Document:

exv10w3

 

Exhibit 10.3

AZLIFE Loan No. 10074

GUARANTY AGREEMENT

     This
GUARANTY AGREEMENT (this “Guaranty”) is made as of
the 14th day of
November, 2007, by CRAFTMADE INTERNATIONAL, INC., a Delaware corporation, whose address is 650 S.
Royal Lane, Coppell, Texas 75019 (“Principal of Borrower”), in favor of ALLIANZ LIFE
INSURANCE COMPANY OF NORTH AMERICA, a Minnesota corporation (“Lender”).

RECITALS

     A. In order to evidence a loan (the “Loan”) advanced by Lender, CM REAL
ESTATE, LLC, a Texas limited liability company (“Borrower”), has executed that certain
Promissory Note of even date herewith (the “Note”) payable to the order of Lender in
the
principal amount of Eleven Million and No/100 Dollars ($11,000,000.00), together with interest
on the balance thereof remaining from time to time unpaid at the rate or rates specified
therein.

     B. The Note is secured by a Deed of Trust, Mortgage and Security Agreement of
even date herewith (the “Deed of Trust”) executed by Borrower to Patrick M. Arnold, as
Trustee,
for the benefit of Lender, evidencing a lien on, among other property, certain real property
in
Dallas County, Texas, described therein (such real property and the other property encumbered
by the Deed of Trust being herein referred to collectively as the “Mortgaged
Property”).

     C. The Note is further secured by, inter alia, an Assignment of Rents and
Leases of
even date herewith (the “Assignment of Leases”) executed by Borrower, covering certain
leases
of the Mortgaged Property (the Note, the Deed of Trust, the Assignment of Leases, and all
other
documents evidencing or securing the indebtedness evidenced by the Note being herein referred
to collectively as the “Loan Documents”).

     D. Principal of Borrower is the owner of a direct or indirect interest in Borrower, and
Principal of Borrower will directly benefit from Lender’s making to Borrower the loan
evidenced by the Note.

     Any capitalized term used and not defined in this Guaranty shall have the meaning given to
such term in the Deed of Trust. This Guaranty is one of the Loan Documents described in the Deed
of Trust.

STATEMENT OF AGREEMENTS

     For good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and as a material inducement to Lender to extend credit to Borrower, Principal of
Borrower hereby guarantees to Lender the prompt and full payment and performance of the
indebtedness and obligations described below in this Guaranty (collectively called the “Guaranteed
Obligations”), this Guaranty being upon the following terms and conditions:

     1. Guaranty of Payment. Principal of Borrower hereby unconditionally and irrevocably
guarantees to Lender the punctual payment when due, whether by lapse of time, by acceleration of
maturity, or otherwise, of all principal, interest (including interest accruing after the
commencement of any bankruptcy or insolvency proceeding by or against Borrower, whether or not
allowed in such proceeding), fees, late charges, costs, expenses, indemnification

GUARANTY AGREEMENT — Page 1

 

 

indebtedness, and other sums of money now or hereafter due and owing, or which Borrower is
obligated to pay, pursuant to (a) the terms of the Note, the Deed of Trust, or any other Loan
Documents, and any indemnifications contained in the Loan Documents, now or hereafter existing,
and (b) all renewals, extensions, refinancings, modifications, supplements or amendments of such
indebtedness, or any of the Loan Documents, or any part thereof (the indebtedness described in
clauses (a) and (b) above in this Section 1 is herein collectively called the
“Indebtedness”). This Guaranty covers the Indebtedness, whether presently outstanding or
arising subsequent to the date hereof, including all amounts advanced by Lender in stages or
installments. The guaranty of Principal of Borrower as set forth in this Section 1 is a
continuing guaranty of payment and not a guaranty of collection.

     2. Guaranty
of Performance. Principal of Borrower additionally hereby
unconditionally and irrevocably guarantees to Lender the timely performance of all other
obligations of Borrower under all of the Loan Documents, including, without limiting the
generality of the foregoing, that Borrower will duly and punctually perform and observe all
other
terms, covenants, and conditions of the Note, the Deed of Trust or any other Loan Document,
whether according to the present terms thereof, at any earlier or accelerated date or dates as
provided therein, or pursuant to any extension of time or to any change or changes in the
terms,
covenants, or conditions thereof now or hereafter made or granted. If any of such obligations
of
Borrower are not complied with, in any respect whatsoever, and without the necessity of any
notice from Lender to Principal of Borrower, Principal of Borrower agrees to indemnify and
hold
Lender harmless from any and all loss, cost, liability or expense that Lender may suffer by
reason of any such non-compliance. The obligations and liability of Principal of Borrower
under
this Section 2 shall not be limited or restricted by the existence of (or any terms
of) the guaranty
of payment under Section 1.

     3. Primary
Liability of Principal of Borrower.

     (a) This Guaranty is an absolute, irrevocable and unconditional guaranty of payment
and performance, and Principal of Borrower shall be liable for the payment and performance of
the Guaranteed Obligations as a primary obligor. This Guaranty shall be effective as a waiver
of,
and Principal of Borrower hereby expressly waives, any right to which Principal of Borrower
may otherwise have been entitled, whether existing under statute, at law or in equity, to
require
Lender to take prior recourse or proceedings against any collateral, security or Person (as
hereafter defined). It shall not be necessary for Lender, in order to enforce such payment
or
performance by Principal of Borrower, first to institute suit or pursue or exhaust any rights
or
remedies against Borrower or other Person liable on such indebtedness or for such performance,
or to enforce any rights against any security given to secure such indebtedness or
performance,
or to join Borrower or any other Person liable for the payment or performance of the
Guaranteed
Obligations or any part thereof in any action to enforce this Guaranty, or to resort to any
other
means of obtaining payment or performance of the Guaranteed Obligations; provided,
however, that nothing herein contained shall prevent Lender from suing on the Note or foreclosing the
Mortgaged Property or exercising any other right under the Loan Documents.

     (b) Suit may be brought or demand may be made against Borrower or against any or
all parties who have signed this Guaranty or any other guaranty covering all or any part of
the

GUARANTY AGREEMENT — Page 2

 

 

Guaranteed Obligations, or against any one or more of them, separately or together, without
impairing the rights of Lender against any party hereto.

  
   4. Certain Agreements and Waivers
by Principal of Borrower.

     (a) Principal of Borrower hereby agrees that neither Lender’s rights or remedies nor
Principal of Borrower’s obligations under the terms of this Guaranty shall be released,
diminished, impaired, reduced or affected by any one or more of the following events, actions,
facts, circumstances or rights, and the liability of Principal of Borrower under this Guaranty
shall be absolute and unconditional irrespective of:

     (i) any claim or defense that this Guaranty was made without consideration or is not
supported by adequate consideration;

     (ii) the taking or accepting of any other security or guaranty for, or right of
recourse with respect to, any or all of the Guaranteed Obligations;

     (iii) any homestead exemption or any other exemption under applicable law;

     (iv) any release, surrender, abandonment, exchange, alteration, sale or other
disposition, subordination, deterioration, waste, failure to protect or preserve,
impairment, or loss of, or any failure to create or perfect any lien or security interest
with respect to, or any other dealings with, any collateral or security at any time
existing or purported, believed or expected to exist in connection with any or all of the
Guaranteed Obligations, including any impairment of Principal of Borrower’s recourse
against any Person or collateral;

     (v) whether express or by operation of law, any partial release of the liability of
Principal of Borrower hereunder, or if one or more other guaranties are now or hereafter
obtained by Lender covering all or any part of the Guaranteed Obligations, any complete or
partial release of any one or more of such guarantors under any such other guaranty, or any
complete or partial release of Borrower or any other party liable, directly or indirectly,
for the payment or performance of any or all of the Guaranteed Obligations;

     (vi) the death, insolvency, bankruptcy, disability, dissolution, liquidation,
termination, receivership, reorganization, merger, consolidation, change of form, structure
or ownership, sale of all assets, or lack of corporate, partnership or other power of
Borrower or any other party at any time liable for the payment or performance of any or all
of the Guaranteed Obligations;

     (vii) either with or without notice to or consent of Principal of Borrower: any
renewal, extension, modification, supplement, subordination or rearrangement of the terms
of any or all of the Guaranteed Obligations and/or any of the Loan Documents, including,
without limitation, material alterations of the terms of payment (including changes in
maturity date(s) and interest rate(s)) or performance or any other terms thereof, or any
waiver, termination, or release of, or consent to departure from, any of the Loan Documents
or any other guaranty of any or all of the Guaranteed Obligations, or

