has received notice of any investigation or review by any governmental entity
with respect to the Company and no investigation or review by any governmental
entity with respect to the Company is, to the Principal Shareholders' best
knowledge, threatened, nor has any governmental entity indicated to the Company,
the Subsidiary or any Shareholder an intention to conduct the same, and (b)
there is no action, suit or proceeding
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pending (service of process with respect to which has been served on the Company
or the Subsidiary) or, to the Principal Shareholders' best knowledge, threatened
against or affecting the Company or the Subsidiary at law or in equity, or
before any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality. Neither the Company nor
the Subsidiary is subject to any outstanding order, writ, injunction or decree
which individually or in the aggregate, would have a material adverse effect on
either of them or would prevent or impair either's ability to consummate the
transactions contemplated hereby.
3.12. NO MATERIAL ADVERSE CHANGE. Since the Balance Sheet Date, there
has not been any (a) material adverse change in the business, operations,
properties, assets, liabilities, results of operations or condition (financial
or otherwise) of the Company or the Subsidiary; (b) damage or loss, whether
covered by insurance or not, materially or adversely affecting the business,
properties or financial condition of the Company or the Subsidiary; (c) material
change by the Company or the Subsidiary in accounting methods or principles used
for financial reporting purposes, except as required by a change in GAAP or
concurred with by the Company's independent public accountants; or (d)
agreement, whether in writing or otherwise, to take any action described in this
Section 3.12.
3.13. TAX RETURNS AND TAX MATTERS. Except as described in Section 3.13
of the Company Disclosure Memorandum, neither the Company nor the Subsidiary has
been audited or examined by the IRS. Each of the Company and the Subsidiary have
filed all tax reports and returns required to be filed by it and has paid all
taxes and other charges shown as due on said reports and returns. Neither the
Company nor the Subsidiary is delinquent in the payment of any tax assessment or
other governmental charge (including, without limitation, any applicable
withholding taxes). The liabilities and accruals for taxes reflected in the
Company Balance Sheet are adequate as of the date thereof and there are no tax
liens upon any property or assets of the Company or the Subsidiary except liens
for current taxes not yet due and any liens that may exist with regard to state
income taxes that may be due and payable. Neither the Company nor the Subsidiary
has, with regard to any assets or property held or acquired, filed a consent to
the application of Section 341(f)(2) of the Code. For the purpose of this
Agreement, the term "tax" shall include all federal, state, local, and foreign
taxes, charges, fees, levies or other assessments, including, without
limitations, income, gross receipts, excise, property, sales, transfer, license,
payroll, withholding, capital stock and franchise taxes imposed by the United
States or any state, local or foreign government or subdivision or agency
thereof including any interest or penalties applicable thereto.
3.14. EMPLOYEE BENEFIT PLANS.
(a) Section 3.14 of the Company Disclosure Memorandum discloses
all pension, profit-sharing, bonus, incentive, deferred compensation, stock
purchase, stock, stock appreciation right, group insurance, severance pay,
retirement and other employee benefit plans, agreements or arrangements of the
Company and the Subsidiary or to which either of them is required to contribute
and true and correct copies of the same have been provided to IHI. Except for
the employee benefit plans, if any, described on Section 3.14 of the Company
Disclosure Memorandum, neither the Company nor the Subsidiary sponsors,
maintains or contributes to any plan program, fund or
10
arrangement that constitutes an "employee pension benefit plan," nor does either
have any obligation to contribute to or accrue or pay any benefits under any
deferred compensation or retirement funding arrangement on behalf of any
employee or employees (such as, for example, and without limitation, any
individual retirement account or annuity, any "excess benefit plan" (within the
meaning of Section 3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) or any non-qualified deferred compensation arrangement).
For the purposes of this Agreement, the term "employee pension benefit plan"
shall have the same meaning as is given that term in Section 3(2) of ERISA.
Neither the Company nor the Subsidiary has sponsored, maintained or contributed
to any employee pension benefit plan other than the plans set forth on Section
3.14 of the Company Disclosure Memorandum, and is not required to contribute to
any retirement plan pursuant to the provisions of any collective bargaining
agreement establishing the terms and conditions or employment of any of the
Company's or the Subsidiary's employees.
(b) Neither of the Company nor the Subsidiary is now, and none of
the Company, the Subsidiary or the Principal Shareholders know of any past
activities that would make or render the Company or the Subsidiary liable to the
Pension Benefit Guaranty Corporation or to any multiemployer employee pension
benefit plan under the provisions of Title IV of ERISA. To the Company's and the
Principal Shareholders' best knowledge, all employee benefit plans listed on
Section 3.14 and the administration thereof are in compliance in all material
respects with their terms and all applicable provisions of ERISA and the
regulations issued thereunder, as well as with all other applicable federal,
state and local statutes, ordinances and regulations. Except as set forth on
Section 3.14 of the Company Disclosure Memorandum, all accrued contribution
obligations of the Company and the Subsidiary with respect to any plan listed on
Section 3.14 of the Company Disclosure Memorandum have either been fulfilled in
their entirety or are fully reflected on the balance sheet of the Company and
the Subsidiary as of the Balance Sheet Date. All plans listed on Section 3.14 of
the Company Disclosure Memorandum that are intended to qualify (the "Qualified
Plans") under Section 401(a) of the Code are qualified, have been so qualified
and have been determined by the Internal Revenue Service to be so qualified, and
copies of the determination letters relating thereto are included as part of
Section 3.14 of the Company Disclosure Memorandum. Except as disclosed on
Section 3.14 of the Company Disclosure Memorandum, all reports and other
documents required to be filed with any governmental agency or distributed to
plan participants or beneficiaries (including, but not limited to, actuarial
reports, audits or tax returns) have been timely filed or distributed, and
copies of the most recent annual reports for such plans are included as part of
Section 3.14 of the Company Disclosure Memorandum. To the Company's and the
Principal Shareholders' best knowledge, neither the Shareholders, any plan
listed in Section 3.14 of the Company Disclosure Memorandum, the Company nor the
Subsidiary has engaged in any transaction prohibited and not exempted under the
provisions of Section 4975 of the Code or Sections 406 and 408 of ERISA; no plan
listed in Section 3.14 of the Company Disclosure Memorandum has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(1) of ERISA; and neither the Company nor the Subsidiary has incurred
any liability for excise tax or penalty due to the Internal Revenue Service or
any liability to the Pension Benefit Guaranty Corporation. There have been no
terminations, partial terminations or discontinuance of contributions to any
such Qualified Plan intended to qualify under Section 401(a) of the Code without
notice to and approval by the
11
Internal Revenue Service; no plan listed in Section 3.14 of the Company
Disclosure Memorandum subject to the provisions of Title IV of ERISA has been
terminated; there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any such plan listed in Section 3.14; the
Company has not incurred liability under Section 4062 of ERISA; and no
circumstances exist pursuant to which the Company or the Subsidiary could have
any direct or indirect liability whatsoever (including, but not limited to, any
liability to any multi employer plan or the PBGC under Title IV of ERISA or to
the Internal Revenue Service for any excise tax or penalty, or being subject to
any statutory lien to secure payment of any such liability) with respect to any
plan now or heretofore maintained or contributed to by any entity other than the
Company or the Subsidiary that is, or at any time was, along with the Company or
the Subsidiary, considered a single employer pursuant to Code Sections 414(b),
(c), (m) or (o).
3.15. MATERIAL CONTRACTS AND COMMITMENTS. Except only as to the
contracts and documents listed in Section 3.15 of the Company Disclosure
Memorandum, neither the Company nor the Subsidiary is a party to or bound by any
written or oral (a) contract not made in the ordinary course of business; (b)
employment contract, (c) contract with any labor union or association; (d)
except as listed in Section 3.14 of the Company Disclosure Memorandum, bonus,
pension, profit sharing, retirement, stock purchase, hospitalization, insurance
or other plan providing employee benefits; (e) lease with respect to any
property, real or personal, whether as lessor or lessee; (f) continuing contract
for the future purchase or sale of materials, supplies, equipment or services;
(g) contract or commitment for capital expenditures; (h) contract with any
distributor or dealer; (i) contract continuing over a period of more than six
months from its date (other than those disclosed in the parenthetical items
above); or (j) offer, bid or commitment to enter into any such contract. Section
3.15 of the Company Disclosure Memorandum sets forth an accurate list of (i) the
10 largest customers in any of the periods covered by the Company Financial
Statements, and (ii) all contracts, commitments, or other similar agreements to
which the Company or the Subsidiary is currently a party or by which either or
any of its properties is bound, including but not limited to, contracts with
customers, leases, loan agreements, pledge and security agreements, indemnity or
guaranty agreements, bonds, notes, mortgages, joint venture or partnership
agreements, options to purchase real or personal property, and agreement
relating to the purchase or sale by the Company or the Subsidiary of assets or
securities. The Company has delivered correct and complete copies of all such
agreements to IHI.
