Document:

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                                                                    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
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                                TABLE OF CONTENTS

<TABLE>
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                                                                                                Page
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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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       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
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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
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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
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         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
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         (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
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         (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
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                  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
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                  (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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                  (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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         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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         (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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         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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                  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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         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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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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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:____________________________

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<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

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                                                                    Exhibit 10.5

                            STOCK PURCHASE AGREEMENT

                                  BY AND AMONG

                            INDUSTRIAL HOLDINGS, INC.

                                       AND

                              GHX ACQUISITION CORP.

                                   DATED AS OF

                                NOVEMBER 14, 2001

STOCK PURCHASE AGREEMENT                                          EXECUTION COPY
<PAGE>
                                Table of Contents

                                                                            Page
                                                                            ----

1.         SALE AND PURCHASE OF THE STOCK; CLOSING.............................1
  1.1.     SALE AND PURCHASE...................................................1
  1.2.     PURCHASE PRICE......................................................1
  1.3.     POST-CLOSING ADJUSTMENT OF PURCHASE PRICE...........................1
  1.4.     CLOSING.............................................................2
  1.5.     DELIVERIES AT CLOSING...............................................3

2.         REPRESENTATIONS AND WARRANTIES OF IHI...............................4
  2.1.     ORGANIZATION AND GOOD STANDING......................................4
  2.2.     AUTHORIZATION AND ENFORCEABILITY....................................4
  2.3.     CAPITALIZATION......................................................5
  2.4.     NO CONFLICTS........................................................5
  2.5.     FINANCIAL STATEMENTS................................................6
  2.6.     LIABILITIES AND OBLIGATIONS.........................................6
  2.7.     FURNITURE, FIXTURES, MACHINERY AND EQUIPMENT........................7
  2.8.     LEGAL PROCEEDINGS...................................................7
  2.9.     TITLE TO ASSETS; LIENS..............................................7
  2.10.    REAL PROPERTY.......................................................7
  2.11.    SUBSIDIARIES, ETC...................................................7
  2.12.    EMPLOYEE BENEFIT PLANS..............................................7
  2.13.    TAX MATTERS.........................................................9
  2.14.    LEASED REAL PROPERTY................................................9
  2.15.    INTELLECTUAL PROPERTY RIGHTS........................................9
  2.16.    BROKERS' FEES......................................................10
  2.17.    LIMITATION ON REPRESENTATIONS; DEFINITION OF KNOWLEDGE.............10

3.         REPRESENTATIONS AND WARRANTIES OF BUYER............................10
  3.1.     ORGANIZATION AND STANDING..........................................10
  3.2.     AUTHORIZATION AND ENFORCEABILITY...................................10
  3.3.     NO VIOLATION OF LAW, ETC...........................................10
  3.4.     BROKERS' FEES......................................................11
  3.5.     BUYER'S KNOWLEDGE..................................................11

4.         PRE-CLOSING ACTIONS................................................11
  4.1.     CONDUCT OF BUSINESS................................................11
  4.2.     BUYER'S ACCESS.....................................................11
  4.3.     ACCURACY OF REPRESENTATIONS AND WARRANTIES.........................11

5.         CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS AT THE CLOSING.........12
  5.1.     COMPLIANCE WITH THIS AGREEMENT.....................................12
  5.2.     ACCURACY OF REPRESENTATIONS........................................12
  5.3.     NO MATERIAL ADVERSE CHANGE.........................................12
  5.4.     SATISFACTION OF CONDITIONS TO MERGER...............................12
  5.5.     DELIVERY OF CLOSING DOCUMENTS AND ITEMS............................12
  5.6.     CERTIFICATE REGARDING CONDITIONS PRECEDENT.........................12

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<PAGE>
                                Table of Contents
                                   (continued)

                                                                            Page
                                                                            ----

6.         CONDITIONS PRECEDENT TO THE OBLIGATIONS OF IHI AT THE CLOSING......12
  6.1.     COMPLIANCE WITH THIS AGREEMENT.....................................12
  6.2.     ACCURACY OF REPRESENTATIONS........................................13
  6.3.     SATISFACTION OF CONDITIONS TO MERGER...............................13
  6.4.     DELIVERY OF CLOSING DOCUMENTS AND ITEMS............................13
  6.5.     CERTIFICATE REGARDING CONDITIONS PRECEDENT.........................13

7.         NONCOMPETITION.....................................................13
  7.1.     PROHIBITED ACTIVITIES..............................................13
  7.2.     DAMAGES............................................................13
  7.3.     REASONABLE RESTRAINT...............................................14
  7.4.     SEVERABILITY; REFORMATION..........................................14

8.         INDEMNIFICATION....................................................14
  8.1.     SURVIVAL OF REPRESENTATIONS AND WARRANTIES.........................14
  8.2.     INDEMNIFICATION BY IHI.............................................14
  8.3.     INDEMNIFICATION BY BUYER...........................................15
  8.4.     PROCEDURE FOR INDEMNIFICATION; THIRD-PARTY CLAIMS..................15
  8.5.     PROCEDURE FOR INDEMNIFICATION; OTHER THAN THIRD-PARTY CLAIMS.......16
  8.6.     SPECIAL PROVISIONS REGARDING LIABILITY.............................16
  8.7.     REMEDIES...........................................................16

9.         POST-CLOSING MATTERS...............................................16
  9.1.     FURTHER ASSURANCES.................................................16
  9.2.     BOOKS AND RECORDS..................................................17
  9.3.     THE COMPANY'S DEBT.................................................17
  9.4.     TAX MATTERS........................................................17

10.        TERMINATION........................................................21
  10.1.    MANNER OF TERMINATION..............................................21
  10.2.    EFFECT OF TERMINATION..............................................21

11.        MISCELLANEOUS......................................................21
  11.1.    ENTIRE AGREEMENT...................................................21
  11.2.    NOTICES............................................................21
  11.3.    AMENDMENT AND WAIVERS..............................................22
  11.4.    ASSIGNMENT.........................................................23
  11.5.    GOVERNING LAW; VENUE...............................................23
  11.6.    SEVERABILITY.......................................................23
  11.7.    ARBITRATION........................................................23
  11.8.    MULTIPLE COUNTERPARTS..............................................24
  11.9.    EXPENSES...........................................................24
  11.10.   WAIVER OF BREACH...................................................24
  11.11.   CONSTRUCTION.......................................................24

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<PAGE>
                                Table of Contents
                                   (continued)

                                                                            Page
                                                                            ----

  11.12.   PUBLIC ANNOUNCEMENTS...............................................24
  11.13.   FACSIMILE SIGNATURES...............................................25

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<PAGE>
SCHEDULES AND EXHIBITS

EXHIBIT A        Form of Subordinated Promissory Note
EXHIBIT B        Form of Sublease Agreement
EXHIBIT C        Form of Security Agreement
SCHEDULE 2.2     Authorization
SCHEDULE 2.5     Financial Statements
SCHEDULE 2.7     Furniture, Fixtures, Machinery and Equipment
SCHEDULE 2.8     Legal Proceedings
SCHEDULE 2.9     Title to Assets; Liens
SCHEDULE 2.10    Real Property
SCHEDULE 2.12    Employee Benefit Plans
SCHEDULE 2.14    Leased Real Property
SCHEDULE 2.15    Intellectual Property Rights

STOCK PURCHASE AGREEMENT               iv                         EXECUTION COPY
<PAGE>
                            STOCK PURCHASE AGREEMENT

        THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of November
14, 2001, by GHX ACQUISITION CORP. ("Buyer"), and INDUSTRIAL HOLDINGS, INC., a
Texas corporation ("IHI").

                                   BACKGROUND

A.      IHI owns 100% of the outstanding capital stock (the "Stock") of GHX,
        Incorporated, a Texas corporation (the "Company"), and desires to sell
        the Stock to Buyer on the terms and subject to the conditions in this
        Agreement. In connection with the sale and purchase of the Stock, the
        Company, IHI and Buyer will enter into certain related agreements, the
        forms of which are attached to this Agreement as exhibits ("Exhibits").

B.      IHI acquired all of the capital stock of the Company from, among others,
        Ben B. Andrews ("Andrews") and Daniel D. Ahuero ("Ahuero"), the
        President of the Buyer, in March 1998. Since that time, Ahuero has been
        the President of the Company, and Andrews has served in a management
        capacity at IHI. The parties therefore hereby acknowledge that the Buyer
        is in many cases as knowledgeable as IHI regarding the Company's
        business and the financial statements.

