SUBORDINATION AGREEMENT
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THIS SUBORDINATION AGREEMENT (this "Subordination
Agreement") is made and entered into as of July 19, 2002, by
XXXXXXX X. XXXXXXXX, XXXXXXX XXX and XXXXXXX XXXXXXXX
(collectively, "Subordinated Creditor"), THE FROST NATIONAL BANK,
a national banking association doing business as FROST CAPITAL
GROUP ("Frost") and XXXXX X. UPFIELD ("Upfield"). Frost and
Upfield are individually and/or collectively referred to herein
as the "Senior Creditor".
RECITALS
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1. Frost has made, or in the future may make, credit
accommodations available to Temtex Industries, Inc., a Delaware
corporation ("Temtex"), and Temco Fireplace Products, Inc., a
Texas corporation (individually and collectively, jointly and
severally, the "Borrower"), pursuant to the terms and provisions
of that certain Loan Agreement, dated September 6, 2000, by and
between Frost and Borrower (as renewed, extended, modified or
restated from time to time, the "Senior Loan Agreement"), which
indebtedness is secured by a lien on substantially all of the
assets and property of Borrower, including the proceeds thereof.
2. Upfield has made, or in the future may make, credit
accommodations available to Borrower, pursuant to the terms and
provisions of that certain Secured Term Note, dated on or about
the date hereof, issued by Borrower and payable to the order of
Upfield, in the aggregate principal amount of $750,000 (the
"Upfield Debt Documents"), which indebtedness is secured by a
first lien on the inventory and a second lien on the equipment of
Borrower.
3. Subordinated Creditor has also made credit accommodations
available to Borrower as described in Exhibit A.
4. In order to induce Senior Creditor to make and continue to
make the credit accommodations described above available to
Borrower, Subordinated Creditor has agreed to subordinate its
rights and claims now existing or hereafter arising against
Borrower to the rights and claims of Senior Creditor now existing
or hereafter arising against Borrower, all in accordance with the
terms and provisions of this Subordination Agreement.
5. The parties hereto are entering into this Subordination
Agreement in order to set forth their agreements as to payment of
the Senior Debt (as defined below) and the Subordinated Debt (as
defined below) and their agreements as to certain other matters.
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NOW, THEREFORE, to induce Frost to provide financing to
Industries, Subordinated Creditor and Frost agree as follows:
1. Definitions. The following terms shall have the following
definitions for purposes of this Subordination Agreement:
"Bankruptcy Code" shall mean Title 11 of the United
States Code (11 U.S.C. 101 et seq.).
"Property" shall mean all, or any portion, of the
assets and property of the Borrower.
"Senior Debt" shall mean all loans, advances, debts,
principal, interest (including any interest accrued subsequent to
the filing of any bankruptcy, insolvency or similar petition or
any interest that, but for the provisions of the Bankruptcy Code,
would have accrued), contingent reimbursement obligations under
any outstanding letters of credit, premiums (including early
termination or prepayment premiums), liabilities (including all
amounts charged to any Borrower's loan accounts established
pursuant to the Senior Loan Agreement), obligations, fees,
charges, costs, or expenses reimbursable or payable to Senior
Creditor (including any fees or expenses that, but for the
provisions of the Bankruptcy Code, would have accrued), lease
payments, guaranties, covenants, and duties owing by the Borrower
to Senior Creditor of any kind and description (whether pursuant
to or evidenced by the Senior Loan Agreement, the Upfield Debt
Documents or pursuant to any other agreement between Frost and
Borrower, or Upfield and Borrower, and irrespective of whether
for the payment of money), whether direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter
arising, and including any debt, liability, or obligation owing
from Borrower to others that Senior Creditor may have obtained by
assignment or otherwise, and further including all interest not
paid when due and all expenses that Borrower is required to pay
or reimburse Senior Creditor pursuant to the Senior Loan
Agreement, Upfield Debt Documents, by law, or otherwise.
"Senior Debt Documents" shall mean, collectively, each
promissory note, loan agreement, security agreement, pledge
agreement, guaranty, financing statement, deed of trust,
mortgage, assignment of leases and rents, and any and all other
agreements executed or delivered by Borrower in connection with
the Senior Debt, and all amendments, renewals, extensions,
increases or modifications thereof, including without limitation
(i) the Loan Agreement and (ii) the Upfield Debt Documents.
