SECOND AMENDMENT TO LOAN AGREEMENT
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THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Amendment")
is made and entered into as of January 23, 2003, by and among
TEMTEX INDUSTRIES, INC. ("Temtex"), TEMCO FIREPLACE PRODUCTS,
INC. ("Temco") (Temtex and Temco are , individually and
collectively, jointly and severally, referred to herein as the
"Borrower"), and THE FROST NATIONAL BANK, a national banking
association, doing business as FROST CAPITAL GROUP, and formerly
known as CREEKWOOD CAPITAL GROUP (hereinafter called, "Lender").
WHEREAS, Borrower and Lender are parties to that certain
Loan Agreement dated September 6, 2000, by and between Borrower
and Lender, as amended by that certain First Amendment to Loan
Agreement dated as of July 19, 2002, by and between Borrower and
Lender (as amended, modified or supplemented from time to time,
the "Loan Agreement");
WHEREAS, Borrower has advised Lender that Temtex desires to
incur additional indebtedness pursuant to those certain
Convertible Subordinated Promissory Notes, dated as of
January 23, 2003, in the aggregate principal amount of $610,000,
issued by Temtex and payable to the order of the Additional
Holders of the Convertible Notes (as hereinafter defined)
(collectively, the "Proposed Transaction");
WHEREAS, Borrower has requested that Lender consent to the
Proposed Transaction;
WHEREAS, Borrower and Lender desire to amend the Loan
Agreement and each of the Security Agreements dated September 6,
2000, by and between Frost and each of Temtex and Temco,
respectively (the "Security Agreements") in the manner provided
in Article II below;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
Definitions
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Section 1.01 DEFINITIONS. Capitalized terms used in this
Amendment, to the extent not otherwise defined herein, shall have
the same meaning as in the Loan Agreement, as amended hereby.
ARTICLE II
Amendments
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Section 2.01 AMENDMENT TO SECTION 1.02; AMENDMENT AND
RESTATEMENT OF CERTAIN DEFINED TERMS. Effective as of the date
hereof, the definitions of "Convertible Notes", "Intercreditor
Agreement", "Subordinated Debt Documents" and "Subordination
Agreement" are hereby amended and restated in their entirety to
read as follows, respectively:
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"Convertible Notes" shall mean (i) those certain
Convertible Subordinated Promissory Notes, dated as of
July 19, 2002, issued by Temtex and payable to the
order of each of William Y. Tauscher, the Leonard Kee
Living Trust, Richard Anderson and David Dalton
(collectively, the "Original Holders of the Convertible
Notes") in the aggregate original principal amount of
$750,000 and (ii) those certain Convertible
Subordinated Promissory Notes, dated January 23, 2003,
issued by Temtex and payable to the order of each John
Gurrola, Jack Fahey, Richard Anderson, Robert Creer,
Terry M. Giles and James E. Upfield (collectively, the
"Additional Holders of the Convertible Notes") in the
aggregated original principal amount of $610,000.
"Intercreditor Agreement" shall mean that certain
Amended and Restated Intercreditor Agreement, dated as
of January 23, 2003, by and between Lender and James E.
Upfield ("Upfield") as acknowledged and agreed to by
Borrower, which provides for such parties' relative
rights and priorities with respect to the assets of
Borrower and other related matters.
"Subordinated Note Documents" shall mean the
Convertible Notes, the Note Purchase Agreement with
respect thereto and any other documents executed in
connection therewith, each in form and substance
satisfactory to Lender and as in effect as of
January 23, 2003
"Subordination Agreement" shall mean, collectively (i)
that certain Subordination Agreement, dated as of July
19, 2002, by and between Lender, Upfield and the
Original Holders of the Convertible Notes, as
acknowledged and agreed to by Borrower and (ii) that
certain Subordination Agreement, dated as of
January 23, 2003, by and between Lender, Upfield and
the Additional Holders of the Convertible Notes, each
providing for such parties relative rights and
priorities with respect to the Subordinated Note
Documents, on the one hand, and the Loan Agreement and
the Upfield Secured Term Note, on the other hand, and
other related matters.
Section 2.02 AMENDMENT EXHIBIT B. Effective as of the
Effective Date, Exhibit B to the Loan Agreement is hereby amended
and restated in its entirety in the form attached hereto as
Exhibit B.
Section 2.03 AMENDMENT TO SECURITY AGREEMENTS. Effective
as of the date hereof, Section 6.12 of each of the Security
Agreements is hereby amended and restated to read as follows:
"Section 6.12 Intercreditor Agreement.
