Document:

exv10w7

 

Exhibit 10.7

CONSULTING AGREEMENT

     This CONSULTING AGREEMENT (this “Agreement”) is entered into as of September 15, 2006,
to be effective as of July 1, 2006 (the “Effective Date”), by and between Imagine One
Resources LLC, a North Carolina limited liability company (the “Consultant”), Trade Source
International, Inc., a Delaware corporation (“TSI”), and Craftmade International, Inc., a
Delaware corporation (“Craftmade”). Capitalized terms used herein without definition shall
have the meanings given to such terms in the Stock Purchase Agreement of even date herewith between
TSI, Robert W. Lackey and Craftmade (the “Stock Purchase Agreement”).

BACKGROUND STATEMENT

     Robert W. Lackey and Robert W. Lackey, Jr. own all of the membership interests in Consultant.
Concurrently with the execution and delivery of this Agreement, TSI is acquiring from Robert W.
Lackey all of the outstanding capital stock in MARKETING IMPRESSIONS, INC., a Georgia corporation,
pursuant to the Stock Purchase Agreement. TSI recognizes the knowledge and experience of
Consultant and desires to secure the services of Consultant with respect to the Business as
conducted by the TSI Group, and Consultant desires to perform such services for or on behalf of
TSI, all on the terms and conditions as hereinafter set forth.

STATEMENT OF AGREEMENT

     Now, therefore, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows:

ARTICLE I

COMPENSATION

     1.1 In consideration of the Consulting Services (as defined below), TSI and Craftmade shall,
jointly and severally, pay to the Consultant the compensation provided for in Section 2.03(g) of
the Stock Purchase Agreement in accordance with the provisions of the Stock Purchase Agreement. In
addition, TSI and Craftmade shall, jointly and severally, reimburse the Consultant for all
reasonable out-of-pocket costs and expenses incurred by the Consultant in providing the Consulting
Services, including without limitation costs and expenses for travel, lodging and meals, if any;
provided, that sufficient evidence thereof is provided by Consultant to TSI.

ARTICLE II

CONSULTING DUTIES AND RESPONSIBILITIES

     2.1 Obligations of Consultant. Subject to the limitations set forth below,
Consultant, through Robert W. Lackey and/or Robert W. Lackey, Jr. shall perform the following
obligations with respect to the Business during the term of this Agreement (the “Consulting
Services”):

 

 

     (i) Consultant shall, upon TSI’s request, provide advice and consultation with respect
to dealing with Major Customers, including advice and consultation with respect to
strategies for pricing products and major line reviews with Major Customers;

     (ii) Consultant shall, upon TSI’s request, provide advice and consultation with respect
to cost reduction efforts;

     (iii) Consultant shall, upon TSI’s request, provide advice and consultation with
respect to new products; and

     (iv) Consultant shall, upon TSI’s request, provide advice and consultation with respect
to strategies for growing the Business.

     2.2 Limitations. Consultant’s duties hereunder are purely advisory in nature, and
Consultant shall have no obligation to perform any other duties not expressly set forth in this
Agreement. Consultant shall have no right to make any decision on behalf of TSI, and TSI may
decide, in its sole discretion, to accept or reject Consultant’s advice and recommendations.
Consultant’s obligations hereunder are intended to be part-time and Consultant is free to engage in
other business activities, subject to the limitations set forth in the Stock Purchase Agreement,
Shareholder Non-Competition Agreement and RLJ Non-Competition Agreement. Consultant shall perform
the Consulting Services from its office in Catawba County, North Carolina, or any other office it
may have from time to time. Consultant shall have no obligation to travel to attend meetings or
for any other reason unless the parties mutually agree to such travel and TSI and Craftmade agree
to reimburse the Consultant for its reasonable travel costs and expenses. Consultant’s
participation in any activity hereunder is subject to adequate advance notice from TSI of all
relevant facts and circumstances and the availability of Consultant’s employees. Should Robert W.
Lackey and/or Robert W. Lackey. Jr. be medically unable to perform any of the duties set forth
above, Consultant may replace them with qualified substitute employees.

ARTICLE III

TERM

     3.1 This Agreement shall commence on the date hereof and continue until June 30, 2011.

ARTICLE IV

INDEMNIFICATION

     4.1 Indemnification by TSI. TSI shall indemnify and hold harmless the Consultant and
its members, managers, employees or agents (each a “Consultant Indemnified Party”), to the
fullest extent permitted by law or equity, from and against any and all judgments, losses, claims
(whether or not valid), damages, costs, fees, expenses or liabilities, joint or several (each a
“Loss”), to which a Consultant Indemnified Party may become subject, related to or arising
out of the transactions contemplated by this Agreement or the services rendered by the Consultant
under this Agreement, and shall, upon request, reimburse a Consultant Indemnified Party for all
legal and other costs, fees and expenses as they are incurred in connection with investigating,
preparing or defending the foregoing; provided, however, that no such
indemnification shall be

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required to be paid to an Indemnified Party with respect to a Loss that is finally determined
by a court of competent jurisdiction (after exhaustion of all appeals) to have resulted solely from
the gross negligence or willful misconduct of such Consultant Indemnified Party.

     4.2 Indemnification by Consultant. Consultant shall indemnify and hold harmless TSI
and its officers, directors, employees or agents (each a “TSI Indemnified Party”), to the
fullest extent permitted by law or equity, from and against any Loss to which a TSI Indemnified
Party may become subject, related to or arising out of the transactions contemplated by this
Agreement or the services rendered by the Consultant under this Agreement that, in each case, is
finally determined (by a court of competent jurisdiction and after exhausting all appeals) to have
resulted from the gross negligence or willful misconduct of Consultant, and shall, upon request,
reimburse a TSI Indemnified Party for all legal and other costs, fees and expenses as they are
incurred in connection with investigating, preparing or defending the foregoing. For the avoidance
of doubt, Consultant shall have no obligation to indemnify or hold harmless any TSI Indemnified
Party to the extent any of the foregoing arise out the negligence of Consultant.

