Document:

exv10w1

 

EXHIBIT
10.1

MODIFICATION, RENEWAL AND EXTENSION AGREEMENT

     THIS MODIFICATION, RENEWAL AND EXTENSION AGREEMENT (“Agreement”) is entered into
effective as of the 31st day of October, 2005, by and between THE FROST NATIONAL BANK, a
national banking association (“Lender”), and CRAFTMADE INTERNATIONAL, INC., a Delaware
corporation (“Borrower”).

R E C I T A L S:

     A.      Lender is the sole owner and holder of that one certain Revolving Promissory Note (the
“$20,000,000.00 Note”), dated November 6, 2001, executed by Borrower and payable to the
order of Lender in the original principal amount of Twenty Million and No/100 Dollars
($20,000,000.00), as modified by a Modification, Renewal and Extension Agreement entered into
October 27, 2003 (the “Modification”).

     B.      Borrower and Lender entered into a Loan Agreement, dated November 6, 2001, as amended by a
First Amendment to Loan Agreement, dated effective as of August 13, 2003, as modified by the
Modification, as further amended by the Second Amendment to Loan Agreement, dated June 14, 2004, as
further amended by a Third Amendment to Loan Agreement, dated February 25, 2005, and as further
amended by the Modification, Renewal and Extension Agreement, dated effective as of May 31, 2005
(the “2005 Modification”) (collectively, the “Loan Agreement”).

     C.      Lender is the sole owner and holder of that one certain Promissory Note (the
“$3,000,000.00 Note”) dated February 25, 2005, executed by Borrower and payable to the
order of Lender in the original principal amount of Three Million and No/100 Dollars
($3,000,000.00), as renewed and extend by a Renewal and Extension Agreement, dated effective
March 31, 2005, and as amended by the 2005 Modification.

     D.      The $20,000,000.00 Note and $3,000,000.00 Note are secured by a Security Agreement dated
November 6, 2001, between Borrower and Lender, covering certain collateral as more particularly
described therein; a Security Agreement dated November 6, 2001, between Trade Source International,
Inc., a Delaware corporation, and Lender, covering certain collateral as more particularly
described therein; a Security Agreement dated November 6, 2001, between Durocraft International,
Inc., a Texas corporation, and Lender, covering certain collateral as more particularly described
therein; and a Security Agreement dated November 6,2001, between Design Trends, LLC, a Delaware
limited liability company, and Lender, covering certain collateral as more particularly described
therein (collectively, the “Security Agreements”). The $20,000,000.00 Note, $3,000,000.00
Note, Loan Agreement, Security Agreements and all modifications, renewals and extensions described
below are hereafter collectively referred to as the “Loan Documents.”

     E.      The $20,000,000.00 Note matured in accordance with its terms as of the date hereof.

	 	 	 
	MODIFICATION, RENEWAL AND EXTENSION AGREEMENT

	 	Page 1 of 6

 

 

     F.      Borrower has requested that Lender modify certain provisions of the Loan Agreement, all as
hereinafter provided, and in consideration thereof Borrower has made certain agreements with Lender
as hereinafter more fully set forth.

     G.      Lender has agreed to such requests, subject to the terms and conditions set forth herein.

     NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged and agreed, Borrower
and Lender hereby agree as follows:

     1.      Acknowledgment of Outstanding Balance. The parties hereto acknowledge that the
outstanding principal balance of the $3,000,000.00 Note as of October 27, 2005 is ZERO AND NO/100
DOLLARS ($0.00) and $3,000,000.00 is available for draw and the outstanding principal balance of
the $20,000,000.00 Note is FIFTEEN MILLION NINE HUNDRED SEVENTY ONE THOUSAND AND NO/100 DOLLARS
($15,971,000.00) and $4,029,000.00 is available for draw.

     2.      Renewal and Extension of Maturity. The $20,000,000.00 Note is hereby renewed and the
maturity of the $20,000,000.00 Note is hereby extended to October 31, 2007.

     3.      Required Payments. From and after the effective date of this Agreement, principal and
interest under the $20,000,000.00 Note shall be due and payable as follows:

Interest only on amounts outstanding hereunder shall be due and payable monthly as
it accrues, on the last day of each and every calendar month, beginning November 30,
2005, and continuing regularly and monthly thereafter until October 31, 2007, when
the entire amount hereof, principal and interest then remaining unpaid, shall be
then due and payable; interest being calculated on the unpaid principal each day
principal is outstanding and all payments made credited to any collection costs and
late charges, to the discharge of the interest accrued and to the reduction of the
principal, in such order as Lender shall determine.

     4.      Loan Agreement. The Loan Agreement is hereby substituted and replaced with an Amended
and Restated Loan Agreement, dated as of the date hereof.

     5.      Usury. No provisions of this Agreement or the Loan Documents shall require the payment
or permit the collection, application or receipt of interest in excess of the maximum permitted by
applicable state or federal law. If any excess of interest in such respect is herein or in any
such other instrument provided for, or shall be adjudicated to be so provided for herein or in any
such instrument, the provisions of this paragraph shall govern, and neither Borrower nor any
endorsers of the $20,000,000.00 Note or $3,000,000.00 Note nor their respective successors, assigns
or personal representatives shall be obligated to pay the amount of such interest to the
extent it is in excess of the amount permitted by applicable law. It is expressly stipulated and
agreed to be the intent of Borrower and Lender to at all times comply with the usury and other laws
relating to the Loan Documents and any subsequent revisions, repeals or judicial interpretations
thereof, to the extent applicable thereto. In the event Lender or other holder of the
$20,000,000.00

	 	 	 
	MODIFICATION, RENEWAL AND EXTENSION AGREEMENT

	 	Page 2 of 6

 

 

Note or $3,000,000.00 Note ever receives, collects or applies as interest any such
excess, such amount which would be excessive interest shall be applied to the reduction of the
unpaid principal balance of the $20,000,000.00 Note or $3,000,000.00 Note and, if upon such
application the principal balance of the $20,000,000.00 Note or $3,000,000.00 Note is paid in full,
any remaining excess shall be forthwith paid to Borrower and the provisions of the Loan Documents
shall immediately be deemed reformed and the amounts thereafter collectible thereunder reduced,
without the necessity of 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 thereunder. In
determining whether or not the interest paid or payable under any specific contingency exceeds the
maximum interest allowed to be charged by applicable law, Borrower and Lender or other holder
hereof shall, to the maximum extent permitted under applicable law, amortize, prorate, allocate and
spread the total amount of interest throughout the entire term of the $20,000,000.00 Note or
$3,000,000.00 Note so that the amount or rate of interest charged for any and all periods of time
during the term of the $20,000,000.00 Note or $3,000,000.00 Note is to the greatest extent possible
less than the maximum amount or rate of interest allowed to be charged by law during the relevant
period of time. Notwithstanding any of the foregoing, if at any time applicable laws shall be
changed so as to permit a higher rate or amount of interest to be charged than that permitted prior
to such change, then unless prohibited by law, references in the $20,000,000.00 Note or
$3,000,000.00 Note to “applicable law” for purposes of determining the maximum interest or rate of
interest that can be charged shall be deemed to refer to such applicable law as so amended to allow
the greater amount or rate of interest.