"Subordinated Debt" shall mean any and all indebtedness
for borrowed money of Borrower to Subordinated Creditor, whether
now or hereafter existing, incurred, or created whether the
obligation of Borrower shall be direct, contingent, primary,
secondary, several, joint and several or otherwise, howsoever
such indebtedness may be hereafter extended, renewed or
evidenced, including, without limitation, the indebtedness
described on Exhibit A attached hereto.
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2. Subordination. Subordinated Creditor agrees to subordinate
and does hereby subordinate payment by Borrower of all and any
part of the Subordinated Debt to the prior indefeasible payment
in full, in cash, to Senior Creditor, its successors and assigns,
of any and all of the Senior Debt. Subordinated Creditor hereby
represents and warrants that the Subordinated Debt is presently
and shall remain unsecured. Notwithstanding the foregoing, if
Subordinated Creditor nonetheless becomes the holder of any lien
or security interest in any of the Property of Borrower, such
liens and security interests of Subordinated Creditor, whether
now or hereafter arising howsoever existing, shall be and are
hereby subordinated to the rights and interests of Senior
Creditor in or to such Property. Except as may be expressly
provided herein, Subordinated Creditor shall have no right to
possession of any portion of the Property or to foreclose upon
any portion of the Property, whether by judicial action or
otherwise, unless and until all of the Senior Debt shall have
been indefeasibly paid in full, in cash. In furtherance,
thereof, Subordinated Creditor agrees not to ask for, demand, xxx
for, take or receive all or any part of the Subordinated Debt
(other than Permitted Payments to the extent allowed under
Section 7 hereof) or enforce Subordinated Creditor's rights to
any security therefor, nor ask for, demand, take or receive any
security therefor, unless and until the Senior Debt shall have
been indefeasibly paid in full in cash.
3. Subrogation. Senior Creditor agrees that from and after the
indefeasible payment in full in cash of the Senior Debt,
Subordinated Creditor shall be subrogated to Senior Creditor with
respect to (a) Senior Creditor's claim against Borrower, and (b)
Senior Creditor's rights, liens and security interests, if any,
in Borrower's assets and the proceeds thereof.
4. Insurance Claims and Proceeds. Subordinated Creditor shall
have no right to participate in the adjustment or settlement of
any insurance losses or condemnation claims with respect to the
Property. Subordinated Creditor hereby agrees, upon the request
and at the direction of Frost, to endorse in favor of Frost any
and all checks payable to Subordinated Creditor which represent
insurance proceeds paid for claims relating to Property in any
manner. Subordinated Creditor agrees, upon request by Frost, to
assign to Frost any and all insurance proceeds payable to
Subordinated Creditor for claims relating to the Property.
Subordinated Creditor hereby appoints Frost as its attorney-in-
fact to settle all insurance claims relating to the Property and
to receive all payments and endorse all checks with respect to
such claims to the full extent of the Senior Debt. Frost agrees
with Upfield to handle all insurance claims and proceeds in the
manner prescribed in the Intercreditor Agreement between them of
even date herewith (the "Intercreditor Agreement").
5. Limitation of Subordinated Creditor's Actions. So long as
any of the Senior Debt remains unpaid, in whole or in part,
Subordinated Creditor agrees: (a) not to commence, or to join
with any other creditor in commencing, any bankruptcy,
reorganization or insolvency proceedings (each, a "Proceeding")
with respect to Borrower without the prior written consent of
Senior Creditor; provided, however, that the foregoing shall not
prohibit Subordinated Creditor from participating in any
Proceeding commenced by Borrower or Senior Creditor; (b) not to
commence, prosecute, or participate in any administrative, legal,
or equitable action that might adversely affect Borrower or
Senior Creditor or any of their interests or Property, including
without limitation, any claim or any fraudulent transfer or
conveyance from any person or entity to Borrower or Senior
Creditor; provided, however, the foregoing shall not prohibit
Subordinated Creditor from accelerating all or part of the
Subordinated Debt immediately upon the commencement of a
Proceeding with respect to the obligor thereof, the acceleration
of any of the Senior Debt or otherwise with the prior written
consent of Senior Creditor; (c) not to take any lien on or
security interest in any of Borrower's Property; and (d) not to
enforce or apply any security now or hereafter existing for the
Subordinated Debt owned by the Borrower.
