Exhibit 10.5
STOCK PURCHASE AGREEMENT
BY AND AMONG
INDUSTRIAL HOLDINGS, INC.
AND
GHX ACQUISITION CORP.
DATED AS OF
NOVEMBER 14, 2001
STOCK PURCHASE AGREEMENT EXECUTION COPY
Table of Contents
Page
----
1. SALE AND PURCHASE OF THE STOCK; CLOSING.............................1
1.1. SALE AND PURCHASE...................................................1
1.2. PURCHASE PRICE......................................................1
1.3. POST-CLOSING ADJUSTMENT OF PURCHASE PRICE...........................1
1.4. CLOSING.............................................................2
1.5. DELIVERIES AT CLOSING...............................................3
2. REPRESENTATIONS AND WARRANTIES OF IHI...............................4
2.1. ORGANIZATION AND GOOD STANDING......................................4
2.2. AUTHORIZATION AND ENFORCEABILITY....................................4
2.3. CAPITALIZATION......................................................5
2.4. NO CONFLICTS........................................................5
2.5. FINANCIAL STATEMENTS................................................6
2.6. LIABILITIES AND OBLIGATIONS.........................................6
2.7. FURNITURE, FIXTURES, MACHINERY AND EQUIPMENT........................7
2.8. LEGAL PROCEEDINGS...................................................7
2.9. TITLE TO ASSETS; LIENS..............................................7
2.10. REAL PROPERTY.......................................................7
2.11. SUBSIDIARIES, ETC...................................................7
2.12. EMPLOYEE BENEFIT PLANS..............................................7
2.13. TAX MATTERS.........................................................9
2.14. LEASED REAL PROPERTY................................................9
2.15. INTELLECTUAL PROPERTY RIGHTS........................................9
2.16. BROKERS' FEES......................................................10
2.17. LIMITATION ON REPRESENTATIONS; DEFINITION OF KNOWLEDGE.............10
3. REPRESENTATIONS AND WARRANTIES OF BUYER............................10
3.1. ORGANIZATION AND STANDING..........................................10
3.2. AUTHORIZATION AND ENFORCEABILITY...................................10
3.3. NO VIOLATION OF LAW, ETC...........................................10
3.4. BROKERS' FEES......................................................11
3.5. BUYER'S KNOWLEDGE..................................................11
4. PRE-CLOSING ACTIONS................................................11
4.1. CONDUCT OF BUSINESS................................................11
4.2. BUYER'S ACCESS.....................................................11
4.3. ACCURACY OF REPRESENTATIONS AND WARRANTIES.........................11
5. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS AT THE CLOSING.........12
5.1. COMPLIANCE WITH THIS AGREEMENT.....................................12
5.2. ACCURACY OF REPRESENTATIONS........................................12
5.3. NO MATERIAL ADVERSE CHANGE.........................................12
5.4. SATISFACTION OF CONDITIONS TO MERGER...............................12
5.5. DELIVERY OF CLOSING DOCUMENTS AND ITEMS............................12
5.6. CERTIFICATE REGARDING CONDITIONS PRECEDENT.........................12
STOCK PURCHASE AGREEMENT i EXECUTION COPY
Table of Contents
(continued)
Page
----
6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF IHI AT THE CLOSING......12
6.1. COMPLIANCE WITH THIS AGREEMENT.....................................12
6.2. ACCURACY OF REPRESENTATIONS........................................13
6.3. SATISFACTION OF CONDITIONS TO MERGER...............................13
6.4. DELIVERY OF CLOSING DOCUMENTS AND ITEMS............................13
6.5. CERTIFICATE REGARDING CONDITIONS PRECEDENT.........................13
7. NONCOMPETITION.....................................................13
7.1. PROHIBITED ACTIVITIES..............................................13
7.2. DAMAGES............................................................13
7.3. REASONABLE RESTRAINT...............................................14
7.4. SEVERABILITY; REFORMATION..........................................14
8. INDEMNIFICATION....................................................14
8.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.........................14
8.2. INDEMNIFICATION BY IHI.............................................14
8.3. INDEMNIFICATION BY BUYER...........................................15
8.4. PROCEDURE FOR INDEMNIFICATION; THIRD-PARTY CLAIMS..................15
8.5. PROCEDURE FOR INDEMNIFICATION; OTHER THAN THIRD-PARTY CLAIMS.......16
8.6. SPECIAL PROVISIONS REGARDING LIABILITY.............................16
8.7. REMEDIES...........................................................16
9. POST-CLOSING MATTERS...............................................16
9.1. FURTHER ASSURANCES.................................................16
9.2. BOOKS AND RECORDS..................................................17
9.3. THE COMPANY'S DEBT.................................................17
9.4. TAX MATTERS........................................................17
10. TERMINATION........................................................21
10.1. MANNER OF TERMINATION..............................................21
10.2. EFFECT OF TERMINATION..............................................21
11. MISCELLANEOUS......................................................21
11.1. ENTIRE AGREEMENT...................................................21
11.2. NOTICES............................................................21
11.3. AMENDMENT AND WAIVERS..............................................22
11.4. ASSIGNMENT.........................................................23
11.5. GOVERNING LAW; VENUE...............................................23
11.6. SEVERABILITY.......................................................23
11.7. ARBITRATION........................................................23
11.8. MULTIPLE COUNTERPARTS..............................................24
11.9. EXPENSES...........................................................24
11.10. WAIVER OF BREACH...................................................24
11.11. CONSTRUCTION.......................................................24
STOCK PURCHASE AGREEMENT ii EXECUTION COPY
Table of Contents
(continued)
Page
----
11.12. PUBLIC ANNOUNCEMENTS...............................................24
11.13. FACSIMILE SIGNATURES...............................................25
STOCK PURCHASE AGREEMENT iii EXECUTION COPY
SCHEDULES AND EXHIBITS
EXHIBIT A Form of Subordinated Promissory Note
EXHIBIT B Form of Sublease Agreement
EXHIBIT C Form of Security Agreement
SCHEDULE 2.2 Authorization
SCHEDULE 2.5 Financial Statements
SCHEDULE 2.7 Furniture, Fixtures, Machinery and Equipment
SCHEDULE 2.8 Legal Proceedings
SCHEDULE 2.9 Title to Assets; Liens
SCHEDULE 2.10 Real Property
SCHEDULE 2.12 Employee Benefit Plans
SCHEDULE 2.14 Leased Real Property
SCHEDULE 2.15 Intellectual Property Rights
STOCK PURCHASE AGREEMENT iv EXECUTION COPY
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of November
14, 2001, by GHX ACQUISITION CORP. ("Buyer"), and INDUSTRIAL HOLDINGS, INC., a
Texas corporation ("IHI").
BACKGROUND
A. IHI owns 100% of the outstanding capital stock (the "Stock") of GHX,
Incorporated, a Texas corporation (the "Company"), and desires to sell
the Stock to Buyer on the terms and subject to the conditions in this
Agreement. In connection with the sale and purchase of the Stock, the
Company, IHI and Buyer will enter into certain related agreements, the
forms of which are attached to this Agreement as exhibits ("Exhibits").
B. IHI acquired all of the capital stock of the Company from, among others,
Xxx X. Xxxxxxx ("Xxxxxxx") and Xxxxxx X. Xxxxxx ("Xxxxxx"), the
President of the Buyer, in March 1998. Since that time, Xxxxxx has been
the President of the Company, and Xxxxxxx has served in a management
capacity at IHI. The parties therefore hereby acknowledge that the Buyer
is in many cases as knowledgeable as IHI regarding the Company's
business and the financial statements.
AGREEMENTS
1. SALE AND PURCHASE OF THE STOCK; CLOSING.
1.1. SALE AND PURCHASE. At the Closing, IHI will sell, assign, transfer and
deliver to Buyer, and Buyer will purchase, an aggregate of 31,666 shares
of common stock, $0.01 par value per share, of the Company (the
"Stock").