GUARANTY AGREEMENT — Page 3

 

 

any adjustment, indulgence, forbearance, or compromise that may be granted from time to
time by Lender to Borrower, Principal of Borrower, and/or any other Person at any time
liable for the payment or performance of any or all of the Guaranteed Obligations;

     (viii) any neglect, lack of diligence, delay, omission, failure, or refusal of Lender
to take or prosecute (or in taking or prosecuting) any action for the collection or
enforcement of any of the Guaranteed Obligations, or to foreclose or take or prosecute any
action to foreclose (or in foreclosing or taking or prosecuting any action to foreclose)
upon any security therefor, or to exercise (or in exercising) any other right or power with
respect to any security therefor, or to take or prosecute (or in taking or prosecuting) any
action in connection with any Loan Document, or any failure to sell or otherwise dispose of
in a commercially reasonable manner any collateral securing any or all of the Guaranteed
Obligations;

     (ix) any failure of Lender to notify Principal of Borrower of any creation, renewal,
extension, rearrangement, modification, supplement, subordination, or assignment of the
Guaranteed Obligations or any part thereof, or of any Loan Document, or of any release of or
change in any security, or of any other action taken or refrained from being taken by Lender
against Borrower or any security or other recourse, or of any new agreement between Lender
and Borrower, it being understood that Lender shall not be required to give Principal of
Borrower any notice of any kind under any circumstances with respect to or in connection
with the Guaranteed Obligations, any and all rights to notice Principal of Borrower may have
otherwise had being hereby waived by Principal of Borrower, and the Principal of Borrower
shall be responsible for obtaining for itself information regarding the Borrower, including,
but not limited to, any changes in the business or financial condition of the Borrower, and
the Principal of Borrower acknowledges and agrees that Lender shall have no duty to notify
the Principal of Borrower of any information which the Lender may have concerning the
Borrower.

     (x) if for any reason any Lender is required to refund any payment by Borrower to any
other party liable for the payment or performance of any or all of the Guaranteed
Obligations or pay the amount thereof to someone else;

     (xi) the making of advances by Lender to protect its interest in the Mortgaged
Property, preserve the value of the Mortgaged Property or for the purpose of performing any
term or covenant contained in any of the Loan Documents;

     (xii) the existence of any claim, counterclaim, set-off or other right that Principal
of Borrower may at any time have against Borrower, Lender, or any other Person, whether or
not arising in connection with this Guaranty, the Note or any other Loan Document;

     (xiii) the unenforceability of all or any part of the Guaranteed Obligations against
Borrower, whether because the Guaranteed Obligations exceed the amount permitted by law or
violate any usury law, or because the act of creating the Guaranteed Obligations, or any
part thereof, is ultra vires, or because the officers or Persons creating the
Guaranteed Obligations acted in excess of their authority, or because of a lack of

GUARANTY AGREEMENT —  Page 4

 

 

validity or enforceability of or defect or deficiency in any of the Loan Documents, or
because Borrower has any valid defense, claim or offset with respect thereto, or because
Borrower’s obligation ceases to exist by operation of law, or because of any other reason
or circumstance, it being agreed that Principal of Borrower shall remain liable hereon
regardless of whether Borrower or any other Person be found not liable on the Guaranteed
Obligations, or any part thereof, for any reason (and regardless of any joinder of Borrower
or any other party in any action to obtain payment or performance of any or all of the
Guaranteed Obligations);

     (xiv) any order, ruling or plan of reorganization emanating from proceedings under
Title 11 of the United States Code with respect to Borrower or any other Person, including
any extension, reduction, composition, or other alteration of the Guaranteed Obligations,
whether or not consented to by Lender; or

     (xv) any limitation of liability or recourse that may be found in any other Loan
Document or that may arise under any law.

     (b) In the event any payment by Borrower or any other Person to Lender is held to
constitute a preference, fraudulent transfer or other voidable payment under any bankruptcy,
insolvency or similar law, or if for any other reason Lender is required to refund such
payment or
pay the amount thereof to any other party, such payment by Borrower or any other party to
Lender shall not constitute a release of Principal of Borrower from any liability hereunder,
and
this Guaranty shall continue to be effective or shall be reinstated (notwithstanding any prior
release, surrender or discharge by Lender of this Guaranty or of Principal of Borrower), as
the
case may be, with respect to, and this Guaranty shall apply to, any and all amounts so
refunded
by Lender or paid by Lender to another Person (which amounts shall constitute part of the
Guaranteed Obligations), and any interest paid by Lender and any attorneys’ fees, costs and
expenses paid or incurred by Lender in connection with any such event.

     (c) It is the intent of Principal of Borrower and Lender that the obligations and
liabilities of Principal of Borrower hereunder are absolute and unconditional under any and
all
circumstances and that until the Guaranteed Obligations are fully and finally paid and
performed,
and not subject to refund or disgorgement, the obligations and liabilities of Principal of
Borrower
hereunder shall not be discharged or released, in whole or in part, by any act or occurrence
that
might, but for the provisions of this Guaranty, be deemed a legal or equitable discharge or
release of a guarantor.

     (d) Principal of Borrower’s obligations shall not be affected, impaired, lessened or
released by loans, credits or other financial accommodations now existing or hereafter
advanced
by Lender to Borrower in excess of the Guaranteed Obligations. All payments, repayments and
prepayments of the loan, whether voluntary or involuntary, received by Lender from Borrower,
any other Person or any other source (other than from Principal of Borrower pursuant to a
demand by Lender hereunder), and any amounts realized from any collateral for the Loan, shall
be deemed to be applied first to any portion of the Loan which is not covered by this
Guaranty,
and last to the Guaranteed Obligations, and this Guaranty shall bind Principal of Borrower to
the
extent of any Guaranteed Obligations that may remain owing to Lender. Lender shall have the

GUARANTY AGREEMENT — Page 5

 

 

right to apply any sums paid by Principal of Borrower to any portion of the Loan in Lender’s sole
and absolute discretion.

     (e) Lender shall be entitled to continue to hold this Guaranty in its possession for the
longer of (i) the period after which any performance of obligations under the Note shall accrue,
or (ii) a period of one year from the date the Guaranteed Obligations are paid and performed in
full and for so long thereafter as may be necessary to enforce any obligation of Principal of
Borrower hereunder and/or to exercise any right or remedy of Lender hereunder.

     (f) If acceleration of the time for payment of any amount payable by Borrower under the Note
or any other Loan Document is stayed or delayed by any law or tribunal, all such amounts shall
nonetheless be payable by Principal of Borrower on demand by Lender.

     5. Subordination.
If, for any reason whatsoever, Borrower now or hereafter becomes
indebted to Principal of Borrower:

     (a) such indebtedness and all interest thereon and all liens, security interests and
rights now or hereafter existing with respect to property of Borrower securing such
indebtedness
shall, at all times, be subordinate in all respects to the Guaranteed Obligations and to all
liens,
security interests and rights now or hereafter existing to secure the Guaranteed Obligations;

     (b) Principal of Borrower shall not be entitled to enforce or receive payment, directly
or indirectly, of any such indebtedness of Borrower to Principal of Borrower until the
Guaranteed Obligations have been fully and finally paid and performed;

     (c) Principal of Borrower hereby assigns and grants to Lender a security interest in all
such indebtedness and security therefor, if any, of Borrower to Principal of Borrower now
existing or hereafter arising, including any dividends and payments
pursuant to debtor relief or insolvency proceedings referred to below. In the event of receivership,
bankruptcy,
reorganization, arrangement or other debtor relief or insolvency proceedings involving Borrower
as debtor, Lender shall have the right to prove its claim in any such proceeding so as to
establish
its rights hereunder and shall have the right to receive directly from the receiver, trustee
or other
custodian (whether or not an Event of Default shall have occurred or be continuing under any
of
the Loan Documents), dividends and payments that are payable upon any obligation of Borrower
to Principal of Borrower now existing or hereafter arising, and to have all benefits of any
security therefor, until the Guaranteed Obligations have been fully and finally
paid and
performed. If, notwithstanding the foregoing provisions, Principal of Borrower should
receive
any payment, claim or distribution that is prohibited as provided above in this Section
5, Principal of Borrower shall pay the same to Lender immediately, Principal of Borrower hereby
agreeing that it shall receive the payment, claim or distribution in trust for Lender and
shall have
absolutely no dominion over the same except to pay it immediately to Lender; and

     (d) Principal of Borrower shall promptly upon request of Lender from time to time
execute such documents and perform such acts as Lender may require to evidence and perfect its
interest and to permit or facilitate exercise of its rights under this Section 5,
including, but not
limited to, execution and delivery of financing statements, proofs of claim, further
assignments
and security agreements, and delivery to Lender of any promissory notes or other instruments

GUARANTY AGREEMENT — Page 6

 

 

evidencing indebtedness of Borrower to Principal of Borrower. All promissory notes, accounts
receivable ledgers or other evidences, now or hereafter held by Principal of Borrower, of
obligations of Borrower to Principal of Borrower shall contain a specific written notice thereon
that the indebtedness evidenced thereby is subordinated under and is subject to the terms of this
Guaranty.