Except as set forth in Section 3.15 of the Company Disclosure
Memorandum, none of the customer contracts or other material agreements to which
the Company is a party requires notice to, or the consent or approval of, any
third party to any of the transactions contemplated hereby to remain in full
force and effect following such transaction. Except as disclosed in Section 3.15
of the Company Disclosure Memorandum, none of the Company's or the Subsidiary's
customers has canceled or substantially reduced and neither the Company nor the
Principal Shareholders have any knowledge that such customers intend in the
future to cancel or substantially reduce its use of the Company's or the
Subsidiary's products or services. Each of the Company and the Subsidiary has
complied in all material respects with all commitments and obligations
pertaining to it under such agreements and to the Principal Shareholders' best
knowledge, is not in default under or in violation
12
of any note, bond, mortgage, indenture, lease, license, contract or agreement to
which the Company or the Subsidiary is a party or by which any of its properties
or assets may be bound or affected and no notice of default has been received by
the Company or the Subsidiary and the Principal Shareholders are aware of no
basis therefor. Except as set forth in Section 3.15 of the Company Disclosure
Memorandum, neither the Company nor the Subsidiary is now and has not been in
the last year a party to any governmental contracts which by their terms are
subject to price redetermination or renegotiation.
3.16. LICENSES AND PERMITS. Section 3.15 of the Company Disclosure
Memorandum contains an accurate and complete list of all permits, licenses and
authorities required in connection with the conduct of its business operations
as now or presently proposed to be conducted (collectively the "Permits"),
except for those that the failure to possess would not have a material adverse
effect on the business, operations, properties, assets, liabilities or condition
(financial or otherwise) of the Company or the Subsidiary. Each Permit listed or
required to be listed in Section 3.15 is valid and in full force and effect.
Each of the Company and the Subsidiary is, and at all-times since January 1,
1996 has been, in full compliance with the terms and provisions of such Permits
and, to the Principal Shareholders' best knowledge, no event has occurred or may
reasonably be expected to occur which could result in such non-compliance.
3.17. EMPLOYEE AND LABOR RELATIONS. Neither of the Company nor the
Subsidiary is bound by or subject to any arrangement with any labor union. No
employees of the Company or the Subsidiary are represented by any labor union or
covered by any collective bargaining agreement nor, to the Principal
Shareholders's best knowledge, is there any campaign to establish such
representation in progress. There are no labor controversies pending or, to the
Company's and the Principal Shareholders' best knowledge, threatened against the
Company or the Subsidiary. Neither the Company nor the Subsidiary has reason to
believe its employee relations are not good.
3.18. EMPLOYEES' COMPENSATION. Disclosed in Section 3.18 of the Company
Disclosure Memorandum is a list of the names and annual rates of salary and
other compensation of all the present officers, directors, and salaried
employees of the Company and the Subsidiary. Section 3.18 of the Company
Disclosure Memorandum discloses the bonuses, profit sharing, percentage
compensation and other like benefits, if any, paid or payable to such officers,
directors, and salaried employees for the fiscal year ended December 31, 1997.
Except as disclosed in Section 3.9 of the Company Disclosure Memorandum, there
are no outstanding loans or advances made by the Company or the Subsidiary to
any director, officer or employee of the Company or the Subsidiary.
3.19. QUESTIONABLE PAYMENTS. To the Company's and the Principal
Shareholders' best knowledge, no Shareholder, officer, director, partner,
employee, agent or other representative of the Company or any person acting on
its behalf has made, directly or indirectly, any bribes, kickbacks or illegal
political contributions with funds of the Company or the Subsidiary, payments
from funds of the Company or the Subsidiary not recorded on the books and
records of the Company or the Subsidiary, payments from funds of the Company or
the Subsidiary that were falsely recorded on the books and records of the
Company or the Subsidiary, payments from funds of the Company or the
13
Subsidiary to governmental officials in their individual capacities, or illegal
payments from funds of the Company or the Subsidiary to obtain or retain
business either within the United States or abroad.
3.20. BANK ACCOUNTS; POWERS OF ATTORNEY. Disclosed in Section 3.20 of
the Company Disclosure Memorandum are (a) 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 have access thereto, and
(b) the name of each person, corporation, firm, association or business entity
or enterprise holding a general or special power of attorney from the Company or
the Subsidiary and a description of the terms thereof.
3.21. PROPERTIES AND ASSETS. Contained in Section 3.21 of the Company
Disclosure Memorandum is an accurate list of (a) each item of property included
under "Property, plant and equipment" on the Company Balance Sheet in excess of
$10,000, and (b) all leases of personal property, including an indication as to
which assets are currently owned by any Shareholder or an affiliate of any
Shareholder. Each of the Company and the Subsidiary has good and indefeasible
title to all properties and assets reflected on the Company Balance Sheet as
owned by it or acquired after the date thereof, subject only to (a) statutory
liens arising or incurred in the ordinary course of business with respect to
which the underlying obligations are not delinquent, (b) with respect to
personal property, the rights of suppliers to and customers of the Company or
the Subsidiary with respect to inventory or work in progress under orders or
contracts entered into by the Company or the Subsidiary in the ordinary course
of business, (c) liens for taxes not yet delinquent, or (d) liens listed in
Section 3.21 of the Company Disclosure Memorandum. Except as specifically
identified in Section 3.21 of the Company Disclosure Memorandum, all of the
tangible assets, vehicles and other significant machinery and equipment of the
Company or the Subsidiary listed in Section 3.21 of the Company Disclosure
Memorandum, taken as a whole, are in reasonably good working order and
condition, ordinary wear and tear excepted, and have been maintained in
accordance with standard industry practices. All fixed assets used by the
Company or the Subsidiary that are material to the operation of the Company's
business are either owned by the Company or the Subsidiary or leased under an
agreement identified in Section 3.21 of the Company Disclosure Memorandum. All
leases listed in Section 3.21 of the Company Disclosure Memorandum are in full
force and effect and, to the Company's and the Principal Shareholders' best
knowledge, constitute valid and binding agreements of the parties thereto in
accordance with their respective terms.
3.22. INSURANCE. Section 3.22 of the Company Disclosure Memorandum sets
forth an accurate list of all insurance policies carried by the Company or the
Subsidiary and an accurate list of all insurance loss runs or workers
compensation claims received for the past three policy years, as well as copies
of insurance policies currently in full force and effect.
3.23. PROPRIETARY RIGHTS. Each of the Company and the Subsidiary owns,
or is licensed under an effective license to use, all copyrights, trademarks,
trade names, patents, technology, know-how and processes used in or necessary
for the conduct of its business as currently conducted. No claim has been
asserted by any person with respect to the use of any material copyright,
trademark,
14
trade name, patent, technology, know-how or process or challenging or
questioning the validity or effectiveness of any such license or agreement, and,
to the Company's and the Principal Shareholders' best knowledge, the use of such
material copyrights, trademarks, trade names, patents, technology, know-how and
processes by the Company and the Subsidiary does not infringe on the rights of
any person.
3.24. ABSENCE OF CHANGES. Since the Balance Sheet Date, each of the
Company and the Subsidiary has conducted its operations in the ordinary course
and, except as set forth in Section 3.24 of the Company Disclosure Memorandum,
there has not been:
(a) any material adverse change in the business, operations,
properties, condition (financial or other), assets, liabilities (contingent or
otherwise) or income of the Company or the Subsidiary;
(b) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
Company or the Subsidiary;
(c) any change in the authorized capital stock of the Company or
the Subsidiary or in either's securities outstanding or any change in the
Shareholders' ownership interests or any grant of any options, warrants, calls,
conversion rights or commitments or the declaration or payment of any dividend
or other distribution;
(d) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption, purchase or
other acquisition of any of the capital stock of the Company or the Subsidiary;
(e) any increase in the compensation payable or to become payable
by the Company or the Subsidiary to any of its officers, directors,
Shareholders, employees, consultants or agents, except for ordinary and
customary bonuses and salary increases for employees in accordance with past
practice;
(f) any work interruptions, labor grievances or claims filed, or
any proposed law, regulation or event or condition of any character materially
adversely affecting the business or future prospects of the Company or the
Subsidiary;
(g) any sale or transfer, or any agreement to sell or transfer,
any material assets, properties or rights of the Company or the Subsidiary to
any person, including, without limitation, the Shareholders and their
affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company or the Subsidiary;
15
(i) any increase in the Company's or the Subsidiary's
indebtedness, other than accounts payable incurred in the ordinary course of
business and normal increases under the Company's working capital line of
credit;
(j) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property or
rights of the Company or the Subsidiary or requiring consent of any party to the
transfer and assignment of any such assets, property or rights;
(k) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside of
the ordinary course of the Company's or the Subsidiary's business;
(l) any waiver of any material rights or claims of the Company or
the Subsidiary;
(m) any material breach, amendment or termination of any material
contract, agreement, license, permit or other right to which the Company or the
Subsidiary is a party; or
(n) any transaction by the Company or the Subsidiary outside of
the ordinary course of business.
3.25 REAL PROPERTY. Section 3.25 of the Company Disclosure Memorandum
lists by physical location and square footage all real property and the
ownership thereof that is owned, leased or used by the Company or the Subsidiary
in its business or in which either of them has an interest (singularly, a
"Property," and collectively, the "Properties"). Each of the Company and the
Subsidiary has good and indefeasible fee simple title to all real property owned
by it, free of all easements, restrictions, occupancy agreements, liens,
encumbrances or other matters affecting its title, use or occupancy, except for
(a) liens for nondelinquent ad valorem taxes; and (b) such easements, liens and
encumbrances as do not materially detract from or interfere with the present use
or reasonably foreseeable use of the Properties subject thereto (including
encumbrances to title or leasehold interest as reflected in any copies of title
policies of insurance, which have been provided to IHI). The Properties are
fully accessible by public roads and are free from strips, gores and enclaves.
