Document:

exv10w6

 

Exhibit 10.6

D. R. HORTON, INC.

2006 STOCK INCENTIVE PLAN

1. Purpose

     The purpose of D. R. Horton, Inc. 2006 Stock Incentive Plan (the “Plan”) is to advance the
interests of D. R. Horton, Inc. (the “Company”) by stimulating the efforts of employees, officers
and, to the extent provided by Sections 5(e) and (f), non-employee directors and certain other
service providers, in each case who are selected to be participants, by heightening the desire of
such persons to continue in working toward and contributing to the success and progress of the
Company. The Plan supersedes the Company’s 1991 Stock Incentive Plan with respect to future
awards, and provides for the grant of Incentive and Nonqualified Stock Options, Stock Appreciation
Rights, Restricted Stock and Restricted Stock Units, any of which may be performance-based, and for
Incentive Bonuses, which may be paid in cash or stock or a combination thereof, as determined by
the Administrator.

2. Definitions

     As used in the Plan, the following terms shall have the meanings set forth below:

     (a) “Administrator” means the Administrator of the Plan in accordance with Section 17.

     (b) “Award” means an Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation
Right, Restricted Stock, Restricted Stock Unit or Incentive Bonus granted to a Participant pursuant
to the provisions of the Plan, any of which the Administrator may structure to qualify in whole or
in part as a Performance Award.

     (c) “Award Agreement” means a written agreement or other instrument as may be approved from
time to time by the Administrator implementing the grant of each Award. An Agreement may be in the
form of an agreement to be executed by both the Participant and the Company (or an authorized
representative of the Company) or certificates, notices or similar instruments as approved by the
Administrator.

     (d) “Board” means the board of directors of the Company.

     (e) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the
rulings and regulations issues thereunder.

     (f) “Company” means D. R. Horton, Inc., a Delaware corporation.

     (g) “Incentive Bonus” means a bonus opportunity awarded under Section 9 pursuant to which a
Participant may become entitled to receive an amount based on satisfaction of such performance
criteria as are specified in the Award Agreement.

 

 

     (h) “Incentive Stock Option” means a stock option that is intended to qualify as an “incentive
stock option” within the meaning of Section 422 of the Code.

     (i) “Nonemployee Director” means each person who is, or is elected to be, a member of the
Board and who is not an employee of the Company or any Subsidiary.

     (j) “Nonqualified Stock Option” means a stock option that is not intended to qualify as an
“incentive stock option” within the meaning of Section 422 of the Code.

     (k) “Option” means an Incentive Stock Option and/or a Nonqualified Stock Option granted
pursuant to Section 6.

     (l) “Participant” means any individual described in Section 3 to whom Awards have been granted
from time to time by the Administrator and any authorized transferee of such individual.

     (m) “Performance Award” means an Award, the grant, issuance, retention, vesting or settlement
of which is subject to satisfaction of one or more Qualifying Performance Criteria established
pursuant to Section 13.

     (n) “Plan” means D. R. Horton, Inc. 2006 Stock Incentive Plan as set forth herein and as
amended from time to time.

     (o) “Prior Plan” means D. R. Horton, Inc. 1991 Stock Incentive Plan, as amended and restated
on February 21, 2002.

     (p) “Qualifying Performance Criteria” has the meaning set forth in Section 13(b).

     (q) “Restricted Stock” means Shares granted pursuant to Section 8.

     (r) “Restricted Stock Unit” means an Award granted to a Participant pursuant to Section 8
pursuant to which Shares or cash in lieu thereof may be issued in the future.

     (s) “Service Provider” means a consultant or advisor to the Company or any Subsidiary who (i)
is a natural person, (ii) provides bona fide services to the Company or any Subsidiary, (iii)
provides services other than in connection with the offer or sale of securities in a
capital-raising transaction, and (iv) does not directly or indirectly promote or maintain a market
for the Company’s securities, in each case, within the meaning of the General Instructions to Form
S-8 under the Securities Act of 1933, as amended.

     (t) “Share” means a share of the Company’s common stock, par value $.01, subject to adjustment
as provided in Section 12.

     (u) “Stock Appreciation Right” means a right granted pursuant to Section 7 that entitles the
Participant to receive, in cash or Shares or a combination thereof, as determined by the
Administrator, value equal to or otherwise based on the excess of (i) the market price of a
specified number of Shares at the time of exercise over (ii) the exercise price of the right, as
established by the Administrator on the date of grant.