ARTICLE V

MISCELLANEOUS

     5.1 Governing Law. The execution, interpretation and performance of this Agreement
shall be governed by the internal laws and judicial decisions of the State of Delaware, without
regard to its conflicts-of-laws principles.

     5.2 Assignment; Third-Party Rights. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party hereto without the prior written consent of
the other party; provided, however, that the Consultant may assign this Agreement
to an Affiliate of the Consultant without such consent so long as Robert W. Lackey and Robert W.
Lackey, Jr. will continue to be actively involved. This Agreement and its provisions are for the
sole benefit of the parties to this Agreement and their successors and permitted assigns and shall
not give any other person or entity any legal or equitable right, remedy or claim.

     5.3 Headings. The headings contained herein are for convenience of reference only,
and are not intended to define, limit or describe the scope or intent of any provisions of this
Agreement.

     5.4 Amendment and Modification. This Agreement may be amended, modified or
supplemented only by an agreement in writing signed by the party against whom such amendment,
modification or supplement is sought to be enforced. Any such writing must refer specifically to
this Agreement and any purported amendment in violation hereof shall be void.

     5.5 Severability. If any provision contained in this Agreement shall for any reason
be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, and this Agreement shall
be construed as if such invalid, illegal or unenforceable provision had never been contained
herein, unless the invalidity of any such provision substantially deprives either party of the
practical benefits

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intended to be conferred by this Agreement. Notwithstanding the foregoing, any provision of
this Agreement held invalid, illegal or unenforceable only in part or degree shall remain in full
force and effect to the extent not held invalid or unenforceable, and the determination that any
provision of this Agreement is invalid, illegal or unenforceable as applied to particular
circumstances shall not affect the application of such provision to circumstances other than those
as to which it is held invalid, illegal or unenforceable.

     5.6 Construction. Each party acknowledges that such party and its attorneys have been
given an equal opportunity to negotiate the terms and conditions of this Agreement and that any
rule of construction to the effect that ambiguities are to be resolved against the drafting party
or any similar rule operating against the drafter of an agreement shall not be applicable to the
construction or interpretation of this Agreement.

     5.7 Counterparts. This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument. This Agreement may be executed on signature pages exchanged by facsimile or electronic
mail, in which event each party shall promptly deliver to the others such number of original
executed copies as the others may reasonably request.

     5.8 Entire Agreement. This Agreement and the Stock Purchase Agreement embody the
entire agreement and understanding of the parties hereto in respect of the subject matter hereof.
This Agreement and the Stock Purchase Agreement supersede all prior agreements and understandings
between the parties with respect to the transactions contemplated by this Agreement. This
Agreement is not intended to supersede or limit the obligations of Robert W. Lackey under the Stock
Purchase Agreement and the Shareholder Non-competition Agreement or Robert W. Lackey, Jr. under the
RLJ Non-Competition Agreement.

     5.9 Relationship of the Parties. Nothing in this Agreement shall be construed as
creating a partnership, joint venture, agency or employment relationship between the Consultant and
TSI. Except as expressly provided herein, neither party shall have any authority to contract or in
any manner incur any liability or obligation for or in the name of the other party. EACH PARTY IS
AND SHALL BE SOLELY LIABLE FOR ANY FEDERAL AND STATE INCOME AND WITHHOLDING TAXES, UNEMPLOYMENT
TAXES, FICA TAXES, AND WORKERS’ COMPENSATION PAYMENTS AND PREMIUMS APPLICABLE TO THE SERVICES
PROVIDED BY SUCH PARTY’S PERSONNEL PURSUANT TO THIS AGREEMENT.

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     IN WITNESS WHEREOF, the parties have duly executed this Consulting Agreement as of the day and
year first above written.

	 	 	 	 	 
	 	IMAGINE ONE RESOURCES LLC

 	 
	 	By:  	/s/ Robert W. Lackey
 	 
	 	 	Robert W. Lackey, Manager 	 
	 	 	 	 
	 	TRADE SOURCE INTERNATIONAL, INC

 	 
	 	By:  	/s/ Marcus Scrudder
 	 
	 	Name: Marcus Scrudder 	 
	 	Title: Chief Financial Officer 	 
	 
	 	CRAFTMADE INTERNATIONAL, INC

 	 
	 	By:  	/s/ Marcus Scrudder
 	 
	 	Name: Marcus Scrudder 	 
	 	Title: Chief Financial Officer 	 
	 

5exv10w8

 

Exhibit 10.8

Execution Copy

PARTIALLY SUBORDINATE SECURITY AGREEMENT

     THIS PARTIALLY SUBORDINATE SECURITY AGREEMENT, dated as of September 15, 2006 (as amended,
supplemented or modified from time to time, this “Agreement”), is made by Trade Source
International, Inc., a Delaware corporation (“TSI”), MARKETING IMPRESSIONS, INC., a Georgia
corporation (“MI”), Prime/Home Impressions, LLC, a North Carolina limited liability company
(“PHI” and together with MI and TSI, the “Pledgors”), in favor of Robert W. Lackey
(“Lackey”), as collateral agent (in such capacity, the “Agent”) for Lackey, Robert
W. Lackey, Jr., Imagine One Resources, LLC, RWL Corporation and R.L. Products Corporation (together
with Lackey, Robert W. Lackey, Jr., Imagine One Resources, LLC and RWL Corporation, the
“Secured Parties”), for the benefit of the Secured Parties. Except as otherwise provided
herein, capitalized terms used herein without definition shall have the meanings given to them in
the Stock Purchase Agreement referred to below.