     6.      Release and Waiver of Claims. In consideration of (i) the modification of certain
provisions of the Note, as herein provided, and (ii) the other benefits received by Borrower
hereunder, Borrower hereby RELEASES, RELINQUISHES and forever DISCHARGES Lender, as well as its
predecessors, successors, assigns, agents, officers, directors, employees and representatives, of
and from any and all claims, demands, actions and causes of action of any and every kind or
character, past or present, which Borrower may have against Lender and its predecessors,
successors, assigns, agents, officers, directors, employees and representatives arising out of or
with respect to (a) any right or power to bring any claim against Lender for usury or to pursue any
cause of action against Lender based on any claim of usury, and (b) any and all transactions
relating to the Loan Documents occurring prior to the date hereof, including any loss, cost or
damage, of any kind or character, arising out of or in any way connected with or in any way
resulting from the acts, actions or omissions of Lender, and its predecessors, successors, assigns,
agents, officers, directors, employees and representatives, including any breach of fiduciary duty,
breach of any duty of fair dealing, breach of confidence, breach of funding commitment, undue
influence, duress, economic coercion, conflict of interest, negligence, bad faith, malpractice,
intentional or negligent infliction of mental distress, tortious interference with contractual
relations, tortious interference with corporate governance or prospective
business advantage, breach of contract, deceptive trade practices, libel, slander or conspiracy,
but in each case only to the extent permitted by applicable law.

     7.      Reaffirmation of Representations, Etc. Borrower hereby reaffirms to Lender each of the
representations, warranties, covenants and agreements of Borrower set forth in the Loan Documents.

	 	 	 
	MODIFICATION, RENEWAL AND EXTENSION AGREEMENT

	 	Page 3 of 6

 

 

     8.      Enforceable Obligations. Borrower hereby ratifies, affirms, reaffirms, acknowledges,
confirms and agrees that the Loan Documents represent valid and enforceable obligations of
Borrower, and Borrower further acknowledges that there are no existing claims, defenses, personal
or otherwise, or rights of setoff whatsoever with respect to the $20,000,000.00 Note and
$3,000,000.00 Note, and Borrower further acknowledges and represents that no event has occurred and
no condition exists which would constitute a default under the Loan Documents or this Agreement,
either with or without notice or lapse of time, or both.

     9.      No Release of Liens. This Agreement in no way acts as a release or relinquishment of
the liens, security interests and rights (the “Liens”) created or evidenced by the Security
Agreements. The Liens are hereby ratified and confirmed by Borrower in all respects and are
extended to secure (i) the principal amount of the $20,000,000.00 Note and $3,000,000.00 Note, (ii)
all interest, charges and other sums payable with respect thereto, and (iii) the performance of all
other obligations under the Security Agreements.

     10.      Additional Renewals and Extensions. Notwithstanding anything to the contrary contained
herein or inferred hereby or in any other instrument executed by Borrower or in any other action or
conduct undertaken by Borrower on or before the date hereof, the agreements, covenants and
provisions contained herein shall constitute the only evidence of Lender’s consent to extend the
terms and provisions of the Loan Documents in the manner set forth herein. No express or implied
consent to any further extensions and/or modifications involving any of the matters set forth in
this Agreement or otherwise, shall be inferred or implied from Lender’s execution of this
Agreement. Further, Lender’s execution of this Agreement shall not constitute a waiver (either
express or implied) of the requirement that any further extensions and/or modifications of the Loan
Documents shall require the express written approval of Lender, no such approval (either express or
implied) having been given as of the date hereof.

     11.      Miscellaneous. (a) As modified hereby, the provisions of the $20,000,000.00 Note and
$3,000,000.00 Note and the Security Agreements shall continue in full force and effect, and the
Borrower acknowledges and reaffirms its liability to Lender thereunder. In the event of any
inconsistency between this Agreement and the terms of the Loan Documents, this Agreement shall
govern.

     (b)      Borrower hereby agrees to pay all costs and expenses incurred by Lender in connection with
the execution and administration of this Agreement and the modification of the Loan Documents
including, but not limited to, all appraisal costs, title insurance costs, legal fees incurred by
Lender and filing fees.

     (c)      Any default by Borrower in the performance of its obligations herein contained shall
constitute a default under the Loan Documents and shall allow Lender to exercise all of its
remedies set forth in the Loan Documents.

     (d)      Lender does not, by its execution of this Agreement, waive any rights it may have against
any person not a party to this Agreement.

	 	 	 
	MODIFICATION, RENEWAL AND EXTENSION AGREEMENT

	 	Page 4 of 6

 

 

     (e)      In case any of the provisions of this Agreement shall for any reason be held to be
invalid, illegal or unenforceable, such invalidity, illegality or unenforceability shall not affect
any other provision hereof, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.

     (f)      This Agreement and the Loan Documents shall be governed and construed according to the
laws of the State of Texas (without regard to any conflict of laws principles) and the applicable
laws of the United States.

     (g)      This Agreement shall be binding upon and inure to the benefit of Lender, Borrower and
their respective successors, assigns and legal representatives.

     (h)      Borrower hereby acknowledges and agrees that it has entered into this Agreement of its own
free will and accord and in accordance with its own judgment after advice of its own legal counsel,
and states that it has not been induced to enter into this Agreement by any statement, act or
representation of any kind or character on the part of the parties hereto, except as expressly set
forth in this Agreement.