To the Company's knowledge, buildings and improvements on the properties leased
by the Company or the Subsidiary do not encroach upon any other properties, and
there are no encroachments by any such other buildings and improvements onto any
of such leased Properties. The Properties are served by all necessary utilities,
including water, sewage, gas, waste disposal, electricity, telephone and
computer data capabilities sufficient for the Company's and the Subsidiary's
current needs, and the Principal Shareholders are not aware of any inadequacies
with respect to such utilities.
3.26. ENVIRONMENTAL DISCLOSURE. Included in Section 3.26 of the Company
Disclosure Memorandum are true, correct and complete copies of all environmental
surveys, audits, reports, memoranda, notices and correspondence generated or
received by the Company or the Subsidiary at any time in the past (a) regarding
Hazardous Materials and Hazardous Materials Activities or (b) from the
Environmental Protection Agency or any similar federal, state or local
environmental regulatory
16
agency or authority. To the Company's and the Principal Shareholders' best
knowledge, the Company, the Subsidiary and the Properties are and have been in
compliance in all material respects with all Hazardous Materials Laws,
including, but not limited to, those relating to soil and groundwater
contamination. Except as disclosed in Section 3.26 of the Company Disclosure
Memorandum, there are no, nor has there been any claims or actions pending or,
to the Company's and the Shareholders' best knowledge, threatened against the
Company or the Subsidiary or in respect of any Property by any governmental
entity or agency or any other person or entity under Hazardous Materials Laws,
relating to Hazardous Materials, or otherwise pursuant to Hazardous Materials
Laws, including, without limitation, any claims or actions relating to the
presence of Hazardous Materials on any Property or to any Hazardous Materials
Activities undertaken at any time in the past by the Company or the Subsidiary
(or, to the Company's and the Principal Shareholder's best knowledge, any
predecessor entity or other person or entity in respect of which the Company or
the Subsidiary may be obligated by contract or under any Hazardous Materials
Laws) whether in connection with any Property, any real property previously
owned or leased by the Company or the Subsidiary or otherwise in connection with
the business or operations of the Company or the Subsidiary, and whether such
claim or action shall be in the nature of an enforcement, cleanup, removal,
warning from a governmental agency, alleged violation, or other governmental or
regulatory action, investigation or proposed final order, or any private claim
or action, or relate to damage, contribution, cost recovery, compensation,
property loss, or personal injury. At no time prior to the date hereof has the
Company or the Subsidiary, to the Company's and the Principal Shareholders' best
knowledge (or, to the Company's and the Principal Shareholders' best knowledge,
any predecessor entity or other person or entity in respect of which the Company
or the Subsidiary may be contractually or otherwise obligated), undertaken any
Hazardous Materials Activities in violation of Hazardous Materials Laws that
might reasonably be expected to have a material adverse effect on the business,
operations or financial condition of the Company or the Subsidiary.
As used in this Section 3.26, the following capitalized terms shall
have the following meanings:
(a) "Hazardous Materials" shall mean flammable explosives,
radioactive materials, oil, asbestos, urea formaldehyde insulation, hazardous
wastes, toxic or contaminated substances or similar materials, to the extent
regulated under laws, rules or regulations relating to pollution or protection
of the environment, including, without limitation, substances defined or
identified as "hazardous substances," "pollutants," "contaminants," "hazardous
materials," or "toxic substances" in any Hazardous Materials Laws.
(b) "Hazardous Materials Activities" shall mean the use,
recycling, reclamation, generation, manufacture, storage, treatment, release,
discharge, handling, disposal or transportation of any Hazardous Materials.
(c) "Hazardous Materials Laws" shall mean all applicable laws,
including without limitation, federal, state or local laws, ordinances, rules,
and regulations in effect as of or prior to the date hereof, but not newly
promulgated or enacted thereafter, and published interpretations and orders
17
of courts or administrative agencies or authorities having jurisdiction over the
business and operations of a respective entity relating in any way to pollution
or protection of the environment (including, without limitation, ambient air,
surface water, ground water, land surface, and subsurface strata), including
without limitation, the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended; the Superfund Amendments and Reauthorization
Act of 1987, as amended; the Resource Conservation and Recovery Act of 1976; as
amended; the Hazardous and Solid Waste Amendments of 1984, as amended; the
Hazardous Materials Transportation Act, as amended; the Water Pollution Control
Act of 1972; the Clean Water Act; the Clean Air Act; the Solid Waste Disposal
and Toxic Substances Control Act; the Insecticide Fungicide and Rodenticide Act;
the Occupational Safety and Health Act of 1970; and other laws relating to
pollution or protection of the environment, or to the manufacture, processing,
distribution, use, treatment, handling, storage, disposal or transportation of
Hazardous Materials.
3.27. FINDERS AND INVESTMENT BANKERS. Except for Xxxxxxx & Co.
Incorporated and the fees payable to it by IHI as a result of the consummation
of the Merger, neither the Company, the Subsidiary nor any Shareholder has
employed or engaged any broker or finder or incurred any liability or
obligation, contingent or otherwise, for any brokerage fees, commissions or
finders' fees in connection with the transactions contemplated hereby.
3.28. COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except
as set forth in Section 3.28 of the Company Disclosure Memorandum, no
Shareholder or any other affiliate of the Company or the Subsidiary owns,
directly or indirectly, any interest in, or is an officer, director, employee or
consultant of or otherwise receives remuneration from, any business which is a
competitor, lessor, lessee, customer or supplier of the Company or the
Subsidiary. Except as set forth in Section 3.28 of the Company Disclosure
Memorandum, no officer, director or Shareholder of the Company or the Subsidiary
has, nor during the period beginning January 1, 1996 through the date hereof,
had any interest in any property, real or personal, tangible or intangible, used
in or pertaining to the Company's or the Subsidiary's business.
3.29. NO CLAIMS AGAINST COMPANY. No Shareholder has any claims,
demands, proceedings or cause of action against the Company or the Subsidiary,
whether in law or at equity, other than claims for ordinary wages, salaries,
bonuses, commissions, expense reimbursements and other claims arising in the
ordinary course of business consistent with past practice.
3.30. ACCURACY OF REPRESENTATIONS AND WARRANTIES.
(a) No representation or warranty by the Company, the Subsidiary
or the Shareholders in this Agreement, nor in any exhibit or schedule hereto or
delivered hereunder, contains any untrue statement of a material fact or omits
to state any material fact necessary in order to make the statements therein not
misleading. The Company, the Subsidiary and the Shareholders, by their execution
and delivery of this Agreement, acknowledge that their representations and
warranties, the schedules and the exhibits, and such statements and certificates
have been and will be relied upon by
18
IHI and Newco in entering into and in performing and observing their obligations
pursuant to this Agreement.
(b) To the extent that any representation or warranty in this
Article III is qualified to the Company's "best knowledge" or "knowledge," it
shall mean the knowledge of Dueitt, Tomlin, Xxxxxxxx, Xxxxxx XxXxxx, Xxxx
Xxxxxxxxx, Xxx Xxxxx, Xxxx Xxxxxx and Xxxxxx Xxxxx, after reasonable
investigation, and to the extent any representation or warranty is qualified to
the Principal Shareholders' "best knowledge" or "knowledge," it shall mean the
Principal Shareholders' knowledge after reasonable investigation.
ARTICLE IV
TRANSFER RESTRICTIONS RELATED TO POOLING-OF-INTERESTS
IHI has informed the Shareholders that IHI intends to account for the
Merger as a pooling-of-interests under Opinion No. 16. IHI has also informed the
Shareholders that its ability to account for the Merger as a
pooling-of-interests was a material factor considered by IHI in IHI's decision
to enter into this Agreement. Therefore, pursuant to Opinion No. 16, prior to
the publication and dissemination by IHI of consolidated financial results which
include results of the combined operations of the Company and IHI for at least
30 days on a consolidated basis following the Effective Time, the Shareholders
shall not sell, offer to sell, or otherwise transfer or dispose of, any of the
IHI Shares received by Shareholders. The certificates evidencing the IHI Shares
to be received by the Shareholders will bear a legend substantially in the form
set forth below.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY
ATTEMPTED SALE, TRANSFER OF ASSIGNMENT, PRIOR TO NOVEMBER 15, 1998.
ARTICLE V
INVESTMENT REPRESENTATIONS OF THE SHAREHOLDERS
5.1. REPRESENTATIONS OF ALL SHAREHOLDERS. Each Shareholder hereby
represents and warrants to IHI and Newco as follows:
(a) He fully understands the nature, scope and duration of
limitations on transfer of the shares of IHI Stock included in this Agreement.
(b) He has such knowledge and experience in financial and
business matters generally, and in the industry engaged in by IHI specifically,
as to be capable of evaluating the risks and merits of an investment in the IHI
shares.