     6. Other Liability of Principal of Borrower or Borrower. If Principal of
Borrower is or becomes liable, by endorsement or otherwise, for any indebtedness owing by
Borrower to Lender other than under this Guaranty, such liability shall not be in any manner
impaired or affected hereby, and the rights of Lender hereunder shall be cumulative of any and
all other rights that Lender may have against Principal of Borrower. If Borrower is or
becomes
indebted to Lender for any indebtedness other than or in excess of the Guaranteed Obligations,
any payment received or recovery realized upon such other indebtedness of Borrower to Lender
may be applied to such other indebtedness. This Guaranty is independent of (and shall not be
limited by) any other guaranty now existing or hereafter given. Further, Principal of
Borrower’s
liability under this Guaranty is in addition to any and all other liability Principal of
Borrower
may have in any other capacity, including, if applicable, its capacity as a general partner.

     7. Lender Assigns. This Guaranty is for the benefit of Lender and its successors
and assigns, and in the event of an assignment of the Guaranteed Obligations, or any part
thereof,
the rights and benefits hereunder, to the extent applicable to the Guaranteed Obligations so
assigned, may be transferred with such Guaranteed Obligations. Principal of Borrower waives
notice of any transfer or assignment of the Guaranteed Obligations, or any part thereof, and
agrees that failure to give notice of any such transfer or assignment will not affect the
liabilities
of Principal of Borrower hereunder. Lender may disclose to any such assignee or participant
or
prospective assignee or participant, to Lender’s affiliates, to any regulatory body having
jurisdiction over Lender and to any other parties as necessary or appropriate in Lender’s
reasonable judgment, any information Lender now has or hereafter obtains pertaining to the
Guaranteed Obligations, this Guaranty, or Principal of Borrower, including
information
regarding any security for the Guaranteed Obligations or for this Guaranty, and/or credit or
other
information on Principal of Borrower and/or any other Person liable, directly or indirectly,
for
any part of the Guaranteed Obligations.

     8. Binding Effect. This Guaranty is binding not only on Principal of Borrower, but
also on Principal of Borrower’s heirs, personal representatives, successors and assigns. Upon
the
death of Principal of Borrower, if Principal of Borrower is a natural person, this Guaranty
shall
continue against Principal of Borrower’s estate as to all of the Guaranteed Obligations,
including
that portion incurred or arising after the death of Principal of Borrower and shall be
provable in
full against Principal of Borrower’s estate, whether or not the Guaranteed Obligations are
then
due and payable. If this Guaranty is signed by more than one Person, then all of the
obligations
of Principal of Borrower arising hereunder shall be jointly and severally binding on each of
the
undersigned, and their respective heirs, personal representatives, successors and assigns, and
the
term “Principal of Borrower” shall mean all of such Persons and each of them individually.

     9. Governing Law; Forum; Consent to Jurisdiction. The validity, enforcement,
and interpretation of this Guaranty, shall for all purposes be governed by and construed in

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accordance with the laws of the State of Texas and applicable United States federal law, and is
intended to be performed in accordance with, and only to the extent
permitted by, such laws. All
obligations of Principal of Borrower hereunder are payable and performable at the place or places
where the Guaranteed Obligations are payable and performable. Principal of Borrower hereby
irrevocably submits generally and unconditionally for Principal of Borrower and in respect of
Principal of Borrower’s property to the nonexclusive jurisdiction of any state court, or any United
States federal court, sitting in the state specified in the first sentence of this Section and to
the jurisdiction of any state or United States federal court sitting in the state in which any of
the Mortgaged Property is located, over any suit, action or proceeding arising out of or relating
to this Guaranty or the Guaranteed Obligations. Principal of Borrower hereby irrevocably waives, to
the fullest extent permitted by law, any objection that Principal of Borrower may now or hereafter
have to the laying of venue in any such court and any claim that any such court is an inconvenient
forum. Final judgment in any such suit, action or proceeding brought in any such court shall be
conclusive and binding upon Principal of Borrower and may be enforced in any court in which
Principal of Borrower is subject to jurisdiction. Principal of Borrower hereby agrees and consents
that, in addition to any methods of service of process provided for under applicable law, all
service of process in any such suit, action or proceeding in any state court, or any United States
federal court, sitting in the state specified in the first sentence of this Section may be made by
certified or registered mail, return receipt requested, directed to Principal of Borrower at the
address set forth at the end of this Guaranty, or at a subsequent address of which Lender receives
actual notice from Principal of Borrower in accordance with the notice provisions hereof, and
service so made shall be complete five (5) days after the same shall have been so mailed. Nothing
herein shall affect the right of Lender to serve process in any manner permitted by law or limit
the right of Lender to bring proceedings against Principal of Borrower in any other court or
jurisdiction. Principal of Borrower hereby releases, to the extent permitted by applicable law, all
errors and all rights of exemption, appeal, stay of execution, inquisition, and other rights to
which the Principal of Borrower may otherwise be entitled under the laws of the United States of
America or any State or possession of the United States of America now in force or which may
hereinafter be enacted. The authority and power to appear for and enter judgment against the
Principal of Borrower shall not be exhausted by one or more exercises thereof or by any imperfect
exercise thereof and shall not be extinguished by any judgment entered pursuant thereto. Such
authority may be exercised on one or more occasions or from time to time in the same or different
jurisdiction as often as the Lender shall deem necessary and desirable.

     10. Invalidity of Certain Provisions. If any provision of this Guaranty or the
application thereof to any Person or circumstance shall, for any reason and to any extent, be
declared to be invalid or unenforceable, neither the remaining provisions of this Guaranty nor
the
application of such provision to any other Person or circumstance shall be affected thereby,
and
the remaining provisions of this Guaranty, or the applicability of such provision to other
Persons
or circumstances, as applicable, shall remain in effect and be enforceable to the maximum
extent
permitted by applicable law.

     11. Attorneys’ Fees and Costs of Collection. Principal of Borrower shall pay on
demand all attorneys’ fees and all other costs and expenses incurred by Lender in the
enforcement of or preservation of Lender’s rights under this Guaranty including, without

GUARANTY AGREEMENT — Page 8

 

 

limitation, all attorneys’ fees and expenses, investigation costs, and all court costs, whether or
not suit is filed hereon, or whether at maturity or by acceleration, or whether before or after
maturity, or whether in connection with bankruptcy, insolvency or appeal, or whether in connection
with the collection and enforcement of this Guaranty against any other guarantor, if there be more
than one. Principal of Borrower agrees to pay interest on any expenses or other sums due to Lender
under this Section 11 that are not paid when due, at a rate per annum equal to the
“Default Rate” provided for in the Note. Principal of Borrower’s obligations and liabilities under
this Section 11 shall survive any payment or discharge in full of the Guaranteed Obligations.

     12. Payments. All sums payable under this Guaranty shall be paid in lawful money
of the United States of America that at the time of payment is legal tender for the payment of
public and private debts.

     13. Controlling Agreement. It is not the intention of Lender or Principal of
Borrower to obligate Principal of Borrower to pay interest in excess of that lawfully
permitted to
be paid by Principal of Borrower under applicable law. Should it be determined that any
portion
of the Guaranteed Obligations or any other amount payable by Principal of Borrower under this
Guaranty constitutes interest in excess of the maximum amount of interest that Principal of
Borrower, in Principal of Borrower’s capacity as guarantor, may lawfully be required to pay
under applicable law, the obligation of Principal of Borrower to pay such interest shall
automatically be limited to the payment thereof in the maximum amount so permitted under
applicable law. The provisions of this Section 13 shall override and control all
other provisions
of this Guaranty and of any other agreement between Principal of Borrower and Lender.

