SECURED TERM NOTE
$750,000.00 July 19, 2002
FOR VALUE RECEIVED, on or before July 19, 2005 ("Maturity
Date"), the undersigned, Temtex Industries, Inc., a Delaware
corporation, and Temco Fireplace Products, Inc., a Texas
corporation (individually, and collectively, jointly and
severally, the "Borrower"), with principal office and mailing
address at 0000 XXX Xxxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000,
HEREBY JOINTLY AND SEVERALLY PROMISE TO PAY to the order of
XXXXX X. XXXXXXX (together with his successors, assigns, heirs
and personal representatives "Lender"), the principal amount of
SEVEN HUNDRED AND FIFTY THOUSAND AND 00/100 DOLLARS ($750,000.00)
("Total Principal Amount"), less any amounts of principal that
have been prepaid by Borrower prior to the Maturity Date in
accordance with the provisions hereunder, together with interest
on the outstanding portion of the Total Principal Xxxxxx paid at
a fixed rate per annum equal to the lesser of (a) the Maximum
Rate (as hereinafter defined) or (b) a rate (the "Contract Rate")
equal to six percent (6.0%), calculated on the basis of actual
days elapsed but computed as if each year consisted of 360 days.
The term "Maximum Rate," as used herein, shall mean at the
particular time in question the maximum rate of interest which,
under applicable law, may then be charged on this Secured Term
Note ("Note"). If such maximum rate of interest changes after
the date hereof and this Note provides for a fluctuating rate of
interest, the Maximum Rate shall be automatically increased or
decreased, as the case may be, without notice to Borrower from
time to time as of the effective date of each change in such
maximum rate. If applicable law ceases to provide for such a
maximum rate of interest, the Maximum Rate shall be equal to
eighteen percent (18%) per annum.
The principal of and all accrued but unpaid interest on this
Note shall be due and payable as follows:
(a) interest shall be due and payable monthly as it accrues,
commencing on the last day of August 2002 and continuing on the
last day of each successive month thereafter during the term of
this Note; and
(b) the outstanding principal balance of this Note, together
with all accrued but unpaid interest, shall be due and payable on
the Maturity Date.
Upon an Event of Default, including failure to pay upon
final maturity, Lender, at its option, may, if permitted under
applicable law, do one or both of the following: (a) increase the
Contract Rate three (3.00) percentage points and (b) add any
unpaid accrued interest to principal and such sum will bear
interest therefrom until paid at the rate provided in this Note
(including any increased Contract Rate).
Borrower may from time to time prepay all or any portion of
the principal of this Note without premium or penalty. Unless
otherwise agreed to in writing, or otherwise required by
applicable law, payments will be applied first to unpaid accrued
interest, then to principal, and any remaining amount to any
unpaid collection costs; provided, however, upon delinquency or
other Event of Default, Lender reserves the right to apply
payments among principal, interest, collection costs , at its
discretion. All prepayments shall be applied to the
indebtedness owing hereunder in such order and manner as Xxxxxx
may from time to time determine in its sole discretion. All
payments and prepayments of principal of or interest on this Note
shall be made in lawful money of the United States of America in
immediately available funds, to the Lender's account indicated on
Exhibit A, or to such other account or in such other manner as
the holder of this Note shall designate from time to time in
writing to Borrower. If any payment of principal of or interest
on this Note shall become due on a day which is not a Business
Day (as hereinafter defined), such payment shall be made on the
next succeeding Business Day and any such extension of time shall
be included in computing interest in connection with such
payment. As used herein, the term "Business Day" shall mean any
day other than a Saturday, Sunday or any other day on which
national banking associations are authorized to be closed. The
books and records of Xxxxxx shall be prima facie evidence of all
outstanding principal of and accrued and unpaid interest on this
Note.
This Note is secured by, inter alia, the collateral security
provided for or otherwise described in that certain Security
Agreement dated the date hereof by and between Borrower and
Lender (the "Security Agreement"). This Note, the Security
Agreement and all other documents evidencing, securing,
governing, guaranteeing and/or pertaining to this Note, including
but not limited to those documents described above, are
hereinafter collectively referred to as the "Loan Documents."
The holder of this Note is entitled to the benefits and security
provided in the Loan Documents.
Xxxxxxxx agrees that the Total Principal Amount advanced to
Borrower shall be used solely for business, commercial,
investment, or other similar purposes.
