<PAGE>
                                                                    Exhibit 10.4




                            ASSET PURCHASE AGREEMENT


                                  BY AND AMONG




                          AMERICAN RIVET COMPANY, INC.

                            INDUSTRIAL HOLDINGS, INC.


                                       AND



                              ARC ACQUISITION CORP.







                                   Dated as of

                                October 26, 2001
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                Page
<S>                                                                                             <C>
1.     Assets Purchased.......................................................................    2
       1.1       Equipment....................................................................    2
       1.2       Inventory....................................................................    2
       1.3       Receivables..................................................................    2
       1.4       Real Property................................................................    2
       1.5       Goodwill.....................................................................    2
       1.6       Outstanding Purchase Orders..................................................    2
       1.7       Contracts....................................................................    2
       1.8       Other Assets.................................................................    2

2.     Excluded Assets........................................................................    3
       2.1       All Cash and Cash Equivalents................................................    3
       2.2       Tax Deposits and Refunds.....................................................    3
       2.3       Corporate Records............................................................    3
       2.4       Insurance Policies...........................................................    3
       2.5       Employee Records.............................................................    3
       2.6       Employee Plans...............................................................    3
       2.7       Assets related to Excluded Liabilities.......................................    3

3.     Liabilities............................................................................    3
       3.1       Liabilities Assumed..........................................................    3
                 (a)       Trade Accounts Payable.............................................    3
                 (b)       Other Accrued Payables.............................................    3
                 (c)       Outstanding Customer and Supplier Purchase Orders..................    4
                 (d)       Vacation Accruals..................................................    4
                 (e)       Assumed Contracts..................................................    4
                 (f)       Real Property Estate Taxes.........................................    4
                 (g)       Warranty Claims....................................................    4
                 (h)       Buyer Deficiencies.................................................    4
       3.2       Excluded Liabilities.........................................................    4
                 (a)       Taxes..............................................................    4
                 (b)       Employee Plans.....................................................    4
                 (c)       Environmental......................................................    4
                 (d)       Comerica Note......................................................    4
                 (e)       MGF Note...........................................................    4
                 (f)       Heller Note........................................................    4
                 (g)       Accrued Interest...................................................    4
                 (h)       Intercompany Payables..............................................    5
                 (i)       Accrued Acquisition Expenses.......................................    5
                 (j)       Accrued Sales and Use Tax..........................................    5
                 (k)       Accrued Business Insurance Expenses................................    5
</TABLE>


ASSET PURCHASE AGREEMENT               i                          EXECUTION COPY
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<TABLE>
<S>                                                                                              <C>
       3.3       Employees....................................................................    5

4.     Purchase Price for Purchased Assets....................................................    5
       4.1       Purchase Price...............................................................    5
       4.2       Allocation of Purchase Price.................................................    5

5.     Closing Matters........................................................................    5
       5.1       Closing......................................................................    5
       5.2       Deliveries Prior to Closing..................................................    5
       5.3       Deliveries At Closing........................................................    6
                 (a)       Deliveries by the Seller Parties...................................    6
                 (b)       Deliveries by the Buyer............................................    7

6.     Seller Parties' Representations and Warranties.........................................    8
       6.1       Organization and Standing....................................................    8
       6.2       Authorization................................................................    8
       6.3       Existing Agreements and Other Approvals......................................    9
       6.4       No Subsidiaries..............................................................    9
       6.5       No Insolvency................................................................    9
       6.6       Permits and Licenses.........................................................    9
       6.7       Financial Statements.........................................................   10
       6.8       Inventory....................................................................   10
       6.9       Receivables..................................................................   10
       6.10      No Undisclosed Liabilities...................................................   10
       6.11      Conduct of Business..........................................................   10
       6.12      No Adverse Changes...........................................................   12
       6.13      Employees....................................................................   12
       6.14      Employee Benefit Plans.......................................................   12
       6.15      Contracts....................................................................   13
       6.16      Title to Purchased Assets; Liens.............................................   13
       6.17      Taxes........................................................................   14
       6.18      Litigation...................................................................   15
       6.19      Product Liability............................................................   15
       6.20      Environmental Matters........................................................   15
       6.21      No Brokers...................................................................   16
       6.22      Intellectual Property........................................................   16
       6.23      Compliance with Law..........................................................   17
       6.24      Insurance....................................................................   17

7.     Buyer's Representations and Warranties.................................................   17
       7.1       Organization and Standing....................................................   17
       7.2       Authorization................................................................   17
       7.3       Existing Agreements and Governmental Approvals...............................   17
       7.4       No Brokers...................................................................   18
</TABLE>


ASSET PURCHASE AGREEMENT               ii                         EXECUTION COPY
<PAGE>
<TABLE>
<S>                                                                                              <C>
8.     Post-Closing Covenants.................................................................   18
       8.1       Post-Closing Receipts........................................................   18
       8.2       Seller Name..................................................................   18
       8.3       Further Assurances...........................................................   18
       8.4       Books and Records............................................................   18
       8.5       Waiver.......................................................................   19
       8.6       Collection of Receivables....................................................   19
       8.7       Warranty and Returns.........................................................   19
       8.8       Employee Payables............................................................   19

9.     Indemnification........................................................................   20
       9.1       Survival of Representations and Warranties...................................   20
       9.2       Indemnification by the Seller Parties........................................   20
       9.3       Indemnification by the Buyer.................................................   20
       9.4       Procedure for Indemnification; Third-Party Claims............................   21
       9.5       Procedure for Indemnification; Other than Third-Party Claims.................   21
       9.6       Time Limitations.............................................................   21
       9.7       Limitations on Liability.....................................................   22
       9.8       Remedies.....................................................................   23

10.    Expenses...............................................................................   23

11.    Miscellaneous Provisions...............................................................   23
       11.1      Notices......................................................................   23
       11.2      Assignment...................................................................   24
       11.3      Parties in Interest..........................................................   24
       11.4      Choice of Law................................................................   24
       11.5      Counterparts.................................................................   24
       11.6      Entire Agreement.............................................................   24
       11.7      Arbitration..................................................................   25
       11.8      Public Announcements.........................................................   26
       11.9      Facsimile Signatures.........................................................   26
       11.10     Construction.................................................................   26
</TABLE>


ASSET PURCHASE AGREEMENT               iii                        EXECUTION COPY
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                             EXHIBITS AND SCHEDULES

Exhibit A              -          Nonsolicitation Agreement
Exhibit B              -          Transitional Services Agreement
Exhibit C              -          Title Insurance Endorsements
Exhibit D              -          Bill of Sale and Assignment
Exhibit E              -          Assignment and Assumption Agreement
Exhibit F              -          Purchase Price Disbursement Instruction Letter
Exhibit G              -          Warranty Deed
Exhibit H              -          Consulting Agreement
Exhibit I              -          No Further Remediation Letter
Exhibit J              -          Escrow Agreement and Instructions
Exhibit K              -          Inspection Report
Schedule 1.1           -          Equipment
Schedule 1.2           -          Inventory
Schedule 1.3           -          Receivables
Schedule 1.4           -          Real Property
Schedule 1.6           -          Outstanding Customer Purchase Orders
Schedule 1.7           -          Assumed Contracts
Schedule 1.8           -          Other Assets
Schedule 3.1(a)        -          Trade Accounts Payable
Schedule 3.1(b)        -          Other Accrued Payables
Schedule 3.1(c)        -          Outstanding Supplier Purchase Orders
Schedule 5.3(a)(iv)    -          Permitted Liens
Schedule 6.3(a)        -          Existing Agreements of Seller Parties
Schedule 6.3(b)        -          Other Approvals of Seller Parties
Schedule 6.6           -          Permits and Licenses
Schedule 6.7           -          Financial Statements
Schedule 6.11          -          Conduct of Business
Schedule 6.12          -          No Adverse Changes
Schedule 6.13          -          Employees
Schedule 6.14          -          Employee Benefit Plans
Schedule 6.15          -          Contracts
Schedule 6.16          -          Title to Purchased Assets; Liens
Schedule 6.20          -          Environmental Matters
Schedule 6.21          -          Brokers
Schedule 6.22          -          Intellectual Property
Schedule 6.24          -          Insurance


ASSET PURCHASE AGREEMENT               iv                         EXECUTION COPY
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                            ASSET PURCHASE AGREEMENT
                                (AMERICAN RIVET)


         THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of October
26, 2001, by and among AMERICAN RIVET COMPANY, INC., an Illinois corporation
(the "Seller"), INDUSTRIAL HOLDINGS, INC., a Texas corporation ("IHI") (the
Seller and IHI sometimes collectively referred to herein as the "Seller
Parties"), and ARC ACQUISITION CORP., an Illinois corporation (the "Buyer").

                                   BACKGROUND

A.       IHI is the owner of all the issued and outstanding capital stock of the
         Seller.

B.       The Seller manufactures and distributes solid, semi-tubular and tubular
         rivets, externally-threaded fasteners and other cold-headed special
         parts in diameters from 0.038" to 3/8" (the "Business"):

C.       The Seller is currently part of IHI's Engineered Products Group
         division (the "EPG Division"), along with IHI's wholly owned subsidiary
         Landreth Metal Forming, Inc. ("Landreth"). Rex Machinery Movers, Inc.
         d/b/a Ideal Products ("Ideal Products"), Philform, Inc. ("Philform"),
         and its affiliate OF Acquisition, L.P. d/b/a Orbitform ("Orbitform"),
         which recently sold substantially all of their assets to one buyer,
         were formerly part of the EPG Division (the Seller, Landreth, Ideal
         Products, Philform, and Orbitform collectively, the "EPG Division
         Members"). As part of the strategic disposition of the assets of the
         EPG Division Members from IHI's core business, Ideal Products,
         Philform, and Orbitform have sold, and Landreth is selling,
         substantially all of their assets to purchasers other than the Buyer.
         However, the acquirors thereof, as well as the Buyer, are interested in
         (i) maintaining the customer and manufactured part base that the EPG
         Division Members currently have and enjoy, without the prospect of the
         solicitation of those customers by each other, and (ii) continuing to
         utilize certain computer hardware and services previously shared among
         the EPG Division Members. Therefore, as a condition precedent to the
         Closing (as defined below), Buyer shall succeed to Seller's rights and
         assume Seller's obligations under (i) a customer and manufactured
         part-based nonsolicitation agreement attached as EXHIBIT A (the
         "Nonsolicitation Agreement") and (ii) a transitional services agreement
         attached as EXHIBIT B (the "Transitional Services Agreement").