     14. Representations, Warranties, and Covenants of Principal of Borrower.
Principal of Borrower hereby represents, warrants, and covenants to Lender that (a) Principal of
Borrower owns a direct or indirect interest in Borrower and will derive a material and substantial
benefit, directly or indirectly, from the making of the Loan to Borrower and from the making of
this Guaranty by Principal of Borrower; (b) this Guaranty is duly authorized and valid, and is
binding upon and enforceable against Principal of Borrower; (c) Principal of Borrower is not, and
the execution, delivery and performance by Principal of Borrower of this Guaranty will not cause
Principal of Borrower to be, in violation of or in default with respect to any law or in default
(or at risk of acceleration of indebtedness) under any agreement or restriction by which Principal
of Borrower is bound or affected; (d) Principal of Borrower is duly organized, validly existing,
and in good standing under the laws of the state of its organization and under laws, and has full
power and authority to enter into and perform this Guaranty; (e) Principal of Borrower will
indemnify Lender from any loss, cost or expense as a result of any representation or warranty of
the Principal of Borrower being false, incorrect, incomplete or misleading in any material respect;
(f) there is no material litigation pending or, to the knowledge of Principal of Borrower,
threatened before or by any tribunal against or affecting Principal of Borrower; (g) all financial
statements and information heretofore furnished to Lender by Principal of Borrower do, and all
financial statements and information hereafter furnished to Lender by Principal of Borrower will,
fully and accurately present the condition (financial or otherwise) of Principal of Borrower as of
their dates and the results of Principal of Borrower’s operations for the periods therein
specified, and, since the date of the most recent financial statements of Principal of Borrower
heretofore furnished to Lender, no material adverse change has occurred in the

GUARANTY AGREEMENT — Page 9

 

 

financial condition of Principal of Borrower, nor, except as heretofore disclosed in writing to
Lender, has Principal of Borrower incurred any material liability, direct or indirect, fixed or
contingent; (h) after giving effect to this Guaranty, Principal of Borrower is solvent, is not
engaged or about to engage in business or a transaction for which the property of Principal of
Borrower is an unreasonably small capital, and does not intend to incur or believe that it will
incur debts that will be beyond its ability to pay as such debts mature; (i) Lender has no duty at
any time to investigate or inform Principal of Borrower of the financial or business condition or
affairs of Borrower or any change therein, and Principal of Borrower will keep fully apprised of
Borrower’s financial and business condition; (j) Principal of Borrower acknowledges and agrees that
Principal of Borrower may be required to pay and perform the Guaranteed Obligations in full without
assistance or support from Borrower or any other Person; and (k) Principal of Borrower has read and
fully understands the provisions contained in the Note, the Deed of Trust, and the other Loan
Documents. Principal of Borrower’s representations, warranties and covenants are a material
inducement to Lender to enter into the other Loan Documents and shall survive the execution hereof
and any bankruptcy, foreclosure, transfer of security or other event affecting Borrower, Principal
of Borrower, any other party, or any security for all or any part of the Guaranteed Obligations.

     15. Notices. All notices, requests, consents, demands and other communications
required or which any party desires to give hereunder or under any other Loan Document shall
be in writing and, unless otherwise specifically provided in such other Loan Document, shall
be
deemed sufficiently given or furnished if delivered by personal delivery, by courier, or by
registered or certified United States mail, postage prepaid, addressed to the party to whom
directed at the addresses specified in this Guaranty (unless changed by similar notice in
writing
given by the particular party whose address is to be changed) or by telegram, telex, or
facsimile.
Any such notice or communication shall be deemed to have been given either at the time of
personal delivery or, in the case of courier or mail, as of the date of first attempted
delivery at the
address and in the manner provided herein, or, in the case of telegram, telex or facsimile,
upon
receipt; provided that, service of a notice required by any applicable statute shall be
considered
complete when the requirements of that statute are met. Notwithstanding the foregoing, no
notice of change of address shall be effective except upon actual receipt. This Section shall
not
be construed in any way to affect or impair any waiver of notice or demand provided in this
Guaranty or in any Loan Document or to require giving of notice or demand to or upon any
Person in any situation or for any reason.

     16. Cumulative
Rights. The exercise by Lender of any right or remedy hereunder or
under any other Loan Document or at law or in equity, shall not preclude the concurrent or
subsequent exercise of any other right or remedy. Lender shall have all rights, remedies and
recourses afforded to Lender by reason of this Guaranty or any other Loan Document or by law
or equity or otherwise, and the same (a) shall be cumulative and concurrent, (b) may be
pursued
separately, successively or concurrently against Principal of Borrower or others obligated for
the
Guaranteed Obligations, or any part thereof, or against any one or more of them, or against
any
security or otherwise, at the sole and absolute discretion of Lender, (c) may be exercised as
often
as occasion therefor shall arise, it being agreed by Principal of Borrower that the exercise
of,
discontinuance of the exercise of or failure to exercise any of such rights, remedies, or
recourses
shall in no event be construed as a waiver or release thereof or of any other right, remedy,
or

GUARANTY AGREEMENT — Page 10

 

 

recourse, and (d) are intended to be, and shall be, nonexclusive. No waiver of any default on the
part of Principal of Borrower or of any breach of any of the provisions of this Guaranty or of any
other document shall be considered a waiver of any other or subsequent default or breach, and no
delay or omission in exercising or enforcing the rights and powers granted herein or in any other
document shall be construed as a waiver of such rights and powers, and no exercise or enforcement
of any rights or powers hereunder or under any other document shall be held to exhaust such rights
and powers, and every such right and power may be exercised from time to time. The granting of any
consent, approval or waiver by Lender shall be limited to the specific instance and purpose
therefor and shall not constitute consent or approval in any other instance or for any other
purpose. No notice to or demand on Principal of Borrower in any case shall of itself entitle
Principal of Borrower to any other or further notice or demand in similar or other circumstances.
No provision of this Guaranty or any right, remedy or recourse of Lender with respect hereto, or
any default or breach, can be waived, nor can this Guaranty or Principal of Borrower be released
or discharged in any way or to any extent, except specifically in each case by a writing intended
for that purpose (and which refers specifically to this Guaranty) executed, and delivered to
Principal of Borrower, by Lender.

     17. Term of Guaranty. This Guaranty shall continue in effect until all the
Guaranteed Obligations are fully and finally paid, performed and discharged, except that, and
notwithstanding any return of this Guaranty to Principal of Borrower, this Guaranty shall
continue in effect (a) with respect to any of the Guaranteed Obligations that survive the full
and
final payment of the indebtedness evidenced by the Note, (b) with respect to all obligations
and
liabilities of Principal of Borrower under Section 11 and (c) as provided in
Section 4(b).

     18. Financial Statements. No later than ninety (90) days after the end of its fiscal
year, Principal of Borrower shall deliver to Lender financial statements with respect to
Principal
of Borrower certified by Principal of Borrower and prepared in accordance with generally
accepted accounting principles. If an Event of Default (as defined in the Deed of Trust)
occurs,
Principal of Borrower will deliver to Lender, upon demand therefor, year-to-date financial
statements with respect to Principal of Borrower prepared by independent certified public
accountants of recognized national standing in accordance with generally accepted accounting
principles. The financial statements delivered to Lender in respect of Principal of Borrower
shall
be reasonably satisfactory to Lender in form.

     19. Disclosure of Information. Lender may sell or offer to sell the Loan or
interests in the Loan to one or more assignees or participants and may disclose to any such
assignee or participant or prospective assignee or participant, to Lender’s affiliates to any
regulatory body having jurisdiction over Lender and to any other parties as necessary or
appropriate in any Lender’s reasonable judgment, any information Lender now have or hereafter
obtain pertaining to the Guaranteed Obligations, this Guaranty, or Principal of Borrower,
including, without limitation, information regarding any security for the Guaranteed Obligations
or for this Guaranty, credit or other information on Principal of Borrower, Borrower, and/or any
other party liable, directly or indirectly, for any part of the Guaranteed Obligations.

