JOINDER AGREEMENT
This Joinder Agreement (the "Joinder Agreement"), dated as
of January 23, 2003, is by and among Temtex Industries, Inc., a
Delaware corporation ("Corporation"), Xxxxxxx X. Xxxxxxxx, The
Xxxxxxx Xxx Living Trust, Xxxxx Xxxxxx and, with respect to his
Note (as defined herein), Xxxxxxx Xxxxxxxx (collectively, the
"Noteholders"), and Xxxxx X. Xxxxx, Xxxx Xxxxxxx, Xxxx Xxxxx,
Xxxxxx Xxxxx, Xxxxx X. Upfield and, with respect to his New Note
(as defined herein), Xxxxxxx Xxxxxxxx (collectively, the "New
Noteholders"). The Corporation, the Noteholders, and the New
Noteholders are sometimes referred to in this Joinder Agreement
individually as a "Party" and collectively as the "Parties."
RECITALS OF THE PARTIES
WHEREAS, on July 19, 2002, the Corporation issued to the
Noteholders certain convertible subordinated promissory notes due
July 19, 2007 (the "Notes");
WHEREAS, as a condition to the issuance of the Notes, the
Corporation and the Noteholders executed (a) that certain Note
Purchase Agreement dated July 19, 2002, together with the
exhibits attached thereto (the "Purchase Agreement"), and (b)
that certain Investors' Rights Agreement dated July 19, 2002,
(the "Investors' Rights Agreement" and, together with the
Purchase Agreement, the "Agreements");
WHEREAS, the New Noteholders desire to make an investment in
the Corporation in exchange for the Corporation's issuance of
additional Notes under the Purchase Agreement to the New
Noteholders (individually, a "New Note" and collectively, the
"New Notes");
WHEREAS, the Corporation and the Noteholders desire to
accept the investment by the New Noteholders and to issue the New
Notes;
WHEREAS, as a condition to the issuance of the New Notes,
the New Noteholders will join the Corporation and the Noteholders
as parties to the Agreements;
WHEREAS, the Parties desire that the New Noteholders join as
parties to the Agreements, as such Agreements are modified by
this Joinder Agreement;
WHEREAS, the Noteholders, by execution of this Joinder
Agreement, agree to the addition of the New Noteholders as
Parties to the Agreements and the modifications to the Agreements
set forth in this Joinder Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties and agreements contained herein, the
Parties agree as follows:
1. The New Noteholders hereby acknowledge, agree, and
confirm that by the execution of this Joinder
Agreement, the New Noteholders shall become and be
deemed to be parties to the Agreements and "Investors"
for purposes of, and as that term is defined in, the
Agreements, as if the New Noteholders had been original
signatories to the Agreements.
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2. The New Noteholders hereby agree to be bound by all of
the terms, provisions and conditions contained in the
Agreements, including without limitation all of the
covenants, representations, warranties and waivers set
forth therein.
3. The New Noteholders hereby acknowledge and confirm that
they have reviewed the Agreements and all schedules and
exhibits thereto.
4. The Parties hereby acknowledge that the New Notes shall
be deemed to be issued pursuant to the Purchase
Agreement and (a) all references to the Notes in the
Agreements shall be references to the Notes and the New
Notes and (b) to the extent that references in the
Agreements to the "Holders" or "holders" of the Notes
or the "Investors" shall be references to the
Noteholders, such terms shall also be deemed to be
references to the New Noteholders as well.
5. The address of the New Noteholders for purposes of
notice under the Agreements shall be the address set
forth beneath the signatures of the New Noteholders to
this Joinder Agreement.
6. The Noteholders hereby consent to the addition of the
New Noteholders as Parties to the Agreements and
further consent to the following modifications to the
Agreements:
a) Exhibit A of the Purchase Agreement is hereby
replaced in its entirety by the Exhibit A attached
hereto;
b) Each reference to the aggregate principal amount
represented by the Notes, shall be a reference to
an aggregate principal amount of $1,360,000;
c) To the extent the Agreements refer to the
aggregate number of shares to be issued pursuant
to warrants to purchase the common stock of the
Company, the aggregate amount of common stock to
be issued pursuant to such warrants shall be a
reference to 453,333 shares;
d) The term "Registrable Securities" as used in the
Investors' Rights Agreement shall include shares
of the Company's common stock issued or issuable
pursuant to the conversion of the Notes and the
New Notes to all of the Noteholders and the New
Noteholders; and
e) The following modifications to the Purchase
Agreement shall be in effect only as applicable to
the New Noteholders:
(i) the Closing Date shall refer to January 23,
2003;
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(ii) the representations and warranties of the
Company set forth in Section 2 of the
Purchase Agreement shall be true and
accurate as of January 23, 2003;
(iii) the Disclosure Letter referenced in the
Purchase Agreement shall refer to the
Disclosure Letter attached hereto as
Exhibit B;
(iv) the references to August 31, 2001 and
August 31, 2002 appearing in the first
sentence of Section 2.7 shall instead
reference August 31, 2002 and August 31,
2003, respectively; and
(v) the representations and warranties of the
Investors set forth in Section 3 of the
Purchase Agreement shall be true and
accurate as of January 23, 2003.