     (i)      This Agreement may be executed in multiple counterparts, each of which shall constitute an
original instrument, but all of which shall constitute one and the same agreement.

     (j)      Except as modified herein, all other terms, conditions and provisions of Loan Documents
shall remain in full force and effect as of the date thereof and Borrower acknowledges and
reaffirms its liability to Lender thereunder.

     EXECUTED as of the day and year first above written.

	 	 	 	 	 
	 	BORROWER:

CRAFTMADE INTERNATIONAL, INC.,

a Delaware corporation

 	 
	 	By:  	     /s/ Brad Heimann
 	 
	 	 	Brad Heimann, Executive Vice President 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	LENDER:

THE FROST NATIONAL BANK,

a national banking association

 	 
	 	By:  	     /s/ D. Michael Randall
 	 
	 	 	D. Michael Randall, Senior Vice President 	 
	 	 	 	 
	 

	 	 	 
	MODIFICATION, RENEWAL AND EXTENSION AGREEMENT

	 	Page 5 of 6

 

 

Guarantor Ratification of Agreement

     By executing this Agreement, DUROCRAFT INTERNATIONAL, INC., a Texas corporation; TRADE SOURCE
INTERNATIONAL, INC., a Delaware corporation; DESIGN TRENDS, LLC, a Delaware limited liability
company; and C/D/R INCORPORATED, a Delaware corporation, as Guarantors of the indebtedness
evidenced by the $20,000,000.00 Note and $3,000,000.00 Note, as set forth in Guaranty Agreements
(collectively, the “Guarantys”) dated November 6, 2001, hereby expressly agree (a) to all
of the terms and provisions of this Agreement, (b) to the continuing validity of the Guarantys and
all duties and obligations thereunder, (c) that their liability under the Guarantys shall not be
reduced, altered, limited, lessened or in any way affected by the execution and delivery of this
Agreement by the parties hereto, and (d) that the Guarantys shall remain in full force and effect
and enforceable in accordance with their terms.

	 	 	 	 	 
	 	DUROCRAFT INTERNATIONAL, INC.,

a Texas corporation

 	 
	 	By:  	     /s/ Brad Heimann
 	 
	 	 	Brad Heimann, Secretary 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	TRADE SOURCE INTERNATIONAL, INC.,

a Delaware corporation

 	 
	 	By:  	     /s/ Brad Heimann
 	 
	 	 	Brad Heimann, Secretary 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	DESIGN TRENDS, LLC,

a Delaware limited liability company

 	 
	 	By:  	Craftmade International, Inc.,;nbsp;	 
	 	 	a Delaware corporation, its Manager 	 
	 	 	 	 
	 	By:  	/s/ Brad Heimann 	 
	 	 	Brad Heimann, Executive Vice President 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	C/D/R INCORPORATED,

a Delaware corporation

 	 
	 	By:  	     /s/ Clifford Crimmings
 	 
	 	 	Clifford Crimmings, V.P. Marketing 	 
	 	 	 	 
	 

	 	 	 
	MODIFICATION, RENEWAL AND EXTENSION AGREEMENT

	 	Page 6 of 6exv10w2

 

Exhibit 10.2

AMENDED AND RESTATED LOAN AGREEMENT

Between

	 	 	 	 	 
	CRAFTMADE INTERNATIONAL, INC.

	 	 	 	THE FROST NATIONAL BANK
	650 South Royal Lane

	 	and	 	P.O. Box 1600
	Coppell, Texas 75019
	 	 	 	San Antonio, Texas 78205

October 31, 2005

     THIS AMENDED AND RESTATED LOAN AGREEMENT (the “Loan Agreement”) will serve to set
forth the terms of the financing transactions by and between CRAFTMADE INTERNATIONAL, INC., a
Delaware corporation (“Borrower”), and THE FROST NATIONAL BANK, a national banking
association (“Lender”). Borrower and Lender entered into a Loan Agreement, dated November
6, 2001, as amended by a First Amendment to Loan Agreement, dated effective as of August 13, 2003,
as modified by a Modification, Renewal and Extension Agreement, entered into October 27, 2003, as
further amended by a Second Amendment to Loan Agreement, dated June 14, 2004, as further amended by
a Third Amendment to Loan Agreement, dated February 25, 2005, and as further amended by a
Modification, Renewal and Extension Agreement, dated effective as of May 31, 2005. Lender has
agreed to modify, renew and extend the Borrowing Base Line of Credit (hereinafter defined), the
terms and conditions which are set forth in this Loan Agreement.

          1.      Credit Facilities;Interest Rate Options. Subject to the terms and conditions set
forth in this Loan Agreement and the agreements, instruments and documents evidencing, securing,
governing, guaranteeing and/or pertaining to the Loans, as hereinafter defined (collectively,
together with the Loan Agreement, referred to hereinafter as the “Loan Documents”), Lender
hereby agrees to provide to Borrower the credit facility or facilities hereinbelow (whether one or
more, the “Credit Facilities”):

     (a)     (I)     Borrowing
Base Line of Credit. Subject to the terms and conditions set forth herein, Lender agrees to
lend to Borrower, on a revolving basis from time to time during the period commencing on the date hereof and continuing through the
maturity date of the promissory note evidencing this Credit Facility from time to time, such amounts as Borrower may request
hereunder; provided, however, the total principal amount outstanding at any time shall not exceed the lesser of (i) an amount equal
to the Revolving Borrowing Base (as such term is defined
hereinbelow), or (ii) $20,000,000.00 (the “Borrowing Base
Line of Credit”).
If at any time the aggregate principal amount outstanding under the Borrowing Base Line of Credit shall exceed an amount equal to
the Revolving Borrowing Base (as such term is defined hereinbelow), Borrower agrees to immediately repay to Lender such excess
amount, plus all accrued but unpaid interest thereon. Subject to the terms and conditions hereof, Borrower may borrow, repay and
reborrow hereunder. The sums advanced under the Borrowing Base Line of Credit shall be used for working capital

 

 

The term “Revolving Borrowing Base” shall have the meaning set forth hereinbelow:

An amount equal to 80% of the Borrower’s Eligible Accounts, plus 55% of the Borrower’s
Eligible Inventory minus the outstanding principal balance of the Borrowing Base Advance
Facility (hereinafter defined); provided, however, the outstanding amount
Advanced against Eligible Inventory at any time shall not exceed 50% of total outstanding
Advances (herein so called) under the Borrowing Base Line of Credit.

