-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VdHQy6GPZ5z0rJlanVa+y90EwjvXhvpK7xgb4Rn5kNKutMq59yrC2qVhn7UKAoZ7 jbZPW9ZAgO5CaT+IVl6dEQ== 0000950134-01-509840.txt : 20020413 0000950134-01-509840.hdr.sgml : 20020413 ACCESSION NUMBER: 0000950134-01-509840 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20011227 GROUP MEMBERS: FIRST RESERVE FUND VIII LP GROUP MEMBERS: FIRST RESERVE GP VIII LP FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: FIRST RESERVE CORP /CT/ /ADV CENTRAL INDEX KEY: 0000814313 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 061210123 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 475 STEAMBOAT RD CITY: GREENWICH STATE: CT ZIP: 06830 BUSINESS PHONE: 2036616601 FORMER COMPANY: FORMER CONFORMED NAME: AMGO MANAGEMENT CORP /ADV/ /ADV DATE OF NAME CHANGE: 19870722 FORMER COMPANY: FORMER CONFORMED NAME: FIRST RESERVE ENERGY ADVISORS INC /ADV DATE OF NAME CHANGE: 19920304 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: T-3 ENERGY SERVICES INC CENTRAL INDEX KEY: 0000879884 STANDARD INDUSTRIAL CLASSIFICATION: BOLTS, NUTS, SCREWS, RIVETS & WASHERS [3452] IRS NUMBER: 760697390 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-41982 FILM NUMBER: 1824126 BUSINESS ADDRESS: STREET 1: 7135 ARDMORE CITY: HOUSTON STATE: TX ZIP: 77054 BUSINESS PHONE: 7137471025 MAIL ADDRESS: STREET 1: 7135 ARDMORE CITY: HOUSTON STATE: TX ZIP: 77054 FORMER COMPANY: FORMER CONFORMED NAME: INDUSTRIAL HOLDINGS INC DATE OF NAME CHANGE: 19930328 SC 13D 1 d93145sc13d.txt SCHEDULE 13D SCHEDULE 13D (Rule 13d-101) SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Under the Securities Exchange Act of 1934 Amendment No. ______ T-3 Energy Services, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, Par Value $.01 Per Share - -------------------------------------------------------------------------------- (Title of Class of Securities) 456160100 - -------------------------------------------------------------------------------- (CUSIP Number) Thomas R. Denison - First Reserve Corporation, 1801 California St., Suite #4110, Denver, CO 80202, (303) 382-1270 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) December 17, 2001 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box following box. [ ] Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SEC 1746 (12-91) - ------------------- ------------------ CUSIP No. 456160100 SCHEDULE 13D Page 2 of 65 Pages - ------------------- ------------------ - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON First Reserve Corporation I.R.S. No.: 06-1210123 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* N/A - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF 0 -------------------------------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY 7,614,456 -------------------------------------------------------------- OWNED BY 9 SOLE DISPOSITIVE POWER EACH 0 -------------------------------------------------------------- REPORTING 10 SHARED DISPOSITIVE POWER WITH 7,614,456 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 7,614,456 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 79.5% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. - ------------------- ------------------ CUSIP No. 456160100 SCHEDULE 13D Page 3 of 65 Pages - ------------------- ------------------ - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON First Reserve Fund VIII, L.P. I.R.S. No.: 06-1507364 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(c) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES 0 -------------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 7,614,456 -------------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 0 -------------------------------------------------------------- PERSON 10 SHARED DISPOSITIVE POWER WITH 7,614,456 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 7,614,456 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 79.5% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. - ------------------- ------------------ CUSIP No. 456160100 SCHEDULE 13D Page 4 of 65 Pages - ------------------- ------------------ - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON First Reserve GP VIII, L.P. I.R.S. No.: 06-1507318 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* N/A - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES 0 -------------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 7,614,456 -------------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 0 -------------------------------------------------------------- PERSON 10 SHARED DISPOSITIVE POWER WITH 7,614,456 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 7,614,456 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 79.5% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. ITEM 1. SECURITY AND ISSUER. This Statement on Schedule 13D (the "Schedule 13D") relates to the Common Stock, par value $.01 per share (the "Common Stock"), of T-3 Energy Services, Inc., a Delaware corporation (the "T-3" or "Issuer"), formally known as Industrial Holdings, Inc. ("IHI"). The principal executive offices of the Issuer are located at 7135 Ardmore, Houston, Texas 77054. ITEM 2. IDENTITY AND BACKGROUND. This Schedule 13D is being filed jointly by First Reserve Fund VIII, L.P. ("Fund VIII"), First Reserve GP VIII, L.P. ("GP VIII"), and First Reserve Corporation ("First Reserve" and collectively, the "Reporting Persons") to report the receipt by Fund VIII of Common Stock and warrants to purchase Common Stock following the merger of IHI and T-3 Energy Services, Inc., a Delaware corporation ("Former T-3"), GP VIII is the general partner of Fund VIII, and First Reserve is the general partner of GP VIII. The Reporting Persons, by and through the holdings of Fund VIII, directly own more than 5% of the issued and outstanding shares of Common Stock. Fund VIII is a Delaware limited partnership with a limited term of existence, the principal purpose of which is to make equity, equity-linked and debt investments in companies engaged in various energy and energy related activities. GP VIII is a Delaware limited partnership, the sole purpose of which is to act as the general partner of Fund VIII. First Reserve is a Delaware corporation and is the general partner of GP VIII. The principal business of First Reserve is to provide investment management services to Fund VIII, and to other investment funds managed by First Reserve. The principal business and office address of the Reporting Persons is 411 West Putnam Ave., Suite 109, Greenwich, Connecticut 06830. Information with respect to the executive officers and directors of First Reserve, including name, business address, present principal occupation or employment and the organization in which such employment is conducted, and their citizenship is listed on the attached Schedule I, which is incorporated in this Schedule 13D by reference. During the last five years, none of the Reporting Persons nor any executive officer or director of First Reserve has (i) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a party to a civil proceeding or a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. The Agreement and Plan of Merger described in Item 6 of this Statement was entered into by IHI and Former T-3 and was closed on December 17, 2001. Fund VIII acquired the Common Stock in connection with the closing of the Merger Agreement. Page 5 of 65 ITEM 4. PURPOSE OF TRANSACTION. Former T-3 entered into the Merger Agreement described in Item 6 in order for Fund VIII to acquire a majority of the outstanding Common Stock of T-3. Fund VIII intends to operate T-3 as a majority-owned subsidiary. Following the Merger, Fund VIII, as the majority stockholder, adopted new articles of incorporation and bylaws, changed the number of directors, elected new directors, and reduced the capitalization of T-3. From time to time, the Reporting Persons may acquire additional shares of Common Stock or dispose of shares of Common Stock at any time, whether in open market purchases or private transactions, depending on various factors, including without limitation the price and availability of the Issuer's Common Stock, subsequent developments affecting the energy market as a whole, the Issuer and the Issuer's business and prospects, and on the eventual liquidation of Fund VIII in accordance with its partnership agreement. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. As of December 17, 2001, the Reporting Persons beneficially owned an aggregate of 7,613,056 shares of Common Stock, constituting approximately 79.5% of the 9,581,757 shares of Common Stock outstanding as of December 17, 2001 as represented to the Reporting Persons by T-3. (a) As of the date hereof, the Reporting Persons are the beneficial owners of T-3 Common Stock in the numbers and percentages set forth in the table below:
NUMBER OF SHARES REPORTING PARTY BENEFICIALLY OWNED PERCENTAGE OF CLASS Fund VIII 7,614,456 79.5% GP VIII(1) 7,614,456 79.5% First Reserve(1) 7,614,456 79.5%
(1) Consists of 7,300,513 shares of Common Stock held directly by Fund VIII and a warrant to purchase 313,943 shares of Common Stock to be held directly by Fund VIII. GP VIII is the general partner of Fund VIII and may be deemed to beneficially own the shares of Common Stock owned by Fund VIII. First Reserve, as the general partner of GP VIII, may be deemed to beneficially own all of the shares of Common Stock owned by Fund VIII. (b) Fund VIII shares with its general partner the power to vote or to direct the vote of the shares directly held by it. GP VIII, as the general partner of Fund VIII, and First Reserve, in its role as general partner of GP VIII, shares with Fund VIII the power to cause Fund VIII to dispose of or vote the shares of Common Stock directly held by Fund VIII. Page 6 of 65 (c) During the past 60 days, the following transactions were effected:
PER SHARE REPORTING PARTY DATE NUMBER OF SHARES PRICE TRANSACTION Fund VIII 12-17-2001 7,613,056(1) N/A Merger of IHI and Former T-3 Fund VIII 12-19-2001 700 $10.3143 Purchase Fund VIII 12-26-2001 700 $10.50 Purchase
(1) In connection with the receipt of these 7,299,113 shares, on December 17, 2001, Fund VIII became entitled to receive a warrant to purchase 313,943 shares of Common Stock at an exercise price of $12.80 per share. (d) To the best knowledge of the Reporting Persons, no other person has the right to receive, or the power to direct the receipt of dividends from, or the power to direct the receipt of proceeds of the sale of the shares of Common Stock owned by the Reporting Persons. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS OR UNDERSTANDING WITH RESPECT TO SECURITIES OF THE ISSUER. JOINT FILING AGREEMENT A Joint Filing Agreement dated December 26, 2001, by and between Fund VIII, GP VIII, and First Reserve has been executed by the Reporting Persons, a copy of which is attached hereto as Exhibit A and incorporated herein by reference. AGREEMENT AND PLAN OF MERGER On May 7, 2001, Former T-3 and IHI entered an Agreement and Plan of Merger (the "Merger Agreement") providing for the merger of Former T-3 with and into IHI (the "Merger") with IHI surviving the Merger under the new name T-3 Energy Services, Inc. and becoming a majority-owned subsidiary of Fund VIII. By virtue of the Merger, each outstanding share of Former T-3 common stock was converted into the right to receive 90.846 shares of the T-3 Common Stock plus a warrant to purchase 3.9074 shares of T-3's Common Stock for $12.80 per share. Following the Merger, T-3 was reincorporated in the State of Delaware and effected a 10 to 1 reverse stock split. As a result of the Merger and the reverse stock split, Fund VIII acquired 7,299,113 shares of Common Stock and received a warrant to acquire an additional 313,943 shares of Common Stock. A copy of the Merger Agreement is included as Exhibit B hereto and the description of the Merger Agreement contained herein is qualified in its entirety by reference to such exhibit, which is incorporated by reference. WARRANT On December 17, 2001 Fund VIII became entitled to receive a warrant to purchase 313,943 shares of T-3 Common Stock for $12.80 per share (the "Warrant"). Fund VIII may exercise the Warrant in whole or in part at any time prior to December 17, 2011. A copy of the Warrant is included as Exhibit C hereto and the description of the Warrant contained herein is qualified in its entirety by reference to such exhibit, which is incorporated by reference. Page 7 of 65 REGISTRATION RIGHTS AGREEMENT On December 17, 2001 Fund VIII and the other parties listed on the signature page thereof entered into a Registration Rights Agreement with T-3 (the "Registration Rights Agreement"). Pursuant to the Registration Rights Agreement, Fund VIII was granted demand and piggyback registration rights with respect to Common Stock owned or acquired by Fund VIII and any Common Stock underlying the Warrant. A copy of the Registration Rights Agreement is included as Exhibit D hereto and the description of the Registration Rights Agreement is qualified in its entirety by reference to such exhibit, which is incorporated by reference. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit A. Joint Filing Agreement dated as of December 26, 2001 by and between First Reserve Fund VIII, L.P., First Reserve GP VIII, L.P., and First Reserve Corporation. Exhibit B. Agreement and Plan of Merger dated as of May 7, 2001, by and among Industrial Holdings, Inc., T-3 Energy Services, Inc. and First Reserve Fund VIII, Limited Partnership. Exhibit C. Warrant to Purchase Shares of Common Stock of Industrial Holdings, Inc. to be issued to First Reserve Fund VIII, L.P. Exhibit D. Registration Rights Agreement dated December 17, 2001, by and among Industrial Holdings, Inc., First Reserve Fund VIII, L.P. and the other parities listed on the signature page thereto. Page 8 of 65 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct. Dated: December 27, 2001. FIRST RESERVE FUND VIII, L.P. By: First Reserve GP VIII, L.P., General Partner By: First Reserve Corporation, General Partner By: /s/ Thomas R. Denison --------------------------------- Name: Thomas R. Denison Title: Managing Director FIRST RESERVE GP VIII, L.P. By: First Reserve Corporation, General Partner By: /s/ Thomas R. Denison --------------------------------- Name: Thomas R. Denison Title: Managing Director FIRST RESERVE CORPORATION By: /s/ Thomas R. Denison ------------------------------------- Name: Thomas R. Denison Title: Managing Director Page 9 of 65 SCHEDULE I The name, business address and present principal occupation or employment of each of the executive officers and directors of the First Reserve Corporation are set forth below. Unless otherwise indicated, (i) the business address of each is 411 West Putnam Ave., Suite 109, Greenwich, Connecticut 06830, (ii) each such person is a citizen of the United States, and (iii) such person does not have any other principal occupation:
Name Position with First Reserve Corporation ---- --------------------------------------- William E. Macaulay Chairman, CEO, Managing Director and Director John A. Hill Vice Chairman, Managing Director and Director Ben A. Guill President, Managing Director and Director Will Honeybourne Managing Director Jonathan S. Linker Managing Director Thomas R. Denison Managing Director, General Counsel, Secretary Cathleen M. Ellsworth Managing Director Mary Ness Managing Director Jennifer G. Zarrilli Controller, Vice President, Treasurer, Assistant Secretary Valerie A. Thomason Assistant Treasurer, Assistant Secretary
Page 10 of 65 EXHIBIT INDEX
Exhibit number Description ------- ----------- A Joint Filing Agreement. B. Agreement and Plan of Merger. C. Warrant. D. Registration Rights Agreement.
Page 11 of 65 EX-99.A 3 d93145ex99-a.txt JOINT FILING AGREEMENT EXHIBIT A JOINT FILING AGREEMENT We, the signatories of the statement on Schedule 13D filed with respect to the Common Stock of Industrial Holdings, Inc., to which this Agreement is attached, hereby agree that such statement is, and any amendments thereto filed by any of us will be, filed on behalf of each of us pursuant to and in accordance with the provisions of Rule 13d-1(k) of the Securities Exchange Act of 1934. FIRST RESERVE FUND VIII, L.P. By: First Reserve GP VIII, L.P., General Partner By: First Reserve Corporation, General Partner By: ------------------------------- Name: Thomas R. Denison Title: Managing Director FIRST RESERVE GP VIII, L.P. By: First Reserve Corporation, General Partner By: ------------------------------- Name: Thomas R. Denison Title: Managing Director FIRST RESERVE CORPORATION By: ------------------------------------ Name: Thomas R. Denison Title: Managing Director Page 12 of 65 EX-99.B 4 d93145ex99-b.txt AGREEMENT AND PLAN OF MERGER EXHIBIT B CONFORMED AND RESTATED AGREEMENT AND PLAN OF MERGER, AS AMENDED AMONG INDUSTRIAL HOLDINGS, INC., T-3 ENERGY SERVICES, INC., AND FIRST RESERVE FUND VIII, LIMITED PARTNERSHIP DATED AS OF MAY 7, 2001 Page 13 of 65 TABLE OF CONTENTS ARTICLE 1. DEFINED TERMS........................................... 1 Section 1.1 Definitions......................................... 1 ARTICLE 2. THE CLOSING; THE MERGER; EFFECTS OF THE MERGER.......... 4 Section 2.1 Closing............................................. 4 Section 2.2 The Merger.......................................... 5 Section 2.3 Effects of the Merger............................... 5 ARTICLE 3. MERGER CONSIDERATION; CONVERSION OF SHARES.............. 6 Section 3.1 Conversion of Shares................................ 6 Section 3.2 Treatment of T-3 Stock Options...................... 7 ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF T-3................... 7 Section 4.1 Organization; Qualification......................... 7 Section 4.2 Capital Stock; Subsidiaries......................... 7 Section 4.3 Corporate Authorization; Enforceability............. 7 Section 4.4 No Conflict......................................... 8 Section 4.5 Consents............................................ 8 Section 4.6 T-3 Financial Statements; Undisclosed Liabilities................................................... 8 Section 4.7 Absence of Certain Changes.......................... 8 Section 4.8 Material Contracts.................................. 8 Section 4.9 Real Property....................................... 8 Section 4.10 Real Property Leases................................ 9 Section 4.11 Personal Property................................... 9 Section 4.12 Compliance with Laws................................ 9 Section 4.13 Permits............................................. 9 Section 4.14 Litigation.......................................... 9 Section 4.15 Environmental Compliance............................ 9 Section 4.16 ERISA and Related Matters........................... 10 Section 4.17 Taxes............................................... 11 Section 4.18 Customers and Suppliers............................. 12 Section 4.19 Insurance........................................... 12 Section 4.20 Safety and Health................................... 12 Section 4.21 Labor Matters....................................... 12 Section 4.22 Transactions with Certain Persons................... 13 Section 4.23 Propriety of Past Payments.......................... 13 Section 4.24 Intellectual Property............................... 13 Section 4.25 Director and Officer Indemnification................ 13 Section 4.26 Brokers' and Finders' Fee........................... 13 ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF IHI................... 13 Section 5.1 Organization; Qualification......................... 13 Section 5.2 Capital Stock; Subsidiaries......................... 13 Section 5.3 Corporate Authorization; Enforceability............. 14 Section 5.4 No Conflict......................................... 14 Section 5.5 Consents............................................ 14 Section 5.6 IHI Financial Statements; Undisclosed Liabilities................................................... 14 Section 5.7 Absence of Certain Changes.......................... 14 Section 5.8 Material Contracts.................................. 14 Section 5.9 Real Property....................................... 15 Section 5.10 Real Property Leases................................ 15 Section 5.11 Personal Property................................... 15 Section 5.12 Compliance with Laws................................ 15 Section 5.13 Permits............................................. 15 Section 5.14 Litigation.......................................... 15 Section 5.15 Environmental Compliance............................ 16 Section 5.16 ERISA and Related Matters........................... 16 Section 5.17 Taxes............................................... 17 Section 5.18 Customers and Suppliers............................. 18 Section 5.19 Insurance........................................... 18 Section 5.20 Safety and Health................................... 18 Section 5.21 Labor Matters....................................... 19 Section 5.22 Transactions with Certain Persons................... 19 Section 5.23 Propriety of Past Payments.......................... 19 Section 5.24 Intellectual Property............................... 19 Section 5.25 Director and Officer Indemnification................ 19 Section 5.26 Brokers' and Finders' Fee........................... 19 Section 5.27 SEC Filings; Financial Statements................... 19
Page 14 of 65 ARTICLE 6. COVENANTS............................................... 19 Section 6.1 Legal Requirements.................................. 19 Section 6.2 Stockholder Approvals............................... 20 Section 6.3 Joint Proxy Statement............................... 20 Section 6.4 Registration of Certain T-3 Control Person Shares........................................................ 20 Section 6.5 Equity Investments in T-3........................... 20 Section 6.6 Financing........................................... 20 Section 6.7 Repayment of Certain Indebtedness................... 20 Section 6.8 Hart-Scott-Rodino................................... 20 Section 6.9 Access to Properties and Records.................... 21 Section 6.10 Consultation and Reporting.......................... 21 Section 6.11 Conduct of Business By Both Parties Prior to the Closing Date.............................................. 21 Section 6.12 Public Statements................................... 22 Section 6.13 No Solicitation..................................... 22 Section 6.14 Update Information.................................. 23 Section 6.15 Maintenance of Policies............................. 23 Section 6.16 Director's and Officer's Indemnification and Insurance..................................................... 23 Section 6.17 Nasdaq Filing....................................... 23 Section 6.18 IHI Employee Benefits............................... 23 Section 6.19 Agreements with Respect to IHI Dispositions.................................................. 23 Section 6.20 Resignations........................................ 24 ARTICLE 7. CLOSING CONDITIONS...................................... 24 Section 7.1 Conditions Applicable to all Parties................ 24 Section 7.2 Conditions to Obligations of IHI.................... 24 Section 7.3 Conditions to Obligations of T-3.................... 24 Section 7.4 Additional Closing Condition........................ 25 ARTICLE 8. TERMINATION AND AMENDMENT............................... 25 Section 8.1 Termination......................................... 25 Section 8.2 Effect of Termination............................... 26 ARTICLE 9. MISCELLANEOUS........................................... 26 Section 9.1 Notices............................................. 26 Section 9.2 Non-Survival of Representations and Warranties.................................................... 26 Section 9.3 Headings; Gender.................................... 26 Section 9.4 Entire Agreement; No Third Party Beneficiaries................................................. 26 Section 9.5 Governing Law....................................... 27 Section 9.6 Assignment.......................................... 27 Section 9.7 Severability........................................ 27 Section 9.8 Counterparts........................................ 27 Section 9.9 Amendment........................................... 27 Section 9.10 Extension; Waiver................................... 27 Section 9.11 Expenses............................................ 27 Section 9.12 Joint Drafting...................................... 27
Exhibits A -- IHI Disclosure Schedules B -- T-3 Disclosure Schedules C -- IHI Affiliate Letter D -- Form of Opinion of Porter & Hedges, L.L.P. E -- Form of Opinion of LeBeouf Lamb Greene & MacRae LLP F -- Environmental Disclosure Letter G -- Form of Merger Warrant Appendices I Reincorporation Merger Agreement II Amended and Restated Articles of Incorporation III Amended and Restated Bylaws IV Registration Rights Agreement Page 15 of 65 AGREEMENT AND PLAN OF MERGER This Agreement and Plan of Merger, dated as of May 7, 2001 is by and among Industrial Holdings, Inc., a Texas corporation ("IHI"), T-3 Energy Services, Inc., a Delaware corporation ("T-3"), and First Reserve Fund VIII, Limited Partnership, a Delaware limited partnership (the "Fund"). WITNESSETH: WHEREAS, the Board of Directors of T-3 and the Board of Directors of IHI have determined it to be desirable to enter into a business combination to be effected by a merger of T-3 into IHI as a result of which the separate existence of T-3 shall cease and IHI shall be the surviving corporation, on the terms and subject to the conditions set forth herein (the "Merger"); WHEREAS, for federal income tax purposes, the Merger is intended to qualify as a tax-free reorganization described in Section 368(a)(1)(A) of the Code (as defined below); WHEREAS, immediately subsequent to the consummation of the Merger, IHI will merge into a Delaware corporation which is a wholly-owned subsidiary of IHI ("IHI Delaware"), on the terms set forth in Appendix I hereto (the "Reincorporation"); and WHEREAS, as of the date hereof, pursuant to a stock purchase agreement, T-3 has acquired all of the capital stock of A&B Bolt & Supply, Inc., a subsidiary of IHI. NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements herein contained, the parties hereto agree as follows: ARTICLE 1. DEFINED TERMS Section 1.1 Definitions. In addition to the other defined terms used herein, as used in this Agreement, the following terms when capitalized have the meanings indicated. "Affiliate" shall have the meaning ascribed by Rule 12b-2 promulgated under the Exchange Act. "Agreed TRO" shall mean the Agreed Temporary Injunction entered April 12, 2001, as modified on May 4, 2001, in Cause No. 2001-1950 styled EnSerCo, LLC vs. Industrial Holdings, Inc., in the 295th Judicial District of Harris County, Texas. "Agreement" shall mean this Agreement and Plan of Merger, as amended or otherwise modified from time to time. "Applicable Law" shall mean any statute, law, rule or regulation or any judgment, order, writ, injunction or decree of any Governmental Entity to which a specified Person or its property is subject. "Business Day" shall mean a day other than a Saturday, a Sunday or a day on which national banks in New York are closed. "Certificate of Merger" shall have the meaning ascribed to it in Section 2.1(b) hereof. "Closing" shall have the meaning ascribed to it in Section 2.1(a) hereof. "Closing Date" shall have the meaning ascribed to it in Section 2.1(a) hereof. "Code" shall mean the Internal Revenue Code of 1986, as amended, or any substitute or successor statute thereto. "Discretionary Equity Investment" shall have the meaning ascribed to it in Section 6.5 hereof. "Disposition Agreements" shall have the meaning ascribed to it in Section 6.19(b) hereof. "DGCL" shall mean the Delaware General Corporation Law. "Effective Date" and "Effective Time" shall have the meanings ascribed to them in Section 2.1(b) hereof. "Environmental Laws" shall mean all Applicable Laws relating to the protection of air, groundwater, surface water, soil or other environmental media of any nature. "Equity Investment" shall have the meaning ascribed to it in Section 6.5 hereof. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder. 1 Page 16 of 65 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Exchange Factor" means 90.846. "Extended Coverage Policy" shall have the meaning ascribed to it in Section 6.16(b) hereof. "Financing" shall have the meaning ascribed to it in Section 6.6(a) hereof. "GAAP" means U.S. generally accepted accounting principles. "Governmental Entity" shall mean any court or tribunal in any jurisdiction or any public, governmental or regulatory body, agency, department, commission, board, bureau or other authority or instrumentality. "Hazardous Substances" or "Hazardous Waste" shall means materials defined as "hazardous substances," "hazardous wastes," or "hazardous constituents" in (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Sections 9601-9675, as amended by the Superfund Amendments and Reauthorization Act of 1986, and any amendments thereto and regulations thereunder; (ii) the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Sections 6901-6992, as amended by the Hazardous and Solid Waste Amendments of 1984, and any amendments thereto and regulations thereunder; (iii) the Oil Pollution Act of 1990, 33 U.S.C. Sections 2701-2761, and any amendments thereto and regulations thereunder; and (iv) any other applicable Environmental Law. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "HSR Form" shall mean the notification and report form required to be filed under the HSR Act. "IHI Annual Financial Statements" shall mean the audited consolidated balance sheet and related audited consolidated statements of operations, stockholders' equity and cash flows, and the related notes thereto of IHI and its Subsidiaries as of and for the fiscal years ended December 31, 1999 and 2000. "IHI Meeting" shall have the meaning ascribed to it in Section 6.2(a) hereof. "IHI Benefit Program or Agreement" shall have the meaning ascribed to it in Section 5.16(a) hereof. "IHI Common Stock" shall mean the shares of common stock, $.01 par value per share, of IHI. "IHI Disclosure Schedules" shall mean the disclosure schedules and other documents attached to such schedules prepared by IHI in connection with this Agreement and attached hereto as Exhibit A. "IHI Dispositions" means the sale by IHI of the companies described in Section 6.19 of the IHI Disclosure Schedules, which is described in Section 6.19 hereof. "IHI Financial Statements" shall mean the IHI Annual Financial Statements and the IHI Interim Financial Statements, collectively. "IHI Interim Financial Statements" shall mean the unaudited consolidated balance sheet and the related unaudited consolidated statement of operations of IHI and its Subsidiaries as of and for the three-month period ended March 31, 2001. "IHI Leased Properties" shall have the meaning ascribed to it in Section 5.10(a) hereof. "IHI Owned Properties" shall have the meaning ascribed to it in Section 5.9 hereof. "IHI Policies" shall have the meaning ascribed to it in Section 5.19(a) hereof. "IHI SEC Filings" shall have the meaning ascribed to it in Section 5.27 hereof. "IHI Senior Secured Credit Facility" shall mean the credit facility evidenced by that certain Amended and Restated Credit Agreement dated as of June 17, 1999 between IHI and Comerica Bank -- Texas, both individually and as agent, and the other banks which, from time to time are a party thereto. "IHI Stockholders" shall mean the holders of IHI Common Stock. "Joint Proxy Statement" shall have the meaning ascribed to it in Section 6.3 hereof. "Knowledge" of any Person means the actual knowledge of such Person's executive and financial officers in each case after reasonable inquiry of such other officers of such Person with direct responsibility for the Person's business relating to such knowledge. "Leases" shall mean any executory lease having future rental payments of more than $200,000 in the aggregate. "Liens" shall mean pledges, liens, defects, leases, licenses, conditional sales contracts, charges, claims, encumbrances, security interests, easements, restrictions, chattel mortgages, mortgages or deeds of trust, of any kind or nature whatsoever. 2 Page 17 of 65 "Material Adverse Effect" means with respect to a Person, any fact, circumstance, event or condition that has or would be reasonably likely to have, with the passage of time, a material adverse effect on the business, operations, assets or financial condition of such Person and its Subsidiaries, taken as a whole, or on such Person's ability to carry out the transactions contemplated hereby; including, but not limited to, with respect to IHI, the environmental condition described in Exhibit F being a material cause of IHI's inability to obtain the Financing. Notwithstanding the foregoing, "Material Adverse Effects" shall not include changes affecting the United States economy or the energy industry generally in which such person operates. "Material Contract" shall mean any executory contract, agreement or other understanding, whether or not reduced to writing, to which a IHI, T-3, their respective Subsidiaries or their respective property is subject, which (i) provides for future payments by such party of more than $200,000 in the aggregate and is not subject to cancellation upon notice of 30 days or less (without penalty), or (ii) relates to the issuance of any security or the registration thereof with the SEC. "Merger Shares" shall mean the shares of IHI Common Stock to be issued by IHI to the T-3 Stockholders in connection with the Merger as contemplated in Section 3.1(b) hereof. "Merger Warrant" means a warrant to purchase one share of common stock of the Surviving Corporation for $1.28 in substantially the form attached hereto as "Exhibit G." "Multiemployer Plan" shall mean a plan or arrangement as defined in Section 4001(a)(3) and 3(37) of ERISA. "NASD" shall mean the National Association of Securities Dealers, Inc. "Nasdaq" shall mean The Nasdaq Stock Market, Inc. "Permitted Liens" shall mean (a) Liens other than for borrowed money that do not materially reduce the value or materially interfere with the present use by the applicable Person of the property subject thereto or affected thereby, (b) Liens for Taxes, assessments or similar governmental charges, which in each case constitute a Lien not yet due and payable or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained by the applicable party on their books in accordance with GAAP, and (c) mechanic's, workmen's, landlord's, materialmen's, maritime or other similar Liens with respect to amounts not yet due and payable or which are being contested in good faith by appropriate proceedings with adequate reserves with respect thereto maintained on the applicable Person's books in accordance with GAAP. "Person" shall mean an individual, firm, corporation, general or limited partnership, limited liability company, limited liability partnership, joint venture, trust, governmental authority or body, association, unincorporated organization or other entity. "Personal Property" shall mean all machinery, equipment, furniture, fixtures and other tangible or intangible personal property used by T-3 or IHI, as the case may be, to carry on its business as presently conducted. "Pre-Closing Periods" shall mean all Tax periods ending on or before the Closing Date and, with respect to any Tax period that includes but does not end on the Closing Date, the portion of such period that ends on and includes the Closing Date. "Proceedings" shall mean any suit, action, proceeding, dispute or claim before or investigation by any Governmental Entity. "Returns" shall mean any returns, declarations, reports, estimates, declarations and statements of any nature required to be filed in respect of Taxes for any Pre-Closing Period, and any claims for refund of Taxes to a Governmental Entity, including any amendments or supplements to any of the foregoing. "Reincorporated Corporation" means the surviving corporation in the Reincorporation. "Reincorporation Merger Agreement" means the Agreement and Plan of Merger attached to this Agreement as Appendix I. "Sale of Assets" means a sale, lease or exchange of all or substantially all of the assets of an entity which is subject to the IHI Dispositions. "Sale of Stock" means (i) any sale in a single transaction or in a series of related and substantially contemporaneous transactions of shares of all of the capital stock of any entity which is subject to the IHI Dispositions, or (ii) any merger, consolidation or reorganization of an entity which is subject to the IHI Dispositions, as a result of which all of the capital stock of such entity is sold, transferred or exchanged pursuant to such merger, consolidation or reorganization. "Sale Transaction" shall mean with respect to IHI and T-3 (for purposes of this definition, each an "issuer") (a) the acquisition (by direct issuance from the issuer, from existing security holders or otherwise), by any Person or group of Persons deemed a "person" under Section 13(a)(3) of the Exchange Act, of beneficial ownership of securities representing a majority of the combined voting power of the outstanding capital stock of the applicable issuer, generally or as a separate class or series or together with one or more class or series of shares or stock, in the election of directors of such issuer, the result of which would give such Person or Persons (or group) the ability to elect a majority of the Board of Directors of such issuer, (b) a reorganization, recapitalization, merger, consolidation or similar business combination or transaction involving the applicable issuer (unless the holders of the outstanding securities of such issuer entitled to vote in the election of directors prior to such transaction continue to own securities of the entity resulting from or surviving such transaction (a "Surviving Entity") entitled to vote in the election of directors sufficient to allow such holders to elect a majority of the board of directors of the Surviving Entity upon the completion of 3 Page 18 of 65 such transaction) or (c) a sale or other disposition (in a single transaction or a series of related transactions) of assets with an asset value in excess of 25% of the market value of the assets of the applicable issuer and its Subsidiaries as a whole; provided, however, such term shall not include the Equity Investment or the transactions contemplated by this Agreement, including without limitation, the IHI Dispositions. "SEC" shall mean the Securities and Exchange Commission. "Securities Act" shall mean the Securities Act of 1933, as amended. "Subsidiary" means, with respect to a Person, any corporation, partnership, joint venture or other legal entity that is consolidated with the Person in the Person's financial statements prepared using GAAP; provided, however, A&B Bolt & Supply, Inc., a Louisiana corporation, shall not be considered a Subsidiary of T-3 for purposes of any representation or warranty by T-3 contained in Article 4. "Superior Proposal" shall have the meaning ascribed to it in Section 6.13 hereof. "Surviving Corporation" shall have the meaning ascribed to it in Section 2.2 hereof. "T-3 Annual Financial Statements" shall mean the audited consolidated balance sheet and related audited consolidated statements of income, stockholders equity and cash flows, and the related notes thereto of T-3 and its Subsidiaries as of and for the fiscal years ended December 31, 2000. "T-3 Benefit Program or Agreement" shall have the meaning ascribed to it in Section 4.16(a) hereof. "T-3 Common Stock" shall mean the shares of common stock of T-3, $.001 par value per share. "T-3 Disclosure Schedules" shall mean the disclosure schedules and other documents attached to such schedules prepared by T-3 in connection with this Agreement and attached hereto as Exhibit B. "T-3 Financial Statements" shall mean the T-3 Annual Financial Statements and the T-3 Interim Financial Statements, collectively. "T-3 Interim Financial Statements" shall mean the unaudited consolidated balance sheet and the related unaudited consolidated statements of income of T-3 and its Subsidiaries as of and for the three-month period ended March 31, 2001. "T-3 Leased Properties" shall have the meaning ascribed to it in Section 4.10(a) hereof. "T-3 Options" shall have the meaning ascribed to such term in Section 3.2 hereof. "T-3 Outside Board Designee" shall mean an individual designated by T-3 on or before the effective date of the Registration Statement, which individual shall be an "outside director" under Treasury Regulation Section 1.162-27 under the Code, "independent directors" under Rule 4200(a)(14) of Nasdaq and a "non-employee director" under Rule 16b-3 promulgated under the Exchange Act. "T-3 Outstanding Shares" shall mean the outstanding shares of common stock of T-3 as disclosed on Section 3.1 of the T-3 Disclosure Schedules, as such Disclosure Schedules shall be amended from time to time. "T-3 Owned Properties" shall have the meaning ascribed to it in Section 4.9(a) hereof. "T-3 Policies" shall have the meaning ascribed to it in Section 4.19(a) hereof. "T-3 Stockholders" shall mean the holders of T-3 Common Stock. "Taxes" shall mean any federal, state, local, foreign or other taxes (including, without limitation, income, corporation, alternative minimum, gross receipts, profits, capital stock, franchise, property, sales, use, lease, excise, severance, premium, windfall profits, payroll, wage, employment or withholding taxes, estimated or other similar tax), fees, duties, assessments, withholdings or governmental charges of any kind whatsoever in the nature of or in lieu of any tax (including interest, penalties and additions to tax) and any liability in respect of any tax as a result of being a member of any affiliated, consolidated, combined, unitary or similar group. "TBCA" means the Texas Business Corporation Act. ARTICLE 2. THE CLOSING; THE MERGER; EFFECTS OF THE MERGER Section 2.1 Closing. (a) The closing of the transactions contemplated herein (the "Closing") will take place, assuming satisfaction or waiver of each of the conditions set forth in Article 7 hereof, at the offices of Porter & Hedges, L.L.P., 700 Louisiana, Houston, Texas 77002, at 10:00 A.M. (local time) on such date as may be mutually agreed upon between the parties following satisfaction or permitted waiver of the last to occur of the conditions set forth in Section 7.1 (other than conditions that will be satisfied or permissively waived at the Closing), or if no date has been agreed to, on any date specified by one party to the others upon three days' notice following satisfaction or permitted waiver of such conditions, 4 Page 19 of 65 provided, in each case, that the other conditions set forth in Article 7 shall have been satisfied or waived as provided in Article 7 at or prior to the Closing (the date of the Closing being referred to herein as the "Closing Date"). (b) At the Closing, the parties shall (i) deliver the documents, certificates and opinions required to be delivered by Article 7 hereof, (ii) provide written evidence, if applicable, of the satisfaction or permitted waiver of each of the conditions to the other party's obligations set forth in Article 7 hereof, (iii) cause the appropriate officers of each party to execute and deliver articles or a certificate of merger in accordance with the provisions of the DGCL and the TBCA (each, the "Certificate of Merger"), and (iv) consummate the Merger by causing to be filed such properly executed Certificate of Merger with the Secretary of State of the State of Delaware and the Secretary of State of the State of Texas in accordance with the provisions of the DGCL and the TBCA, respectively. The Merger shall be effective as of the date and time set forth in the Certificates of Merger (such date and time being hereinafter referred to respectively as the "Effective Date" and the "Effective Time"). Section 2.2 The Merger. Subject to the terms and conditions of this Agreement, T-3 shall be merged with and into IHI at the Effective Time. Following the Merger, the separate corporate existence of T-3 shall cease, and IHI shall be the surviving corporation in accordance with the provisions of the TBCA (the "Surviving Corporation"). Section 2.3 Effects of the Merger. (a) At the Effective Time and except as provided in this Section 2.3, the identity, existence, purposes, powers, objects, franchises, rights, and immunities of IHI, the surviving corporation of the Merger, shall continue unaffected and unimpaired by the Merger, and the corporate identity, existence, purposes, powers, objects, franchises, rights, and immunities of T-3 shall be wholly merged into IHI, and IHI shall be fully vested therewith. Accordingly, at the Effective Time, the separate existence of T-3, except insofar as continued by statute, shall cease. (b) With respect to the conversion of shares of T-3 Common Stock, the Merger is intended to qualify as a tax-free reorganization described in Section 368(a)(1)(A) of the Code. (c) The laws of the State of Texas shall continue to govern the Surviving Corporation. From and after the Effective Time, the articles of incorporation of IHI, the Surviving Corporation, shall be amended and restated in the form attached hereto as Appendix II (the "Restated Articles"), until further amended in the manner provided by the Restated Articles and Applicable Law. (d) From and after the Effective Time, the bylaws of IHI, the Surviving Corporation, shall be amended and restated in the form attached hereto as Appendix III (the "Restated Bylaws"), until altered, amended, or repealed, or until new bylaws shall be adopted in accordance with the provisions therein, the Restated Articles and Applicable Law. (e) The directors who shall constitute the board of directors of the Surviving Corporation from and after the Effective Time shall be as follows: CLASS I Robert E. Cone Donald P. Carlin CLASS II Steven W. Krablin Joseph R. Edwards T-3 Outside Board Designee CLASS III Ben A. Guill Michael L. Stansberry Thomas R. Denison until their successors are duly elected and qualified in accordance with the Restated Articles, the Restated Bylaws and Applicable Law. If before the Effective Time, any one or more of such directors dies or refuses or becomes unable to serve as a director of the Surviving Corporation, then the remaining named directors shall be the directors of the Surviving Corporation from and after the Effective Time until their successors are duly elected and qualified in accordance with the restated Articles, the Restated Bylaws and Applicable Law. (f) On or after the Effective Time, if a vacancy shall exist for any reason in the board of directors of the Surviving Corporation, such vacancy shall be filled in the manner provided in the Articles and/or the Restated Bylaws of the Surviving Corporation. 5 Page 20 of 65 (g) From and after the Effective Time, the members of the committees of the Board of Directors of the Surviving Corporation shall be as set forth below: Audit Committee Steven W. Krablin (Chairman) James M.. Tidwell Donald P. Carlin Compensation Committee Ben A. Guill (Chairman) Thomas R. Denison (h) From and after the Effective Time, the officers of the Surviving Corporation shall be as set forth below:
TITLE NAME ----------------------------------------------------- ---------------------- President and Chief Executive Officer................ Michael L. Stansberry Chief Financial Officer, Treasurer and Secretary..... Michael T. Mino Assistant Secretary.................................. Helen A. Tate
All other officers of the Surviving Corporation shall be as elected by the Board of Directors from time to time following the Effective Time in accordance with the Restated Bylaws. From and after the Effective Time, the officers of the Surviving Corporation shall hold office subject to the provisions of the Restated Bylaws and Applicable Law. (i) The authorized number of shares of capital stock of the Surviving Corporation, and the par value, designations, preferences, rights, and limitations thereof, and the express terms thereof, shall be as set forth in the Restated Articles. ARTICLE 3. MERGER CONSIDERATION; CONVERSION OF SHARES Section 3.1 Conversion of Shares. (a) The manner and basis of converting the issued and outstanding shares of T-3 Common Stock into shares of IHI Common Stock shall be as hereinafter set forth in this Section 3.1. (b) At the Effective Time, each share of T-3 Common Stock issued and outstanding immediately prior to the Effective Time (other than shares held by a holder that properly exercises dissenters' rights in strict compliance with the DGCL), without any action on the part of the holder thereof, shall automatically become and be converted into (i) the right to receive certificates evidencing a number of shares of IHI Common Stock equal to the Exchange Factor plus (ii) 3.9074 Merger Warrants upon surrender, in accordance with Subsection 3.1(c) hereof, of certificates theretofore evidencing shares of T-3 Common Stock. Section 3.1 of the T-3 Disclosure Schedules lists all T-3 Stockholders and the number of shares of T-3 Common Stock owned by each such stockholder as of the date hereof (including shares issuable upon conversion of debt held by the Fund). (c) Commencing on the Effective Date, each holder of an outstanding certificate or certificates theretofore representing shares of T-3 Common Stock may surrender the same to an exchange agent designated by IHI, and such holder shall be entitled upon such surrender to receive in exchange therefor a certificate or certificates representing the number of whole IHI Shares into which the shares of T-3 Common Stock theretofore represented by the certificate or certificates so surrendered shall have been converted. However, before surrender, each outstanding certificate representing issued and outstanding T-3 Common Stock shall be deemed, for all purposes, only to evidence ownership of the number of whole Merger Shares into which such shares have been so converted. Unless and until such outstanding certificates formerly representing T-3 Common Stock are so surrendered, no dividend payable to holders of record of IHI Common Stock as of any date after the Effective Date shall be paid to the holders of such outstanding certificates. Upon surrender of such outstanding certificates, however, there shall be paid to the holders of the certificates of Merger Shares the amount of dividends, if any, which theretofore (but after the Effective Date) became payable with respect to such full Merger Shares. No interest shall be payable with respect to the payment of such dividends on surrender of outstanding certificates. The holder of fractional share interests, as such, shall not be entitled to any dividends or to any distribution in the event of liquidation or to any voting or other privileges of a stockholder of IHI. (d) No certificates for fractional share interests of IHI Common Stock will be issued, but, in lieu thereof, IHI will settle all such fractional share interests in cash on the basis of the closing price for IHI Common Stock on the Nasdaq on the last trading day before the Effective Date. (e) Upon the Effective Date, the stock transfer books of T-3 shall be deemed closed, and no transfer of any certificates theretofore representing shares of T-3 shall thereafter be made or consummated. (f) The assets and liabilities of IHI and T-3 shall be taken up on the books of the Surviving Corporation in accordance with GAAP, and the capital surplus and retained earnings accounts of the Surviving Corporation shall be determined, in accordance with GAAP, by the board of directors of the Surviving Corporation. Nothing herein shall prevent the board of directors of the Surviving Corporation from making any future changes in its accounts in accordance with law. (g) Subject to any contrary provision of Applicable Law, all consideration deposited with the exchange agent or held by IHI for the payment of the consideration into which the outstanding shares of T-3 Common Stock shall have been converted, and remaining unclaimed for one year after the Effective Date, shall be paid or delivered to the Surviving Corporation; and the holder of any unexchanged certificate or certificates which before the Effective Date represented shares of T-3 Common Stock shall thereafter look only to the Surviving Corporation for exchange or payment thereof upon surrender of such certificate or certificates to Surviving Corporation. 6 Page 21 of 65 (h) IHI agrees that, if the merger contemplated hereby becomes effective, it will promptly pay to any dissenting stockholder of T-3 the amount, if any, to which such holder is entitled under the provisions of Section 262 of the DGCL, provided such dissenter acts in strict compliance with such provisions. (i) Each share of IHI Common Stock outstanding immediately prior to the Effective Time shall remain one validly issued and outstanding share of common stock of the Surviving Corporation following the Effective Time. Section 3.2 Treatment of T-3 Stock Options. On the Effective Date, each of the then outstanding options to purchase T-3 Common Stock (collectively, the "T-3 Options") (which includes all outstanding options granted under T-3's stock option plans (the "T-3 Option Plans")) will and without any further action on the part of any holder thereof (herein, an "optionholder"), be converted into an option to purchase that number of shares of IHI Common Stock determined by multiplying the number of shares of T-3 Common Stock subject to such T-3 Option at the Effective Date by the Exchange Factor (as may be adjusted pursuant to the terms hereof), at an exercise price per share of IHI Common Stock (rounded up to the nearest whole cent) equal to the exercise price per share of such T-3 Option divided by the Exchange Factor. If the foregoing calculation results in an exchanged T-3 Option being exercisable for a fraction of a share of IHI Common Stock, then the number of shares of IHI Common Stock subject to such option will be rounded down to the nearest whole number of shares, and the total exercise price for the option will be reduced by the exercise price of the fractional share. The term, exercisability, vesting schedule, and all other terms and conditions of the T-3 Options will otherwise be unchanged by the provisions of this Section 3.2 and shall operate in accordance with their terms. All shares of IHI Common Stock issued upon exercise of the exchanged T-3 Options shall be registered under an effective Form S-8 Registration Statement (or other comparable form) filed with the SEC. ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF T-3 T-3 represents and warrants to IHI as follows (each of the representations and warranties made with respect to T-3, unless the context requires the contrary, includes all of T-3's Subsidiaries) with respect to the matters set forth below. Section 4.1 Organization; Qualification. T-3 is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to own its property and to carry on its business as it is now being conducted. No actions or proceedings to dissolve T-3 are pending. Section 4.1 of the T-3 Disclosure Schedules sets forth the jurisdictions in which T-3 is qualified to do business as a foreign corporation. Copies of the certificate of incorporation and by- laws of T-3, with all amendments to the date hereof, have been furnished to IHI or its representatives, and such copies are accurate and complete as of the date hereof. T-3 has made available to IHI accurate and complete copies of the minutes of all meetings of its boards of directors, any committees of such boards and stockholders (and all consents in lieu of such meetings). Such records, minutes and consents accurately reflect in all material respects all actions taken by its board of directors, committees and stockholders as of the date hereof. T-3 is not in violation of any provision of its certificate of incorporation or its by-laws other than such violations, that in the aggregate, would not have a Material Adverse Effect on T-3. Section 4.2 Capital Stock; Subsidiaries. As of the date of this Agreement, the authorized capital stock of T-3 consists of 500,000 shares of T-3 Common Stock, of which 218,337 shares are issued and outstanding, and 500,000 shares of preferred stock, par value $.01 per share, no shares of which are issued and outstanding, and no shares of capital stock are held in its treasury. All issued and outstanding shares of T-3 Common Stock have been duly authorized and are validly issued, fully paid and non-assessable. All outstanding shares of T-3 Common Stock are held of record and beneficially by the Persons set forth in Section 3.1 of the T-3 Disclosure Schedules, as it may be amended as of the Closing Date in accordance with Section 6.6. (a) Except as set forth in Section 4.2 of the T-3 Disclosure Schedules, there are no outstanding stock options, warrants or other rights to acquire of have delivered any shares of the capital stock of T-3 or any security convertible into T-3 Common Stock, and except as set forth in Section 4.2 of the T-3 Disclosure Schedules, T-3 has no obligation or other commitment to issue, sell or deliver any of the foregoing or any shares of its capital stock. Neither the execution of this Agreement nor any other document contemplated to be executed hereby nor the consummation of the Merger nor any other transaction contemplated hereby or thereby will result in the triggering of any "anti-dilution" provisions of any option, warrant or other instrument granting others the right to acquire any securities of T-3. All issued and outstanding shares of T-3 Common Stock have been issued in compliance with all legal requirements and without violation of any preemptive or similar rights. (b) All issued and outstanding shares of common stock of T-3's Subsidiaries have been duly authorized and are validly issued, fully paid and non-assessable. Except as set forth in Section 4.2 of the T-3 Disclosure Schedules, all outstanding capital stock of T-3 Subsidiaries are held of record and beneficially by T-3. (c) Section 4.2 of the T-3 Disclosure Schedules contains a list of all of T-3's Subsidiaries. Except for its Subsidiaries, T-3 does not directly or indirectly have any legal or beneficial ownership interest in any Person. Section 4.3 Corporate Authorization; Enforceability. (a) The execution, delivery and performance of this Agreement by T-3 has been duly authorized by the board of directors of T-3. Upon an affirmative vote or consent of the holders of a majority of the outstanding T-3 Common Stock, no further vote or consent of stockholders or directors of T-3 and no further corporate acts or other corporate proceedings are required of T-3 for the due and valid authorization, execution, delivery and performance of this Agreement or the consummation of the Merger. (b) This Agreement is the legal, valid and binding obligation of T-3 enforceable against it in accordance with its terms, except that enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally and equitable principles which may limit the availability of certain equitable remedies in certain instances. 