BACKGROUND STATEMENT

     A. TSI, Lackey and Craftmade International, Inc., a Delaware corporation and parent of TSI
(“Craftmade”), are parties to a Stock Purchase Agreement, dated as of even date herewith
(as amended, modified or supplemented from time to time, the “Stock Purchase Agreement”),
pursuant to which TSI is (i) purchasing all of Lackey’s interest in MI, (ii) purchasing certain
intellectual property from Lackey, RWL Corporation and R. L. Products Corporation, (iii) entering
into a non-competition agreement with, and purchasing the goodwill of, each of Lackey and Robert W.
Lackey, Jr. and (iv) entering into a consulting agreement with Imagine One Resources, LLC, all upon
the terms and conditions set forth therein. The Stock Purchase Agreement provides that the
purchase price for the assets listed in clauses (i) through (iv) above will be paid partially at
the closing, with the remainder to be paid over the following 62 months through an earnout.

     B. TSI and MI each owns a 50% membership interest in PHI and, subsequent to the acquisition of
MI, TSI will directly or indirectly own all of the membership interests in the PHI.

     C. It is a condition to the closing of the Stock Purchase Agreement that the Pledgors shall
have agreed, by executing and delivering this Agreement, to secure the payment in full of TSI’s and
Craftmade’s, respective obligations under the Stock Purchase Agreement. Lackey is relying on this
Agreement in his decision to enter into the Stock Purchase Agreement, and would not enter into the
Stock Purchase Agreement without the execution and delivery of this Agreement by the Pledgors.

     D. The Pledgors will obtain benefits as a result of the transactions contemplated by the Stock
Purchase Agreement, which benefits are hereby acknowledged, and, accordingly, desire to execute and
deliver this Agreement.

STATEMENT OF AGREEMENT

     NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Pledgors and the Agent hereby
agree as follows:

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ARTICLE I

DEFINITIONS

     1.1 Defined Terms. The following terms that are defined in the Uniform Commercial
Code (as hereinafter defined) are used in this Agreement as so defined (and, in the event any such
term is defined differently for purposes of Article 9 of the Uniform Commercial Code than for any
other purpose or purposes of the Uniform Commercial Code, the Article 9 definition shall govern):
Account, Chattel Paper, Documents, Equipment, Fixtures, General Intangibles, Goods, Instruments,
Inventory, Letter-of-Credit Rights and Records; provided, however, that, for the
purposes of this Agreement, the definition of each such term is hereby amended to require that the
applicable property arise out of, relate to or be used in the Business as conducted by any of the
Pledgors. In addition, the following terms have the meanings set forth below:

     “Collateral” means and includes, to the extent and only to the extent that the same
arise out of, relate to or are used in the Business as conducted by any of the Pledgors, all of the
Pledgors’ Accounts, Chattel Paper, Documents, Equipment, Fixtures, General Intangibles, Goods,
Instruments, Inventory, Intellectual Property, Letter-of-Credit Rights, Records, membership
interest in PHI and all other similar articles of personal property of any of the Pledgors now or
hereafter held or received by, in transit to, or in the possession or control of any of the
Pledgors or the Agent, and any substitutions or replacements thereof and any products and proceeds
thereof, including without limitation, insurance proceeds.

     “Default” means the occurrence of any the following:

     (i) a Stock Purchase Agreement Default;

     (ii) any Pledgor fails to keep and perform any covenant or agreement contained in this
Agreement and such failure is not cured within thirty days after notice thereof is provided by
Agent to the Pledgors;

     (iii) any Pledgor shall (a) apply for or consent to the appointment of a receiver, trustee,
custodian, intervenor or liquidator of themselves or of all or a substantial part of their assets,
(b) file a voluntary petition in bankruptcy or admit in writing that it is unable to pay its debts
as they become due, (c) make a general assignment for the benefit of creditors, (d) file a petition
or answer seeking reorganization of an arrangement with creditors or to take advantage of any
bankruptcy or insolvency laws, (e) file an answer admitting the material allegations of, or consent
to, or default in answering, a petition filed against it in any bankruptcy, reorganization or
insolvency proceeding, or (f) take corporate action for the purpose of effecting any of the
foregoing; or

     (iv) an involuntary petition or complaint shall be filed against any Pledgor seeking
its bankruptcy or reorganization or the appointment of a receiver, custodian, trustee, intervenor
or liquidator of it, or all or substantially all of its assets, and such petition or complaint
shall not have been dismissed within 60 days of the filing thereof; or an order, order for relief,
judgment or decree shall be entered by any court of competent jurisdiction or other competent
authority approving a petition or complaint seeking reorganization of it or appointing a receiver,
custodian,

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trustee, intervenor or liquidator of it, or of all or substantially all of their assets, and
such order, judgment or decree shall continue unstayed and in effect for a period of thirty (30)
days.

     “Intellectual Property” means, to the extent and only to the extent that the same are
used in any Fan Accessories that were, are or have been conceived to be manufactured, marketed or
sold in the Business as conducted by any of the Pledgors, (i) all inventions (whether or not
patentable and whether or not reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all reissues, continuations,
continuations-in-part, divisions, revisions, extensions, and reexaminations thereof, (ii) all
trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all
goodwill associated therewith, and all applications, registrations, and renewals in connection
therewith, (iii) all copyrightable works and all copyrights (registered and unregistered), (iv) all
trade secrets and confidential information (including, without limitation, financial, business and
marketing plans and customer and supplier lists and related information), (v) all computer software
and software systems (including, without limitation, data, databases and related documentation),
(vi) all Internet web sites and domain names, (vii) all technology, know-how, processes and other
proprietary rights, and (viii) all licenses or other agreements to or from third parties regarding
any of the foregoing.