2

 

     (v) “Subsidiary” means (i) any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company where each of the corporations in the unbroken chain other
than the last corporation owns stock possessing at least 50 percent or more of the total combined
voting power of all classes of stock in one of the other corporations in the chain, (ii) other than
with respect to Incentive Stock Options, any limited liability company, limited partnership,
general partnership or other entity, the majority of the equity or ownership interests in which are
owned, directly or indirectly, by the Company, and (iii) if specifically determined by the
Administrator in the context other than with respect to Incentive Stock Options, any entity in
which the Company has a significant ownership interest or that is directly or indirectly controlled
by the Company.

     (w) “Substitute Awards” means Awards granted or Shares issued by the Company in assumption of,
or in substitution or exchange for, awards previously granted, or the right or obligation to make
future awards, by a person or entity acquired by the Company or any Subsidiary or with which the
Company or any Subsidiary merges or combines.

     (x) “Termination of Employment” means ceasing to serve as a full-time employee of the Company
and its Subsidiaries or, with respect to a Nonemployee Director or other Service Provider, ceasing
to serve as such for the Company, except that with respect to all or any Awards held by a
Participant (i) the Administrator may determine, subject to Section 6(d), that an approved leave of
absence or approved employment on a less than full-time basis is not considered a “Termination of
Employment,” (ii) the Administrator may determine that a transition of employment to service with a
partnership, joint venture or corporation not meeting the requirements of a Subsidiary in which the
Company or a Subsidiary is a party is not considered a “Termination of Employment,” (iii) service
as a member of the Board shall constitute continued employment with respect to Awards granted to a
Participant while he or she served as an employee and (iv) service as an employee of the Company or
a Subsidiary shall constitute continued employment with respect to Awards granted to a Participant
while he or she served as a member of the Board. The Administrator shall determine whether any
corporate transaction, such as a sale or spin-off of a division or subsidiary that employs a
Participant, shall be deemed to result in a Termination of Employment with the Company and its
Subsidiaries for purposes of any affected Participant’s Options, and the Administrator’s decision
shall be final and binding.

3. Eligibility

     Any person who is a current or prospective officer or employee (including, without limitation,
any director who is also an employee, in his or her capacity as such) of the Company or of any
Subsidiary shall be eligible for selection by the Administrator for the grant of Awards hereunder.
To the extent provided by Section 5(e), any Nonemployee Director shall be eligible for the grant of
Awards hereunder as determined by the Administrator. In addition, to the extent provided by
Section 5(f), any Service Provider shall be eligible for selection by the Administrator for the
grant of Awards hereunder. Options intending to qualify as Incentive Stock Options may only be
granted to employees of the Company or any Subsidiary within the meaning of Section 424(f) the
Code, as selected by the Administrator.

3

 

4. Effective Date and Termination of Plan

     This Plan was adopted by the Board on November 17, 2005, and it will become effective (the
“Effective Date”) when it is approved by the Company’s stockholders. All Awards granted under this
Plan are subject to, and may not be exercised before, the approval of this Plan by the stockholders
prior to the first anniversary date of the adoption date of the Plan, by the affirmative vote of
the holders of a majority of the outstanding Shares of the Company present, or represented by
proxy, and entitled to vote, at a meeting of the Company’s stockholders in accordance with the laws
of the State of Delaware; provided that if such approval by the stockholders of the Company is not
forthcoming, all Awards previously granted under this Plan shall be void. The Plan shall remain
available for the grant of Awards until the tenth (10th) anniversary of the Effective Date.
Notwithstanding the foregoing, the Plan may be terminated at such earlier time as the Board may
determine. Termination of the Plan will not affect the rights and obligations of the Participants
and the Company arising under Awards theretofore granted and then in effect.

5. Shares Subject to the Plan and to Awards

     (a) Aggregate Limits. The aggregate number of Shares issuable pursuant to all Awards shall not
exceed 28,000,000, plus (i) any Shares that were authorized for issuance under the Prior Plan that,
as of January 26, 2006, remain available for issuance under the Prior Plan (not including any
Shares that are subject to, as of January 26, 2006, outstanding awards under the Prior Plan or any
Shares that prior to January 26, 2006 were issued pursuant to awards granted under the Prior Plan)
and (ii) any Shares subject to outstanding awards under the Prior Plan as of January 26, 2006 that
on or after such date cease for any reason to be subject to such awards (other than by reason of
exercise or settlement of the awards to the extent they are exercised for or settled in vested and
nonforfeitable shares); provided that any Shares granted under Options or Stock Appreciation Rights
shall be counted against this limit on a one-for-one basis and any Shares granted as Awards other
than Options or Stock Appreciation Rights shall be counted against this limit as 1.75 Shares for
every one Share subject to such Award. The aggregate number of Shares available for grant under
this Plan and the number of Shares subject to outstanding Awards shall be subject to adjustment as
provided in Section 12. The Shares issued pursuant to Awards granted under this Plan may be shares
that are authorized and unissued or shares that were reacquired by the Company, including, without
limitation, shares purchased in the open market.