D.       The Business of the Seller is conducted at an owned manufacturing
         facility in Franklin Park, Illinois, consisting of a 81,000 square foot
         facility (the "Premises") on 175,000 square feet, commonly known as
         11330 W. Melrose St., Franklin Park, Illinois (the "Real Property").

E.       Buyer desires to purchase, and Seller desires to sell to Buyer, the
         Purchased Assets (as defined below) on the terms and subject to the
         conditions of this Agreement.

                                   AGREEMENTS

         NOW, THEREFORE, consistent with the Background and in consideration of
the terms and conditions set forth in this Agreement, each of the Seller Parties
and Buyer agree as follows:


ASSET PURCHASE AGREEMENT                                          EXECUTION COPY
<PAGE>
1.       ASSETS PURCHASED. At the Closing, Seller shall sell, assign, convey,
         transfer, set over, and deliver to Buyer all of the assets, rights, and
         interests of every conceivable kind or character whatsoever, whether
         tangible or intangible, that on the Closing Date (as defined below) are
         owned by Seller or in which Seller has an interest of any kind, except
         for the Excluded Assets (as defined below) (the assets being so
         purchased, the "Purchased Assets"). The Purchased Assets include,
         without limitation:

1.1      EQUIPMENT. All machinery, equipment, tools, fixtures, workstations,
         computers, office equipment, manufacturing and engineering drawings,
         and tangible personal property owned by Seller, and to the extent not
         otherwise constituting equipment as defined herein, all other items of
         tangible personal property (including, without limitation, the items
         listed on SCHEDULE 1.1) (the "Equipment").

1.2      INVENTORY. All raw materials inventory, work-in-process inventory, and
         finished goods inventory owned by Seller on the Closing Date
         (including, without limitation, the items listed on SCHEDULE 1.2) (the
         "Inventory").

1.3      RECEIVABLES. All accounts, chattel paper, documents, and instruments
         (all as defined in the Uniform Commercial Code (the "UCC") and any
         security Seller holds for the payment thereof on the Closing Date
         (including, without limitation, the items described on SCHEDULE 1.3)
         (the "Receivables"), and all of Seller's general intangibles (as
         defined in the UCC) (except as they may pertain to Seller's liabilities
         other than Assumed Liabilities described in Section 2 below).

1.4      REAL PROPERTY. Indefeasible title in fee simple to ownership of the
         Real Property as further described on SCHEDULE 1.4.

1.5      GOODWILL. The name "American Rivet Company," or any substantial
         derivation thereof, and any assumed name currently used in the
         Business, and all telephone numbers, fax numbers, and all Seller's
         rights and interest in and to inventions, copyrights, patents,
         trademarks, designs, prototypes, trade secrets, know-how, technology,
         technical literature, advertising literature, confidential information,
         intangible property, and all goodwill, going concern value and customer
         lists, all financial books and records, quoting systems or any other
         accounting or counting systems, and all records pertinent to the
         customers, suppliers, advertising, services, and operations of the
         Seller (the "Goodwill").

1.6      OUTSTANDING PURCHASE ORDERS. The full benefit of any and all purchase
         orders placed with and accepted by Seller on or before the Closing Date
         that have not been completely performed by Seller before the Closing
         Date, covering the purchase from Seller of products to be supplied by
         Seller, or covering the rendition by Seller of service on products
         supplied by Seller (including, without limitation, those items listed
         on SCHEDULE 1.6) (the "Outstanding Customer Purchase Orders").

1.7      CONTRACTS. All of the Sellers' right, title and interest in and to, and
         claims and rights under, the assumed contracts listed on SCHEDULE 1.7
         (the "Assumed Contracts")

1.8      OTHER ASSETS. All other assets of the Seller, including insurance
         benefits (and the cash surrender value of two life insurance policies
         on the two former owners of Seller (James Bauer and Anthony Reibel),
         and other claims and rights used in, related to, or pertaining to


ASSET PURCHASE AGREEMENT               2                          EXECUTION COPY
<PAGE>
         the Business (including, without limitation, the items described in
         SCHEDULE 1.8), except for the Excluded Assets (as defined below) (the
         "Other Assets").

2.       EXCLUDED ASSETS. The only assets of the Seller that are not being
         purchased hereunder are as follows (collectively, the "Excluded
         Assets"):

2.1      ALL CASH AND CASH EQUIVALENTS. All of the Seller's cash, temporary cash
         investments and instruments representing the same and all other cash
         equivalents, including checks, automated clearing house deposits or
         cash delivered to Comerica Bank-Texas ("Comerica") on the Closing Date
         or held by Comerica on the Closing Date.

2.2      TAX DEPOSITS AND REFUNDS. Any Tax (as defined below) deposits or
         prepaid Taxes, Tax refunds or claims related to the Business or the
         ownership of the Purchased Assets prior to the Closing Date.

2.3      CORPORATE RECORDS. Articles of Incorporation and original minute books
         and corporate records of the Seller (it being agreed that a copy of
         such documents shall be supplied to the Buyer on its request).

2.4      INSURANCE POLICIES. All casualty, liability, life or other insurance
         policies owned or obtained on the Seller's behalf and all claims or
         rights under any such insurance policies (excluding the two life
         insurance policies on the aforesaid former owners of Seller).

2.5      EMPLOYEE RECORDS. All employee records that Seller is required by law
         to retain in its possession (it being agreed that copies of such
         records shall be supplied to Buyer on its request).

2.6      EMPLOYEE PLANS. All of Seller's rights in connection with, and all
         assets of, its Employee Plans (as defined below).

2.7      ASSETS RELATED TO EXCLUDED LIABILITIES. All assets related to Excluded
         Liabilities (as defined below).

3.       LIABILITIES.

3.1      LIABILITIES ASSUMED. The parties agree that Buyer assumes no
         liabilities of Seller Parties, whether accrued, absolute, contingent,
         known, unknown, or otherwise, except for the following as they exist on
         the Closing Date (the liabilities so assumed, the "Assumed
         Liabilities"):

         (a)      TRADE ACCOUNTS PAYABLE. The trade accounts payable of Seller
                  that (i) are not over 90 days from the date of invoice as of
                  the Closing Date, as incurred in the Ordinary Course of
                  Business (as defined below) with respect to the materials or
                  services used in the conduct of the Business, a listing of
                  which as of October 25, 2001, is included on SCHEDULE 3.1(a),
                  and (ii) are over 90 days from the date of invoice as of the
                  Closing Date that are designated with an asterisk on SCHEDULE
                  3.1(a);

         (b)      OTHER ACCRUED PAYABLES. The other accrued payables incurred in
                  the Ordinary Course of Business as of the Closing Date that
                  are directly related to the Business, a listing of which as of
                  October 25, 2001 is set forth on SCHEDULE 3.1(b);


ASSET PURCHASE AGREEMENT               3                          EXECUTION COPY
<PAGE>
         (c)      OUTSTANDING CUSTOMER AND SUPPLIER PURCHASE ORDERS. All
                  obligations of the Seller under the Outstanding Customer
                  Purchase Orders and under Seller's outstanding purchase orders
                  with its vendors that are not yet recorded as trade accounts
                  payable, a listing of which as of October 25, 2001 is included
                  on SCHEDULE 3.1(c);

         (d)      VACATION ACCRUALS. All obligations of the Seller for any
                  vacation accruals for the Employees (as defined in Section
                  6.13);

         (e)      ASSUMED CONTRACTS. All obligations of the Seller under the
                  Assumed Contracts;

         (f)      REAL PROPERTY ESTATE TAXES. All real property ad valorem taxes
                  relating to the Real Property for the current tax year;

         (g)      WARRANTY CLAIMS. All obligations under warranty claims related
                  to products manufactured and sold to satisfy the Outstanding
                  Customer Purchase Orders; and

         (h)      BUYER DEFICIENCIES. All obligations in connection with or
                  related to the B Deficiencies (as defined in Section 9.7(f)).

3.2      EXCLUDED LIABILITIES. Buyer does not assume and will have no liability
         for any debt, liability or obligation of IHI or the Seller not
         expressly assumed in SECTION 3.1. Without limiting the generality of
         the foregoing sentence in any way, listed below are several of the
         liabilities and obligations that Buyer does not assume and will not be
         liable or responsible for (collectively, the "Excluded Liabilities"):

         (a)      TAXES. Any Tax liability of the Seller Parties;

         (b)      EMPLOYEE PLANS. Any liability under or with respect to any
                  Employee Plan;

         (c)      ENVIRONMENTAL. Any liability under any Environmental Laws (as
                  defined below) occurring or existing for events or
                  circumstances existing prior to the Closing and arising out of
                  or related to (i) any pre-Closing conduct, operation or
                  activity at the Real Property; (ii) any pre-Closing condition
                  of the Real Property; or (iii) Seller's lease, ownership or
                  operation of real property, including the Real Property, prior
                  to the Closing;

         (d)      COMERICA NOTE. All liabilities and obligations of either
                  Seller Party under the Amended and Restated Credit Agreement
                  with Comerica, dated June 17, 1999;

         (e)      MGF NOTE. All liabilities and obligations of the Seller under
                  the promissory note, dated August 3, 2001, in the original
                  principal amount of $657,225.86, made payable to the order of
                  MGF Industries, L.L.C;

         (f)      HELLER NOTE. All liabilities and obligations of the Seller
                  under that Promissory Note dated November 10, 1997, payable to
                  Heller Financial, Inc. in the original principal amount of
                  $8,000,000;

         (g)      ACCRUED INTEREST. All accrued interest related to the notes
                  described in subparagraphs 3.2(d)-(f) above;


ASSET PURCHASE AGREEMENT               4                          EXECUTION COPY
<PAGE>
         (h)      INTERCOMPANY PAYABLES. All payables included in the line item
                  titled "Interco payables (rec)" reflected on the balance sheet
                  of the Seller as of August 31, 2001 included in SCHEDULE 6.7
                  hereto, and those recorded in the financial records of Seller
                  after that date in the Ordinary Course of Business;

         (i)      ACCRUED ACQUISITION EXPENSES. Any and all expenses recorded by
                  IHI as part its purchase accounting in connection with the
                  acquisition of the Seller;

         (j)      ACCRUED SALES AND USE TAX. All accrued sales and use taxes of
                  the Seller as of the Closing Date; and

         (k)      ACCRUED BUSINESS INSURANCE EXPENSES. All accrued business
                  insurance of the Sellers (to the extent accrued on a
                  consistent basis).

