SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") dated July 19, 2002 by
TEMCO FIREPLACE PRODUCTS, INC., a Texas corporation ("Debtor"), in
favor of ▇▇▇▇▇ ▇. UPFIELD (as further defined below "Secured
Party"). Debtor hereby agrees with Secured Party as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the meanings indicated below:
(a) The term "Code" shall mean the Uniform Commercial Code as in
effect in the State of Texas on the date of this Agreement or as
it may hereafter be amended from time to time.
(b) The term "Collateral" shall mean all of the property set
forth below:
(i) All present and hereafter acquired inventory (including
without limitation, all raw materials, work in process and
finished goods) held, possessed, owned, held on consignment, or
held for sale, lease, return or to be furnished under contracts
of services, in whole or in part, by Debtor wherever located, all
records, to the extent relating in any way to the foregoing
(including, without limitation, any computer software, whether on
tape, disk, card, strip, cartridge or any other form), together
with the PROCEEDS of the foregoing, including accounts
receivable, to the extent such PROCEEDS (including accounts
receivable) arose (A) after any sale, disposition or other
realization of any of Debtor's assets, (B) after demand for
payment of the Indebtedness (as hereinafter defined) by Secured
Party, (C) upon any dissolution, liquidation, winding-up,
reorganization, bankruptcy, insolvency or receivership of Debtor
or any other marshaling of Debtor's assets that is similar
thereto, (D) upon the enforcement of, or any action taken with
respect to, any of Secured Party's or The Frost National Bank's
security interest under the Frost Bank Loan (as hereinafter
defined) in or other rights to such assets, (E) with respect to
insurance proceeds as a result of the loss of, destruction of or
damage to any of such assets, or (F) as a result of the
expropriation or other condemnation of any of such assets.
(ii) All equipment and fixtures of whatsoever kind and character
now or hereafter possessed, held, acquired, leased or owned by
Debtor and used or usable in Debtor's business, together with all
replacements, accessories, additions, substitutions and
accessions to all of the foregoing, all records, to the extent
relating in any way to the foregoing (including, without
limitation, any computer software, whether on tape, disk, card,
strip, cartridge or any other form), together with the PRODUCTS
and PROCEEDS of all of the foregoing (including without
limitation, insurance payable by reason of loss or damage to the
foregoing property). To the extent that the foregoing property
is located on, attached to, annexed to, related to, or used in
connection with, or otherwise made a part of, and is or shall
become fixtures upon, real property, such real property and the
record owner thereof is described on Exhibit A attached hereto
and made a part hereof.
The designation of PROCEEDS under 1.(b)(i) and
1.(b)(ii) above does not authorize Debtor to sell,
transfer or otherwise convey any of the foregoing
property except finished goods intended for sale in the
ordinary course of Debtor's business or as otherwise
provided herein.
(c) The term "Frost Bank Loan" shall mean that certain
$4,000,000 Loan Agreement by and among The Frost National Bank,
as lender, and Debtor and certain affiliates of Debtor, as
borrowers, dated as of September 6, 2000, and all renewals,
extensions, modifications, or replacements thereof.
(d) The term "Indebtedness" shall mean (i) all indebtedness,
obligations and liabilities of Debtor to Secured Party of any
kind or character, now existing or hereafter arising, arising
under the Secured Term Note dated July 19, 2002 (the "Note") in
the stated principal amount of $750,000 payable by Debtor and
Debtor's parent Temtex Industries, Inc. to the order of
Secured Party whether direct, indirect, related, unrelated,
fixed, contingent, liquidated, unliquidated, joint, several or
joint and several, (ii) all accrued but unpaid interest on any of
the indebtedness described in (i) above, (iii) all obligations of
Debtor to Secured Party under any documents evidencing, securing,
governing and/or pertaining to all or any part of the
indebtedness described in (i) and (ii) above, (iv) all costs and
expenses incurred by Secured Party in connection with the
collection and administration of all or any part of the
indebtedness and obligations described in (i), (ii) and (iii)
above or the protection or preservation of, or realization upon,
the collateral securing all or any part of such indebtedness and
obligations, including without limitation all reasonable
attorneys' fees, and (v) all renewals, extensions, modifications
and rearrangements of the indebtedness and obligations described
in (i), (ii), (iii) and (iv) above.