     “Secured Obligations “ means the payment obligations of TSI and Craftmade under
Sections 2.03, 2.04, 2.05 and 2.06 of the Stock Purchase Agreement.

     “Senior Lender” means The Frost National Bank, a national banking association.

     “Senior Loan Agreement” means the that certain Amended and Restated Loan Agreement
dated October 31, 2005, executed by Senior Lender and Craftmade, as such loan agreement may have
been, or hereafter may be, amended, restated, modified, supplemented or otherwise modified from
time to time.

     “Senior Loan Documents” means the Senior Notes, the Senior Loan Agreement and all
other documents and instruments executed by Pledgors in favor of Senior Lender to secure payment
and performance of the Senior Loan Obligations, and all other documents and agreements evidencing
or governing the indebtedness, liabilities and obligations evidenced by the Senior Notes.

     “Senior Loan Obligations” means indebtedness, liabilities, and obligations incurred
under, or in connection with, the Senior Loan Agreement, the Senior Notes or any other present or
future indebtedness, liabilities or obligations of Craftmade payable to the Senior Lender whether
direct, indirect or contingent.

     “Senior Notes” means, collectively: (i) that certain Revolving Promissory Note dated
November 6, 2001 (as such Revolving Promissory Note has been, or may hereafter be, increased,
modified, restated, renewed or extended from time to time), executed by Craftmade payable to the
order of Senior Lender in the original principal amount of $20,000,000; (ii) that certain
Promissory Note dated February 25, 2005(as such Promissory Note has been, or may hereafter be,
increased, modified, restated, renewed or extended from time to time), executed by Craftmade
payable to the order of Senior Lender in the original principal amount of $3,000,000

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and (iii) any other present or future promissory note or notes payable by Craftmade to Senior
Lender including, but not limited to, any increase, modification, renewal or extension thereof.

     “Senior Security Interests” means (i) the security interest and liens in TSI’s
Accounts and Inventory in favor of the Senior Lender and all products and proceeds thereof
(including, without limitation, insurance payable by reason of loss or damage to the foregoing
collateral) and any property, securities, guaranties or monies of TSI which may at any time come
into the possession of the Senior Lender, and (ii) any security interest or lien now existing or
hereafter created in PHI’s Accounts or Inventory in favor of the Senior Lender and all products and
proceeds thereof (including, without limitation, insurance payable by reason of loss or damage to
the foregoing collateral) and any property, securities, guaranties or monies of PHI which may at
any time come into the possession of the Senior Lender.

     “Stock Purchase Agreement Default” means the occurrence of each of the following:

     (i) the occurrence of a Triggering Event under the Stock Purchase Agreement;

     (ii) the election by the Shareholder to accelerate amounts due under the Stock Purchase
Agreement pursuant to Section 2.06(a) thereof; and

     (iii) TSI and/or Craftmade, or their successors and assigns, fail to pay the Estimated
Acceleration Amount or the True-up Amount in accordance with, and in the time provided in, Section
2.06 of the Stock Purchase Agreement.

     “Subordination Agreement” means the Subordination Agreement of even date herewith
between the Agent, the Senior Lender, the Pledgors and Craftmade.

     “Uniform Commercial Code” means the Uniform Commercial Code as the same may be in
effect from time to time in the State of Delaware; provided that if, by reason of
applicable law, the validity or perfection of any security interest in any Collateral granted under
this Agreement is governed by the Uniform Commercial Code as in effect in another jurisdiction,
then as to the validity or perfection, as the case may be, of such security interest, “Uniform
Commercial Code” means the Uniform Commercial Code as in effect from time to time in such other
jurisdiction.

ARTICLE II

CREATION OF SECURITY INTEREST

     2.1 Pledge and Grant of Security Interest. Each Pledgor hereby pledges, assigns and
delivers to the Agent, for the ratable benefit of the Secured Parties, and grants to the Agent, for
the ratable benefit of the Secured Parties, a lien upon and security interest in all of its right,
title and interest in and to the Collateral.

     2.2 Security for Secured Obligations. This Agreement and the Collateral secure the
full and prompt payment, at any time and from time to time as and when due (whether at the stated
maturity, by acceleration or otherwise), of the Secured Obligations.

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     2.3 Security Interests Absolute. Subject to the rights of the Senior Lender under the
Senior Security Interests, all rights of the Agent and security interests hereunder, and all
obligations of each Pledgor hereunder, shall be absolute and unconditional and, without limiting
the generality of the foregoing, shall not be released, discharged or otherwise affected by:

     (i) any extension, renewal, settlement, compromise, waiver or release in respect of any
Secured Obligation or any other document evidencing or securing such Secured Obligation, by
operation of law or otherwise;

     (ii) any modification or amendment or supplement to the Stock Purchase Agreement or any
other document evidencing or securing any Secured Obligation;

     (iii) any release, non-perfection or invalidity of any direct or indirect security for
any Secured Obligation;

     (iv) any insolvency, bankruptcy, reorganization or other similar proceeding affecting
TSI and/or Craftmade or their assets or any resulting disallowance, release or discharge of
all or any portion of the Secured Obligations;

     (v) the existence of any claim, set-off or other right which any Pledgor may have at
any time against TSI, Craftmade, the Agent or any other corporation or person, whether in
connection herewith or any unrelated transactions; provided, that nothing herein
shall prevent the assertion of any such claim by separate suit or compulsory counterclaim;

     (vi) any invalidity or unenforceability relating to or against any Pledgor for any
reason of any Secured Obligation, or any provision of applicable law or regulation
purporting to prohibit the payment by any Pledgor of the Secured Obligations;