1.2. PURCHASE PRICE. The purchase price ("Purchase Price") for the Stock will
be $4,959,000 (the "Purchase Price"), to be paid to IHI as follows:
(a) $3,459,000 in cash (the "Cash Consideration"); and
(b) a subordinated promissory note in the original principal amount
of $1,500,000, made payable by Buyer to the order of IHI, in
substantially the form attached hereto as EXHIBIT A (the
"Note").
1.3. POST-CLOSING ADJUSTMENT OF PURCHASE PRICE.
(a) Within 30 calendar days following the Closing Date, IHI shall
cause to be prepared and delivered to the Buyer a Statement of
Net Working Capital of the Company as of the Closing Date (such
statement, the "Closing Date Statement"). The Closing Date
Statement shall be prepared in accordance with generally
accepted accounting principles, consistently applied ("GAAP").
The Buyer shall give IHI and its representatives reasonable
access to the books, records and personnel of the business for
the purpose of preparing and auditing the Closing Date
Statement. The Buyer
STOCK PURCHASE AGREEMENT EXECUTION COPY
shall have a period of 30 calendar days after the delivery to it
of the Closing Date Statement, and during such time the Buyer
shall have access to all workpapers and other relevant
documents, to review the foregoing and to deliver in writing to
IHI any objections to the Closing Date Statement that the Buyer
may have. If Buyer does not deliver in writing any objections to
IHI within the 30-day period, the Closing Date Statement shall
be deemed to be accepted and approved by the Buyer. If Buyer
delivers within the 30-day period written objections to IHI,
then the Buyer and IHI shall attempt to resolve the matter or
matters in dispute. The Buyer shall quantify its objections to
the extent reasonably practicable in all written objections
delivered to IHI with respect to the Closing Date Statement.
(b) If such disputes cannot be resolved by the Buyer and IHI within
20 calendar days after the delivery of the objections to the
Closing Date Statement, then the specific matters in dispute
shall be submitted to Deloitte & Touche, LLP, 000 Xxxx Xxxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxx 00000 (the "Independent
Accountants"), which firm shall render its opinion as to such
matters. Based on that opinion, the Independent Accountants
shall then send to the Buyer and to IHI a written determination
of the matters in dispute and a written determination of the
Purchase Price as adjusted based upon such opinion, whereupon
the confirmed or revised Closing Date Statement shall be final
and binding upon the Buyer and IHI. All costs, fees and expenses
charged or incurred by the Independent Accountants, if any,
shall be borne equally by IHI and the Buyer.
(c) For purposes hereof, "Net Working Capital" means, as of the date
of the Closing Date Statement and based thereon, an amount equal
to the Company's net accounts receivable, net inventories
(valued at average cost), notes receivable and other current
assets (excluding in all cases cash and cash equivalents), minus
the Company's trade accounts payable and current accrued
payables. Notwithstanding the foregoing, Net Working Capital
shall not include any amounts for intercompany payables to IHI
or intercompany receivables from IHI. The Purchase Price shall
be increased by the amount by which the Net Working Capital
contained in the Closing Date Statement is greater than
$4,600,000, and shall be decreased by the amount by which the
Net Working Capital contained in the Closing Date Statement is
less than $4,600,000 (whether an increase to or decrease from
the Purchase Price, the "Purchase Price Adjustment"). The
Purchase Price Adjustment shall be paid by IHI to Buyer, or
Buyer to IHI, as the case may be, within 5 days of the
determination of the Purchase Price Adjustment. If IHI is
obligated to pay the Purchase Price Adjustment to Buyer and if
payment is not made within 5 days of the determination of the
Purchase Price Adjustment, Buyer shall have the option (but not
the obligation) to set off the Purchase Price Adjustment against
the Note.
1.4. CLOSING. The purchase and sale and related transactions this Agreement
provides for (the "Closing") will occur at the offices of Xxxxxxx
Xxxxxx, L.L.P., 0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000,
on the date on which the proposed merger between IHI and T-3 Energy
Services, Inc. (such entity, "T-3", and the proposed Merger, the
"Merger") shall occur, or at such other time or place as the parties
shall mutually agree (the "Closing Date").
STOCK PURCHASE AGREEMENT 2 EXECUTION COPY
1.5. DELIVERIES AT CLOSING.
(a) DELIVERIES BY IHI. IHI or the other indicated parties shall have
executed and delivered to Buyer the following:
(1) the Sublease Agreement attached hereto as EXHIBIT B (the
"Sublease Agreement"), executed by an authorized
representative of The Xxx Group, Inc., a Texas
corporation and a wholly-owned subsidiary of IHI;
(2) a Security Agreement granting a lien in favor of IHI on
the Company's assets that is subordinate to the Buyer's
primary secured lender, in substantially the form
attached as EXHIBIT C (the "Security Agreement");
(3) either (y) UCC-termination statements as are required to
terminate and release all liens on the Company's and the
Subsidiary's assets and equipment (including without
limitation the Liens disclosed on SCHEDULE 2.9), or (z)
letters of creditors indicating that such liens, and
that certificates evidencing IHI's ownership of the
Stock and the Company's ownership of the Subsidiary
Stock, shall be released on payment of identified
amounts payable, in each case except for Permitted
Encumbrances and the permitted liens ("Permitted Liens")
listed on SCHEDULE 2.9;
(4) the Company's corporate records, including its Articles
of Incorporation, Bylaws and corporate minute book;
(5) a certificate executed by IHI representing and
warranting to Buyer that each of IHI's representations
and warranties in this Agreement is accurate in all
material respects as of the Closing Date;
(6) certificates, dated as of a date no earlier than 10 days
before the Closing Date, duly issued by the appropriate
governmental authority in Texas and in any state in
which the Company is authorized to do business, showing
the Company is in good standing and authorized to do
business;
(7) copies certified by IHI's Secretary of resolutions duly
adopted by the board of directors of IHI authorizing and
approving the execution and delivery of this Agreement,
including the exhibits hereto, and the transactions
contemplated hereby; and
(8) such other documents, instruments and certificates
necessary or appropriate in connection with the IHI's
sale and transfer of the Stock.
(b) DELIVERIES BY BUYER. Buyer or the other indicated parties shall
have executed and delivered to IHI the following:
(1) the Cash Consideration;
(2) the Note;
STOCK PURCHASE AGREEMENT 3 EXECUTION COPY
(3) the Sublease Agreement;
(4) the Security Agreement;
(5) a certificate executed by Buyer representing and
warranting to Buyer that each of Buyer's representations
and warranties in this Agreement is accurate in all
material respects as of the Closing Date;
(6) certificates dated as of a date no earlier than 10 days
before the Closing Date, duly issued by the appropriate
governmental authority in its state of organization and
in any state in which Buyer is authorized to do
business, showing Buyer is in good standing and
authorized to do business;
(7) copies certified by Buyer's Secretary (or the holder of
a similar office) of resolutions duly adopted by the
board of directors of Buyer authorizing and approving
the execution and delivery of this Agreement, including
the exhibits hereto, and the transactions contemplated
hereby; and
(8) such other documents, instruments and certificates
necessary or appropriate in connection with the Buyer's
purchase of the Stock.
2. REPRESENTATIONS AND WARRANTIES OF IHI. IHI represents and warrants to
Buyer that the statements in this Section 2 are true and correct as of
the date of this Agreement and will be true and correct on the Closing
Date as if made on the Closing Date (except to the extent any
representation or warranty is made as of another date, which is hereby
made as of such other date).
2.1. ORGANIZATION AND GOOD STANDING.
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Texas. The
Company is duly qualified and in good standing in every
jurisdiction in which it is required by the nature of its
business or lease of its properties to so qualify, except where
the failure to so qualify does not or is not reasonably expected
to have a material adverse effect on the Company or its
operations.
(b) The Company's wholly-owned subsidiary, GHX, Incorporated of
Louisiana, a Louisiana corporation (the "Subsidiary"), is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Louisiana. The
Subsidiary is duly qualified and in good standing in every
jurisdiction in which it is required by the nature of its
business or lease of its properties to so qualify, except where
the failure to so qualify does not or is not reasonably expected
to have a material adverse effect on the Subsidiary or its
operations.