          (II)      Borrowing Base Advance Facility. Subject to the terms and conditions set
forth herein, Lender agrees to lend to Borrower, on a revolving basis from time to time
during the period commencing on the date hereof and continuing through the maturity date of
the promissory note evidencing this Credit Facility from time to time, an aggregate amount
not to exceed $3,000,000.00 in a single advance or in multiple advances, as may be requested
by Borrower from time to time; provided, however, the total principal amount
outstanding at any time shall not exceed the lesser of (i) an amount equal to the Advancing
Borrowing Base (as such term is defined hereinbelow), or (ii) $3,000,000.00 (the
“Borrowing Base Advance Facility”). All sums advanced under the Borrowing Base
Advance Facility shall be used for inventory purposes.

The term “Advancing Borrowing Base” shall have the meaning set forth hereinbelow:

An amount equal to 80% of the Borrower’s Eligible Accounts, plus 55% of the Borrower’s
Eligible Inventory minus the outstanding principal balance of the Borrowing Base Line of
Credit; provided, however, the outstanding amount Advanced against Eligible
Inventory at any time shall not exceed 50% of total outstanding Advances (herein so called)
under the Borrowing Base Advance Facility.

As used in this Loan Agreement, the term “Borrowing Base” shall have the meaning set forth
hereinbelow:

An amount equal to 80% of the Borrower’s Eligible Accounts, plus 55% of the Borrower’s
Eligible Inventory; provided, however, the outstanding amount Advanced against Eligible
Inventory at any time shall not exceed 50% of total outstanding Advances (herein so called)
under the Borrowing Base Line of Credit (as hereinafter defined).

As used herein, the term “Eligible Accounts” shall mean at anytime, an amount equal
to the aggregate net invoice or ledger amount owing on all trade accounts receivable of
Borrower and any Affiliates for goods sold or leased or services rendered in the ordinary
course of business, in which the Lender has a perfected, first priority lien, after
deducting (without duplication): (i) each such account that is unpaid 60 days or more after
the original invoice date thereof, or, in the case of Lowe’s, 90 days or more after the
original invoice date thereof, (ii) the amount of all discounts, allowances, rebates,
credits and adjustments to such accounts (iii) the amount of all contra accounts, setoffs,
defenses or counterclaims asserted by or available to the account debtors, (iv) all accounts
with

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respect to which goods are placed on consignment or subject to a guaranteed sale or other
terms by reason of which payment by the account debtor may be conditional, (v) all accounts
with respect to which a payment and/or performance bond has been furnished and that portion
of any account for or representing retainage, if any, until all prerequisites to the
immediate payment of retainage have been satisfied, (vi) all accounts owing by account
debtors for which there has been instituted a proceeding in bankruptcy or reorganization
under the United States Bankruptcy Code or other law, whether state or federal, now or
hereafter existing for relief of debtors, (vii) all accounts owing by any Affiliates; (viii)
all accounts in which the account debtor is the United States or any department, agency or
instrumentality of the United States, except to the extent an acknowledgment of assignment
to Lender of such account in compliance with the Federal Assignment of Claims Act and other
applicable laws has been received by Lender, (ix) all accounts due by any account debtor
whose principal place of business is located outside the United States of America and its
territories, (x) all accounts subject to any provision prohibiting assignment or requiring
notice of or consent to such assignment, (xi) that portion of all account balances owing by
any single account debtor which exceeds 25% of the aggregate of all accounts otherwise
deemed eligible hereunder which are owing by all account debtors, other than Lowe’s, and
(xii) any other accounts deemed unacceptable by Lender in its sole and absolute discretion;
provided, however, if more than 20% of the then balance owing by any single account debtor
does not qualify as an Eligible Account under the foregoing provisions, then the aggregate
amount of all accounts owing by such account debtor shall be excluded from Eligible
Accounts.

As used herein, the term “Eligible Inventory” shall mean as of any date, the
aggregate value of all inventory of raw materials and finished goods (excluding work in
progress and packaging materials, supplies and any advertising costs capitalized into
inventory) then owned by Borrower and any Affiliates and held for sale, lease or other
disposition in the ordinary course of its business, in which Lender has a first priority
lien, excluding (i) inventory which is damaged, defective, obsolete or otherwise unsaleable
in the ordinary course of business, (ii) inventory which has been returned or rejected, and
(iii) inventory subject to any consignment arrangement with any other person or entity. For
purposes of this definition, Eligible Inventory shall be valued at the lower of cost
(excluding the cost of labor) or market value.

All Advances under the Credit Facilities shall be collectively called the “Loans”. Lender
reserves the right to require Borrower to give Lender not less than one (1) business day
prior notice of each requested Advance under the Credit Facilities, specifying (i) the
aggregate amount of such requested Advance, (ii) the requested date of such Advance, and
(iii) the purpose of such Advance, with such Advances to be requested in a form satisfactory
to Lender.

     (b)      Interest Rate. The interest to be paid by Borrower and collected by Lender
on each Advance shall be at one of the following rates as requested by Borrower:

3

 

     The lesser of (x) a rate equal to the London Interbank Offered Rate (as defined
below) plus the following percentage based on Borrower’s “Debt to Worth Ratio” set
forth in Paragraph 9(a) below:

	 	 	 
	Percentage	 	Debt to Worth Ratio
	2.75%
	 	>3.00 to 1.00
	2.25%
	 	>=2.50 to 1.00 or <=3.00 to 1.00
	1.75%
	 	>2.00 to 1.00 or <2.50 to 1.00
	1.50%
	 	<=2.00 to 1.00

as adjusted provided below, or (y) the highest rate permitted by applicable law, but
in no event shall interest exceed the maximum interest permitted by law (“Libor
Rate”). Such rate will be adjusted based upon Lender’s receipt of Borrower’s
Compliance Certificate as provided in Section 10(c) of the Loan Agreement, with the
“Debt to Worth Ratio” calculation. If Borrower fails to provide the Compliance
Certificate as provided in Section 10(c) then the percentage will be 2.75% until the
delivery of the next quarter’s Compliance Certificate.