3.3      EMPLOYEES. As of the Closing Date, the Buyer shall make offers of
         employment to all Employees at salaries or wage rates, as applicable,
         comparable to those provided by the Seller before the Closing Date, and
         shall become the employer of all of the Employees who accept such
         employment offers; provided, however, that Buyer shall offer to the
         Employees such employee and fringe benefits as Buyer determines in its
         sole discretion.

4.       PURCHASE PRICE FOR PURCHASED ASSETS.

4.1      PURCHASE PRICE. The purchase price to be paid by wire transfer in
         immediately available funds by Buyer to Seller for the Purchased Assets
         (the "Purchase Price") shall, in addition to the Assumed Liabilities,
         be $4,653,145.

4.2      ALLOCATION OF PURCHASE PRICE. The Purchase Price and the Assumed
         Liabilities shall be allocated among the Purchased Assets based on
         Buyer's and Seller's good faith and reasonable determination thereof,
         and in accordance with Section 1060 of the Internal Revenue Code of
         1986, as amended (the "Code") and the regulations promulgated
         thereunder. Such allocation shall be made in writing by Buyer and
         delivered to Seller within 60 days after the date hereof, and shall be
         binding on the Buyer and Seller for all purposes. Buyer and Seller
         agree to file all other returns and reports in a manner consistent with
         such allocation.

5.       CLOSING MATTERS.

5.1      CLOSING. The closing of the transactions provided for in this Agreement
         (the "Closing") shall occur at the offices of Baker & McKenzie, Suite
         3900, 130 East Randolph Drive, Chicago, Illinois 60601, at 10:00 a.m.,
         on October 26, 2001 (the "Closing Date"), or in such other manner as
         the parties agree to.

5.2      DELIVERIES PRIOR TO CLOSING. Prior to the Closing, the Seller delivered
         to the Buyer:

         (a)      a copy of the Nonsolicitation Agreement;

         (b)      a copy of the Transitional Services Agreement;

         (c)      a title commitment (the "Title Commitment") issued by Chicago
                  Title Insurance Company (the "Title Insurer") to insure title
                  to the Real Property, including all


ASSET PURCHASE AGREEMENT               5                          EXECUTION COPY
<PAGE>
                  insurable easements, if any, for the benefit thereof and
                  appurtenant thereto, in the amount of the portion of the
                  Purchase Price applicable to the Real Property, naming Buyer
                  as the proposed insured and having an effective date before
                  the date of this Agreement, wherein the Title Insurer will
                  commit to issue an ALTA 1992 form owner's policy of title
                  insurance with respect to the Real Property together with the
                  endorsements thereto specified in EXHIBIT C attached hereto;

         (d)      complete and legible copies of all recorded documents listed
                  as Schedule B matters to be terminated or satisfied in order
                  to issue the policy described in each Title Commitment or as
                  special Schedule B exceptions thereunder; and

         (e)      an ALTA/ACSM Land Title Survey of the Real Property (the
                  "Survey") dated October 18, 2001, made by Jens K. Doe
                  Professional Land Surveyors, P.C., a professional land
                  surveyor licensed by the state of Illinois, and bearing an
                  ALTA certificate, and signed and sealed by the surveyor.

5.3      DELIVERIES AT CLOSING.

         (a)      DELIVERIES BY THE SELLER PARTIES. At the Closing, the Seller
                  or the other indicated parties executed and delivered or
                  provided, as applicable, to Buyer:

                  (i)      the Bill of Sale and Assignment conveying the
                           Purchased Assets, attached as EXHIBIT D;

                  (ii)     the Assignment and Assumption Agreement, attached as
                           EXHIBIT E;

                  (iii)    the Purchase Price Disbursement Instruction Letter,
                           attached as EXHIBIT F;

                  (iv)     either (A) UCC-3 termination statements as are
                           required to terminate and release all liens on the
                           Purchased Assets (including without limitation the
                           Liens disclosed on SCHEDULE 6.16), or (B) letters of
                           creditors indicating that such Liens shall be
                           released on the Seller's payment of identified
                           amounts payable, in each case except for Permitted
                           Encumbrances and the permitted liens ("Permitted
                           Liens") listed on SCHEDULE 5.3(a)(iv);

                  (v)      a warranty deed conveying the Real Property, attached
                           as EXHIBIT G;

                  (vi)     the Title Insurer's pro forma title insurance policy
                           based on the Title Commitment deleting all
                           requirements listed therein for issuing the subject
                           title policy, amending the effective date thereof to
                           the date of recordation of the deed transferring
                           title to the Real Property to Buyer with no exception
                           for the gap between original date of issuance of the
                           Title Commitment and recordation, deleting or
                           insuring over any title objections which are not
                           Permitted Encumbrances, attaching all endorsements
                           required hereunder, and insuring Buyer's interest in
                           the Real Property, as evidenced by the Title
                           Insurer's acknowledgment of receipt of the Joint
                           Escrow Instruction Letter to the Title Insurer
                           delivering various closing documents pertaining to
                           the conveyance of the Real Property;


ASSET PURCHASE AGREEMENT               6                          EXECUTION COPY
<PAGE>
                  (vii)    certificates, dated as of a date no earlier than 15
                           days before the Closing Date, duly issued by the
                           appropriate governmental authority in the State of
                           Illinois, reflecting that Seller is in existence and
                           in good standing in such state;

                  (viii)   the Consulting Agreement attached as EXHIBIT H (the
                           "Consulting Agreement");

                  (ix)     Articles of Amendment to the Articles of
                           Incorporation of the Seller changing its name to a
                           name other than "American Rivet Company, Inc.";

                  (x)      a certification stating Seller's U.S. taxpayer
                           identification number and that Seller is not a
                           "foreign person" as defined in Code Section
                           1445(f)(3);

                  (xi)     an affidavit signed and sworn to on behalf of Seller
                           (to accompany the deed conveying the Real Property)
                           that the provisions of the Illinois Plat Act are
                           inapplicable to said conveyance because Seller owns
                           no property adjacent to the Real Property described
                           in said deed;

                  (xii)    a fully completed Illinois Transfer Tax Declaration
                           for the deed of the Real Property duly executed on
                           behalf of Seller;

                  (xiii)   a fully completed Cook County, Illinois Transfer Tax
                           Declaration for the deed of the Real Property duly
                           executed on behalf of Seller;

                  (xiv)    stamp(s) and such other certificates or documents as
                           are issued by the Village of Franklin Park, Illinois
                           evidencing payment in full of the applicable transfer
                           tax and satisfaction of all prerequisite requirements
                           pertaining thereto imposed by said Village on the
                           conveyance of the Real Property;

                  (xv)     copies certified by the respective Secretaries of the
                           Seller Parties of resolutions duly adopted by the
                           boards of directors of each of the Seller Parties and
                           by the sole shareholder of Seller authorizing and
                           approving the execution and delivery of this
                           Agreement, including the exhibits hereto, and the
                           transactions contemplated hereby;

                  (xvi)    the Escrow Agreement and the Joint Escrow Instruction
                           Letter to the American National Bank and Trust
                           Company of Chicago attached as EXHIBIT I (the "Escrow
                           Agreement and Instructions"); and

                  (xvii)   such other documents, instruments and certificates
                           necessary or appropriate in connection with the
                           Seller's sale and transfer of the Purchased Assets
                           and transfer and assignment of the Assumed
                           Liabilities.

         (b)      DELIVERIES BY THE BUYER. At the Closing, Buyer executed and
                  delivered or provided, as applicable, to the Seller Parties:

                  (i)      the Purchase Price;

                  (ii)     the Assignment and Assumption Agreement;


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<PAGE>
                  (iii)    the Consulting Agreement;

                  (iv)     any of the above documents and certifications related
                           to the Real Property to be executed and delivered by
                           Buyer;

                  (v)      a fully completed Illinois Transfer Tax Declaration
                           for the deed of the Real Property duly executed on
                           behalf of Buyer;

                  (vi)     a fully completed Cook County, Illinois Transfer Tax
                           Declaration for the deed of the Real Property duly
                           executed on behalf of Buyer;

                  (vii)    copy certified by the Secretary of the Buyer of
                           resolutions duly adopted by the board of directors of
                           the Buyer authorizing and approving the execution and
                           delivery of this Agreement, including the exhibits
                           hereto, and the transactions contemplated hereby;

                  (viii)   the Escrow Agreement and Instructions;

                  (ix)     such other documents, instruments and certificates
                           necessary or appropriate in connection with the
                           Buyer's purchase of the Purchased Assets and
                           assumption of the Assumed Liabilities; and

                  (x)      the Buyer Gap Undertaking Statement as promulgated by
                           the Title Insurer.

6.       SELLER PARTIES' REPRESENTATIONS AND WARRANTIES. Each of the Seller
         Parties, jointly and severally, represents and warrants to Buyer that
         as of the Closing Date (except to the extent any representation or
         warranty is made as of another date, which is in such case made as of
         such other date):

6.1      ORGANIZATION AND STANDING. The Seller is a corporation duly
         incorporated, validly existing, and in good standing under the laws of
         the State of Illinois. Seller has all requisite power and authority to
         own its properties and conduct the Business as it is now being
         conducted. Seller is duly qualified and in good standing in every
         jurisdiction in which it is required by the nature of its business or
         the ownership or lease of its properties to so qualify, except where
         the failure to so qualify does not or is not reasonably expected to
         have a material adverse effect on the Seller or the Business. IHI is
         the owner of all of the issued and outstanding capital stock of the
         Seller.