     (vii) any failure by the Agent (A) to file or enforce a claim against any Pledgor (in a
bankruptcy or other proceeding), (B) to give notice of the existence, creation or incurrence
by TSI and/or Craftmade of any new or additional indebtedness or obligation under or with
respect to the Secured Obligations, (C) to commence any action against any Pledgor or (D) to
proceed with due diligence in the collection, protection or realization upon any collateral
securing the Secured Obligations; or

     (viii) any other act or omission to act or delay of any kind by any Pledgor or the
Agent or any other corporation or person or any other circumstance whatsoever which might,
but for the provisions of this clause, constitute a legal or equitable discharge of each
Pledgor’s obligations hereunder.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

     Each Pledgor hereby represents and warrants as follows:

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     3.1 Security Interests; Filings. This Agreement, together with (i) the filing, with
respect to each Pledgor, of duly completed Uniform Commercial Code financing statements naming such
Pledgor as debtor, the Agent as secured party, and describing the Collateral, in the jurisdictions
set forth with respect to such Pledgor on Schedule 3.1 hereto, and (ii) to the extent required by
applicable law, the filing, with respect to each relevant Pledgor, of duly completed and executed
assignments in the forms required by the U.S. Copyright Office or the U.S. Patent and Trademark
Office, creates, and at all times shall constitute, a valid and perfected security interest in and
lien upon the Collateral in favor of the Agent, for the benefit of the Secured Parties, to the
extent a security interest therein can be perfected by such filings.

     3.2 Authorization; Consent. The execution, delivery and performance by each Pledgor
of this Agreement require no action by or in respect of, or filing with, any governmental authority
and do not contravene, or constitute (with or without the giving of notice or lapse of time or
both) a default under, any provision of applicable law or of any agreement, judgment, injunction,
order, decree or other instrument binding upon or affecting each Pledgor.

     3.3 Intellectual Property. The information listed in Schedules 3.3A, 3.3B and 3.3C is
true and correct in all material respects for the registered copyrights, patents and trademarks and
applications for the same owned by any Pledgor as of the date hereof (after giving effect to the
Intellectual Property Assignment and assuming the accuracy of the representation given by Lackey in
the first sentence of Section 4.01.07 of the Stock Purchase Agreement and in Section 3(b) of the
Intellectual Property Assignment) and used in any Fan Accessories that were, are or have been
conceived to be manufactured, marketed or sold in the Business as conducted by any of the Pledgors.

ARTICLE IV

COVENANTS

     Each Pledgor agrees that so long as any Secured Obligation remains unpaid; subject, however,
to the rights of the Senior Lender under the Senior Security Interests as more fully set forth in
the Subordination Agreement:

     4.1 Use and Disposition of Collateral. So long as no Default shall have occurred and
be continuing, each Pledgor may, in any lawful manner not inconsistent with the provisions of this
Agreement, use, control and manage the Collateral in the operation of its businesses, and receive
and use the income, revenue and profits arising therefrom and the proceeds thereof, in the same
manner and with the same effect as if this Agreement had not been made.

     4.2 Change of Name, Locations, etc. No Pledgor will (i) change its name, identity or
corporate structure or (ii) change the jurisdiction of its incorporation or organization from the
jurisdiction listed on Schedule 3.1 (whether by merger or otherwise), unless in each case such
Pledgor has given twenty (20) days’ prior written notice to the Agent of its intention to do so,
together with such information in connection with such proposed action as the Agent may reasonably
request.

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     4.3 Equipment. Each Pledgor will, in accordance with sound business practices,
maintain all Equipment used by it in the Business (other than obsolete Equipment) in good repair,
working order and condition (normal wear and tear excepted) and make all necessary repairs and
replacements thereof so that the value and operating efficiency thereof shall at all times be
maintained and preserved. No Pledgor shall knowingly permit any Equipment to become a fixture to
any real property.

     4.4 Inventory. Each Pledgor will, in accordance with sound business practices,
maintain all Inventory held by it or on its behalf in good saleable or useable condition. Unless a
Default has occurred and is continuing, each Pledgor may, in any lawful manner not inconsistent
with the provisions of this Agreement, process, use and, in the ordinary course of business but not
otherwise, sell its Inventory.

     4.5 Intellectual Property. Each applicable Pledgor will execute and deliver to the
Agent, upon request, fully completed security agreements consistent with the terms set forth in
this Agreement in the forms reasonably requested by the Agent for recordation in the U.S. Copyright
Office or the U.S. Patent and Trademark Office with regard to any registered Intellectual Property
owned by such Pledgor. In the event that after the date hereof any Pledgor shall acquire any or
effect any registration of any registered Intellectual Property, whether within the United States
or any other country or jurisdiction, such Pledgor shall promptly furnish written notice to the
Agent and such Pledgor shall, upon request, execute and deliver to the Agent amended security
agreements consistent with the terms set forth in this Agreement in the forms reasonably requested
by the Agent for recordation in the U.S. Copyright Office or the U.S. Patent and Trademark Office,
together with any other amendments, agreements, instruments and documents that the Agent may
reasonably request. Each Pledgor hereby appoints the Agent its attorney-in-fact to execute,
deliver and record any and all such amendments, agreements, instruments and documents for the
foregoing purposes, all acts of such attorney being hereby ratified and confirmed and such power,
being coupled with an interest, shall be irrevocable for so long as this Agreement shall be in
effect with respect to such Pledgor.

     4.6 Protection of Security Interest; Further Assurances. Each Pledgor will, at its
own cost and expense, take any and all actions reasonably necessary to warrant and defend the
right, title and interest of the Secured Parties in and to the Collateral against the claims and
demand of all other persons. Each Pledgor agrees that it will do such further acts and things
(including, without limitation, making any notice filings with state tax or revenue authorities
required to be made by account creditors in order to enforce any Accounts in such state) and to
execute and deliver to the Agent such additional conveyances, assignments, agreements and
instruments as the Agent may reasonably require or deem advisable to perfect, establish, confirm
and maintain the security interest and lien provided for herein, to carry out the purposes of this
Agreement or to further assure and confirm unto the Agent his rights, powers and remedies
hereunder.