                                   AGREEMENTS

1.      SALE AND PURCHASE OF THE STOCK; CLOSING.

1.1.    SALE AND PURCHASE. At the Closing, IHI will sell, assign, transfer and
        deliver to Buyer, and Buyer will purchase, an aggregate of 31,666 shares
        of common stock, $0.01 par value per share, of the Company (the
        "Stock").

1.2.    PURCHASE PRICE. The purchase price ("Purchase Price") for the Stock will
        be $4,959,000 (the "Purchase Price"), to be paid to IHI as follows:

        (a)     $3,459,000 in cash (the "Cash Consideration"); and

        (b)     a subordinated promissory note in the original principal amount
                of $1,500,000, made payable by Buyer to the order of IHI, in
                substantially the form attached hereto as EXHIBIT A (the
                "Note").

1.3.    POST-CLOSING ADJUSTMENT OF PURCHASE PRICE.

        (a)     Within 30 calendar days following the Closing Date, IHI shall
                cause to be prepared and delivered to the Buyer a Statement of
                Net Working Capital of the Company as of the Closing Date (such
                statement, the "Closing Date Statement"). The Closing Date
                Statement shall be prepared in accordance with generally
                accepted accounting principles, consistently applied ("GAAP").
                The Buyer shall give IHI and its representatives reasonable
                access to the books, records and personnel of the business for
                the purpose of preparing and auditing the Closing Date
                Statement. The Buyer

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                shall have a period of 30 calendar days after the delivery to it
                of the Closing Date Statement, and during such time the Buyer
                shall have access to all workpapers and other relevant
                documents, to review the foregoing and to deliver in writing to
                IHI any objections to the Closing Date Statement that the Buyer
                may have. If Buyer does not deliver in writing any objections to
                IHI within the 30-day period, the Closing Date Statement shall
                be deemed to be accepted and approved by the Buyer. If Buyer
                delivers within the 30-day period written objections to IHI,
                then the Buyer and IHI shall attempt to resolve the matter or
                matters in dispute. The Buyer shall quantify its objections to
                the extent reasonably practicable in all written objections
                delivered to IHI with respect to the Closing Date Statement.

        (b)     If such disputes cannot be resolved by the Buyer and IHI within
                20 calendar days after the delivery of the objections to the
                Closing Date Statement, then the specific matters in dispute
                shall be submitted to Deloitte & Touche, LLP, 333 Clay Street,
                Suite 2300, Houston, Texas 77002 (the "Independent
                Accountants"), which firm shall render its opinion as to such
                matters. Based on that opinion, the Independent Accountants
                shall then send to the Buyer and to IHI a written determination
                of the matters in dispute and a written determination of the
                Purchase Price as adjusted based upon such opinion, whereupon
                the confirmed or revised Closing Date Statement shall be final
                and binding upon the Buyer and IHI. All costs, fees and expenses
                charged or incurred by the Independent Accountants, if any,
                shall be borne equally by IHI and the Buyer.

        (c)     For purposes hereof, "Net Working Capital" means, as of the date
                of the Closing Date Statement and based thereon, an amount equal
                to the Company's net accounts receivable, net inventories
                (valued at average cost), notes receivable and other current
                assets (excluding in all cases cash and cash equivalents), minus
                the Company's trade accounts payable and current accrued
                payables. Notwithstanding the foregoing, Net Working Capital
                shall not include any amounts for intercompany payables to IHI
                or intercompany receivables from IHI. The Purchase Price shall
                be increased by the amount by which the Net Working Capital
                contained in the Closing Date Statement is greater than
                $4,600,000, and shall be decreased by the amount by which the
                Net Working Capital contained in the Closing Date Statement is
                less than $4,600,000 (whether an increase to or decrease from
                the Purchase Price, the "Purchase Price Adjustment"). The
                Purchase Price Adjustment shall be paid by IHI to Buyer, or
                Buyer to IHI, as the case may be, within 5 days of the
                determination of the Purchase Price Adjustment. If IHI is
                obligated to pay the Purchase Price Adjustment to Buyer and if
                payment is not made within 5 days of the determination of the
                Purchase Price Adjustment, Buyer shall have the option (but not
                the obligation) to set off the Purchase Price Adjustment against
                the Note.

1.4.    CLOSING. The purchase and sale and related transactions this Agreement
        provides for (the "Closing") will occur at the offices of Jackson
        Walker, L.L.P., 1100 Louisiana Street, Suite 4200, Houston, Texas 77002,
        on the date on which the proposed merger between IHI and T-3 Energy
        Services, Inc. (such entity, "T-3", and the proposed Merger, the
        "Merger") shall occur, or at such other time or place as the parties
        shall mutually agree (the "Closing Date").

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<PAGE>
1.5.    DELIVERIES AT CLOSING.

        (a)     DELIVERIES BY IHI. IHI or the other indicated parties shall have
                executed and delivered to Buyer the following:

                (1)     the Sublease Agreement attached hereto as EXHIBIT B (the
                        "Sublease Agreement"), executed by an authorized
                        representative of The Rex Group, Inc., a Texas
                        corporation and a wholly-owned subsidiary of IHI;

                (2)     a Security Agreement granting a lien in favor of IHI on
                        the Company's assets that is subordinate to the Buyer's
                        primary secured lender, in substantially the form
                        attached as EXHIBIT C (the "Security Agreement");

                (3)     either (y) UCC-termination statements as are required to
                        terminate and release all liens on the Company's and the
                        Subsidiary's assets and equipment (including without
                        limitation the Liens disclosed on SCHEDULE 2.9), or (z)
                        letters of creditors indicating that such liens, and
                        that certificates evidencing IHI's ownership of the
                        Stock and the Company's ownership of the Subsidiary
                        Stock, shall be released on payment of identified
                        amounts payable, in each case except for Permitted
                        Encumbrances and the permitted liens ("Permitted Liens")
                        listed on SCHEDULE 2.9;

                (4)     the Company's corporate records, including its Articles
                        of Incorporation, Bylaws and corporate minute book;

                (5)     a certificate executed by IHI representing and
                        warranting to Buyer that each of IHI's representations
                        and warranties in this Agreement is accurate in all
                        material respects as of the Closing Date;

                (6)     certificates, dated as of a date no earlier than 10 days
                        before the Closing Date, duly issued by the appropriate
                        governmental authority in Texas and in any state in
                        which the Company is authorized to do business, showing
                        the Company is in good standing and authorized to do
                        business;

                (7)     copies certified by IHI's Secretary of resolutions duly
                        adopted by the board of directors of IHI authorizing and
                        approving the execution and delivery of this Agreement,
                        including the exhibits hereto, and the transactions
                        contemplated hereby; and

                (8)     such other documents, instruments and certificates
                        necessary or appropriate in connection with the IHI's
                        sale and transfer of the Stock.

        (b)     DELIVERIES BY BUYER. Buyer or the other indicated parties shall
                have executed and delivered to IHI the following:

                (1)     the Cash Consideration;

                (2)     the Note;

STOCK PURCHASE AGREEMENT               3                          EXECUTION COPY
<PAGE>
                (3)     the Sublease Agreement;

                (4)     the Security Agreement;

                (5)     a certificate executed by Buyer representing and
                        warranting to Buyer that each of Buyer's representations
                        and warranties in this Agreement is accurate in all
                        material respects as of the Closing Date;

                (6)     certificates dated as of a date no earlier than 10 days
                        before the Closing Date, duly issued by the appropriate
                        governmental authority in its state of organization and
                        in any state in which Buyer is authorized to do
                        business, showing Buyer is in good standing and
                        authorized to do business;

                (7)     copies certified by Buyer's Secretary (or the holder of
                        a similar office) of resolutions duly adopted by the
                        board of directors of Buyer authorizing and approving
                        the execution and delivery of this Agreement, including
                        the exhibits hereto, and the transactions contemplated
                        hereby; and

                (8)     such other documents, instruments and certificates
                        necessary or appropriate in connection with the Buyer's
                        purchase of the Stock.

2.      REPRESENTATIONS AND WARRANTIES OF IHI. IHI represents and warrants to
        Buyer that the statements in this Section 2 are true and correct as of
        the date of this Agreement and will be true and correct on the Closing
        Date as if made on the Closing Date (except to the extent any
        representation or warranty is made as of another date, which is hereby
        made as of such other date).

2.1.    ORGANIZATION AND GOOD STANDING.

        (a)     The Company is a corporation duly incorporated, validly existing
                and in good standing under the laws of the State of Texas. The
                Company is duly qualified and in good standing in every
                jurisdiction in which it is required by the nature of its
                business or lease of its properties to so qualify, except where
                the failure to so qualify does not or is not reasonably expected
                to have a material adverse effect on the Company or its
                operations.