Xxxxxxxx agrees that upon the occurrence of any one or more
of the following events of default ("Event of Default"):
(a) failure of Borrower to pay (i) any installment of
principal on this Note when due or (ii) any installment
of interest on this Note or on any other indebtedness
of Borrower to Lender when due and such failure
continues unremedied for three Business Days;
(b) the occurrence of any event of default specified in any
of the other Loan Documents (after giving effect to any
applicable grace or cure period set forth therein);
(c) the bankruptcy or insolvency of, the assignment for the
benefit of creditors by, or the appointment of a
receiver for any of the property of, or the
liquidation, termination, dissolution or death or legal
incapacity of, any party liable for the payment of this
Note, whether as maker, endorser, guarantor, surety or
otherwise; or
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(d) an event of default or a default shall have occurred
under any credit agreement, loan agreement, promissory
note or other document or instrument evidencing
indebtedness of Borrower and the holder of any such
indebtedness shall have declared such indebtedness to
be due and payable prior to the scheduled maturity
thereof, or shall have instituted collection
proceedings with respect thereto;
the holder of this Note may, at its option, without further
notice or demand, (i) declare the outstanding principal balance
of and accrued but unpaid interest on this Note at once due and
payable, (ii) foreclose all liens securing payment hereof, (iii)
pursue any and all other rights, remedies and recourses available
to the holder hereof, including but not limited to any such
rights, remedies or recourses under the Loan Documents, at law or
in equity, or (iv) pursue any combination of the foregoing.
The failure to exercise the option to accelerate the
maturity of this Note or any other right, remedy or recourse
available to the holder hereof upon the occurrence of an Event of
Default hereunder shall not constitute a waiver of the right of
the holder of this Note to exercise the same at that time or at
any subsequent time with respect to such Event of Default or any
other Event of Default. The rights, remedies and recourses of
the holder hereof, as provided in this Note and in any of the
other Loan Documents, shall be cumulative and concurrent and may
be pursued separately, successively or together as often as
occasion therefore shall arise, at the sole discretion of the
holder hereof. The acceptance by the holder hereof of any
payment under this Note which is less than the payment in full of
all amounts due and payable at the time of such payment shall not
(i) constitute a waiver of or impair, reduce, release or
extinguish any right, remedy or recourse of the holder hereof, or
nullify any prior exercise of any such right, remedy or recourse,
or (ii) impair, reduce, release or extinguish the obligations of
any party liable under any of the Loan Documents as originally
provided herein or therein.
This Note and all of the other Loan Documents are intended
to be performed in accordance with, and only to the extent
permitted by, all applicable usury laws. If any provision hereof
or of any of the other Loan Documents or the application thereof
to any person or circumstance shall, for any reason and to any
extent, be invalid or unenforceable, neither the application of
such provision to any other person or circumstance nor the
remainder of the instrument in which such provision is contained
shall be affected thereby and shall be enforced to the greatest
extent permitted by law. It is expressly stipulated and agreed
to be the intent of the holder hereof to at all times comply with
the usury and other applicable laws now or hereafter governing
the interest payable on the indebtedness evidenced by this Note.
If the applicable law is ever revised, repealed or judicially
interpreted so as to render usurious any amount called for under
this Note or under any of the other Loan Documents, or contracted
for, charged, taken, reserved or received with respect to the
indebtedness evidenced by this Note, or if Xxxxxx's exercise of
the option to accelerate the maturity of this Note, or if any
prepayment by Borrower results in Borrower having paid any
interest in excess of that permitted by law, then it is the
express intent of Xxxxxxxx and Lender that all excess amounts
theretofore collected by Xxxxxx be credited on the principal
balance of this Note (or, if this Note and all other indebtedness
arising under or pursuant to the other Loan Documents have been
paid in full, refunded to Borrower),
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and the provisions of this Note and the other Loan Documents
immediately be deemed reformed and the amounts thereafter
collectable hereunder and thereunder reduced, without the
necessity of the execution of any new document, so as to comply
with the then applicable law, but so as to permit the recovery of
the fullest amount otherwise called for hereunder or thereunder.
All sums paid, or agreed to be paid, by Borrower for the use,
forbearance, detention, taking, charging, receiving or reserving
of the indebtedness of Borrower to Lender under this Note or
arising under or pursuant to the other Loan Documents shall, to
the maximum extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of such
indebtedness until payment in full so that the rate or amount of
interest on account of such indebtedness does not exceed the
usury ceiling from time to time in effect and applicable to such
indebtedness for so long as such indebtedness is outstanding.