(c) He has received and reviewed such of the instruments and
documents pertaining to the formation, organization, governance, operation and
business of IHI, including those contained
19
in the IHI Disclosure Memorandum (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 IHI or anyone acting on
its behalf.
(d) He acknowledges that he has had an adequate opportunity to
ask questions of the officers and directors of IHI and receive answers from them
concerning the Documents and the business plan and corporate governance of IHI
and that he has asked any and all questions in the nature described in the
preceding sentence and has had all such questions answered to his satisfaction.
(e) He recognizes that the offer and sale by IHI to him of the
IHI Shares has not been and will not be registered under the 1933 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 1933 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 the IHI Shares
solely for his account for investment purposes and not with a view to, or for
offer or resale in connection with, a distribution thereof in violation of any
Securities Laws. He understands that the effect of such representation and
warranty is that the 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 the IHI Shares by
him must be made pursuant to an effective registration statement under the 1933
Act or in compliance with Rule 145 under the 1933 Act. He also understands that
IHI is under no obligation to file a registration statement under the 1933 Act
covering the sale or transfer of any of the IHI Shares except in the
circumstances described in Article IX hereof. He acknowledges that IHI is and
will be relying upon the truth and accuracy of the representations and
warranties contained herein in issuing the IHI Shares to him without first
filing a registration statement with respect thereto under the Securities Laws.
(f) He acknowledges that a legend will be placed on the
certificates representing the 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, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS. 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.
(g) He acknowledges that stop transfer instructions have been
or will be placed with respect to the IHI Shares so as to restrict his resale or
distribution thereof.
20
(h) He has no contract, undertaking, agreement or arrangement,
whether written or oral, with any other person, to sell, transfer or grant
participation in any of the IHI Shares to be acquired by him.
5.2 REPRESENTATION OF THE PRINCIPAL SHAREHOLDERS. Each Principal
Shareholder, and each of Sellers and Xxxxxxxx hereby additionally represents and
warrants to IHI and Newco that he is an "accredited investor," as that term is
defined in Regulation D under the 1933 Act.
ARTICLE VI
DELIVERIES
6.1. DELIVERIES BY IHI AND NEWCO. Simultaneously with the execution
hereof, (a) Newco has executed and delivered the Articles of Merger attached
hereto as EXHIBIT A; and (b) IHI has delivered an irrevocable instruction letter
to its transfer agent directing it to issue and deliver (i) to the Shareholders,
the IHI Shares not being escrowed, and (ii) to the Escrow Agent, the remaining
IHI Shares, promptly upon receipt of such letter; and (c) IHI has delivered to
the Company and the Shareholders an opinion of IHI's counsel in form and
substance satisfactory to the Company's counsel.
6.2. DELIVERIES BY THE COMPANY, THE SHAREHOLDERS AND OTHERS.
Simultaneously with the execution hereof, (a) the Company has executed and
delivered the Certificate of Merger attached hereto as EXHIBIT A; (b) the
Shareholders have executed and delivered to (i) the Escrow Agent, the Escrow
Agreement attached hereto as EXHIBIT B and (ii) to IHI, certificates
representing the Company Common Stock; (c) the Company has delivered to IHI an
opinion of the Company's counsel in form and substance satisfactory to IHI's
counsel; (d) the Company has delivered to IHI a copy of (i) resolutions or
minutes of its Board of Directors in which the Company's Board authorized and
approved the termination of its 401(k) plan (the "Plan"); and (ii) an agreement
for amendment and termination of the Plan; and (e) each of Dueitt, Xxxxxx and
Xxxxxxxx has executed and delivered to the Company an Employment Agreement.
ARTICLE VII
POST-CLOSING MATTERS
7.1. FUTURE COOPERATION; TAX MATTERS. The Shareholders and IHI shall
each deliver or cause to be delivered to the other following the Effective Time
such additional instruments as the other may reasonably request for the purpose
of fully carrying out this Agreement. The Shareholders will cooperate and use
their reasonable best efforts to have the present officers, directors and
employees of the Company cooperate with IHI at and after the Effective Time in
furnishing, at IHI's expense, information, evidence, testimony and other
assistance in connection with any actions, proceedings, arrangements or disputes
of any nature with respect to matters pertaining to all periods prior to the
Effective Time. IHI will cooperate with the Shareholders in the preparation of
all tax returns covering the period from the beginning of the Company's current
tax year through the Effective Time. In addition, IHI will provide the
Shareholders with access to such of its books and
21
records as may be reasonably requested by the Shareholders in connection with
federal, state and local tax matters relating to periods prior to the Effective
Time.
7.2. RULE 144 AFFILIATES. IHI and the Shareholders agree that
immediately following the Effective Time, no Shareholder will be deemed an
"affiliate" of IHI, as such term is defined for purposes of Rule 144 under the
1933 Act, and that it is not contemplated that any Shareholder would
subsequently be deemed an affiliate of IHI as a result of his power or authority
at IHI or the Surviving Corporation.
7.3. RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the SEC that may permit the sale of IHI
Shares to the public without registration, IHI agrees to use its commercially
reasonable efforts to:
(a) make and keep public information (as such term is defined in
Rule 144) regarding IHI available;
(b) file with the SEC in a timely manner all reports and other
documents required of IHI under the 1933 Act and the 1934 Act; and
(c) so long as a Shareholder owns any IHI Shares, furnish to such
Shareholder upon written request a written statement by IHI as to its compliance
with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, a
copy of the most recent annual or quarterly report of IHI, and such other
reports and documents so filed as such Shareholder may reasonably request in
availing itself of any rule or regulation of the SEC allowing such Shareholder
to sell any such shares without registration.
7.4. RELEASE FROM SHAREHOLDER GUARANTEES. IHI shall use its best
efforts after the Effective Time to have Dueitt, Wallace, Xxxxxxxx and Xxxxxx
and any other applicable Shareholder released from personal guarantees of the
Company's indebtedness to Community National Bank and Norwest Bank. IHI shall
indemnify and hold harmless the foregoing Shareholders from any and all
liabilities, obligations and claims in connection with such guaranties and
indebtedness of the Company.
7.5 PUBLICATION OF CONSOLIDATED FINANCIAL RESULTS. IHI shall, within 45
days after the end of the first fiscal quarter following the Effective Time that
includes 30 days of combined operations of the Company and IHI, publish and
disseminate consolidated financial results that include results of the combined
operations of the Company and IHI for at least 30 days on a consolidated basis
following the Effective Time.
7.6 TERMINATION OF THE PLAN. After the effective date of termination of
the Plan, the Plan shall be "frozen" pending distribution of its assets to
Participants and their beneficiaries. No persons who are not Participants as of
the termination date shall be eligible to participate in the Plan or receive
benefits thereunder, and no distributions shall be made by the Plan except
normal distributions in the
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ordinary course of business to or on behalf of employees who have separated from
service with the Seller or after the Effective Time, with IHI and its
subsidiaries.
Within 90 days after the Effective Time, IHI agrees, on behalf of the
Company, to perform a compliance audit upon the Plan, to correct all discovered
defects that could result in disqualification of the Plan through the IRS
Employee Plans Compliance Resolution System described in IRS Revenue Procedure
98-22 and to file a submission to formally request a determination letter from
the Internal Revenue Service ("IRS") to the effect that the Plan is a qualified
plan under Section 401(a) of the Code upon its termination and that the trust
used to fund the Plan (the "Trust") is tax exempt under Section 501(a) of the
Code. As soon as administratively practicable following receipt of a favorable
IRS determination letter, the trustee of the Trust shall effectuate
distributions of all remaining assets from the Trust and thereafter it shall be
liquidated. After liquidation of the Trust, IHI agrees to file, on behalf of the
Company, a final IRS Form 5500 for the Plan with the IRS and the Department of
Labor. IHI assumes no liability or obligation with respect to or arising out of
the Plan or Trust at any time, before, on or after the Effective Time, and all
costs, damages, liabilities, penalties, taxes and expenses, of any nature
whatsoever, relating to, or arising out of, the Plan and Trust, including
termination of the Plan and Trust, shall be paid by the Company and the
Shareholders and not by IHI.
ARTICLE VIII
INDEMNIFICATION
8.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the parties hereto contained in this Agreement or in any
writing delivered pursuant hereto shall survive the Closing and the consummation
of the transaction contemplated hereby, notwithstanding any investigation by or
on behalf of any party hereto, until the first anniversary of the closing of the
Merger (the "Expiration Date").
8.2. INDEMNIFICATION BY THE SHAREHOLDERS. To the extent provided in
this Article VIII, (and subject in all cases to the provisions of the Escrow
Agreement to the extent an IHI Indemnitee shall elect to recover its Damages
from the Escrowed Shares) the Shareholders shall indemnify and hold harmless
IHI, Newco and the Surviving Corporation, and their respective officers,
directors, employees, shareholders, agents, and representatives (the "IHI
Indemnitees") from and against any liabilities, claims, demands, judgments,
losses, costs, damages or expenses whatsoever (including reasonable attorneys',
consultants' and other professional fees and disbursements of every kind, nature
and description incurred by them in connection therewith) (collectively,
"Damages") that any such indemnified party may sustain, suffer or incur and that
may result from, arise out of or relate to any breach of any representation,
warranty, covenant or agreement of the Company or the Shareholders contained in
this Agreement.