7. The Parties hereby acknowledge that, to the extent that
any provisions contained in the Agreements or other
agreements of the Parties not specifically mentioned
herein shall be inconsistent with any provisions
contained herein, the intent of this Joinder Agreement
is to provide that the Agreements or other agreements
be amended to be consistent with this Joinder Agreement
and that this Joinder Agreement shall control and such
inconsistent provisions shall be deemed modified by
this Joinder Agreement. Further each Party agrees to
provide further assurances that they will execute, upon
request, any additional document or agreement to give
effect to the foregoing modifications to the
Agreements.
8. This Joinder Agreement sets forth the entire agreement
and understanding among the Parties as to the subject
matter hereof.
9. This Joinder Agreement shall not be changed, modified
or amended except by a writing signed by the party to
be charged, and this Joinder Agreement may not be
discharged except by performance in accordance with its
terms or by a writing signed by the party to which
performance is to be rendered.
10. If any provision of this Joinder Agreement or the
application of any provision hereof to any person or in
any circumstances is held invalid, the remainder of
this Joinder Agreement and the application of such
provision to other persons or circumstances shall not
be affected unless the provision held invalid shall
substantially impair the benefits of the remaining
portions of this Joinder Agreement. If any provision
in this Joinder Agreement is unenforceable or overly
broad for any reason whatsoever, that provision will be
appropriately limited and reformed to the maximum
extent provided by applicable law.
11. This Joinder Agreement and any claims arising out of
this Joinder Agreement shall be governed by and
construed in accordance with the laws of the State of
Delaware, without giving effect to the provisions
thereof relating to conflicts of law.
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12. This Joinder Agreement and the Agreements represent the
final agreement between the Parties regarding the
subject matter herein and therein and may not be
contradicted by evidence of prior, contemporaneous or
subsequent oral agreements of the Parties hereto or
thereto. There are no unwritten oral agreements
between the Parties.
13. This Joinder Agreement may be executed by facsimile
signature and two or more counterparts, each of which
shall be deemed an original but all which together
shall constitute one and the same instrument.
[signature pages follows]
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IN WITNESS WHEREOF, the Parties have caused this Joinder
Agreement to be executed by their duly authorized officers or by
themselves individually.
NOTEHOLDERS:
TEMTEX INDUSTRIES, INC.
By: /s/
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Address: 0000 X. Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
INVESTORS:
XXXXXXX X. XXXXXXXX
/s/ XXXXXXX X. XXXXXXXX
----------------------------------
Address: 000 Xxxxxx Xxxxxxxxx
Xxxxx Xxx Xxxxxxxxx, XX 00000-0000
XXXXXXX XXX LIVING TRUST
By: Xxxxxxx Xxx, as Sole Trustee
/s/ XXXXXXX XXX
----------------------------------
Address: 000 Xxxxxx Xxxxxxxxx
Xxxxx Xxx Xxxxxxxxx, XX 00000-0000
XXXXXXX XXXXXXXX
/s/ XXXXXXX XXXXXXXX
----------------------------------
Address: 00 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
XXXXX XXXXXX
/s/ XXXXX XXXXXX
----------------------------------
Address: 0000 Xxxxxxx Xxxxx
Xxxxxx Xxx Xxx, Xxxxxxxxxx 00000
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NEW NOTEHOLDERS:
XXXXX X. XXXXX
/s/ XXXXX X. XXXXX
----------------------------------
Address: 0 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
XXXXX X. UPFIELD
/s/ XXXXX X. UPFIELD
----------------------------------
Address: 00000 Xxxx Xxxxx Xxxxx
Xxxxxx, XX 00000
XXXX XXXXXXX
/s/ XXXX XXXXXXX
----------------------------------
Address: 0000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
XXXX XXXXX
/s/ XXXX XXXXX
----------------------------------
Address: 0000 Xxxx Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
XXXXXX XXXXX
/s/ XXXXXX XXXXX
----------------------------------
Address: 0000 Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
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EXHIBIT A
---------
EXHIBIT A
to
Note Purchase Agreement
===============================================================
Principal
Amount of
Investor Name Note
-------------------- ----------
1. Xxxxxxx X. Xxxxxxxx $ 430,000
2. The Xxxxxxx Xxx $ 150,000
Living Trust
3. Xxxxxxx Xxxxxxxx $ 20,000
4. Xxxxx Xxxxxx $ 150,000
5. Xxxxx X. Xxxxx $ 300,000
6. Xxxxx X. Upfield $ 200,000
7. Xxxxxxx Xxxxxxxx $ 50,000
8. Xxxx Xxxxxxx $ 10,000
9. Xxxx Xxxxx $ 25,000
10. Xxxxxx Xxxxx $ 25,000
TOTAL $1,360,000
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EXHIBIT B
---------
Disclosure Letter Dated January 23, 2003
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Disclosure Letter
to
Note Purchase Agreement
=================================================================
Section 2.3 - Capitalization
----------------------------
1. As of the date hereof, the Company has 10,000,000
shares of Common Stock authorized, of which 3,444,641 shares are
issued and outstanding. In addition thereto, the Company has
authorized 1,000,000 shares of blank check preferred stock, par
value $1.00 per share, of which no shares have been issued.