     (b) Issuance of Shares. For purposes of Section 5(a), the aggregate number of Shares issued
under this Plan at any time shall equal only the number of Shares actually issued upon exercise or
settlement of an Award. Notwithstanding the foregoing, Shares subject to an Award under the Plan
may not again be made available for issuance under the Plan if such Shares are: (i) Shares that
were subject to a stock-settled Stock Appreciation Right and were not issued upon the net
settlement or net exercise of such Stock Appreciation Right, (ii) Shares used to pay the exercise
price of a Stock Option, (iii) Shares delivered to or withheld by the Company to pay the
withholding taxes related to a Stock Option or a Stock Appreciation Right, or (iv) Shares
repurchased on the open market with the proceeds of a Stock Option exercise. Shares subject to
Awards that have been canceled, expired, forfeited or otherwise not issued under an Award and
Shares subject to Awards settled in cash shall not count as Shares issued under this Plan.

4

 

     (c) Substitute Awards. Substitute Awards shall not reduce the Shares authorized for issuance
under the Plan or authorized for grant to a Participant in any calendar year. In addition, in the
event that a person or entity acquired by the Company or any Subsidiary, or with which the Company
or any Subsidiary merges or combines, has shares available under a pre-existing plan approved by
its stockholders and not adopted in contemplation of such acquisition, merger or combination, the
shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the
extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used
in such acquisition, merger or combination to determine the consideration payable to the holders of
common stock of the entities party to such transaction) may be used for Awards under the Plan and,
notwithstanding any other provision hereof, shall not reduce the Shares authorized for issuance
under the Plan; provided that Awards using such available shares shall not be made after the date
awards or grants could have been made under the terms of the pre-existing plan, absent the
acquisition, merger or combination, and shall only be made to individuals who were employees,
directors or Service Providers of such acquired, merged or combined company before such
acquisition, merger or combination.

     (d) Tax Code Limits. The aggregate number of Shares subject to Awards granted under this Plan
during any calendar year to any one Participant shall not exceed 500,000, which number shall be
calculated and adjusted pursuant to Section 12 only to the extent that such calculation or
adjustment will not affect the status of any Award intended to qualify as “performance based
compensation” under Section 162(m) of the Code but which number shall not count any tandem SARs (as
defined in Section 7). The aggregate number of Shares that may be issued pursuant to the exercise
of Incentive Stock Options granted under this Plan shall not exceed 28,000,000, which number shall
be calculated and adjusted pursuant to Section 12 only to the extent that such calculation or
adjustment will not affect the status of any option intended to qualify as an Incentive Stock
Option under Section 422 of the Code. The maximum amount payable pursuant to that portion of an
Incentive Bonus granted with respect any specified performance period to any Participant under this
Plan that is intended to satisfy the requirements for “performance based compensation” under
Section 162(m) of the Code shall not exceed two percent (2%) of the Company’s consolidated pre-tax
income for such performance period.

     (e) Director Awards. The aggregate number of Shares subject to Awards granted under this Plan
during any calendar year to any one Nonemployee Director shall not exceed 10,000, which limit shall
not count any tandem SARs (as defined in Section 7).

     (f) Awards to Service Providers. The aggregate number of Shares issued under this Plan
pursuant to all Awards granted to Service Providers shall not exceed 300,000.

     (g) Effect on Prior Plan. From and after the Effective Date, no further grants or awards
shall be made under the Prior Plan. Grants and awards made under the Prior Plan before the
Effective Date, however, shall continue in effect in accordance with their terms.

6. Options

     (a) Option Awards. Options may be granted at any time and from time to time prior to the
termination of the Plan to Participants as determined by the Administrator. No Participant shall
have any rights as a stockholder with respect to any Shares subject to Options hereunder

5

 

until such Shares have been issued, except that the Administrator may authorize dividend
equivalent accruals with respect to such Shares. Each Option shall be evidenced by an Award
Agreement. Options granted pursuant to the Plan need not be identical but each Option must contain
and be subject to the terms and conditions set forth below.