6.2      AUTHORIZATION. Each of the Seller Parties has all requisite corporate
         power and authority (a) to execute, deliver, and perform this Agreement
         and all other agreements and instruments that are being delivered
         herewith at the Closing under Section 5.3(a) (all such other agreements
         and instruments, the "Related Agreements") to which each is a party and
         (b) to consummate the transactions contemplated under this Agreement
         and the Related Agreements. Each of the Seller Parties has taken all
         necessary corporate action (including the approval of its board of
         directors and, in the case of Seller, its sole shareholder), as the
         case may be, to approve the execution, delivery, and performance of
         this Agreement and the Related Agreements to be executed and delivered
         by it and the consummation of the transactions contemplated in this
         Agreement and in the Related Agreements. Each of the Seller Parties has
         duly executed and delivered this Agreement. This Agreement and the


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<PAGE>
         Related Agreements are the legal, valid, and binding obligations of
         each of the Seller Parties that are a party to them, enforceable
         against each of them in accordance with the Agreement and Related
         Agreements' respective terms, except as such enforcement may be limited
         by bankruptcy, insolvency, moratorium, or similar laws relating to the
         enforcement of creditors' rights and by general principles of equity
         (regardless of whether such enforceability is considered in a
         proceeding at law or in equity).

6.3      EXISTING AGREEMENTS AND OTHER APPROVALS.

         (a)      Except as set forth on SCHEDULE 6.3(a), the execution,
                  delivery, and performance of this Agreement and the Related
                  Agreements and the consummation of the transactions
                  contemplated by them: (i) do not violate any provisions of law
                  applicable to either of the Seller Parties, the Business or
                  the Purchased Assets; (ii) do not conflict with, result in the
                  breach or termination of any provision of, or constitute a
                  default under (in each case whether with or without the giving
                  of notice or the lapse of time or both) the Articles of
                  Incorporation or Bylaws of either of the Seller Parties, or
                  any indenture, mortgage, lease, deed of trust, or other
                  instrument, contract, or agreement that is material to the
                  Business, or any order, judgment, arbitration award, or decree
                  to which either of the Seller Parties is a party or by which
                  it is bound (including, without limitation, the Purchased
                  Assets); and (iii) do not result in the creation of any lien
                  or encumbrance on any of the Purchased Assets.

         (b)      Except as set forth on SCHEDULE 6.3(b), no approval,
                  authority, or consent of, or filing by, either of the Seller
                  Parties with, or notification to, any federal, state, or local
                  court, authority, or governmental or regulatory body or agency
                  or any other corporation, partnership, individual, or other
                  entity is necessary (i) to authorize the execution and
                  delivery of this Agreement or any of the Related Agreements by
                  either of the Seller Parties, (ii) to authorize the
                  consummation of the transactions contemplated by this
                  Agreement or any of the Related Agreements by either of the
                  Seller Parties, or (iii) to continue Buyer's use and operation
                  of the Purchased Assets after the Closing Date.

6.4      NO SUBSIDIARIES. Seller has no subsidiaries and directly or indirectly
         owns no interest or has any investment in any other corporation,
         partnership, or other entity.

6.5      NO INSOLVENCY. No insolvency proceeding of any character, including,
         without limitation, bankruptcy, receivership, reorganization,
         composition, or arrangement with creditors, voluntary or involuntary,
         affecting either of the Seller Parties or any of its assets or
         properties is pending or, to Seller Parties' knowledge, threatened.
         Seller Parties have not taken any action in contemplation of, or that
         would constitute the basis for, the institution of any such insolvency
         proceedings.

6.6      PERMITS AND LICENSES. SCHEDULE 6.6 lists all the permits certificates,
         licenses, approvals, consents, and other authorizations or
         qualifications that the Seller has and that are necessary to carry and
         conduct the Business and to own, lease, use, and operate the Purchased
         Assets at the places and in the manner in which the Business is
         conducted, all of which, to the extent


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<PAGE>
         transferable, shall be transferred or assigned to Buyer at the Closing,
         without expense to Buyer.

6.7      FINANCIAL STATEMENTS. Attached as SCHEDULE 6.7 are copies of the
         Seller's:

         (a)      unaudited balance sheet as of December 31, 1999 and related
                  statement of operations for the 12-month period then ended;

         (b)      unaudited balance sheet as of December 31, 2000 and related
                  statement of operations for the 12-month period then ended;
                  and

         (c)      unaudited balance sheet of Seller as of August 31, 2001 (the
                  "August 31 Balance Sheet") and related statement of operations
                  for the eight-month period then ended ((a)-(c) above,
                  collectively, the "Financial Statements").

         The Financial Statements have been prepared in accordance with
         generally accepted accounting principles ("GAAP"), subject to normal
         recurring year-end adjustments and the absence of notes, fairly present
         in all material respects Seller's financial position as of the dates
         indicated and the results of its operations as of the dates indicated
         and for the periods covered thereby. Seller's books and records have
         been maintained on an accrual basis in accordance with GAAP in the
         financial books and records of the Seller, and accurately reflect the
         basis for the financial condition and the results of its operations
         that are set forth in the Financial Statements.

6.8      INVENTORY. All items included in the Inventory listing on SCHEDULE 1.2
         are of a quality usable and, with respect to finished goods, saleable
         in the Ordinary Course of Business, except for obsolete items and items
         of below-standard quality that have been written off, written down or
         reserved against, as reflected on SCHEDULE 1.2. All of the Inventory
         not written off has been valued at standard cost consistent with
         Seller's past practices. Seller is not in possession of any consigned
         inventory not owned by Seller or any finished goods to which title has
         passed to the customer under the Seller's customary shipping and
         fulfillment practices. All of the Inventory purchased after August 31,
         2001 was purchased in the Ordinary Course of Business. All of the
         Inventory is maintained at the location of the Real Property.

6.9      RECEIVABLES. All Receivables that are reflected on SCHEDULE 1.3
         represent valid obligations arising from sales actually made or service
         actually performed in the Ordinary Course of Business. All Receivables
         reflected on SCHEDULE 1.3 are current and collectible within 120 days
         after the date of invoice, net of the reserve shown on SCHEDULE 1.3.

6.10     NO UNDISCLOSED LIABILITIES. Except as disclosed in the August 31, 2001
         Balance Sheet or as incurred in the Ordinary Course of Business
         thereafter, Seller has no liabilities or obligations, whether accrued,
         absolute, contingent, or otherwise, and, to the Seller Parties'
         knowledge, there exists no fact or circumstance that could give rise to
         any such liabilities or obligations in the future.

6.11     CONDUCT OF BUSINESS. Except as otherwise disclosed on attached SCHEDULE
         6.11, since August 31, 2001, Seller has not:


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<PAGE>
         (a)      declared or paid any dividend or made any other payment from
                  capital or surplus or other distribution of any nature, or
                  directly or indirectly redeemed, purchased, or otherwise
                  acquired, recapitalized, or reclassified any of its capital
                  stock;

         (b)      altered or amended its Articles of Incorporation or Bylaws;

         (c)      entered into, materially amended, or terminated any contract,
                  license, lease, commitment, or permit, except in the Ordinary
                  Course of Business;

         (d)      experienced any labor disturbance;

         (e)      incurred or become subject to any obligation or liability
                  (absolute, accrued, contingent, or otherwise), except (i) in
                  the Ordinary Course of Business and (ii) in connection with
                  the performance of this Agreement;

         (f)      paid or satisfied any obligation or liability (absolute,
                  accrued, contingent, or otherwise) other than (i) liabilities
                  shown or reflected in the August 31 Balance Sheet, or (ii)
                  liabilities incurred since the date of the balance sheet, in
                  each case only in the Ordinary Course of Business and in
                  accordance with the express terms of such obligation or
                  liability;

         (g)      sold, transferred, or agreed to sell or transfer any asset,
                  property, or business; cancelled or agreed to cancel any debt
                  or claim; or waived any right, except in the Ordinary Course
                  of Business;

         (h)      disposed of or permitted to lapse any Intellectual Property;

         (i)      instituted or settled any litigation, action, or proceeding
                  before any court or governmental body relating to the
                  Purchased Assets or the Business;

         (j)      made any change in any method of accounting or any accounting
                  practice or suffered any deterioration in accounting controls;

         (k)      carried on or conducted the Business or entered into any other
                  transaction other than in the Ordinary Course of Business;

         (l)      reduced, on a daily basis, the cash allocation from IHI to
                  Seller so that it was less than an average of $12,500 per
                  business day; or

         (m)      agreed or committed to do any of the foregoing.

         As used herein, "Ordinary Course of Business" means actions of the
         Seller that are: (a) consistent with past practices taken in the course
         of its usual day-to-day operations (including the collection of its
         accounts receivable, payment of trade accounts and other payables, and
         maintenance of insurance and inventory levels); (b) not required to be
         authorized by resolution of the Seller's board of directors; and (c)
         similar in nature and magnitude to actions customarily taken, without
         authorization by the boards of directors in


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<PAGE>
         the ordinary course of usual day-to-day operations of other companies
         of similar size in the same line of business.

6.12     NO ADVERSE CHANGES. Except as otherwise disclosed in SCHEDULE 6.12,
         since December 31, 2000, there has been no occurrence, condition, or
         development that has adversely affected, or is likely to adversely
         affect, Seller, its prospects, its condition (financial or otherwise),
         its affairs, its operations, the Business, or the Purchased Assets.

6.13     EMPLOYEES. SCHEDULE 6.13 lists the name, position, date of employment,
         salary, hourly wage rate, commission or bonus and other benefits
         (excluding those under any Employee Plan (as defined below)), for each
         employee of Seller (the "Employees"). Except as described on SCHEDULE
         6.13, Seller is not a party to or bound by any agreement with any
         employee. There is not now, nor has there been at any time during the
         past five years, any strike, lockout, grievance, other labor dispute,
         or trouble of any nature pending or, to Seller Parties' knowledge,
         threatened against Seller. All wages, vacation pay, and fringe benefits
         due to employees of the Business have, as of the Closing Date, been
         paid or accrued consistent with past practices of Seller, except where
         the failure to so pay or accrue does not or is not reasonably expected
         to have a material adverse effect on the Seller or the Business.