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6. Readjustment of Subordinated Debt. Subordinated Creditor
further agrees that, upon any distribution of the assets or
readjustments of the indebtedness of Borrower, whether by reason
of liquidation, composition, bankruptcy, arrangement,
receivership, assignment for the benefit of creditors or any
other action or proceeding involving the readjustment of all or
any of the Subordinated Debt, or the application of the assets of
Borrower to the payment or liquidation thereof, Senior Creditor
shall be entitled to receive payment in full in cash of the
Senior Debt prior to the payment of all or any part of the
Subordinated Debt, and in order to enable Senior Creditor to
enforce its rights hereunder in any such actions or proceedings,
Senior Creditor is hereby irrevocably authorized and empowered in
its sole discretion to make and present, but Senior Creditor is
in no manner obligated to make or present, for and on behalf of
Subordinated Creditor such proofs of claim against Borrower on
account of the Subordinated Debt in the name of Subordinated
Creditor or Senior Creditor as Senior Creditor may deem expedient
or proper and to vote such proofs of claim in any such proceeding
and to receive and collect any and all dividends or other
payments or disbursements made thereon in whatever form the same
may be paid or issued and to apply the same on account of any of
the Senior Debt.
7. Permitted Payments. Subject to the foregoing provisions,
until such time as Subordinated Creditor shall have received
written notice in accordance with the terms hereof from Senior
Creditor or its agents of the occurrence of a default or
potential default with respect to the Senior Debt, Subordinated
Creditor may accept and retain the payments identified on Exhibit
A attached hereto as "Permitted Payments". From and after
Subordinated Creditor's receipt of written notice of a default or
potential default, Permitted Payments may not be accepted or
retained by Subordinated Creditor until all defaults and
potential defaults with respect to the Senior Debt shall have
been cured or otherwise waived by the applicable Senior Creditor.
Upon receipt of notice from such Senior Creditor that all
defaults and potential defaults with respect to the Senior Debt
have been cured or otherwise waived by such Senior Creditor
(which notice shall be promptly provided by Senior Creditor to
Subordinated Creditor), Permitted Payments shall resume and shall
be increased by an amount equal to the Permitted Payments that
would have been eligible for payment to Subordinated Creditor
hereunder but for the limitations set forth herein (the "Accrued
Payments"); provided, however, payment of the Accrued Payments
shall be made only to the extent that other Permitted Payments
may then be made in accordance with the terms hereof and the
payment thereof will not cause a default under the Senior Debt
Documents.
8. Property Held in Trust. If (a) any money or other property
(other than the Permitted Payments) is received by Subordinated
Creditor for application to the Subordinated Debt or (b) any
money or other property shall be disbursed to Subordinated
Creditor at any time after a Senior Creditor's delivery to
Subordinated Creditor of notice of a default or potential default
with respect to the Senior Debt and prior to a Senior Creditor's
delivery of notice that all defaults and potential defaults have
been cured or otherwise waived such Senior Creditor, Subordinated
Creditor will hold such money and other property in trust for
Senior Creditor and, promptly after receipt, deliver such money
and other property to Frost. Notwithstanding the foregoing,
including the terms of Section 7, in the event that the
disbursement of a Permitted Payment results in the occurrence of
a default or event of default under any Senior Debt Document,
Subordinated Creditor will hold such money or other property
disbursed in such Permitted Payment in trust for Senior Creditor
and, promptly following Senior Creditor's request, deliver such
money or other property to Frost. No payment or distribution to
Senior Creditor pursuant to the provisions of this Subordination
Agreement shall entitle Subordinated Creditor to exercise any
rights of subrogation in respect thereof until the Senior Debt
shall have been indefeasibly paid in full in cash.
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9. Assignment of Subordinated Debt. Subordinated Creditor
hereby agrees not to assign or transfer, at any time while this
Subordination Agreement remains in affect, any rights, claim or
interest of any kind in or to any of the Subordinated Debt,
without (a) first notifying Senior Creditor and (b) making such
assignment expressly subject to this Subordination Agreement.