     (b) Price. The Administrator will establish the exercise price per Share under each Option,
which, in no event will be less than the fair market value of the Shares on the date of grant;
provided, however, that the exercise price per Share with respect to an Option that is granted in
connection with a merger or other acquisition as a substitute or replacement award for options held
by optionees of the acquired entity may be less than 100% of the market price of the Shares on the
date such Option is granted if such exercise price is based on a formula set forth in the terms of
the options held by such optionees or in the terms of the agreement providing for such merger or
other acquisition. The exercise price of any Option may be paid in Shares, cash or a combination
thereof, as determined by the Administrator, including, without limitation, an irrevocable
commitment by a broker to pay over such amount from a sale of the Shares issuable under an Option,
the delivery of previously owned Shares and withholding of Shares deliverable upon exercise.

     (c) No Repricing. Other than in connection with a change in the Company’s capitalization (as
described in Section 12), the exercise price of an Option may not be reduced without stockholder
approval (including, without limitation, canceling previously awarded Options and regranting them
with a lower exercise price).

     (d) Provisions Applicable to Options. The date on which Options become exercisable shall be
determined at the sole discretion of the Administrator and set forth in an Award Agreement. Unless
provided otherwise in the applicable Award Agreement, to the extent that the Administrator
determines that an approved leave of absence or employment on a less than full-time basis is not a
Termination of Employment, the vesting period and/or exercisability of an Option shall be adjusted
by the Administrator during or to reflect the effects of any period during which the Participant is
on an approved leave of absence or is employed on a less than full-time basis.

     (e) Term of Options and Termination of Employment. The Administrator shall establish the term
of each Option, which in no case shall exceed a period of ten (10) years from the date of grant.
In addition, the Award Agreement evidencing the grant of each Option shall set forth the terms and
conditions applicable to such Option upon a Participant’s Termination of Employment.

     (f) Incentive Stock Options. Notwithstanding anything to the contrary in this Section 6, in
the case of the grant of an Option intending to qualify as an Incentive Stock Option: (i) if the
Participant owns stock possessing more than 10 percent of the combined voting power of all classes
of stock of the Company (a “10% Shareholder”), the exercise price of such Option must be at least
110 percent of the fair market value of the Shares on the date of grant and the Option must expire
within a period of not more than five (5) years from the date of grant, and (ii) Termination of
Employment will occur when the person to whom an Award was granted ceases to be an employee (as
determined in accordance with Section 3401(c) of the Code and the regulations promulgated
thereunder) of the Company and its Subsidiaries. Notwithstanding

6

 

anything in this Section 6 to the contrary, options designated as Incentive Stock Options
shall not be eligible for treatment under the Code as Incentive Stock Options (and will be deemed
to be Nonqualified Stock Options) to the extent that either (a) the aggregate fair market value of
Shares (determined as of the time of grant) with respect to which such Options are exercisable for
the first time by the Participant during any calendar year (under all plans of the Company and any
Subsidiary) exceeds $100,000, taking Options into account in the order in which they were granted,
or (b) such Options otherwise remain exercisable but are not exercised within three (3) months of
Termination of Employment (or such other period of time provided in Section 422 of the Code).

7. Stock Appreciation Rights

     Stock Appreciation Rights may be granted to Participants from time to time either in tandem
with or as a component of other Awards granted under the Plan (“tandem SARs”) or not in conjunction
with other Awards (“freestanding SARs”) and may, but need not, relate to a specific Option granted
under Section 6. The provisions of Stock Appreciation Rights need not be the same with respect to
each grant or each recipient. Any Stock Appreciation Right granted in tandem with an Award may be
granted at the same time such Award is granted or at any time thereafter before exercise or
expiration of such Award. All freestanding SARs shall be granted subject to the same terms and
conditions applicable to Options as set forth in Section 6 (including, without limitation, no
repricing) and all tandem SARs shall have the same exercise price, vesting, exercisability,
forfeiture and termination provisions as the Award to which they relate. Subject to the provisions
of Section 6 and the immediately preceding sentence, the Administrator may impose such other
conditions or restrictions on any Stock Appreciation Right as it shall deem appropriate. Stock
Appreciation Rights may be settled in Shares, cash or a combination thereof, as determined by the
Administrator and set forth in the applicable Award Agreement.