     20. Right of Set-Off. Upon the occurrence and during the continuance of any Event of
Default, however defined, in the payment or performance when due of any of the Guaranteed

GUARANTY AGREEMENT — Page 11

 

 

Obligations, Lender is hereby authorized at any time and from time to time with prior notice to
and consent of Lender, to the fullest extent permitted by applicable law, without notice to any
Person (any such notice being expressly waived by Principal of Borrower to the fullest extent
permitted by applicable law), to set off and apply any and all deposits, funds, or assets at any
time held and other indebtedness at any time owing by Lender to or for the credit or the account
of Principal of Borrower against any and all of the obligations of Principal of Borrower now or
hereafter existing under this Guaranty, whether or not Lender shall have made any demand under
this Guaranty or exercised any other right or remedy hereunder. Lender will promptly notify
Principal of Borrower after any such set-off and application made by Lender, provided that the
failure to give such notice shall not affect the validity of such set-off and application. The
rights of Lender under this Section 20 are in addition to the other rights and remedies
(including other rights of set-off) that Lender may have, and every right of setoff and lien shall
continue in full force and effect until such right of setoff or lien is specifically waived or
released by an instrument in writing executed by Lender.

     21. Subrogation. Notwithstanding anything to the contrary contained
herein,
Principal of Borrower shall not have any right of subrogation in or under any of the Loan
Documents or to participate in any way therein, or in any right, title or interest in and to
any
security or right of recourse for the Indebtedness or any right to reimbursement, exoneration,
contribution, indemnification or any similar rights, until the Indebtedness has been fully and
finally paid. This waiver is given to induce Lender to make the Loan to Borrower.

     22. Further Assurances. Principal of Borrower at Principal of Borrower’s expense
will promptly execute and deliver to Lender upon Lender’s request all such other and further
documents, agreements, and instruments in compliance with or accomplishment of
the
agreements of Principal of Borrower under this Guaranty.

     23. No Fiduciary Relationship. The relationship between Lender and Principal of
Borrower is solely that of lender and guarantor. Lender has no fiduciary or other special
relationship with or duty to Principal of Borrower and none is created hereby or may be
inferred
from any course of dealing or act or omission of Lender.

     24. Interpretation. If this Guaranty is signed by more than one Person as “Principal
of Borrower”, then the term “Principal of Borrower” as used in this Guaranty shall refer to
all
such Persons, jointly and severally, and all promises, agreements, covenants, waivers,
consents,
representations, warranties and other provisions in this Guaranty are made by and shall be
binding upon each and every such Person, jointly and severally and Lender may pursue any
Principal of Borrower hereunder without being required (a) to pursue any other Principal of
Borrower hereunder or (b) pursue rights and remedies under the Deed of Trust and/or applicable
law with respect to the Mortgaged Property or any other Loan Documents. The term “Lender”
shall be deemed to include any subsequent Lender appointed under the Note. Whenever the
context of any provisions hereof shall require it, words in the singular shall include the
plural,
words in the plural shall include the singular, and pronouns of any gender shall include the
other gender. Captions and headings in the Loan Documents are for convenience only and shall not affect the construction of the Loan Documents. All references in this Guaranty to Schedules,
Articles, Sections, Subsections, paragraphs and subparagraphs refer to the
respective

GUARANTY
AGREEMENT — Page 12

 

 

subdivisions of this Guaranty, unless such reference specifically identifies another document. The
terms “herein”, “hereof”, “hereto”, “hereunder” and similar terms refer to this Guaranty and not
to any particular Section or subsection of this Guaranty. The terms “include” and “including”
shall be interpreted as if followed by the words “without limitation”. All references in this
Guaranty to sums denominated in dollars or with the symbol “$” refer to the lawful currency of the
United States of America, unless such reference specifically identifies another currency. For
purposes of this Guaranty, “Person” or “Persons” shall include firms, associations, partnerships
(including limited partnerships), joint ventures, trusts, corporations, limited liability
companies, and other legal entities, including governmental bodies, agencies, or
instrumentalities, as well as natural persons.

     25. Time
of Essence. Time shall be of the essence in this Guaranty with respect to
all of Principal of Borrower’s obligations hereunder.

     26. Counterparts. This Guaranty may be executed in multiple counterparts, each of
which, for all purposes, shall be deemed an original, and all of which taken together shall
constitute but one and the same agreement.

     27. Entire Agreement. This Guaranty embodies the entire agreement between
Lender and Principal of Borrower with respect to the guaranty by Principal of Borrower of the
Guaranteed Obligations. This Guaranty supersedes all prior agreements and understandings, if
any, with respect to the guaranty by Principal of Borrower of the Guaranteed Obligations. No
condition or conditions precedent to the effectiveness of this Guaranty exist. This Guaranty
shall
be effective upon execution by Principal of Borrower and delivery to Lender. This Guaranty
may not be modified, amended or superseded except in a writing signed by Lender and Principal
of Borrower referencing this Guaranty by its date and specifically identifying the portions
hereof
that are to be modified, amended or superseded.

     28. Waiver
of Jury Trial. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, PRINCIPAL OF BORROWER HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, PROCEEDING, OR COUNTERCLAIM THAT RELATES TO OR ARISES OUT OF
THIS GUARANTY OR THE OTHER LOAN DOCUMENTS OR THE ACTS OR FAILURE
TO ACT OF OR BY LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR
PROVISIONS OF THIS GUARANTY OR THE OTHER LOAN DOCUMENTS.

     29. No Oral Agreements. THE LOAN DOCUMENTS REPRESENT 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 ORAL AGREEMENTS BETWEEN PRINCIPAL OF
BORROWER AND LENDER.

GUARANTY AGREEMENT — Page 13

 

 

     IN WITNESS WHEREOF, Principal of Borrower duly executed this Guaranty as of the date first
written above.

	 	 	 	 	 	 	 	 	 
	Address of Principal of Borrower:	 	 	 	PRINCIPAL OF BORROWER:	 	 
	 	 	 	 	 
	 	 
	 
	 	 	 	 	 	 	 	 
	Craftmade International, Inc.	 	 	 	CRAFTMADE INTERNATIONAL, INC.,	 	 
	Attention: Mr. Marcus Scrudder	 	 	 	a Delaware corporation	 	 
	650 S. Royal Lane,
	 	 	 	 	 	 	 	 
	Coppell, Texas 75019
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ James R. Ridings
 

	 	 
	 

	 	 	 	Name:
	 	James R. Ridings
 
	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 		 	 
	STATE OF TEXAS 

	 	§

§	 	 	 	 	 	 
	COUNTY OF DALLAS

	 	§	 	 	 	 	 	 

     This
instrument was acknowledged before me on the 13th day of
November, 2007, by
James Ridings,
                     of Craftmade International, Inc., a
Delaware corporation, on behalf of said corporation.

	 	 	 
	 

	 	/s/ Susan B. Peresh
	 

	 	 
	 

	 	Notary Public in and for the State of Texas
	 
	 	 
	 

	 	Printed Name of Notary
	 
	 

	 	/s/ Susan B. Peresh
	 

	 	 
	 

	 	My Commission Expires: 3/20/2009

GUARANTY AGREEMENT — Signature Pageexv10w4

 

Exhibit 10.4

LEASE AGREEMENT

     This Lease Agreement (this “Lease”) is made and entered into effective as of
November 14, 2007 (the “Effective Date”) between CM REAL ESTATE, LLC, a Texas limited
liability company (“Landlord”), whose address is 650 South Royal Lane, Coppell, Texas 75019, and
CRAFTMADE INTERNATIONAL, INC., a Delaware corporation (“Tenant”), whose address is 650 South Royal
Lane, Coppell, Texas 75019.

W I T N E S S E T H

     Section1. Lease of Premises. For and in consideration of the covenants and conditions
herein contained, Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, that
certain tract of land that is located at 650 South Royal Lane, Coppell, Texas and is more
particularly described in Exhibit A hereto (the “Land”), together with the buildings and
all other improvements situated on the Land and all other appurtenances to the Land (the Land, the
buildings, all other such improvements, and all other such appurtenances are herein collectively
called the “Premises”).

     Section 2. Term. The term of this Lease (the “Term”) shall commence on the Effective
Date and shall end at 11:59 p.m. on December 31, 2017, unless earlier terminated pursuant to other
provisions hereof.

     Section 3. Base Rent. Tenant shall, on the first day of each calendar month of the
Term, pay to Landlord, without deduction or offset, the amount of $102,375.00 (the “Base Rent”),
which shall be due and payable without demand or notice. If this Lease commences other than on the
first day of a calendar month, then the Base Rent for the remaining portion of such month shall be
prorated, and the prorated portion thereof shall be due and payable on such commencement date.