2.2. AUTHORIZATION AND ENFORCEABILITY. IHI has all requisite power and
authority to execute and deliver this Agreement and all other agreements
to be executed and delivered by it in connection with this Agreement
that are identified in Section 1.5(a) of this Agreement (such
STOCK PURCHASE AGREEMENT 4 EXECUTION COPY
other agreements, collectively, the "Related Agreements"), and to
perform its obligations under this Agreement and the Related Agreements.
IHI has duly executed and delivered this Agreement, and it is IHI's
legal, valid and binding obligation, enforceable against it in
accordance with its terms, except as its enforcement may be limited by
bankruptcy, insolvency moratorium, or similar laws relating to the
enforcement of creditors' rights and by general principals of equity
(regardless of whether such enforceability is considered in a proceeding
at law or in equity) (collectively, the "Exceptions"). When IHI executes
and delivers the Related Agreements, the Related Agreements will be
IHI's legal, valid and binding obligations, enforceable against it in
accordance with their respective terms, except as the enforcement
thereof may be limited by the Exceptions. Except as disclosed on
SCHEDULE 2.2, IHI is not required to obtain any consent, approval or
authorization of, or registration, declaration or filing with any
Governmental Authority or third party to authorize its execution,
delivery or performance of its obligations under this Agreement or the
Related Agreements.
"GOVERNMENTAL AUTHORITY" means any foreign governmental authority, the
United States of America, any state of the United States, and any
political subdivision of any of the foregoing, and any agency,
department, commission, board, bureau or court of any of the foregoing
having jurisdiction over the respective party or their assets.
2.3. CAPITALIZATION.
(a) The Company's authorized equity securities consist of (a)
100,000 shares of common stock, $0.01 par value per share,
31,666 shares of which are issued and outstanding and owned of
record and beneficially by IHI and constitute the Stock, and (b)
2,500 shares of preferred stock, par value $100.000 per share,
none of which are issued and outstanding. Except as disclosed on
SCHEDULE 2.2, IHI owns all of the Stock, free and clear of all
liens, claims, encumbrances, equities, voting trusts and
agreements, and proxies. The Stock is all of the outstanding
capital stock of the Company. Each outstanding share of the
Stock has been duly authorized and validly issued and is fully
paid and non-assessable. There are no options, warrants,
subscriptions, or other rights to purchase, or securities
convertible into or exchangeable for, any of the Company's
authorized or outstanding securities. None of the Stock has been
issued or disposed of in violation of the preemptive rights of
any of the Company's present or former stockholders.
(b) The Subsidiary's authorized equity securities consist of 500,000
shares of common stock, no par value per share, 100,000 shares
of which (the "Subsidiary Stock") are issued and outstanding.
Each outstanding share of the Subsidiary Stock has been duly
authorized and validly issued and is fully paid and
non-assessable. Except as disclosed on SCHEDULE 2.2, the Company
owns all of the Subsidiary Stock, free and clear of all liens,
claims, encumbrances, equities, voting trusts and agreements,
and proxies.
2.4. NO CONFLICTS. Except as disclosed on SCHEDULE 2.2, IHI's execution,
delivery and performance of this Agreement does not, and its execution,
delivery and performance of the Related Agreements will not:
STOCK PURCHASE AGREEMENT 5 EXECUTION COPY
(a) conflict with, violate or constitute a material breach of or a
material default under; or
(b) result in the creation or imposition of any lien upon any of the
property or assets of IHI, the Company or the Subsidiary under
the terms of:
(1) the Organizational Documents (as defined below) of IHI,
the Company or the Subsidiary; or
(2) any material credit or loan agreement, mortgage,
indenture, promissory note or any other material
agreement or instrument to which IHI, the Company or the
Subsidiary is a party or by which any of them or any of
their properties may be bound or affected.
"ORGANIZATIONAL DOCUMENTS" means the Articles of Incorporation or
Certificate of Incorporation, as applicable, and Bylaws of the
referenced entity, each as amended and in effect on the date of this
Agreement.
2.5. FINANCIAL STATEMENTS. Attached as EXHIBIT 2.5 are copies of the
Company's:
(a) unaudited consolidated balance sheet at December 31, 2000, and
related unaudited income statement for the 12 months then ended
(the December 31, 2000 Balance Sheet and Income Statement
referred to as the "2000 Financial Statements"); and
(b) unaudited consolidated balance sheet at September 30, 2001 (the
"Interim Balance Sheet") and related unaudited income statement
for the nine months then ended (collectively, the "Interim
Financial Statements").
The 2000 Financial Statements and the Interim Financial Statements are
referred to collectively as the "Financial Statements." The Financial
Statements have been prepared from the Company's books and records in
conformity with GAAP, subject to normal recurring year-end adjustments
(the effect of which will not, individually or in the aggregate, be
materially adverse) and the absence of notes to the Financial
Statements. The Financial Statements present fairly in all material
respects the Company's financial position at the dates indicated and the
results of its operations for the periods then ended. For purposes of
this Agreement, December 31, 2000 is referred to as the "2000 Financial
Statement Date" and September 30, 2001 is referred to as the "Interim
Financial Statement Date."
2.6. LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for on the Interim Balance Sheet, and except for
liabilities and obligations that have arisen since the Interim Financial
Statement Date in the Ordinary Course of Business (as that term is
defined below), neither the Company nor the Subsidiary has incurred any
material liabilities of a type required by GAAP to be reflected on a
balance sheet.
"Ordinary Course of Business" means actions of the Company or the
Subsidiary that are:
(a) consistent with past practices taken in the course of its usual
day-to-day operations;
(b) not required to be authorized by resolution of its board of
directors; and
STOCK PURCHASE AGREEMENT 6 EXECUTION COPY
(c) similar in nature and magnitude to actions customarily taken,
without authorization by the boards of directors in the ordinary
course of usual day-to-day operations of other companies of
similar size in the same line of business.
2.7. FURNITURE, FIXTURES, MACHINERY AND EQUIPMENT. SCHEDULE 2.7 is a list of
all of the material items of the Company's and the Subsidiary's
furniture, fixtures, machinery and equipment, which constitutes
substantially all the material fixtures, machinery and equipment used in
the conduct of each's business. SCHEDULE 2.7 also identifies any such
equipment that is leased.
2.8. LEGAL PROCEEDINGS. Except as disclosed on SCHEDULE 2.8, there are no
actions, suits or proceedings pending, or known to be threatened,
against the Company or the Subsidiary or either of their properties, at
law or in equity, or before or by any Governmental Authority.
2.9. TITLE TO ASSETS; LIENS. The Company and the Subsidiary each has good and
marketable title to its assets and properties (not taking into account
personal property the Company or the Subsidiary leases) other than the
leased real property described in SCHEDULE 2.10. Such assets are not
subject to any liens, claims, demands, equity interests, pledges or
security interests ("Liens"), except as disclosed on SCHEDULE 2.9 and
except for: (a) liens for taxes not yet due and payable or being
contested in good faith by appropriate proceedings; and (b) statutory
liens not yet due and payable. When Buyer pays to the applicable
creditor, at IHI's direction, the amounts identified in the creditor
payoff letters that will be delivered to Buyer at the Closing pursuant
to Section 1.5(a)(iii), IHI shall obtain a release of all Liens except
those Permitted Liens identified on SCHEDULE 2.9.
2.10. REAL PROPERTY. SCHEDULE 2.10 includes a legal description of all real
property that the Company owns. The Subsidiary owns no real property.
The Company has good and indefeasible fee simple title to all such real
property, free and clear of all material easements, restrictions, liens,
encumbrances or other matters affecting its title, use or occupancy,
except for: (a) liens for real property taxes, assessments and charges
not yet due and payable; and (b) such easements, liens and encumbrances
as do not materially detract from or interfere with the present use of
such real property ("Permitted Encumbrances").