7 Page 22 of 65 Section 4.4 No Conflict. Except as set forth in Section 4.4 of the T-3 Disclosure Schedules, neither the execution, delivery or performance of this Agreement by T-3 nor the consummation of the transactions contemplated hereby will (a) if the requisite T-3 Stockholder approval is obtained, conflict with or result in any breach of the provisions of the certificate of incorporation or by-laws of T-3, (b) result in the violation or breach of, or constitute (with or without due notice or the lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, or any material license, contract, agreement or other instrument or obligation to which either of T-3 is a party or by which it or its properties or assets may be bound, except for such violations, breaches or defaults that would not, individually or in the aggregate, have a Material Adverse Effect on T-3, or (c) violate any order, writ, injunction, decree, statute, rule or regulation applicable to T-3 or its properties or assets, except for such violations, that in the aggregate, would not have a Material Adverse Effect on T-3. Section 4.5 Consents. No consent, approval, order or authorization of, or declaration, filing or registration with, any Governmental Entity or other Person is required to be obtained or made by T-3 in connection with the execution, delivery or performance by T-3 of this Agreement or the consummation by T-3 of the transactions contemplated hereby except for (a) those required by the HSR Act, if any, (b) as set forth in Section 4.5 of the T-3 Disclosure Schedules, (c) the requisite T-3 Stockholder approval and action set forth in Section 4.3(a) hereof and (d) such other consents, approvals, orders, authorizations, declarations, filings, or registrations, the failure of which to obtain or make would not have, in the aggregate, a Material Adverse Effect on T-3. Section 4.6 T-3 Financial Statements; Undisclosed Liabilities. (a) The T-3 Annual Financial Statements have been audited by Arthur Andersen, LLP, independent public accountants, in accordance with generally accepted auditing standards, have been prepared in accordance with GAAP, and present fairly in all material respects the financial position of T-3 and its Subsidiaries at such dates and the results of operations and cash flows for the periods then ended. (b) The T-3 Interim Financial Statements have been prepared in accordance with GAAP on a basis consistent with the prior year end and reflect all adjustments, consisting only of normal, recurring adjustments, that are necessary for a fair statement in all material respects of the results for the interim period presented therein. Except as disclosed in Section 4.6 of the T-3 Disclosure Schedules, none of T-3, its Subsidiaries, nor any of their respective assets, is subject to any liability, commitment, debt or obligation that would be required to be disclosed in financial statements prepared in accordance with GAAP, except (i) as and to the extent reflected on the T-3 Interim Financial Statements, or (ii) as may have been incurred or may have arisen since the date of the T-3 Interim Financial Statements in the ordinary course of business and that are permitted by this Agreement, or, in the aggregate, would not have a Material Adverse Effect on T-3. Section 4.7 Absence of Certain Changes. Since March 31, 2001, T-3 has operated in the ordinary course of business consistent with past practice and there has been no event or condition of any character that has had, or can reasonably be expected to have, a Material Adverse Effect on T-3. Section 4.8 Material Contracts. (a) Section 4.8 of the T-3 Disclosure Schedules contains a list and brief description (including the names of the parties and the date and nature of the agreement) of each Material Contract to which T-3 or any of its Subsidiaries is a party, or to which any of their respective properties is subject. IHI has been provided a complete and accurate copy of each Material Contract listed on Section 4.8 of the T-3 Disclosure Schedules. Except as set forth in Section 4.8 of the T-3 Disclosure Schedules, each such Material Contract is a legal, valid, binding and enforceable obligation of T-3 or any of its Subsidiaries, as the case may be, except to the extent that enforcement may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the enforcement of creditors' rights generally and (ii) general equitable principles. (b) Except as set forth in Section 4.8 of the T-3 Disclosure Schedules, T-3 is not in material breach of or default (and, to the Knowledge of T-3, no event has occurred which, with due notice or lapse of time or both, would constitute such a breach or default) under any Material Contract, except where any such breaches or defaults, in the aggregate, would not have a Material Adverse Effect on T-3, and no party to any Material Contract has given T-3 written notice of or made a claim in writing with respect to any breach or default under any such Material Contract. Section 4.9 Real Property. (a) Section 4.9 of the T-3 Disclosure Schedules sets forth a true and complete list of all real property owned in fee simple title by T-3 (collectively, the "T-3 Owned Properties"). Except as set forth in Section 4.9 of the T-3 Disclosure Schedules, T-3 has good and indefeasible title to all T-3 Owned Properties. Except as disclosed in Section 4.9 of the T-3 Disclosure Schedules, none of the T-3 Owned Properties is subject to any Liens, except for (i) Liens that collateralize indebtedness that is reflected in the T-3 Interim Financial Statements and (ii) Permitted Liens. (b) Except as set forth in Section 4.9 of the T-3 Disclosure Schedules, all improvements on the T-3 Owned Properties and the operations therein conducted conform in all material respects to all applicable health, fire, safety, zoning and building laws, ordinances and administrative regulations, except for possible nonconforming uses or violations which do not materially interfere with the present use, operation or maintenance thereof or access thereto by T-3, and, individually or in the aggregate, would not otherwise have a Material Adverse Effect on T-3. The operating condition and state of repair of all buildings, structures, improvements and fixtures on the T-3 Owned Properties are sufficient to permit the use and operation of all such buildings, structures, improvements and fixtures as now used or operated by T-3 except where the failure to be in such condition would not have a Material Adverse Effect on T-3. 8 Page 23 of 65 Section 4.10 Real Property Leases. (a) Section 4.10 of the T-3 Disclosure Schedules sets forth a list of all Leases with respect to all real properties in which T-3 has a leasehold, subleasehold, or other occupancy interest (the "T-3 Leased Properties"). Complete and accurate copies of all such Leases and all amendments thereto have been provided to IHI. All of the Leases for the T-3 Leased Properties are valid and effective against T-3 in accordance with their respective terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally and (ii) general equitable principles. (b) T-3 has not received written notice that it is in material breach of or default (and, to the Knowledge of T-3, no event has occurred, that, with due notice or lapse of time or both, would constitute such a breach or default) under any Lease. (c) Except as set forth in Section 4.10 of the T-3 Disclosure Schedules, no T-3 Leased Property is subject to any material sublease, license or other agreement granting to any Person any right to the use, occupancy or enjoyment of T-3 Leased Property or any portion thereof through T-3. Section 4.11 Personal Property. (a) Except as set forth in Section 4.11 of the T-3 Disclosure Schedules, T-3 has good and indefeasible title to all Personal Property owned by T-3, free and clear of all Liens other than (i) Liens that collateralize indebtedness that is reflected in the T-3 Interim Financial Statements and (ii) Permitted Liens. (b) Except as set forth in Section 4.11 of the T-3 Disclosure Schedules, T-3 holds valid leaseholds in all of the Personal Property leased by it, which leases are enforceable against T-3 in accordance with their respective terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally, and (ii) general equitable principles. (c) Except as set forth in Section 4.11 of the T-3 Disclosure Schedules, T-3 is not in breach of or default (and, to the Knowledge of T-3, no event has occurred that, with due notice or lapse of time or both, would constitute such a lapse or default) under any lease of any item of Personal Property leased by T-3, except for any such breach or default that would not, individually or in the aggregate, have a Material Adverse Effect on T-3. (d) Except as set forth in Section 4.11 of the T-3 Disclosure Schedules, the Personal Property now owned, leased or used by T-3 is sufficient and adequate to carry on its business as presently conducted and the operating condition and the state of repair thereof is sufficient to permit T-3 to carry on its business as presently conducted except where the failure to be in such condition would not have a Material Adverse Effect on T-3. Section 4.12 Compliance with Laws. Except as set forth in Sections 4.12, 4.15, 4.16, 4.20 or 4.21 of the T-3 Disclosure Schedules, T-3 is not in violation of any Applicable Law, nor is it in default with respect to any order, writ, judgment, award, injunction or other decree of any Governmental Entity applicable to it or any of its respective assets, properties or operations except such violations or defaults that, in the aggregate, would not have a Material Adverse Effect on T-3. Section 4.13 Permits. Except as set forth in Sections 4.13 or 4.15 of the T-3 Disclosure Schedules, T-3 has all permits, licenses and governmental authorizations that are required for the lease, ownership, occupancy or operation of its properties and assets and the carrying on of its business except where the failure to have any such permits, licenses or authorizations would not, in the aggregate, have a Material Adverse Effect on T-3. Section 4.14 Litigation. (a) Except as set forth in Section 4.14 of the T-3 Disclosure Schedules, there are no Proceedings pending or, to the Knowledge of T-3, threatened, against T-3 (i) for which an indemnification claim has been asserted, (ii) that could reasonably be expected to have a Material Adverse Effect on T-3 or (iii) that seeks to prohibit or restrict consummation of the transactions contemplated by this Agreement. (b) Except as set forth in Section 4.14 of the T-3 Disclosure Schedules, T-3, nor any of their respective assets or properties is subject to any material order, writ, judgment, award, injunction or decree of any Governmental Entity. Section 4.15 Environmental Compliance. (a) Except as set forth in Section 4.15 of the T-3 Disclosure Schedules, T-3 possesses all material licenses, permits and other approvals and authorizations that are required under, and is and has been in compliance with, all Environmental Laws, including all Environmental Laws governing the generation, use, collection, treatment, storage, transportation, recovery, removal, discharge or disposal of Hazardous Substances or Wastes, and all Environmental Laws imposing record-keeping, maintenance, testing, inspection, notification and reporting requirements with respect to Hazardous Substances or Wastes, except where noncompliance would not, individually or in the aggregate, have a Material Adverse Effect on T-3, and, to the Knowledge of T-3, except as set forth in Section 4.15 of the T-3 Disclosure Schedules, there is no condition that would materially interfere with such compliance in the future. (b) Except as set forth in Section 4.15 of the T-3 Disclosure Schedules, T-3 is not subject to any Proceeding pursuant to, or has received any notice of any violation of, or claim alleging liability under, any Environmental Laws. To the Knowledge of T-3, no facts or circumstances exist that would reasonably be likely to result in a claim, citation or allegation against T-3 for a violation of, or alleging liability under any Environmental Laws, except such violations or liabilities that would not, individually or in the aggregate, have a Material Adverse Effect on T-3. 9 Page 24 of 65 (c) Except as set forth in Section 4.15 of the T-3 Disclosure Schedules, to the Knowledge of T-3, there are no underground tanks of any type (including tanks storing gasoline, diesel fuel, oil or other petroleum products) or disposal sites for hazardous substances, hazardous wastes or any other regulated waste, located on or under the T-3 Owned Properties or T-3 Leased Properties. (d) Except as set forth in Section 4.15 of the T-3 Disclosure Schedules, to the Knowledge of T-3, except in the ordinary course of business, and in all cases in material compliance with all Environmental Laws, T-3 has not engaged any third party to handle, transport or dispose of hazardous substances or wastes (including for this purpose, gasoline, diesel fuel, oil or other petroleum products, or bilge waste) on its behalf. Section 4.16 ERISA and Related Matters. (a) Section 4.16 of the T-3 Disclosure Schedules provides a list of each of the following which T-3 or any Subsidiary thereof maintains or contributes to, for the benefit of its current or former employees, officers or directors, or with respect to which T-3 or any Subsidiary thereof has or may have any liability (the "T-3 Employee Plans") as of the Closing Date: (i) each employee benefit plan (as defined in Section 3(3) of ERISA); and (ii) each written or material unwritten fringe benefit, change in control, stock purchase, personnel, stock option, collective bargaining, bonus, incentive, vacation, severance pay, deferred compensation, executive compensation or supplemental retirement, consulting, employment or other written or unwritten employee benefit plan, agreement, arrangement, program, practice or understanding that is not described in Section 4.16(a)(i). True and complete copies of each of the written T-3 Employee Plans and descriptions of material unwritten T-3 Employee Plans, current summary plan descriptions, related trusts or other funding arrangements, if applicable, and all amendments thereto, have been or on request will be furnished to IHI. Further, a copy of the most recent determination letter, if applicable, and, for the three most recent years, the Form 5500 and attached schedules, audited financial statements and actuarial valuation reports, if applicable, for each T-3 Employee Plan, and all material communications received from or sent to the Internal Revenue Service or the Department of Labor in the last two years regarding any T-3 Employee Plan will be provided to IHI upon request. (b) Benefits under any T-3 Employee Plan are as represented in said documents and have not been increased or modified (whether written or not written) subsequent to the dates of such documents. T-3 has not communicated to any employee or former employee any intention or commitment to modify any T-3 Employee Plan or to establish or implement any other employee or retiree benefit or compensation arrangement. (c) Neither T-3 nor any trade or business under common control with T-3 within the meaning of Section 414(b) or (c) of the Code prior to the Closing Date maintains or has ever maintained or become obligated to contribute to any employee benefit plan (i) that is subject to Title IV of ERISA, (ii) to which Section 412 of the Code applies, (iii) that is a Multiemployer Plan, or (iv) in connection with any trust described in Section 501(c)(9) of the Code. T-3 has not within the last five years engaged in, and is not a successor corporation to an entity that has engaged in, a transaction described in Section 4069 of ERISA. (d) Except as otherwise set forth in Section 4.16 of the T-3 Disclosure Schedules: (i) each T-3 Employee Plan has been administered, maintained and operated in all material respects in accordance with the terms thereof and in compliance with its governing documents and Applicable Law (including where applicable, ERISA and the Code); (ii) each of the T-3 Employee Plans intended to be qualified under section 401 of the Code (A) satisfies in form the requirements of such section except to the extent amendments are not required by law to be made until a date after the Closing Date, (B) has received or will file for a favorable determination letter from the Internal Revenue Service regarding such qualified status, (C) has not, since receipt of the most recent favorable determination letter, been amended, and (D) has not been operated in a way that would adversely affect its qualified status; (iii) no act, omission or transaction has occurred which would result in the imposition on T-3 of a breach of fiduciary duty liability or damages under Section 409 of ERISA, a civil penalty assessed pursuant to Subsections (c), (i) or (l) of Section 502 of ERISA or a Tax imposed pursuant to Chapter 43 of Subtitle D of the Code; (iv) neither T-3 nor any of its directors, officers or employees has engaged in any transaction with respect to a T-3 Employee Plan that could subject T-3 to a Tax, penalty or liability for a prohibited transaction, as defined in Section 406 of ERISA or Section 4975 of the Code, and none of the assets of any T-3 Employee Plan are invested in employer securities or employer real property; (v) full payment has been made of all amounts which T-3 is or has been required to have paid as contributions to or benefits due under any T-3 Employee Plan under Applicable Law or under the terms of any such plan or any arrangement and there are no accrued but unpaid contribution or benefit obligations that are not reflected on the T-3 Financial Statements; and (vi) there is no Proceeding or other dispute pending or, to the Knowledge of T-3, threatened, and there is no administrative investigation, audit or other administrative proceeding by the Department of Labor, the Pension Benefit Guaranty Corporation, the Internal Revenue Service or other Governmental Entity pending, in progress or, to the Knowledge of T-3, threatened that involves any T-3 Employee Plan that could reasonably be expected to result in a material liability to T-3. (e) Except as set forth in Section 4.16 of the T-3 Disclosure Schedules, in connection with the consummation of the transactions contemplated in this Agreement, no employee or former employee of T-3 will become entitled to any bonus, retirement, severance, job security, 10 Page 25 of 65 change in control or similar benefit or enhanced benefit (including acceleration of an award, vesting or exercise of an incentive award) or any fee or payment of any kind as a result of any of the transactions contemplated hereby, and no such disclosed payment will constitute a parachute payment described in Section 280G of the Code. (f) All group health plans of T-3 have at all times fully complied in all material respects with all applicable notification and continuation coverage requirements of Section 4980B(f) of the Code and Section 601 of ERISA. T-3 has no current or projected liability in respect of post-retirement or post- employment welfare benefits for retired, current or former employees, or for any stockholder or director who is not an employee, former employee or beneficiary thereof, except to the extent otherwise required by the continuation requirements of Section 4980B(f) of the Code and Section 601 of ERISA. (g) All group health plans (within the meaning of Section 5000(b)(1) of the Code) of T-3 have at all times fully complied in all material respects with, and have been maintained and operated in all material respects in accordance with (i) the health care requirements relating to portability, access, and renewability of Sections 9801 through 9803 of the Code and Part 7 of Title I, Subtitle B of ERISA, (ii) the health care requirements relating to the benefits for mothers and newborns under Section 9811 of the Code and Section 711 of ERISA, and (iii) the health care requirements relating to the parity provisions applicable to mental health benefits under Section 9812 of the Code and Section 712 of ERISA, and neither T-3 nor any Subsidiary thereof has contributed to a nonconforming group health plan (as defined in Code Section 5000(c)). (h) Except as set forth in Section 4.16 of the T-3 Disclosure Schedules, no employee or former employee, officer or director of T-3 is or will become entitled to receive any award under T-3's discretionary or other bonus plans except for amounts reflected on the T-3 Financial Statements. Section 4.17 Taxes. (a) Except as set forth in Section 4.17 of the T-3 Disclosure Schedules, all Returns required to be filed by or on behalf of T-3 have been duly filed and such Returns (including all attached statements and schedules) are true, complete and correct in all material respects and all amounts of Taxes shown as due thereon have been paid on a timely basis. (b) Except as set forth in Section 4.17 of the T-3 Disclosure Schedules, T-3 has withheld and paid over all Taxes required to have been withheld and paid over (including any estimated taxes and Taxes pursuant to Section 1441 or 1442 of the Code or similar provisions under any foreign laws), and has complied in all material respects with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with amounts paid or owing to any employee, creditor, independent contractor, shareholder or other third party. (c) Except as set forth in Section 4.17 of the T-3 Disclosure Schedules, there are no Liens on any of the assets of T-3 with respect to Taxes, other than Permitted Liens. (d) T-3 has furnished or made available to IHI true and complete copies of: (i) all federal and state income and franchise tax returns of T-3 for all periods beginning on or after January 1, 1996 if any and (ii) all material tax audit reports, work papers, statements of deficiencies, closing or other agreements received by T-3 or on its behalf relating to Taxes for all periods beginning on or after January 1, 1996. (e) Except as disclosed in Section 4.17 of the T-3 Disclosure Schedules: (i) The Returns of T-3 have never been audited by a Governmental Entity, nor is there any pending or, to the Knowledge of T-3, threatened (formally or informally) actions or proceedings for the assessment, collection or refund of Taxes with respect to T-3. (ii) No adjustment relating to such Returns has been proposed formally or informally by any Governmental Entity and, to the Knowledge of T-3, no basis exists for any such adjustment; (iii) Except as reflected in the Returns, no waiver or extension of any statute of limitations is in effect with respect to Taxes or Returns of T-3. (iv) There are no requests for rulings, subpoenas or requests for information pending with respect to Taxes or Returns of T-3. (v) No power of attorney has been granted by T-3 with respect to any matter relating to Taxes. (vi) The amount of the current liability accruals for Taxes (excluding reserves for deferred taxes) reflected on the consolidated balance sheet of T-3 as of March 31, 2000 are, and such accruals reflected on the consolidated balance sheet of T-3 as of the Closing Date will be, reasonable and sufficient based on T-3's books and records as of the time of the calculation of such accruals. (f) Except as disclosed in Section 4.17 of the T-3 Disclosure Schedules: (i) T-3 has not issued or assumed any indebtedness that is subject to section 279(b) of the Code. (ii) T-3 has not entered into any compensatory agreements with respect to the performance of services which payment thereunder would result in a nondeductible expense pursuant to Section 280G or 162(m) of the Code or an excise tax to the recipient of such payment pursuant to Section 4999 of the Code. 11 Page 26 of 65 (iii) No election has been made under Section 338 of the Code with respect to T-3 and no action has been taken that would result in any income tax liability to either T-3 as a result of deemed election within the meaning of Section 338 of the Code. (iv) No consent under Section 341(f) of the Code has been filed with respect to T-3. (v) T-3 has not agreed, nor is it required as of the date hereof, to make any adjustment under Code Section 481(a) by reason of a change in accounting method or otherwise. (vi) T-3 is not a party to any tax sharing or allocation agreement nor does either T-3 owe any amount under any tax sharing or allocation agreement. (vii) T-3 has no liability for any Taxes of any person other than T-3 ((A) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), (B) as a transferee or successor, (C) by contract or (D) otherwise. (g) T-3 is not an investment company. For purposes of this representation, the term "investment company" means a regulated investment company, a real estate investment trust, or a corporation 50% or more of the value of whose total assets are stock and securities and 80% or more of the value of whose total assets are assets held for investment. In making the 50% and the 80% determinations under the preceding sentence, stock and securities in any subsidiary corporation will be disregarded and the parent corporation will be deemed to own its ratable share of the subsidiary's assets. (h) T-3 is not under the jurisdiction of a court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code. Section 4.18 Customers and Suppliers. Section 4.18 of the T-3 Disclosure Schedules sets forth a complete and correct list of all customers whose purchases exceeded 5% of the aggregate net sales of T-3 for the fiscal year ended December 31, 2000. Section 4.19 Insurance. (a) Section 4.19 of the T-3 Disclosure Schedules sets forth a true and complete list of all policies of protection and indemnity, title insurance, liability and casualty insurance, property insurance, auto insurance, business interruption insurance, tenant's insurance, workers' compensation, life insurance, disability insurance, excess or umbrella insurance, directors' and officers' liability insurance and any other type of insurance insuring the properties, assets, employees or operations of T-3 (collectively the "T-3 Policies"). T-3 has made available to IHI a true, complete and accurate copy of all T-3 Policies. (b) All T-3 Policies are in full force and effect except where failures to have any T-3 Policies in full force and effect would not, in the aggregate, have a Material Adverse Effect on T-3. (c) There is no claim by T-3 or any other Person pending under any of the T-3 Policies as to which, to the Knowledge of T-3, coverage has been denied or disputed by the underwriters or issuers of such T-3 Policies. T-3 has not received any notice of default, and T-3 is not in default, under any provision of the T-3 Policies where any such defaults, in the aggregate, would have a Material Adverse Effect on T-3. (d) T-3 has not since January 1, 2001 received any written notice from or on behalf of any insurance carrier or other issuer issuing such T-3 Policies that insurance rates or other annual premiums or fees in effect as of the date hereof will hereafter be materially increased, that there will be a non-renewal, cancellation or increase in a deductible (or a material increase in premiums in order to maintain an existing deductible) of any of the T-3 Policies in effect as of the date hereof, or that material alteration of any equipment or any improvements of the T-3 Owned Properties or the T-3 Leased Properties, purchase of additional material equipment, or material modification of any of the methods of doing business of T-3 will be required after the date hereof. Section 4.20 Safety and Health. Except as set forth in Section 4.20 of the T-3 Disclosure Schedules, the property and assets of T-3 have been and are being operated in compliance in all respects with all Applicable Laws designed to protect safety or health, or both, including without limitation, the Occupational Safety and Health Act, and the regulations promulgated pursuant thereto, except for any violations or deficiency that would not have a Material Adverse Effect on T-3. T-3 has not received any