     Section 4. Taxes and Utilities. Tenant shall pay, when due and without notice or
demand from Landlord, (i) all real property and other ad valorem taxes assessed against the
Premises, and all charges or assessments made against or with respect to the Premises by any
governmental entity or agency thereof, including without limitation charges and assessments for
street repair, paving, and sewer or water pipeline repair or construction (all such taxes, charges,
and assessments are herein collectively called “Taxes”), and (ii) all costs of electricity, water,
sewer services, natural gas, telephone service, garbage collection, and all other utilities and
services that are provided to or used on the Premises (collectively, “Utilities’”). Taxes shall be
prorated for any partial calendar year during the Term with Tenant paying the portion thereof
allocable to the interval in such calendar year during which this Lease was in effect and with
Landlord paying the balance. If Landlord receives a tax statement for the Premises during the Term,
then Landlord shall promptly forward such tax statement to Tenant. Landlord and Tenant agree to
reasonably cooperate with each other in connection with contesting any Taxes during the Term.
Utilities shall be prorated for any partial calendar month during the Term with Tenant paying the
portion thereof allocable to the interval in such calendar month during which this Lease was in
effect and with Landlord paying the balance.

Lease Agreement — Page 1

 

 

     Section 5. Tenant’s Insurance Obligations. Tenant shall keep in force during the Term,
at Tenant’s sole cost, the following insurance coverage.

	 	(i)	 	fire and extended coverage insurance covering the Premises, in the amount of
the full insurable value of the buildings, and naming Landlord and any mortgagee of
Landlord as the insured parties, as their interests may appear.
	 
	 	(ii)	 	fire and extended coverage insurance covering the full value of all Tenant’s personal property and improvements, and of all other personal property (including
the personal property of others) in the Premises, naming Tenant as the insured
party;
	 
	 	(iii)	 	comprehensive general liability insurance covering the Premises in an
amount of not less than a combined single limit of $5,000,000 or such other amount as
Landlord or any mortgagee of Landlord may from time to time reasonably require,
insuring Tenant, Landlord and any mortgagee of Landlord against all liability for
injury to or death of a person or persons or damage to property arising from the use
and occupancy of the Premises; and
	 
	 	(iv)	 	such other insurance as any mortgagee of Landlord may require with respect
to the Premises.

Each of the insurance policies shall be in form and substance reasonably satisfactory to Landlord
and any mortgagee of Landlord, and shall include an endorsement waiving the insurer’s rights of
recovery under subrogation or otherwise against both Landlord and Tenant. Each such policy shall
provide that it may not be cancelled or amended without at least twenty (20) days’ prior written
notice to Landlord. At least twenty (20) days prior to the expiration of each of such policies,
Tenant shall deliver to Landlord a certificate of insurance evidencing a renewal of such policy,
together with evidence satisfactory to Landlord of the payment of the premiums therefor. If Tenant
fails to obtain and maintain insurance in accordance with this Section, and does not cure such
failure within one business day’s written notice, then, without limiting any other remedy available
to Landlord under this Lease, Landlord shall have the right (but not the obligation) to cause such
insurance to be issued in accordance with this Section, whereupon Tenant shall promptly reimburse
to Landlord the amount of all premiums paid by Landlord.

     Section 6. Use of Premises. The Premises shall be used by Tenant only for commercial
uses that are permitted by applicable zoning, environmental, and other laws, which uses are herein
called the “Permitted Uses.”

     Section 7. Maintenance and Repairs. Tenant shall, at its sole cost, maintain the
Premises in the same manner that a reasonably careful and prudent person would maintain business
property owned by such person. Without limiting the foregoing, Tenant shall maintain in a good
state of repair, and in a clean condition, the buildings, including all structural elements thereof
and all plumbing, electrical conduits, and air-conditioning equipment therein, and all streets,
parking areas, loading zones, landscaped areas, drains, fences, and sidewalks on the Premises. If
(i) Tenant fails to make repairs which Tenant is obligated to make pursuant to this Section within
ten (10) days after receipt of written notice from Landlord describing the repairs to be performed,

Lease Agreement — Page 2

 

 

or (ii) Landlord reasonably determines that emergency repairs for which Tenant is responsible are
necessary, then without limiting any other remedy available to Landlord under this Lease, Landlord
shall have the right (but not the obligation) to cause such repairs to be made and Tenant shall be
obligated forthwith to reimburse Landlord for the cost thereof. Landlord and Tenant hereby
acknowledge and agree that (a) Tenant shall be liable for and obligated to perform all maintenance
and repairs to the Premises during the Term and (b) Landlord shall have no duty, obligation or
liability to perform any maintenance or repairs or make any improvements to the Premises.

     Section 8. Tenant’s Improvements. Prior to making any improvements in the Premises,
Tenant shall submit to Landlord plans and specifications therefor in such detail as may reasonably
be requested by Landlord. Tenant shall not construct, remove, or alter any improvements in the
Premises without first obtaining Landlord’ prior written consent, which consent shall not
unreasonably be withheld.

     Section 9. Assignment and Subletting. Tenant shall not, without the prior written
consent of Landlord, which may be withheld in Landlord’s sole discretion, sell or otherwise
transfer or mortgage or otherwise encumber its interest in the Premises or any portion thereof.
Without limiting the foregoing, Tenant shall not assign this Lease or sublet or license the
Premises or any portion thereof without Landlord’s prior written consent.

     Section 10. INDEMNITY. TENANT SHALL DEFEND, INDEMNIFY, AND HOLD HARMLESS LANDLORD AND ITS
AGENTS FROM AND AGAINST ALL CLAIMS, DEMANDS, LIABILITIES, CAUSES OF ACTION, SUITS, JUDGMENTS, AND
EXPENSES (INCLUDING ATTORNEYS’ FEES) FOR ANY INJURY TO OR DEATH OF ANY PERSON OR PERSONS OR THE
DAMAGE TO OR THEFT, DESTRUCTION, LOSS, OR LOSS OF USE OF ANY PROPERTY (A“LOSS”) ARISING FROM ANY
OCCURRENCE ON THE PREMISES OR FROM TENANT’S FAILURE TO PERFORM ITS OBLIGATIONS UNDER THIS LEASE
(OTHER THAN A LOSS ARISING FROM THE GROSS NEGLIGENCE OF LANDLORD OR ITS AGENTS), EVEN THOUGH CAUSED
OR ALLEGED TO BE CAUSED BY THE JOINT, COMPARATIVE, OR CONCURRENT NEGLIGENCE OR FAULT OF LANDLORD OR
ITS AGENTS. AND EVEN THOUGH ANY SUCH CLAIM, CAUSE OF ACTION, OR SUIT IS BASED UPON OR ALLEGED TO BE
BASED UPON THE STRICT LIABILITY OF LANDLORD OR ITS AGENTS. THIS INDEMNITY PROVISION IS INTENDED TO
INDEMNIFY LANDLORD AND ITS AGENTS AGAINST THE CONSEQUENCES OF THEIR OWN NEGLIGENCE OR FAULT AS
PROVIDED ABOVE WHEN LANDLORD OR ITS AGENTS ARE JOINTLY, COMPARATIVELY, OR CONCURRENTLY NEGLIGENT
WITH TENANT. THIS INDEMNITY PROVISION SHALL SURVIVE THE TERMINATION OR EXPIRATION OF THIS LEASE.

     Section 11. Waiver of Subrogation. Notwithstanding any provision to the contrary in
this Lease, Landlord and Tenant each waives all rights of recovery, claims, and causes of action
against the other, or against the agents, officers, invitees, or employees of the other, for any
death of or injury to any person or any loss or damage that may occur to the Premises or any
personal property of either party located therein or thereon, by reason of fire, the elements,
accidental occurrence, or any other cause which is insured against under the terms of the policies
of insurance maintained by Tenant pursuant to this Lease, regardless of the origin of such loss or

Lease Agreement — Page 3

 

 

damage including the negligence of the other party, its agents, officers, licensees, or employees;
however, the foregoing waiver shall be inapplicable in instances of willful misconduct.