        (b)     The Company's wholly-owned subsidiary, GHX, Incorporated of
                Louisiana, a Louisiana corporation (the "Subsidiary"), is a
                corporation duly organized, validly existing and in good
                standing under the laws of the State of Louisiana. The
                Subsidiary is duly qualified and in good standing in every
                jurisdiction in which it is required by the nature of its
                business or lease of its properties to so qualify, except where
                the failure to so qualify does not or is not reasonably expected
                to have a material adverse effect on the Subsidiary or its
                operations.

2.2.    AUTHORIZATION AND ENFORCEABILITY. IHI has all requisite power and
        authority to execute and deliver this Agreement and all other agreements
        to be executed and delivered by it in connection with this Agreement
        that are identified in Section 1.5(a) of this Agreement (such

STOCK PURCHASE AGREEMENT               4                          EXECUTION COPY
<PAGE>
        other agreements, collectively, the "Related Agreements"), and to
        perform its obligations under this Agreement and the Related Agreements.
        IHI has duly executed and delivered this Agreement, and it is IHI's
        legal, valid and binding obligation, enforceable against it in
        accordance with its terms, except as its enforcement may be limited by
        bankruptcy, insolvency moratorium, or similar laws relating to the
        enforcement of creditors' rights and by general principals of equity
        (regardless of whether such enforceability is considered in a proceeding
        at law or in equity) (collectively, the "Exceptions"). When IHI executes
        and delivers the Related Agreements, the Related Agreements will be
        IHI's legal, valid and binding obligations, enforceable against it in
        accordance with their respective terms, except as the enforcement
        thereof may be limited by the Exceptions. Except as disclosed on
        SCHEDULE 2.2, IHI is not required to obtain any consent, approval or
        authorization of, or registration, declaration or filing with any
        Governmental Authority or third party to authorize its execution,
        delivery or performance of its obligations under this Agreement or the
        Related Agreements.

        "GOVERNMENTAL AUTHORITY" means any foreign governmental authority, the
        United States of America, any state of the United States, and any
        political subdivision of any of the foregoing, and any agency,
        department, commission, board, bureau or court of any of the foregoing
        having jurisdiction over the respective party or their assets.

2.3.    CAPITALIZATION.

        (a)     The Company's authorized equity securities consist of (a)
                100,000 shares of common stock, $0.01 par value per share,
                31,666 shares of which are issued and outstanding and owned of
                record and beneficially by IHI and constitute the Stock, and (b)
                2,500 shares of preferred stock, par value $100.000 per share,
                none of which are issued and outstanding. Except as disclosed on
                SCHEDULE 2.2, IHI owns all of the Stock, free and clear of all
                liens, claims, encumbrances, equities, voting trusts and
                agreements, and proxies. The Stock is all of the outstanding
                capital stock of the Company. Each outstanding share of the
                Stock has been duly authorized and validly issued and is fully
                paid and non-assessable. There are no options, warrants,
                subscriptions, or other rights to purchase, or securities
                convertible into or exchangeable for, any of the Company's
                authorized or outstanding securities. None of the Stock has been
                issued or disposed of in violation of the preemptive rights of
                any of the Company's present or former stockholders.

        (b)     The Subsidiary's authorized equity securities consist of 500,000
                shares of common stock, no par value per share, 100,000 shares
                of which (the "Subsidiary Stock") are issued and outstanding.
                Each outstanding share of the Subsidiary Stock has been duly
                authorized and validly issued and is fully paid and
                non-assessable. Except as disclosed on SCHEDULE 2.2, the Company
                owns all of the Subsidiary Stock, free and clear of all liens,
                claims, encumbrances, equities, voting trusts and agreements,
                and proxies.

2.4.    NO CONFLICTS. Except as disclosed on SCHEDULE 2.2, IHI's execution,
        delivery and performance of this Agreement does not, and its execution,
        delivery and performance of the Related Agreements will not:

STOCK PURCHASE AGREEMENT               5                          EXECUTION COPY
<PAGE>
        (a)     conflict with, violate or constitute a material breach of or a
                material default under; or

        (b)     result in the creation or imposition of any lien upon any of the
                property or assets of IHI, the Company or the Subsidiary under
                the terms of:

                (1)     the Organizational Documents (as defined below) of IHI,
                        the Company or the Subsidiary; or

                (2)     any material credit or loan agreement, mortgage,
                        indenture, promissory note or any other material
                        agreement or instrument to which IHI, the Company or the
                        Subsidiary is a party or by which any of them or any of
                        their properties may be bound or affected.

        "ORGANIZATIONAL DOCUMENTS" means the Articles of Incorporation or
        Certificate of Incorporation, as applicable, and Bylaws of the
        referenced entity, each as amended and in effect on the date of this
        Agreement.

2.5.    FINANCIAL STATEMENTS. Attached as EXHIBIT 2.5 are copies of the
        Company's:

        (a)     unaudited consolidated balance sheet at December 31, 2000, and
                related unaudited income statement for the 12 months then ended
                (the December 31, 2000 Balance Sheet and Income Statement
                referred to as the "2000 Financial Statements"); and

        (b)     unaudited consolidated balance sheet at September 30, 2001 (the
                "Interim Balance Sheet") and related unaudited income statement
                for the nine months then ended (collectively, the "Interim
                Financial Statements").

        The 2000 Financial Statements and the Interim Financial Statements are
        referred to collectively as the "Financial Statements." The Financial
        Statements have been prepared from the Company's books and records in
        conformity with GAAP, subject to normal recurring year-end adjustments
        (the effect of which will not, individually or in the aggregate, be
        materially adverse) and the absence of notes to the Financial
        Statements. The Financial Statements present fairly in all material
        respects the Company's financial position at the dates indicated and the
        results of its operations for the periods then ended. For purposes of
        this Agreement, December 31, 2000 is referred to as the "2000 Financial
        Statement Date" and September 30, 2001 is referred to as the "Interim
        Financial Statement Date."

2.6.    LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
        adequately provided for on the Interim Balance Sheet, and except for
        liabilities and obligations that have arisen since the Interim Financial
        Statement Date in the Ordinary Course of Business (as that term is
        defined below), neither the Company nor the Subsidiary has incurred any
        material liabilities of a type required by GAAP to be reflected on a
        balance sheet.

        "Ordinary Course of Business" means actions of the Company or the
        Subsidiary that are:

        (a)     consistent with past practices taken in the course of its usual
                day-to-day operations;

        (b)     not required to be authorized by resolution of its board of
                directors; and

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<PAGE>
        (c)     similar in nature and magnitude to actions customarily taken,
                without authorization by the boards of directors in the ordinary
                course of usual day-to-day operations of other companies of
                similar size in the same line of business.

2.7.    FURNITURE, FIXTURES, MACHINERY AND EQUIPMENT. SCHEDULE 2.7 is a list of
        all of the material items of the Company's and the Subsidiary's
        furniture, fixtures, machinery and equipment, which constitutes
        substantially all the material fixtures, machinery and equipment used in
        the conduct of each's business. SCHEDULE 2.7 also identifies any such
        equipment that is leased.

2.8.    LEGAL PROCEEDINGS. Except as disclosed on SCHEDULE 2.8, there are no
        actions, suits or proceedings pending, or known to be threatened,
        against the Company or the Subsidiary or either of their properties, at
        law or in equity, or before or by any Governmental Authority.

2.9.    TITLE TO ASSETS; LIENS. The Company and the Subsidiary each has good and
        marketable title to its assets and properties (not taking into account
        personal property the Company or the Subsidiary leases) other than the
        leased real property described in SCHEDULE 2.10. Such assets are not
        subject to any liens, claims, demands, equity interests, pledges or
        security interests ("Liens"), except as disclosed on SCHEDULE 2.9 and
        except for: (a) liens for taxes not yet due and payable or being
        contested in good faith by appropriate proceedings; and (b) statutory
        liens not yet due and payable. When Buyer pays to the applicable
        creditor, at IHI's direction, the amounts identified in the creditor
        payoff letters that will be delivered to Buyer at the Closing pursuant
        to Section 1.5(a)(iii), IHI shall obtain a release of all Liens except
        those Permitted Liens identified on SCHEDULE 2.9.

2.10.   REAL PROPERTY. SCHEDULE 2.10 includes a legal description of all real
        property that the Company owns. The Subsidiary owns no real property.
        The Company has good and indefeasible fee simple title to all such real
        property, free and clear of all material easements, restrictions, liens,
        encumbrances or other matters affecting its title, use or occupancy,
        except for: (a) liens for real property taxes, assessments and charges
        not yet due and payable; and (b) such easements, liens and encumbrances
        as do not materially detract from or interfere with the present use of
        such real property ("Permitted Encumbrances").