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8.3. INDEMNIFICATION BY IHI. To the extent provided in this Article
VIII, IHI shall indemnify and hold harmless the Shareholders from and against
any Damages that the Shareholders may sustain, suffer, or incur and that may
result from, arise out of or relate to any breach of any representation,
warranty, covenant or agreement of IHI contained in this Agreement.
8.4. PROCEDURE FOR INDEMNIFICATION; THIRD PARTY CLAIMS.
(a) Within 15 days after receipt of notice of commencement of any
action by any third party evidenced by service of process or other legal
pleading, or with reasonable promptness after the assertion in writing of any
claim by a third party, the party entitled to indemnification hereunder
("Indemnified Person") shall give the party obligated to provide indemnification
under Section 8.2 or 8.3 hereof (the "Indemnifying Person") written notice
thereof, together with a copy of such claim, process or other legal pleading.
The failure to so notify the Indemnifying Person within the above time frame
will not relieve the Indemnifying Person of any liability it may have to the
Indemnified Person, except to the extent the Indemnifying Person demonstrates
that the defense of such action is unduly prejudiced by the Indemnified Person's
failure to give such notice. The Indemnifying Person shall have the right to
undertake the defense, settlement, compromise or other disposition thereof at
its own expense and through a legal representative of its own choosing. The
Indemnified Person and its counsel shall have the right to be present at the
negotiation, defense and settlement of such action or claim, and any settlement
or compromise of any such action or claim shall be subject to the approval of
the Indemnified Person, which approval shall not be unreasonably withheld.
(b) If the Indemnifying Person, by the 30th day after receipt of
notice of any such claim (or, if earlier, by the 10th day immediately preceding
the day on which an answer or other pleading must be served in order to prevent
judgment by default in favor of the person asserting such claim), has not
notified the Indemnified Person of its election to defend against such claim,
the Indemnified Person shall have the right to undertake the defense, compromise
or settlement of such claim through counsel of its choice on behalf of and for
the account and risk of the Indemnifying Person, at the cost and expense of the
Indemnifying Person. In such event, the Indemnifying Party and its counsel shall
have the right to be present at the negotiation, defense and settlement of such
action or claim, and any settlement or compromise of any such action or claim
shall be subject to the approval of the Indemnifying Party, which approval shall
not be unreasonably withheld.
(c) With regard to claims pursuant to this Section 8.4, any
reasonable fees or expenses of the party undertaking the defense of the claim,
incurred in connection with the defense of such claim, including fees and
expenses of counsel, shall be considered Damages.
8.5. PROCEDURE FOR INDEMNIFICATION; OTHER THAN THIRD PARTY CLAIMS. Any
claim for indemnification for any matter not involving a third-party claim shall
be asserted by written notice to the Indemnifying Person on or before the
Expiration Date.
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8.6. ESCROWED SHARES AND METHOD OF PAYMENT. Shortly after the Effective
Time, IHI shall issue the Escrowed Shares to the Shareholders and shall deliver
the certificates representing the Escrowed Shares into the Escrow Account
maintained by the Escrow Agent. The Escrow Account shall be subject to the terms
of the Escrow Agreement. All claims by IHI Indemnitees for Damages will be
subject to the additional conditions of Section 8.7 below and the Escrow
Agreement and may be paid either in Escrowed Shares, valued at $12.83, or in
cash, at the option of the Shareholders. All claims by the Shareholders for
Damages shall be paid in cash.
8.7. ADDITIONAL CONDITIONS OF INDEMNIFICATION BY THE SHAREHOLDERS. The
following additional terms and conditions are imposed upon IHI in seeking
indemnification for Damages, whether for a third-party claim or otherwise:
(a) If IHI seeks indemnification for Damages, IHI shall give
written notice of its claim for indemnification (a "Claim Notice") to Dueitt,
who shall act as the representative (the "Representative") of the other
Shareholders under this Section 8.7 by the Expiration Date. The Claim Notice
shall explain the basis of the claim in sufficient detail so as to be
understandable to a reasonable person and shall specify the amount of the claim
for Damages. If the amount of a claim is not readily determinable as of the date
of the Claim Notice, IHI shall estimate the amount of the claim for Damages in
the Claim Notice, but also specify therein that the claim has not yet been
liquidated (an "Unliquidated Claim"). If IHI gives a Claim Notice for an
Unliquidated Claim, IHI shall also give to the Representative a second Claim
Notice (the "Second Claim Notice") within 30 days after the amount of the claim
becomes finally determined, and the Second Claim Notice shall specify the amount
of the claim. If the Representative does not object to such claim under Section
8.7(b) below, then the Representative shall be deemed to have agreed in all
respects to IHI's claim, and shall, five days after the Expiration Date, give
written notice to the Escrow Agent of the number of Escrowed Shares to transfer
to IHI, which shall have an aggregate value equal to the amount of such Damages,
subject to and net of any offsets, limitations or adjustments made pursuant to
Section 8.8. To the extent that the value of the Escrowed Shares represented by
the certificates so delivered exceeds the cash value of the Damages, IHI shall
promptly deliver to the Representative certificates issued proportionately to
the Shareholders for the excess balance of the Escrowed Shares. Damages paid to
IHI under this Agreement shall be paid proportionately by the Shareholders
according to their proportionate ownership of the Escrowed Shares.
(b) If the Representative gives IHI written notice of his
objections to a claim of indemnification within 30 days after the later of: (i)
the date on which the Claim Notice for such claim is given under Section 8.7(a);
or (ii) the date on which a Second Claim Notice for such claim is given under
Section 8.7(a), the Escrowed Shares shall remain in escrow until the
Representative and IHI have given the Escrow Agent joint written notice of their
agreement regarding the rights of IHI and the Shareholders with respect thereto
or until such rights are determined by binding arbitration in Xxxxxx County,
Texas, by a panel of three arbitrators, each of whom shall be a member of the
American Arbitration Association. Either the Representative or IHI may initiate
such arbitration upon 10 days written notice to the other party.
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(c) If there is an arbitration, one arbitrator shall be appointed
by the Representative, one arbitrator shall be appointed by IHI and the third
arbitrator shall be selected by the first two arbitrators. Such arbitration
shall take place as soon as practicable after the occurrence of any dispute. In
any such arbitration, each side shall be limited to two depositions and 15
interrogatories, and any hearing shall be limited to a maximum of six weeks,
with the time allocated to each party as the arbitral panel shall determine. If
a decision has not been rendered by the arbitration panel within six months of
the date of the appointment of the panel, either party may cancel the
arbitration and institute other legal proceedings. If such arbitral panel
determines that any or all of the Escrowed Shares are to be transferred to IHI,
the Representative shall, within 20 business days following receipt of a copy of
such determination, join IHI in giving written notice to the Escrow Agent of the
number of Escrowed Shares to transfer to IHI. To the extent that the value of
the Escrowed Shares represented by the certificates so delivered exceeds the
cash value of the Damages, IHI shall promptly deliver to the Representative
certificates issued to the Shareholders for the excess balance of the Escrowed
Shares which shall be held pursuant to this Agreement. All costs of such
arbitration shall be borne equally by IHI and the Shareholders, and each party
shall be responsible for its own costs, including legal fees.
8.8. LIMITATIONS ON LIABILITY OF THE SHAREHOLDERS.
(a) No claim for indemnification shall be made by any IHI
Indemnitee with respect to any matter unless and until the total amount of
Damages exceeds $160,000, and then only for the excess over such amount.
(b) The aggregate liability of the Shareholders in connection
with their indemnification obligations under Section 8.2 shall not exceed
$1,250,000.
(c) No claim for indemnification shall be made hereunder unless
asserted by a written notice given to the Indemnifying Party, on or prior to the
Expiration Date.
(d) Any claim for indemnification for Damages hereunder shall be
offset or reduced by the amount of any tax benefit 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.
(e) The Indemnified Person shall act in good faith and in a
commercially reasonable manner to mitigate any Damages for which it may seek
indemnification under this Article VIII.
8.9. OTHER RIGHTS AND REMEDIES NOT AFFECTED. The foregoing
indemnification provisions are in addition to any statutory, equitable or common
law remedy any party may have for breach of representations, warranties,
covenants or agreements.