     Section 12. Damage to Premises. If the Premises are damaged or destroyed by fire,
explosion, wind storm, or any other casualty during the Term to such an extent that the damage
cannot, in Landlord’s reasonable judgment, be repaired within 180 days thereof, and if as a result
of such damage or destruction it becomes impracticable for Tenant to operate its business from the
Premises, each of Landlord and Tenant shall have the option, exercisable by written notice to the
other within 30 days after such damage or destruction, to terminate this Lease effective as of the
date of such damage or destruction. If the damage can, in Landlord’s reasonable judgment, be
repaired within 180 days, or if neither Tenant nor Landlord elects to terminate this Lease during
the 30-day period, then Landlord shall, at Landlord’s sole cost, proceed to repair and rebuild the
damaged or destroyed Premises upon substantially the same plan as existed immediately prior to such
damage or destruction, subject to changes thereto acceptable to Landlord and Tenant. During such
period of time as the Premises are affected by such damage or destruction, and to the extent that
the business of Tenant is materially impaired, neither the Base Rent nor any other payments due
hereunder shall be reduced, but instead shall continue in full force and effect. Tenant, at
Tenant’s option and expense, shall have the right to obtain business interruption insurance. Tenant
shall not be entitled to compensation from Landlord for damages on account of inconvenience,
annoyance, or loss of business during any period of repair or reconstruction unless Landlord fails
diligently and continuously to prosecute to completion such repair or reconstruction.
Notwithstanding the foregoing, if any mortgagee of Landlord elects to apply casualty proceeds
against the mortgage indebtedness, then Landlord shall have the right to terminate this Lease by
delivering notice thereof to Tenant.

     Section 13. Condemnation. If any material part of the Premises is taken under the
power of eminent domain such that Tenant’s ability to carry on its business would be materially
impaired, then Tenant shall have the right to elect, by delivering notice to Landlord not more than
30 days after the conclusion of the eminent domain proceeding, to terminate this Lease. If this
Lease is not so terminated, then all of the terms and provisions hereof shall continue in full
force and effect. All compensation awarded for the taking of the fee or for diminution in value to
the reversion shall be the property of Landlord; however, Landlord shall not be entitled to the
award made to Tenant for relocation expenses and depreciation to and cost of removal of fixtures
and merchandise.

     Section 14. Landlord’s Liens. Landlord hereby waives any and all of Landlord’s
liens and other security interests that Landlord may now hereafter have on any of Tenant’s
personal property that may now or hereafter be located at the Premises.

     Section 15. Mortgages.

	 	(i)	 	This Lease shall be subordinate to any deed of trust, mortgage or other
security instrument (a “Mortgage”) that now or hereafter covers any portion of the
Premises (the mortgagee under any Mortgage being referred to herein as “Landlord’s
Mortgagee”), and to increases, renewals, modifications, consolidations, replacements,
and extensions thereof. However, any Landlord’s Mortgagee may elect to subordinate its
Mortgage to this Lease by delivering

Lease Agreement — Page 4

 

 

written notice thereof to Tenant. The provisions of this Section 15(i) shall be
self-operative, and no further instrument shall be required to effect such
subordination; however, Tenant shall from time to time within ten days after
request therefor, execute any instruments that may be required by any Landlord’s
Mortgagee to evidence the subordination of this Lease to any such Mortgage.

	 	(ii)	 	Tenant shall attorn to any party succeeding to Landlord’s interest in the
Premises, whether by purchase, foreclosure, deed in lieu of foreclosure, power of sale,
termination of lease, or otherwise, upon such party’s request, and shall execute such
agreements confirming such attornment as such party may reasonably request. Tenant
shall not seek to enforce any remedy it may have for any default on the part of
Landlord without first giving written notice by certified mail, return receipt
requested, specifying the default in reasonable detail to any Landlord’s Mortgagee
whose address has been given to Tenant, and affording such Landlord’s Mortgagee a
reasonable opportunity to perform Landlord’s obligations hereunder. Notwithstanding the
foregoing attornment and subordination provisions, Landlord’s Mortgagee shall not be
liable for any acts of any previous landlord under this Lease (including, without
limitation, any acts of Landlord) or for construction of any improvements and shall not
be bound by any amendment to which Landlord’s Mortgagee did not consent in writing nor
any payment of rent made more than one month in advance. No amendment to this Lease
shall be effective without the prior written consent of Landlord’s Mortgagee.
	 
	 	(iii)	 	Without limiting the generality of the provisions set forth in the foregoing
provisions of this Section 15, in the event that Landlord’s Mortgagee (or its
successor or assignee) should acquire the Premises by foreclosure, deed in lieu of
foreclosure or similar arrangement, Landlord’s Mortgagee shall have the following
options:

     (1) Landlord’s Mortgagee shall have the right to keep this Lease in full
force and effect. Tenant agrees upon demand by Landlord’s Mortgagee, before or
after the institution of any proceedings for foreclosure, or the sale of the
Premises pursuant to a Mortgage or other instrument of security, to attorn to Landlord’s
Mortgagee or any purchaser at a foreclosure sale and to recognize Landlord’s
Mortgagee or such purchaser as Landlord under this Lease. The foregoing
agreement of Tenant to attorn upon demand of Landlord’s Mortgagee shall survive
any foreclosure sale.

     (2) Landlord’s Mortgagee (or any purchaser at a foreclosure sale) shall
have the right to terminate this Lease by written notice to Tenant.

	 	(iv)	 	Landlord and Tenant acknowledge and agree that as of the date of this Lease
the sole Landlord’s Mortgagee is Allianz Life Insurance Company of North America, a
Minnesota corporation, which shall be entitled to all rights and benefits conferred
upon a Landlord’s Mortgagee pursuant to this Lease.

Lease Agreement — Page 5

 

 

     Section 16. Access to Premises. Landlord shall have the right to enter upon the
Premises at all reasonable hours to conduct inspections, show the Premises to lenders and
purchasers and (at Landlord’s option) perform maintenance and repairs; however, Landlord shall use
its reasonable efforts to minimize interference with the business of Tenant. During the final six
(6) months of the Term, Landlord may enter upon the Premises to show the Premises to prospective
tenants; however, Landlord may do so only during Tenant’s normal business hours, and Landlord shall
use reasonable efforts to minimize interference with the business of Tenant.

     Section 17. Mechanics’ and Materialmen’s Liens. Tenant shall cause to be discharged,
by payment or by filing a bond in form acceptable to Landlord or Landlord’s mortgagees within
twenty (20) days after the filing thereof, any general contractor’s, mechanics’, or materialmen’s
lien that is filed against the Premises, or any part thereof, for any work claimed to have been
performed at the request or for the account of Tenant or for any materials claimed to have been
furnished to or at the request of Tenant.

     Section 18. Surrender of Premises. Upon the expiration of the Term, Tenant shall
surrender the Premises to Landlord, broom clean, ordinary wear and tear accepted. All trade
fixtures and equipment installed in the Premises by Tenant during the Term shall remain the
property of Tenant, and may be removed at any time during the Term. Unless otherwise consented to
in writing by Landlord, Tenant shall, prior to the expiration of the Term, remove all trade
fixtures installed in the Premises by Tenant, and shall remove in a good and workmanlike manner all
protrusions from the walls of the Premises, including without limitation, all protrusions for
lights, electrical equipment, or plumbing fixtures and connections, and shall fill and repair all
holes or voids in the interior walls of the Premises, and shall repair all other damage to the
Premises caused by the removal of Tenant’s trade fixtures.

     Section 19. Holding Over. If Tenant continues to occupy the Premises after the
termination of this Lease and without the written consent of Landlord, then (i) Tenant’s occupancy
shall be construed as a tenancy at sufferance at a rental equal to 110% of the Base Rent in effect
immediately prior to the end of the Term, which shall be prorated and due and payable on a per day
basis, and (ii) Tenant shall be liable for all of Landlord’s consequential damages resulting from
such holding over. Tenant hereby agrees that, notwithstanding any other provision in this Lease
providing for notice or cure in the event of a default by Tenant, Landlord shall have no obligation
to give to Tenant any notice to vacate the Premises before filing a suit for forcible detainer.