6.14     EMPLOYEE BENEFIT PLANS.

         (a)      SCHEDULE 6.14 lists or discloses each employee benefit plan,
                  program or arrangement of whatever nature, whether or not
                  subject to any provisions of the Employee Retirement Income
                  Security Act of 1974, as amended ("ERISA"), bonus, stock, or
                  other employee pay practice, consulting, retainer, employment,
                  retirement, welfare, fringe benefit, insurance, incentive,
                  vacation, holiday, sickness, leave of absence, or any other
                  plan, policy, program, agreement or other arrangement that
                  either Seller Party sponsors, maintains or contributes to with
                  respect to either Seller Party's current or former employees
                  (individually and collectively, "Employee Plan"). No Employee
                  Plan shall by its terms or applicable law, become binding upon
                  or an obligation, liability or responsibility of Buyer in any
                  way, financial or otherwise. Neither Seller Party has engaged
                  in any action or omission which may result in Buyer being a
                  party to, or bound by, any Employee Plan. Except for the
                  agreement between Seller and Anthony W. Reibel that is
                  disclosed on Schedule 6.15 hereto, no Employee Plan provides
                  for payment of termination, change of control or retiree
                  benefits in any manner such that Buyer would become liable to
                  provide such benefits.

         (b)      With respect to any Employee Plan that is subject to the
                  continuation requirements of Sections 601-608 of ERISA and
                  Code Section 4980B or the continuation requirements of any
                  applicable state or local law, each Seller Party's sponsoring,
                  maintaining or contributing to such Employee Plan has complied
                  with all such applicable laws and regulatory requirements with
                  respect to such Seller Party's current or former employees.

         (c)      No Employee Plan is either (i) a "multiemployer plan" (as
                  defined in Section 3(37) of ERISA) or (ii) a defined benefit
                  pension plan subject to Title IV of ERISA.


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<PAGE>
         (d)      During the five years preceding the Closing Date, (i) no
                  under-funded pension plan subject to Section 412 of the Code
                  has been transferred out of the Seller or IHI and (ii) neither
                  Seller Party has participated in or contributed to, nor had an
                  obligation to contribute to, any multiemployer plan (as
                  defined in ERISA Section 3(37)) and neither Seller Party has
                  any withdrawal liability with respect to any multiemployer
                  plan.

         (e)      Each Employee Plan which the employees of either Seller Party
                  participate in that meets or purports to meet the requirements
                  of Code Section 401(a) has received a favorable determination
                  letter from the IRS that it is qualified under Section 401(a)
                  and that its related trust is exempt from federal income tax
                  under Section 501(a) and each such plan complies in form and
                  in operation with the requirements of the Code and meets the
                  requirements of a "qualified plan" under Code Section 401(a).
                  To each Seller Party's knowledge, no event has occurred or
                  circumstance exists that will or could give use to
                  disqualification or loss of tax-exempt status of any such plan
                  or trust.

6.15     CONTRACTS. Except for (i) the contracts and commitments listed on
         SCHEDULE 6.15 ("Contracts and Commitments"), (ii) contracts and
         commitments specifying payment by the Seller or to the Seller of
         $25,000 or less over the term of that contract or commitment, (iii) the
         Outstanding Customer Purchase Orders, or (iv) as otherwise listed on
         SCHEDULE 6.15, the Seller is not a party to nor bound by any agreement
         or commitment that affects the Business, the Purchased Assets, or the
         Assumed Liabilities. All Contracts and Commitments are valid and
         binding obligations of the Seller in accordance with their respective
         terms. No material default or alleged material default exists on the
         part of the Seller or, to the Seller Parties' knowledge, on the part of
         any other party, under any of the Contracts and Commitments. True and
         complete copies of all Contracts and Commitments that are Assumed
         Contracts have been delivered to Buyer.

6.16     TITLE TO PURCHASED ASSETS; LIENS.

         (a)      Seller is the owner of and has good title to all of the
                  Purchased Assets other than the Real Property, free and clear
                  of any and all liens, claims, demands, charges, options,
                  equity interests, leases, pledges and security interests
                  ("Liens"), except as described on SCHEDULE 6.16 and except for
                  liens for personal property taxes that are not yet due and
                  payable.

         (b)      SCHEDULE 6.16 contains a correct legal description, street
                  address and tax parcel identification number of the Real
                  Property.

         (c)      Seller owns good and marketable fee simple title to the Real
                  Property, free and clear of any Encumbrances, other than the
                  lien for general real estate taxes which are not yet due and
                  payable, public utility easements and covenants, conditions
                  and restrictions of record which will not materially and
                  adversely affect Buyer's use and enjoyment of the Real
                  Property (collectively, the "Permitted Encumbrances"). As used
                  herein the term "Encumbrances" means any Lien, charge, claim,
                  mortgage, servitude, easement, right of way, community or
                  other marital property interest,


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<PAGE>
                  covenant, equitable interest, license, lease or other
                  possessory interest, option, pledge, security interest, deed
                  restriction, preference, priority, right of first refusal or
                  similar restriction.

         (d)      Except for the roof of the building on the Premises (the
                  "Building Roof"), and the deficiencies identified in the
                  Inspection Report for the Premises issued by the Village of
                  Franklin Park, Illinois, dated October 16, 2001, a copy of
                  which is attached hereto as EXHIBIT K (the "Identified
                  Deficiencies"), such building and all structures, furniture,
                  fixtures, machinery and equipment included in the Purchased
                  Assets are in good operating condition and repair, given their
                  respective ages and prior usage, ordinary wear and tear
                  excepted. Except for the Building Roof and the Identified
                  Deficiencies, none of such building or any structures,
                  furniture, fixtures, machinery and equipment needs maintenance
                  or repairs, except for ordinary, routine maintenance and
                  repairs. Except for the Building Roof and the Identified
                  Deficiencies, neither Seller Party is aware of (i) any defects
                  in the structural components of such building (including the
                  foundation and exterior walls) and building systems (including
                  the heating, ventilating and air conditioning, electrical,
                  mechanical and plumbing systems) included in the Purchased
                  Assets, taking into account their respective ages and prior
                  usage, or (ii) any present need for material repairs to the
                  structural components of such building or the building
                  systems, except for ordinary, routine maintenance and repair.

         (e)      SCHEDULE 6.16 lists or describes all property used in the
                  conduct of the Business and/or situated on the Premises that
                  is owned by or an interest in which is claimed by any other
                  person (whether a customer, supplier, or other person) and for
                  which Seller is responsible, together with copies of all
                  related agreements.

6.17     TAXES.

         (a)      "Tax" or "Taxes" shall mean all of the Seller's federal,
                  state, county, local, and other taxes relating to all periods
                  before the Closing Date (including, without limitation, income
                  taxes; premium taxes; single-business taxes; excise taxes;
                  sales taxes; use taxes; value-added taxes; gross receipts
                  taxes; franchise taxes; ad valorem taxes; real estate taxes;
                  severance taxes; capital levy taxes; stamp taxes; employment,
                  unemployment, and payroll-related taxes; withholding taxes;
                  and governmental changes and assessments; including without
                  limitation all transfer taxes), and include interest,
                  additions to tax, and penalties.

         (b)      Seller has filed on a timely basis all Tax returns it is
                  required to file under federal, state, or local law, and has
                  paid or established an adequate reserve with respect to all
                  Taxes for the periods covered by such returns. No agreements
                  have been made by or on behalf of Seller for any waiver or for
                  the extension of any statute of limitations governing the time
                  of assessment or collection of any Taxes. Neither of the
                  Seller Parties nor their respective officers have received
                  notice of any pending or threatened audit by the IRS or any
                  state or local agency related to Seller's Tax returns or Tax
                  liability for any period, and no claim for assessment or
                  collection of Taxes has been asserted against Seller. There
                  are no federal, state, or local tax liens outstanding


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<PAGE>
                  against any of Seller's assets (including, without limitation,
                  the Purchased Assets) or the Business.

         (c)      The sale by Seller of the Purchased Assets and the Buyer's
                  acquisition of such assets will not result in the imposition
                  of or liability of the Buyer for any sales or use taxes except
                  in connection with the transfer of any motor vehicles that are
                  part of the Purchased Assets.

6.18     LITIGATION. There are no claims, disputes, actions, suits, proceedings,
         or investigations pending or, to Seller Parties' knowledge, threatened,
         against or affecting the Seller, the Business, or the Purchased Assets.

6.19     PRODUCT LIABILITY. No known defect or deficiency exists in any of the
         products manufactured or sold by the Seller, or in any finished
         Inventory of the Seller, that could give rise to any liabilities or
         claims for product liability or similar liabilities or claims.

6.20     ENVIRONMENTAL MATTERS.

         (a)      The following terms used in this Section 6.20 have the
                  meanings set forth below:

                  (i)      Environmental Laws means all federal, state, county,
                           municipal and local, foreign, and other statutes,
                           laws, regulations, and ordinances that relate to
                           human health or Environment, all as may be amended
                           from time to time.

                  (ii)     Hazardous Substance(s) means any flammable or
                           combustible substance, explosive, radioactive
                           material, hazardous waste, toxic substance,
                           pollutant, contaminant, or any waste or other
                           substance identified in or regulated by any of the
                           Environmental Laws, including but not limited to,
                           asbestos or asbestos-containing materials;
                           polychlorinated biphenyls, urea formaldehyde,
                           chemicals and chemical wastes, petroleum products and
                           by-products (including all derivates thereof or
                           synthetic substitutes therefor), and radon.

                  (iii)    Release means any release, spill, emissions, leaking,
                           pumping, pouring, dumping, emptying, injection,
                           deposit, disposal, discharge, dispersal, leaching or
                           migration on or into the Environment or into or out
                           of any property.

                  (iv)     Environment means soil, land surface or subsurface
                           strata, surface water (including navigable water),
                           ground waters, drinking water supply, stream
                           sediments, ambient air (including indoor air), plant
                           life, animal life, and any other similar medium or
                           natural resource.