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ARTICLE IX
REGISTRATION OF IHI SHARES
9.1. REGISTRATION OBLIGATIONS. Within 120 days after the date hereof,
taking into account the restrictions on resale of the IHI Shares pursuant to the
pooling-of-interests rules, IHI shall file a registration statement under the
1933 Act covering the registration of the IHI Shares for resale by the
Shareholders. In connection with such registration statement, IHI shall use its
best efforts to cause such registration statement to become effective and to
keep such registration statement effective until the earlier of (i) the second
anniversary date of the effective date of the registration statement or (ii) the
first date on which no Shareholder owns any of the IHI Shares. In connection
with such registration statement, IHI shall, as expeditiously as reasonably
possible:
(a) use its best efforts to prepare and file with the SEC such
amendments and supplements to such registration statement as may be necessary to
comply with the provisions of the 1933 Act;
(b) no less than twenty-four (24) hours prior to filing such
registration statement or prospectus contained therein or any amendment or
supplement thereto, furnish to each Shareholder copies of all documents proposed
to be filed to permit the reasonable and timely review of statements contained
in such documents pertaining to such parties and thereafter furnish to the
Shareholders such number of copies of such registration statement, each
amendment and supplement thereto, such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
1933 Act, and such other documents as they may reasonably request in order to
facilitate the disposition of the IHI Shares to be received by them pursuant to
this Agreement;
(c) use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Shareholders,
and to keep such registration or qualification effective during the period such
registration statement is to be kept effective, provided that IHI shall not be
required to become subject to taxation, to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions;
(d) use its best efforts to maintain the authorization for
quotation of the securities covered by such registration statement on the Nasdaq
National Market of the Nasdaq Stock Market, Inc.; and
(e) notify each Shareholder, at any time when the Shareholders
must suspend offers or sales of IHI Shares under the registration statement,
either because the prospectus included in such registration statement is
required to be amended for any reason, such as an amendment under the 1933 Act
to provide current information, or because the prospectus includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the
27
statements therein not misleading in the light of the circumstances then
existing. IHI shall use its best efforts to enable the Shareholders to promptly
recommence offers and sales under the registration statement.
(f) The parties acknowledge that this Article IX is provided as
an inducement to the Shareholders to approve the Merger and that the
Shareholders shall be entitled to enforce the terms of this Article IX or
otherwise bring an action with respect to the breach thereof.
9.2. FURNISH INFORMATION. It is a condition precedent to the
obligations of IHI to take any action pursuant to Section 9.1 hereof with
respect to the registered IHI Shares of any Shareholder that such Shareholder
shall furnish to IHI such information regarding himself, the IHI Shares then
held by him and the intended method of disposition of such securities as shall
be required to effect the registration of such Shareholders' IHI Shares and as
may be required from time to time to keep such registration current.
9.3. EXPENSES OF REGISTRATION. Except as otherwise provided, all
expenses incurred by or on behalf of IHI in connection with registration,
filings or qualifications pursuant to Section 9.1 hereof, including without
limitation all registration, filing and qualification fees, the fees and
expenses incurred in connection with the listing of the IHI Shares to be
registered on each security exchange (or Nasdaq) on which shares of Common Stock
of IHI are then listed, printers' and accounting fees, and fees and
disbursements of counsel for IHI, shall be borne by IHI. In no event shall IHI
be obligated to bear underwriting brokerage or related fees, discounts or
commissions or the fees or expenses of counsel to the Shareholders.
9.4. FURTHER ASSURANCES. Each of IHI and the Shareholders shall agree
to such other reasonable and customary arrangements, undertakings and
indemnifications with respect to the registration of the IHI Shares to be
received by the Shareholders pursuant to the Agreement as may be requested by
any of them, but shall not be obligated to enter into any underwriting
arrangements. Such indemnifications shall include IHI's indemnity of
Shareholders and their brokers or dealers which may be deemed to be underwriters
as reasonably requested by the Shareholders and their brokers or dealers against
liability, including liability arising under the 1933 Act.
ARTICLE X
NONCOMPETITION COVENANTS
10.1. PROHIBITED ACTIVITIES.
(a) Dueitt and Xxxxxx (the "Covenanting Shareholders") will not,
for a period of three years after the Effective Time, directly or indirectly,
for themselves or on behalf of or in conjunction with any other person, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial or advisory capacity,
whether as an employee, independent
28
contractor, consultant or advisor, or as a sales representative, in any
business offering products or services substantially similar to or in
direct competition with the business conducted by the Company or any of
its subsidiaries as of the date of this Agreement within 150 miles of
where the Company or any of its subsidiaries conducts business;
(ii) contact any person who is, at that time, an employee
of IHI or any of its subsidiaries for the purpose or with the intent of
enticing such employee to terminate or solicit or induce such employee
to terminate his employment with IHI or any of its subsidiaries; or
(iii) contact, communicate with or solicit any person or
entity that is at that time, or that has been within one year prior to
that time, a customer of the Company or any of its subsidiaries for the
purpose of soliciting or selling services or products in direct
competition with the Company or any of its subsidiaries.
(b) Notwithstanding the above, the foregoing covenant shall not
preclude any Covenanting Shareholder from acquiring, as a passive investor with
no involvement in the operations of the business, not more than 1% of the
capital stock of a business providing competitive products or services whose
stock is publicly traded on a national securities exchange or over-the-counter.
10.2. EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to IHI as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to IHI for which it
would have no other adequate remedy, each of the Covenanting Shareholders agrees
that IHI shall be entitled to specific performance, injunctive or other relief
in order to enforce the foregoing covenants.
10.3. REASONABLE LIMITATIONS. It is agreed by the parties hereto that
the foregoing covenants in this Article X impose reasonable limitations on the
Covenanting Shareholders as to the time, geographical area and scope of the
activity to be restrained, and do not impose a greater restraint than necessary
to protect the goodwill or other legitimate business interest of IHI and the
Surviving Corporation.
10.4. SEVERABILITY; REFORMATION. The covenants in this Article X are
severable and separate, and the unenforceability of any specific covenant shall
not affect the continuing validity and enforceability of any other covenant. If
any court of competent jurisdiction determines that the scope of activity, time
or geographic restrictions set forth in this Article X are unreasonable and
therefore unenforceable, then it is the intention of the parties that such
restrictions shall be considered divisible and may be amended only to such
scope, time and area as are determined to be reasonable by such court.
10.5. MATERIAL AND INDEPENDENT COVENANT. The Covenanting Shareholders
acknowledge that their agreements with the covenants set forth in this Article X
were material inducements and conditions to IHI's execution and delivery of this
Agreement and to the consummation of the
29
transactions contemplated hereby. All of the covenants in this Article X shall
be construed as an agreement independent of any other provision in this
Agreement.
ARTICLE XI
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
11.1. GENERAL. The Covenanting Shareholders recognize and acknowledge
that they had in the past, currently have, and in the future will have, access
to certain confidential information of the Company and/or IHI and their
businesses, such as lists of customers and suppliers, operational policies, and
pricing and cost policies that are valuable, special and unique assets of the
Company and/or IHI. The Covenanting Shareholders agree that they will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose whatsoever, except as is required in
the course of performing their duties to the Surviving Corporation and/or IHI,
unless (a) such information becomes known to the public generally through no
fault of the Covenanting Shareholders, or (b) disclosure is required by law or
the order of any governmental authority, provided, that prior to disclosing any
information pursuant to this clause (b) the Covenanting Shareholders shall, if
possible, give prior written notice thereof to IHI and provide IHI with the
opportunity to contest such disclosure.
11.2. EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which the surviving
corporation and/or IHI would have no other adequate remedy, the Covenanting
Shareholders agree that the Surviving Corporation and/or IHI shall be entitled
to specific performance and injunctive or other relief in order to enforce or
prevent any violations of the foregoing covenants. Nothing herein shall be
construed as prohibiting IHI from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages.
11.3. SURVIVAL. The obligations of the parties under this Article XI
shall survive the termination of this Agreement.
ARTICLE XII
MISCELLANEOUS
12.1. ENTIRE AGREEMENT. This Agreement, including the exhibits and
schedules hereto and the agreements and disclosure memorandums expressly
referred to herein, embodies the entire agreement and understanding of the
parties hereto with respect to the subject matter contained herein. There are no
restrictions, promises, representations, warranties, covenants, or undertakings,
other than those expressly set forth or referred to herein. This Agreement
supersedes all prior agreements and the understandings between the parties with
respect to such subject matter.
12.2. NOTICES. Any notices permitted or required to be given under the
terms of this Agreement shall be in writing and shall be deemed given if
delivered to the party to be notified at the
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address specified below, by first class mail, overnight courier or fax with hard
copy being sent by first class mail or overnight courier. Such notice shall be
deemed received 24 hours after it is sent via fax (with receipt confirmed) or
overnight courier. Any notice given in any other manner shall be effective only
if and when received.
(a) if to IHI or the Company, to it at:
7135 Ardmore
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxxxx X. Xxxxx
Telecopier No.: (000) 000-0000
With a copy (which shall not constitute notice) to:
Norton, Jacobs, Xxxx & McTopy, L.L.P.
Texaco Heritage Plaza
0000 Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attn: Xxxxxxx X. XxXxxx
Telecopier No.: (000) 000-0000
(b) if to the Shareholders, to their addresses on the signature
pages hereof.
The address of any party may be changed by notice given in the manner
provided in this Section 12.2.
12.3. AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented only by a written instrument designated as an
"amendment" to this Agreement and signed by the parties hereto, and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) only by a written
instrument signed by the person specifically waiving such observance.
12.4. GOVERNING LAW; VENUE. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED UNDER, ENFORCED AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL
SUBSTANTIVE LAWS OF THE STATE OF TEXAS APPLICABLE TO AGREEMENTS TO BE MADE AND
PERFORMED SOLELY WITHIN SUCH STATE, WITHOUT GIVING EFFECT TO ANY CONFLICTS OR
CHOICE OF LAWS PRINCIPLES WHICH MIGHT OTHERWISE APPLY. EXCEPT WITH RESPECT TO
DISPUTES REGARDING THE ESCROWED SHARES WHICH THE PARTIES ACKNOWLEDGE WILL BE
RESOLVED BY ARBITRATION IN ACCORDANCE WITH SECTION 8.7, THE PARTIES AGREE THAT
ANY DISPUTE ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE RESOLVED BY A
COURT OF COMPETENT JURISDICTION IN XXXXXX COUNTY, TEXAS.