written notice of any violations, deficiency, investigation or inquiry from any Governmental Entity, employer or third party under any such law and, to the Knowledge of T-3, no such investigation or inquiry is planned or threatened, which, if adversely determined would, individually or in the aggregate, have a Material Adverse Effect on T-3. Section 4.21 Labor Matters. (a) Set forth in Section 4.21 of the T-3 Disclosure Schedules is a list of all: (i) outstanding employment, consulting or management agreements or contracts with officers, directors or employees of T-3 (other than those that are terminable on no more than 30 days notice) that provide for the payment of any bonus or commission; (ii) agreements, policies or practices that require T-3 to pay termination or severance pay to salaried, non-exempt or hourly employees in excess of 30 days' salary and benefits to any employee upon termination of such employee's employment (other than as required by law); and (iii) collective bargaining agreements or other labor union contracts applicable to persons employed by T-3. T-3 has made available to IHI complete and correct copies of all such employment and labor agreements. Except as set forth in Section 4.21 of the T-3 Disclosure Schedules, T-3 has not breached or otherwise failed to comply in any material respect with any provisions of any employment or labor agreement, and there are no grievances outstanding thereunder. (b) Except as set forth in Section 4.21 of the T-3 Disclosure Schedules: (i) T-3 is in compliance in all material respects with all Applicable Laws relating to employment and employment practices, wages, hours, and terms and conditions of employment; (ii) there is no unfair labor practice charge or complaint against T-3 pending before any Governmental Entity; (iii) there is no labor strike, material slowdown or material 12 Page 27 of 65 work stoppage or lockout actually pending or, to the Knowledge of T-3, threatened, against or affecting T-3; (iv) there is no representation claim or petition pending before any Governmental Entity; (v) there are no charges with respect to or relating to T-3 pending before any Governmental Entity responsible for the prevention of unlawful employment practices; and (vi) T-3 has not had formal notice from any Governmental Entity responsible for the enforcement of labor or employment laws of an intention to conduct an investigation of T-3 and, to the Knowledge of T-3, no such investigation is in progress. Section 4.22 Transactions with Certain Persons. Except as set forth in Section 4.22 of the T-3 Disclosure Schedules, no director, officer or employee of either T-3 or any of its respective Affiliates is presently a party to any transaction with T-3, including any contract, agreement or other arrangement providing for the furnishing of services by or the rental of real or personal property from any such Person or from any of its Affiliates. Section 4.23 Propriety of Past Payments. Neither T-3 nor any director, officer, employee or agent of T-3 has (a) used any funds for unlawful contributions, gifts, entertainment or other unlawful payments or expenses relating to political activity or (b) made any bribe, rebate, payoff, influence payment, kick-back or other unlawful payment that is in violation of Applicable Law. Section 4.24 Intellectual Property. T-3 either owns or has valid licenses to use all patents, copyrights, trademarks, software, databases, and other technical information used in its business as presently conducted, subject to limitations contained in the agreements governing the use of same, which limitations are customary for companies engaged in businesses similar to T-3. T-3 is in compliance with all such licenses and agreements except where any noncompliance would not, in the aggregate, have a Material Adverse Effect on T-3, and there are no pending or, to the Knowledge of T-3, threatened Proceedings challenging or questioning the validity or effectiveness of any license or agreement relating to such property or the right of T-3 to use, copy, modify or distribute the same. Section 4.25 Director and Officer Indemnification. The directors, officers and employees of T-3 are not entitled to indemnification by T-3, except to the extent that indemnification rights are provided for generally by Applicable Law or such corporation's charter, by-laws or directors' and officers' liability insurance policies described in Section 4.19 of the T-3 Disclosure Schedules or in employment agreements described in Section 4.21 of the T-3 Disclosure Schedules, and there are no pending claims for indemnification by any such director, officer or employee. Section 4.26 Brokers' and Finders' Fee. No agent, broker, person or firm acting on behalf of T-3 or the Fund is or will be entitled to any commission or brokers' or finders' fees payable by T-3 in connection with any of the transactions contemplated herein. ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF IHI IHI represents and warrants to T-3 and the Fund as follows (each of the representations and warranties made with respect to IHI, unless the context requires the contrary, includes all of IHI's Subsidiaries). Section 5.1 Organization; Qualification. IHI is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas and has the requisite corporate power and authority to own its property and to carry on its business as it is now being conducted. No actions or proceedings to dissolve IHI are pending. Section 5.1 of the IHI Disclosure Schedules sets forth the jurisdictions in which IHI is qualified to do business as a foreign corporation. Copies of the articles of incorporation and by-laws of IHI with all amendments to the date hereof, have been furnished to T-3 or its representatives, and such copies are accurate and complete as of the date hereof. IHI has made available to T-3 accurate copies of the minutes of all meetings of its board of directors, any committees of such board and stockholders (and all consents in lieu of such meetings). Such records, minutes and consents accurately reflect in all material respects all actions taken by the board of directors, committees and stockholders as of the date hereof. IHI is not in violation of any provision of its articles of incorporation or bylaws other than any such violations that, in the aggregate, would not have a Material Adverse Effect on IHI. Section 5.2 Capital Stock; Subsidiaries. (a) As of the date of this Agreement, the authorized capital stock of IHI consists of 50,000,000 shares of IHI Common Stock, of which 13,690,165 shares of IHI Common Stock are issued and outstanding and 1,586,265 shares are held in its treasury, and 7,500,000 shares of preferred stock, $.01 par value per share, none of which are issued and outstanding and none are held in its treasury. All issued and outstanding shares of IHI Common Stock have been duly authorized and are validly issued, fully paid and non-assessable. (b) Except as set forth in Section 5.2 of the IHI Disclosure Schedules, there are no outstanding options, warrants or other rights to acquire or have delivered any shares of IHI Common Stock or any security convertible into IHI Common Stock and except as set forth in Section 5.2 of the IHI Disclosure Schedules, IHI has no obligation or other commitment to issue, sell or deliver any of the foregoing or any shares of its capital stock. Except as set forth in Section 5.2 of the IHI Disclosure Schedules, neither the execution of this Agreement nor any other documents contemplated to be executed hereby nor the consummation of the Merger nor any other transaction contemplated hereby or thereby will result in the triggering of any "anti-dilution" provisions of any option, warrant or other instrument granting others the right to acquire any securities of IHI. Except as set forth in Section 5.2 of the IHI Disclosure Schedules, no Person has any registration rights with respect to any of IHI's capital stock. All of the issued and outstanding shares of IHI Common Stock have been issued in compliance with all Legal Requirements and without violation of any preemptive or similar rights. (c) All issued and outstanding shares of common stock of IHI's Subsidiaries have been duly authorized and are validly issued, fully paid and non-assessable. Except as set forth in Section 5.2 of the IHI Disclosure Schedules, all outstanding capital stock of IHI's Subsidiaries are held of record and beneficially by IHI. 13 Page 28 of 65 (d) All shares of IHI Common Stock to be issued pursuant to this Agreement will be, when issued in exchange for shares of T-3 Common Stock upon consummation of the Merger, duly authorized, validly issued, fully paid and non-assessable. (e) Section 5.2 of the IHI Disclosure Schedules contains a list of all of IHI's Subsidiaries. Except for its Subsidiaries, or as set forth in Section 5.2 of the IHI Disclosure Schedules, IHI does not directly or indirectly have any legal or beneficial ownership interest in any other Person. Section 5.3 Corporate Authorization; Enforceability. (a) The execution, delivery and performance of this Agreement by IHI has been duly authorized by the board of directors of IHI. Upon an affirmative vote of the holders of 66 2/3% of the outstanding shares of IHI Common Stock present or represented at a meeting of the IHI Stockholders approving this Agreement and the transactions contemplated hereby, no further vote or consent of shareholders or directors of IHI and no further corporate acts or other corporate proceedings are required of IHI for the due and valid authorization, execution, delivery and performance of this Agreement or the consummation of the Merger. (b) This Agreement is the legal, valid and binding obligations of IHI enforceable against it in accordance with its terms, except that enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally and equitable principles which may limit the availability of certain equitable remedies in certain instances. Section 5.4 No Conflict. Except as set forth in Section 5.4 of the IHI Disclosure Schedules, neither the execution, delivery or performance of this Agreement, nor the consummation of the transactions contemplated hereby, will (a) if the requisite IHI stockholder approval set forth in Section 5.3(a) is obtained, conflict with or result in any breach of the provisions of the articles of incorporation or by-laws of IHI, (b) result in the violation or breach of, or constitute (with or without due notice or the lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, or any material license, contract, agreement or other instrument or obligation to which IHI is a party or by which its properties or assets may be bound, except for such violations, breaches or defaults that would not, individually or in the aggregate, have a Material Adverse Effect on IHI, or (c) violate any order, writ, injunction, decree, statute, rule or regulation applicable to IHI or any of its respective properties or assets, except for such violations that, in the aggregate, would not have a Material Adverse Effect on IHI. Section 5.5 Consents. Except as set forth in Section 5.5 of the IHI Disclosure Schedules, no consent, approval, order or authorization of, or declaration, filing or registration with, any Governmental Entity or other Person is required to be obtained or made by IHI in connection with the execution, delivery or performance by IHI of this Agreement or the consummation by IHI of the transactions contemplated hereby except for (a) those required by the HSR Act, if any, and (b) any filings required to be made under the Securities Act in connection with the Agreement, (c) the requisite IHI stockholder approval set forth in Section 5.3(a) and (d) such other consents, approvals, orders, authorizations, declarations, filings or registrations, the failure of which to obtain or make would not have, in the aggregate, a Material Adverse Effect on IHI. Section 5.6 IHI Financial Statements; Undisclosed Liabilities. (a) The IHI Annual Financial Statements have been audited by Deloitte & Touche, LLP, independent public accountants, in accordance with generally accepted auditing standards, have been prepared in accordance with GAAP applied on a basis consistent with prior periods, and present fairly in all material respects the financial position of IHI at such dates and the results of operations and cash flows for the periods then ended. (b) The IHI Interim Financial Statements have been prepared in accordance with GAAP on a basis consistent with the prior periods and reflect all adjustments, consisting only of normal, recurring adjustments, that are necessary for a fair statement in all material respects of the results for the interim period presented therein. Neither IHI nor any of its assets are subject to any liability, commitment, debt or obligation that would be required to be disclosed in financial statements prepared in accordance with GAAP, except (i) as and to the extent reflected on the IHI Interim Financial Statements, or (ii) as may have been incurred or may have arisen since the date of the IHI Interim Financial Statements in the ordinary course of business and that are permitted by this Agreement, or, in the aggregate, would not have a Material Adverse Effect on IHI. Section 5.7 Absence of Certain Changes. Except as set forth in Section 5.7 of the IHI Disclosure Schedules, since March 31, 2001, IHI has operated in the ordinary course of business consistent with past practice and there has been no event or condition of any character that has had, or can reasonably be expected to have, a Material Adverse Effect on IHI. Section 5.8 Material Contracts. (a) Section 5.8 of the IHI Disclosure Schedules contains a list and brief description (including the names of the parties and the date and nature of the agreement) of each Material Contract to which IHI is a party or to which any of its properties is subject. T-3 has been provided a complete and accurate copy of each Material Contract listed on Section 5.8 of the IHI Disclosure Schedules. Each such Material Contract is a legal, valid, binding and enforceable obligation of IHI except to the extent that enforcement may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the enforcement of creditors' rights generally and (ii) general equitable principles. (b) Except as set forth in Section 5.8 of the IHI Disclosure Schedules, IHI is not in material breach of or default (and, to the Knowledge of IHI, no event has occurred which, with due notice or lapse of time or both, would constitute such a breach or default) under any Material Contract, except where any such breaches or defaults, in the aggregate, would not have a Material Adverse Effect on IHI, and no party to any Material Contract has given IHI written notice of or made a claim in writing with respect to any breach or default under any such Material Contract. 14 Page 29 of 65 Section 5.9 Real Property. (a) Section 5.9 of the IHI Disclosure Schedules sets forth a true and complete list of all real property owned in fee simple title by IHI (collectively, the "IHI Owned Properties"). IHI has good and indefeasible title to all IHI Owned Properties. None of the IHI Owned Properties is subject to any Liens, except for (i) Liens that collateralize indebtedness that is reflected in the IHI Interim Financial Statements and (ii) Permitted Liens. (b) Except as set forth in Section 5.9 of the IHI Disclosure Schedules, all improvements on the IHI Owned Properties and the operations therein conducted conform in all material respects to all applicable health, fire, safety, zoning and building laws, ordinances and administrative regulations, except for possible nonconforming uses or violations which do not materially interfere with the present use, operation or maintenance thereof or access thereto by IHI, and, individually or in the aggregate, would not otherwise have a Material Adverse Effect on IHI. The operating condition and state of repair of all buildings, structures, improvements and fixtures on the IHI Owned Properties are sufficient to permit the use and operation of all such buildings, structures, improvements and fixtures as now used or operated by IHI except where the failure to be in such condition would not have a Material Adverse Effect on IHI. Section 5.10 Real Property Leases. (a) Section 5.10 of the IHI Disclosure Schedules sets forth a list of all Leases with respect to all real properties in which IHI has a leasehold, subleasehold, or other occupancy interest (the "IHI Leased Properties"). Complete and accurate copies of all such Leases and all amendments thereto have been provided to T-3. Except as set forth in Section 5.10 of the IHI Disclosure Schedules, all of the Leases for the IHI Leased Properties are valid and effective against IHI in accordance with their respective terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally and (ii) general equitable principles. (b) IHI has not received written notice that it is in material breach of or default (and, to IHI's Knowledge, no event has occurred, that, with due notice or lapse of time or both, would constitute such a breach or default) under any Lease. (c) Except as set forth in Section 5.10 of the IHI Disclosure Schedules, no IHI Leased Property is subject to any material sublease, license or other agreement granting to any Person any right to the use, occupancy or enjoyment of Leased Property or any portion thereof through IHI. Section 5.11 Personal Property. (a) Except as set forth in Section 5.11 of the IHI Disclosure Schedules, IHI has good and indefeasible title to all Personal Property owned by IHI, free and clear of all Liens other than (i) Liens that collateralize indebtedness that is reflected in the IHI Interim Financial Statements and (ii) Permitted Liens. (b) Except as set forth in Section 5.11 of the IHI Disclosure Schedules, IHI holds valid leaseholds in all of the Personal Property leased by it, which leases are enforceable against IHI in accordance with their respective terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally, and (ii) general equitable principles. (c) Except as set forth in Section 5.11 of the IHI Disclosure Schedules, IHI is not in breach of or default (and no event has occurred that, with due notice or lapse of time or both, would constitute such a lapse or default) under any lease of any item of Personal Property leased by it, except for any such breach or default that would not, individually or in the aggregate, have a Material Adverse Effect on IHI. (d) Except as set forth in Section 5.11 of the IHI Disclosure Schedules, the Personal Property now owned, leased or used by IHI is sufficient and adequate to carry on its business as presently conducted and the operating condition and the state of repair thereof is sufficient to permit IHI to carry on its business as presently conducted except where the failure to be in such condition would not have a Material Adverse Effect on IHI. Section 5.12 Compliance with Laws. Except as set forth in Sections 5.12, 5.15, 5.16, 5.20 or 5.21 of the IHI Disclosure Schedules, IHI is not in violation of any Applicable Law, nor is it in default with respect to any order, writ, judgment, award, injunction or other decree of any Governmental Entity applicable to it or any of its respective assets, properties or operations except such violations or defaults that, in the aggregate, would not have a Material Adverse Effect on IHI. Section 5.13 Permits. Except as set forth in Sections 5.13 or 5.15 of the IHI Disclosure Schedules, IHI has all permits, licenses and governmental authorizations that are required for the lease, ownership, occupancy or operation of its properties and assets and the carrying on of its business, except where the failure to have any such permits, licenses or authorizations would not, in the aggregate, have a Material Adverse Effect on IHI. Section 5.14 Litigation. (a) Except as set forth in Section 5.14 of the IHI Disclosure Schedules, there are no Proceedings pending or, to the Knowledge of the IHI, threatened, against IHI (i) for which an indemnification claim has been asserted, (ii) that could reasonably be expected to have a Material Adverse Effect on IHI or (iii) that seeks to prohibit or restrict consummation of the transactions contemplated by this Agreement. (b) Except as set forth in Section 5.14 of the IHI Disclosure Schedules, neither IHI nor any of its assets or properties is subject to any material order, writ, judgment, award, injunction or decree of any Governmental Entity. 15 Page 30 of 65 Section 5.15 Environmental Compliance. (a) Except as set forth in Section 5.15 of the IHI Disclosure Schedules, IHI possesses all material licenses, permits and other approvals and authorizations that are required under, and is and has been in compliance with, all Environmental Laws, including all Environmental Laws governing the generation, use, collection, treatment, storage, transportation, recover, removal, discharge or disposal of hazardous substances or wastes and all Environmental Laws imposing record-keeping, maintenance, testing, inspection, notification and reporting requirements with respect to hazardous substances or wastes except where noncompliance would not, individually or in the aggregate, have a Material Adverse Effect on IHI, and, except as set forth in Section 5.15 of the IHI Disclosure Schedules, to the Knowledge of IHI, there is no condition that would materially interfere with compliance in the future. (b) Except as set forth in Section 5.15 of the IHI Disclosure Schedules, is not subject to any Proceeding pursuant to, nor has it received any notice of any violation of, or claim alleging liability under, any Environmental Laws. To the Knowledge of IHI, no facts or circumstances exist that would reasonably be likely to result in a claim, citation or allegation against IHI for a violation of, or alleging liability under any Environmental Laws, except such violations or liabilities that would not, individually or in the aggregate, have a Material Adverse Effect on IHI. (c) Except as set forth in Section 5.15 of the IHI Disclosure Schedules, to the Knowledge of IHI, there are no underground tanks of any type (including tanks storing gasoline, diesel fuel, oil or other petroleum products) or disposal sites for hazardous substances, hazardous wastes or any other regulated waste, located on or under the IHI Owned Properties or IHI Leased Properties. (d) Except as set forth in Section 5.15 of the IHI Disclosure Schedules, to the Knowledge of IHI, except in the ordinary course of business, and in all cases in material compliance with all Environmental Laws, IHI has not engaged any third party to handle, transport or dispose of hazardous substances or wastes (including for this purpose, gasoline, diesel fuel, oil or other petroleum products, or bilge waste) on its behalf. Section 5.16 ERISA and Related Matters. (a) Section 5.16 of the IHI Disclosure Schedules provides a list of each of the following which IHI or any Subsidiary thereof maintains or contributes to, for the benefit of its current or former employees, officers or directors, or with respect to which IHI or any Subsidiary thereof has or may have any liability (the "IHI Employee Plans") as of the Closing Date: (i) each employee benefit plan (as defined in Section 3(3) of ERISA); and (ii) each written or material unwritten fringe benefit, change in control, stock purchase, personnel, stock option, collective bargaining, bonus, incentive, vacation, severance pay, deferred compensation, executive compensation or supplemental retirement, consulting, employment or other written or unwritten employee benefit plan, agreement, arrangement, program, practice or understanding that is not described in Section 5.16(a)(i). True and complete copies of each of the written IHI Employee Plans and descriptions of material unwritten IHI Employee Plans, current summary plan descriptions, related trusts or other funding arrangements, if applicable, and all amendments thereto, have been or on request will be furnished to T-3. Further, a copy of the most recent determination letter, if applicable, and, for the three most recent years, the Form 5500 and attached schedules, audited financial statements and actuarial valuation reports, if applicable, for each IHI Employee Plan, and all material communications received from or sent to the Internal Revenue Service or the Department of Labor in the last two years regarding any IHI Employee Plan will be provided to T-3 upon request. (b) Except as disclosed in Section 5.16 of the IHI Disclosure Schedules, benefits under any IHI Employee Plan are as represented in said documents and have not been increased or modified (whether written or not written) subsequent to the dates of such documents. IHI has not communicated to any employee or former employee any intention or commitment to modify any IHI Employee Plan or to establish or implement any other employee or retiree benefit or compensation arrangement. (c) Except as disclosed in Section 5.16 of the IHI Disclosure Schedules, neither IHI nor any trade or business under common control with IHI within the meaning of Section 414(b) or (c) of the Code prior to the Closing Date maintains or has ever maintained or become obligated to contribute to any employee benefit plan (i) that is subject to Title IV of ERISA, (ii) to which Section 412 of the Code applies, (iii) that is a Multiemployer Plan, or (iv) in connection with any trust described in Section 501(c)(9) of the Code. IHI has not within the last five years engaged in, and is not a successor corporation to an entity that has engaged in, a transaction described in Section 4069 of ERISA. (d) Except as otherwise set forth in Section 5.16 of the IHI Disclosure Schedules: (i) each IHI Employee Plan has been administered, maintained and operated in all material respects in accordance with the terms thereof and in compliance with its governing documents and Applicable Law (including where applicable, ERISA and the Code); (ii) each of the IHI Employee Plans intended to be qualified under section 401 of the Code (A) satisfies in form the requirements of such section except to the extent amendments are not required by law to be made until a date after the Closing Date, (B) has received a favorable determination letter from the Internal Revenue Service regarding such qualified status, (C) has not, since receipt of the most recent favorable determination letter, been amended, and (D) has not been operated in a way that would adversely affect its qualified status; (iii) no act, omission or transaction has occurred which would result in the imposition on IHI of a breach of fiduciary duty liability or damages under Section 409 of ERISA, a civil penalty assessed pursuant to Subsections (c), (i) or (l) of Section 502 of ERISA or a Tax imposed pursuant to Chapter 43 of Subtitle D of the Code; 16 Page 31 of 65 (iv) neither IHI nor any of its directors, officers or employees has engaged in any transaction with respect to an IHI Employee Plan that could subject IHI to a Tax, penalty or liability for a prohibited transaction, as defined in Section 406 of ERISA or Section 4975 of the Code, and none of the assets of any IHI Employee Plan are invested in employer securities or employer real property; (v) full payment has been made of all amounts which IHI is or has been required to have paid as contributions to or benefits due under any IHI Employee Plan under Applicable Law or under the terms of any such plan or any arrangement and there are no accrued but unpaid contribution or benefit obligations that are not reflected on the IHI Financial Statements; and (vi) there is no Proceeding or other dispute pending or, to the Knowledge of IHI, threatened, and there is no administrative investigation, audit or other administrative proceeding by the Department of Labor, the Pension Benefit Guaranty Corporation, the Internal Revenue Service or other Governmental Entity pending, in progress or, to the Knowledge of IHI, threatened that involves any IHI Employee Plan that could reasonably be expected to result in a material liability to IHI. (e) Except as set forth in Section 5.16 of the IHI Disclosure Schedules, in connection with the consummation of the transactions contemplated in this Agreement, no employee or former employee of IHI will become entitled to any bonus, retirement, severance, job security, change in control or similar benefit or enhanced benefit (including acceleration of an award, vesting or exercise of an incentive award) or any fee or payment of any kind as a result of any of the transactions contemplated hereby, and no such disclosed payment will constitute a parachute payment described in Section 280G of the Code. (f) All group health plans of IHI have at all times fully complied in all material respects with all applicable notification and continuation coverage requirements of Section 4980B(f) of the Code and Section 601 of ERISA. IHI has no current or projected liability in respect of post-retirement or post- employment welfare benefits for retired, current or former employees, or for any stockholder or director who is not an employee, former employee or beneficiary