         (b)      Except as described in SCHEDULE 6.20: (i) Seller is now and
                  has at all times been in full compliance with all
                  Environmental Laws; (ii) to Seller Parties' knowledge, there
                  are no Hazardous Substances or other conditions in, on or
                  under the Real Property that may support a claim or cause of
                  action against Seller Parties or Buyer under any Environmental
                  Laws; (iii) there are not, and never have been, any
                  underground storage tanks located in, on or under the Real
                  Property; (iv) neither the Seller Parties nor their directors,
                  officers, employees, or agents have generated or transported
                  any Hazardous Substances at any time that have been
                  transported to or disposed of in any


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<PAGE>
                  landfill or other facility where the transportation or
                  disposal could create liability to any unit of government or
                  any third party; (v) since December 13, 1996, there has been
                  no Release of any Hazardous Substances at, in, on or under the
                  Real Property; (vi) to Seller Parties' knowledge, prior to
                  December 16, 1996, there has been no Release or threatened
                  Release of any Hazardous Substance at, in, on or under the
                  Real Property; and (vii) there are no Hazardous Substances
                  used, generated, or stored on or at the Real Property.

         (c)      Except as described in SCHEDULE 6.20, no activity has been
                  undertaken on the Real Property by Seller, or, to Seller
                  Parties' knowledge, by any other party, that would cause or
                  contribute to (i) the Real Property becoming a treatment,
                  storage or disposal facility within the meaning of any
                  Environmental Laws; (ii) a Release or threatened Release of
                  any Hazardous Substances; or (iii) the discharge of pollutants
                  or effluents into the Environment or the dredging or filling
                  of any waters, where such action would require a permit under
                  any Environmental Laws. Seller Parties have obtained all
                  permits required by all applicable Environmental Laws, which
                  are listed on SCHEDULE 6.20, and all such permits are in full
                  force and effect.

         (d)      Except as described in SCHEDULE 6.20, no executive officer of
                  either Seller Party have has received any verbal notification,
                  and neither Seller Party has received any written citation,
                  directive, inquiry, notice, order, summons, warning or other
                  written communication that relates to such party being liable
                  or potentially liable (including being a potentially
                  responsible party) under, or being in violation or potential
                  violation of, any Environmental Laws.

         (e)      Seller is in full compliance with the provisions applicable to
                  Seller contained in the No Further Remediation Letter (the
                  "NFR") issued by the Illinois Environmental Protection Agency
                  for the Real Property and described more fully in EXHIBIT J.
                  The NFR has been properly and timely recorded with the
                  Recorder of Deeds of Cook County, Illinois. Fees, if any,
                  applicable to Seller Parties with respect to the NFR pursuant
                  to the Illinois Environmental Protection Act and regulations
                  promulgated thereunder, as to which invoices have been
                  received by Seller Parties, have been paid. To Seller Parties'
                  knowledge, the NFR is fully valid and in force. To Seller
                  Parties' knowledge, the NFR is not at risk of being voided by
                  the Illinois Environmental Protection Agency.

         (f)      Seller Parties have disclosed and delivered to Buyer true and
                  complete copies and results of all completed environmental
                  reports, investigations, studies, analyses, tests or
                  monitoring that Seller Parties have in their possession or
                  control with respect to the Real Property.

6.21     NO BROKERS. The Seller Parties have not engaged, and are not
         responsible for any payment to, any finder, broker, or consultant in
         connection with the transactions contemplated by this Agreement, except
         as set forth on SCHEDULE 6.21.

6.22     INTELLECTUAL PROPERTY. SCHEDULE 6.22 lists all patents, processes,
         trademarks, trade names, copyrights, service marks, logos, trade
         secrets and all applications and registrations therefor


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<PAGE>
         that are used in the Business, and licenses thereof under which the
         Seller has any right to the use or benefit of, or other rights with
         respect to, any of the foregoing ("Intellectual Property"). Except as
         set forth in SCHEDULE 6.22, the Seller is the sole and exclusive owner
         of the Intellectual Property, free and clear of all Encumbrances. To
         the Seller Parties' knowledge, none of the Seller's Intellectual
         Property infringes on any other person's intellectual property, and, to
         the Seller Parties' knowledge, no activity of any other person
         infringes on any of the Intellectual Property. To the Seller Parties'
         knowledge, the Seller has been and is now conducting the Business in a
         manner that has not been and is not now in violation of any other
         person's intellectual property, and Seller does not require a license
         or other proprietary right to so operate the Business.

6.23     COMPLIANCE WITH LAW. Seller is not, and at all times since January 1,
         1997, has not been, in violation of any provision of any law, decree,
         order, regulation, license, permit, consent, approval, authorization or
         qualification, including, without limitation, those relating to health,
         the environment or Hazardous Substances, and neither of the Seller
         Parties has received notice of any alleged violation by Seller of such
         law, decree, order, regulation, license, permit, consent, approval,
         authorization or qualification.

6.24     INSURANCE. SCHEDULE 6.24 contains a list and brief description of (a)
         each insurance policy in effect on the date hereof issued to either or
         both of the Seller Parties as a "named insured" or otherwise providing
         insurance to either or both of the Seller Parties as an insured party
         or additional insured party, or on any other basis, relating to the
         Purchased Assets or the Business (b) any self-insurance program,
         retrospective premium program or captive insurance program in effect on
         the date hereof in which either or both of the Seller Parties has
         participated relating to Purchased Assets or the Business.

7.       BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants
         to each of the Seller Parties that as of the Closing Date (except to
         the extent any representation or warranty is made as of another date,
         which is in such case made as of such other date):

7.1      ORGANIZATION AND STANDING. Buyer is a corporation validly existing
         under the laws of the State of Illinois, and Buyer has all the
         requisite corporate power and authority to own its properties and to
         conduct its business as it is now being conducted.

7.2      AUTHORIZATION. Buyer has taken all necessary action (a) to duly approve
         the execution, delivery, and performance of this Agreement and (b) to
         consummate any related transactions. Buyer has duly executed and
         delivered this Agreement. This Agreement is the legal, valid, and
         binding obligation of Buyer, enforceable against Buyer in accordance
         with its terms, except as such enforcement may be limited by
         bankruptcy, insolvency, moratorium, or similar laws relating to the
         enforcement of creditor's rights and by general principles of equity
         (regardless of whether such enforceability is considered in a
         proceeding at law or in equity).

7.3      EXISTING AGREEMENTS AND GOVERNMENTAL APPROVALS.

         (a)      The execution, delivery, and performance of this Agreement and
                  the consummation of the transactions contemplated thereby: (i)
                  do not violate any provisions of the law applicable to Buyer;
                  (ii) do not conflict with, result in the breach or termination
                  of


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<PAGE>
                  any provision of, or constitute a default under (in each case
                  whether with or without the giving of notice or the lapse of
                  time, or both) Buyer's Articles of Incorporation, or any
                  indenture, mortgage, lease, deed of trust, or other
                  instrument, contract, or agreement or any order, judgment,
                  arbitration award, or decree to which Buyer is a party or by
                  which it or any of its assets and properties are bound; and
                  (iii) do not result in the creation of any Lien or encumbrance
                  on any of the Buyer's properties, assets, or business.

         (b)      No approval, authority, or consent of, or filing by Buyer
                  with, or notification to, any federal, state, or local court,
                  authority, or governmental or regulatory body or agency or any
                  other corporation, partnership, individual, or other entity is
                  necessary (i) to authorize Buyer's execution and delivery of
                  this Agreement or (ii) to authorize Buyer's consummation of
                  the transactions contemplated by this Agreement.

7.4      NO BROKERS. The Buyer has not engaged, and is not responsible for any
         payment to, any finder, broker, or consultant in connection with the
         transactions contemplated by this Agreement.

8.       POST-CLOSING COVENANTS.

8.1      POST-CLOSING RECEIPTS. From and after the Closing Date, the Seller
         Parties will promptly notify and transfer to Buyer any payments or
         other receipts they receive with respect to any of the Purchased
         Assets. Pending any such transfer, the Seller Parties will segregate
         any such payments from its other assets and will clearly mark or
         designate them as the property of Buyer.

8.2      SELLER NAME. From and after the Closing Date, Buyer shall have the
         right to use in or in connection with the conduct of any business
         (whether carried on by it directly or through any related corporation)
         the name "American Rivet Company" and any other name used by the Seller
         (collectively, the "Name") or any substantially similar variation of
         the Name. The Seller Parties agree that they will not use either
         directly or indirectly the Name, either alone or in combination with
         one or more other words, in or in connection with any business,
         activities, or operations that either of the Seller Parties or any
         other subsidiaries of IHI or the Seller directly or indirectly carries
         on or conducts.

8.3      FURTHER ASSURANCES. From time to time after the Closing Date, each
         party hereto will, at any other party's request, execute, acknowledge
         and deliver to such requesting party such other instruments and take
         such other actions and deliver such other documents as may be
         reasonably required to carry out the intent of this Agreement and the
         Related Agreements.

8.4      BOOKS AND RECORDS. Insofar as the Seller determines that any books and
         records may be needed or useful in connection with federal, state or
         local regulatory or tax matters, resolution of third party disputes or
         contract compliance issues, or other bona fide business purposes, for a
         period of seven years after the Closing Date, Buyer will use its
         reasonable commercial efforts to preserve and make available to the
         Seller, at the location of such books and records in the Buyer's
         organization, access to and the right to copy such of the books and
         records as such Buyer may then have in its possession or to which it
         may have access upon written request of the Seller during normal
         business hours. The Buyer agrees to make such


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<PAGE>
         of their employees and of the books and records as the Seller may
         reasonably request, available at the Buyer's cost, to assist in the
         preparation by Seller of financial reports and tax returns for the
         Seller's fiscal year ending in 2001.

8.5      WAIVER. The Buyer hereby waives, releases, relinquishes and acquits
         each of IHI, T-3 Energy Services, Inc., First Reserve Fund VIII, L.P.
         and Comerica, as agent and individually, Hibernia National Bank and
         National Bank of Canada, and their directors, officers, stockholders,
         agents and successors, from and against all claims, counterclaims,
         demands, suits, rights, actions and causes of action of any nature
         whatsoever, as a result of or in connection with the sale by IHI or the
         EPG Division Members (other than Seller) of the assets or capital stock
         of such EPG Group Division Members to persons other than the Buyer.