(e) The term "Loan Documents" shall mean all instruments and
documents evidencing, securing, governing, guaranteeing and/or
pertaining to the Indebtedness, including the Note.
(f) The term "Obligated Party" shall mean any party other than
Debtor who secures, guarantees and/or is otherwise obligated to
pay all or any portion of the Indebtedness.
-2-
(g) The term "Permitted Liens" shall mean (i) liens created by
this Agreement, (ii) liens created by or in connection with
capitalized leases entered into in the ordinary course of
Debtor's business, (iii) liens for taxes, assessments, or other
governmental charges not yet due, or which are being contested in
good faith by appropriate action promptly initiated and
diligently conducted, and any reserve as shall be required by
generally accepted accounting principles shall have been made
therefor, (iv) liens of landlords, vendors, carriers,
warehousemen, mechanics, laborers and materialmen arising by law
in the ordinary course of Debtor's business for sums not yet due
or, which are being contested in good faith by appropriate action
promptly initiated and diligently conducted, and any reserve as
shall be required by generally acceptable accounting principles
shall have been made therefor, (v) pledges or deposits made in
the ordinary course of Debtor's business in connection with
workmen's compensation, unemployment insurance, social security
and other like laws and (vi) liens in favor of The Frost National
Bank under the Frost Bank Loan, subject to the superior rights of
Secured Party in the Collateral described in Paragraph 1(b)(i)
above, other than Returned Goods (as hereinafter defined).
(h) The term "Returned Goods" shall mean any of the Collateral
described in Paragraph 1.(b)(i) which has been returned to or
reclaimed or repossessed by Debtor or which has otherwise come
back into Debtor's possession for any reason after having been
sold or otherwise transferred by Debtor.
(i) The term "Secured Party" shall mean ▇▇▇▇▇ ▇. Upfield, his
successors and assigns, or heirs and personal representatives,
including without limitation, any party to whom Secured Party, or
his successors or assigns, or heirs and personal representatives,
may assign his or its rights and interests under this Agreement.
All words and phrases used herein which are expressly
defined in Section 1.201 or Chapter 9 of the Code shall have the
meaning provided for therein. Other words and phrases defined
elsewhere in the Code shall have the meaning specified therein
except to the extent such meaning is inconsistent with a
definition in Section 1.201 or Chapter 9 of the Code.
2. Security Interest. As security for the Indebtedness,
Debtor, for value received, hereby grants to Secured Party a
continuing security interest in the Collateral.
3. Representations and Warranties. Debtor hereby represents
and warrants the following to Secured Party:
(a) Due Authorization. The execution, delivery and performance
of this Agreement and all of the other Loan Documents by Debtor
have been duly authorized by all necessary corporate action of
Debtor.
(b) Enforceability. This Agreement and the other Loan Documents
constitute legal, valid and binding obligations of Debtor,
enforceable in accordance with their respective terms, except as
limited by bankruptcy, insolvency or similar laws of general
application relating to the enforcement of creditors' rights and
except to the extent specific remedies may generally be limited
by equitable principles.
(c) Ownership and Liens. Debtor has good and marketable title
to the Collateral free and clear of all liens, security
interests, encumbrances or adverse claims, except for the
Permitted Liens. No dispute, right of setoff, counterclaim or
defense exists with respect to all or any part of the Collateral.
Debtor has not executed any other security agreement currently
affecting the Collateral and no effective financing statement or
other instrument similar in effect covering all or any part of
the Collateral is on file in any recording office except as may
have been executed or filed in favor of Secured Party or with
respect to the Permitted Liens.