As used herein, the “London Interbank Offered Rate” shall mean with respect to any
Interest Period (defined below), the rate of interest per annum (rounded to the
nearest 1/16 of 1%—and if the rate is equidistant to the lower and higher nearest
1/16 of 1%, rounded upwards to the nearest 1/16 of 1%) quoted in U.S. Dollars by the
British Bankers’ Association at approximately 11:00 a.m. London time on the first
day of such Interest Period on which deposits in immediately available funds are
offered to first class banks in the interbank eurodollar market (as determined by
Lender in its sole discretion), such deposits being for a one (1) month period
(“Interest Period”), and in amounts equal to or comparable to the amount of
the Advance. In the event that the London Interbank Offered Rate is no longer
published or reported as specified above, then the Lender shall use the rate of
interest published in The Wall Street Journal (Central Edition) in the
“Money Rates” section as the “London Interbank Offered Rates (LIBOR)” for a period
of time equal or comparable to the applicable Interest Period, as of five (5)
Business Days preceding the date of the Advance. Each determination by Lender of
the London Interbank Offered Rate shall be conclusive and binding, absent manifest
error, and may be computed using any reasonable averaging and attribution method.

     (c)      Increased Cost. If any governmental agency, court, central bank or
comparable authority shall impose any taxation, required level of reserves (except reserve
requirements for certificates of deposit), deposits, insurance or capital, or similar
requirements against assets, deposits or credit extended by Lender or shall impose on Lender
or the eurodollar market any other condition affecting Advances, and the result of the
foregoing is to increase the cost of Lender making or maintaining Advances or reduce

4

 

any sums received or receivable by Lender under this Loan Agreement or the Notes by a
material amount as determined by Lender in its sole discretion, then Borrower shall
reimburse Lender for such increased costs or reduced sums upon demand. Nothing herein will
be construed to require Borrower to pay any interest, fees, costs or charges greater than
the highest rate permitted by law.

     2.      Promissory Notes. The Loans shall be evidenced by one or more promissory notes
(whether one or more, together with any renewals, extensions and increases thereof, the
“Notes”) duly executed by Borrower and payable to the order of Lender, in form and
substance acceptable to Lender. Interest on the Notes shall accrue at the rate set forth herein.
The principal of and interest on the Notes shall be due and payable in accordance with the terms
and conditions set forth in the Notes and in this Loan Agreement.

     3.      Collateral. As collateral and security for the indebtedness evidenced by the Notes
and any and all other indebtedness or obligations from time to time owing by Borrower to Lender,
Borrower, Trade Source International, Inc., Durocraft International, Inc. and Design Trends, LLC
(together hereinafter referred to as “Pledgors”) shall grant, and hereby grants, to Lender, its
successors and assigns, a first and prior lien and security interest in and to the property
described hereinbelow, together with any and all PRODUCTS AND PROCEEDS thereof (the
“Collateral”):

     (a)      All present and future accounts, (including any right to payment for goods sold or
services rendered arising out of the sale or delivery of personal property or work done or
labor performed by Pledgors), now or hereafter owned, held, or acquired by Borrower and its
Affiliates (as hereinafter defined), together with any and all books of account, customer
lists and other records relating in any way to the foregoing.

     (b)      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 service, in whole or
in part, by Pledgors wherever located.

The term “Collateral” shall also include all records and data relating to any of the
foregoing (including, without limitation, any computer software on which such records and data may
be located). Pledgors shall execute such security agreements, assignments, deeds of trust and
other agreements and documents as Lender shall deem appropriate and otherwise require from time to
time to more fully create and perfect Lender’s lien and security interests in the Collateral.

     4.      Guarantors. Durocraft International, Inc., a Texas corporation; Trade Source
International, Inc., a Delaware corporation; Design Trends, LLC, a Delaware limited liability
company; and C/D/R Incorporated, a Delaware corporation, as guarantors of the indebtedness
evidenced by the Notes, as set forth in Guaranty Agreements (collectively, the “Guarantys”)
dated November 6, 2001, hereby expressly agree (a) to all of the terms and provisions of this Loan
Agreement, (b) to the continuing validity of the Guarantys and all duties and obligations
thereunder, (c) that their liability under the Guarantys shall not be reduced, altered, limited,
lessened or in any

5

 

way affected by the execution and delivery of this Agreement by the parties
hereto, and (d) that the Guarantys shall remain in full force and effect and enforceable in
accordance with their terms.

     5.      Representations and Warranties. Borrower hereby represents and warrants, and upon
each request for an Advance under the Credit Facilities further represents and warrants, to Lender
as follows:

     (a)      Existence. Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and all other states where it is
doing business, and has all requisite power and authority to execute and deliver the Loan
Documents.

     (b)      Binding Obligations. The execution, delivery, and performance of this Loan
Agreement and all of the other Loan Documents by Borrower have been duly authorized by all
necessary action by Borrower, and constitute legal, valid and binding obligations of
Borrower, 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)      No Consent. The execution, delivery and performance of this Loan Agreement
and the other Loan Documents, and the consummation of the transactions contemplated hereby
and thereby, do not (i) conflict with, result in a violation of, or constitute a default
under (A) any provision of its articles or certificate of incorporation or bylaws, if
Borrower is a corporation, or its partnership agreement, if Borrower is a partnership, or
any agreement or other instrument binding upon Borrower, or (B) any law, governmental
regulation, court decree or order applicable to Borrower, or (ii) require the consent,
approval or authorization of any third party.

     (d)      Financial Condition. Each financial statement of Borrower supplied to the
Lender truly discloses and fairly presents Borrower’s financial condition as of the date of
each such statement. There has been no material adverse change in such financial condition
or results of operations of Borrower subsequent to the date of the most recent financial
statement supplied to Lender.

     (e)      Litigation. There are no actions, suits or proceedings, pending or, to the
knowledge of Borrower, threatened against or affecting Borrower or the properties of
Borrower, before any court or governmental department, commission or board, which, if
determined adversely to Borrower, would have a material adverse effect on the financial
condition, properties, or operations of Borrower.

     (f)      Taxes; Governmental Charges. Borrower has filed all federal, state and
local tax reports and returns required by any law or regulation to be filed by it and has
either duly paid all taxes, duties and charges indicated due on the basis of such returns

6

 

and reports, or made adequate provision for the payment thereof, and the assessment of any
material amount of additional taxes in excess of those paid and reported is not
reasonably expected.