2.11. SUBSIDIARIES, ETC. Except for the Subsidiary, the Company (a) has no
subsidiaries; (b) is not a co-venturer in any joint venture or a partner
in any partnership; and (c) owns no interest in any other corporation,
business enterprise or other entity.
2.12. EMPLOYEE BENEFIT PLANS.
(a) SCHEDULE 2.12 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. Except as disclosed on SCHEDULE 2.12,
neither the Company nor the Subsidiary sponsors, maintains nor
contributes to any plan, program, fund or arrangement that
constitutes an employee pension benefit plan, and neither has
any obligation to contribute to or accrue or pay any benefits
under any deferred
STOCK PURCHASE AGREEMENT 7 EXECUTION COPY
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 SECTION 2.12, the term
"employee pension benefit plan" has the same meaning given that
term in Section 3(2) of ERISA.
(b) No employee benefit plan listed on SCHEDULE 2.12 is either (i) a
"multiemployer plan" (as defined in Section 3 (37) of ERISA), or
(ii) a defined benefit pension plan subject to Title IV of
ERISA.
(c) All employee benefit plans listed on SCHEDULE 2.12 that are
intended to qualify (each such plan, a "Qualified Plan") under
Section 401(a) of the Internal Revenue Code of 1986, as amended,
(the "Code") have been so qualified. 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
SCHEDULE 2.12. Neither IHI, any plan listed in SCHEDULE 2.12,
the Company or the Subsidiary has engaged in any transaction
prohibited and not exempted under Section 4975 of the Code or
Sections 406 and 408 of ERISA; no plan listed in SCHEDULE 2.12
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 ("PBGC").
(d) 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 Internal Revenue Service; no plan
listed in SCHEDULE 2.12 subject to the provisions of Title IV of
ERISA has been terminated; there have been no "reportable
events" (as that term is defined in Section 4043 of ERISA) with
respect to any such plan listed in SCHEDULE 2.12; neither
Company nor the Subsidiary has incurred liability under Section
4062 of ERISA; and no circumstances exist under which the
Company or the Subsidiary could have any direct or indirect
liability whatsoever (including, but not limited to, any
liability to any multiemployer 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
previously 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 and the Subsidiary considered a single employer
under Sections 414(b), (c), (m) or (o) of the Code.
(e) With respect to any employee benefit plan that is subject to the
continuation requirements of Sections 601-608 of ERISA and
Section 4980B of the Code or the continuation requirements of
any applicable state or local law, each of the Company
STOCK PURCHASE AGREEMENT 8 EXECUTION COPY
and the Subsidiary has complied with all such applicable laws
and regulatory requirements with which it is required to comply.
2.13. TAX MATTERS.
(a) "Tax" or "Taxes" shall mean all of the Company's and the
Subsidiary's federal, state, county, local, and other taxes
relating to all periods before the Closing Date (including,
without limitation, income taxes; premium taxes; single-business
taxes; excise taxes; sales taxes; use taxes; value-added taxes;
gross receipts taxes; franchise taxes; ad valorem taxes; real
estate taxes; severance taxes; capital levy taxes; transfer
taxes; stamp taxes; employment, unemployment, and
payroll-related taxes; withholding taxes; and governmental
charges and assessments, and including all transfer taxes), and
include interest, additions to tax, and penalties.
(b) Each of the Company and the Subsidiary has duly and timely filed
all Tax returns and reports it is required to file by any
Governmental Authority. Each of the Company and the Subsidiary
has paid or established adequate reserves for all Taxes
(including penalties and interest) that have or may become due
under such returns and any assessments that have been received
by it or otherwise. All such Tax returns or reports fairly
reflect the Taxes of the Company and the Subsidiary for the
periods covered thereby.
(c) Neither the Company nor the Subsidiary is delinquent in the
payment of any Tax assessment or governmental charge and there
are no Tax deficiencies or delinquencies asserted against either
of them. No Internal Revenue Service audit of the Company or the
Subsidiary is pending or threatened, and the results of any
completed audits are properly reflected in the Financial
Statements. Neither the Company nor the Subsidiary has granted
to any taxing authority any extension of the limitation period
during which any Tax liability may be asserted. All amounts of
money the Company and the Subsidiary are required to withhold
from employees or collect from customers for Taxes, social
security and unemployment insurance, and the portion of any such
Taxes the Company and the Subsidiary are required to pay to any
Governmental Authority, have been collected or withheld and
either paid to the respective Governmental Authority or set
aside in accounts for such purpose, or such monies have been
reserved against and entered on the Company's or the
Subsidiary's books.
2.14. LEASED REAL PROPERTY. Disclosed on SCHEDULE 2.14 is a list by legal
description of all leased real property that the Company or the
Subsidiary leases (the "Leased Property"). SCHEDULE 2.14 also discloses
the owner of the Leased Property.
2.15. INTELLECTUAL PROPERTY RIGHTS. To IHI's knowledge, no patents, processes,
inventions, trademarks, trade names, copyrights, licenses, information
and proprietary rights (collectively, "Intellectual Property Rights")
being used by the Company or the Subsidiary in the conduct of their
business infringe upon or are in conflict with the rights of others.
SCHEDULE 2.15 is a summary of all Intellectual Property Rights.
STOCK PURCHASE AGREEMENT 9 EXECUTION COPY
2.16. BROKERS' FEES. Neither the Company nor IHI is obligated (contingently or
otherwise) under any contract or other agreement, and there are no
outstanding claims against either of them for the payment of any
broker's or finder's fee or agent's commission or other similar payment
in connection with the origin, negotiation, execution or performance of
this Agreement or the Related Agreements.
2.17. LIMITATION ON REPRESENTATIONS; DEFINITION OF KNOWLEDGE. All
representations and warranties of IHI in this Section 2 are being made
to its "knowledge" (as that term is defined below) except for those
representations and warranties made in Sections 2.2, 2.3, 2.5, 2.6, 2.9
and 2.13. When any representation or warranty in this Section 2 is
qualified to IHI's "knowledge," it means the actual knowledge of its
executive officers.
3. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants
to IHI that the statements in this Section 3 are true and correct as of
the date of this Agreement and will be true and correct on the Closing
Date as if made on the Closing Date (except to the extent any
representation or warranty is made as of another date, which are hereby
made as of such other date):
3.1. ORGANIZATION AND STANDING. The Buyer is a corporation duly incorporated,
validly existing, and in good standing under the laws of the State of
Texas. Buyer is duly qualified and in good standing in every
jurisdiction in which it is required by the nature of its business or
the ownership or lease of its properties to so qualify, except where the
failure to so qualify does not or is not reasonably expected to have a
material adverse effect on the Buyer.
3.2. AUTHORIZATION AND ENFORCEABILITY. Buyer has full power and authority to
execute and deliver this Agreement, the Related Agreements and the Note,
and to perform its obligations hereunder and thereunder. Buyer has duly
authorized the execution, delivery and performance of this Agreement,
and it is Buyer's legal, valid and binding obligation, enforceable
against it in accordance with its terms, except for the Exceptions. When
Buyer executes and delivers the Related Agreements and the Note, each
will have been duly executed and delivered by Buyer and will constitute
its legal, valid and binding obligations, except as the enforcement
thereof may be limited by the Exceptions. Buyer is not required to
obtain any consent, approval or authorization of, or registration,
declaration or filing with any Governmental Authority or third party to
authorize the execution and delivery of, the performance of its
obligations under this Agreement, the Related Agreements, or the Note.
3.3. NO VIOLATION OF LAW, ETC. Buyer's execution, delivery and performance of
this Agreement does not, and its execution, delivery and performance of
the Related Agreements and the Note will not:
(a) conflict with, violate or constitute a breach of or a default
under; or
(b) result in the creation or imposition of any lien upon any of the
assets or properties of Buyer under the terms of:
(1) if Buyer is other than a natural person, the
Organizational Documents of Buyer; or
STOCK PURCHASE AGREEMENT 10 EXECUTION COPY
(2) any credit or any loan agreement, mortgage, indenture,
promissory note or other agreement or instrument to
which Buyer is a party or by which it or any of its
properties may be bound or affected.