2. As of the date hereof, the Company has outstanding
options granted, in each case, to employees, officers or
directors of the Company for a total of 975,500 shares of the
Company's common stock.
Section 2.7 - Financial Information and SEC Reports
---------------------------------------------------
Information about the Company's financial statements
has been fully disclosed in the reports it has filed under the
Securities Exchange Act of 1934.
Section 2.8 - Litigation
------------------------
Management of the Company is not aware of any
litigation against the Company except for routine litigation
against the Company or litigation referenced in the Company's
reports filed under the Securities Exchange Act of 1934, as
amended.
Section 2.11 - Subsidiaries
---------------------------
The Company has the following subsidiaries:
* Temtex Fireplace Products, Inc., a Texas corporation,
wholly owned by the Company.
* Temtex International, Inc., a Texas corporation,
wholly owned by Temco Fireplace Products, Inc.
* Temcomex, S.A. DE C.V., a Mexican corporation jointly
owned by Temco Fireplace Products, Inc. and Temtex
International.
Section 2.16 - Insurance
------------------------
None
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Additional Disclosures
----------------------
1. The Company is a party to that Consulting Services
Agreement, dated July 27, 2001 by and between the Company and
ECDI Capital Corp. (the "Consulting Agreement"). Pursuant to the
Consulting Agreement, among other things, ECDI was to assist the
Company in its efforts to effect a "Sale" of the business of the
Company (as "Sale" is defined in the Consulting Agreement") in
exchange for a consulting fee of not less than $250,000 (the
"Consulting Fee"). While ECDI was not successful in its attempts
to effect a Sale of the Company, it is possible that ECDI may
claim that the transactions contemplated by the Note Purchase
Agreement and the Secured Term Note (and all ancillary agreements
thereto) meet the definition of Sale under the Consulting
Agreement and attempt to collect the Consulting Fee from the
Company. While the Company's management does not believe the
contemplated transactions constitute a sale under the Consulting
Agreement, it is impossible to determine if EDCI will make such a
claim, and if so whether ECDI would be successful in pressing
such a claim. Should the Company ultimately be compelled to make
payment of the Consulting Fee, it would likely have a material
adverse impact on its financial position and results of
operation.
2. The Company has previously considered, and may in
the future consider, becoming a private company under the
Securities Exchange Act of 1934, as amended. No assurances,
however, can be given that:
* such a transaction is feasible;
* if feasible, that such a transaction would benefit the
Company or the Investors;
* whether the Company could maintain its net operating
loss carryforwards after such a transaction.
To the extent the Company should elect to engage in a
going-private transaction, there would be no public market for
the Conversion Shares thereafter.
3. We may need additional working capital after this
transaction to remain operational. No assurances can be given
that the funds received in connection with the contemplated
transactions will be sufficient for any period of time in the
future. To the extent we need additional working capital, we may
not be able to get it on terms acceptable to the Company, or at
all.
4. We are in the process of moving our Manchester,
Tennessee operations to Mexicali, Mexico. The required reduction
in force at our Manchester facility may give rise to certain
litigation which could have a negative impact on our operations.
In addition, the move requires the transfer of a significant
amount of equipment and materials from Manchester to Mexicali.
As the move has not been completed the risks associated with the
completion of the move, including delayed operations due to
damaged equipment, are currently unknown. Likewise, the level of
performance of the operations at the Mexicali location is
currently unknown. Losses attributed to the move, disruption in
production, or difficulties with a new and unproven workforce all
could have a negative effect on our operations and the return on
your investment in Temtex.
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5. The residential housing market has experienced a
sustained period of growth in new construction, which has been an
advantage to us. Even with this advantage, we have experienced a
period of difficulty and instability, requiring additional
capital to fund our operations. Historically, such performance
is followed by an industry downturn. As a major producer of
metal fireplace products used in the residential construction
markets, a downturn in the housing market would have a
significant negative impact on our performance leading to an even
greater drain on capital resources than recently experienced.
6. No assurances can be given that the Company will
be able to continue as a going concern.
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