Notwithstanding anything set forth herein, Debtor and
Secured Party acknowledge and agree that the liens and
security interests granted herein on or in respect of
the Upfield Priority Collateral (as defined in the
hereinafter described Intercreditor Agreement) are
subject to the Amended and Restated Intercreditor
Agreement dated as of January 23, 2003, between Secured
Party and James E. Upfield ("Upfield"), and that if
Debtor fails to perform any obligation or duty
hereunder with respect to the Upfield Priority
Collateral solely because doing so would cause Debtor
to breach its obligations or duties owing to Upfield
with respect to such collateral, Debtor will not be in
violation hereof. Notwithstanding Section 4.10 hereof,
Secured Party consents to the grant of liens by Debtor
to Upfield and the filing of the UCC-1 financing
statements evidencing the same, provided that such
liens are as described in and shall be subject to the
Intercreditor Agreement. "
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ARTICLE III
Conditions Precedent
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Section 3.01. CONDITIONS. The effectiveness of this
Amendment is subject to the satisfaction of the following
conditions precedent:
(a) Lender shall have received (i) this Amendment, duly
executed by the Borrower and Lender, (ii) a certificate of the
Secretary of the Borrower acknowledging (A) that the Borrower's
Board of Directors has adopted, approved, consented to and
ratified resolutions which authorize the execution, delivery and
performance by the Borrower of this Amendment, and (B) the names
of the officers of the Borrower authorized to sign this Amendment
together with specimen signatures of such officers, (iii) the
Amended and Restated Intercreditor Agreement, in form and
substance satisfactory to Lender, duly executed by Borrower and
Upfield; (iv) the Subordination Agreement in form and substance
satisfactory to Lender, duly executed by Lender, Upfield and the
Additional Holders of the Convertible Notes and acknowledged and
agreed to by Borrower, (iv) the Subordinated Note Documents, in
form and substance satisfactory to Lender, duly executed by
Borrower and the holders of the Subordinated Note Documents, and
(v) such additional documents, instruments and information as the
Agents or any Lender may reasonably request;
(b) Lender shall have received evidence of the consummation
of the Proposed Transaction on terms and conditions satisfactory
to Lender and all conditions thereto shall have been satisfied or
waived with Lender's consent;
(c) The representations and warranties contained herein and
in the Loan Agreement, as amended hereby, and the other Credit
Documents shall be true and correct in all material respects as
of the date hereof, as if made on the date hereof;
(d) After giving effect to this Amendment, no Default or
Event of Default shall have occurred and be continuing; and
(e) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents,
instruments and other legal matters incident thereto shall be
satisfactory to the Lender and its legal counsel.
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ARTICLE IV
Limited Consent
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Upon satisfaction of the terms and conditions in Article III
hereof, the Lender hereby consents to the Proposed Transaction,
which would otherwise result in a Default under Section 5.01 of
the Loan Agreement. Except as specifically provided in this
Article IV, nothing contained in this Amendment shall be
construed as a waiver by Lender of any covenant or provision of
the Loan Agreement, the other loan documents, this Amendment, or
of any other contract or instrument between Borrower and Lender,
and the failure of Lender at any time or times hereafter to
require strict performance by Borrower of any provision thereof
shall not waive, affect or diminish any right of Lender to
thereafter demand strict compliance therewith. Lender hereby
reserves all rights granted under the Loan Agreement, the other
loan documents, this Amendment and any other contract or
instrument between Borrower and Lender.
ARTICLE V
Ratifications, Representations and Warranties
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Section 5.01. RATIFICATIONS. The terms and provisions set
forth in this Amendment shall modify and supersede all
inconsistent terms and provisions set forth in the Loan Agreement
and except as expressly modified and superseded by this
Amendment, the terms and provisions of the Loan Agreement are
ratified and confirmed and shall continue in full force and
effect.
Section 5.02. REPRESENTATIONS AND WARRANTIES. Borrower
hereby represents and warrants to Lender that (a) the execution,
delivery and performance of this Amendment and any and all other
loan documents executed and/or delivered in connection herewith
have been authorized by all requisite corporate action on the
part of Borrower and will not violate the Certificate of
Incorporation or Bylaws of Borrower, (b) the representations and
warranties contained in the Loan Agreement, as amended hereby,
and any other loan document are true and correct on and as of the
date hereof as though made on and as of the date hereof, (c)
Borrower is in full compliance with all covenants and agreements
contained in the Loan Agreement, as amended hereby, and (d) none
of the Convertible Notes dated July 19, 2002, the Subordinated
Note Documents relating thereto, the Upfield Secured Term Note or
any documents executed in connection therewith have been amended
or modified in any respect, except pursuant to the documents
attached hereto as Exhibit A.