3.4. BROKERS' FEES. Buyer is not obligated (contingently or otherwise) under
any contract or other agreement, and there are no outstanding claims
against Buyer for the payment of any broker's or finder's fee or agent's
commission or other similar payment in connection with the origin,
negotiation, execution or performance of this Agreement or the Related
Agreements.
3.5. BUYER'S KNOWLEDGE. Neither Xxxxxxx nor Xxxxxx has knowledge of any facts
or circumstances that would indicate that any of the representations or
warranties of IHI contained in this Agreement are inaccurate or untrue
in any material respect. For purposes of this Agreement, Xxxxxxx' and
Xxxxxx'x knowledge of a fact or circumstance shall in all cases be
attributed to the Buyer.
4. PRE-CLOSING ACTIONS.
4.1. CONDUCT OF BUSINESS. Except as otherwise provided in this Section 4.1,
from the date of this Agreement to the Closing Date, IHI shall cause the
Company to carry on and conduct its operations only in the Ordinary
Course of Business, including the collection of its accounts receivable,
payment of trade account and other-payables, and maintenance of
inventory levels, without any change in the policies, practices, and
methods that the Company pursued before the date of this Agreement. As
an exception to the foregoing sentence, immediately before the Closing
(a) the Company shall transfer to IHI, and shall no longer have access
to, all of the Company's bank accounts, and the cash, temporary cash
investments and instruments representing the same and all other cash
equivalents contained therein; and (b) IHI shall forgive all
intercompany amounts recorded in the Company's financial records as a
payable due to IHI, and the Company shall forgive all intercompany
amounts recorded on IHI's financial records as a payable to the Company.
Subject in all cases to the above required actions that will be taken
before the Closing, IHI will use its reasonable commercial efforts to
preserve the business organizations of the Company intact; to preserve
the relationships with Company's customers, suppliers, and others having
business dealings with the Company.
4.2. BUYER'S ACCESS. IHI and the Company shall permit Buyer and its
representatives to make a full business, financial, accounting, and
legal investigation of the Company, its operations, properties and
equipment. IHI and the Company shall take all reasonable steps necessary
to cooperate with Buyer in undertaking any investigation which they deem
necessary.
4.3. ACCURACY OF REPRESENTATIONS AND WARRANTIES. IHI will promptly advise
Buyer in writing if (a) any of its representations or warranties are
untrue or incorrect in any material respect or (b) IHI becomes aware of
the occurrence of any event or of any state of facts that results in any
of the representations and warranties of IHI being untrue or incorrect
in any material respect as if IHI were then making them. IHI will use
its reasonable commercial efforts to cause all conditions within its
control that are set forth in Section 5 to be satisfied as promptly as
practicable under the circumstances.
STOCK PURCHASE AGREEMENT 11 EXECUTION COPY
5. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS AT THE CLOSING. Buyer's
obligation to purchase the Stock on the Closing Date is subject to the
satisfaction, by the Closing Date, of the conditions of this Section 5.
If any such condition is not satisfied or waived, then Buyer shall have
no obligation to purchase the Stock.
5.1. COMPLIANCE WITH THIS AGREEMENT. By the Closing Date, IHI and the Company
shall have performed, and complied with all agreements and conditions
contained in this Agreement that each are required to perform or comply
with.
5.2. ACCURACY OF REPRESENTATIONS.
(a) All of the representations and warranties of IHI in this
Agreement (considered collectively), and each of these
representations and warranties (considered individually), must
have been accurate, in light of the circumstance under which
they were made, in all material respects as of the date of this
Agreement, and must be accurate in all material respects as of
the Closing Date as if made on the Closing Date.
(b) Buyer must not have discovered any material error, misstatement
or omission in the representations and warranties made by IHI in
this Agreement, the Financial Statements, or in any Exhibit,
schedule or other disclosure made hereunder.
5.3. NO MATERIAL ADVERSE CHANGE. Between the date of this Agreement and the
Closing Date, there must not have occurred any material adverse change
in the Company's financial condition or results of operations (on a
consolidated basis)
5.4. SATISFACTION OF CONDITIONS TO MERGER. All of the conditions precedent to
the Merger shall have been satisfied and performed.
5.5. DELIVERY OF CLOSING DOCUMENTS AND ITEMS. IHI shall have delivered or
caused to have been delivered to Buyer the documents, certificates and
general instruments of transfer enumerated in Section 1.5(a) of this
Agreement.
5.6. CERTIFICATE REGARDING CONDITIONS PRECEDENT. IHI shall have delivered to
Buyer a certificate of IHI certifying that as of the Closing Date all of
the conditions set forth in this Section 5 have been satisfied.
6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF IHI AT THE CLOSING. IHI's
obligation to sell the Stock to Buyer on the Closing Date is subject to
the satisfaction, by the Closing Date, of the conditions set forth in
this Section 6. If any such condition is not satisfied or waived, then
IHI shall have no obligation to sell the Stock to Buyer.
6.1. COMPLIANCE WITH THIS AGREEMENT. By the Closing Date, Buyer shall have
performed and complied with all agreements and conditions contained in
this Agreement that it is required to perform or comply with.
STOCK PURCHASE AGREEMENT 12 EXECUTION COPY
6.2. ACCURACY OF REPRESENTATIONS.
(a) All of Buyer's representations and warranties in this Agreement
(considered collectively), and each of its representations and
warranties in this Agreement (considered individually), must
have been accurate, in light of the circumstance under which
they were made, in all material respects as of the date of this
Agreement and must be accurate in all material respects as of
the Closing Date as if made on the Closing Date.
(b) IHI must not have discovered any material error, misstatement or
omission in the representations and warranties Buyer made in
this Agreement or in any Exhibit, schedule or other disclosure
hereunder.
6.3. SATISFACTION OF CONDITIONS TO MERGER. All of the conditions precedent to
the Merger shall have been satisfied and performed.
6.4. DELIVERY OF CLOSING DOCUMENTS AND ITEMS. Buyer have delivered or caused
to have been delivered to IHI the documents, certificates and general
instruments of transfer enumerated in Section 1.5(b) of this Agreement.
6.5. CERTIFICATE REGARDING CONDITIONS PRECEDENT. The Buyer shall have
delivered to IHI a certificate of the Buyer certifying that as of the
Closing Date all of the conditions set forth in Section 6 have been
satisfied.
7. NONCOMPETITION.
7.1. PROHIBITED ACTIVITIES. IHI will not, for a period of two years after the
Closing Date, directly or indirectly, for itself or on behalf of or in
conjunction with any other person, persons, company, partnership,
corporation or business of whatever nature:
(a) engage in the design, manufacture, sale, marketing or assembly
of industrial gaskets and hoses to the process industries and
turbine manufacturing industries (the "GHX Business"); or
(b) contact or solicit any person or entity which is, at that time,
or which has been, within two years before the Closing Date, a
customer of the Company or (a "Protected Customer"), in order to
divert the Protected Customer to any other company or entity in
the GHX Business.
Notwithstanding the above, the foregoing covenants shall not prohibit
IHI from (i) continuing to engage in the design, manufacture,
fabrication, assembly or sale of any equipment, parts or component parts
as IHI, T-3, or either of their subsidiaries or affiliates currently
engages; or (ii) acquiring as an investment no more than 1% of the
capital stock of a competing business whose stock is traded on a
national securities exchange or in the over-the-counter market.
7.2. DAMAGES. Because of the difficulty of measuring economic losses to Buyer
as a result of a breach of any of the foregoing covenants, and because
of the immediate and irreparable
STOCK PURCHASE AGREEMENT 13 EXECUTION COPY
damage that will result to Buyer for which it would have no other
adequate remedy, IHI agrees that the foregoing covenant may be enforced
by Buyer if there is a breach by IHI, by injunctive relief, restraining
orders, or other extraordinary relief to be cumulative to, but not in
limitation of, any other remedies to which Buyer may be entitled.