thereof, except to the extent otherwise required by the continuation requirements of Section 4980B(f) of the Code and Section 601 of ERISA. (g) All group health plans (within the meaning of Section 5000(b)(1) of the Code) of IHI have at all times fully complied in all material respects with, and have been maintained and operated in all material respects in accordance with (i) the health care requirements relating to portability, access, and renewability of Sections 9801 through 9803 of the Code and Part 7 of Title I, Subtitle B of ERISA, (ii) the health care requirements relating to the benefits for mothers and newborns under Section 9811 of the Code and Section 711 of ERISA, and (iii) the health care requirements relating to the parity provisions applicable to mental health benefits under Section 9812 of the Code and Section 712 of ERISA, and neither IHI nor any Subsidiary thereof has contributed to a nonconforming group health plan (as defined in Code Section 5000(c)). (h) Except as set forth in Section 5.16 of the IHI Disclosure Schedules, no employee or former employee, officer or director of IHI is or will become entitled to receive any award under IHI's discretionary or other bonus plans except for amounts reflected on the IHI Financial Statements. Section 5.17 Taxes. (a) Except as set forth in Section 5.17 of the IHI Disclosure Schedules, all Returns required to be filed by or on behalf of IHI have been duly filed and such Returns (including all attached statements and schedules) are true, complete and correct in all material respects and all amounts of Taxes shown as due thereon have been paid on a timely basis. (b) Except as set forth in Section 5.17 of the IHI Disclosure Schedules, IHI has withheld and paid over all Taxes required to have been withheld and paid over (including any estimated taxes and Taxes pursuant to Section 1441 or 1442 of the Code or similar provisions under any foreign law), and has complied in all material respects with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with amounts paid or owing to any employee, creditor, independent contractor, shareholder or other third party. (c) Except as set forth in Section 5.17 of the IHI Disclosure Schedules, there are no Liens on any of the assets of IHI with respect to Taxes, other than Permitted Liens. (d) IHI has furnished or made available to T-3 true and complete copies of: (i) all federal and state income and franchise tax returns of IHI for all periods beginning on or after January 1, 1996, and (ii) all material tax audit reports, work papers, statements of deficiencies, closing or other agreements received by IHI or on its behalf relating to Taxes for all periods beginning on or after January 1, 1996. (e) Except as disclosed in Section 5.17 of the IHI Disclosure Schedules: (i) The Returns of IHI have never been audited by a Governmental Entity, nor is there any pending or, to the Knowledge of the IHI, threatened (formally or informally) actions or proceedings for the assessment, collection or refund of Taxes with respect to IHI. (ii) No adjustment relating to such Returns has been proposed formally or informally by any Governmental Entity and, to the Knowledge of IHI, no basis exists for any such adjustment. (iii) Except as reflected in the Returns, no waiver or extension of any statute of limitations is in effect with respect to Taxes or Returns of IHI. (iv) There are no requests for rulings, subpoenas or requests for information pending with respect to Taxes or Returns of IHI. 17 Page 32 of 65 (v) No power of attorney has been granted by IHI with respect to any matter relating to Taxes. (vi) The amount of current liability accruals for Taxes (excluding reserves for deferred taxes), as such accruals are reflected on the consolidated balance sheet of IHI as of March 31, 2001 are, and such accruals reflected on the consolidated balance sheet of IHI as of the Closing Date will be, reasonable and sufficient based on IHI's books and records as of the time of the calculation of such accruals. (f) Except as disclosed in Section 5.17 of the IHI Disclosure Schedules: (i) IHI has not issued or assumed any indebtedness that is subject to section 279(b) of the Code. (ii) IHI has not entered into any compensatory agreements with respect to the performance of services which payment thereunder would result in a nondeductible expense pursuant to Section 280G or 162(m) of the Code or an excise tax to the recipient of such payment pursuant to Section 4999 of the Code. (iii) No election has been made under Section 338 of the Code with respect to IHI and no action has been taken that would result in any income tax liability to either IHI as a result of deemed election within the meaning of Section 338 of the Code. (iv) No consent under Section 341(f) of the Code has been filed with respect to IHI. (v) IHI has not agreed, nor is it required as of the date hereof, to make any adjustment under Code Section 481(a) by reason of a change in accounting method or otherwise. (vi) IHI is not a party to any tax sharing or allocation agreement nor does IHI owe any amount under any tax sharing or allocation agreement. (vii) IHI has no liability for any Taxes of any person other than IHI ((A) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), (B) as a transferee or successor, (C) by contract or (D) otherwise. (g) IHI is not an investment company. For purposes of this representation, the term "investment company" means a regulated investment company, a real estate investment trust, or a corporation 50% or more of the value of whose total assets are stock and securities and 80% or more of the value of whose total assets are assets held for investment. In making the 50% and the 80% determinations under the preceding sentence, stock and securities in any subsidiary corporation will be disregarded and the parent corporation will be deemed to own its ratable share of the subsidiary's assets. (h) IHI is not under the jurisdiction of a court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code. Section 5.18 Customers and Suppliers. Section 5.18 of the IHI Disclosure Schedules sets forth a complete and correct list of all customers whose purchases exceeded 5% of the aggregate net sales of IHI for the fiscal year ended December 31, 2000. Section 5.19 Insurance. (a) Section 5.19 of the IHI Disclosure Schedules sets forth a true and complete list of all policies of protection and indemnity, title insurance, liability and casualty insurance, property insurance, auto insurance, business interruption insurance, tenant's insurance, workers' compensation, life insurance, disability insurance, excess or umbrella insurance, directors' and officers' liability insurance and any other type of insurance insuring the properties, assets, employees or operations of IHI (collectively the "IHI Policies"). IHI has made available to T-3 a true, complete and accurate copy of all IHI Policies. (b) All IHI Policies are in full force and effect except where failures to have any IHI Policies in full force and effect would not in the aggregate, have a Material Adverse Effect on IHI. (c) There is no claim by IHI or any other Person pending under any of the IHI Policies as to which coverage has been denied or disputed by the underwriters or issuers of such IHI Policies. IHI has not received any notice of default, and is not in default, under any provision of the IHI Policies. (d) IHI has not since January 1, 2001 received any written notice from or on behalf of any insurance carrier or other issuer issuing such IHI Policies that insurance rates or other annual premiums or fees in effect as of the date hereof will hereafter be materially increased, that there will be a non-renewal, cancellation or increase in a deductible (or a material increase in premiums in order to maintain an existing deductible) of any of the IHI Policies in effect as of the date hereof, or that material alteration of any equipment to the IHI Owned Properties or the IHI Leased Properties, purchase of additional material equipment, or material modification of any of the methods of doing business of IHI will be required after the date hereof. Section 5.20 Safety and Health. The property and assets of IHI have been and are being operated in compliance in all respects with all Applicable Laws designed to protect safety or health, or both, including without limitation, the Occupational Safety and Health Act, and the regulations promulgated pursuant thereto, except for any violations or deficiency that would not have a Material Adverse Effect on IHI. IHI has not received any written notice of any violations, deficiency, investigation or inquiry from any Governmental Entity, employer or third party under any such law and, to the Knowledge of IHI, no such investigation or inquiry is planned or threatened, which, if adversely determined would, individually or in the aggregate, have a Material Adverse Effect on IHI. 18 Page 33 of 65 Section 5.21 Labor Matters. (a) Set forth in Section 5.21 of the IHI Disclosure Schedules is a list of all: (i) outstanding employment, consulting or management agreements or contracts with officers, directors or employees of IHI (other than those that are terminable on no more than 30 days notice) that provide for the payment of any bonus or commission; (ii) agreements, policies or practices that require IHI to pay termination or severance pay to salaried, non-exempt or hourly employees in excess of 30 days' salary and benefits to any employee upon termination of such employee's employment (other than as required by law); and (iii) collective bargaining agreements or other labor union contracts applicable to persons employed by IHI. IHI has made available to T-3 complete and correct copies of all such employment and labor agreements. Except as set forth in Section 5.21 of the IHI Disclosure Schedules, IHI has not breached or otherwise failed to comply in any material respect with any provisions of any employment or labor agreement, and there are no grievances outstanding thereunder. (b) Except as set forth in Section 5.21 of the IHI Disclosure Schedules: (i) IHI is in compliance in all material respects with all Applicable Laws relating to employment and employment practices, wages, hours, and terms and conditions of employment; (ii) there is no unfair labor practice charge or complaint against IHI pending before any Governmental Entity; (iii) there is no labor strike, material slowdown or material work stoppage or lockout actually pending or, to the Knowledge of IHI threatened, against or affecting IHI; (iv) there is no representation claim or petition pending before any Governmental Entity; (v) there are no charges with respect to or relating to IHI pending before any Governmental Entity responsible for the prevention of unlawful employment practices; and (vi) IHI has not had formal notice from any Governmental Entity responsible for the enforcement of labor or employment laws of an intention to conduct an investigation of IHI and, to the Knowledge of IHI, no such investigation is in progress. Section 5.22 Transactions with Certain Persons. Except as set forth in Section 5.22 of the Disclosure Schedules, no director, officer or employee of IHI or any of its respective Affiliates is presently a party to any transaction with IHI, including any contract, agreement or other arrangement providing for the furnishing of services by or the rental of real or personal property from any such Person or from any of its Affiliates. Section 5.23 Propriety of Past Payments. Neither IHI or any of its Subsidiaries nor any director, officer, employee or agent of IHI or any of its Subsidiaries has (a) used any funds for unlawful contributions, gifts, entertainment or other unlawful payments or expenses relating to political activity or (b) made any bribe, rebate, payoff, influence payment, kick-back or other unlawful payment that is in violation of Applicable Law. Section 5.24 Intellectual Property. IHI either owns or has valid licenses to use all patents, copyrights, trademarks, software, databases, and other technical information used in its business as presently conducted, subject to limitations contained in the agreements governing the use of same, which limitations are customary for companies engaged in businesses similar to IHI. IHI is in compliance with all such licenses and agreements except where any noncompliance would not, in the aggregate, have a Material Adverse Effect on IHI and there are no pending or, to the Knowledge of IHI, threatened Proceedings challenging or questioning the validity or effectiveness of any license or agreement relating to such property or the right of IHI to use, copy, modify or distribute the same. Section 5.25 Director and Officer Indemnification. The directors, officers and employees of IHI are not entitled to indemnification by IHI except to the extent that indemnification rights are provided for generally by Applicable Law or IHI's charter, by-laws or directors' and officers' liability insurance policies as described in Section 5.19 of the IHI Disclosure Schedules or in employment agreements described in Section 5.21 of the IHI Disclosure Schedules, and there are no pending claims for indemnification by any such director, officer or employee. Section 5.26 Brokers' and Finders' Fee. Except for as set forth in Section 5.27 of the IHI Disclosure Schedule, no agent, broker, person or firm acting on behalf of IHI is or will be entitled to any commission or brokers' or finders' fees payable by IHI in connection with any of the transactions contemplated herein. Section 5.27 SEC Filings; Financial Statements. Except as set forth in Section 5.27 of the IHI Disclosure Schedule, since January 1, 1999, IHI has timely filed all reports, registration statements and other filings, together with any amendments required to be made with respect thereto, that it has been required to file with the SEC under the Securities Act and the Exchange Act. All reports, registration statements and other filings (including all notes, exhibits and schedules thereto and documents incorporated by reference therein) filed by IHI with the SEC since January 1, 1999 through the date of this Agreement, together with any amendments thereto, are sometimes collectively referred to as the "IHI SEC Filings." As of the respective dates of their filing with the SEC, the IHI SEC Filings complied in all material respects with the Securities Act or the Exchange Act, as applicable, and the rules and regulations of the SEC thereunder, and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. ARTICLE 6. COVENANTS Section 6.1 Legal Requirements. Subject to the conditions set forth in Section 7 and to the other terms and provisions of this Agreement, each of the parties to this Agreement agrees to take, or cause to be taken, all reasonable actions necessary to comply promptly with all legal requirements applicable to it with respect to the transactions contemplated by this Agreement and will promptly cooperate with and furnish information to each other in connection with any such requirements imposed upon any of them. Without limiting the preceding sentence, each of IHI, T-3 and the Fund agrees to take all reasonable actions necessary to obtain, and cooperate with each other in obtaining, any consent, authorization, order or approval of, or any exemption by, any Governmental Entity or other public or private party, required to be obtained or made by it or the taking of any action contemplated by this Agreement. In addition IHI hereby agrees and covenants to take all commercially reasonable actions necessary to maintain its listing of the IHI Common Stock on The Nasdaq National Market, and, if requested by IHI, T-3 hereby agrees and covenants to reasonably cooperate and participate in such effort. 19 Page 34 of 65 Section 6.2 Stockholder Approvals. (a) As soon as practicable following the date of this Agreement, IHI shall convene a meeting of its shareholders (the "IHI Meeting") for the purposes of: (i) approving this Agreement, including the plan of merger for the Merger, and (ii) approving the Reincorporation of the Surviving Corporation, including the plan of merger for the Reincorporation. Subject to the terms and conditions of Section 6.13, the Board of Directors of IHI shall (i) recommend at the IHI Meeting that the shareholders of IHI adopt and approve all such matters; (ii) use its reasonable efforts to solicit from the shareholders of IHI proxies in favor of such adoption and approval; and (iii) take all other actions reasonably necessary to secure a vote of its shareholders in favor of adoption and approval of all such other matters. (b) As soon as practicable after the date of this Agreement, T-3 shall submit this Agreement for approval by the T-3 Stockholders at a special meeting of stockholders. Subject to the terms and conditions of Section 6.13 hereof, the Board of Directors of T-3 shall recommend that the T-3 Stockholders approve the adoption of this Agreement and take all other actions reasonably necessary to secure a vote of the T-3 Stockholders in favor of adoption of this Agreement. (c) In connection with the stockholder approvals provided for herein, each party agrees to cooperate with the other and take all actions reasonably necessary or appropriate to obtain such approvals. Section 6.3 Joint Proxy Statement. As promptly as reasonably practicable after the date hereof, IHI will prepare and file with the SEC in accordance with the Exchange Act, a joint proxy statement (the "Joint Proxy Statement"), relating to approval and adoption of this Agreement and the transactions contemplated hereby by the stockholders of IHI and T-3. The parties will take such actions as may be reasonably required to cause the Joint Proxy Statement to be cleared by the SEC for mailing to the IHI stockholders as promptly as practicable after such filing and to cause the shares of IHI Common Stock issuable in connection with the Merger to be exempt from registration under applicable federal and state securities laws. Each of the parties hereto shall furnish all information concerning itself which is required or customary for inclusion in the Joint Proxy Statement. As soon as reasonably practicable after the Joint Proxy Statement has been cleared by the SEC, IHI and T-3 shall promptly mail the Joint Proxy Statement to each of their respective stockholders. Section 6.4 Registration Rights. Upon the Closing, IHI and each of the former T-3 stockholders will enter into a registration rights agreement (the "Registration Rights Agreement") in the form attached hereto as Appendix IV. Section 6.5 Equity Investments in T-3. Immediately prior to the closing of the Merger, the parties agree that the Fund shall make an additional equity investment in the amount of $46,800,000 to acquire additional shares of T-3 Common Stock at a price per share of $116.28 (the "Equity Investment"). Section 6.6 Financing. (a) Prior to the Closing, IHI shall use its commercially reasonable efforts to obtain a new credit facility, which shall be in a form reasonably satisfactory to T-3 and the Fund, containing usual and customary covenants, and on terms that are mutually agreed upon by IHI and T-3, in a principal amount (the "Financing") equal to at least $80 million, and in any case, an amount that together with the Equity Investment, will produce proceeds sufficient to repay or refinance the IHI Senior Secured Credit Facility and the EnSerCo Loan. (b) T-3 agrees to provide, and will cause their respective officers, employees and advisors to provide, all reasonable cooperation in connection with the arrangement of Financing, including (i) providing prompt assistance in the preparation of any offering or information memorandum and other offering materials for the Financing, (ii) providing all information reasonably deemed necessary by any syndication agent to complete the Financing, (iii) assisting the providers of the Financing in connection with their confirmation of the accuracy and completeness of the materials and information referenced in clauses (i) and (ii) above, and (iii) causing T-3's senior management to participate in meetings and conference calls with potential participants in the Financing at such times and places as any syndication agent for the Financing may reasonably request. (c) Notwithstanding any other term or provision hereof, in the event IHI is unable to obtain the Financing prior to the Closing Date, the Fund agrees to provide a bridge loan at Closing in an amount sufficient to repay or refinance the indebtedness referred to in Section 6.7 hereof. The bridge financing will be on terms substantially similar to those available in the credit markets generally for similar financings, but in any event will be on terms no less favorable. Such bridge financing, if required, must be on terms reasonably satisfactory to IHI, T-3 and the Fund. Section 6.7 Repayment of Certain Indebtedness. At Closing, IHI shall repay in full by wire transfer of immediately available funds the outstanding indebtedness balance under the IHI Senior Secured Credit Facility and all amounts owed to EnSerCo, LLC under the Loan Agreement dated June 30, 1998 (the "EnSerCo Loan"). T-3 and the Fund acknowledge that in connection with the consent of EnSerCo, LLC to the transactions, IHI has paid EnSerCo, LLC the fees set forth in Section 6.7 of the IHI Disclosure Schedule. Subject to IHI's obtaining the Financing pursuant to Section 6.6(a) or the bridge financing by the Fund pursuant to Section 6.6(c) at or prior to Closing, IHI shall also repay at Closing all other outstanding indebtedness (together with any applicable premium) of IHI specified in Section 6.7 of the IHI Disclosure Schedules, together with all accrued and unpaid interest thereon, with the proceeds of such financings. Section 6.8 Hart-Scott-Rodino. (a) T-3, the Fund and IHI shall cooperate in good faith and take all actions reasonably necessary or appropriate to file, and expeditiously and diligently prosecute to a favorable conclusion, the HSR Forms required, if any, to be filed by each of them in connection herewith with the Federal Trade Commission and the Department of Justice pursuant to the HSR Act. 20 Page 35 of 65 (b) T-3, the Fund and IHI agree that from the date of this Agreement through the Effective Time, neither party nor any of its subsidiaries or Affiliates shall enter into any transaction with a third party or take any other action that would have the effect of impeding the ability to obtain HSR Act clearance, if required, for the transactions contemplated by this Agreement. Section 6.9 Access to Properties and Records. Until the Closing Date, each of IHI and T-3 shall, and shall cause each of its Subsidiaries to, allow the other party and its authorized representatives full access, during normal business hours and on reasonable notice, to all of its properties, offices, vehicles, equipment, inventory and other assets, documents, files, books and records, in order to allow the other party a full opportunity to make such investigation and inspection as the other party desires of its business and assets. Each of IHI and T-3 shall, and shall cause each of its Subsidiaries to, (a) use its reasonable best efforts to cause its employees, counsel and independent certified public accountants to be available upon reasonable notice to answer questions of the other party's representatives concerning its business and affairs and (b) use its reasonable best efforts to cause them to make available all relevant books and records in connection with such inspection and examination, including without limitation work papers for all audits and reviews of its financial statements. Section 6.10 Consultation and Reporting. During the period from the date of this Agreement to the Closing Date, each of T-3 and IHI will, subject to any applicable legal or contractual restrictions, confer on a regular and frequent basis with the other to report material operational matters and to report on the general status of ongoing operations. Each of T-3 and IHI will notify the other of any unexpected emergency or other change in the normal course of its business or in the operation of its properties and of any governmental complaints, investigations, adjudicatory proceedings or hearings (or communications indicating that the same may be contemplated) and will keep the other fully informed of such events and permit its representatives prompt access to all materials prepared by or on behalf of such party or served on them, in connection therewith. Section 6.11 Conduct of Business By Both Parties Prior to the Closing Date. During the period from the date of this Agreement to Closing Date, T-3 and IHI shall each use its reasonable best efforts to preserve the goodwill of suppliers, customers and others having business relations with it and its Subsidiaries and to do nothing knowingly to impair its ability to keep and preserve its business as it exists on the date of this Agreement. Without limiting the generality of the foregoing, except as otherwise specifically provided in this Agreement or as set forth in Section 6.11 of the IHI Disclosure Schedule, during the period from the date of this Agreement to the Closing Date neither IHI (and IHI shall cause its Subsidiaries not to) nor T-3 shall (and T-3 shall cause its Subsidiaries not to), without the prior written consent of the other: (a) declare, set aside, increase or pay any dividend (including any stock dividends), or declare or make any distribution on, or directly or indirectly combine, redeem, reclassify, purchase, or otherwise acquire, any shares of its capital stock; (b) amend its certificate or articles of incorporation or by-laws, or adopt or amend any resolution or agreement concerning indemnification of its directors, officers, employees or agents; (c) commit any act which act would cause any representation or warranty contained in this Agreement to become untrue in any material respect, as if each such representation and warranty were continuously made from and after the date hereof; (d) violate any Applicable Law that would have a Material Adverse Effect on such party; (e) fail to maintain its books, accounts and records in the usual manner on a basis consistent with that previously employed in all material respects; (f) fail to pay, or to make adequate provision in all material respects for the payment of, all Taxes, interest payments and penalties due and payable (for all periods up to the Closing Date) to any city, parish, state, the United States, foreign or any other taxing authority, except those being contested in good faith by appropriate proceedings and for which sufficient reserves have been established, or make any elections with respect to Taxes; (g) make any material change in the conduct of its businesses and operations or enter into any transaction other than in the ordinary course of business consistent with past practices; (h) except for the Equity Investment, the Discretionary Equity Investment, the extension of options to purchase IHI common stock held by employees of A&B Bolt, and the acceleration of options to purchase IHI common stock upon a change of control as provided in the IHI's existing stock option plan, issue any additional shares of capital stock or equity securities or grant any option, warrant or right to acquire any capital stock or equity securities; issue any security convertible into or exchangeable for its capital stock; alter any material term of any of its outstanding securities or make any change in its outstanding shares of capital stock or other ownership interests or its capitalization, whether by reason of exchange or readjustment of shares, stock dividend or otherwise; provided, however, that IHI may issue shares of IHI Common Stock pursuant to the obligations set forth in Section 5.2 of the IHI Disclosure Schedules, and T-3 may issue shares of T-3 Common Stock pursuant to obligations set forth in Section 4.2 of the T-3 Disclosure Schedules; (i) except for the Financing and as otherwise provided herein, incur, assume or guarantee any indebtedness for borrowed money or any other obligation of any other Person, issue any notes, bonds, debentures or other corporate debt securities or grant any option, warrant or right to purchase any thereof other than for working capital under an existing line of credit and to fund capital expenditures disclosed in such party's Disclosure Schedules; (j) make any sale, assignment, transfer, abandonment or other conveyance of any of its material assets or any part thereof, except for the IHI Dispositions and transactions pursuant to existing contracts set forth in such party's Disclosure Schedules and dispositions of worn-out or obsolete equipment for fair or reasonable value in the ordinary course of business consistent with past practices; 21 Page 36 of 65 (k) subject any of its assets or properties to a Lien other than a Permitted Lien; (l) make or commit to make capital expenditures that in the aggregate are in excess of $150,000 except as described in the capital budget set forth in Section 6.11 of either party's Disclosure Schedules; (m) except as described in Section 6.12 