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ARTICLE V

GENERAL AUTHORITY; REMEDIES

     5.1 General Authority. Each Pledgor hereby irrevocably appoints the Agent, with full
power of substitution, as its true and lawful attorney-in-fact, in the name of each such Pledgor or
the Agent, for the sole use and benefit of the Agent, but at each Pledgor’s expense, from time to
time in the Agent’s discretion after the occurrence and during the continuation of a Default, to
take any and all appropriate action and to execute any and all documents and instruments which may
be necessary or desirable to carry out the terms of this Agreement and, without limiting the
foregoing, each Pledgor hereby gives the Agent the power and right on its behalf, without notice to
or further assent by any Pledgor to do the following, from time to time in the Agent’s discretion
after the occurrence and during the continuation of a Default, subject, however, to the rights of
the Senior Lender under the Senior Security Interests as more fully set forth in the Subordination
Agreement:

     (i) to receive, take, endorse, assign and deliver any and all checks, notes, drafts,
acceptances, documents and other negotiable and nonnegotiable instruments taken or received
by any Pledgor as, or in connection with, the Collateral;

     (ii) to demand, sue for, collect, receive and give acquittance for any and all monies
due or to become due upon or in connection with the Collateral;

     (iii) to commence, settle, compromise, compound, prosecute, defend or adjust any claim,
suit, action or proceeding with respect to, or in connection with, the Collateral;

     (iv) to sell, transfer, assign or otherwise deal in or with the Collateral or any part
thereof, as fully and effectually as if the Agent were the absolute owner thereof; and

     (v) to do, at its option, but at the expense of the Pledgors, at any time or from time
to time, all acts and things which the Agent deems necessary to protect or preserve the
Collateral and to realize upon the Collateral.

     5.2 Rights and Remedies. Subject to the rights of the Senior Lender under the Senior
Security Interests, if a Default shall have occurred and be continuing, the Agent shall be entitled
to exercise in respect of the Collateral all of its rights, powers and remedies provided for herein
or otherwise available to him under the Stock Purchase Agreement, by law, in equity or otherwise,
including all rights and remedies of a secured party under the Uniform Commercial Code, and shall
be entitled in particular, but without limitation of the foregoing, to exercise the following
rights, which each Pledgor agrees to be commercially reasonable:

     (a) To notify any or all account debtors or obligors under any Accounts or other Collateral of
the security interest in favor of the Agent created hereby and to direct all such persons to make
payments of all amounts due thereon or thereunder directly to the Agent or to an account designated
by the Agent; and in such instance and from and after such notice, all amounts and proceeds
received by any Pledgor in respect of any Accounts or other Collateral shall be received in trust
for the benefit of the Agent hereunder, shall be segregated from the other funds of such Pledgor
and shall be forthwith deposited into such account or paid over or

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delivered to the Agent in the same form as so received (with any necessary endorsements or
assignments), to be held as Collateral and applied to the Secured Obligations as provided herein;

     (b) To take possession of, receive, endorse, assign and deliver, in its own name or in the
name of any Pledgor, all checks, notes, drafts and other instruments relating to any Collateral,
including receiving, opening and properly disposing of all mail addressed to any Pledgor concerning
Accounts and other Collateral; to verify with account debtors or other contract parties the
validity, amount or any other matter relating to any Accounts or other Collateral, in his own name
or in the name of any Pledgor; to accelerate any indebtedness or other obligation constituting
Collateral that may be accelerated in accordance with its terms; to take or bring all actions and
suits deemed necessary or appropriate to effect collections and to enforce payment of any Accounts
or other Collateral; to settle, compromise or release in whole or in part any amounts owing on
Accounts or other Collateral; and to extend the time of payment of any and all Accounts or other
amounts owing under any Collateral and to make allowances and adjustments with respect thereto, all
in the same manner and to the same extent as any Pledgor might have done;

     (c) To transfer to or register in his name or the name of any of his agents or nominees all or
any part of the Collateral, without notice to any Pledgor and with or without disclosing that such
Collateral is subject to the security interest created hereunder;

     (d) To require any Pledgor to, and each Pledgor hereby agrees that it will at its expense and
upon request of the Agent forthwith, assemble all or any part of the Collateral as directed by the
Agent and make it available to the Agent at a place designated by the Agent;

     (e) To enter and remain upon the premises of any Pledgor and take possession of all or any
part of the Collateral, with or without judicial process; to use the materials, services, books and
records of any Pledgor for the purpose of liquidating or collecting the Collateral, whether by
foreclosure, auction or otherwise; and to remove the same to the premises of the Agent or any
designated agent for such time as the Agent may desire, in order to effectively collect or
liquidate the Collateral; and

     (f) To sell, resell, assign and deliver, in its sole discretion, all or any of the Collateral,
in one or more parcels, at public or private sale, at any of the Agent’s offices or elsewhere, for
cash, upon credit or for future delivery, at such time or times and at such price or prices and
upon such other terms as the Agent may deem satisfactory. If any of the Collateral is sold by the
Agent upon credit or for future delivery, the Agent shall not be liable for the failure of the
purchaser to purchase or pay for the same and, in the event of any such failure, the Agent may
resell such Collateral. In no event shall any Pledgor be credited with any part of the proceeds of
sale of any Collateral until and to the extent cash payment in respect thereof has actually been
received by the Agent. Each purchaser at any such sale shall hold the property sold absolutely,
free from any claim or right of whatsoever kind, including any equity or right of redemption of any
Pledgor, and each Pledgor hereby expressly waives all rights of redemption, stay or appraisal, and
all rights to require the Agent to marshal any assets in favor of such Pledgor or any other party
or against or in payment of any or all of the Secured Obligations, that it has or may have under
any rule of law or statute now existing or hereafter adopted. If any notice of a proposed sale or
other disposition of any part of the Collateral shall be required under applicable