7.3. REASONABLE RESTRAINT. The parties agree that the covenants in this
Section 7 impose a reasonable restraint on IHI in light of the
activities and business of the Company as of the date of this Agreement.
7.4. SEVERABILITY; REFORMATION. The covenants in this Section 7 are severable
and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. If any court of
competent jurisdiction determines that the scope, time or territorial
restrictions are unreasonable, the parties intend that such restrictions
be enforced to the fullest extent the court deems reasonable, and the
Agreement shall thereby be reformed.
8. INDEMNIFICATION.
8.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The parties'
representations, warranties, covenants, agreements and indemnities in
this Agreement shall survive the Closing, the consummation of the
transactions evidenced by this Agreement, and any investigation with
respect thereto for a period of one year after the Closing Date (the
"Expiration Date"). Notwithstanding the foregoing, any representation,
warranty, covenant, agreement or indemnity in respect to which indemnity
may be sought, shall survive the time at which it would otherwise
terminate if notice of the inaccuracy or breach thereof shall have been
given to the party against whom such indemnity may be sought before such
time.
8.2. INDEMNIFICATION BY IHI.
(a) Subject to the provisions of this Section 8, IHI agrees to
protect, indemnify and hold harmless Buyer and its stockholders,
officers, directors, agents and attorneys, (the "Buyer
Indemnitees"), from and against any demand, claim, action, cause
of action, suit, proceeding, investigation, liability,
obligation, judgment, loss, damage, cost or expense (excluding
in all cases consequential and punitive damages, but including
reasonable attorneys' fees) (collectively, "Damages") as they
are incurred or suffered by any of them and caused by or arising
out of:
(1) IHI's or the Company's breach or default in the
performance of any covenant or agreement in this
Agreement or in any IHI Related Agreement; and
(2) IHI's breach of or inaccurate or erroneous
representation or warranty made in this Agreement; and
(3) Any liability under any Environmental Laws (as defined
below) occurring or existing for events or circumstances
existing prior to December 1, 2000, the date of the
Company's occupancy of the leased property located at
0000 Xxxxxxx, Xxxxxxx, Xxxxx 00000 (the "Company
Occupancy Date") and arising out of or related to (i)
any conduct, operation or activity at the leased
STOCK PURCHASE AGREEMENT 14 EXECUTION COPY
property located at 0000 Xxxxxxx, Xxxxxxx, Xxxxx 00000
prior to the Company Occupancy Date; or (ii) any
condition of the leased property located at 7111
Ardmore, Xxxxxxx, Xxxxx 00000 existing on or prior to
the Company Occupancy Date.
"ENVIRONMENTAL LAWS" means all federal, state, county, municipal and
local, foreign, and other statutes, laws, regulations, and ordinances
that relate to human health or Environment, all as may be amended from
time to time.
"ENVIRONMENT" means soil, land surface or subsurface strata, surface
water (including navigable water), ground waters, drinking water supply,
stream sediments, ambient air (including indoor air), plant life, animal
life, and any other similar medium or natural resource.
8.3. INDEMNIFICATION BY BUYER. Subject to the provisions of this Section 8,
Buyer agrees to protect, indemnify and hold harmless IHI and its
stockholders, officers, directors, agents, attorneys and assigns (the
"IHI Indemnitees") from and against any Damages as they are incurred or
suffered by any of them and caused by or arising out of:
(a) Buyer's breach or default in the performance of any covenant or
agreement in this Agreement, or in any Related Agreements or the
Note; and
(b) Buyer's breach of or inaccurate or erroneous representation or
warranty made 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, or except if such notice is not delivered before the
time specified in Section 8.1. 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.
STOCK PURCHASE AGREEMENT 15 EXECUTION COPY
(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 Person, which
approval shall not be unreasonably withheld.
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, which specifies in reasonable
detail the factual basis of such claim, delivered to the Indemnifying
Person on or before the Expiration Date.
8.6. SPECIAL PROVISIONS REGARDING LIABILITY.
(a) No claim for indemnification shall be made hereunder unless
asserted by a written notice given to the Indemnifying Person,
on or before the Expiration Date.
(b) No claim for indemnification shall be made hereunder with
respect to any matter (i) unless and until the total amount of
Damages exceeds $50,000 in the aggregate ("Minimum Damages"),
and then only for the amount by which such Damages exceeds
Minimum Damages; and (ii) to the extent that the total amount of
Damages exceeds the Cash Consideration.
(c) 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 Section 8.
(d) An indemnity payment for Damages otherwise due and payable under
this Section 8 shall be decreased to the extent of any (i) net
reduction of tax liability the Indemnified Party actually
realizes as a result of such indemnifiable loss, and (ii)
insurance proceeds the Indemnified Party actually collects in
connection with the indemnifiable loss.
8.7. REMEDIES. The remedies of the Buyer and the Buyer Indemnitees set forth
in this Section 8 shall be the exclusive post-Closing remedies available
to them with respect to the actual or alleged breach by IHI of any
provision of this Agreement or the Related Agreements.
9. POST-CLOSING MATTERS.
9.1. FURTHER ASSURANCES. From time to time after the Closing Date, each party
hereto will, at any other party's request, execute, acknowledge and
deliver to such requesting party such
STOCK PURCHASE AGREEMENT 16 EXECUTION COPY
other instruments and take such other actions and deliver such other
documents as may be reasonably required to carry out the intent of this
Agreement and the Related Agreements.
9.2. BOOKS AND RECORDS. Insofar as IHI determines that any books and records
may be needed or useful in connection with federal, state or local
regulatory or tax matters, resolution of third party disputes or
contract compliance issues, or other bona fide business purposes, for a
period of seven years after the Closing Date, Buyer and the Company will
use their best efforts to preserve and make available to IHI, at the
location of such books and records in Buyer's and the Company's
organization, access to and the right to copy such of the books and
records as such they may then have in their possession or to which it
may have access upon written request of IHI during normal business
hours.
9.3. THE COMPANY'S DEBT. After the Closing Date and until such time as the
Note is paid in full, the Company shall not, without IHI's prior written
approval, incur any additional debt other than (a) ordinary advances
under the Company's revolving working capital line to be established by
Buyer and (b) up to an additional $200,000 per calendar year in the
aggregate for the purchase of new equipment in the Ordinary Course of
Business and for necessary building improvements.
9.4. TAX MATTERS.
(a) ALLOCATION OF LIABILITY FOR TAXES, TAX RETURNS AND TAX PAYMENTS.
(1) IHI and Buyer shall, to the extent permitted by
applicable law and except as otherwise provided herein,
elect with the relevant Governmental Authority to close
the taxable period of the Company and the Subsidiary at
the close of business on the Closing Date.
(2) IHI shall prepare or cause to be prepared and file or
cause to be filed any required Tax Returns for all
taxable periods or portions thereof ending on or before
the Closing Date, and shall pay all Taxes of the Company
for taxable periods or portions thereof ending on or
before the Closing Date.
(3) Buyer shall be liable for and indemnify IHI and its
affiliates against Taxes imposed on or incurred by the
Company, the Subsidiary, IHI or its affiliates for any
Pre-Closing Tax Period (as defined below) attributable
to any Section 338(h)(10) Election (as defined below).
Buyer shall be liable for and indemnify IHI and its
affiliates against Taxes imposed on or incurred by the
Company or the Subsidiary for any Straddle Period (as
defined below), including (A) any Taxes attributable to
any transactions that are properly allocable to the
portion of the Closing Date after the Closing, and (B)
any Taxes attributable to any Section 338(h)(10)
Election. Buyer shall pay all Taxes reported on Tax
returns for which Buyer has filing responsibility, and
all Taxes resulting from adjustments to any Tax returns
of the Company or the Subsidiary other than a Tax return
that includes the assets and activities of the Company
or the Subsidiary with the assets or activities of IHI
or any affiliate of IHI (other than the Company and the
Subsidiary). Buyer will not
STOCK PURCHASE AGREEMENT 17 EXECUTION COPY
file any amended return, carryback claim, or other
adjustment request relating to the Company or the
Subsidiary for any Tax period that includes or ends on
or before the Closing Date unless such action is
required by law, or Buyer has obtained IHI's written
consent, which consent shall not be unreasonably
withheld.