-3-
(d) No Conflicts or Consents. Neither the ownership, the
intended use of the Collateral by Debtor, the grant of the
security interest by Debtor to Secured Party herein nor the
exercise by Secured Party of its rights or remedies hereunder,
will (i) conflict with any provision of (A) any domestic or
foreign law, statute, rule or regulation, (B) the articles or
certificate of incorporation, charter, bylaws or partnership
agreement, as the case may be, of Debtor, or (C) any agreement,
judgment, license, order or permit applicable to or binding upon
Debtor, or (ii) result in or require the creation of any lien,
charge or encumbrance upon any assets or properties of Debtor or
of any person except as may be expressly contemplated in the Loan
Documents. Except as expressly contemplated in the Loan
Documents, no consent, approval, authorization or order of, and
no notice to or filing with, any court, governmental authority or
third party is required in connection with the grant by Debtor of
the security interest herein or the exercise by Secured Party of
its rights and remedies hereunder.
(e) Security Interest. Debtor has and will have at all times
full right, power and authority to grant a security interest in
the Collateral to Secured Party in the manner provided herein,
free and clear of any lien, security interest or other charge or
encumbrance except for Permitted Liens. This Agreement creates a
legal, valid and binding security interest in favor of Secured
Party in the Collateral securing the Indebtedness. Possession by
Secured Party of all certificates, instruments and cash
constituting Collateral from time to time and/or the filing of
the financing statements delivered prior hereto and/or
concurrently herewith by Debtor to Secured Party will perfect and
establish Secured Party's security interest hereunder in the
Collateral.
(f) Location. Debtor's residence or chief executive office, as
the case may be, and the office where the records concerning the
Collateral are kept is located at its address set forth on the
signature page hereof.
4. Affirmative Covenants. Debtor will comply with the
covenants contained in this Section 4 at all times during the
period of time this Agreement is effective unless Secured Party
shall otherwise consent in writing.
(a) Ownership and Liens. Debtor will maintain good and
marketable title to all Collateral free and clear of all liens,
security interests, encumbrances or adverse claims, except for
the security interest created by this Agreement and the Permitted
Liens.
(b) Further Assurances. Debtor will from time to time at its
expense promptly execute and deliver all further instruments and
documents and take all further action necessary or appropriate or
that Secured Party may request in order (i) to perfect and
protect the security interest created or purported to be created
hereby and the priority of such security interest, (ii) to enable
Secured Party to exercise and enforce its rights and remedies
hereunder in respect of the Collateral, and (iii) to otherwise
effect the purposes of this Agreement, including without
limitation: (A) executing and filing such financing or
continuation statements, or amendments thereto; and (B)
furnishing to Secured Party from time to time statements and
schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral, all in
reasonable detail satisfactory to Secured Party.
-4-
(c) Inspection of Collateral. Debtor will keep adequate records
concerning the Collateral and will permit Secured Party and all
representatives and agents appointed by Secured Party to inspect
any of the Collateral and the books and records of or relating to
the Collateral at any time during normal business hours, to make
and take away photocopies, photographs and printouts thereof and
to write down and record any such information.
(d) Payment of Taxes. Debtor (i) will timely pay all property
and other taxes, assessments and governmental charges or levies
imposed upon the Collateral or any part thereof, (ii) will timely
pay all lawful claims which, if unpaid, might become a lien or
charge upon the Collateral or any part thereof, and (iii) will
maintain appropriate accruals and reserves for all such
liabilities in a timely fashion in accordance with generally
accepted accounting principles. Debtor may, however, delay
paying or discharging any such taxes, assessments, charges,
claims or liabilities so long as the validity thereof is
contested in good faith by proper proceedings and provided Debtor
has set aside on Debtor's books adequate reserves therefor;
provided, however, Debtor understands and agrees that in the
event of any such delay in payment or discharge and upon Secured
Party's written request, Debtor will establish with Secured Party
an escrow acceptable to Secured Party adequate to cover the
payment of such taxes, assessments and governmental charges with
interest, costs and penalties and a reasonable additional sum to
cover possible costs, interest and penalties (which escrow shall
be returned to Debtor upon payment of such taxes, assessments,
governmental charges, interests, costs and penalties or disbursed
in accordance with the resolution of the contest to the claimant)
or furnish Secured Party with an indemnity bond secured by a
deposit in cash or other security acceptable to Secured Party.
Notwithstanding any other provision contained in this Subsection,
Secured Party may at its discretion exercise its rights under
Subsection 6(c) at any time to pay such taxes, assessments,
governmental charges, interest, costs and penalties.