Subordinated Creditor will, upon request from Senior Creditor,
deliver any note or other evidence of the Subordinated Debt to
Senior Creditor, and Senior Creditor may (or Subordinated
Creditor, upon request from Frost, will) add a legend,
substantially in the form set forth on Exhibit B, to such note or
other evidence of the Subordinated Debt stating that payment
thereof is subject to the provisions of this Subordination
Agreement. Subordinated Creditor shall not subordinate any of
the Subordinated Debt to any indebtedness of Borrower or any
affiliate of Borrower, other than the Senior Debt or pursuant to
the express provisions of the Convertible Note (as defined on
Exhibit A and as in effect on the date hereof).
10. Assignment of Senior Debt. Senior Creditor may, from time
to time, whether before or after any discontinuance of this
Subordination Agreement, in its sole discretion and without
notice to Subordinated Creditor, assign or transfer any or all of
the Senior Debt or any interest therein, and, notwithstanding any
such assignment or transfer or subsequent assignment or transfer
thereof, the Senior Debt Documents and the Senior Debt shall
remain senior to the Subordinated Debt for the purposes of this
Subordination Agreement.
11. Renewal and Extension of Senior Debt. This is the
continuing agreement of subordination and Senior Creditor may
continue, without notice to Subordinated Creditor, to extend
credit or other accommodations or benefits and lend moneys to or
for the account of Borrower on the faith hereof. It is further
understood and agreed that Frost may at any time, in its sole
discretion, increase the amount of, or renew or extend the time
of payment of all or any part of any existing or future
indebtedness or obligations of Borrower to Senior Creditor or
renew, waive or release the lien in the Property or the security
interest in any collateral which may be held therefor at any time
and in reference thereto to make and enter into any such
agreement or agreements as Senior Creditor may deem proper or
desirable without notice to or further assets from Subordinated
Creditor and without in any manner impairing or affecting this
Subordination Agreement or any of Senior Creditor's rights
hereunder.
12. Waiver of Notice. Subordinated Creditor hereby expressly
waives notice of acceptance by Senior Creditor of the
subordination and other provisions of this Subordination
Agreement and, except as expressly provided herein, all other
notices whatsoever, including, without limitation, notice of the
creation of any indebtedness or liability of Borrower to Senior
Creditor, notice of the giving or extension of credit by Senior
Creditor to Borrower, notice of protest and default, and all
other notices to which Subordinated Creditor might otherwise be
entitled from Senior Creditor. Subordinated Creditor consents
and agrees that Senior Creditor shall be under no obligation to
marshal any assets in favor of Subordinated Creditor or against
or in payment of any or all of the Senior Debt.
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13. Rights of Senior Creditor. Subordinated Creditor expressly
waives reliance by Senior Creditor upon the subordination and
other agreements as herein provided and presentment, demand and
protest. Subordinated Creditor agrees that Senior Creditor has
made no warranties or representations with respect to the due
execution, legality, validity, completeness or enforceability of
the Senior Debt Documents, or the collectibility of the Senior
Debt, that each Senior Creditor shall be entitled to manage and
supervise its loans to Borrower in accordance with its usual
practices, modified from time to time as such Senior Creditor
deems appropriate under the circumstances, without regard to the
existence of any rights that Subordinated Creditor may now or
hereafter have in or to any of the assets of Borrower, and that
Senior Creditor shall have no liability to Subordinated Creditor
for, and waives any claim which Subordinated Creditor may now or
hereafter have against Senior Creditor arising out of (a) any and
all actions which Senior Creditor takes or omits to take
(including, without limitation, actions with respect to the
creation, perfection or continuation of liens or security
interests in the Property or other collateral for the Senior
Debt, actions with respect to the occurrence of a "Default" or an
"Event of Default" (as defined in any of the Senior Debt
Documents), actions with respect to the foreclosure upon, sale,
release of, depreciation of or failure to realize upon the
Property or other collateral for the Senior Debt, and actions
with respect to the collection of any claim for all or any part
of the Senior Debt from any account debtor, guarantor or any
other party with respect to the Senior Debt Documents or to the
collection of the Senior Debt, or the valuation, use, protection
or release of the Property or other collateral for the Senior
Debt, (b) Senior Creditor's election, in any proceeding
instituted under the Bankruptcy Code, of the application of
Section 1111(b)(2) of the Bankruptcy Code, and/or (c) any
borrowing or grant of a security interest under Section 364 of
the Bankruptcy Code. Senior Creditor may, at any time and from
time to time, without the consent of or notice to Subordinated
Creditor, without incurring responsibility to Subordinated
Creditor, and without impairing or releasing any of Frost's
rights or any of the obligations of Subordinated Creditor
hereunder, change the amount, manner, place or term of payment
of, or change or extend the time of payment of, or renew or alter
Senior Debt in any and all respects; sell, exchange, release, or
otherwise deal with all or any part of any Property securing
Senior Debt; exercise or refrain from exercising any rights
against the Borrower and others (including Subordinated
Creditor); add or release any party or other person primarily or
secondarily liable for the Senior Debt; and apply any sums, by
whomsoever paid or howsoever realized, to Senior Debt.