(4) If Buyer or any of its affiliates (including the Company
and the Subsidiary) makes any payment of Tax for which
IHI is liable under Section 9.4(a)(2), or if IHI or any
of its affiliates (other than the Company or the
Subsidiary) makes any payment of any Tax for which Buyer
is liable under Section 9.4(a)(3), then the Person
liable for the Tax under Section 9.4(a) shall pay the
amount of the Tax to the Person making the payment
within 10 days following written notice from the Person
making the payment that payment of such amounts to the
appropriate Governmental Authority is due, provided that
the Person liable for the Tax shall not be required to
make any payment earlier than the day it is due to the
appropriate Governmental Authority.
(5) Any reimbursement payment due under Section 9.4(a)(4)
and not made by required date shall bear interest on the
amount of the payment from the last date provided for
such payment until the date paid. The interest payable
shall be computed at an interest rate equal to the
Federal short-term rate determined under Code Section
6621(b) plus 0.5 percentage point (i.e., the interest
rate paid by the Internal Revenue Service on large
corporate overpayments).
(6) Any payments pursuant to Section 9.4(a)(4) shall be
reported by the parties as adjustments to the Purchase
Price, except as otherwise required by the Code or any
Tax law. If, contrary to the intent of the parties, any
such payment is treated other than as an adjustment to
the Purchase Price, then the payment will be adjusted to
take into account any Tax applicable to the payment to
fully compensate the recipient on an after-Tax basis.
Any payments of interest pursuant to Section 9.4(a)(5)
shall be treated as payments of interest (and not as
additional Purchase Price), and shall not be adjusted to
take into account any Tax applicable to the receipt of
such interest.
(7) The Buyer shall cooperate fully, as and to the extent
reasonably requested by IHI in connection with the
filing of Tax Returns (including the Section 338 Forms,
as defined below) pursuant to this Section 9.4 and any
audit, litigation, or other proceeding with respect to
Taxes. Such cooperation shall include the retention and
(upon IHI's request) the provision of records and
information which are reasonably relevant to any such
audit, litigation or other proceeding and making
employees available on a mutually convenient basis to
provide additional information and explanation of any
material provided hereunder. Buyer agrees (i) to retain
all books and records with respect to Tax matters
pertinent to the Company relating to any Tax period
beginning before the Closing Date until the expiration
of any applicable
STOCK PURCHASE AGREEMENT 18 EXECUTION COPY
statutes of limitations (including, to the extent
notified by IHI) of the respective Tax periods, and to
abide by all record retention agreements entered into
with any Tax authority, and (ii) to give IHI reasonable
written notice prior to transferring, destroying, or
discarding any such books and records and, if IHI shall
request, the Buyer shall allow IHI to take possession of
such books and records. Should any audit, litigation or
other proceeding with respect to Taxes potentially give
rise to a payment obligation by IHI or the Company,
Buyer will allow IHI and its counsel to review and
comment on written responses provided to the IRS or Tax
authority, if it so elects, at its own expense in the
defense of such audit, litigation, or other proceeding.
(b) SECTION 338 ELECTIONS.
(1) At Buyer's option, Buyer and IHI shall join, and shall
cause their respective affiliates to join with each
other as applicable, in making a Section 338(h)(10)
Election with respect to Buyer's purchase of the Stock
pursuant to this Agreement, and with respect to Buyer's
deemed purchase of the stock of the Subsidiary resulting
from any Section 338(h)(10) Election. Any such elections
shall be made in accordance with applicable laws and
under any comparable provision of domestic state or
local law for which a separate election is permissible
and as set forth herein.
(2) The Purchase Price, liabilities of the Company and the
Subsidiary, and other relevant items shall be allocated
in accordance with Code Sections 338(b)(5) and 1060 (as
applicable) and the Treasury Regulations thereunder as
set forth on a schedule (the "Allocation Statement").
The Allocation Statement will be prepared by Buyer and
provided to IHI within 120 days after the Closing Date.
IHI shall have 30 days after receipt of the Allocation
Statement to object to any allocation set forth therein.
Any such objection shall provided to Buyer in a written
notice setting forth each disputed item in the
Allocation Statement, specifying the amount of each
disputed item and describing in reasonable detail the
basis for such dispute. If Buyer and IHI cannot agree on
the final form of the Allocation Statement, any disputed
items shall be resolved in accordance with the
procedures set forth in Section 1.3(b).
(3) Buyer shall prepare all Section 338 Forms in accordance
with the Allocation Statement and shall deliver such
Section 338 Forms to IHI as soon as practical after the
finalization of the Allocation Statement, and in any
event at least 30 days prior to the due date for filing
such forms. Buyer and IHI shall take all reasonable
actions or refrain from taking any actions, as the case
may be, necessary to give effect to the Section
338(h)(10) Elections. Buyer and IHI shall report the
transactions contemplated by this Agreement on any
Section 338 Forms, any statement required under Code
Section 1060, and any other Tax returns consistent with
the Allocation Statement, and shall take no position
contrary thereto unless required to do so by applicable
tax law pursuant to a determination (as that term is
defined in Code Section 1313(a)).
STOCK PURCHASE AGREEMENT 19 EXECUTION COPY
(c) MISCELLANEOUS.
(1) Each party and its affiliates shall bear their own
expenses incurred in connection with preparation of Tax
returns and other matters related to Taxes under the
provisions of this Agreement.
(2) The rights and obligations under this Section 9.4 shall
survive the Closing until six months after the
expiration of any applicable period of limitations on
assessments, giving effect to any waiver, mitigation, or
extension thereof.
(3) If there is any conflict between the provisions of this
Section 9.4 and any other provisions of the Agreement as
applied to any liability for any Tax or any other matter
relating to Taxes, the provisions of this Section 9.4
shall control.
As used in this Section 9.4:
"PERSON" means any individual, corporation, partnership, joint venture, trust,
association, organization, governmental authority, or other entity.
"POST-CLOSING TAX PERIOD" means any Tax period beginning after the Closing Date.
"PRE-CLOSING TAX PERIOD" means any Tax period ending on or before the Closing
Date.
"SECTION 338(h)(10) ELECTION" means an election described in Code Section
338(h)(10) and applicable Treasury Regulations with respect to Buyer's purchase
of the Stock pursuant to this Agreement, or with respect to Buyer's deemed
purchase of the stock of the Subsidiary resulting from any Code Section
338(h)(10) election. Section 338(h)(10) Election shall include any corresponding
election under any Tax law pursuant to which a separate election is permissible
(i.e., a state election that ignores the actual or deemed sale of stock of the
Company or the Subsidiary and instead treats the applicable Company or
Subsidiary as having sold all of its assets to a Buyer subsidiary followed by a
distribution of the proceeds of such sale in a complete liquidation in which no
gain or loss is recognized under a state provision corresponding to Code Section
332).
"SECTION 338 FORMS" means all returns, documents, statements, and other forms
that are required to be submitted to any federal, state, county or other local
Governmental Authority in connection with a Section 338 Election. Section 338
Forms shall include any "statement of section 338 election" and IRS Form 8023
(together with any schedules or attachments thereto) that are required pursuant
to Treasury Regulations Section 1.338-1 or Treasury Regulations Section
1.338(h)(10)-1 or any successor provisions.
"STRADDLE PERIOD" means any Tax period that begins on or before the Closing Date
and ends after the Closing Date.