5. Negative Covenants. Debtor will comply with the covenants
contained in this Section 5 at all times during the period of
time this Agreement is effective, unless Secured Party shall
otherwise consent in writing.
(a) Transfer or Encumbrance. Debtor will not (i) sell, assign
(by operation of law or otherwise), transfer, exchange, lease or
otherwise dispose of any of the Collateral or (ii) ▇▇▇▇▇ ▇ ▇▇▇▇
or security interest in or execute, file or record any financing
statement or other security instrument with respect to the
Collateral to any party other than Secured Party except with
respect to the Permitted Liens, except for (A) sales of inventory
and equipment in the ordinary course of business.
(b) Impairment of Security Interest. Debtor will not take or
fail to take any action which would in any manner impair the
value or enforceability of Secured Party's security interest in
any Collateral.
-5-
(c) Financing Statement Filings. Debtor will not cause or
permit any change in the location of (i) any Collateral, (ii) any
records concerning any Collateral, or (iii) Debtor's residence or
chief executive office, as the case may be, to a jurisdiction
other than as represented in Subsection 3(f) unless Debtor shall
have notified Secured Party in writing of such change at least
thirty (30) days prior to the effective date of such change, and
shall have first taken all action required by Secured Party for
the purpose of further perfecting or protecting the security
interest in favor of Secured Party in the Collateral. In any
written notice furnished pursuant to this Subsection, Debtor will
expressly state that the notice is required by this Agreement and
contains facts that may require additional filings of financing
statements or other notices for the purpose of continuing
perfection of Secured Party's security interest in the
Collateral.
6. Rights of Secured Party. Secured Party shall have the
rights contained in this Section 6 at all times during the period
of time this Agreement is effective.
(a) Additional Financing Statements Filings. Debtor hereby
authorizes Secured Party to file, without the signature of
Debtor, one or more financing or continuation statements, and
amendments thereto, relating to the Collateral. Debtor further
agrees that a carbon, photographic or other reproduction of this
Security Agreement or any financing statement describing any
Collateral is sufficient as a financing statement and may be
filed in any jurisdiction Secured Party may deem appropriate.
(b) Power of Attorney. Debtor hereby irrevocably appoints
Secured Party as Debtor's attorney-in-fact, such power of
attorney being coupled with an interest, with full authority in
the place and stead of Debtor and in the name of Debtor or
otherwise, from time to time in Secured Party's discretion, to,
during the existence of any Event of Default, take any action and
to execute any instrument which Secured Party may deem necessary
or appropriate to accomplish the purposes of this Agreement,
including without limitation: (i) to obtain and adjust insurance
required by Secured Party hereunder; (ii) to demand, collect, ▇▇▇
for, recover, compound, receive and give acquittance and receipts
for moneys due and to become due under or in respect of the
Collateral; (iii) to receive, endorse and collect any drafts or
other instruments, documents and chattel paper in connection with
clause (i) or (ii) above; and (iv) to file any claims or take any
action or institute any proceedings which Secured Party may deem
necessary or appropriate for the collection and/or preservation
of the Collateral or otherwise to enforce the rights of Secured
Party with respect to the Collateral.
(c) Performance by Secured Party. If Debtor fails to perform
any agreement or obligation provided herein, Secured Party may
itself perform, or cause performance of, such agreement or
obligation, and the expenses of Secured Party incurred in
connection therewith shall be a part of the Indebtedness, secured
by the Collateral and payable by Debtor on demand.