     6.      Conditions Precedent to Advances. Lender’s obligation to make any Advance under
this Loan Agreement and the other Loan Documents shall be subject to the conditions precedent that,
as of the date of such Advance and after giving effect thereto (i) all representations and
warranties made to Lender in this Loan Agreement and the other Loan Documents shall be true and
correct, as of and as if made on such date, (ii) no material adverse change in the financial
condition of Borrower since the effective date of the most recent financial statements furnished to
Lender by Borrower shall have occurred and be continuing, (iii) no event has occurred and is
continuing, or would result from the requested Advance, which with notice or lapse of time, or
both, would constitute an Event of Default (as hereinafter defined), and (iv) Lender’s receipt of
all Loan Documents appropriately executed by Borrower and all other proper parties.

     7.      Affirmative Covenants. Until (i) the Notes and all other obligations and
liabilities of Borrower under this Loan Agreement and the other Loan Documents are fully paid and
satisfied, and (ii) the Lender has no further commitment to lend hereunder, Borrower agrees and
covenants that it will, unless Lender shall otherwise consent in writing:

     (a)      Accounts and Records. Maintain its books and records in accordance with
generally accepted accounting principles.

     (b)      Right of Inspection. Permit Lender to visit its properties and
installations and to examine, audit and make and take away copies or reproductions of
Borrower’s books and records, at all reasonable times.

     (c)      Right to Additional Information. Furnish Lender with such additional
information and statements, lists of assets and liabilities, tax returns, and other reports
with respect to Borrower’s financial condition and business operations as Lender may request
from time to time.

     (d)      Compliance with Laws. Conduct its business in an orderly and efficient
manner consistent with good business practices, and perform and comply with all statutes,
rules, regulations and/or ordinances imposed by any governmental unit upon Borrower and its
businesses, operations and properties (including without limitation, all applicable
environmental statutes, rules, regulations and ordinances).

     (e)      Taxes. Pay and discharge when due all of its indebtedness and obligations,
including without limitation, all assessments, taxes, governmental charges, levies and
liens, of every kind and nature, imposed upon Borrower or its properties, income, or
profits, prior to the date on which penalties would attach, and all lawful claims that, if
unpaid, might become a lien or charge upon any of Borrower’s properties, income,

7

 

or profits; provided, however, Borrower will not be required to pay and discharge any such
assessment, tax, charge, levy, lien or claim so long as (i) the legality of the same
shall be contested in good faith by appropriate judicial, administrative or other legal
proceedings, and (ii) Borrower shall have established on its books adequate reserves with
respect to such contested assessment, tax, charge, levy, lien or claim in accordance with
generally accepted accounting principles, consistently applied.

     (f)      Insurance. Maintain insurance, including but not limited to, fire
insurance, comprehensive property damage, public liability, worker’s compensation, business
interruption and other insurance deemed necessary or otherwise required by Lender.

     (g)      Notice of Indebtedness. Promptly inform Lender of the creation, incurrence
or assumption by Borrower of any actual or contingent liabilities not permitted under this
Loan Agreement.

     (h)      Notice of Litigation. Promptly after the commencement thereof, notify
Lender of all actions, suits and proceedings before any court or any governmental
department, commission or board affecting Borrower or any of its properties.

     (i)      Notice of Material Adverse Change. Promptly inform Lender of (i) any and
all material adverse changes in Borrower’s financial condition, and (ii) all claims made
against Borrower which could materially affect the financial condition of Borrower.

     (j)      Additional Documentation. Execute and deliver, or cause to be executed and
delivered, any and all other agreements, instruments or documents which Lender may
reasonably request in order to give effect to the transactions contemplated under this Loan
Agreement and the other Loan Documents.

     8.      Negative Covenants. Until (i) the Notes and all other obligations and liabilities
of Borrower under this Loan Agreement and the other Loan Documents are fully paid and satisfied,
and (ii) the Lender has no further commitment to lend hereunder, Borrower will not, without the
prior written consent of Lender:

     (a)      Nature of Business. Make any material change in the nature of its business
as carried on as of the date hereof.

     (b)      Liquidations, Mergers, Consolidations. Liquidate, merge or consolidate with
or into any other entity.

     (c)      Sale of Assets. Sell, transfer or otherwise dispose of any of its assets
or properties, other than in the ordinary course of business.

     (d)      Liens. Create or incur any lien or encumbrance on any of its assets, other
than (i) liens and security interests securing indebtedness owing to Lender, (ii) liens for

8

 

taxes, assessments or similar charges that are (1) not yet due or (2) being contested in
good faith by appropriate proceedings and for which Borrower has established adequate
reserves, (iii) liens and security interests existing as of the date hereof which have been
disclosed to and approved by Lender in writing, and (iv) purchase money security interests
covering assets other than the Collateral incurred in the normal course of business.

     (e)      Indebtedness. Create, incur or assume any indebtedness for borrowed money
or issue or assume any other note, debenture, bond or other evidences of indebtedness, or
guarantee any such indebtedness or such evidences of indebtedness of others, other than (i)
borrowings from Lender, (ii) borrowings outstanding on the date hereof and disclosed in
writing to Lender, and (iii) borrowings representing trade debt incurred in the normal
course of business.

     (f)      Change in Management. Permit a change in the senior management of
Borrower.

     (g)      Loans. Make any loans to any person or entity except for (i) loans to
Affiliates, and (ii) loans to officers and directors of Borrower not to exceed $100,000.00
in the aggregate at any one time.

     (h)      Transactions with Affiliates. Enter into any transaction, including,
without limitation, the purchase, sale or exchange of property or the rendering of any
service, with any Affiliate (as hereinafter defined) of Borrower, except in the ordinary
course of and pursuant to the reasonable requirements of Borrower’s business and upon fair
and reasonable terms no less favorable to Borrower than would be obtained in a comparable
arm’s-length transaction with a person or entity not an Affiliate of Borrower. As used in
this Loan Agreement, the term “Affiliate” means (i) any individual or entity
directly or indirectly controlling, controlled by, or under common control with, another
individual or entity, and (ii) Design Trends, LLC.