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law, the Agent shall give the applicable Pledgor at least ten (10) days’ prior notice of the
time and place of any public sale and of the time after which any private sale or other disposition
is to be made, which notice each Pledgor agrees is commercially reasonable. The Agent shall not be
obligated to make any sale of Collateral if it shall determine not to do so, regardless of the fact
that notice of sale may have been given. the Agent may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by announcement at the
time and place fixed for sale, and such sale may, without further notice, be made at the time and
place to which the same was so adjourned. Upon each public sale and, to the extent permitted by
applicable law, upon each private sale, the Agent may purchase all or any of the Collateral being
sold, free from any equity, right of redemption or other claim or demand, and may make payment
therefor by endorsement and application (without recourse) of the Secured Obligations in lieu of
cash as a credit on account of the purchase price for such Collateral.

     5.3 Application of Proceeds.

     (a) All proceeds collected by the Agent upon any sale, other disposition of or realization
upon any of the Collateral, together with all other moneys received by the Agent hereunder, shall
be applied as follows:

     (i) first, to payment of the expenses of such sale or other realization, including
reasonable compensation to the Agent and his agents and counsel, and all expenses,
liabilities and advances incurred or made by the Agent, his agents and counsel in connection
therewith or in connection with the care, safekeeping or otherwise of any or all of the
Collateral, and any other unreimbursed expenses for which the Agent is to be reimbursed
pursuant to Section 6.1;

     (ii) second, after payment in full of the amounts specified in clause (i) above, to
payment of the Secured Obligations; and

     (iii) finally, after payment in full of the amounts specified in clauses (i) and (ii)
above, any surplus then remaining shall be paid to the Pledgors, or their successors or
assigns, or to whomever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct.

     (b) Each Pledgor shall remain liable to the extent of any deficiency between the amount of all
proceeds realized upon sale or other disposition of the Collateral pursuant to this Agreement.
Upon any sale of any Collateral hereunder by the Agent (whether by virtue of the power of sale
herein granted, pursuant to judicial proceeding, or otherwise), the receipt of the Agent or the
officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Agent or such officer or be
answerable in any way for the misapplication thereof.

     5.4 Collateral Accounts. Upon the occurrence and during the continuance of a Default,
subject, however, to the rights of the Senior Lender under the Senior Security Interests as more
fully set forth in the Subordination Agreement, the Agent shall have the right to cause to be
established and maintained, at its principal office or such other location or locations as it may

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establish from time to time in its discretion, one or more accounts (collectively,
“Collateral Accounts”) for the collection of cash proceeds of the Collateral. Such
proceeds, when deposited, shall continue to constitute Collateral for the Secured Obligations and
shall not constitute payment thereof until applied as herein provided. the Agent shall have sole
dominion and control over all funds deposited in any Collateral Account, and such funds may be
withdrawn therefrom only by the Agent. Upon the occurrence and during the continuance of a
Default, the Agent shall have the right to apply amounts held in the Collateral Accounts in payment
of the Secured Obligations in the manner provided for in Section 5.3.

     5.5 Grant of License. Each Pledgor hereby grants to the Agent an irrevocable,
non-exclusive license (exercisable without payment of royalty or other compensation to any Pledgor)
to use, license or sublicense any Intellectual Property now owned or licensed or hereafter acquired
or licensed by such Pledgor, wherever the same may be located throughout the world, for such term
or terms, on such conditions and in such manner as the Agent shall determine, whether general,
special or otherwise, and including in such license reasonable access to all media in which any of
the licensed items may be recorded or stored and to all computer software and programs used for the
compilation or printout thereof. The use of such license or sublicense by the Agent shall be
exercised, at the option of the Agent, only upon the occurrence and during the continuation of a
Default; provided that any license, sublicense or other transaction entered into by the Agent in
accordance herewith shall be binding upon each applicable Pledgor notwithstanding any subsequent
cure of a Default.

     5.6 Waivers. Each Pledgor, to the greatest extent not prohibited by applicable law,
hereby waives all rights that it has or may have under any rule of law or statute now existing or
hereafter adopted to require the Agent to marshal any Collateral or other assets in favor of such
Pledgor or any other party or against or in payment of any or all of the Secured Obligations..

ARTICLE VI

MISCELLANEOUS

     6.1 Indemnity and Expenses. The Pledgors shall jointly and severally pay and
reimburse the Agent upon demand for all reasonable costs and expenses (including, without
limitation, reasonable attorneys’ fees and expenses) that the Agent may incur in connection with
(i) the custody, use or preservation of, or the sale of, collection from or other realization upon,
any of the Collateral, including the reasonable expenses of re-taking, holding, preparing for sale
or lease, selling or otherwise disposing of or realizing on the Collateral, (ii) the exercise or
enforcement of any rights or remedies granted hereunder (including, without limitation, under
Article V), or otherwise available to him (whether at law, in equity or otherwise), or (iii) the
failure by any Pledgor to perform or observe any of the provisions hereof. The provisions of this
Section 6.1 shall survive the execution and delivery of this Agreement, the repayment of any of the
Secured Obligations and the termination of this Agreement.