Notwithstanding anything to the contrary contained herein or in
any of the other Loan Documents, it is not the intention of
Lender to accelerate the maturity of any interest that has not
accrued at the time of such acceleration or to collect unearned
interest at the time of such acceleration.
If this Note is placed in the hands of an attorney for
collection, or is collected in whole or in part by suit or
through probate, bankruptcy or other legal proceedings of any
kind, Xxxxxxxx agrees to pay, in addition to all other sums
payable hereunder, all costs and expenses of collection,
including but not limited to reasonable attorneys' fees.
Borrower and any and all endorsers and guarantors of this
Note severally waive presentment for payment, notice of
nonpayment, protest, demand, notice of protest, notice of intent
to accelerate, notice of acceleration and dishonor, diligence in
enforcement and indulgences of every kind and without further
notice hereby agree to renewals, extensions, exchanges or
releases of collateral, taking of additional collateral,
indulgences or partial payments, either before or after maturity.
BY ACCEPTANCE OF THIS NOTE, XXXXXX AND EACH HOLDER HEREOF
ACKNOWLEDGES AND AGREES THAT THE INDEBTEDNESS EVIDENCED HEREBY,
AND THE LIENS AND SECURITY INTERESTS SECURING SAME ARE SUBJECT TO
THAT CERTAIN INTERCREDITOR AGREEMENT OF EVEN DATE HEREWITH
BETWEEN LENDER AND THE FROST NATIONAL BANK (THE "INTERCREDITOR
AGREEMENT") AND THAT RIGHTS AND PRIORITIES HEREOF AND THEREOF,
INCLUDING THOSE RELATING TO THE PAYMENT AND PERFORMANCE, ARE
SUBORDINATE IN THE MANNER AND TO THE EXTENT SET FORTH IN SUCH
INTERCREDITOR AGREEMENT.
[Signature Page Follows]
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THIS NOTE HAS BEEN EXECUTED UNDER, AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
BORROWER:
TEMTEX INDUSTRIES, INC.
By:_______________________________
Name:_____________________________
Title:_____________________________
BORROWER:
TEMCO FIREPLACE PRODUCTS, INC.
By:_______________________________
Name:_____________________________
Title:_____________________________
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EXHIBIT A
ACCOUNT INFORMATION
-------------------
Xxxxx X. Xxxxxxx
00000 Xxxx Xxxxx
Xxxxxx, Xxxxx 00000
EXHIBIT B
MANDATORY PREPAYMENT PROVISIONS
The Secured Term Note to which this Exhibit B is attached by
Temtex Industries, Inc. and Temco Fireplace Products, Inc., as
Borrower, payable to the order of Xxxxx X. Xxxxxxx, as Lender,
shall be subject to mandatory prepayment of principal in
accordance with the following provisions, to the extent permitted
pursuant to the Intercreditor Agreement:
1. Within one hundred twenty (120) days following each of
Borrower's fiscal years ending on August 31, 2003 and August 31,
2004, the Borrower shall determine the Prepayment Amount (as
defined below), if any, and shall provide to Lender a Prepayment
Certificate setting forth in reasonable detail the calculation
with respect to each such fiscal year of the Prepayment Amount
for that fiscal year or, if there is no Prepayment Amount, a
reasonable explanation of the factors supporting the
determination that a Prepayment Amount is not being paid.
2. Any Prepayment Amount reflected as being payable in the
Prepayment Certificate shall be paid to Lender at the earlier of
the time of delivery of the Prepayment Certificate or the date
such Prepayment Certificate is required to be delivered pursuant
to Paragraph 1 above.
3. The Prepayment Amount shall be that amount, if any, for
each of Borrowers' fiscal years ending August 31, 2003 and
August 31, 2004 which equals 25% of the Company's "Excess Cash
Flow" for the applicable fiscal year. Excess Cash Flow shall be
that amount derived by subtracting regularly scheduled payments
of principal on indebtedness for borrowed monies and "Capital
Expenditures" which are not financed for the fiscal year in
question, from Xxxxxxxx's consolidated net earnings before
depreciation and amortization for such fiscal year for such
fiscal year) as determined in accordance with generally accepted
accounting principles, consistently applied. "Capital
Expenditures" means expenditures or liabilities incurred for the
acquisition of any fixed assets or improvements, replacements,
substitutions, or additions thereto which have a useful life of
more than one year, including the total principal portion of
capitalized leased obligations.