of either party's Disclosure Schedules, otherwise provided herein, make any loan, advance or capital contribution to or investment in, or sell, transfer or lease any properties or assets to, or enter into any agreement or arrangement with, any of its Affiliates other than in the ordinary course of business and for fair value; (n) make any change in any method of accounting or accounting principle, method, estimate or practice except for any such change required by reason of a concurrent change required by generally accepted accounting principles; (o) enter into or modify any employee benefit plans any employment, change in control, severance or similar agreement or arrangement with any director, officer or employee, or grant any increase in the rate of wages, salaries, bonuses or other compensation or benefits of any director, officer or employee other than increases in wages, salaries, bonuses, compensation or benefits (i) required by contracts, agreements, policies or collective bargaining agreements set forth in Sections 4.16 and 4.21 of the T-3 Disclosure Schedules with respect to T-3, and Sections 5.16 and 5.21 of the IHI Disclosure Schedules with respect to IHI, or (ii) to employees below the management level made in the ordinary course of business; (p) enter into any new line of business; (q) make any Tax election that is inconsistent with any corresponding election made on a prior Return or settle or compromise any Tax liability for an amount in excess of the liability therefor that is reflected on the T-3 Financial Statements or the IHI Financial Statements, as the case may be; or (r) authorize any of, or agree or commit to do any of, the foregoing actions. Section 6.12 Public Statements. Prior to the Closing Date, none of the parties to this Agreement shall (and each party shall use its reasonable best efforts so that none of its advisors, officers, directors or employees shall) except with the prior consent of the other parties, which consent shall not be unreasonably withheld, publicize, announce or describe to any third person (except their respective advisors and employees) the execution or terms of this Agreement, the parties hereto or the transactions contemplated hereby, except that IHI may make such disclosures and announcements as may be necessary or advisable under applicable securities laws after giving reasonable prior notice, if practicable, to T-3 of any such disclosure or announcement and allowing T-3 to comment on the same. Section 6.13 No Solicitation. (a) None of IHI and its Subsidiaries, or T-3 and its Subsidiaries will (nor will they permit any of their respective Affiliates, officers, directors, representatives, or agents to), prior to the earlier of the Closing Date or the termination of this Agreement pursuant to Section 8.1, directly or indirectly, (i) solicit, initiate or encourage the submission of any proposal for a Sale Transaction, (ii) enter into any agreement with respect to any Sale Transaction or give any approval with respect to any Sale Transaction, or (iii) participate in any discussions or negotiations regarding, or furnish to any Person any information with respect to or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Sale Transaction or any proposal for a Sale Transaction. Notwithstanding the preceding sentence, if at any time the Board of Directors of IHI or T-3 determines in good faith, (i) based on the advice of outside counsel, that it is advisable to do so in order to comply with its fiduciary duties to its stockholders under Applicable Law and (ii) after consultation with its financial advisors, that the Sales Transaction, if completed, would result in a transaction superior to the transaction contemplated by this Agreement, taking into account, among other things, the long term interests of IHI or T-3, as applicable, and their stockholders (a "Superior Proposal"), IHI or T-3 (and their respective officers, directors, representatives or agents) may in response to a written proposal for a Sale Transaction not solicited on or after the date hereof, subject to compliance with Section 6.13(c), (A) furnish information with respect to itself or a Subsidiary pursuant to a customary confidentiality agreement to any Person making such proposal, and (B) participate in negotiations regarding such proposal. Without limiting the foregoing, it is understood that any violations of the restrictions set forth in this Section 6.13(a) by any of a party's officers, directors, representatives, agents, Affiliates or Subsidiaries, whether or not such Person is purporting to act on behalf of such party or any of its Subsidiaries or otherwise, shall be deemed to be a breach of this Section 6.13(a) by such party. (b) Neither of the Boards of Directors of IHI or T-3 shall (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to the approval (including, without limitation, the Board of Directors' resolution providing for such approval) of this Agreement or the transactions contemplated hereby or (ii) approve or recommend, or propose to approve or recommend, any Sale Transaction, except in the event the Board of Directors of a party determines in good faith, (x) based on the advice of outside counsel, that it is advisable to do so in order to comply with its fiduciary duties to its stockholders under Applicable Law and (y) after consultation with its financial advisors, that the Sale Transaction is a Superior Proposal, and then only at or after the termination of this Agreement pursuant to Section 8.1(f) or 8.1(g). (c) In addition to the obligations set forth in subsections (a) and (b) of this Section 6.13, each party promptly shall advise the others orally and in writing of any request for information or of any proposed Sale Transaction or any inquiry with respect to or which could reasonably be expected to lead to any proposed Sale Transaction, the identity of the Person making any such request, proposed Sale Transaction or inquiry and the terms and conditions thereof. Each party will keep the others fully informed of the status and details (including amendments or proposed amendments) of any such request, proposed Sale Transaction or inquiry, and each party shall keep confidential such information provided to it by another party pursuant to this Section 6.13(c), subject to any judicial or other legal order, directions or obligations to disclose such information. 22 Page 37 of 65 (d) Nothing contained in this Section 6.13 shall prohibit IHI from taking and disclosing to its stockholders a position contemplated by Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act. Section 6.14 Update Information. After the date hereof, each party hereto will promptly disclose to the other any event or occurrence which causes, or with notice or the passage of time would cause, its representations and warranties to be incomplete or no longer correct; provided, however, that except as contemplated by Section 6.5, relative to Section 3.1 of the T-3 Disclosure Schedules, none of such disclosures will be deemed to modify, amend, or supplement the representations and warranties of such party, unless the other party consents to such modification, amendment, or supplement in writing. Each party shall promptly advise the other party orally and in writing of any change or event having or which insofar as reasonably can be foreseen would have, a Material Adverse Effect on the party providing such notification. Section 6.15 Maintenance of Policies. IHI and T-3 shall maintain the coverage under the IHI Policies and the T-3 Policies respectively, in full force and effect until the Closing Date. Section 6.16 Director's and Officer's Indemnification and Insurance. (a) For four years after the Effective Time, IHI shall indemnify and hold harmless the present and former officers and directors of T-3 and IHI in respect of acts or omissions prior to the Effective Time to the fullest extent provided under T-3's Certificate of Incorporation and IHI's articles of incorporation, as applicable, in effect on the date hereof and pursuant to any agreements set forth in Section 4.21 of the Disclosure Schedule and Section 5.21 of the IHI Disclosure Schedule; provided that such indemnification shall be subject to any limitation imposed from time to time under Applicable Law. (b) The Surviving Corporation shall pay the insurance premiums required for any extension of T-3's and IHI's officers' and directors' liability insurance policies that are in force at the date hereof following the Closing Date for a "discovery" period elected under such insurance policy covering the officers and directors of T-3 (the "Extended Coverage Policy") for a period of four years or shall provide substantially similar coverage for the same period under IHI's directors' and officers' insurance policy for all directors and officers of T-3 and IHI. Section 6.17 Nasdaq Application. IHI shall apply for initial listing of the common stock of the Reincorporated Corporation on the Nasdaq National Market and IHI shall remit the fees required to be paid in connection therewith. IHI and T-3 shall use their commercially reasonable efforts to obtain approval for the initial listing of the common stock of the Reincorporated Corporation on the Nasdaq National Market. Section 6.18 IHI Employee Benefits. As soon as practicable after the Effective Time, employees of the Surviving Corporation and its Subsidiaries shall be entitled to participate in all employee benefit plans of the Surviving Corporation, which shall be the employee benefit plans maintained by T-3 as of the Effective Time, including without limitation, the T-3 401(k) plan, in respect of their service after the Effective Time to the same extent that employees of T-3 or IHI who are employed in comparable positions are entitled to participate. To the extent permitted under Applicable Law as determined by legal counsel for the Surviving Corporation, the 401(k) plan maintained by IHI as of the Effective Time shall be merged into the 401(k) plan maintained by T-3, with the T-3 401(k) plan being the surviving plan. IHI and T-3 further agree that any such employees shall be credited for their service with IHI, T-3 and their Subsidiaries, as the case may be, for purposes of eligibility, benefit entitlement and vesting in the employee benefit plans provided by the Surviving Corporation, but not for purposes of any executive compensation plan or program. No benefits of any employee under the Surviving Corporation's medical benefit plan shall be subject to any exclusions for any pre-existing conditions (to the extent such exclusions did not apply under to such employee under IHI's, T-3's or their Subsidiaries' existing medical benefit plan, as applicable), and credit shall be received for any deductibles or out-of-pocket amounts previously paid during the year. Nothing herein shall be construed to limit in any way the right of the Surviving Corporation to amend or terminate any employee benefit plan or other benefit program at any time in its discretion. Section 6.19 Agreements with Respect to IHI Dispositions. (a) IHI and/or one or more of its Affiliates shall have entered into definitive agreements (the "Disposition Agreements") with respect to each of the IHI Dispositions not later than November 15, 2001. The IHI Dispositions are set forth on Schedule 6.19 of the IHI Disclosure Schedules. (b) The Disposition Agreements may take the form of a merger, sale of stock or sale of assets or such other form as may be reasonably acceptable to T-3 and IHI. No Disposition Agreement shall be entered into without the written consent of T-3, which consent shall not be unreasonably withheld; however, T-3 shall have no obligation to consent unless the Disposition Agreements provide for an aggregate Net Proceeds of at least $33.3 million, of which not greater than $6.1 million shall be represented by seller financing or other deferred payment obligations to IHI or its Subsidiaries with respect to non-competition agreements, consulting arrangements, earnout payments or other similar arrangements. Notwithstanding the foregoing, T-3 has consented to two of the Disposition Agreements as indicated in Section 6.19 of the IHI Disclosure Schedules. IHI agrees to keep T-3 informed regarding the status of all negotiations relating to the IHI Dispositions and allow T-3 to participate (with such legal or other advisors as it deems appropriate), at its expense, in discussions and negotiations with the proposed purchasers. Notwithstanding the foregoing, IHI shall remain solely responsible for the IHI Dispositions, and T-3 shall have no authority to negotiate such transactions or enter into any agreements on IHI's part. (c) All proceeds from the IHI Dispositions shall be used (i) first to repay any capitalized leases that are owed by the entity being sold, or borrowed money indebtedness secured by the assets of the entity being sold in order of priority of their secured position and (ii) second to repay a portion of IHI's Senior Secured Credit Facility satisfactory to IHI's senior secured lenders. 23 Page 38 of 65 (d) The "Net Proceeds" from the IHI Dispositions shall be determined as follows: (i) If the IHI Disposition results from the Sale of Stock, the amount of the consideration received by IHI or its Subsidiaries from such sale, less all expenses incurred or estimated to be incurred by IHI or its Subsidiaries in connection with the Sale of Stock, including all Taxes resulting therefrom, fees of counsel, accountants and other consultants, fees of any investment banking firm acting as financial advisor to IHI or its Subsidiaries, and any brokerage or finder's fee payable in connection with the Sale of Stock. (ii) If the IHI Disposition results from the Sale of Assets, the amount of the consideration received by IHI or its Subsidiaries for the assets sold by it in the Sale of Assets (exclusive of any IHI or Subsidiary liabilities assumed by the purchaser of such assets), less all expenses incurred or estimated to be incurred by IHI or its Subsidiaries in connection with the Sale of Assets, including all Taxes resulting therefrom, fees of counsel, accountants and other consultants, fees of any investment banking firm acting as financial advisor to IHI or its Subsidiaries, and any brokerage or finder's fee payable in connection with the Sale of Assets. Section 6.20 Resignations. All of the directors of IHI shall provide IHI with written resignations with respect to their director positions at IHI to be effective immediately prior to the Effective Time. ARTICLE 7. CLOSING CONDITIONS Section 7.1 Conditions Applicable to all Parties. The respective obligations of each party to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction or, where permissible, waiver by such party of the following conditions at or prior to the Closing Date: (a) Other than the Agreed TRO, no statute, rule, regulation, executive order, decree, preliminary or permanent injunction or restraining order shall have been enacted, entered, promulgated or enforced by any court of competent jurisdiction or other Governmental Entity which prohibits or restricts the consummation of the transactions contemplated by this Agreement, and no Proceeding shall have been commenced and be pending which seeks to prohibit or restrict the consummation of the transactions contemplated by this Agreement. (b) The IHI Stockholders shall have met and approved this Agreement, including the plan of merger for the Merger, and the Reincorporation Merger Agreement. (c) The T-3 Stockholders shall have approved this Agreement. (d) The waiting period applicable to the consummation of the Merger under the HSR Act, if any, shall have expired or been terminated. (e) All consents and approvals of third parties necessary for consummation of the transactions contemplated by this Agreement shall have been obtained. (f) The IHI Dispositions shall have been completed in accordance with Section 6.19 hereof. (g) The Reincorporated Company shall meet the initial listing requirements (on a pro forma basis) for the shares of its common stock to be approved for quotation on the Nasdaq National Market based on the average closing price of IHI common stock on the Nasdaq Stock Market for the ten trading days immediately prior to the Closing Date or the shares of common stock of the Reincorporated Company shall have been conditionally approved for listing on the Nasdaq National Market subject to the requirement of meeting the $5 minimum bid price requirement. Section 7.2 Conditions to Obligations of IHI. The obligations of IHI to consummate the transactions contemplated by this Agreement are subject to the satisfaction of the following conditions unless waived by IHI: (a) Each of the representations and warranties of T-3 set forth in this Agreement, without regard to qualifications for materiality or Material Adverse Effect, shall be true and correct in all material respects, as of the date of this Agreement and as of the Closing Date (except to the extent any such representation or warranty expressly speaks as of an earlier date, which representations and warranties shall be true and correct in all material respects as of such earlier date) as though made on and as of the Closing Date. T-3 and the Fund shall have performed in all material respects all obligations required to be performed by them under this Agreement at or prior to the Closing Date. (b) IHI shall have received an opinion of Porter & Hedges, L.L.P., counsel for T-3, substantially in the form attached hereto as Exhibit D. (c) Eligible holders of shares of not more than 2.5% of the outstanding T-3 Common Stock shall have delivered a written demand for appraisal of such shares in the manner provided in the DGCL. (d) IHI shall have received a favorable opinion from Raymond James for inclusion in the Joint Proxy Statement as to the fairness, from a financial point of view, to the IHI Stockholders of the consideration paid to the T-3 Stockholders, which opinion shall not have been withdrawn at the Effective Date. (e) there shall have occurred no Material Adverse Effect with respect to T-3 since the date of this Agreement. Section 7.3 Conditions to Obligations of T-3. The obligations of T-3 to consummate the transactions contemplated by this Agreement are subject to the satisfaction for the following conditions, unless waived by T-3: 24 Page 39 of 65 (a) Each of the representations and warranties of IHI set forth in this Agreement, without regard to qualifications or materiality or Material Adverse Effect, shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date (except to the extent any such representation or warranty expressly speaks of an earlier date, which representations and warranties shall be true and correct in all material respects as of such earlier date) as though made on and as of the Closing Date. IHI shall have performed in all material respects all obligations required to be performed by it under this Agreement on or prior to the Closing Date. (b) T-3 shall have received the legal opinions of LeBoeuf, Lamb, Greene & MacRae, L.L.P., counsel for IHI, set forth in Exhibit E hereto in a form reasonably acceptable to T-3. (c) T-3 shall have received an opinion from Porter & Hedges, L.L.P., counsel for T-3, to the effect that (i) the merger of T-3 into IHI as provided in this Agreement will constitute a reorganization within the meaning of Section 368(a)(1)(A) of the Code, and T-3 and IHI will be parties to the reorganization; and (ii) no gain or loss will be recognized as a consequence of the Merger to any T-3 Stockholder who exchanges all of their T-3 Common Stock for IHI Common Stock, except to the extent of any cash received in lieu of fractional share interests. (d) IHI or its Subsidiaries shall have entered in employment agreements in a form reasonable satisfactory to T-3 with the persons listed in Section 7.3 of the T-3 Disclosure Schedules. (e) Each member of the board of directors of IHI shall have resigned effective immediately preceding the Effective Time. (f) All agreements among the IHI Stockholders regarding the election of directors and/or the voting of shares of IHI Common Stock shall have been terminated. (g) there shall have occurred no Material Adverse Effect with respect to IHI since the date of this Agreement. Section 7.4 Additional Closing Condition. No Merger shall occur, unless all principal, interest, fees and other amounts due under the IHI Senior Secured Credit Facility and the EnSerCo Loan shall be paid in full. IHI and T-3 agree that as of March 31, 2001, the principal amount due under the EnSerCo Loan is $15 million, the interest due and payable under the EnSerCo Loan is $3,473,753.42, and that interest continues to accrue under the EnSerCo Loan at the rate of 18% per annum (as calculated under the terms of the EnSerCo Loan). ARTICLE 8. TERMINATION AND AMENDMENT Section 8.1 Termination. This Agreement may be terminated and abandoned at any time prior to the Closing Date: (a) by mutual consent of IHI and T-3; (b) by IHI, if there shall have been a breach of any representation, warranty, covenant or agreement on the part of T-3 such that the condition set forth in Section 7.2(a) would not be satisfied and such breach shall not have been cured prior to the earlier of (i) 30 days following notice of such breach and (ii) December 31, 2001; provided, however, the right to terminate this Agreement pursuant to this Section 8.1(b) shall not be available to IHI if it, at such time is in material breach of any representation, warranty, covenant or agreement set forth in this Agreement such that the condition set forth in Section 7.3 (a) would not be satisfied; (c) by T-3, if there shall have been a breach of any representation, warranty, covenant or agreement on the part of IHI such that the condition set forth in Section 7.3(a) would not be satisfied and such breach shall not have been cured prior to the earlier of (i) 30 days following notice of such breach and (ii) December 31, 2001; provided, however, the right to terminate this Agreement pursuant to this Section 8.1(c) shall not be available to T-3 if it, at such time is in material breach of any representation, warranty, covenant or agreement set forth in this Agreement such that the condition set forth in Section 7.2(a) would not be satisfied; (d) by either IHI on the one hand, or T-3 on the other hand, if any injunction other than the Agreed TRO or other order of a court or other competent Governmental Entity preventing the transactions contemplated by this agreement shall be pending; (e) by either IHI on the one hand, or T-3 on the other hand, if the transactions contemplated by this Agreement shall not have been consummated on or before December 31, 2001; provided, that the right to terminate this Agreement under this Section 8.1(e) shall not be available to any party whose breach of its representations and warranties in this Agreement or whose failure to perform any of its covenants and agreements under this Agreement has resulted in the failure of the transactions contemplated by this agreement to occur on or before such date; (f) by IHI, if (i) the Board of Directors of T-3 withdraws, modifies or changes its recommendation of this Agreement or the Merger or shall have resolved to do any of the foregoing or the Board of Directors of T-3 shall have recommended to the stockholders of T-3 any proposed Sale Transaction or resolved to do so; (ii) a tender offer or exchange offer for 30% or more of the outstanding shares of T-3 Common Stock is commenced and the Board of Directors of T-3, within 10 Business Days after such tender offer or exchange offer is so commenced, either fails to recommend against acceptance of such tender or exchange offer by its stockholders or takes no position with respect to the acceptance of such tender or exchange offer by its stockholders; or (iii) except as contemplated by this Agreement, any person shall have acquired beneficial ownership or the right to acquire beneficial ownership of, or any "group" (as such term is defined under Section 13(d) of the Exchange Act and the regulations promulgated thereunder), shall have been formed which beneficially owns, or has the right to acquire beneficial ownership of, 30% or more of the then outstanding shares of T-3 Common Stock; 25 Page 40 of 65 (g) by T-3 if (i) the Board of Directors of IHI withdraws, modifies or changes its recommendation of this Agreement or the Merger or shall have resolved to do any of the foregoing or the Board of Directors of IHI shall have recommended to the stockholders of IHI any proposed Sale Transaction or resolved to do so; (ii) a tender offer or exchange offer for 30% or more of the outstanding shares of IHI Common Stock is commenced and the Board of Directors of IHI, within 10 Business Days after such tender offer or exchange offer is so commenced, either fails to recommend against acceptance of such tender or exchange offer by its stockholders or takes no position with respect to the acceptance or such tender or exchange offer by its stockholders; or (iii) as contemplated by this Agreement, any person shall have acquired beneficial ownership or the right to acquire beneficial ownership of, or any "group" (as such term is defined under Section 13(d) of the Exchange Act and the regulations promulgated thereunder), shall have been formed which beneficially owns, or has the right to acquire beneficial ownership of, 30% or more of the then outstanding shares of IHI Common Stock; (h) by either IHI on the one hand, or T-3 on the other hand, if (i) T-3 accepts a proposed Sale Transaction, which shall have been approved by T-3's Board of Directors in accordance with Section 6.13(b); (ii) IHI accepts a proposed Sale Transaction, which shall have been approved by IHI's Board of Directors in accordance with Section 6.13(b); (iii) if the required approval of the stockholders of IHI of this Agreement is not received at the IHI Meeting; or (iv) if the required approval of the T-3 stockholders of this Agreement is not obtained. (i) notwithstanding Section 8.1(c) hereof, by T-3, if IHI and/or one or more of its Affiliates has not entered into definitive Disposition Agreements by November 15, 2001 with respect to each of the IHI Dispositions in accordance with Section 6.19. Section 8.2 Effect of Termination. (a) Except as provided in this Section 8.2, in the event of a termination of this Agreement as provided in Section 8.1, this Agreement shall forthwith become void, the representations and warranties shall not survive, and there shall be no further liability or obligation under any provisions hereof on the part of the parties hereto or their respective officers, directors or stockholders. (b) To the extent that a termination of this Agreement pursuant to Section 8.1(b) or (c) results from a willful breach of any of a party's representations, warranties, covenants or agreements set forth in this Agreement, the injured party shall have a right to recover its damages caused thereby, provided, however, that such injured party, shall not be entitled to consequential or punitive damages. (c) In the event of a termination of this Agreement pursuant to Sections 8.1(b), 8.1(f) or 8.1(h)(iv), then T-3 shall pay to IHI a termination fee equal to $850,000 within two days of the first to occur of any such event. (d) In the event of a termination of this Agreement pursuant to Sections 8.1(c), 8.1(g) or 8.1(h)(iii), then IHI shall pay to T-3 a termination fee equal to $850,000 within two days of the first to occur of any such event. (e) In the event of a termination of this Agreement pursuant to Section 8.1(h)(i) or (ii) hereof, then the party who has accepted a proposed Sale Transaction shall pay to the other immediately a termination fee equal to $850,000. (f) Notwithstanding the foregoing, any termination fee that becomes payable by T-3 pursuant to this Section shall be paid to EnSerCo, LLC on behalf of IHI to reduce the principal and interest on the EnSerCo Loan. ARTICLE 9. MISCELLANEOUS Section 9.1 Notices. Any notice or other communication required or permitted hereunder shall be in writing or by telex, telephone or facsimile transmission with subsequent written confirmation, and may be personally served or sent by United States mail and shall be deemed to have been given upon receipt by the party notified. For purposes hereof, the addresses of the parties hereto (until notice of a change thereof is delivered as provided in this Section 9.1) shall be as set forth opposite each party's name on the signature page hereof. Section 9.2 Non-Survival of Representations and Warranties. The representations and warranties of the parties shall not survive the Closing. Section 9.3 Headings; Gender. When a reference is made in this Agreement to a section, exhibit or schedule, such reference shall be to a section, exhibit or schedule of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All personal pronouns used in this Agreement shall include the other genders, whether used in the masculine, feminine or neuter gender, and the singular shall include the plural and vice versa, whenever and as often as may be appropriate. Section 9.4 Entire Agreement; No Third Party Beneficiaries. This Agreement (including the documents, exhibits and instruments referred to herein) and the Confidentially Agreement between IHI and T-3 dated January 11, 2001 (a) constitute the entire agreement and supersedes all 26 Page 41 of 65 prior agreements, and understandings and communications, both written and oral, among the parties with respect to the subject matter hereof, and (b) except as provided in Sections 6.4 and 6.16 hereof, are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. Section 9.5 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware without regard to any applicable principles of conflicts of law. Section 9.6 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Section 9.7 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by reason of any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any adverse manner to either party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible, and in any case such term or provision shall be deemed amended to the extent necessary to make it no longer invalid, illegal or unenforceable. Section 9.8 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which taken together shall constitute one and the same document. Section 9.9 Amendment. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto. Section 9.10 Extension; Waiver. At any time prior to the Closing Date, the parties hereto may, in their respective sole discretion and to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto; (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant thereto; and (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed by or on behalf of such party. Section 9.11 Expenses. Except as provided in Section 8.2, whether or not the transactions contemplated herein are consummated, payment for all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be made by the party incurring such costs and expenses. Section 9.12 Joint Drafting. This Agreement and its Exhibits and Appendices have been jointly drafted by the parties hereto and their respective counsel. Neither this Agreement nor any of its Exhibits and Appendices shall be construed against any party thereto based on its authorship. [SIGNATURE PAGE FOLLOWS] 27 Page 42 of 65 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed themselves or by their respective duly authorized officers as of the date first written above. Address: INDUSTRIAL HOLDINGS, INC. 7135 Ardmore Houston, Texas 77054 Attn: Robert Cone By: /s/ ROBERT CONE Fax: (713) 749-9642 ------------------------------ Robert Cone President Address: T-3 ENERGY SERVICES, INC. 600 Travis, Suite 6050 Houston, Texas 77002 Attn: Michael L. Stansberry By: /s/ MICHAEL L. STANSBERRY Fax: (713) 224-6430 ------------------------------ Michael L. Stansberry President and CEO Address: FIRST RESERVE FUND VIII, LIMITED PARTNERSHIP 600 Travis, Suite 6000 Houston, Texas 77002 By: First Reserve GP VIII, L.P., Attn: Ben A. Guill its General Partner Fax: 713-224-0771 By: First Reserve Corporation, its General Partner By: /s/ JOSEPH R. EDWARDS ------------------------------ Joseph R. Edwards Vice President 28 Page 43 of 65 EX-99.C 5 d93145ex99-c.txt WARRANT EXHIBIT C THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS, AND THEY CANNOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE HYPOTHECATED EXCEPT IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH STATE LAWS OR UPON DELIVERY TO THE COMPANY OF AN OPINION OF LEGAL COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE. WARRANT TO PURCHASE SHARES OF COMMON STOCK OF INDUSTRIAL HOLDINGS, INC. This Warrant Certificate certifies that First Reserve Fund VIII, Limited Partnership, a Delaware limited partnership, ("Holder"), is the owner of a warrant ("Warrant") which represents the right to subscribe for and purchase from T-3 Energy Services, Inc., a Delaware corporation (the "Company"), 313,943 shares of the Company's common stock, par value $.01 per share (the "Common Stock"), for an exercise price per share of $12.80 per share (subject to adjustment as provided herein) (the "Exercise Price"). 1. Exercise of Warrant The Warrant may be exercised by Holder, in whole or in part by (a) surrender of this Warrant Certificate at the principal office of the Company at (or such other office or agency of the Company as may be designated by notice in writing to Holder at the address of such Holder appearing on the books of the Company) with the appropriate form attached hereto duly exercised, at any time within the period beginning on the date hereof and expiring at 5:00 p.m. Houston, Texas time, on tenth anniversary of date of issuance (the "Exercise Period") and (b) delivery to the Company of a certified or cashier's check for the amount of the Exercise Price for such shares. Holder shall become the record owner of the shares of Common Stock so purchased as of the close of business on the date on which the Warrant Certificate shall have been surrendered and payment made for such shares of Common Stock. Certificates representing the shares of Common Stock so purchased shall be delivered to Holder promptly and in no event later than ten days after this Warrant shall have been so exercised, and, unless this Warrant has expired or been exercised in full, a new Warrant Certificate representing the then-unexercised portion of this Warrant also shall be delivered to Holder within such time. 2. Adjustment of Exercise Price and Number of Shares of Common Stock Issuable Upon Exercise of Warrant 2.1. Certain Adjustments. The number and kind of securities purchasable upon the exercise of the Warrant and payment of the Exercise Price shall be subject to adjustment as follows: (a) Stock Dividends, Splits, etc. In case the Company shall at any time prior to the expiration of the Exercise Period (i) pay a dividend in shares of Common Stock or make a distribution to all holders of shares of Common Stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue by reclassification of its shares of Common Stock other securities of the Company, the number of shares of Common Stock purchasable upon exercise of the Warrant immediately prior thereto shall be adjusted so that Holder shall be entitled to receive upon exercise of the Warrant the kind and number of shares of Common Stock or other securities of the Company that it would have owned or have been entitled to receive after the happening of any of the events described above had the Warrant been exercised immediately prior to the happening of such event or any record date with respect thereto. An adjustment made pursuant to this paragraph (a) shall become effective on the effective date of such event retroactive to the record date, if any, for such event. (b) Exercise Price Adjustment. Whenever the number of shares of Common Stock purchasable upon the exercise of the Warrant is adjusted, as herein provided, the Exercise Price per share of Common Stock payable upon exercise of the Warrant shall be adjusted by multiplying such Exercise Price immediately prior to such adjustment by a fraction, the numerator of which shall be the number of shares of Common Stock purchasable upon the exercise of the Warrant immediately prior to such adjustment, and the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter. 2.2. Preservation of Purchase Rights Upon Merger, Consolidation, etc. In case of any consolidation of the Company with or merger of the Company into another corporation or other entity or in case of any sale or conveyance to another corporation or other entity of the property of the Company as an entirety or substantially as an entirety, the Company or such successor or purchasing corporation or other entity, as the case may be, shall execute with Holder an agreement that Holder shall have the right thereafter upon payment of the Exercise Price in effect immediately prior to such action to purchase upon exercise of the Warrant the kind and amount of shares and other securities and property that it would have owned or have been entitled to receive after the happening of such consolidation, merger, sale or conveyance had the Warrant been exercised immediately prior to such action. The Company shall mail by first-class mail, postage prepaid, to Holder, notice of the execution of any such agreement. In any such case, the Company will make appropriate provision to insure that the provisions of this Section 2 hereof will thereafter be applicable as nearly as may be in relation to any shares of stock or securities thereafter deliverable upon the exercise of this Warrant. The Company will not effect any consolidation, merger, sale or conveyance described herein unless prior to the consummation thereof, the successor corporation (if other than the Company) assumes by written instrument the obligations under this Section 2 and the obligations to deliver to Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, Holder may be entitled to acquire. 2.3. Notice of Adjustment. Whenever the number of shares of Common Stock purchasable upon the exercise of the Warrant or the Exercise Price is adjusted, as provided in Section 2, the Company or its successor shall promptly notify the Holder in writing of such adjustment(s) or of Page 44 of 65 any effect of such event hereupon, and shall deliver to such Holder a statement setting forth the number of shares of Common Stock or other securities or property, as the case may be, purchasable upon exercise of the Warrant and the Exercise Price after any such adjustment or event, setting forth a brief statement of the facts requiring such adjustment or notice of such event and setting forth the computation by which such adjustment was made. 2.4. Warrant Certificates. The form of this Warrant Certificate need not be changed because of any change in the Exercise Price or in the number or kind of shares purchasable upon the exercise of the Warrant. 2.5. Record Date Notices. In the event of any (a) capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all of the assets of the Company to any other person or any consolidation, share exchange or merger involving the Company; or (b) voluntary or involuntary dissolution, liquidation or winding up of the Company, the Company will mail to Holder at least 20 days before the earliest date specified therein, a written notice specifying the date on which any such reorganization, reclassification, transfer, consolidation, share exchange, merger, dissolution, liquidation or winding up is expected to become effective and the record date for determining stockholders entitled to vote thereon. 3. Reservation and Authorization of Common Stock The Company covenants and agrees (a) that all shares of Common Stock which may be issued upon the exercise of the Warrant represented by this Warrant Certificate will, upon issuance, be validly issued, fully paid and nonassessable and free of all transfer taxes, liens and charges with respect to the issue thereof, (b) that during the Exercise Period, the Company will at all times have authorized, and reserved for the purpose of issue or transfer upon exercise of the Warrant evidenced by this Warrant Certificate, sufficient shares of Common Stock to provide for the exercise of the Warrant represented by this Warrant Certificate and (c) that the Company will take all such action as may be necessary to ensure that the shares of Common Stock issuable upon the exercise of the Warrant may be so issued without violation of any applicable law or regulation, or any requirement of any securities exchange upon which any capital stock of the Company may be listed. If at any time the number of authorized but unissued shares of Common Stock is not sufficient to effect the issue or transfer of shares of Common Stock upon exercise of the Warrant, in addition to the other remedies as may be available to the Holder for such failure, the Company will take such corporate action as, in the opinion of its counsel, may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as will be sufficient for such purpose. 4. No Fractional Shares No certificates representing fractional shares of Common Stock shall be issuable upon any exercise of this Warrant. The Company shall, in respect of any fraction of a share, make a payment in cash based on the fair market value of the Common Stock determined in good faith by the Board of Directors. 5. No Voting Rights This Warrant Certificate shall not entitle the holder hereof to any voting rights or other rights or liabilities as a stockholder of the Company. 6. Closing of Books The Company will at no time close its transfer books against the transfer of any Warrant or of any shares of Common Stock or other securities issuable upon the exercise of any Warrant in any manner which interferes with the timely exercise of a Warrant. 7. Warrant Exchangeable; Loss, Theft This Warrant Certificate is exchangeable, upon the surrender hereof by Holder at the office or agency of the Company referred to in Section 1, for new Warrant Certificates of like tenor representing in the aggregate the right to subscribe for and purchase the number of shares of Common Stock which may be subscribed for and purchased hereunder, each such new Warrant to represent the right to subscribe and purchase such number of shares of Common Stock as shall be designated by said holder hereof at the time of such surrender. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation, or upon surrender or cancellation of this Warrant Certificate, the Company will issue to the holder hereof a new Warrant Certificate of like tenor, in lieu of this Warrant Certificate, representing the right to subscribe for and purchase the number of shares of Common Stock which may be subscribed for and purchased hereunder. 8. Right to Convert Warrants. (a) The Holder shall have the right to convert this Warrant (the "Conversion Right"), in whole or in part, at any time prior to the expiration of the Exercise Period, into shares of Common Stock as provided for in this Section 8. Upon exercise of the Conversion Right, the Company shall deliver to the Holder (without payment by the Holder of any Exercise Price) that number of shares of Common Stock equal to the quotient obtained by dividing (x) the value of the number of warrants being exercised at the time the Conversion Right is exercised (determined by subtracting the aggregate Exercise Price for the number of warrants being exercised in effect immediately prior to the exercise of the Conversion Right from the amount obtained by multiplying the number of shares of Common Stock issuable upon such exercise of the Warrant by the Current Market Price of the Common Stock by (y) the Current Market Price of one share of Common Stock. (b) The Conversion Right may be exercised by the Holder, at any time during the Exercise Period, on any business day by delivering a written notice in the form attached hereto (the "Conversion Notice") to the Company at the offices of the Company designated in Section 1 hereof, exercising the Conversion Right and specifying (i) the total number of shares of Common Stock the Holder will purchase pursuant to such conversion and (ii) a place and date not less than one or more than 20 business days from the date of the Conversion Notice for the closing of such purchase. Page 45 of 65 (c) At any closing under Section 8(b) hereof, (i) the Holder will surrender this Warrant and (ii) the Company will deliver to the Holder a certificate or certificates for the number of shares of Common Stock issuable upon such conversion, together with cash, in lieu of any fraction of a share, as provided in Section 4 above. (d) For the purposes hereof, "Current Market Price" means, as to any security on the date of determination thereof, the average of the closing prices of such security's sales on all principal United States securities exchanges on which such security may at the time be listed, or, if there shall have been no sales on any such exchange on any day, the last trading price of such security on such day, or if there is no such price, the average of the bid and asked prices at the end of such day, on the Nasdaq Stock Market, in each such case averaged for a period of 20 consecutive trading days prior to the day when the Current Market Price is being determined. If any time such security in not listed on any exchange or the Nasdaq Stock Market, the Current Market Price shall be deemed to be the fair value thereof determined by the board of directors of the Company in good faith, as of the most recent practicable date when the determination is to be made, taking into account the value of the Corporation as a going concern, and without taking into account any lack of liquidity of such security or any discount for a minority interest. 9. Covenant of the Company. The Company covenants and agrees with Holder as follows: In case the Company shall propose (1) to declare a dividend on shares of Common Stock, or (2) to offer rights, options or warrants to all holders of Common Stock entitling them to subscribe for or purchase Common Stock (or securities convertible into or exercisable or exchangeable for Common Stock or any other securities), or (3) to offer any shares of capital stock in a reclassification of shares of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), or (4) to effect any consolidation or merger into or with, or to effect any sale or other transfer, in one or more transactions, of more than 50% of the assets or net income of the Company and its subsidiaries (taken as a whole) to, any other person, or (5) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall provide to each registered holder of a Warrant, a notice of such proposed action, which shall specify the record date for the purpose of such dividend, distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of Common Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (1) or (2) above at least 20 days prior to the record date for determining holders of the Common Stock for purposes of such action, and in the case of any such other action, at least 20 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of Common Stock, whichever shall be the earlier. 10. Governing Law. This Warrant shall be governed by and construed in accordance with the internal laws, and not the laws of conflict, of the State of Delaware. T-3 ENERGY SERVICES, INC. By: -------------------------- Name: Title: Dated: , 2001 Page 46 of 65 [FORM OF ELECTION TO PURCHASE] (To be executed upon exercise of Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to purchase shares of Common Stock and herewith tenders in payment for such shares a bank certified check or cashier's check payable to the order of Industrial Holdings, Inc. in the amount of $ . The undersigned requests that a certificate for such shares be registered in the name of whose address is and that such certificate (or any payment in lieu thereof) be delivered to whose address is . (Signature must conform in all respects to name of holder as specified on the face of the Warrant.) Dated: [FORM OF ELECTION TO CONVERT] (To be executed upon conversion of Warrant.) The undersigned hereby irrevocably elects to exercise the Conversion Right, represented by this Warrant Certificate, to purchase shares of Common Stock and herewith tenders in payment for such shares this Warrant Certificate, all in accordance with the terms hereof. The undersigned requests that a certificate for such shares be registered in the name of whose address is and that such certificate (or any payment in lieu thereof) be delivered to whose address is . (Signature must conform in all respects to name of holder as specified on the face of the Warrant.) Dated: Page 47 of 65 EX-99.D 6 d93145ex99-d.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT D REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made and entered into as of December 17, 2001, by and among Industrial Holdings, Inc., a Texas corporation (the "Company"), and the other parties listed on the signature pages hereof. WHEREAS, pursuant to the Agreement and Plan of Merger dated May 7, 2001, as amended (the "Merger Agreement"), by and among the Company, T-3 Energy Services, Inc., a Delaware corporation, and First Reserve Fund VIII, L.P., a Delaware limited partnership ("First Reserve"), certain Holders (as defined herein) has or will acquire shares of the surviving company's common stock, par value $.01 per share (the "Common Stock"); WHEREAS, SJMB, L.P., a Delaware limited partnership ("St. James"), has previously been granted registration rights with respect to the Company's securities, pursuant to which St. James is entitled to the benefit of any later, more favorable registration rights; WHEREAS, certain other shareholders of the Company have been granted registration rights, which such shareholders and the Company desire to replace with the rights granted herein; and WHEREAS, this Agreement is entered into pursuant to the terms of the Merger Agreement. NOW, THEREFORE, for and in consideration of the premises, and the mutual and dependent promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Certain Definitions. For the purposes of the this Agreement the term: "Agreement" is defined in the preamble. "Affiliate" shall mean, as to any specified Person, any other Person that, directly or indirectly through one or more intermediaries or otherwise, controls, is controlled by or is under common control with the specified Person. As used in this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person (whether through ownership of capital stock of that Person, by contract or otherwise). "Board" means the board of directors of the Company. Page 48 of 65 "Business Day" means any day that is not a Saturday, a Sunday or any day on which banks in the State of Texas are authorized or obligated to close. "Company Notice" is defined in Section 2.1(a). "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Holder" means the parties (other than the Company) listed on the signature pages hereof and any permitted assignee to whom rights under Section 2 hereof have been duly assigned in accordance with Section 3.2 of this Agreement. "Holder Notice" is defined in Section 2.1(a). "Inclusion Notice" is defined in Section 2.1(a). "Person" shall mean any natural person, entity, estate, trust, union or employee organization or governmental authority. "Registration" shall, and the terms "register," "registered," and "registration" shall also refer to a registration effected by preparing and filing a Registration Statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such Registration Statement. "Registration Expense" shall mean, with respect to any demand registration (as set forth in Section 2.1) or piggyback registration (as set forth in Section 2.2) all (i) registration, qualification and filing fees, (ii) fees and expenses of compliance with securities or blue sky laws (including the reasonable fees and disbursements of counsel for any underwriters, dealers or placement agents in connection therewith), (iii) printing expenses (or comparable duplication expenses) and escrow fees, (iv) internal expenses of the Company (including all salaries and expenses of officers and employees performing legal or accounting duties), (v) fees and disbursements of counsel for the Company, (vi) fees and expenses for independent certified public accountants retained by the Company (including all fees and expenses associated with special audits or the delivery by independent certified public accountants of a "cold comfort" letter or letters), (vii) fees and expenses of any special experts retained by the Company in connection with such registration, (viii) fees and expenses of listing the Registrable Securities on a securities exchange, (ix) the reasonable fees and expenses of a single firm of legal counsel for the Holders participating in such demand registration or piggyback registration and, (x) all other reasonable fees, costs, expenses and disbursements incurred in connection with or incident to the Company's compliance with Section 2. "Registration Statement" means a registration statement filed with the SEC under applicable provisions of the Securities Act and regulations promulgated thereunder. Page 49 of 65 "Registrable Securities" shall mean any Common Stock of the Company owned or hereafter acquired by the Holders and any Common Stock of the Company underlying Warrants owned or hereafter acquired by the Holders. Notwithstanding the foregoing, "Registrable Securities" shall exclude (i) any Registrable Securities sold by a person in a transaction in which rights under Section 2 hereof are not assigned in accordance with this Agreement and (ii) any Registrable Securities sold in a public offering. "Registrable Securities Then Outstanding" shall mean the number of shares of Common Stock of the Company that are Registrable Securities and are then outstanding. "SEC" The term "SEC" or "Commission" means the U.S. Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Shelf Registration" is defined in section 2.1(c). "Warrants" means any rights granted by the Company to purchase shares of Common Stock of the Company at a determinable price (subject to adjustment), but excluding any options to purchase shares of such Common Stock granted by the Company to any employee, director or consultant of the Company or any of its subsidiaries under any written plan adopted by the Company or any of its subsidiaries for the benefit of such persons. "Violation" is defined in Section 2.5(a). 2. Registration Rights. 