2.11.   SUBSIDIARIES, ETC. Except for the Subsidiary, the Company (a) has no
        subsidiaries; (b) is not a co-venturer in any joint venture or a partner
        in any partnership; and (c) owns no interest in any other corporation,
        business enterprise or other entity.

2.12.   EMPLOYEE BENEFIT PLANS.

        (a)     SCHEDULE 2.12 discloses all pension, profit-sharing, bonus,
                incentive, deferred compensation, stock purchase, stock, stock
                appreciation right, group insurance, severance pay, retirement
                and other employee benefit plans, agreements or arrangements of
                the Company and the Subsidiary or to which either of them is
                required to contribute. Except as disclosed on SCHEDULE 2.12,
                neither the Company nor the Subsidiary sponsors, maintains nor
                contributes to any plan, program, fund or arrangement that
                constitutes an employee pension benefit plan, and neither has
                any obligation to contribute to or accrue or pay any benefits
                under any deferred

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<PAGE>
                compensation or retirement funding arrangement on behalf of any
                employee or employees (such as, for example, and without
                limitation, any individual retirement account or annuity, any
                "excess benefit plan" (within the meaning of Section 3(36) of
                the Employee Retirement Income Security Act of 1974, as amended
                ("ERISA")) or any non-qualified deferred compensation
                arrangement. For the purposes of this SECTION 2.12, the term
                "employee pension benefit plan" has the same meaning given that
                term in Section 3(2) of ERISA.

        (b)     No employee benefit plan listed on SCHEDULE 2.12 is either (i) a
                "multiemployer plan" (as defined in Section 3 (37) of ERISA), or
                (ii) a defined benefit pension plan subject to Title IV of
                ERISA.

        (c)     All employee benefit plans listed on SCHEDULE 2.12 that are
                intended to qualify (each such plan, a "Qualified Plan") under
                Section 401(a) of the Internal Revenue Code of 1986, as amended,
                (the "Code") have been so qualified. All reports and other
                documents required to be filed with any governmental agency or
                distributed to plan participants or beneficiaries (including,
                but not limited to, actuarial reports, audits or tax returns)
                have been timely filed or distributed, and copies of the most
                recent annual reports for such plans are included as part of
                SCHEDULE 2.12. Neither IHI, any plan listed in SCHEDULE 2.12,
                the Company or the Subsidiary has engaged in any transaction
                prohibited and not exempted under Section 4975 of the Code or
                Sections 406 and 408 of ERISA; no plan listed in SCHEDULE 2.12
                has incurred an accumulated funding deficiency, as defined in
                Section 412(a) of the Code and Section 302(1) of ERISA; and
                neither the Company nor the Subsidiary has incurred any
                liability for excise tax or penalty due to the Internal Revenue
                Service or any liability to the Pension Benefit Guaranty
                Corporation ("PBGC").

        (d)     There have been no terminations, partial terminations or
                discontinuance of contributions to any such Qualified Plan
                intended to qualify under Section 401(a) of the Code without
                notice to and approval by the Internal Revenue Service; no plan
                listed in SCHEDULE 2.12 subject to the provisions of Title IV of
                ERISA has been terminated; there have been no "reportable
                events" (as that term is defined in Section 4043 of ERISA) with
                respect to any such plan listed in SCHEDULE 2.12; neither
                Company nor the Subsidiary has incurred liability under Section
                4062 of ERISA; and no circumstances exist under which the
                Company or the Subsidiary could have any direct or indirect
                liability whatsoever (including, but not limited to, any
                liability to any multiemployer plan or the PBGC under Title IV
                of ERISA or to the Internal Revenue Service for any excise tax
                or penalty, or being subject to any statutory lien to secure
                payment of any such liability) with respect to any plan now or
                previously maintained or contributed to by any entity other than
                the Company or the Subsidiary that is, or at any time was, along
                with the Company and the Subsidiary considered a single employer
                under Sections 414(b), (c), (m) or (o) of the Code.

        (e)     With respect to any employee benefit plan that is subject to the
                continuation requirements of Sections 601-608 of ERISA and
                Section 4980B of the Code or the continuation requirements of
                any applicable state or local law, each of the Company

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<PAGE>
                and the Subsidiary has complied with all such applicable laws
                and regulatory requirements with which it is required to comply.

2.13.   TAX MATTERS.

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

        (b)     Each of the Company and the Subsidiary has duly and timely filed
                all Tax returns and reports it is required to file by any
                Governmental Authority. Each of the Company and the Subsidiary
                has paid or established adequate reserves for all Taxes
                (including penalties and interest) that have or may become due
                under such returns and any assessments that have been received
                by it or otherwise. All such Tax returns or reports fairly
                reflect the Taxes of the Company and the Subsidiary for the
                periods covered thereby.

        (c)     Neither the Company nor the Subsidiary is delinquent in the
                payment of any Tax assessment or governmental charge and there
                are no Tax deficiencies or delinquencies asserted against either
                of them. No Internal Revenue Service audit of the Company or the
                Subsidiary is pending or threatened, and the results of any
                completed audits are properly reflected in the Financial
                Statements. Neither the Company nor the Subsidiary has granted
                to any taxing authority any extension of the limitation period
                during which any Tax liability may be asserted. All amounts of
                money the Company and the Subsidiary are required to withhold
                from employees or collect from customers for Taxes, social
                security and unemployment insurance, and the portion of any such
                Taxes the Company and the Subsidiary are required to pay to any
                Governmental Authority, have been collected or withheld and
                either paid to the respective Governmental Authority or set
                aside in accounts for such purpose, or such monies have been
                reserved against and entered on the Company's or the
                Subsidiary's books.

2.14.   LEASED REAL PROPERTY. Disclosed on SCHEDULE 2.14 is a list by legal
        description of all leased real property that the Company or the
        Subsidiary leases (the "Leased Property"). SCHEDULE 2.14 also discloses
        the owner of the Leased Property.

2.15.   INTELLECTUAL PROPERTY RIGHTS. To IHI's knowledge, no patents, processes,
        inventions, trademarks, trade names, copyrights, licenses, information
        and proprietary rights (collectively, "Intellectual Property Rights")
        being used by the Company or the Subsidiary in the conduct of their
        business infringe upon or are in conflict with the rights of others.
        SCHEDULE 2.15 is a summary of all Intellectual Property Rights.

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<PAGE>
2.16.   BROKERS' FEES. Neither the Company nor IHI is obligated (contingently or
        otherwise) under any contract or other agreement, and there are no
        outstanding claims against either of them for the payment of any
        broker's or finder's fee or agent's commission or other similar payment
        in connection with the origin, negotiation, execution or performance of
        this Agreement or the Related Agreements.

2.17.   LIMITATION ON REPRESENTATIONS; DEFINITION OF KNOWLEDGE. All
        representations and warranties of IHI in this Section 2 are being made
        to its "knowledge" (as that term is defined below) except for those
        representations and warranties made in Sections 2.2, 2.3, 2.5, 2.6, 2.9
        and 2.13. When any representation or warranty in this Section 2 is
        qualified to IHI's "knowledge," it means the actual knowledge of its
        executive officers.

3.      REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants
        to IHI that the statements in this Section 3 are true and correct as of
        the date of this Agreement and will be true and correct on the Closing
        Date as if made on the Closing Date (except to the extent any
        representation or warranty is made as of another date, which are hereby
        made as of such other date):

3.1.    ORGANIZATION AND STANDING. The Buyer is a corporation duly incorporated,
        validly existing, and in good standing under the laws of the State of
        Texas. Buyer is duly qualified and in good standing in every
        jurisdiction in which it is required by the nature of its business or
        the ownership or lease of its properties to so qualify, except where the
        failure to so qualify does not or is not reasonably expected to have a
        material adverse effect on the Buyer.

3.2.    AUTHORIZATION AND ENFORCEABILITY. Buyer has full power and authority to
        execute and deliver this Agreement, the Related Agreements and the Note,
        and to perform its obligations hereunder and thereunder. Buyer has duly
        authorized the execution, delivery and performance of this Agreement,
        and it is Buyer's legal, valid and binding obligation, enforceable
        against it in accordance with its terms, except for the Exceptions. When
        Buyer executes and delivers the Related Agreements and the Note, each
        will have been duly executed and delivered by Buyer and will constitute
        its legal, valid and binding obligations, except as the enforcement
        thereof may be limited by the Exceptions. Buyer is not required to
        obtain any consent, approval or authorization of, or registration,
        declaration or filing with any Governmental Authority or third party to
        authorize the execution and delivery of, the performance of its
        obligations under this Agreement, the Related Agreements, or the Note.