7. Events of Default. Each of the following constitutes an
"Event of Default" under this Agreement:
(a) Failure to Pay Indebtedness. The failure, refusal or
neglect of Debtor to make any payment of principal or interest on
the Indebtedness, or any portion thereof, as the same shall
become due and payable; or
-6-
(b) Non-Performance of Covenants. The failure of Debtor or any
Obligated Party to timely and properly observe, keep or perform
any covenant, agreement, warranty or condition required herein or
in any of the other Loan Documents and such failure shall not be
cured within ten (10) days after Debtor shall have received
written notice of such failure from Second Party; or
(c) Default Under other Loan Documents. The occurrence of an
event of default under any of the other Loan Documents; or
(d) False Representation. Any representation contained herein
or in any of the other Loan Documents made by Debtor or any
Obligated Party is false or misleading in any material respect;
or
(e) Default to Third Party. An event of 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
maturity thereof, or shall have instituted collection proceedings
with respect thereto; or;
(f) Bankruptcy or Insolvency. If Debtor or any Obligated Party:
(i) becomes insolvent, or makes a transfer in fraud of creditors,
or makes an assignment for the benefit of creditors, or admits in
writing its inability to pay its debts as they become due; (ii)
generally is not paying its debts as such debts become due; (iii)
has a receiver, trustee or custodian appointed for, or take
possession of, all or substantially all of the assets of such
party or any of the Collateral, either in a proceeding brought by
such party or in a proceeding brought against such party and such
appointment is not discharged or such possession is not
terminated within sixty (60) days after the effective date
thereof or such party consents to or acquiesces in such
appointment or possession; (iv) files a petition for relief under
the United States Bankruptcy Code or any other present or future
federal or state insolvency, bankruptcy or similar laws (all of
the foregoing hereinafter collectively called "Applicable
Bankruptcy Law") or an involuntary petition for relief is filed
against such party under any Applicable Bankruptcy Law and such
involuntary petition is not dismissed within sixty (60) days
after the filing thereof, or an order for relief naming such
party is entered under any Applicable Bankruptcy Law, or any
composition, rearrangement, extension, reorganization or other
relief of debtors now or hereafter existing is requested or
consented to by such party; (v) fails to have discharged within a
period of sixty (60) days any attachment, sequestration or
similar writ levied upon any property of such party; or (vi)
fails to pay within thirty (30) days any final money judgment
against such party; or
(g) Execution on Collateral. The Collateral or any portion
thereof is taken on execution or other process of law in any
action against Debtor; or
(h) Abandonment. Debtor abandons the Collateral or any portion
thereof; or
-7-
(i) Action by Other Lienholder. The holder of any lien or
security interest on any of the assets of Debtor, including
without limitation, the Collateral (without hereby implying the
consent of Secured Party to the existence or creation of any such
lien or security interest on the Collateral), declares a default
thereunder and institutes foreclosure or other proceedings for
the enforcement of its remedies thereunder; or
(j) Liquidation and Related Events. The liquidation,
dissolution, merger or consolidation of Debtor.
8. Remedies and Related Rights. If an Event of Default shall
have occurred, and without limiting any other rights and remedies
provided herein, under any of the other Loan Documents or
otherwise available to Secured Party, Secured Party may exercise
one or more of the rights and remedies provided in this Section.
(a) Remedies. Secured Party may from time to time at its
discretion, without limitation and without notice except as
expressly provided in any of the Loan Documents:
(i) exercise in respect of the Collateral all the rights and
remedies of a secured party under the Code (whether or not the
Code applies to the affected Collateral);
(ii) require Debtor to, and Debtor hereby agrees that it will
at its expense and upon request of Secured Party, assemble the
Collateral as directed by Secured Party and make it available to
Secured Party at a place to be designated by Secured Party which
is reasonably convenient to both parties;
(iii) reduce its claim to judgment or foreclose or otherwise
enforce, in whole or in part, the security interest granted
hereunder by any available judicial procedure;
(iv) sell or otherwise dispose of, at its office, on the
premises of Debtor or elsewhere, the Collateral, as a unit or in
parcels, by public or private proceedings, and by way of one or more
contracts (it being agreed that the sale or other disposition of
any part of the Collateral shall not exhaust Secured Party's
power of sale, but sales or other dispositions may be made from
time to time until all of the Collateral has been sold or
disposed of or until the Indebtedness has been paid and performed
in full), and at any such sale or other disposition it shall not
be necessary to exhibit any of the Collateral;
(v) buy the Collateral, or any portion thereof, at any public
sale;
(vi) buy the Collateral, or any portion thereof, at any private
sale if the Collateral is of a type customarily sold in a
recognized market or is of a type which is the subject of widely
distributed standard price quotations;
(vii) apply for the appointment of a receiver for the
Collateral, and Debtor hereby consents to any such appointment;
and
-8-
(viii) at its option, retain the Collateral in satisfaction of
the Indebtedness whenever the circumstances are such that Secured
Party is entitled to do so under the Code or otherwise.