     9.      Financial Covenants. Until (i) the Notes and all other obligations and liabilities
of Borrower under this Loan Agreement and the other Loan Documents are fully paid and satisfied,
and (ii) the Lender has no further commitment to lend hereunder, Borrower will maintain the
following financial covenants on a consolidated basis:

     (a)      Debt to Worth Ratio. Borrower will maintain, at all times, a ratio of (a)
total liabilities (excluding any Subordinated Debt), to (b) Tangible Net Worth of not
greater than 3.5 to 1.0 beginning September 30, 2005; and 3.0 to 1.0 beginning December 31,
2005 and thereafter, tested quarterly. If Borrower’s Debt to Worth Ratio exceeds 3.0 to 1.0
then Borrower will not make any stock repurchases.

     (b)      Fixed Charge Coverage Ratio. Borrower will maintain, as of the end of each
fiscal quarter, a ratio of (a) net income after taxes plus depreciation, amortization,

9

 

other non-cash expenses and interest expense for the 4 most recently completed quarters ending
with such fiscal quarter to (b) interest expense, dividends and capital expenditures
and current portion of long-term debt for such 4 quarter period, of not less than 1.25
to 1.0.

As used herein, the term “Tangible Net Worth” means, as of any date, Borrower’s total
assets excluding all intangible assets, less total liabilities excluding any Subordinated
Debt. As used herein, the term “Subordinated Debt” means any indebtedness owing by
Borrower which has been subordinated by written agreement to all indebtedness now or hereafter
owing by Borrower to Lender, such agreement to be in form and substance acceptable to Lender.
Unless otherwise specified, all accounting and financial terms and covenants set forth above are to
be determined according to generally accepted accounting principles, consistently applied.

     10.      Reporting Requirements. Until (i) the Notes and all other obligations and
liabilities of Borrower under this Loan Agreement and the other Loan Documents are fully paid and
satisfied, and (ii) the Lender has no further commitment to lend hereunder, Borrower will, unless
Lender shall otherwise consent in writing, furnish to Lender on a consolidated basis:

     (a)      Interim Financial Statements. As soon as available, and in any event
within forty five (45) days after the end of each quarter of each fiscal year of Borrower, a
balance sheet and income statement of Borrower as of the end of such fiscal quarter, all in
form and substance and in reasonable detail satisfactory to Lender and duly certified
(subject to year-end review adjustments) by the President and/or Chief Financial Officer of
Borrower (i) as being true and correct in all material aspects to the best of his or her
knowledge and (ii) as having been prepared in accordance with generally accepted accounting
principles, consistently applied.

     (b)      Annual Financial Statements. As soon as available and in any event within
ninety (90) days after the end of each fiscal year of Borrower, a balance sheet and income
statement of Borrower as of the end of such fiscal year, in each case audited and
unqualified by independent public accountants of recognized standing acceptable to Lender.

     (c)      Compliance Certificate. A certificate signed by the Chief Financial
Officer of Borrower within forty five (45) days after the end of each quarter of each fiscal
year of Borrower, stating that Borrower is in full compliance with all of its obligations
under this Loan Agreement and all other Loan Documents and is not in default of any term or
provisions hereof or thereof, and demonstrating compliance with all financial ratios and
covenants set forth in the Loan Agreement.

     (d)      Borrowing Base Report. A borrowing base report for the Revolving Borrowing
Base and the Advancing Borrowing Base signed by the Chief Financial Officer of Borrower
within thirty (30) days after the end of each month of each fiscal year, in form and detail
satisfactory to Lender.

10

 

     (e)      Accounts Aging. An account receivable aging report within thirty (30) days
after the end of each month of each fiscal year, in form and detail satisfactory to Lender.

     (f)      10K Filings. Borrower’s annual 10K filing with the Securities and Exchange
Commission within (30) days after such filing.

     (g)      10Q Filings. Borrower’s quarterly 10Q filing with the Securities and
Exchange Commission within forty five (45) days after the end of each quarter of each fiscal
year of Borrower.

     (h)      Additional Information. Such other additional financial information as
Lender may request from time to time, including, without, limitation, operating statements
on any assets listed on Borrower’s financial statement.

     11.      Events of Default. Each of the following shall constitute an “Event of
Default” under this Loan Agreement:

     (a)      The failure, refusal or neglect of Borrower to pay when due any part of the
principal of, or interest on, the Notes or any other indebtedness or obligations owing to
Lender by Borrower from time to time.

     (b)      The failure of Borrower or any Obligated Party (as defined below) to timely and
properly observe, keep or perform any covenant, agreement, warranty or condition required
herein or in any of the other Loan Documents.

     (c)      The occurrence of an event of default under any of the other Loan Documents or
under any other agreement now existing or hereafter arising between Lender and Borrower.

     (d)      Any representation contained herein or in any of the other Loan Documents made by
Borrower or any Obligated Party is false or misleading in any material respect.

     (e)      The occurrence of any event which permits the acceleration of the maturity of any
indebtedness owing by Borrower to any third party under any agreement or understanding.

     (f)      If Borrower 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, either in a
proceeding brought by such party or in a proceeding brought against such party

11

 

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 thirty (30) 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.

     (g)      If Borrower or any Obligated Party is an entity, the liquidation, dissolution,
merger or consolidation of any such entity or, if Borrower or any Obligated Party is an
individual, the death or legal incapacity of any such individual.

     (h)      The entry of any judgment against Borrower or the issuance or entry of any
attachment or other lien against any of the property of Borrower for an amount in excess of
$250,00.00, if undischarged, unbonded or undismissed within thirty (30) days after such
entry.

Nothing contained in this Loan Agreement shall be construed to limit the events of default
enumerated in any of the other Loan Documents and all such events of default shall be cumulative.
The term “Obligated Party”, as used herein, shall mean any party other than Borrower who
secures, guarantees and/or is otherwise obligated to pay all or any portion of the indebtedness
evidenced by the Notes.