3.3.    NO VIOLATION OF LAW, ETC. Buyer's execution, delivery and performance of
        this Agreement does not, and its execution, delivery and performance of
        the Related Agreements and the Note will not:

        (a)     conflict with, violate or constitute a breach of or a default
                under; or

        (b)     result in the creation or imposition of any lien upon any of the
                assets or properties of Buyer under the terms of:

                (1)     if Buyer is other than a natural person, the
                        Organizational Documents of Buyer; or

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<PAGE>
                (2)     any credit or any loan agreement, mortgage, indenture,
                        promissory note or other agreement or instrument to
                        which Buyer is a party or by which it or any of its
                        properties may be bound or affected.

3.4.    BROKERS' FEES. Buyer is not obligated (contingently or otherwise) under
        any contract or other agreement, and there are no outstanding claims
        against Buyer for the payment of any broker's or finder's fee or agent's
        commission or other similar payment in connection with the origin,
        negotiation, execution or performance of this Agreement or the Related
        Agreements.

3.5.    BUYER'S KNOWLEDGE. Neither Andrews nor Ahuero has knowledge of any facts
        or circumstances that would indicate that any of the representations or
        warranties of IHI contained in this Agreement are inaccurate or untrue
        in any material respect. For purposes of this Agreement, Andrews' and
        Ahuero's knowledge of a fact or circumstance shall in all cases be
        attributed to the Buyer.

4.      PRE-CLOSING ACTIONS.

4.1.    CONDUCT OF BUSINESS. Except as otherwise provided in this Section 4.1,
        from the date of this Agreement to the Closing Date, IHI shall cause the
        Company to carry on and conduct its operations only in the Ordinary
        Course of Business, including the collection of its accounts receivable,
        payment of trade account and other-payables, and maintenance of
        inventory levels, without any change in the policies, practices, and
        methods that the Company pursued before the date of this Agreement. As
        an exception to the foregoing sentence, immediately before the Closing
        (a) the Company shall transfer to IHI, and shall no longer have access
        to, all of the Company's bank accounts, and the cash, temporary cash
        investments and instruments representing the same and all other cash
        equivalents contained therein; and (b) IHI shall forgive all
        intercompany amounts recorded in the Company's financial records as a
        payable due to IHI, and the Company shall forgive all intercompany
        amounts recorded on IHI's financial records as a payable to the Company.
        Subject in all cases to the above required actions that will be taken
        before the Closing, IHI will use its reasonable commercial efforts to
        preserve the business organizations of the Company intact; to preserve
        the relationships with Company's customers, suppliers, and others having
        business dealings with the Company.

4.2.    BUYER'S ACCESS. IHI and the Company shall permit Buyer and its
        representatives to make a full business, financial, accounting, and
        legal investigation of the Company, its operations, properties and
        equipment. IHI and the Company shall take all reasonable steps necessary
        to cooperate with Buyer in undertaking any investigation which they deem
        necessary.

4.3.    ACCURACY OF REPRESENTATIONS AND WARRANTIES. IHI will promptly advise
        Buyer in writing if (a) any of its representations or warranties are
        untrue or incorrect in any material respect or (b) IHI becomes aware of
        the occurrence of any event or of any state of facts that results in any
        of the representations and warranties of IHI being untrue or incorrect
        in any material respect as if IHI were then making them. IHI will use
        its reasonable commercial efforts to cause all conditions within its
        control that are set forth in Section 5 to be satisfied as promptly as
        practicable under the circumstances.

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<PAGE>
5.      CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS AT THE CLOSING. Buyer's
        obligation to purchase the Stock on the Closing Date is subject to the
        satisfaction, by the Closing Date, of the conditions of this Section 5.
        If any such condition is not satisfied or waived, then Buyer shall have
        no obligation to purchase the Stock.

5.1.    COMPLIANCE WITH THIS AGREEMENT. By the Closing Date, IHI and the Company
        shall have performed, and complied with all agreements and conditions
        contained in this Agreement that each are required to perform or comply
        with.

5.2.    ACCURACY OF REPRESENTATIONS.

        (a)     All of the representations and warranties of IHI in this
                Agreement (considered collectively), and each of these
                representations and warranties (considered individually), must
                have been accurate, in light of the circumstance under which
                they were made, in all material respects as of the date of this
                Agreement, and must be accurate in all material respects as of
                the Closing Date as if made on the Closing Date.

        (b)     Buyer must not have discovered any material error, misstatement
                or omission in the representations and warranties made by IHI in
                this Agreement, the Financial Statements, or in any Exhibit,
                schedule or other disclosure made hereunder.

5.3.    NO MATERIAL ADVERSE CHANGE. Between the date of this Agreement and the
        Closing Date, there must not have occurred any material adverse change
        in the Company's financial condition or results of operations (on a
        consolidated basis)

5.4.    SATISFACTION OF CONDITIONS TO MERGER. All of the conditions precedent to
        the Merger shall have been satisfied and performed.

5.5.    DELIVERY OF CLOSING DOCUMENTS AND ITEMS. IHI shall have delivered or
        caused to have been delivered to Buyer the documents, certificates and
        general instruments of transfer enumerated in Section 1.5(a) of this
        Agreement.

5.6.    CERTIFICATE REGARDING CONDITIONS PRECEDENT. IHI shall have delivered to
        Buyer a certificate of IHI certifying that as of the Closing Date all of
        the conditions set forth in this Section 5 have been satisfied.

6.      CONDITIONS PRECEDENT TO THE OBLIGATIONS OF IHI AT THE CLOSING. IHI's
        obligation to sell the Stock to Buyer on the Closing Date is subject to
        the satisfaction, by the Closing Date, of the conditions set forth in
        this Section 6. If any such condition is not satisfied or waived, then
        IHI shall have no obligation to sell the Stock to Buyer.

6.1.    COMPLIANCE WITH THIS AGREEMENT. By the Closing Date, Buyer shall have
        performed and complied with all agreements and conditions contained in
        this Agreement that it is required to perform or comply with.

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<PAGE>
6.2.    ACCURACY OF REPRESENTATIONS.

        (a)     All of Buyer's representations and warranties in this Agreement
                (considered collectively), and each of its representations and
                warranties in this Agreement (considered individually), must
                have been accurate, in light of the circumstance under which
                they were made, in all material respects as of the date of this
                Agreement and must be accurate in all material respects as of
                the Closing Date as if made on the Closing Date.

        (b)     IHI must not have discovered any material error, misstatement or
                omission in the representations and warranties Buyer made in
                this Agreement or in any Exhibit, schedule or other disclosure
                hereunder.

6.3.    SATISFACTION OF CONDITIONS TO MERGER. All of the conditions precedent to
        the Merger shall have been satisfied and performed.

6.4.    DELIVERY OF CLOSING DOCUMENTS AND ITEMS. Buyer have delivered or caused
        to have been delivered to IHI the documents, certificates and general
        instruments of transfer enumerated in Section 1.5(b) of this Agreement.

6.5.    CERTIFICATE REGARDING CONDITIONS PRECEDENT. The Buyer shall have
        delivered to IHI a certificate of the Buyer certifying that as of the
        Closing Date all of the conditions set forth in Section 6 have been
        satisfied.

7.      NONCOMPETITION.

7.1.    PROHIBITED ACTIVITIES. IHI will not, for a period of two years after the
        Closing Date, directly or indirectly, for itself or on behalf of or in
        conjunction with any other person, persons, company, partnership,
        corporation or business of whatever nature:

        (a)     engage in the design, manufacture, sale, marketing or assembly
                of industrial gaskets and hoses to the process industries and
                turbine manufacturing industries (the "GHX Business"); or

        (b)     contact or solicit any person or entity which is, at that time,
                or which has been, within two years before the Closing Date, a
                customer of the Company or (a "Protected Customer"), in order to
                divert the Protected Customer to any other company or entity in
                the GHX Business.

        Notwithstanding the above, the foregoing covenants shall not prohibit
        IHI from (i) continuing to engage in the design, manufacture,
        fabrication, assembly or sale of any equipment, parts or component parts
        as IHI, T-3, or either of their subsidiaries or affiliates currently
        engages; or (ii) acquiring as an investment no more than 1% of the
        capital stock of a competing business whose stock is traded on a
        national securities exchange or in the over-the-counter market.

7.2.    DAMAGES. Because of the difficulty of measuring economic losses to Buyer
        as a result of a breach of any of the foregoing covenants, and because
        of the immediate and irreparable

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<PAGE>
        damage that will result to Buyer for which it would have no other
        adequate remedy, IHI agrees that the foregoing covenant may be enforced
        by Buyer if there is a breach by IHI, by injunctive relief, restraining
        orders, or other extraordinary relief to be cumulative to, but not in
        limitation of, any other remedies to which Buyer may be entitled.