Debtor agrees that in the event Debtor is entitled to
receive any notice under the Uniform Commercial Code, as it
exists in the state governing any such notice, of the sale or
other disposition of any Collateral, reasonable notice shall be
deemed given when such notice is deposited in a depository
receptacle under the care and custody of the United States Postal
Service, postage prepaid, at Debtor's address set forth on the
signature page hereof, ten (10) days prior to the date of any
public sale, or after which a private sale, of any of such
Collateral is to be held. Secured Party shall not be obligated
to make any sale of Collateral regardless of notice of sale
having been given. Secured Party may adjourn any public or
private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.
(b) Application of Proceeds. If any Event of Default shall have
occurred, Secured Party may at its discretion apply or use any
cash held by Secured Party as Collateral, and any cash proceeds
received by Secured Party in respect of any sale or other
disposition of, collection from, or other realization upon, all
or any part of the Collateral as follows in such order and manner
as Secured Party may elect:
(i) to the repayment or reimbursement of the reasonable costs
and expenses (including, without limitation, reasonable
attorneys' fees and expenses) incurred by Secured Party in
connection with (A) the custody, preservation, use or operation
of, or the sale of, collection from, or other realization upon,
the Collateral, and (B) the exercise or enforcement of any of the
rights and remedies of Secured Party hereunder;
(ii) to the payment or other satisfaction of any liens and other
encumbrances upon the Collateral;
(iii) to the satisfaction of the Indebtedness;
(iv) by holding such cash and proceeds as Collateral;
(v) to the payment of any other amounts required by applicable
law (including without limitation, Section 9.615 of the Code or
any other applicable statutory provision); and
(vi) by delivery to Debtor or any other party lawfully entitled
to receive such cash or proceeds whether by direction of a court
of competent jurisdiction or otherwise.
(c) Deficiency. In the event that the proceeds of any sale of,
collection from, or other realization upon, all or any part of
the Collateral by Secured Party are insufficient to pay all
amounts to which Secured Party is legally entitled, Debtor and
any party who guaranteed or is otherwise obligated to pay all or
any portion of the Indebtedness shall be liable for the
deficiency, together with interest thereon as provided in the
Loan Documents.
-9-
(d) Non-Judicial Remedies. In granting to Secured Party the
power to enforce its rights hereunder without prior judicial
process or judicial hearing, Debtor expressly waives, renounces
and knowingly relinquishes any legal right which might otherwise
require Secured Party to enforce its rights by judicial process.
Debtor recognizes and concedes that non-judicial remedies are
consistent with the usage of trade, are responsive to commercial
necessity and are the result of a bargain at arm's length.
Nothing herein is intended to prevent Secured Party or Debtor
from resorting to judicial process at either party's option.
(e) Other Recourse. Debtor waives any right to require Secured
Party to proceed against any third party, exhaust any Collateral
or other security for the Indebtedness, or to have any third
party joined with Debtor in any suit arising out of the
Indebtedness or any of the Loan Documents, or pursue any other
remedy available to Secured Party. Debtor further waives any and
all notice of acceptance of this Agreement and of the creation,
modification, rearrangement, renewal or extension of the
Indebtedness. Debtor further waives any defense arising by
reason of any disability or other defense of any third party or
by reason of the cessation from any cause whatsoever of the
liability of any third party. Until all of the Indebtedness
shall have been paid in full, Debtor shall have no right of
subrogation and Debtor waives the right to enforce any remedy
which Secured Party has or may hereafter have against any third
party, and waives any benefit of and any right to participate in
any other security whatsoever now or hereafter held by Secured
Party. Debtor authorizes Secured Party, and without notice or
demand and without any reservation of rights against Debtor and
without affecting Debtor's liability hereunder or on the
Indebtedness to (i) take or hold any other property of any type
from any third party as security for the Indebtedness, and
exchange, enforce, waive and release any or all of such other
property, (ii) apply such other property and direct the order or
manner of sale thereof as Secured Party may in its discretion
determine, (iii) renew, extend, accelerate, modify, compromise,
settle or release any of the Indebtedness or other security for
the Indebtedness, (iv) waive, enforce or modify any of the
provisions of any of the Loan Documents executed by any third
party, and (v) release or substitute any third party.