8.6      COLLECTION OF RECEIVABLES. Buyer shall notify the Seller in writing
         regarding any receivables set forth on SCHEDULE 6.9 that are not
         collected within 120 days after the invoice dates thereof (the
         "Post-Invoice Collection Period"), specifying those receivables not
         collected within the Post-Invoice Collection Period. Seller shall then
         have a period of 30 days after the date of such written notice to
         collect such receivables, which shall be deemed "Uncollected
         Receivables" if not collected during such 30-day period.

8.7      WARRANTY AND RETURNS.

         (a)      After the Closing, if any customer of Seller is entitled by
                  law or contract to, and does, return any item sold by Seller
                  prior to Closing, Buyer shall take such returned item and
                  credit the account of such customer as follows: (i) if such
                  item is not saleable within 90 days of its return, for the
                  full amount of the purchase price; and (ii) otherwise, zero
                  (in either case, the "Return Amount"). For all such returns,
                  the Return Amount shall be paid to Buyer by Seller.

         (b)      After the Closing, if any customer of Seller is entitled by
                  law or contract to, and does, seek warranty work on any item
                  sold by Seller prior to Closing, Buyer agrees with Seller to
                  provide such warranty work on such item for Seller's account.
                  Seller shall pay Buyer for such work an amount equal to the
                  actual cost of such work; provided (i) that if the labor for
                  such warranty work is applied in the Ordinary Course of
                  Business and does not give rise to incremental labor cost to
                  Buyer, there shall be no charge for such labor, and (ii) that
                  Buyer shall not charge Seller for charges by a subcontractor
                  on account of labor unless the use of a subcontractor is
                  consistent with Seller's customary business practice or course
                  of dealing prior to the Closing.

8.8      EMPLOYEE PAYABLES. After the Closing Date, Seller shall pay, perform,
         satisfy and discharge, as and when due and payable, the accrued
         payables or expenses that pertain to the Employees that are not Assumed
         Liabilities, including without limitation, the credit union payable,
         medical savings or child support withheld, accrued payroll expense, IHI
         401(k) Plan payable (employer match), employee life insurance payable,
         and employee/employer medical expenses, all as reflected on the
         financial records of the Seller on and as of the Closing Date.


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<PAGE>
9.       INDEMNIFICATION.

9.1      SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
         warranties, covenants and obligations in this Agreement, the Schedules,
         the updates, amendments or changes to the Schedules, and any other
         certificate or document delivered pursuant to this Agreement will
         survive the Closing, and the consummation of the contemplated
         transactions, subject to the limitations set forth in this Section 9.

9.2      INDEMNIFICATION BY THE SELLER PARTIES. The Seller Parties, jointly and
         severally, shall defend, indemnify, and hold harmless Buyer and its
         directors, officers, shareholders, agents and attorneys, successors,
         and assigns (the "Buyer Indemnitees") from and against any and all
         costs, losses, claims, suits, actions, proceedings, demands,
         assessments, diminution in value, liabilities, fines, penalties,
         damages and expenses (including reasonable legal fees) ("Damages") in
         connection with or resulting from:

         (a)      any of the Excluded Liabilities and any other debts,
                  liabilities, and obligations of Seller, whether accrued,
                  absolute, contingent, known, unknown, or otherwise, but
                  excluding any of the Assumed Liabilities;

         (b)      any inaccuracy in any representation or breach of any warranty
                  of Seller Parties contained in this Agreement or any Related
                  Agreement; and

         (c)      any failure by Seller Parties to perform or observe in full,
                  or to have performed or observed in full, any covenant,
                  agreement, or condition to be performed or observed by the
                  Seller Parties under this Agreement or any Related Agreement.

9.3      INDEMNIFICATION BY THE BUYER. The Buyer shall defend, indemnify and
         hold harmless the Seller Parties and their directors, officers,
         shareholders, agents and attorneys, successors and assigns (the "Seller
         Indemnitees") from and against any Damages in connection with or
         resulting from:

         (a)      any of the Assumed Liabilities;

         (b)      any inaccuracy in any representation or breach of any warranty
                  of Buyer contained in this Agreement or any Related Agreement;

         (c)      any failure by Buyer to perform or observe in full, or to have
                  performed or observed in full, any covenant, agreement, or
                  condition to be performed or observed by the Buyer under this
                  Agreement or any Related Agreement;

         (d)      any liability of Seller under the Worker Adjustment and
                  Retraining Notification Act that results from the sale of the
                  Purchased Assets to Buyer; and

         (e)      any liability of Seller arising after the Closing Date as a
                  result of Buyer not possessing on and after the Closing Date a
                  Federally Enforceable State Operation Permit/NESHAP Source, as
                  more fully described on Schedule 6.20 under the heading
                  "Disclosures Relating to Section 6.20(c)(ii)."


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<PAGE>
9.4      PROCEDURE FOR INDEMNIFICATION; THIRD-PARTY CLAIMS.

         (a)      Any party claiming indemnification under this Section 9 is
                  referred to in this Agreement as an "Indemnified Person" and
                  any party against whom such claims are asserted under this
                  Section 9 is referred to in this Agreement as an "Indemnifying
                  Person."

         (b)      Within 15 days after receipt of notice of commencement of any
                  action by any third party evidenced by service of process or
                  other legal pleading, or with reasonable promptness after the
                  assertion in writing of any claim by a third party, the
                  Indemnified Person shall give the Indemnifying Person written
                  notice thereof, together with a copy of such claim, process or
                  other legal pleading. The failure to so notify the
                  Indemnifying Person within the above time frame will not
                  relieve the Indemnifying Person of any liability it may have
                  to the Indemnified Person, except to the extent the
                  Indemnifying Person demonstrates that the defense of such
                  action is unduly prejudiced by the Indemnified Person's
                  failure to give such notice, or except if such notice is not
                  delivered before the time specified in Section 9.1. The
                  Indemnifying Person shall have the right to undertake and
                  control the defense, settlement, compromise or other
                  disposition thereof at its own expense and through a legal
                  representative of its own choosing. The Indemnified Person and
                  its counsel shall have the right to be present at the
                  negotiation, defense and settlement of such action or claim,
                  and any settlement or compromise of any such action or claim
                  shall be subject to the approval of the Indemnified Person,
                  which approval shall not be unreasonably withheld.

         (c)      If the Indemnifying Person, by the 30th day after receipt of
                  notice of any such claim (or, if earlier, by the 10th day
                  immediately preceding the day on which an answer or other
                  pleading must be served in order to prevent judgment by
                  default in favor of the person asserting such claim), has not
                  notified the Indemnified Person of its election to defend
                  against such claim, the Indemnified Person shall have the
                  right to undertake the defense, compromise or settlement of
                  such claim through counsel of its choice on behalf of and for
                  the account and risk of the Indemnifying Person, at the cost
                  and expense of the Indemnifying Person. In such event, the
                  Indemnifying Party and its counsel shall have the right to be
                  present at the negotiation, defense and settlement of such
                  action or claim, and any settlement or compromise of any such
                  action or claim shall be subject to the approval of the
                  Indemnifying Party, which approval shall not be unreasonably
                  withheld.

9.5      PROCEDURE FOR INDEMNIFICATION; OTHER THAN THIRD-PARTY CLAIMS. Any claim
         for indemnification for a matter not involving a third-party claim
         shall be asserted by written notice, which specifies in reasonable
         detail the factual basis of such claim, and delivered to the party or
         parties from which indemnification is sought.

9.6      TIME LIMITATIONS.

         (a)      If the Closing occurs, the Seller Parties will have no
                  liability for breach of a representation or warranty, other
                  than those in Section 6.1, 6.2, 6.14, 6.17, 6.20 or


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<PAGE>
                  6.21, unless on or before the second anniversary of the
                  Closing Date Buyer notifies the Seller Parties of a claim
                  specifying the factual basis of that claim in reasonable
                  detail to the extent then known by Buyer. A claim for
                  indemnification with respect to Section 6.1, 6.2, 6.14, 6.17,
                  6.20 or 6.21, a claim for indemnification based upon any
                  covenant or obligation to be performed or complied with after
                  the Closing Date or a claim for indemnification under Section
                  9.2(a) may be made at any time.

         (b)      If the Closing occurs, Buyer will have no liability for breach
                  of a representation or warranty, other than those in Section
                  7.1, 7.2 or 7.4, unless on or before the second anniversary of
                  the Closing Date a Seller Party notifies Buyer of a claim
                  specifying the factual basis of that claim in reasonable
                  detail to the extent then known by the Seller Parties. A claim
                  with respect to Section 7.1, 7.2 or 7.4, a claim for
                  indemnification based upon any covenant or obligation to be
                  performed or complied with after the Closing Date or a claim
                  for indemnification under Section 9.3(a), (d) or (e) may be
                  made at any time.

9.7      LIMITATIONS ON LIABILITY.

         (a)      No claim for indemnification shall be made hereunder unless
                  asserted by a written notice given to the Indemnifying Party
                  with the time limitations set forth in Section 9.6.

         (b)      The Indemnified Person shall act in good faith and in a
                  commercially reasonable manner to mitigate any Damages for
                  which it may seek indemnification under this Section 9.

         (c)      An indemnity payment for Damages otherwise due and payable
                  under this Section 9 shall be decreased to the extent of any
                  (i) net reduction of tax liability the Indemnified Party or
                  any affiliated party thereof actually realizes as a result of
                  such indemnifiable loss, and (ii) insurance proceeds the
                  Indemnified Party or any affiliated party thereof actually
                  collects in connection with the indemnifiable loss.

         (d)      No party shall be liable under Sections 9.2(b) or 9.3(b)
                  except to the extent the aggregate amount of such liability
                  (for all such claims) exceeds 1% of the Purchase Price and
                  then only to the extent of such excess. Any liability under
                  Sections 9.2(b) or 9.3(b) shall be limited in the aggregate to
                  a maximum amount equal to the Purchase Price.

         (e)      Notwithstanding Section 6.9 and Section 9.2, Buyer shall make
                  claims for indemnification only for Uncollected Receivables,
                  and only upon the Buyer's concurrent conveyance to Seller of
                  such Uncollected Receivable, without recourse to Buyer and
                  without representation or warranty.