2.1. Demand Registrations. (a) Request by Holders. If the Company shall receive a written request from a Holder that the Company file a Registration Statement under the Securities Act covering the registration of Registrable Securities pursuant to this Section 2.1 (a "Holder Notice"), then the Company shall, within 10 Business Days of the receipt of such Holder Notice, give written notice of such request ("Company Notice") to all Holders. The Holders shall, within 20 days after receipt of the Company Notice, deliver written notice to the Company of the number of Registrable Securities that Holders electing to participate in the demand rights under this Section 2.1(a) ("Inclusion Notice"), and the Company shall use its commercially reasonable efforts to effect, as soon as practicable, the registration under the Securities Act of all Registrable Securities that Holders request to be registered in the Inclusion Notice, subject only to the limitations of this Section 2.1. Notwithstanding the foregoing and provided that SJMB, L.P. shall be entitled to one demand registration under this Section 2.1 regardless of its percentage of the Registrable Securities Then Page 50 of 65 Outstanding, the Company shall not be required to effect a registration under this Section 2.1(a) if (x) the Registrable Securities requested by all Holders to be registered in the Inclusion Notice is less than 8% of the Registrable Securities Then Outstanding, (y) the Company has, within the six month period preceding the date of such request, already effected a registration under the Securities Act pursuant to this Section 2.1, or in which the Holders had an opportunity to participate pursuant to the provisions of Section 2.2, other than a registration from which the Registrable Securities of Holders have been excluded (with respect to all or any portion of the Registrable Securities the Holders requested be included in such registration) pursuant to the provisions of Section 2.2(a) or (z) at the time of the Company's receipt of the Holder Notice, the filing of the Registration Statement or at any time during which the Registration Statement is effective, the Company is not eligible to register ("S3 Eligible") the resale of shares by Holders on Form S-3 under General Instructions I.A and I.B.3 to Form S-3 (or applicable successor form). (b) Underwriting. If the Holders initiating the registration request under this Section 2.1 ("Initiating Holders") intend to distribute the Registrable Securities covered by their request by means of an underwriting, then they shall so advise the Company as a part of the Holder Notice and the Company shall include such information in the Company Notice. In such event, the right of any Holder to include his Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such underwriting by the Holders of a majority of the Registrable Securities and reasonably acceptable to the Company. Notwithstanding any other provision of this Section 2.1, if the underwriter(s) advise(s) the Company in writing that marketing factors require a limitation of the number of securities to be underwritten then the Company shall so advise all Holders of Registrable Securities which would otherwise be registered and underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be reduced as required by the underwriter(s) and allocated among the Holders of Registrable Securities on a pro rata basis according to the number of Registrable Securities then outstanding held by each Holder requesting registration under this Section 2.1 (including the Initiating Holders); provided, however, that the number of shares of Registrable Securities to be included in such underwriting and registration shall not be reduced unless (i) all Registrable Securities held by Holders requesting registration under Section 2.2 are first entirely excluded from the underwriting and registration on a pro rata basis based on the total number of Registrable Securities then held by each such Holder; and (ii) all other securities of the Company (whether being sold by the Company or otherwise) are then entirely excluded from the underwriting and registration. Any Registrable Securities excluded and withdrawn from such underwriting shall be withdrawn from the registration. For any Holder that is a partnership, the Holder and the partners and retired partners of such Holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons, and for any Holder that is a corporation, the Holder and all corporations that are affiliates of such Holder, shall be deemed to be a single "Holder," and any pro rata reduction with respect to such "Holder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "Holder," as defined in this sentence. If any such registration, as a result of a reduction at the request of an underwriter, does not include at least Page 51 of 65 8% of the Registrable Securities Then Outstanding, such registration shall not constitute a demand for purposes of Section 2.1(d). (c) Shelf Registration. Any registration requested under Section 2.1(a) shall be effected on Form S-3 pursuant to Rule 415 under the Securities Act (or its successor) on a continuous basis for the period requested (a "Shelf Registration"). Under the Shelf Registration, the Company shall be entitled to require that a Holder or Holders refrain from effecting any public sales or distributions of the Registrable Securities pursuant to a Registration Statement, if the Board reasonably determines that such public sales or distributions would interfere in any material respect with any transaction involving the Company that the Board reasonably determines to be material to the Company. The Board shall, as promptly as practicable, give the Holders written notice of any such development. In the event of a request by the Board that Holders refrain from effecting any public sales or distributions of the Registrable Securities, the Company shall be required to lift such restrictions regarding effecting public sales or distributions of the Registrable Securities as soon as reasonably practicable after the Board shall reasonably determine public sales or distributions by Holders shall not interfere with such transaction, provided, that in no event shall any requirement that Holders refrain from effecting public sales or distributions in the Registrable Securities extend for more than 90 days; provided, however, that the Company may not utilize this right more than once in any 12 month period. (d) Other Registration. Notwithstanding the provisions of this Agreement to the contrary, if the Company is not S-3 Eligible after August 1, 2002, as a result of any action or omission by the Company after such date, the Holder Notice may request any registration requested under Section 2.1(a) be effected on Form S-1 (or any applicable successor form). Other than the requirement that registrations requested under Section 2.1(a) be effected on Form S-3, any such registration effected pursuant to this paragraph shall be subject to the same agreements regarding restrictions on public sales or distributions set forth in Section 2.1. (e) Maximum Number of Demand Registrations. The Company shall be obligated to effect three such demand registrations pursuant to this Section 2.1. (f) Deferral. Notwithstanding the foregoing, if the Company shall furnish to Holders requesting the filing of a Registration Statement pursuant to this Section 2.1, a certificate signed by the President or Chief Executive Officer of the Company stating that, in the good faith judgment of the Board, it would be materially detrimental to the Company and its stockholders for such Registration Statement to be filed, then the Company shall have the right to defer such filing for a period of not more than 90 days after receipt of the request of the initiating Holders; provided, however, that the Company may not utilize this right more than once in any 12 month period. (g) Expenses. All Registration Expenses incurred in connection with any registration pursuant to this Section 2.1, shall be borne by the Company. Each Holder participating in a registration pursuant to this Section 2.1 shall bear such Holder's proportionate share (based on the total number of shares sold in such registration other than for the account of Page 52 of 65 the Company) of all discounts, commissions or other amounts payable to underwriter(s) or brokers in connection with such offering by the Holders. 2.2. Piggyback Registrations. (a) Notice by Company. The Company shall notify all Holders of Registrable Securities in writing (a "Company Registration Notice") at least 15 days prior to filing any Registration Statement under the Securities Act for purposes of effecting a public offering of securities of the Company (including, but not limited to, Registration Statements relating to secondary offerings of securities of the Company, and Registration Statements relating to a Holder Notice under Section 2.1(a), but excluding Registration Statements relating to any employee benefit plan or a corporate reorganization) and will afford each such Holder an opportunity to include in such Registration Statement all or any part of the Registrable Securities then held by such Holder. Each Holder desiring to include in any such Registration Statement all or any part of the Registrable Securities held by such Holder shall within 5 Business Days after receipt of the Company Registration Notice, so notify the Company in writing (a "Piggyback Notice"), and in such notice shall inform the Company of the number of Registrable Securities such Holder wishes to include in such Registration Statement. If a Holder decides not to include all of its Registrable Securities in any Registration Statement thereafter filed by the Company, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent Registration Statement or Registration Statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein. (b) Underwriting. If a Registration Statement for which the Company gives a Company Registration Notice is for an underwritten offering, then the Company shall so advise the Holders of Registrable Securities in the Company Registration Notice. In such event, the right of any such Holder's Registrable Securities to be included in a registration pursuant to this Section 2.2 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Agreement, if the managing underwriter(s) determine(s) in good faith that marketing factors require a limitation of the number of shares to be underwritten, then the managing underwriter(s) may exclude shares in the manner set forth in Section 2.1(b); provided, however, if the Registration Statement originally proposed to be filed under this Section 2.2 is for a primary offering for cash by the Company, none of the securities to be offered by the Company shall be excluded. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter(s), delivered at least ten Business Days prior to the effective date of the Registration Statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. Page 53 of 65 (c) Withdrawal Right. Notwithstanding any provision contained in this Section 2.2 to the contrary, the Company shall have the right to terminate or withdraw any Registration Statement initiated by it (other than in response to a Holder Notice under Section 2.1) prior to the effectiveness of such Registration Statement whether or not any Holder has elected to include his Registrable Securities in such Registration Statement. (d) Expenses. All Registration Expenses incurred in connection with any registration pursuant to this Section 2.2, shall be borne by the Company. Each Holder participating in a registration pursuant to this Section 2.2 shall bear such Holder's proportionate share (based on the total number of shares sold in such registration other than for the account of the Company) of all discounts, commissions or other amounts payable to underwriter(s) or broker(s) in connection with such offering by the Holders. (e) Not Demand Registration. Registration pursuant to this Section 2.2 shall not be deemed to be a demand registration as described in Section 2.1 above. There shall be no limit on the number of times the Holders may request registration of Registrable Securities under this Section 2.2. (f) Shelf Registrations. In the event the registration pursuant to this Section 2.2 is a Shelf Registration, the Holders requesting inclusion in such registration pursuant to Section 2.2(a) shall comply with the provisions of Section 2.1(c). 2.3. Obligations of the Company. Whenever required to effect the registration of any Registrable Securities under this Agreement the Company shall, as expeditiously as reasonably possible: (a) Registration Statement. Prepare and file with the SEC a Registration Statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such Registration Statement to become effective and to keep such Registration Statement effective until the last to occur of (i) the sale or other distribution of all of the Registrable Securities covered by such Registration Statement in accordance with the intended methods of distribution thereof, (ii) the expiration of all periods during which transactions in Registrable Securities by a dealer are not exempt from the provisions of Section 5 of the Securities Act by virtue of Section 4(3) of the Securities Act or during which any dealer is obligated under the Securities Act to deliver a prospectus in connection with transactions involving Registrable Securities, (iii) the expiration of all other periods, if any, during which the Registration Statement is required to remain effective in order to avoid a violation of applicable law by any Holder or the Company related to the sale or other distribution of all of the Registrable Securities covered by such Registration Statement in accordance with the intended methods of distribution thereof, (iv) in the case of a Shelf Registration, the expiration of the period requested under Section 2.1(c); provided however that nothing in clauses (i) through (iii) hereof shall require the Company to keep a Registration Statement effective for more than 120 days; provided further, that the Holders may request that the Company grant extensions to such 120-day period and the Company shall not unreasonably deny such request. Page 54 of 65 (b) Amendments and Supplements. Prepare and file with the SEC such amendments and supplements to such Registration Statement and the prospectus used in connection with such Registration Statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement. (c) Prospectuses. Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of the Registrable Securities owned by them that are included in such registration. (d) Blue Sky. Use its commercially reasonable 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 Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) Customary Agreements. Enter into customary agreements (including, in the case of an underwritten offering, an underwriting agreement in customary form); make such representations and warranties to any underwriters, brokers, dealers, placement agents and other Persons involved in the distribution to any underwriters, brokers, dealers, placement agents and other persons involved in the distribution of the Registrable Shares included in such Registration Statement as in form, substance and scope are customarily made by issuers in similar circumstances or which may be reasonably requested. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement. (f) Notification. Notify each Holder of Registrable Securities covered by such Registration Statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such Registration Statement, as then in effect, 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 statements therein not misleading in the light of the circumstances then existing. In addition, the Company shall promptly notify each Holder and each underwriter, broker, dealer and placement agent participating in any offering or sale or other distribution of securities covered by such Registration Statement of the issuance or threatened issuance of any order suspending the registration or qualification of any Registrable Securities covered by such Registration Statement for disposition in any jurisdiction; use its commercially reasonable efforts to prevent the issuance of any such threatened order and, if any such order is issued, use its commercially reasonable efforts to obtain the lifting or withdrawal of such order at the earliest possible moment and promptly notify each Holder and each such underwriter, broker, dealer and placement agent of any lifting or withdrawal. (g) Opinion and Comfort Letter. Furnish, at the request of any Holder requesting registration of Registrable Securities, on the date that such Registrable Securities are delivered to the underwriter(s) for sale, if such securities are being sold through underwriters, or, Page 55 of 65 if such securities are not being sold through underwriters, on the date that the Registration Statement with respect to such securities becomes effective, (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, addressed to the Holders requesting registration of Registrable Securities (A) in the event of any offering other than an underwritten offering, in form and substance as is customarily given to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holders requesting registration, and (B) in the event of an underwritten offering, in the form given to the underwriters. (ii) in any underwritten offering, a "comfort" letter dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holders requesting registration, addressed to the underwriters and to the Holders requesting registration of Registrable Securities. (h) Additional Actions. Take all other actions which are reasonably necessary or which may be reasonably requested by the majority of selling Holders or any underwriter, broker, dealer or placement agent participating in any offering or sale or other distribution of securities covered by such Registration Statement to effect the registration and qualification of the Registrable Securities covered by such Registration Statement and to facilitate the disposition thereof in accordance with the respective plans of distribution of the selling Holders. 2.4. Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to Sections 2.1 or 2.2 that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Securities held by them, and the intended method of disposition of such securities as shall be reasonably requested by the Company or otherwise required in order to timely effect the Registration of their Registrable Securities. 2.5. Indemnification. In the event any Registrable Securities are included in a Registration Statement under Sections 2.1 or 2.2: (a) By the Company. To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, officers and directors of each Holder, any underwriter (as determined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act), against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar Page 56 of 65 as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any federal or state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any federal or state securities law in connection with the offering covered by such Registration Statement; and the Company will reimburse each such Holder, partner, officer or director, underwriter or controlling person for any legal or other expenses reasonably incurred by them, as incurred, in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 2.5(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by a Holder, partner, officer, director, underwriter or controlling person of such Holder. (b) By Selling Holders. To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the Registration Statement, each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter and any other Holder selling securities under such Registration Statement or any of such other Holder's partners, directors or officers or any person who controls such Holder within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such director, officer, controlling person, underwriter or other such Holder, partner or director, officer or controlling person of such other Holder may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such selling Holder expressly for use in connection with such registration; and each such Holder will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or other Holder, partner, officer, director or controlling person of such other Holder in connection with investigating or defending any such loss, claim, damage, liability or action: provided, however, that the indemnity agreement contained in this Section 2.5(b) shall not apply Page 57 of 65 to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided, further, that the total amounts payable in indemnity by a Holder under this Section 2.5(b) in respect of any Violation shall not exceed the net proceeds received by such Holder in the registered offering out of which such Violation arises. (c) Notice. Promptly after receipt by an indemnified party under this Section 2.5 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.5, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the indemnified and indemnifying parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential conflict of interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of liability to the indemnified party under this Section 2.5 to the extent the indemnifying party is prejudiced as a result thereof, but the omission so to deliver written notice to the indemnified party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.5. (d) Defect Eliminated in Final Prospectus. The foregoing indemnity agreements of the Company and Holders are subject to the condition that, insofar as they relate to any Violation made in a preliminary prospectus but eliminated or remedied in the amended prospectus on file with the SEC at the time the Registration Statement in question becomes effective or in the amended prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "Final Prospectus"), such indemnity agreement shall not inure to the benefit of any person if a copy of the Final Prospectus was timely furnished to the indemnified party, was not furnished to the person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act, and the furnishing of such Final Prospectus as so required would have eliminated liabilities under the Securities Act or the Exchange Act. (e) Contribution. In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any Holder exercising rights under this Agreement, or any controlling person of any such Holder, makes a claim for indemnification pursuant to this Section 2.5, but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 2.5 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such selling Holder or any such controlling person in circumstances for which indemnification is provided under this Section 2.5; then, and in each such case, the Company and such Holder will contribute to the Page 58 of 65 aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect not only the relative benefits received by the Company on the one hand and the selling Holders on the other hand, from the offering of the Registered Securities, but also the relative fault of the Company and the selling Holders in connection with the statements or omissions which resulted in such claim as well as any other relevant equitable considerations; provided, however, that, in any such case: (A) no such Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such Registration Statement; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. (f) Survival. The obligations of the Company and Holders under this Section 2.5 shall survive until 90 days following the third anniversary of the completion of any offering of Registrable Securities in a Registration Statement, regardless of the expiration of any statutes of limitation or extensions of such statutes. 2.6. Termination of the Company's Obligations. The Company shall have no obligations pursuant to Sections 2.1 and 2.2 with respect to any Registrable Securities proposed to be sold by a Holder in a registration pursuant to Section 2.1 or 2.2 if, in the opinion of counsel to the Company, all such Registrable Securities proposed to be sold by a Holder may then be sold under (a) Rule 144 in a single transaction without exceeding the applicable volume limitations thereunder, or (b) under Rule 144(k). 2.7. No Registration Rights to Third Parties. Without the prior written consent of the Holders of a majority of the Registrable Securities, the Company covenants and agrees that it shall not grant, or cause or permit to be created, for the benefit of any person or entity any registration rights of any kind (whether similar to the demand or "piggyback" registration rights described in this Section 2, or otherwise) relating to shares of the Company's Common Stock or any other voting securities of the Company, other than rights that are on a parity with or subordinate in right to the Holders. 2.8. Rule 144 Reporting; S-3 Eligibility. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of "Restricted Securities" (used herein as defined in Rule 144 under the Securities Act) to the public without registration, and to be eligible to use Form S-3, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times during which the Company is subject to the reporting requirements of the Exchange Act; (b) file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at all times during which the Company is subject to such reporting requirements); and (c) so long as any holders of Registrable Securities owns any Restricted Securities, to furnish to such holder forthwith upon request a written statement by the Page 59 of 65 Company as to its compliance with the reporting requirements of said Rule 144 and with regard to the Securities Act and the Exchange Act (at all times during which the Company is subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company and other information in the possession of or reasonably obtainable by the Company as such holder of the Registrable Securities may reasonably request in availing itself of any rule or regulation of the Commission allowing such holder to sell any such securities without registration. 2.9. Maintenance of Listed Status The Company shall use its commercially reasonable efforts to maintain its status as a listed company on the National Market System of the Nasdaq Stock Market, Inc. as such listing exists as of the date hereof. In the event the Company should be de-listed, for whatever reason, the Company agrees to use its commercially reasonable efforts to regain its status as a listed company on the National Market System of the Nasdaq Stock Market, Inc., or, if not available, the Small Cap Market. 3. MISCELLANEOUS 3.1. Governing Law. This Agreement shall be governed in all respects by the laws of the State of Delaware without regard to provisions regarding choice of laws. 3.2. Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto whose rights or obligations hereunder are affected by such amendments. This Agreement and the rights and obligations therein may not be assigned by a Holder without the written consent of the Company. Notwithstanding the foregoing, a Holder may transfer its rights hereunder in connection with a transfer of Registrable Securities (i) to any affiliate, related entity of such Holder, or to another partnership managed by First Reserve Corporation, (ii) to the limited or general partners of a Holder in connection with the full or partial liquidation of such Holder or (iii) to a person who acquires Registrable Securities having a fair market value of at least $2,500,000 from a Holder in a private transaction. This Agreement and the rights and obligations therein may not be assigned by the Company without the written consent of the Holders of a majority of the Registrable Securities. 3.3. Entire Agreement; Merger. This Agreement constitutes the entire understanding and agreement between the parties with regard to the subjects hereof and thereof. This Agreement supersedes in their entirety any prior agreements or understandings between the Holders, on the one hand, and the Company, on the other hand, regarding the registration of Company securities, including without limitation the registration rights agreements between St. James and the Company, dated June 16, 2000, June 29, 2000 and June 30, 2000. 3.4. Notices. Except as may be otherwise provided herein, all notices, requests, waivers and other communications made pursuant to this Agreement shall be in writing and shall be conclusively deemed to have been duly given (a) when hand delivered to the other party; (b) when received when sent by facsimile at the address and number set forth below; (c) three (3) Business Days after deposit in the U.S. mail with first class or certified mail receipt requested postage prepaid and addressed to the other party as set forth below; or (d) the next Business Day after deposit with a national overnight delivery service, postage prepaid, addressed to the parties Page 60 of 65 as set forth below with next-business-day delivery guaranteed, provided that the sending party receives a confirmation of delivery from the delivery service provider. To a Holder: To the Company: Industrial Holdings, Inc. to the address set forth opposite such Holder 7135 Ardmore on the signature pages hereto Houston, Texas 77054 Attn: President Fax: (713) 749-9642 With copies to: First Reserve Corporation 1801 California St., Suite 4110 Denver, CO 80202 Attn: Thomas R. Denison Fax Number: (303) 382-1275 Each person making a communication hereunder by facsimile shall promptly confirm by telephone to the person to whom such communication was addressed each communication made by it by facsimile pursuant hereto but the absence of such confirmation shall not affect the validity of any such communication. A party may change or supplement the addresses given above, or designate additional addresses, for purposes of this Section 3.4 by giving the other party written notice of the new address in the manner set forth above. 3.5. Amendments and Waivers. Any term of this Agreement may be amended only with the written consent of the Company and the holders of a majority of the Registrable Securities. 3.6. Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to the Company or to the Holders, upon any breach or default of any party hereto under this Agreement, shall impair any such right, power or remedy of the Company, or the Holders nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of any similar breach of default thereafter occurring; nor shall any waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of the Company or the Holders of any breach of default under this Agreement or any waiver on the part of the Company or the Holders of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, or by law or otherwise afforded to the Company or the Holders shall be cumulative and not alternative. Page 61 of 65 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year herein above first written. INDUSTRIAL HOLDINGS, INC. By: ------------------------------- Name: ------------------------------- Title: ------------------------------- Page 62 of 65 FIRST RESERVE FUND VIII, L.P., a Delaware limited partnership By: FIRST RESERVE GP VIII, L.P. a Delaware limited partnership, its General Partner By: FIRST RESERVE CORPORATION, a Delaware corporation, its General Partner By: ------------------------- Name: ------------------------- Title: ------------------------- Address: -------------------- -------------------- -------------------- SJMB, L.P., a Texas limited partnership By: ----------------------------------- Name: ----------------------------------- Title: ----------------------------------- Address: -------------------- -------------------- -------------------- St. James Capital Partners, L.P By: ----------------------------------- Name: ----------------------------------- Title: ----------------------------------- Address: -------------------- -------------------- -------------------- Page 63 of 65 CFE, Inc. By: ----------------------------------- Name: ----------------------------------- Title: ----------------------------------- Address: 201 Highridge Stamford, CT 06927 -------------------- Michael L. Stansberry Address: 14 Hidden Pond Place The Woodlands, TX 77381 -------------------- Michael T. Mino Address: 4144 Greystone, #702 Sugarland, TX 77479 -------------------- Randy Deroche Address: 4033 Hwy 24 Bourg, LA 70343 -------------------- Bobby Corte, Jr. Address: 105 Feldspar Drive Houma, LA 70360 Page 64 of 65 -------------------- Kane Corte Address: #8 Asthodel Houma, LA 70360 -------------------- Steven W. Krablin Address: 9619 Windrush Spring, TX 77379 -------------------- Dennis Sanvi and Kim Sanvi Address: 605 Morningside Drive Houma, LA 70360 Page 65 of 65 -----END PRIVACY-ENHANCED MESSAGE-----