     6.2 No Waiver. The Agent’s failure at any time or times hereafter to require strict
performance by any Pledgor of any of the provisions of this Agreement shall not waive, affect or
diminish any right of the Agent at any time or times hereafter to demand strict performance

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therewith and with respect to any other provision of this Agreement, and any waiver of any
Default shall not waive or affect any other Default, whether prior or subsequent thereto, and
whether of the same or a different type. None of the provisions of this Agreement shall be deemed
to have been waived by any act or knowledge of the Agent or his agents, except by an instrument in
writing signed by the Agent and directed to the Pledgors specifying such waiver.

     6.3 Binding Effect. This Agreement and all other instruments and documents executed
and delivered pursuant hereto or in connection herewith shall be binding upon and inure to the
benefit of the successors and assigns of the parties hereto.

     6.4 Governing Law. This Agreement shall be construed and interpreted in accordance
with the internal laws and judicial decisions of the State of Delaware without giving effect to the
conflict of laws principles thereof, except to the extent that matters of perfection and validity
of the security interests hereunder, or remedies hereunder, are governed by the laws of a
jurisdiction other than the State of Delaware.

     6.5 Survival of Agreement. All representations and warranties of each Pledgor and all
obligations of each Pledgor contained herein shall survive the execution and delivery of this
Agreement.

     6.6 Continuing Security Interest; Term; Successors and Assigns; Assignment; Termination
and Release; Survival. This Agreement shall create a continuing security interest in the
Collateral and shall secure the payment and performance of all of the Secured Obligations as the
same may arise and be outstanding at any time and from time to time from and after the date hereof,
and shall (i) remain in full force and effect until all of the Secured Obligations have been paid
and finally discharged in full (the “Termination Requirement”), (ii) be binding upon and
enforceable against each Pledgor and its successors and assigns; provided, however,
that no Pledgor may sell, assign or transfer any of its rights, interests, duties or obligations
hereunder without the prior written consent of the Agent, and (iii) inure to the benefit of and be
enforceable by the Agent and its successors and assigns. Upon the occurrence of the Termination
Requirement, this Agreement and the lien and security interest created hereby shall terminate; and
in connection with any such release or termination, the Agent, promptly at the request of the
applicable Pledgor, will execute and deliver to such Pledgor such documents and instruments
evidencing such release or termination as such Pledgor may reasonably request and will assign,
transfer and deliver to such Pledgor, without recourse and without representation or warranty, such
of the Collateral as may then be in the possession of the Agent (or, in the case of any partial
release of Collateral, such of the Collateral so being released as may be in its possession).

     6.7 Notice. Except as otherwise provided herein, notice to the Pledgors or to the
Agent shall be given or delivered in the manner set forth in Section 7.01 of the Stock Purchase
Agreement.

     6.8 Severability. To the extent any provision of this Agreement is prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the remaining provisions of
this Agreement.

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     6.9 Captions. The captions to the sections of this Agreement have been inserted for
convenience only and shall not limit or modify any of the terms hereof.

     6.10 Counterparts. This Agreement may be executed in two or more counterparts, which
when assembled shall constitute one and the same agreement. Execution and delivery of this
Agreement by facsimile or as an attachment to an electronic mail shall constitute a valid and
binding execution and delivery of this Agreement by such party. Such facsimile copies or
electronic mail attachments shall constitute enforceable original documents.

     6.11 Amendments and Waivers. Any provision of this Agreement may be amended or
waived, if, but only if, such amendment or waiver is in writing and is signed by each Pledgor and
the Agent.

     6.12 Conflict of Terms. The terms of this Agreement and the terms of the Stock
Purchase Agreement shall be construed and interpreted to the full extent possible to give effect to
all such terms. In the event of any conflict between the terms of this Agreement and the Stock
Purchase Agreement, the terms of the Stock Purchase Agreement shall control.

     6.13 Subordination. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THIS
AGREEMENT, THE OBLIGATIONS UNDER THIS AGREEMENT, ALL RIGHTS AND REMEDIES OF THE AGENT AND SECURED
PARTIES, AND ALL COVENANTS, OBLIGATIONS, AND RESPONSIBILITIES OF PLEDGORS, ARE SUBJECT TO THE
RIGHTS AND REMEDIES OF THE SENIOR LENDER IN AND UNDER THE SENIOR SECURITY INTERESTS AND/OR THE
SENIOR LOAN DOCUMENTS AS MORE FULLY SET FORTH IN THE SUBORDINATION AGREEMENT.

     6.14 Permitted Transactions. No Pledgor shall merge, consolidate, liquidate or
dissolve prior to the termination of this Agreement pursuant to Section 6.6; provided,
however, that one or more Pledgors may be merged, consolidated, liquidated or dissolved
after the date hereof if (i) in the case of a merger or consolidation, the surviving entity is a
Pledgor; or (ii) in the case of a liquidation or dissolution, the assets of the entity or
entities being liquidated or dissolved that are included in the Collateral are assigned or
transferred to another Pledgor.

[The remainder of this page is left blank intentionally; signature page follows]

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     IN WITNESS WHEREOF, this Partially Subordinated Security Agreement has been executed as of the
day and year first above written by the parties hereto.

	 	 	 	 	 	 	 
	 	 	TRADE SOURCE INTERNATIONAL, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Brad Dale Heimann
 

Brad Dale Heimann
	 	 
	 

	 	Title:
	 	President and Chief Operating Officer	 	 
	 
	 	 	 	 	 	 
	 	 	MARKETING IMPRESSIONS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Brad Dale Heimann
 

Brad Dale Heimann
	 	 
	 

	 	Title:
	 	President and Chief Operating Officer	 	 
	 
	 	 	 	 	 	 
	 	 	PRIME/HOME IMPRESSIONS, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Brad Dale Heimann
 

Brad Dale Heimann
	 	 
	 

	 	Title:
	 	President and Chief Operating Officer	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	/s/ Robert W. Lackey
 

Robert W. Lackey, as Agent
	 	 

Signature
Page to Partially Subordinated Security Agreement

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