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12.5. EXPENSES. Except as otherwise provided herein, IHI shall pay the
fees and expenses of IHI's representatives, accountants and counsel incurred in
connection with the execution, delivery and performance of this Agreement and
the Closing Documents. On or before the Effective Time, the Company will pay all
professional fees and expenses of the Company then outstanding and shall
promptly after receipt of invoices thereafter pay all other fees and expenses
incurred in connection with the execution, delivery and performance of this
Agreement and the Closing Documents.
12.6. ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; but neither this Agreement nor any
of the rights, interest or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties or by
operation of law, and this Agreement is not intended to confer upon any other
person except the parties (and their successors and permitted assigns) any
rights or remedies hereunder.
12.7. WAIVER OF BREACH. No waiver of any provision of this Agreement
shall constitute a waiver of any other provision of this Agreement, nor shall
such waiver constitute a waiver of any subsequent breach of such provision.
12.8. SEVERABILITY. If any provision of this Agreement is declared
unenforceable by a court of last resort, such provision shall be enforced to the
greatest extent permitted by law, and such declaration shall not affect the
validity of any other provision of this Agreement.
12.9. MULTIPLE COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and all of which
shall constitute one and the same instrument.
12.10. CONSTRUCTION. The headings contained in this Agreement are for
reference purposes only and shall not affect this Agreement in any manner
whatsoever. Wherever required by the context, any gender shall include any other
gender, the singular shall include the plural, and the plural shall include the
singular.
12.11. COMMUNITY INTEREST OF SPOUSES. The undersigned spouses of the
Shareholders join in the execution of this Agreement to evidence their knowledge
of its existence and content, to acknowledge that this Agreement is fair,
equitable and in their best interests and to bind their community interest in
the Company Common Stock, and their heirs, beneficiaries, assigns, executors,
and administrators to the representations, covenants and agreements contained in
this Agreement.
32
[THIS PAGE INTENTIONALLY LEFT BLANK]
33
IN WITNESS WHEREOF, IHI, Newco, the Subsidiary and the Company have
caused this Agreement to be signed by their respective duly authorized officers,
and the Shareholders have executed this Agreement, all on June ___, 1998.
INDUSTRIAL HOLDINGS, INC.
By:____________________________________
Xxxxxx X. Xxxx, Chief Executive
Officer and President
INDUSTRIAL HOLDINGS ACQUISITION THREE,
INC.
By:____________________________________
Xxxxxx X. Xxxx, President
UNITED WELLHEAD SERVICES, INC.
By:____________________________________
Xxxxx X. Xxxxxx, President
34
STATE OF TEXAS ss.
ss.
COUNTY OF XXXXXX xx.
BEFORE ME, the undersigned authority, personally appeared Xxxxxx X.
Xxxx, Chief Executive Officer and President of Industrial Holdings, Inc., known
to me to be the person whose name is subscribed to the foregoing instrument, and
being by me first duly sworn, declared and acknowledged to me that he executed
the same for the purposes and consideration therein expressed and that the
statements contained therein are true and correct.
GIVEN under my hand and seal of office this _____ day of ____________,
1998.
___________________________________
Notary Public in and for
the State of T E X A S
___________________________________
Printed Name of Notary Public
STATE OF TEXAS ss.
ss.
COUNTY OF XXXXXX xx.
BEFORE ME, the undersigned authority, personally appeared Xxxxxx X.
Xxxx, President of Industrial Holdings Acquisition Three, Inc., known to me to
be the person whose name is subscribed to the foregoing instrument, and being by
me first duly sworn, declared and acknowledged to me that he executed the same
for the purposes and consideration therein expressed and that the statements
contained therein are true and correct.
GIVEN under my hand and seal of office this _____ day of ____________,
1998.
Notary Public in and for
the State of T E X A S
___________________________________
Printed Name of Notary Public
35
STATE OF TEXAS ss.
ss.
COUNTY OF XXXXXX xx.
BEFORE ME, the undersigned authority, personally appeared Xxxx X.
Xxxxxx, President of United Wellhead Services, Inc., known to me to be the
person whose name is subscribed to the foregoing instrument, and being by me
first duly sworn, declared and acknowledged to me that he executed the same for
the purposes and consideration therein expressed and that the statements
contained therein are true and correct.
GIVEN under my hand and seal of office this _____ day of ____________,
1998.
Notary Public in and for
the State of T E X A S
___________________________________
Printed Name of Notary Public
36
Address for Notice: THE SHAREHOLDERS:
____________________________
000 Xxxxxx Xxxx 48 Xxxxx X. Xxxxxx
Xxxxxxxx, Xxxxx 00000
____________________________
[Spouse]
____________________________
000 Xxxxxx Xxxx 00 Xxxxxx Xxxxxx
Xxxxxx Xxxxxxx, XX 00000
____________________________
[Spouse]
____________________________
000 Xxxxx X. Xxxxxxxx, XX 198, Ste. 000 Xxxxxxx X. Xxxxxxxx
Xxxxxx Xxxxxxx, XX 00000
____________________________
[Spouse]
____________________________
0000 Xxxxx Xxxx Xxxx Xxxxxxx X. Xxxxxxx
X.X. Xxx 000
Xxxxxxxx, XX 00000 ____________________________
[Spouse]
____________________________
X.X. Xxx 0000 Xxxxxxx Xxx Xxxxxx
0000 X. Xxxxxx
Xxxxxxxxxx, Xxxxx 00000 ____________________________
[Spouse]
____________________________
United Wellhead Services, Inc. J. Xxxxxxx Xxxxxxxx
0000 Xxx Xxxx
Xxxxxxx, Xxxxx 00000 ____________________________
[Spouse]
____________________________
00 Xxxxxx Xxxxx Xxxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxx 00000
____________________________
[Spouse]
37
____________________________
802 N. Carancahua, #575 Xxxx X. Xxxxxxx
Xxxxxx Xxxxxxx, Xxxxx 00000
____________________________
[Spouse]
____________________________
000 Xxxxx X. Xxxxxxxx, XX 198, Ste. 000 Xxxxx Xxxxxxxx
Xxxxxx Xxxxxxx, XX 00000
____________________________
[Spouse]
____________________________
x/x Xxxxxxx Xxx Xxxx X. Xxxxxxx
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000 ____________________________
[Spouse]
____________________________
0000 Xxxx Xxxxx Xxxxxxx, #000 Xxxxx X. Xxxxxxx
Xxxxxx, Xxxxx 00000
____________________________
[Spouse]
____________________________
14 Hummingbird Xxxxxx X. Xxxxx
Xxxxxx, Xxxxx 00000
____________________________
[Spouse]
____________________________
000 Xxxxx X. Xxxxxxxx, XX 198, Xxxx X. Wait
Xxxxx 000
Xxxxxx Xxxxxxx, Xxxxx 00000 ____________________________
[Spouse]
HI-TECH COMPRESSOR CO., LC
2911 S. CR 1260 By:____________________________
Xxxxxxx, Xxxxx 00000 Xxxxx Xxxxxx, President
38
STATE OF TEXAS ss.
ss.
COUNTY OF XXXXXX xx.
BEFORE ME, the undersigned authority, personally appeared Xxxxx X.
Xxxxxx, known to me to be the person whose name is subscribed to the foregoing
instrument, and being by me first duly sworn, declared and acknowledged to me
that he executed the same for the purposes and consideration therein expressed
and that the statements contained therein are true and correct.
GIVEN under my hand and seal of office this _____ day of ____________,
1998.
___________________________________
Notary Public in and for
the State of T E X A S
___________________________________
Printed Name of Notary Public
STATE OF TEXAS ss.
ss.
COUNTY OF NUECES ss.
BEFORE ME, the undersigned authority, personally appeared Xxxxxx
Xxxxxx, known to me to be the person whose name is subscribed to the foregoing
instrument, and being by me first duly sworn, declared and acknowledged to me
that he executed the same for the purposes and consideration therein expressed
and that the statements contained therein are true and correct.
GIVEN under my hand and seal of office this _____ day of ____________,
1998.
___________________________________
Notary Public in and for
the State of T E X A S
___________________________________
Printed Name of Notary Public
___________________________________
Printed Name of Notary Public
39
STATE OF TEXAS ss.
ss.
COUNTY OF NUECES ss.
BEFORE ME, the undersigned authority, personally appeared Xxxxxxx X.
Xxxxxxxx, known to me to be the person whose name is subscribed to the foregoing
instrument, and being by me first duly sworn, declared and acknowledged to me
that he executed the same for the purposes and consideration therein expressed
and that the statements contained therein are true and correct.
GIVEN under my hand and seal of office this _____ day of ____________,
1998.
___________________________________
Notary Public in and for
the State of T E X A S
___________________________________
Printed Name of Notary Public
STATE OF TEXAS ss.
ss.
COUNTY OF___________ ss.