         (f)      Seller Parties and Buyer have reviewed the Inspection Report
                  attached as EXHIBIT K, and have agreed to, and specified by
                  the initials "SP" or "B" in the left hand column on the copy
                  of the Inspection Report, the specific Identified Deficiencies
                  to be corrected by Seller Parties or by Buyer, respectively.
                  In accordance with the terms


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<PAGE>
                  and conditions of the Escrow Agreement and Instructions,
                  Seller Parties shall correct all of the Identified
                  Deficiencies specified with the initials "SP" (the "SP
                  Deficiencies"). Notwithstanding Section 6.16(d) and Section
                  9.2, Buyer shall make no claims for indemnification with
                  respect to the Identified Deficiencies, and Buyer's exclusive
                  post-Closing remedy with respect to the Identified
                  Deficiencies (including the SP Deficiencies) shall be as
                  provided in the Escrow Agreement and Instructions.

         (g)      Nothing in Section 5 as to Seller's deliveries of the Title
                  Commitment or the policy issued pursuant thereto will be
                  deemed to waive Buyer's right to claim a breach of the
                  representations and warranties set forth in Section 6.16(c) or
                  to claim a right to indemnification as provided in Section 9.2
                  if Buyer suffers any Damages as a result of a
                  misrepresentation with respect to the condition of title to
                  the Real Property, provided that, notwithstanding Section 9.2,
                  recovery shall first be sought from the owner's policy of
                  title insurance.

9.8      REMEDIES. The remedies of the Buyer and the Buyer Indemnitees set forth
         in this Section 9 shall be the exclusive post-Closing remedies
         available to them with respect to the actual or alleged breach by any
         of the Seller Parties of any provision of this Agreement or the Related
         Agreements (other than the Nonsolicitation Agreement and the Consulting
         Agreement). The remedies of the Seller Parties and the Seller
         Indemnities set forth in this Section 9 shall be exclusive post-Closing
         remedies available to them with respect to the actual or alleged breach
         by the Buyer or any provision of this Agreement or the Related
         Agreements (other than the Nonsolicitation Agreement and the Consulting
         Agreement).

10.      EXPENSES. Each of the parties shall pay all of the costs that it incurs
         incident to the preparation, execution, and delivery of this Agreement
         and the performance of any related obligations, whether or not the
         transactions contemplated by this Agreement shall be consummated.

11.      MISCELLANEOUS PROVISIONS.

11.1     NOTICES. All notices, demands, and requests required or permitted to be
         given under the provisions of this Agreement shall be in writing and
         shall be deemed given (a) when personally delivered or sent by
         facsimile transmission to the party to be given the notice or other
         communication or (b) on the business day following the day such notice
         or other communication is sent by overnight courier to the following:

         IF TO SELLER PARTIES:
         Robert E. Cone
         Industrial Holdings, Inc.
         7135 Ardmore
         Houston, Texas 77054
         Telephone: 713-747-1025
         Facsimile: 713-749-9642

         With a copy to:
         Jackson Walker L.L.P.
         1100 Louisiana, Suite 4200


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<PAGE>
         Houston, Texas 77002
         Attn: Sabrina A. McTopy
         Telephone: 713-752-4200
         Facsimile: 713-752-4221

         IF TO BUYER:
         Matthew F. O'Connor
         ARC Acquisition Corp.
         4234 West Drummond Place
         Chicago, Illinois  60639
         Telephone: 773-489-6353
         Facsimile: 773-489-6353

         With a copy to:
         Baker & McKenzie
         One Prudential Plaza
         130 East Randolph Drive
         Chicago, IL  60601
         Attn:  Edwin R. Dunn
         Telephone: 312-861-2864
         Facsimile: 312-861-2899

         or to such other address or facsimile number that the parties may
         designate in writing.

11.2     ASSIGNMENT. Except as set forth herein, neither Seller Parties nor
         Buyer shall assign this Agreement, or any interest in it, without the
         prior written consent of the other.

11.3     PARTIES IN INTEREST. This Agreement shall inure to the benefit of, and
         be binding on, the named parties and their respective successors and
         permitted assigns, but not any other person.

11.4     CHOICE OF LAW. This Agreement shall be governed, construed, and
         enforced in accordance with the laws of the State of Illinois.

11.5     COUNTERPARTS. This Agreement may be signed in any number of
         counterparts with the same effect as if the signature on each
         counterpart were on the same instrument.

11.6     ENTIRE AGREEMENT. This Agreement and all related documents, schedules,
         exhibits, or certificates represent the entire understanding and
         agreement between the parties with respect to the subject matter and
         supersede all prior agreements or negotiations between the parties.
         This Agreement may be amended, supplemented, or changed only by an
         agreement in writing that makes specific reference to this Agreement or
         the agreement delivered pursuant to it and that is signed by the party
         against whom enforcement of any such amendment, supplement, or
         modification is sought.


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<PAGE>
11.7     ARBITRATION.

         (a)      Subject to the provisions of Section 9.8, any dispute,
                  controversy, or claim arising out of or relating to this
                  Agreement or relating to the breach, termination, or
                  invalidity of this Agreement, whether arising in contract,
                  tort, or otherwise, shall at the request of any party be
                  resolved in binding arbitration. Any arbitration shall proceed
                  in accordance with Title 9 of the United States Code, as it
                  may be amended or recodified from time to time ("Title 9"),
                  and the current Commercial Arbitration Rules (the "Arbitration
                  Rules") of the American Arbitration Association ("AAA") to the
                  extent that Title 9 and the Arbitration Rules do not conflict
                  with any provision of this Section 11.7.

         (b)      No provision of or the exercise of any rights under this
                  Section 11.7 shall limit the right of any party to seek and
                  obtain provisional or ancillary remedies (such as injunctive
                  relief, attachment, or the appointment of a receiver) from any
                  court having jurisdiction before, during, or after the
                  pendency of an arbitration proceeding under this Section. The
                  institution and maintenance of any such action or proceeding
                  shall not constitute a waiver of the right of any party
                  (including the party taking the action or instituting the
                  proceeding) to submit a dispute, controversy, or claim to
                  arbitration under this Section.

         (c)      Any award, order, or judgment made pursuant to arbitration
                  shall be deemed final and may be entered in any court having
                  jurisdiction over the enforcement of the award, order, or
                  judgment. Each party agrees to submit to the jurisdiction of
                  any court for purposes of the enforcement of the award, order,
                  or judgment.

         (d)      The arbitration shall be held before one arbitrator
                  knowledgeable in the general subject matter of the dispute,
                  controversy, or claim and selected by AAA in accordance with
                  the Arbitration Rules, except that any arbitration in which
                  the disputed, controverted, or claimed amount (as reflected on
                  the demand for arbitration, as the same may be amended)
                  exceeds $500,000.00 shall be held before three arbitrators,
                  one arbitrator being selected by Buyer, one by the Seller
                  Parties, and the third by the other two from a panel of
                  persons identified by AAA who are knowledgeable in the general
                  subject matter of the dispute, controversy, or claim.

         (e)      The arbitration shall be held at the office of AAA located in
                  Cook County, Illinois (as the same may be from time to time
                  relocated), or at another place the parties agree on.

         (f)      In any arbitration proceeding under this Section 11.7, subject
                  to the award of the arbitrator(s), each party shall pay all
                  its own expenses, an equal share of the fees and expenses of
                  the arbitrator, and, if applicable, the fees and expenses of
                  its own appointed arbitrator. The arbitrator(s) shall have the
                  power to award recovery of costs and fees (including
                  reasonable attorney fees, administrative and AAA fees, and
                  arbitrators' fees) among the parties as the arbitrators
                  determine to be equitable under the circumstances.


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<PAGE>
         (g)      The interpretation and construction of this Section 11.7,
                  including, but not limited to, its validity and
                  enforceability, shall be governed by Title 9 of the U.S. Code,
                  notwithstanding the choice of law set forth in Section 11.4 of
                  this Agreement.

11.8     PUBLIC ANNOUNCEMENTS. The parties agree to advise and confer with each
         other prior to the issuance of any public reports, statements or press
         releases pertaining to this Agreement and the transactions contemplated
         hereby. Each party will use its best efforts to maintain in strict
         confidence the existence and terms of this Agreement and the
         transactions contemplated hereby. Unless otherwise required by law or
         as set forth above, no party shall make any public announcement or
         disclosure concerning this Agreement, except as mutually agreed. The
         financial terms of the Agreement are to be kept confidential, except to
         the extent that the disclosure is required under law. Nothing in the
         foregoing is intended to prevent IHI from making any filings required
         with the Securities and Exchange Commission.

11.9     FACSIMILE SIGNATURES. The parties acknowledge that signatures on this
         Agreement may be delivered by facsimile in lieu of an original
         signature and the parties agree to treat such signatures as original
         signatures and shall be bound thereby.

11.10    CONSTRUCTION. Any reference to this Agreement to an "Article,"
         "Section" or "Schedule" refers to the corresponding Article, Section or
         Schedule of or to this Agreement, unless the context indicates
         otherwise. The headings of Articles and Sections are provided for
         convenience only and should not affect the construction or
         interpretation of this Agreement. All words used in this Agreement
         should be construed to be of such gender or number as the circumstances
         require. The terms "include" and "including" indicate examples of a
         foregoing general statement and not a limitation on that general
         statement. Any reference to a statute refers to the statute, any
         amendments or successor legislation, and all regulations promulgated
         under or implementing the statute, as in effect at the relevant time.
         Any reference to a contract or other documents as of a given date means
         the contract or other document as amended, supplemented and modified
         from time to time through such date.

         The parties have executed this Agreement on the date set forth on the
first page of this Agreement.


                                                SELLER PARTIES:
                                                AMERICAN RIVET COMPANY, INC.
                                                By:_____________________________
                                                Name:___________________________
                                                Title:__________________________
                                                Its:____________________________


ASSET PURCHASE AGREEMENT               26                         EXECUTION COPY
<PAGE>
                                                INDUSTRIAL HOLDINGS, INC.

                                                By: /s/ ROBERT E. CONE
                                                    ----------------------------
                                                Name:  Robert E. Cone
                                                Title: President



                                                BUYER:

                                                ARC ACQUISITION CORP.

                                                By: /s/ MATTHEW F. O'CONNOR
                                                    ----------------------------
                                                    Matthew F. O'Connor
                                                    President


ASSET PURCHASE AGREEMENT               27                         EXECUTION COPY