9. Frost Bank Loan Liens.
Notwithstanding anything to the contrary contained herein,
Secured Party and Debtor expressly acknowledge and agree that the
liens and security interests granted in this Agreement on or in
respect of the Collateral described in Paragraph 1.b(ii) of this
Agreement, products and proceeds therefrom and all Returned Goods
shall be subordinate and inferior to the liens granted to The
Frost National Bank in such Collateral under or pursuant to the
Frost Bank Loan pursuant to the terms of the Intercreditor
Agreement of even date herewith between Secured Party and the
Frost Bank.
-10-
10. Miscellaneous.
(a) Entire Agreement. This Agreement contains the entire
agreement of Secured Party and Debtor with respect to the
Collateral. If the parties hereto are parties to any prior
agreement, either written or oral, relating to the Collateral,
the terms of this Agreement shall amend and supersede the terms
of such prior agreements as to transactions on or after the
effective date of this Agreement, but all security agreements,
financing statements, guaranties, other contracts and notices for
the benefit of Secured Party shall continue in full force and
effect to secure the Indebtedness unless Secured Party
specifically releases its rights thereunder by separate release.
(b) Amendment. No modification, consent or amendment of any
provision of this Agreement or any of the other Loan Documents
shall be valid or effective unless the same is in writing and
signed by the party against whom it is sought to be enforced.
(c) Actions by Secured Party. The lien, security interest and
other security rights of Secured Party hereunder shall not be
impaired by (i) any renewal, extension, increase or modification
with respect to the Indebtedness, (ii) any surrender, compromise,
release, renewal, extension, exchange or substitution which
Secured Party may grant with respect to the Collateral, or (iii)
any release or indulgence granted to any endorser, guarantor or
surety of the Indebtedness. The taking of additional security by
Secured Party shall not release or impair the lien, security
interest or other security rights of Secured Party hereunder or
affect the obligations of Debtor hereunder.
(d) Waiver by Secured Party. Secured Party may waive any Event
of Default without waiving any other prior or subsequent Event of
Default. Secured Party may remedy any default without waiving
the Event of Default remedied. Neither the failure by Secured
Party to exercise, nor the delay by Secured Party in exercising,
any right or remedy upon any Event of Default shall be construed
as a waiver of such Event of Default or as a waiver of the right
to exercise any such right or remedy at a later date. No single
or partial exercise by Secured Party of any right or remedy
hereunder shall exhaust the same or shall preclude any other or
further exercise thereof, and every such right or remedy
hereunder may be exercised at any time. No waiver of any
provision hereof or consent to any departure by Debtor therefrom
shall be effective unless the same shall be in writing and signed
by Secured Party and then such waiver or consent shall be
effective only in the specific instances, for the purpose for
which given and to the extent therein specified. No notice to or
demand on Debtor in any case shall of itself entitle Debtor to
any other or further notice or demand in similar or other
circumstances.
(e) Costs and Expenses. Debtor will upon demand pay to Secured
Party the amount of any and all costs and expenses (including
without limitation, attorneys' fees and expenses), which Secured
Party may incur in connection with (i) the custody, preservation,
use or operation of, or the sale of, collection from, or other
realization upon, the Collateral, (ii) the exercise or
enforcement of any of the rights of Secured Party under the Loan
Documents, or (iii) the failure by Debtor to perform or observe
any of the provisions hereof.
-11-
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND
APPLICABLE FEDERAL LAWS, EXCEPT TO THE EXTENT PERFECTION AND THE
EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST
GRANTED HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL, ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
TEXAS.
(g) Venue. This Agreement has been entered into in Dallas
County, Texas and it shall be performable for all purposes in
such county. Courts within the State of Texas shall have
jurisdiction over any and all disputes arising under or
pertaining to this Agreement and venue for any such disputes
shall be in Dallas County, Texas.