14. Remedies Upon Default. Subordinated Creditor hereby
covenants and agrees that, upon the occurrence of a Default or an
Event of Default under any of the Senior Debt Documents, Senior
Creditor may, at its sole option, without notice to Subordinated
Creditor: (a) with and without releasing or extinguishing any
liens or security interests created by the Senior Debt Documents,
cause title in and to all or any portion of the Property (or any
interest of any kind in the Property, including, without
limitation, a beneficial interest in a land trust) to be
transferred, assigned or conveyed to a nominees of Senior
Creditor, subject to the liens of the Subordinated Debt, if any;
and/or (b) take possession of the Property and take all actions
necessary to operate and maintain the Property (and to increase
the amounts owed by Borrower pursuant to the Senior Debt by an
amount equal to such costs) and the right to lease or sell all or
any portion of the Property or any interest in the Property.
Subordinated Creditor hereby expressly waives the right to assert
any and all claims and defenses against Senior Creditor relating
to or arising from any action taken by Senior Creditor pursuant
to this Section 14.
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15. Financial Condition of Borrower. Subordinated Creditor
hereby assumes responsibility for keeping itself informed of the
financial condition of Borrower and of all other circumstances
bearing upon the risk of nonpayment of the Subordinated Debt that
diligent inquiry would reveal, and Subordinated Creditor hereby
agrees that Senior Creditor shall have no duty to advise
Subordinated Creditor of information known to Senior Creditor
regarding such condition of any such circumstance.
16. Entire Debt. Subordinated Creditor represents and warrants
to Senior Creditor that Exhibit A attached hereto identifies all
of Borrower's existing indebtedness for borrowed money owing to
Subordinated Creditor.
17. Other Instruments. Subordinated Creditor further agrees to
execute and deliver to Senior Creditor such assignments,
endorsements or other instruments as may be reasonably required
by Senior Creditor in order to enable Senior Creditor to enforce
any and all claims provided or permitted hereunder and to collect
any and all dividends or other payments or disbursements which
may be made at any time on accounts of all or any of the
Subordinated Debt, other than Permitted Payments to the extent
allowed hereunder.
18. Binding Effect. This Subordination Agreement is binding on
Subordinated Creditor, its legal representatives, successors and
assigns, and shall inure to the benefit of Senior Creditor, its
successors and assigns. Whenever reference is made in this
Subordination Agreement to Borrower, such term shall include any
heir, legal representative, successor or assign of Borrower,
including, without limitation, a receiver, trustee or debtor-in-
possession.
19. Notice. Any notice or notification required, permitted or
contemplated hereunder shall be in writing, shall be addressed to
the party to be notified at the address set forth below or at
such other address as each party may designate for itself from
time to time by notice hereunder, and shall be deemed to have
been validly served, given or delivered (a) three days following
deposit in the United States mail, with proper first class
postage prepaid, certified, return receipt requested, (b) the
next business day after such notice was delivered to a regularly
scheduled overnight delivery carrier with delivery fees either
prepaid or an arrangement, satisfactory with such carrier, made
for the payment of such fees, or (c) upon receipt of notice given
by telecopy, mailgram, telegram, telex, or personal delivery:
To Frost: The Frost National Bank,
a national banking association,
d/b/a Frost Capital Group
0000 Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxx Xxxxxx
Fax No. 000-000-0000
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with copies to: Xxxxxx Xxxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxxxx X. Xxxxxx, Esq.