7.3.    REASONABLE RESTRAINT. The parties agree that the covenants in this
        Section 7 impose a reasonable restraint on IHI in light of the
        activities and business of the Company as of the date of this Agreement.

7.4.    SEVERABILITY; REFORMATION. The covenants in this Section 7 are severable
        and separate, and the unenforceability of any specific covenant shall
        not affect the provisions of any other covenant. If any court of
        competent jurisdiction determines that the scope, time or territorial
        restrictions are unreasonable, the parties intend that such restrictions
        be enforced to the fullest extent the court deems reasonable, and the
        Agreement shall thereby be reformed.

8.      INDEMNIFICATION.

8.1.    SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The parties'
        representations, warranties, covenants, agreements and indemnities in
        this Agreement shall survive the Closing, the consummation of the
        transactions evidenced by this Agreement, and any investigation with
        respect thereto for a period of one year after the Closing Date (the
        "Expiration Date"). Notwithstanding the foregoing, any representation,
        warranty, covenant, agreement or indemnity in respect to which indemnity
        may be sought, shall survive the time at which it would otherwise
        terminate if notice of the inaccuracy or breach thereof shall have been
        given to the party against whom such indemnity may be sought before such
        time.

8.2.    INDEMNIFICATION BY IHI.

        (a)     Subject to the provisions of this Section 8, IHI agrees to
                protect, indemnify and hold harmless Buyer and its stockholders,
                officers, directors, agents and attorneys, (the "Buyer
                Indemnitees"), from and against any demand, claim, action, cause
                of action, suit, proceeding, investigation, liability,
                obligation, judgment, loss, damage, cost or expense (excluding
                in all cases consequential and punitive damages, but including
                reasonable attorneys' fees) (collectively, "Damages") as they
                are incurred or suffered by any of them and caused by or arising
                out of:

                (1)     IHI's or the Company's breach or default in the
                        performance of any covenant or agreement in this
                        Agreement or in any IHI Related Agreement; and

                (2)     IHI's breach of or inaccurate or erroneous
                        representation or warranty made in this Agreement; and

                (3)     Any liability under any Environmental Laws (as defined
                        below) occurring or existing for events or circumstances
                        existing prior to December 1, 2000, the date of the
                        Company's occupancy of the leased property located at
                        7111 Ardmore, Houston, Texas 77054 (the "Company
                        Occupancy Date") and arising out of or related to (i)
                        any conduct, operation or activity at the leased

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<PAGE>
                        property located at 7111 Ardmore, Houston, Texas 77054
                        prior to the Company Occupancy Date; or (ii) any
                        condition of the leased property located at 7111
                        Ardmore, Houston, Texas 77054 existing on or prior to
                        the Company Occupancy Date.

        "ENVIRONMENTAL LAWS" means all federal, state, county, municipal and
        local, foreign, and other statutes, laws, regulations, and ordinances
        that relate to human health or Environment, all as may be amended from
        time to time.

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

8.3.    INDEMNIFICATION BY BUYER. Subject to the provisions of this Section 8,
        Buyer agrees to protect, indemnify and hold harmless IHI and its
        stockholders, officers, directors, agents, attorneys and assigns (the
        "IHI Indemnitees") from and against any Damages as they are incurred or
        suffered by any of them and caused by or arising out of:

        (a)     Buyer's breach or default in the performance of any covenant or
                agreement in this Agreement, or in any Related Agreements or the
                Note; and

        (b)     Buyer's breach of or inaccurate or erroneous representation or
                warranty made in this Agreement.

8.4.    PROCEDURE FOR INDEMNIFICATION; THIRD-PARTY CLAIMS.

        (a)     Within 15 days after receipt of notice of commencement of any
                action by any third party evidenced by service of process or
                other legal pleading, or with reasonable promptness after the
                assertion in writing of any claim by a third party, the party
                entitled to indemnification hereunder ("Indemnified Person")
                shall give the party obligated to provide indemnification under
                Section 8.2 or 8.3 hereof (the "Indemnifying Person") written
                notice thereof, together with a copy of such claim, process or
                other legal pleading. The failure to so notify the Indemnifying
                Person within the above time frame will not relieve the
                Indemnifying Person of any liability it may have to the
                Indemnified Person, except to the extent the Indemnifying Person
                demonstrates that the defense of such action is unduly
                prejudiced by the Indemnified Person's failure to give such
                notice, or except if such notice is not delivered before the
                time specified in Section 8.1. The Indemnifying Person shall
                have the right to undertake the defense, settlement, compromise
                or other disposition thereof at its own expense and through a
                legal representative of its own choosing. The Indemnified Person
                and its counsel shall have the right to be present at the
                negotiation, defense and settlement of such action or claim, and
                any settlement or compromise of any such action or claim shall
                be subject to the approval of the Indemnified Person, which
                approval shall not be unreasonably withheld.

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

8.5.    PROCEDURE FOR INDEMNIFICATION; OTHER THAN THIRD-PARTY CLAIMS. Any claim
        for indemnification for any matter not involving a third-party claim
        shall be asserted by written notice, which specifies in reasonable
        detail the factual basis of such claim, delivered to the Indemnifying
        Person on or before the Expiration Date.

8.6.    SPECIAL PROVISIONS REGARDING LIABILITY.

        (a)     No claim for indemnification shall be made hereunder unless
                asserted by a written notice given to the Indemnifying Person,
                on or before the Expiration Date.

        (b)     No claim for indemnification shall be made hereunder with
                respect to any matter (i) unless and until the total amount of
                Damages exceeds $50,000 in the aggregate ("Minimum Damages"),
                and then only for the amount by which such Damages exceeds
                Minimum Damages; and (ii) to the extent that the total amount of
                Damages exceeds the Cash Consideration.

        (c)     The Indemnified Person shall act in good faith and in a
                commercially reasonable manner to mitigate any Damages for which
                it may seek indemnification under this Section 8.

        (d)     An indemnity payment for Damages otherwise due and payable under
                this Section 8 shall be decreased to the extent of any (i) net
                reduction of tax liability the Indemnified Party actually
                realizes as a result of such indemnifiable loss, and (ii)
                insurance proceeds the Indemnified Party actually collects in
                connection with the indemnifiable loss.

8.7.    REMEDIES. The remedies of the Buyer and the Buyer Indemnitees set forth
        in this Section 8 shall be the exclusive post-Closing remedies available
        to them with respect to the actual or alleged breach by IHI of any
        provision of this Agreement or the Related Agreements.

9.      POST-CLOSING MATTERS.

9.1.    FURTHER ASSURANCES. From time to time after the Closing Date, each party
        hereto will, at any other party's request, execute, acknowledge and
        deliver to such requesting party such

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<PAGE>
        other instruments and take such other actions and deliver such other
        documents as may be reasonably required to carry out the intent of this
        Agreement and the Related Agreements.

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

9.3.    THE COMPANY'S DEBT. After the Closing Date and until such time as the
        Note is paid in full, the Company shall not, without IHI's prior written
        approval, incur any additional debt other than (a) ordinary advances
        under the Company's revolving working capital line to be established by
        Buyer and (b) up to an additional $200,000 per calendar year in the
        aggregate for the purchase of new equipment in the Ordinary Course of
        Business and for necessary building improvements.

9.4.    TAX MATTERS.

        (a)     ALLOCATION OF LIABILITY FOR TAXES, TAX RETURNS AND TAX PAYMENTS.

                (1)     IHI and Buyer shall, to the extent permitted by
                        applicable law and except as otherwise provided herein,
                        elect with the relevant Governmental Authority to close
                        the taxable period of the Company and the Subsidiary at
                        the close of business on the Closing Date.

                (2)     IHI shall prepare or cause to be prepared and file or
                        cause to be filed any required Tax Returns for all
                        taxable periods or portions thereof ending on or before
                        the Closing Date, and shall pay all Taxes of the Company
                        for taxable periods or portions thereof ending on or
                        before the Closing Date.