(h) Severability. If any provision of this Agreement is held by
a court of competent jurisdiction to be illegal, invalid or
unenforceable under present or future laws, such provision shall
be fully severable, shall not impair or invalidate the remainder
of this Agreement and the effect thereof shall be confined to the
provision held to be illegal, invalid or unenforceable.
(i) No Obligation. Nothing contained herein shall be construed
as an obligation on the part of Secured Party to extend or
continue to extend credit to Debtor.
(j) Notices. All notices, requests, demands or other
communications required or permitted to be given pursuant to this
Agreement shall be in writing and given by (i) personal delivery,
(ii) expedited delivery service with proof of delivery, or (iii)
United States mail, postage prepaid, registered or certified
mail, return receipt requested, sent to the intended addressee at
the address set forth on the signature page hereof or to such
different address as the addressee shall have designated by
written notice sent pursuant to the terms hereof and shall be
deemed to have been received either, in the case of personal
delivery, at the time of personal delivery, in the case of
expedited delivery service, as of the date of first attempted
delivery at the address and in the manner provided herein, or in
the case of mail, upon deposit in a depository receptacle under
the care and custody of the United States Postal Service. Either
party shall have the right to change its address for notice
hereunder to any other location within the continental United
States by notice to the other party of such new address at least
thirty (30) days prior to the effective date of such new address.
(k) Binding Effect and Assignment. This Agreement (i) creates a
continuing security interest in the Collateral, (ii) shall be
binding on Debtor and the heirs, executors, administrators,
personal representatives, successors and assigns of Debtor, and
(iii) shall inure to the benefit of Secured Party and its
successors and assigns. Without limiting the generality of the
foregoing, Secured Party may pledge, assign or otherwise transfer
the Indebtedness and its rights under this Agreement and any of
the other Loan Documents to any other party. Debtor's rights and
obligations hereunder may not be assigned or otherwise
transferred without the prior written consent of Secured Party.
-12-
(l) Termination. It is contemplated by the parties hereto that
from time to time there may be no outstanding Indebtedness, but
notwithstanding such occurrences, this Agreement shall remain
valid and shall be in full force and effect as to subsequent
outstanding Indebtedness. Upon (i) the satisfaction in full of
the Indebtedness, (ii) the termination or expiration of any
commitment of Secured Party to extend credit to Debtor, (iii)
written request for the termination hereof delivered by Debtor to
Secured Party, and (iv) written release or termination delivered
by Secured Party to Debtor, this Agreement and the security
interests created hereby shall terminate. Upon termination of
this Agreement and Debtor's written request, Secured Party will,
at Debtor's sole cost and expense, return to Debtor such of the
Collateral as shall not have been sold or otherwise disposed of
or applied pursuant to the terms hereof and execute and deliver
to Debtor such documents as Debtor shall reasonably request to
evidence such termination.
(m) Cumulative Rights. All rights and remedies of Secured Party
hereunder are cumulative of each other and of every other right
or remedy which Secured Party may otherwise have at law or in
equity or under any of the other Loan Documents, and the exercise
of one or more of such rights or remedies shall not prejudice or
impair the concurrent or subsequent exercise of any other rights
or remedies.
(n) Gender and Number. Within this Agreement, words of any
gender shall be held and construed to include the other gender,
and words in the singular number shall be held and construed to
include the plural and words in the plural number shall be held
and construed to include the singular, unless in each instance
the context requires otherwise.
(o) Descriptive Headings. The headings in this Agreement are
for convenience only and shall in no way enlarge, limit or define
the scope or meaning of the various and several provisions
hereof.
[Signature Page Follows]
-13-
EXECUTED as of the date first written above.
Debtor's Address: DEBTOR:
_____________________________
_____________________________ TEMTEX INDUSTRIES, INC.
_____________________________
_____________________________
By:_____________________
Name:___________________
Title:__________________
Secured Party's Address: SECURED PARTY:
____________________________
____________________________
___________________________ __________________________
▇▇▇▇▇ ▇. Upfield
-14-
EXHIBIT A
TO
SECURITY AGREEMENT
Exhibit A-1 ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Exhibit A-2 ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Exhibit A-3 ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