ARTICLE VI
Miscellaneous
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Section 6.01. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties made in the Loan Agreement or
any other document or documents relating thereto, including,
without limitation, any loan document furnished in connection
with this Amendment, shall survive the execution and delivery of
this Amendment and the other loan documents, and no investigation
by Lender or any closing shall affect the representations and
warranties or the right of Lender to rely upon them.
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Section 6.02. REFERENCE TO LOAN AGREEMENT. Each of the
loan documents, including the Loan Agreement and any and all
other agreements, documents or instruments now or hereafter
executed and delivered pursuant to the terms hereof or pursuant
to the terms of the Loan Agreement as amended hereby, are hereby
amended so that any reference in such loan documents to the Loan
Agreement shall mean a reference to the Loan Agreement as amended
hereby.
Section 6.03. EXPENSES OF LENDER. As provided in the Loan
Agreement, Borrower agrees to pay on demand all reasonable costs
and expenses incurred by Lender in connection with the
preparation, negotiation and execution of this Amendment and the
other loan documents executed pursuant hereto and any and all
amendments, modifications, and supplements thereto, including
without limitation the reasonable costs and fees of Lender's
legal counsel, and all reasonable costs and expenses incurred by
Lender in connection with the enforcement or preservation of any
rights under the Loan Agreement, as amended hereby, or any other
loan document, including without limitation the reasonable costs
and fees of Lender's legal counsel.
Section 6.04. SEVERABILITY. Any provision of this
Amendment held by a court of competent jurisdiction to be invalid
or unenforceable shall not impair or invalidate the remainder of
this Amendment and the effect thereof shall be confined to the
provision so held to be invalid or unenforceable. Furthermore,
in lieu of each such invalid or unenforceable provision there
shall be added automatically as a part of this Amendment a valid
and enforceable provision that comes closest to expressing the
intention of such invalid or unenforceable provision.
Section 6.05. SUCCESSORS AND ASSIGNS. This Amendment is
binding upon and shall inure to the benefit of Lender and
Borrower and their respective successors and assigns, except
Borrower may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of
Lender.
Section 6.06. COUNTERPARTS. This Amendment may be executed
in one or more counterparts, each of which when so executed shall
be deemed to be an original, but all of which when taken together
shall constitute one and the same instrument.
Section 6.07. HEADINGS. The headings, captions, and
arrangements used in this Amendment are for convenience only and
shall not affect the interpretation of this Amendment.
SECTION 6.08. NO ORAL AGREEMENTS. THE AGREEMENT, THIS
AMENDMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
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SECTION 6.09. RELEASE. BORROWER HEREBY ACKNOWLEDGES THAT
IT HAS NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM
OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED
TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY
THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY
KIND OR NATURE FROM LENDER. BORROWER HEREBY VOLUNTARILY AND
KNOWINGLY RELEASES AND FOREVER DISCHARGES LENDER, ITS
PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL
POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES,
COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN,
ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED,
CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN
WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS
EXECUTED, WHICH THE BORROWER MAY NOW OR HEREAFTER HAVE AGAINST
LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND
ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS
ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR
OTHERWISE, AND ARISING FROM ANY LOANS, INCLUDING, WITHOUT
LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING,
COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL
RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER
THE LOAN AGREEMENT OR OTHER AGREEMENTS, AND NEGOTIATION FOR AND
EXECUTION OF THIS AMENDMENT.
SECTION 6.10. APPLICABLE LAW. THIS AMENDMENT SHALL BE
DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN AND SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS.
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IN WITNESS WHEREOF, this Amendment has been duly executed by
Borrower and Lender to be effective as of the date first above
written.
BORROWER:
TEMTEX INDUSTRIES, INC.
By:
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Name:
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Title:
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TEMCO FIREPLACE PRODUCTS, INC.
By:
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Name:
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Title:
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LENDER:
THE FROST NATIONAL BANK
(d/b/a/ FROST CAPITAL GROUP and
f/k/a CREEKWOOD CAPITAL GROUP)
By:
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Name:
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Title:
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EXHIBIT "A"
Joinder Agreement
and
Amended and Restated Voting Agreement
(each dated as of January 23, 2003)
[See Attached]
EXHIBIT "B"
Subordinated Lenders
Upfield
Original Holders of the Convertible Notes
Additional Holders of the Convertible Notes