                (3)     Buyer shall be liable for and indemnify IHI and its
                        affiliates against Taxes imposed on or incurred by the
                        Company, the Subsidiary, IHI or its affiliates for any
                        Pre-Closing Tax Period (as defined below) attributable
                        to any Section 338(h)(10) Election (as defined below).
                        Buyer shall be liable for and indemnify IHI and its
                        affiliates against Taxes imposed on or incurred by the
                        Company or the Subsidiary for any Straddle Period (as
                        defined below), including (A) any Taxes attributable to
                        any transactions that are properly allocable to the
                        portion of the Closing Date after the Closing, and (B)
                        any Taxes attributable to any Section 338(h)(10)
                        Election. Buyer shall pay all Taxes reported on Tax
                        returns for which Buyer has filing responsibility, and
                        all Taxes resulting from adjustments to any Tax returns
                        of the Company or the Subsidiary other than a Tax return
                        that includes the assets and activities of the Company
                        or the Subsidiary with the assets or activities of IHI
                        or any affiliate of IHI (other than the Company and the
                        Subsidiary). Buyer will not

STOCK PURCHASE AGREEMENT               17                         EXECUTION COPY
<PAGE>
                        file any amended return, carryback claim, or other
                        adjustment request relating to the Company or the
                        Subsidiary for any Tax period that includes or ends on
                        or before the Closing Date unless such action is
                        required by law, or Buyer has obtained IHI's written
                        consent, which consent shall not be unreasonably
                        withheld.

                (4)     If Buyer or any of its affiliates (including the Company
                        and the Subsidiary) makes any payment of Tax for which
                        IHI is liable under Section 9.4(a)(2), or if IHI or any
                        of its affiliates (other than the Company or the
                        Subsidiary) makes any payment of any Tax for which Buyer
                        is liable under Section 9.4(a)(3), then the Person
                        liable for the Tax under Section 9.4(a) shall pay the
                        amount of the Tax to the Person making the payment
                        within 10 days following written notice from the Person
                        making the payment that payment of such amounts to the
                        appropriate Governmental Authority is due, provided that
                        the Person liable for the Tax shall not be required to
                        make any payment earlier than the day it is due to the
                        appropriate Governmental Authority.

                (5)     Any reimbursement payment due under Section 9.4(a)(4)
                        and not made by required date shall bear interest on the
                        amount of the payment from the last date provided for
                        such payment until the date paid. The interest payable
                        shall be computed at an interest rate equal to the
                        Federal short-term rate determined under Code Section
                        6621(b) plus 0.5 percentage point (i.e., the interest
                        rate paid by the Internal Revenue Service on large
                        corporate overpayments).

                (6)     Any payments pursuant to Section 9.4(a)(4) shall be
                        reported by the parties as adjustments to the Purchase
                        Price, except as otherwise required by the Code or any
                        Tax law. If, contrary to the intent of the parties, any
                        such payment is treated other than as an adjustment to
                        the Purchase Price, then the payment will be adjusted to
                        take into account any Tax applicable to the payment to
                        fully compensate the recipient on an after-Tax basis.
                        Any payments of interest pursuant to Section 9.4(a)(5)
                        shall be treated as payments of interest (and not as
                        additional Purchase Price), and shall not be adjusted to
                        take into account any Tax applicable to the receipt of
                        such interest.

                (7)     The Buyer shall cooperate fully, as and to the extent
                        reasonably requested by IHI in connection with the
                        filing of Tax Returns (including the Section 338 Forms,
                        as defined below) pursuant to this Section 9.4 and any
                        audit, litigation, or other proceeding with respect to
                        Taxes. Such cooperation shall include the retention and
                        (upon IHI's request) the provision of records and
                        information which are reasonably relevant to any such
                        audit, litigation or other proceeding and making
                        employees available on a mutually convenient basis to
                        provide additional information and explanation of any
                        material provided hereunder. Buyer agrees (i) to retain
                        all books and records with respect to Tax matters
                        pertinent to the Company relating to any Tax period
                        beginning before the Closing Date until the expiration
                        of any applicable

STOCK PURCHASE AGREEMENT               18                         EXECUTION COPY
<PAGE>
                        statutes of limitations (including, to the extent
                        notified by IHI) of the respective Tax periods, and to
                        abide by all record retention agreements entered into
                        with any Tax authority, and (ii) to give IHI reasonable
                        written notice prior to transferring, destroying, or
                        discarding any such books and records and, if IHI shall
                        request, the Buyer shall allow IHI to take possession of
                        such books and records. Should any audit, litigation or
                        other proceeding with respect to Taxes potentially give
                        rise to a payment obligation by IHI or the Company,
                        Buyer will allow IHI and its counsel to review and
                        comment on written responses provided to the IRS or Tax
                        authority, if it so elects, at its own expense in the
                        defense of such audit, litigation, or other proceeding.

        (b)     SECTION 338 ELECTIONS.

                (1)     At Buyer's option, Buyer and IHI shall join, and shall
                        cause their respective affiliates to join with each
                        other as applicable, in making a Section 338(h)(10)
                        Election with respect to Buyer's purchase of the Stock
                        pursuant to this Agreement, and with respect to Buyer's
                        deemed purchase of the stock of the Subsidiary resulting
                        from any Section 338(h)(10) Election. Any such elections
                        shall be made in accordance with applicable laws and
                        under any comparable provision of domestic state or
                        local law for which a separate election is permissible
                        and as set forth herein.

                (2)     The Purchase Price, liabilities of the Company and the
                        Subsidiary, and other relevant items shall be allocated
                        in accordance with Code Sections 338(b)(5) and 1060 (as
                        applicable) and the Treasury Regulations thereunder as
                        set forth on a schedule (the "Allocation Statement").
                        The Allocation Statement will be prepared by Buyer and
                        provided to IHI within 120 days after the Closing Date.
                        IHI shall have 30 days after receipt of the Allocation
                        Statement to object to any allocation set forth therein.
                        Any such objection shall provided to Buyer in a written
                        notice setting forth each disputed item in the
                        Allocation Statement, specifying the amount of each
                        disputed item and describing in reasonable detail the
                        basis for such dispute. If Buyer and IHI cannot agree on
                        the final form of the Allocation Statement, any disputed
                        items shall be resolved in accordance with the
                        procedures set forth in Section 1.3(b).

                (3)     Buyer shall prepare all Section 338 Forms in accordance
                        with the Allocation Statement and shall deliver such
                        Section 338 Forms to IHI as soon as practical after the
                        finalization of the Allocation Statement, and in any
                        event at least 30 days prior to the due date for filing
                        such forms. Buyer and IHI shall take all reasonable
                        actions or refrain from taking any actions, as the case
                        may be, necessary to give effect to the Section
                        338(h)(10) Elections. Buyer and IHI shall report the
                        transactions contemplated by this Agreement on any
                        Section 338 Forms, any statement required under Code
                        Section 1060, and any other Tax returns consistent with
                        the Allocation Statement, and shall take no position
                        contrary thereto unless required to do so by applicable
                        tax law pursuant to a determination (as that term is
                        defined in Code Section 1313(a)).

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<PAGE>
        (c)     MISCELLANEOUS.

                (1)     Each party and its affiliates shall bear their own
                        expenses incurred in connection with preparation of Tax
                        returns and other matters related to Taxes under the
                        provisions of this Agreement.

                (2)     The rights and obligations under this Section 9.4 shall
                        survive the Closing until six months after the
                        expiration of any applicable period of limitations on
                        assessments, giving effect to any waiver, mitigation, or
                        extension thereof.

                (3)     If there is any conflict between the provisions of this
                        Section 9.4 and any other provisions of the Agreement as
                        applied to any liability for any Tax or any other matter
                        relating to Taxes, the provisions of this Section 9.4
                        shall control.

As used in this Section 9.4:

"PERSON" means any individual, corporation, partnership, joint venture, trust,
association, organization, governmental authority, or other entity.

"POST-CLOSING TAX PERIOD" means any Tax period beginning after the Closing Date.

"PRE-CLOSING TAX PERIOD" means any Tax period ending on or before the Closing
Date.

"SECTION 338(h)(10) ELECTION" means an election described in Code Section
338(h)(10) and applicable Treasury Regulations with respect to Buyer's purchase
of the Stock pursuant to this Agreement, or with respect to Buyer's deemed
purchase of the stock of the Subsidiary resulting from any Code Section
338(h)(10) election. Section 338(h)(10) Election shall include any corresponding
election under any Tax law pursuant to which a separate election is permissible
(i.e., a state election that ignores the actual or deemed sale of stock of the
Company or the Subsidiary and instead treats the applicable Company or
Subsidiary as having sold all of its assets to a Buyer subsidiary followed by a
distribution of the proceeds of such sale in a complete liquidation in which no
gain or loss is recognized under a state provision corresponding to Code Section
332).

"SECTION 338 FORMS" means all returns, documents, statements, and other forms
that are required to be submitted to any federal, state, county or other local
Governmental Authority in connection with a Section 338 Election. Section 338
Forms shall include any "statement of section 338 election" and IRS Form 8023
(together with any schedules or attachments thereto) that are required pursuant
to Treasury Regulations Section 1.338-1 or Treasury Regulations Section
1.338(h)(10)-1 or any successor provisions.