Fax No. 000-000-0000
To Subordinated
Creditor: Xxxxxxx X. Xxxxxxxx
000 Xxxxxx Xxxxxxxxx
Xxxxx Xxx Xxxxxxxxx, Xxxxxxxxxx
00000-0000
Fax No. 000-000-0000
Xxxxxxx Xxx
000 Xxxxxx Xxxxxxxxx
Xxxxx Xxx Xxxxxxxxx, Xxxxxxxxxx
00000-0000
Fax No. 000-000-0000
Xxxxxxx Xxxxxxxx
00 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxxx 00000
Fax No.: ____________________
20. GOVERNING LAW. THIS SUBORDINATION AGREEMENT SHALL BE
INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO
DETERMINED IN ACCORDANCE WITH THE LOCAL LAW OF THE STATE OF
TEXAS, EXCLUDING ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT
MIGHT OTHERWISE REFER CONSTRUCTION OR INTERPRETATION OF THIS
SUBORDINATION AGREEMENT TO THE SUBSTANTIVE LAW OF ANOTHER
JURISDICTION, AND ALL OTHER LAWS OF MANDATORY APPLICATION.
21. Entire Agreement. This Subordination Agreement sets forth
the complete undertaking and agreements of Senior Creditor and
Subordinated Creditor with respect to the subject matter hereof,
and there are no other agreements or undertakings binding upon
them, including, without limitation, any conflicting provisions
of any agreement or notes referred to on Exhibit A attached
hereto.
22. No Effect on Intercreditor Agreement. Notwithstanding the
foregoing, Frost and Upfield agree that, as between them, their
respective rights and priorities are set forth in and governed by
the Intercreditor Agreement, and nothing set forth herein shall
be deemed to increase or expand their rights vis-a-vis one
another.
23. Execution in Counterparts and Facsimile Signatures. This
Subordination Agreement may be executed in a number of identical
counterparts. If so executed, each of such counterparts shall be
deemed to be an original for all purposes, and all such
counterparts shall collectively constitute one Subordination
Agreement. This Subordination Agreement may be signed by
facsimile signature, and a facsimile signature shall, for all
purposes, have the effect of an original signature.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Subordination Agreement has been
duly executed by Subordinated Creditor and Senior Creditor as of
the day and date first written above.
___________________________________
XXXXXXX X. XXXXXXXX
___________________________________
XXXXXXX XXX
___________________________________
XXXXXXX XXXXXXXX
Accepted as of July 19, 2002
THE FROST NATIONAL BANK, a national
banking association doing business
as Frost Capital Group
By:________________________________
Name:______________________________
Title:_____________________________
___________________________________
XXXXX X. UPFIELD
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ACKNOWLEDGMENT OF BORROWER
The Borrower hereby acknowledges receipt of a copy of the
foregoing Subordination Agreement, confirms the accuracy of the
information set forth in Exhibit A attached hereto and that
Exhibit A identifies all of Borrower's existing indebtedness and
obligations to Subordinated Creditor, and agree that they will
not pay any indebtedness subordinated by the foregoing
Subordination Agreement (except as otherwise permitted hereby)
until all indebtedness of Borrower to Senior Creditor, its
successors and assigns, now existing and hereafter arising shall
have been indefeasibly paid in full in cash. In the event of any
breach of the provisions of the foregoing Subordination
Agreement, Borrower agrees that, in addition to any other rights
and remedies Secured Party may have, all of Borrower's
obligations and liabilities to Senior Creditor shall, without
notice or demand, become immediately due and payable, unless
Senior Creditor shall otherwise elect.
TEMTEX INDUSTRIES, INC.
By:________________________________
Name:______________________________
Title:_____________________________
TEMCO FIREPLACE PRODUCTS, INC.
By:________________________________
Name:______________________________
Title:_____________________________
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EXHIBIT A
SUBORDINATED DEBT AND PERMITTED PAYMENTS
----------------------------------------
I. Debt Owed to Subordinated Creditor
$750,000 Convertible Subordinated Notes dated as of the date
hereof, issued by Temtex and payable to the order of
Subordinated Creditor (collectively, the "Convertible
Note").
II. Permitted Payments
Each regularly scheduled payment of interest, as and when
due and payable pursuant to the terms of the Convertible
Note as in effect on the date hereof.
Exhibit A -1-
EXHIBIT B
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LEGEND TO NOTE
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[See Attached]
Exhibit B -1-