     Section 20. Events of Default. Each of the following occurrences shall constitute an
“Event of Default”:

	 	(i)	 	Tenant’s failure to pay Base Rent, or any other sums due from Tenant to
Landlord under the Lease, when due, and the continuation of such failure for a period
of five (5) days after Landlord has delivered to Tenant written notice thereof;
provided, however, that Landlord shall not be required to deliver such written notice
to Tenant for a monetary default more than two (2) times in any twelve (12) month
period during the Term;

Lease Agreement — Page 6

 

 

	 	(ii)	 	Tenant’s failure to perform, comply with, or observe any other obligation of Tenant under this Lease, and the continuation of such failure, after Landlord has
delivered to Tenant written notice thereof, for a period of (A) ten (10) days, in
the case of obligations arising under Sections 4 and 5 hereof, and (B) thirty (30)
days, in the case of obligations arising under other provisions of this Lease;
	 
	 	(iii)	 	the filing of a petition by or against Tenant (A) in any bankruptcy or other
insolvency proceeding; (B) seeking any relief under any state or federal debtor
relief law; (C) for the appointment of a liquidator or receiver for all or
substantially all of Tenant’s property or for Tenant’s interest in this Lease; or
(D) for the reorganization or modification of Tenant’s capital structure, however,
if such petition is filed against Tenant, then such filing shall not be an Event of
Default unless Tenant fails to have the proceedings initiated by such filing
dismissed within sixty (60) days; and/or

	 	(iv)	 	the admission by Tenant that it cannot meet its obligations as they become
due or the making by Tenant of an assignment for the benefit of its creditors.

     Section 21. Landlord’s Remedies. Upon any Event of Default, Landlord may, in addition
to all other rights and remedies afforded Landlord hereunder or by law or equity, take any of the
following actions:

     (a) terminate this Lease by giving Tenant written notice thereof, in which event,
Tenant shall pay to Landlord the sum of (i) all Base Rent accrued hereunder through the date
of termination, (ii) all other amounts then due by Tenant to Landlord under this Lease, and (iii)
an amount equal to (A) the total Base Rent that Tenant would have been required to pay for the
remainder of the Term if this Lease had not been terminated discounted to present value at a
per annum rate equal to the “Prime Rate” as published on the date this Lease is terminated by The
Wall Street Journal, Southwest Edition, in its listing of “Money Rates,” minus (B) the then
present fair rental value of the Premises for such period, similarly discounted; or

     (b) terminate Tenant’s right to possession of the Premises without terminating this
Lease by giving written notice thereof to Tenant, in which event Tenant shall pay to Landlord
(i) all Base Rent and other amounts accrued hereunder to the date of termination of possession,
and (ii) all Base Rent and other sums required to be paid by Tenant hereunder during the remainder
of the Term, diminished by any net sums thereafter received by Landlord through reletting the
Premises during such period. Landlord shall use reasonable efforts to relet the Premises on
such terms and conditions as Landlord in its sole discretion may determine (including a term
different from the Term, rental concessions, and alterations to, and improvement of, the Premises).
Landlord shall not be liable for, nor shall Tenant’s obligations hereunder be diminished
because of, Landlord’s failure to relet the Premises or to collect rent due for such reletting. Tenant
shall not be entitled to the excess of any consideration obtained by reletting over the Base Rent
due hereunder. Reentry by Landlord in the Premises shall not affect Tenant’s obligations hereunder
for the unexpired Term; rather, Landlord may, from lime to time, bring action against Tenant
to collect amounts due by Tenant, without the necessity of Landlord’s waiting until the
expiration of the Term. Unless Landlord delivers written notice to Tenant expressly stating that it has
elected to terminate this Lease, all actions taken by Landlord to exclude or dispossess Tenant
of

Lease Agreement — Page 7

 

 

the Premises shall be deemed to be taken under this subsection (b). If Landlord elects to proceed
under this subsection (b), then Landlord may at any time thereafter elect to terminate this Lease
under subsection (a).

Additionally, without notice, Landlord may, upon any Event of Default, alter locks or other
security devices at the Premises to deprive Tenant of access thereto, and Landlord shall not be
required to provide a new key or right of access to Tenant except as may be required by law.

     Section 22. Notices. All notices to be given or delivered hereunder shall be in
writing and shall be delivered either by certified mail, postage prepaid, return receipt requested,
or by courier or messenger delivery, at the address of Landlord and Tenant set forth in the
preamble of this Lease. Notices shall be deemed to be given and received when delivered to the
addresses called for hereby. Landlord and Tenant may, by delivering notice to the other, designate
substitute addresses for those set forth above.

     Section 23. Broker’s Commissions. Each of Landlord and Tenant shall indemnify the
other against, and hold the other harmless from, all liabilities (including reasonable attorneys’
fees) arising from any right or claim to a brokerage commission, finder’s fee, or similar
compensation in connection with this Lease which arises out of any act or agreement of the
indemnitor.

     Section 24. Limitation of Liability. Notwithstanding any provision to the contrary in
this Lease, Tenant’s sole and exclusive remedy in the event of a breach by Landlord of any
provisions herein shall be an action for damages which may not be instituted unless and until (i)
Tenant has delivered to Landlord notice specifying with particularity the nature of such breach,
and (ii) Landlord has failed to commence to cure said breach within ten (10) days after receipt of
such notice. Tenant shall look solely to the estate and interest of Landlord in the Premises for
the collection of any judgment (or other judicial process) arising out of any default by Landlord
hereunder. Without limiting the foregoing, no assets of Landlord other than the Premises shall be
subject to levy, execution, or other process for the satisfaction of Tenant’s remedies for a breach
of this Lease. If Landlord conveys fee simple title to the Premises to any third party, and such
third party assumes all of the obligations of Landlord hereunder, then Landlord shall thereupon be
relieved and released from all obligations of Landlord thereafter arising under this Lease, and
Tenant shall look solely to such third party grantee for performance of such obligations.

     Section 25. Quiet Enjoyment. Landlord covenants that, if Tenant pays all rents and
performs all of its obligations pursuant to this Lease, then Tenant shall peaceably and quietly
enjoy the Premises subject only to the terms of this Lease and to any mortgage to which this Lease
is or may become subordinate.

     Section 26. Estoppel Certificates. Tenant shall, at the request of Landlord from time
to time, execute and deliver all estoppel certificates reasonably requested by Landlord for the
benefit of any prospective mortgagee or purchaser of the Premises.

     Section 27. Entire Agreement. This Lease, including Exhibit A attached hereto, merges
all prior agreements of Landlord and Tenant and constitutes the entire agreement between

Lease Agreement — Page 8

 

 

Landlord and Tenant with respect to Tenant’s occupancy of the Premises, and may be amended only by
a written instrument executed by both Landlord and Tenant. This Lease shall be construed in
accordance with and governed by the laws of the State of Texas. All references in this Lease to a
Section shall, unless expressly otherwise indicated, refer to a Section of this Lease.

     Section 28. Condition. THE PREMISES ARE LEASED BY LANDLORD AND ACCEPTED BY TENANT “AS
IS,” “WHERE IS” AND “WITH ALL FAULTS” AND WITHOUT ANY WARRANTIES OR REPRESENTATIONS OF WHATSOEVER
KIND OR NATURE, WHETHER EXPRESS OR IMPLIED, OR WHETHER WRITTEN OR ORAL. WITHOUT LIMITING THE
FOREGOING, LANDLORD MAKES NO REPRESENTATIONS OR WARRANTIES ABOUT THE PHYSICAL CONDITION OF THE
PREMISES OR THE PRESENCE OR ABSENCE OF ANY HAZARDOUS WASTE THEREON, LANDLORD AND TENANT EXPRESSLY
DISCLAIM ANY IMPLIED WARRANTY THAT THE PREMISES ARE SUITABLE FOR TENANT’S INTENDED COMMERCIAL
PURPOSE, AND TENANT’S OBLIGATION TO PAY RENT HEREUNDER IS NOT DEPENDENT UPON THE CONDITION OF THE
PREMISES OR THE PERFORMANCE BY LANDLORD OF ITS OBLIGATIONS HEREUNDER, AND, EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED HEREIN, TENANT SHALL CONTINUE TO PAY THE RENT, WITHOUT ABATEMENT, SETOFF, OR
DEDUCTION, NOTWITHSTANDING ANY BREACH BY LANDLORD OF ITS DUTIES OR OBLIGATIONS HEREUNDER, WHETHER
EXPRESS OR IMPLIED.

Lease Agreement — Page 9

 

 

     IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the effective date
first set forth above.

	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	LANDLORD:	 	TENANT:	 	 
	 
	 	 	 	 	 	 	 	 
	CM REAL ESTATE, LLC,	 	CRAFTMADE INTERNATIONAL, INC.,	 	 
	a Texas limited liability company	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 	 	 
	By:  

	/s/ James R. Ridings
	 	By:  
	/s/ James R. Ridings	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	Name: 	James R. Ridings
	 	 	Name: 	James R. Ridings	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	Title: 	 
	 	 	Title: 	 	 	 
	 

	 	 
	 	 	 	 	 	 

Lease Agreement — Page 10

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