"STRADDLE PERIOD" means any Tax period that begins on or before the Closing Date
and ends after the Closing Date.

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<PAGE>
10.     TERMINATION.

10.1.   MANNER OF TERMINATION. This Agreement may be terminated at any time
        before the Closing Date as follows:

        (a)     By Buyer and IHI in a written instrument signed by each of them.

        (b)     By Buyer or IHI if the Closing does not occur on or before
                December 31, 2001 (the "Termination Date").

        (c)     By Buyer or IHI if there has been a material breach of any of
                the representations or warranties set forth in this Agreement on
                the part of the other, and this breach by its nature cannot be
                cured before the Termination Date.

        (d)     By Buyer or IHI if there has been a material breach of any of
                the covenants or agreements set forth in this Agreement on the
                part of the other, and this breach is not cured by the
                Termination Date.

10.2.   EFFECT OF TERMINATION. If terminated as provided in Section 10.1, this
        Agreement shall forthwith become void and have no effect, except for
        Section 11.9 and Section 11.12, and except that no party shall be
        relieved or released from any liabilities or damages arising out of the
        party's breach of any provision of this Agreement.

11.     MISCELLANEOUS.

11.1.   ENTIRE AGREEMENT. This Agreement, including the Exhibits and schedules
        hereto, constitutes the entire agreement between the parties with
        respect to the subject matter hereof and no party shall be liable or
        bound to any other party in any manner by any warranties,
        representations or covenants except as specifically set forth herein or
        therein. This Agreement supersedes all letters, memoranda and term
        sheets previously prepared in connection with the negotiations
        surrounding the subject matter hereof. The terms and conditions of this
        Agreement shall inure to the benefit of and be binding upon the parties'
        respective successors and permitted assigns. Nothing in this Agreement,
        express or implied, is intended to confer upon any third party any
        rights, remedies, obligations or liabilities under or by reason of this
        Agreement, except as expressly provided in this Agreement.

11.2.   NOTICES. Any notices permitted or required to be given under the terms
        of this Agreement shall be in writing and shall be deemed given if
        delivered to the party to be notified at the address specified below, by
        first class mail, overnight courier or fax with hard copy being sent by
        first class mail or overnight courier. Such notice shall be deemed
        received 24 hours after it is sent via fax (with receipt confirmed) or
        overnight courier. Any notice given in any other manner shall be
        effective only if and when received.

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<PAGE>
        (a)     if to Buyer, at:

                       GHX Acquisition Corp.
                       7111 Ardmore
                       Houston, Texas  77054
                       Attn:  Daniel D. Ahuero
                       Telephone No.: (713) 222-2231
                       Facsimile No.: (713) 222-8347

                with a copy (which shall not constitute notice) to:

                       Stumpf, Craddock, Massey & Pullman, PC
                       1400 Post Oak Blvd.
                       Suite 400
                       Houston, Texas  77056
                       Attn:  Lawrence J. Fontana
                       Telephone No.: (713) 871-0919
                       Facsimile No.: (713) 871-0408

        (b)     if to IHI, at:

                       Industrial Holdings, Inc.
                       7135 Ardmore
                       Houston, Texas 77054
                       Attn: Christine A. Smith
                       Telephone No.  (713) 747-1025
                       Facsimile No.: (713) 749-9642

                with a copy (which shall not constitute notice) to:

                       Jackson Walker L.L.P.
                       1100 Louisiana, Suite 4200
                       Houston, Texas 77002
                       Attn: Sabrina A. McTopy
                       Telephone No.  (713) 752-4265
                       Facsimile No.: (713) 752-4221

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

11.3.   AMENDMENT AND WAIVERS. This Agreement may be amended, modified or
        supplemented only by a written instrument designated as an "amendment"
        to this Agreement and signed by the parties hereto. The observance of
        any term of this Agreement may be waived (either generally or in a
        particular instance and either retroactively or prospectively) only by a
        written instrument signed by the person specifically waiving such
        observance.

STOCK PURCHASE AGREEMENT               22                         EXECUTION COPY
<PAGE>
11.4.   ASSIGNMENT. This Agreement shall inure to the benefit of and be binding
        upon the parties hereto and their respective legal representatives,
        successors (including the successor to IHI in the Merger) and permitted
        assigns; provided, however, that no party may assign this Agreement
        without the prior written consent of the other party, which consent
        shall be not unreasonably withheld.

11.5.   GOVERNING LAW; VENUE. This Agreement shall be governed by, construed
        under, enforced and interpreted in accordance with the internal
        substantive laws of the State of Texas that apply to agreements to be
        made and performed solely within such state, without giving effect to
        any conflicts or choice of laws principles that might otherwise apply.
        The parties hereto agree that any dispute arising in connection with
        this Agreement shall be resolved by arbitration in accordance with
        Section 11.7 of this Agreement; provided, however, to the extent a party
        exercises its rights under Section 7 of this Agreement; venue shall lie
        with a court of competent jurisdiction in Harris County, Texas.

11.6.   SEVERABILITY. If any provision of this Agreement is declared
        unenforceable by any court of competent jurisdiction, such provision
        shall be enforced to the greatest extent permitted by law, and such
        declaration shall not affect the validity of any other provision of this
        Agreement.

11.7.   ARBITRATION.

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

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

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

        (d)     The arbitration shall be held before one neutral, disinterested
                arbitrator knowledgeable in the general subject matter of the
                dispute, controversy, or claim and

STOCK PURCHASE AGREEMENT               23                         EXECUTION COPY
<PAGE>
                selected by AAA in accordance with the Arbitration Rules, except
                that any arbitration in which the disputed, controverted, or
                claimed amount (as reflected on the demand for arbitration, as
                the same may be amended) exceeds $500,000.00 shall be held
                before three arbitrators, one arbitrator being selected by
                Buyer, one by IHI, and the third by the other two from a panel
                of persons identified by AAA who are knowledgeable in the
                general subject matter of the dispute, controversy, or claim.

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

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

        (g)     The interpretation and construction of this Section 11.7,
                including, but not limited to, its validity and enforceability,
                shall be governed by Title 9 of the U.S. Code, notwithstanding
                the choice of law set forth in Section 11.5 of this Agreement.

11.8.   MULTIPLE COUNTERPARTS. This Agreement may be executed in multiple
        counterparts, each of which shall be deemed an original but all of which
        shall constitute one instrument.

11.9.   EXPENSES. Except as provided in the next sentence of this Section 11.9,
        IHI and Buyer are each solely responsible for and will bear all of their
        own respective expenses, including, without limitation, expenses of
        legal counsel, investment bankers, brokers, consultants, accountants and
        other advisors, incurred at any time in connection with this Agreement,
        the Related Agreements, the Note, and the transactions contemplated
        hereby and thereby, and no such expenses shall be borne by the Company.
        Notwithstanding the foregoing, IHI shall pay Buyer's expenses incurred
        in connection with this Agreement in an amount not to exceed $25,000,
        whether or not the Closing occurs.

11.10.  WAIVER OF BREACH. No waiver of any provision of this Agreement shall
        constitute a waiver of any other provision of this Agreement, nor shall
        such waiver constitute a waiver of any subsequent breach of such
        provision.

11.11.  CONSTRUCTION. The headings contained in this Agreement are for reference
        purposes only and shall not affect this Agreement in any manner
        whatsoever. Wherever required by the context, any gender shall include
        any other gender, the singular shall include the plural, and the plural
        shall include the singular.

11.12.  PUBLIC ANNOUNCEMENTS. The parties agree to advise and confer with each
        other prior to the issuance of any public reports, statements or press
        releases pertaining to this Agreement and the transactions contemplated
        hereby. Each party will use its best efforts to maintain in strict

STOCK PURCHASE AGREEMENT               24                         EXECUTION COPY
<PAGE>
        confidence the existence and terms of this Agreement and the
        transactions contemplated hereby. Unless otherwise required by law or as
        set forth above, no party shall make any public announcement or
        disclosure concerning this Agreement, except as mutually agreed. The
        financial terms of the Agreement are to be kept confidential, except to
        the extent that the disclosure is required under law. Nothing in the
        foregoing is intended to prevent IHI from making any filings required
        with the Securities and Exchange Commission.

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

STOCK PURCHASE AGREEMENT               25                         EXECUTION COPY
<PAGE>
DATED NOVEMBER 14, 2001.

                                       INDUSTRIAL HOLDINGS, INC.

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

                                       BUYER

                                       GHX ACQUISITION CORP.

                                       By: /s/ DANIEL D. AHUERO
                                           ------------------------------------
                                            Daniel D. Ahuero, President

STOCK PURCHASE AGREEMENT               26                         EXECUTION COPY

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