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EXHIBIT 10.3
AMENDMENT NO. 3 TO
CONVERTIBLE NOTES
AND
AGREEMENT TO CONVERT
This Amendment No. 3 to Convertible Notes and Agreement to Convert
(this "Amendment"), dated effective as of September 4, 2001, is by and between
SJMB, L.P., a Texas limited partnership ("SJMB"), and Industrial Holdings, Inc.,
a Texas corporation ("IHI").
WITNESSETH:
WHEREAS, SJMB was the holder of two Subordinated Convertible
Promissory Notes dated August 25, 2000, one in the original principal amount of
$3,450,000 originally convertible to IHI common stock at $1.15 per share ("Note
A") and the other in the original principal amount of $3,450,000 originally
convertible to IHI common stock at $2.00 per share ("Note B," and together with
Note A, the "Convertible Notes"); and
WHEREAS, IHI and SJMB have entered into (i) a Consent and Release
dated as of May 7, 2001, whereby SJMB has given its consent to the sale of A&B
Bolt and Supply, Inc. to T-3 Energy Services, Inc. ("T-3) and the subsequent
merger of IHI and T-3 (the "Merger"), and (ii) Amendment No. 1 to the
Convertible Notes and Agreement to Convert dated as of May 7, 2001 ("Amendment
No. 1"); and
WHEREAS, IHI and T-3 have agreed to amend the Agreement and Plan of
Merger dated as of May 7, 2001 (the "Merger Agreement") pursuant to the First
Amendment to Agreement and Plan of Merger dated as of the date hereof (the
"First Amendment"); and
WHEREAS, IHI and SJMB entered into an Amendment No. 2 to the
Convertible Notes and Agreement to Convert dated as of June 29, 2001 ("Amendment
No.2"), whereby Amendment No. 1 was cancelled, SJMB converted Note A into
3,284,167 shares of IHI common stock and SJMB agreed to convert Note B on the
consummation of the Merger pursuant to the terms of Amendment No. 2; and
WHEREAS, SJMB and IHI desire that this Amendment replace and
supercede Amendment No. 2 and govern, among other things, the conversion of Note
B on the date of the consummation of the Merger (the "Closing Date"), in
accordance with the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
1. Incorporation of the Convertible Notes. All capitalized terms
which are not defined herein shall have the same meanings as set forth in the
Convertible Notes, to the extent not inconsistent with this Amendment. To the
extent any terms and provisions of the Convertible Notes are inconsistent with
the amendments set forth herein, such terms and provisions shall be deemed
superseded hereby. This Amendment also replaces and supercedes the terms and
provisions of Amendment No. 1 and Amendment No. 2.
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2. Payment and Conversion of Note B at the Consummation of the
Merger. Notwithstanding any other provisions of the Convertible Notes, on the
Closing Date, IHI shall pay $350,000 of the accrued interest under Note B in
cash to SJMB and all of the remaining principal and accrued interest outstanding
under Note B shall automatically convert into the number of shares of IHI common
stock equal to (1) the number of shares that would have been received by SJMB
had SJMB not converted or received payment for any portion of principal or
interest under the Convertible Notes, but instead had converted the entire
principal and interest under both Convertible Notes as if outstanding on the
Closing Date at $1.28 per share, less (2) the 3,284,167 shares issued to SJMB
pursuant to Amendment No. 2. For purposes of providing an example only, as set
forth in Schedule A, assuming that the Closing Date occurs on September 30,
2001, SJMB would receive an additional 2,768,606 shares of common stock of IHI
on the Closing Date (the difference between the 6,052,773 shares SJMB would have
received had both Convertible Notes been converted on the Closing Date and the
3,284,167 shares received pursuant to Amendment No. 2). Upon receiving the
common stock of IHI pursuant to this Section 2, SJMB shall surrender the
original Note B to IHI for cancellation.
3. Conversion Standstill; Assignment; and Prepayment.
Notwithstanding any provision of the Convertible Notes, SJMB agrees that except
as provided in this Amendment, it shall not exercise any right to convert any
portion of Note B prior to the earlier to occur of (i) the Closing Date and (ii)
December 31, 2001, unless such date is extended by the parties hereto, and SJMB
shall not assign any right, title or interest in Note B to any third party prior
to the Closing Date without the express written consent of IHI and without the
written agreement of such third party to be bound by the terms of this
Amendment. IHI agrees that it shall not prepay all or any portion of Note B
prior to the earlier to occur of (i) the Closing Date and (ii) December 31,
2001, unless such date is extended by the parties hereto. IHI will have the
right to prepay all or any part of the outstanding principal and accrued and
unpaid interest under Note B at any time after December 31, 2001; provided,
however, that IHI is not entitled to prepay any portion of Note B as to which
SJMB has given prior notice of conversion; provided further, notwithstanding any
provision of Note B to the contrary, once IHI has given notice of prepayment of
all or any portion of Note B, that portion of Note B may not be converted to
common stock of IHI. Each notice to convert any portion of Note B pursuant to
Section 4 of Note B shall be given five business days prior to conversion, and
once given, such notice shall be irrevocable. All notices of prepayment shall be
given pursuant to Section 2.3 of Note B, and once given, payment of the portion
of Note B being prepaid shall be made five business days from such notice.