BEFORE ME, the undersigned authority, personally appeared Xxxxxxx Xxx
Xxxxxx, known to me to be the person whose name is subscribed to the foregoing
instrument, and being by me first duly sworn, declared and acknowledged to me
that he executed the same for the purposes and consideration therein expressed
and that the statements contained therein are true and correct.
GIVEN under my hand and seal of office this _____ day of ____________,
1998.
___________________________________
Notary Public in and for
the State of T E X A S
___________________________________
Printed Name of Notary Public
40
STATE OF TEXAS ss.
ss.
COUNTY OF XXXXXX xx.
BEFORE ME, the undersigned authority, personally appeared J. Xxxxxxx
Xxxxxxxx, known to me to be the person whose name is subscribed to the foregoing
instrument, and being by me first duly sworn, declared and acknowledged to me
that he executed the same for the purposes and consideration therein expressed
and that the statements contained therein are true and correct.
GIVEN under my hand and seal of office this _____ day of ____________,
1998.
___________________________________
Notary Public in and for
the State of T E X A S
___________________________________
Printed Name of Notary Public
STATE OF VERMONT ss.
ss.
COUNTY OF _______ ss.
BEFORE ME, the undersigned authority, personally appeared Xxxxxx
Xxxxxxx, known to me to be the person whose name is subscribed to the foregoing
instrument, and being by me first duly sworn, declared and acknowledged to me
that he executed the same for the purposes and consideration therein expressed
and that the statements contained therein are true and correct.
GIVEN under my hand and seal of office this _____ day of ____________,
1998.
___________________________________
Notary Public in and for
the State of T E X A S
___________________________________
Printed Name of Notary Public
41
STATE OF TEXAS ss.
ss.
COUNTY OF NUECES ss.
BEFORE ME, the undersigned authority, personally appeared Xxxx X.
Xxxxxxx, known to me to be the person whose name is subscribed to the foregoing
instrument, and being by me first duly sworn, declared and acknowledged to me
that he executed the same for the purposes and consideration therein expressed
and that the statements contained therein are true and correct.
GIVEN under my hand and seal of office this _____ day of ____________,
1998.
___________________________________
Notary Public in and for
the State of T E X A S
___________________________________
Printed Name of Notary Public
STATE OF TEXAS ss.
ss.
COUNTY OF NUECES ss.
BEFORE ME, the undersigned authority, personally appeared Xxxxx
Xxxxxxxx, known to me to be the person whose name is subscribed to the foregoing
instrument, and being by me first duly sworn, declared and acknowledged to me
that he executed the same for the purposes and consideration therein expressed
and that the statements contained therein are true and correct.
GIVEN under my hand and seal of office this _____ day of ____________,
1998.
___________________________________
Notary Public in and for
the State of T E X A S
___________________________________
Printed Name of Notary Public
42
STATE OF TEXAS ss.
ss.
COUNTY OF XXXXXX xx.
BEFORE ME, the undersigned authority, personally appeared Xxxx X.
Xxxxxxx, known to me to be the person whose name is subscribed to the foregoing
instrument, and being by me first duly sworn, declared and acknowledged to me
that he executed the same for the purposes and consideration therein expressed
and that the statements contained therein are true and correct.
GIVEN under my hand and seal of office this _____ day of ____________,
1998.
___________________________________
Notary Public in and for
the State of T E X A S
___________________________________
Printed Name of Notary Public
STATE OF TEXAS ss.
ss.
COUNTY OF __________ ss.
BEFORE ME, the undersigned authority, personally appeared Xxxxx X.
Xxxxxxx, known to me to be the person whose name is subscribed to the foregoing
instrument, and being by me first duly sworn, declared and acknowledged to me
that he executed the same for the purposes and consideration therein expressed
and that the statements contained therein are true and correct.
GIVEN under my hand and seal of office this _____ day of ____________,
1998.
___________________________________
Notary Public in and for
the State of T E X A S
___________________________________
Printed Name of Notary Public
43
STATE OF TEXAS ss.
ss.
COUNTY OF___________ ss.
BEFORE ME, the undersigned authority, personally appeared Xxxxxx X.
Xxxxx, known to me to be the person whose name is subscribed to the foregoing
instrument, and being by me first duly sworn, declared and acknowledged to me
that he executed the same for the purposes and consideration therein expressed
and that the statements contained therein are true and correct.
GIVEN under my hand and seal of office this _____ day of ____________,
1998.
___________________________________
Notary Public in and for
the State of T E X A S
___________________________________
Printed Name of Notary Public
STATE OF TEXAS ss.
ss.
COUNTY OF NUECES ss.
BEFORE ME, the undersigned authority, personally appeared Xxxx X. Wait
known to me to be the person whose name is subscribed to the foregoing
instrument, and being by me first duly sworn, declared and acknowledged to me
that he executed the same for the purposes and consideration therein expressed
and that the statements contained therein are true and correct.
GIVEN under my hand and seal of office this _____ day of ____________,
1998.
___________________________________
Notary Public in and for
the State of T E X A S
___________________________________
Printed Name of Notary Public
44
STATE OF TEXAS ss.
ss.
COUNTY OF ___________ ss.
BEFORE ME, the undersigned authority, personally appeared Xxxxx Xxxxxx,
President of Hi-Tech Compressor Co., LC, known to me to be the person whose name
is subscribed to the foregoing instrument, and being by me first duly sworn,
declared and acknowledged to me that he executed the same for the purposes and
consideration therein expressed and that the statements contained therein are
true and correct.
GIVEN under my hand and seal of office this _____ day of ____________,
1998.
___________________________________
Notary Public in and for
the State of T E X A S
___________________________________
Printed Name of Notary Public
45
ARTICLES OF MERGER
Pursuant to the provisions of article 5.04 of the Texas Business
Corporations Act (the "TBCA"), the undersigned corporations adopt these Articles
of Merger for the purpose of effecting a merger in accordance with the
provisions of article 5.01 of the TBCA.
ARTICLE I
An Agreement and Plan of Merger (the "Plan"), adopted in accordance
with the provisions of article 5.03 of the TBCA, provides for the merger of
Industrial Holdings Acquisition Three, Inc. with and into United Wellhead
Services, Inc. as the surviving corporation. No amendments or changes shall be
made to the Articles of Incorporation of the surviving corporation. The executed
Plan is on file at the principal place of business of the surviving corporation:
000 Xxxxxx Xxxx 00, Xxxxxxxx, Xxxxx 00000. A copy of the Plan will be furnished
on written request and without cost, to any shareholder of each corporation that
is a party to the Plan.
ARTICLE II
The name of each of the undersigned corporations and other entities,
the type of such corporation or other entity and the laws of the state under
which it was organized are as follows:
NAME OF CORPORATION OR OTHER ENTITY TYPE OF ENTITY STATE
United Wellhead Services, Inc. Corporation Texas
Industrial Holdings Acquisition Three, Inc. Corporation Texas
ARTICLE III
The plan was submitted to the shareholders of each of the undersigned
corporations by their respective Board of Directors. As to each of the
undersigned corporations, the number of shares outstanding, and the designation
and number of outstanding shares of each class entitled to vote as a class on
the Plan, are as follows:
NUMBER OF SHARES
NUMBER OF ENTITLED TO
NAME OF CORPORATION OUTSTANDING SHARES VOTE AS A CLASS
United Wellhead Services, Inc. 526,133 Common 0
Industrial Holdings Acquisition
Three, Inc. 526,133 Common 0
ARTICLE IV
The Plan was approved by the unanimous consent of the shareholders of
each of United Wellhead Services, Inc. and Industrial Holdings Acquisition
Three, Inc.
1
ARTICLE V
The Plan and the performance of its terms were duly authorized by all
actions required by laws under which each corporation was incorporated or
organized and by its constituent documents.
ARTICLE VI
The merger will become effective upon the issuance of the certificate
of merger by the Secretary of State, in accordance with the provisions of
article 5.05 of the TBCA.
DATED July 1, 1998
SURVIVING CORPORATION:
UNITED WELLHEAD SERVICES, INC.
By:________________________________
Xxxxx X. Xxxxxx, President
MERGED CORPORATION:
INDUSTRIAL HOLDINGS ACQUISITION
THREE INC.
By:________________________________
Xxxxxx X. Xxxx,
President and Chief Executive
Officer
2
SECTION 3.4 OF
COMPANY DISCLOSURE MEMORANDUM
NUMBER OF
SHARES OF
SHAREHOLDER NAME COMMON STOCK
Xxxxx X. Xxxxxx 128,276
Xxxxxx Xxxxxx 126,776
Diamente Investments, L.P. 94,776
Xxxxxxx X. Xxxxxxx 75,388
Xxxxxxx Xxx Xxxxxx 36,194
J. Xxxxxxx Xxxxxxxx 12,690
Xxxxxx Xxxxxxx 12,678
Xxxx X. Xxxxxxx 9,508
Xxxxx Xxxxxxxx 6,339
Xxxx X. Xxxxxxx 6,339
Xxxxx X. Xxxxxxx 3,169
Xxxxxx X. Xxxxx 1,500
Hi-Tech Compressor Co., LC 1,500
Xxxx X. Wait 11,000
---------
526,133
3