     12.      Remedies. Upon the occurrence of any one or more of the foregoing Events of
Default, and upon the expiration of ten (10) days following the giving of notice in accordance with
Section 16 hereof with respect to any Event of Default described in subparagraph 11(a)
above (provided, however, that no more than two (2) such notices will be given during any calendar
year) or upon the expiration of thirty (30) days following the giving of notice by Lender to
Borrower in accordance with Section 16 hereof, with respect to any Event of Default
described in any of subparagraphs 11(b) through (e), the entire unpaid balance of principal of the
Notes, together with all accrued but unpaid interest thereon, and all other indebtedness owing to
Lender by Borrower at such time shall, at the option of Lender, become immediately due and payable
without further notice, demand, presentation, notice of dishonor, notice of intent to accelerate,
notice of acceleration, protest or notice of protest of any kind, all of which are expressly waived
by Borrower, and (b) Lender may, at its option, cease further advances under any of the Notes. All
rights and remedies of Lender set forth in this Loan Agreement and in any of the other Loan
Documents may also be exercised by Lender, at its option to be exercised in its sole discretion,
upon the occurrence of an Event of Default.

12

 

     13.      Rights Cumulative. All rights of Lender under the terms of this Loan Agreement
shall be cumulative of, and in addition to, the rights of Lender under any and all other agreements
between Borrower and Lender (including, but not limited to, the other Loan Documents), and not in
substitution or diminution of any rights now or hereafter held by Lender under the terms of any
other agreement.

     14.      Waiver and Agreement. Neither the failure nor any delay on the part of Lender to
exercise any right, power or privilege herein or under any of the other Loan Documents shall
operate as a waiver thereof, nor shall any single or partial exercise of such right, power or
privilege preclude any other or further exercise thereof or the exercise of any other right, power
or privilege. No waiver of any provision in this Loan Agreement or in any of the other Loan
Documents and no departure by Borrower therefrom shall be effective unless the same shall be in
writing and signed by Lender, and then shall be effective only in the specific instance and for the
purpose for which given and to the extent specified in such writing. No modification or amendment
to this Loan Agreement or to any of the other Loan Documents shall be valid or effective unless the
same is signed by the party against whom it is sought to be enforced.

     15.      Benefits. This Loan Agreement shall be binding upon and inure to the benefit of
Lender and Borrower, and their respective successors and assigns, provided, however, that Borrower
may not, without the prior written consent of Lender, assign any rights, powers, duties or
obligations under this Loan Agreement or any of the other Loan Documents.

     16.      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 first page hereof and shall be deemed to have been
received either, in the case of personal delivery, as of 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.

     17.      Construction, Venue. This Loan Agreement and the other Loan Documents have been
executed and delivered in the State of Texas, shall be governed by and construed in accordance with
the laws of the State of Texas, and shall be performable by the parties hereto in the county in
Texas where the Lender’s address set forth on the first page hereof is located. In the event of a
dispute involving this Loan Agreement or any other instruments executed in connection herewith, the
undersigned irrevocably agrees that venue for such dispute shall lie in any court of competent
jurisdiction in Tarrant County, Texas

13

 

     18.      Invalid Provisions. If any provision of this Loan Agreement or any of the other
Loan Documents is held to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and the remaining provisions of this Loan Agreement or any of
the other Loan Documents shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance.

     19.      Expenses. Borrower shall pay all costs and expenses (including, without
limitation, reasonable attorneys’ fees) in connection with (i) any action required in the course of
administration of the indebtedness and obligations evidenced by the Loan Documents, and (ii) any
action in the enforcement of Lender’s rights upon the occurrence of Event of Default.

     20.      Participation of the Loans. Borrower agrees that Lender may, at its option, sell
interests in the Loans and its rights under this Loan Agreement to a financial institution or
institutions and, in connection with each such sale, Lender may disclose any financial and other
information available to Lender concerning Borrower to each prospective purchaser.

     21.      Conflicts. In the event any term or provision hereof is inconsistent with or
conflicts with any provision of the other Loan Documents, the terms and provisions contained in
this Loan Agreement shall be controlling.

     22.      Counterparts. This Loan Agreement may be separately executed in any number of
counterparts, each of which shall be an original, but all of which, taken together, shall be deemed
to constitute one and the same instrument.

     23.      Facsimile Documents and Signatures. For purposes of negotiating and finalizing
this Loan Agreement, if this document or any document executed in connection with it is transmitted
by facsimile machine (“fax”), it shall be treated for all purposes as an original document.
Additionally, the signature of any party on this document transmitted by way of a facsimile
machine shall be considered for all purposes as an original signature. Any such faxed document
shall be considered to have the same binding legal effect as an original document. At the request
of any party, any faxed document shall be re-executed by each signatory party in an original form.

If the foregoing correctly sets forth our mutual agreement, please so acknowledge by signing and
returning this Loan Agreement to the undersigned.

NOTICE TO COMPLY WITH STATE LAW

For the purpose of this Notice, the term “WRITTEN AGREEMENT” shall include the document set
forth above, together with each and every other document relating to and/or securing the same loan
transaction, regardless of the date of execution.

14

 

THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

	 	 	 	 	 	 	 	 
	BORROWER

 	 	LENDER:

 	 
	CRAFTMADE INTERNATIONAL, INC.,
	 	THE FROST NATIONAL BANK,
	 
	a Delaware corporation
	 	a national banking association
	 
	 
	By:
	 	/s/ James R. Ridings	 	By:	 	/s/ D. Michael Randall	 
	 
	 	 	 	 	 	 	 
	 
	 	James R. Ridings, President	 	 	 	D. Michael Randall, Senior Vice President	 
	 

	 	 	 	 	 
	GUARANTORS

 

DUROCRAFT INTERNATIONAL, INC.,

a Texas corporation

 	 	 
	By:  	/s/ Brad Heimann
 	 	 
	 	Brad Heimann, Secretary 	 	 
	 	 	 	 
	 

	 	 	 	 	 
	TRADE SOURCE INTERNATIONAL, INC.,

a Delaware corporation

 	 	 
	By:  	/s/ Brad Heimann 	 	 
	 	Brad Heimann, Secretary 	 	 
	 	 	 	 
	 

	 	 	 	 	 
	DESIGN TRENDS, LLC,

a Delaware limited liability company

 	 	 
	By:  	Craftmade International, Inc., 

a Delaware corporation, its Manager 	 	 
	 	 	 	 
	By:  	/s/ Brad Heimann
 	 	 
	 	Brad Heimann, Executive Vice President 	 	 
	 	 	 	 
	 

	 	 	 	 	 
	C/D/R INCORPORATED,

a Delaware corporation

 	 	 
	By:  	/s/ Clifford Crimmings
 	 	 
	 	Clifford Crimmings, V.P. Marketing 	 	 
	 	 	 	 
	 

15

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