4. Warrant. As provided in Amendment No. 2, if the merger is not
completed by December 31, 2001, on that date, IHI shall (i) pay SJMB $600,000 in
cash, (ii) issue SJMB a warrant (the "Warrant) to purchase one million
(1,000,000) shares of IHI common stock with an exercise price of $1.00 per share
in substantially the same form as the warrant to purchase 750,000 shares of IHI
common stock issued to SJMB as of June 29, 2000, and (iii) grant SJMB demand and
piggy-back registration rights with respect to the IHI Common Stock issuable
upon exercise of the Warrant in substantially the same form granted to SJMB
pursuant to the Registration Rights Agreement dated as of June 30, 2000 entered
into between IHI and SJMB in connection with the Convertible Notes. As provided
in Amendment No. 2, the obligations of IHI
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under this Section 4 shall be secured by the security interests granted by IHI
under the Subordinated Security Agreement dated as of June 13, 2000 in favor of
SJMB.
5. Miscellaneous.
a. IHI hereby acknowledges that SJMB has assigned
Note A and Note B to Legacy Trust Company, as collateral agent
("Legacy") for Blackcross, a California general partnership
("Blackcross"), Antar & Co. ("Antar") and Xxxxxx X. Xxxx
("Xxxx").
b. Legacy, Blackcross, Xxxxx, Xxxx, T-3 Energy
Services, Inc. and First Reserve Fund VIII, L.P. each hereby
consents to terms of this Amendment; and Legacy, Blackcross,
Antar and Xxxx, as assignees of Note B, each hereby agrees to
be bound by the terms of this Amendment.
c. SJMB and St. Xxxxx Capital Partners, L.P. hereby
consent to the Merger Agreement, as amended by the First
Amendment in substantially the form attached hereto as Exhibit
A, and hereby agree that immediately following the closing of
the Merger, they will enter into a Registration Rights
Agreement in substantially the form attached hereto as
Exhibit B.
d. This Amendment may not be amended without the
written consent of IHI and SJMB.
e. The section headings used in this Amendment are
for convenience of reference only and do not constitute a part
of this Amendment for any purpose.
f. This Amendment shall be governed by and construed
in accordance with the laws of the State of Texas, regardless
of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
g. The terms, covenants and conditions contained
herein shall inure to the benefit of, and bind, the respective
parties and their assigns, transferees and successors.
h. This Amendment may be executed in any number of
counterparts and by different parties in separate
counterparts, each of which when so executed and delivered
shall be deemed to be an original and all of such counterparts
taken together shall constitute but one and the same
instrument.
i. This Amendment constitutes the entire agreement of
the parties of the matters described herein and may not be
modified or amended except in written instrument between the
parties hereto.
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IN WITNESS WHEREOF, the parties have caused this Amendment to
be duly executed as of the date first written above.
SJMB, L.P.
By: /s/ XXXXX XXXXXXXX
-------------------------------------------
Name: Xxxxx Xxxxxxxx
Title: Vice President of the general partner
INDUSTRIAL HOLDINGS, INC.
By: /s/ XXXXXX X. XXXX
-------------------------------------------
Name: Xxxxxx X. Xxxx
Title: President and Chief Executive Officer
ST. XXXXX CAPITAL PARTNERS, L.P.
By: /s/ XXXXX XXXXXXXX
---------------------------------------
Name: Xxxxx Xxxxxxxx
Title: Vice President of the general partner
ANTAR.& Co.
By: /s/ X.X. XXXXXX
-------------------------
X.X. Xxxxxx
General Partner
BLACKCROSS
By: /s/ XXXXX XXXXXX
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Xxxxx Xxxxxx
Managing Partner
/s/ XXXXXX X. XXXX
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Xxxxxx X. Xxxx
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T-3 Energy Services, Inc. and First Reserve Fund, VIII, Limited
Partnership hereby consent to the signing of this Amendment.
T-3 ENERGY SERVICES, INC.
By: /s/ XXXXXXX X. XXXXXXXXXX
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Xxxxxxx X. Xxxxxxxxxx
President and CEO
FIRST RESERVE FUND VIII,
LIMITED PARTNERSHIP
By:First Reserve GP VIII, L.P.,
its General Partner
By:First Reserve Corporation,
its General Partner
By: /s/ XXXXXX XXXXXXX
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Xxxxxx Xxxxxxx
Managing Director
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SCHEDULE A
TO AMENDMENT NO. 2 TO
CONVERTIBLE NOTES
AND
AGREEMENT TO CONVERT
THIS SCHEDULE IS INCLUDED FOR ILLUSTRATION PURPOSES ONLY. IT ILLUSTRATES THE
CALCULATION OF INDUSTRIAL HOLDINGS COMMON SHARES TO BE ISSUED TO SJMB IN
ACCORDANCE WITH SECTION 2 OF THE AMENDMENT, ASSUMING THE CLOSING DATE IS
SEPTEMBER 30, 2001.
Calculation of Industrial Holdings common shares that would have been received
if both Convertible Notes were converted on the Closing Date:
Note A principal $3,450,000
Note A accrued interest at 9/30/01 $ 423,775
Note B principal $3,450,000
Note B accrued interest at 9/30/01 $ 423,775
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Total Note A and Note B principal and accrued interest at 9/30/01 $7,747,550
Conversion price $1.28
Conversion shares 6,052,773
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Calculation of Industrial Holdings common shares to be issued upon conversion of
Note B:
Industrial Holdings common shares that would have been
received above 6,052,773
Industrial Holdings common shares received upon conversion
of Note A pursuant to Section 3 of the Amendment 3,284,167
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Industrial Holdings common shares to be issued at
conversion of Note B 2,768,606
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Exhibit A
First Amendment to Merger Agreement
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Exhibit B
Registration Rights Agreement