STOCK PURCHASE AGREEMENT 20 EXECUTION COPY
10. TERMINATION.
10.1. MANNER OF TERMINATION. This Agreement may be terminated at any time
before the Closing Date as follows:
(a) By Buyer and IHI in a written instrument signed by each of them.
(b) By Buyer or IHI if the Closing does not occur on or before
December 31, 2001 (the "Termination Date").
(c) By Buyer or IHI if there has been a material breach of any of
the representations or warranties set forth in this Agreement on
the part of the other, and this breach by its nature cannot be
cured before the Termination Date.
(d) By Buyer or IHI if there has been a material breach of any of
the covenants or agreements set forth in this Agreement on the
part of the other, and this breach is not cured by the
Termination Date.
10.2. EFFECT OF TERMINATION. If terminated as provided in Section 10.1, this
Agreement shall forthwith become void and have no effect, except for
Section 11.9 and Section 11.12, and except that no party shall be
relieved or released from any liabilities or damages arising out of the
party's breach of any provision of this Agreement.
11. MISCELLANEOUS.
11.1. ENTIRE AGREEMENT. This Agreement, including the Exhibits and schedules
hereto, constitutes the entire agreement between the parties with
respect to the subject matter hereof and no party shall be liable or
bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or
therein. This Agreement supersedes all letters, memoranda and term
sheets previously prepared in connection with the negotiations
surrounding the subject matter hereof. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the parties'
respective successors and permitted assigns. Nothing in this Agreement,
express or implied, is intended to confer upon any third party any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
11.2. 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 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.
STOCK PURCHASE AGREEMENT 21 EXECUTION COPY
(a) if to Buyer, at:
GHX Acquisition Corp.
0000 Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Stumpf, Craddock, Xxxxxx & Pullman, PC
0000 Xxxx Xxx Xxxx.
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxxx X. Xxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(b) if to IHI, at:
Industrial Holdings, Inc.
0000 Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxxxx X. Xxxxx
Telephone No. (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxx Xxxxxx L.L.P.
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. XxXxxx
Telephone No. (000) 000-0000
Facsimile No.: (000) 000-0000
or at such other address or facsimile number that the parties may
designate in writing.
11.3. AMENDMENT AND WAIVERS. 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. 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.
STOCK PURCHASE AGREEMENT 22 EXECUTION COPY
11.4. ASSIGNMENT. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective legal representatives,
successors (including the successor to IHI in the Merger) and permitted
assigns; provided, however, that no party may assign this Agreement
without the prior written consent of the other party, which consent
shall be not unreasonably withheld.
11.5. 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 that apply to agreements to be
made and performed solely within such state, without giving effect to
any conflicts or choice of laws principles that might otherwise apply.
The parties hereto agree that any dispute arising in connection with
this Agreement shall be resolved by arbitration in accordance with
Section 11.7 of this Agreement; provided, however, to the extent a party
exercises its rights under Section 7 of this Agreement; venue shall lie
with a court of competent jurisdiction in Xxxxxx County, Texas.
11.6. SEVERABILITY. If any provision of this Agreement is declared
unenforceable by any court of competent jurisdiction, 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.
11.7. ARBITRATION.
(a) Any dispute, controversy, or claim arising out of or relating to
this Agreement or relating to the breach, termination, or
invalidity of this Agreement, whether arising in contract, tort,
or otherwise, shall at the request of any party be resolved in
binding arbitration. Any arbitration shall proceed in accordance
with Title 9 of the United States Code, as it may be amended or
recodified from time to time ("Title 9"), and the current
Commercial Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association ("AAA") to the extent that
Title 9 and the Arbitration Rules do not conflict with any
provision of this Section 11.7.
(b) No provision of or the exercise of any rights under this Section
11.7 shall limit the right of any party to seek and obtain
provisional or ancillary remedies (such as injunctive relief,
attachment, or the appointment of a receiver) from any court
having jurisdiction before, during, or after the pendency of an
arbitration proceeding under this Section. The institution and
maintenance of any such action or proceeding shall not
constitute a waiver of the right of any party (including the
party taking the action or instituting the proceeding) to submit
a dispute, controversy, or claim to arbitration under this
Section.
(c) Any award, order, or judgment made pursuant to arbitration shall
be deemed final and may be entered in any court having
jurisdiction over the enforcement of the award, order, or
judgment. Each party agrees to submit to the jurisdiction of any
court for purposes of the enforcement of the award, order, or
judgment.
(d) The arbitration shall be held before one neutral, disinterested
arbitrator knowledgeable in the general subject matter of the
dispute, controversy, or claim and
STOCK PURCHASE AGREEMENT 23 EXECUTION COPY
selected by AAA in accordance with the Arbitration Rules, except
that any arbitration in which the disputed, controverted, or
claimed amount (as reflected on the demand for arbitration, as
the same may be amended) exceeds $500,000.00 shall be held
before three arbitrators, one arbitrator being selected by
Buyer, one by IHI, and the third by the other two from a panel
of persons identified by AAA who are knowledgeable in the
general subject matter of the dispute, controversy, or claim.
(e) The arbitration shall be held at the office of AAA located in
Xxxxxx County, Texas (as the same may be from time to time
relocated), or at another place the parties agree on.
(f) In any arbitration proceeding under this Section 11.7, subject
to the award of the arbitrator(s), each party shall pay all its
own expenses, an equal share of the fees and expenses of the
arbitrator, and, if applicable, the fees and expenses of its own
appointed arbitrator. The arbitrator(s) shall have the power to
award recovery of costs and fees (including reasonable attorney
fees, administrative and AAA fees, and arbitrators' fees) among
the parties as the arbitrators determine to be equitable under
the circumstances.
(g) The interpretation and construction of this Section 11.7,
including, but not limited to, its validity and enforceability,
shall be governed by Title 9 of the U.S. Code, notwithstanding
the choice of law set forth in Section 11.5 of this Agreement.
11.8. MULTIPLE COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
shall constitute one instrument.
11.9. EXPENSES. Except as provided in the next sentence of this Section 11.9,
IHI and Buyer are each solely responsible for and will bear all of their
own respective expenses, including, without limitation, expenses of
legal counsel, investment bankers, brokers, consultants, accountants and
other advisors, incurred at any time in connection with this Agreement,
the Related Agreements, the Note, and the transactions contemplated
hereby and thereby, and no such expenses shall be borne by the Company.
Notwithstanding the foregoing, IHI shall pay Buyer's expenses incurred
in connection with this Agreement in an amount not to exceed $25,000,
whether or not the Closing occurs.
11.10. 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.
11.11. 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.
11.12. PUBLIC ANNOUNCEMENTS. The parties agree to advise and confer with each
other prior to the issuance of any public reports, statements or press
releases pertaining to this Agreement and the transactions contemplated
hereby. Each party will use its best efforts to maintain in strict
STOCK PURCHASE AGREEMENT 24 EXECUTION COPY
confidence the existence and terms of this Agreement and the
transactions contemplated hereby. Unless otherwise required by law or as
set forth above, no party shall make any public announcement or
disclosure concerning this Agreement, except as mutually agreed. The
financial terms of the Agreement are to be kept confidential, except to
the extent that the disclosure is required under law. Nothing in the
foregoing is intended to prevent IHI from making any filings required
with the Securities and Exchange Commission.
11.13. FACSIMILE SIGNATURES. The parties acknowledge that signatures on this
Agreement may be delivered by facsimile in lieu of an original signature
and the parties agree to treat such signatures as original signatures
and shall be bound thereby.
STOCK PURCHASE AGREEMENT 25 EXECUTION COPY
DATED NOVEMBER 14, 2001.
INDUSTRIAL HOLDINGS, INC.
By: /s/ XXXXXX X. XXXX
------------------------------------
Name: Xxxxxx X. Xxxx
Title: President
BUYER
GHX ACQUISITION CORP.
By: /s/ XXXXXX X. XXXXXX
------------------------------------
Xxxxxx X. Xxxxxx, President
STOCK PURCHASE AGREEMENT 26 EXECUTION COPY