8. Restricted Stock and Restricted Stock Units

     (a) Restricted Stock and Restricted Stock Unit Awards. Restricted Stock and Restricted Stock
Units may be granted at any time and from time to time prior to the termination of the Plan to
Participants as determined by the Administrator. Restricted Stock is an award or issuance of
Shares the grant, issuance, retention, vesting and/or transferability of which is subject during
specified periods of time to such conditions (including, without limitation, continued employment
or performance conditions) and terms as the Administrator deems appropriate. Restricted Stock
Units are Awards denominated in units of Shares under which the issuance of Shares is subject to
such conditions (including, without limitation, continued employment or performance conditions) and
terms as the Administrator deems appropriate. Each grant of Restricted Stock and Restricted Stock
Units shall be evidenced by an Award Agreement. Unless determined otherwise by the Administrator,
each Restricted Stock Unit will be equal to one Share and will entitle a Participant to either the
issuance of Shares or payment of an amount of cash determined with reference to the value of
Shares. To the extent determined by the Administrator, Restricted Stock and Restricted Stock Units
may be satisfied or settled in Shares, cash or a combination thereof. Restricted Stock and
Restricted Stock Units granted pursuant to the Plan need not be identical but each grant of
Restricted Stock and Restricted Stock Units must contain and be subject to the terms and conditions
set forth below.

7

 

     (b) Contents of Agreement. Each Award Agreement shall contain provisions regarding (i) the
number of Shares or Restricted Stock Units subject to such Award or a formula for determining such
number, (ii) the purchase price of the Shares, if any, and the means of payment, (iii) the
performance criteria, if any, and level of achievement versus these criteria that shall determine
the number of Shares or Restricted Stock Units granted, issued, retainable and/or vested, (iv) such
terms and conditions on the grant, issuance, vesting and/or forfeiture of the Shares or Restricted
Stock Units as may be determined from time to time by the Administrator, (v) the term of the
performance period, if any, as to which performance will be measured for determining the number of
such Shares or Restricted Stock Units, and (vi) restrictions on the transferability of the Shares
or Restricted Stock Units. Shares issued under a Restricted Stock Award may be issued in the name
of the Participant and held by the Participant or held by the Company, in each case as the
Administrator may provide.

     (c) Vesting and Performance Criteria. The grant, issuance, retention, vesting and/or, subject
to Section 10, settlement of shares of Restricted Stock and Restricted Stock Units will occur when
and in such installments as the Administrator determines or under criteria the Administrator
establishes, which may include Qualifying Performance Criteria. The grant, issuance, retention,
vesting and/or settlement of Shares under any such Award that is based on performance criteria and
level of achievement versus such criteria will be subject to a performance period of not less than
one (1) year, and the grant, issuance, retention, vesting and/or settlement of Shares under any
Restricted Stock or Restricted Stock Unit Award that is based solely upon continued employment
and/or the passage of time may not vest or be settled in full over a period of less than three (3)
years but may be subject to pro-rata vesting over such period, except that the Administrator may
provide for the satisfaction and/or lapse of all conditions under any such Award in the event of
the Participant’s death, disability, retirement or in connection with a change in control of the
Company, and the Administrator may provide that any such restriction or limitation will not apply
in the case of a Restricted Stock or Restricted Stock Unit Award that is issued in payment or
settlement of compensation that has been earned by the Participant or that qualifies as a
Substitute Award. Notwithstanding anything in this Plan to the contrary, the performance criteria
for any Restricted Stock or Restricted Stock Unit that is intended to satisfy the requirements for
“performance-based compensation” under Section 162(m) of the Code will be a measure based on one or
more Qualifying Performance Criteria selected by the Administrator and specified when the Award is
granted.

     (d) Discretionary Adjustments and Limits. Subject to the limits imposed under Section 162(m)
of the Code for Awards that are intended to qualify as “performance based compensation,”
notwithstanding the satisfaction of any performance goals, the number of Shares granted, issued,
retainable and/or vested under an Award of Restricted Stock or Restricted Stock Units on account of
either financial performance or personal performance evaluations may, to the extent specified in
the Award Agreement, be reduced by the Administrator on the basis of such further considerations as
the Administrator shall determine.

     (e) Voting Rights. Unless otherwise determined by the Administrator, Participants holding
shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those
shares during the period of restriction. Participants shall have no voting rights with respect to
Shares underlying Restricted Stock Units unless and until such Shares are reflected as issued and
outstanding shares on the Company’s stock ledger.

8

 

     (f) Dividends and Distributions. Participants in whose name Restricted Stock is granted shall
be entitled to receive all dividends and other distributions paid with respect to those Shares,
unless determined otherwise by the Administrator. The Administrator will determine whether any
such dividends or distributions will be automatically reinvested in additional shares of Restricted
Stock and subject to the same restrictions on transferability as the Restricted Stock with respect
to which they were distributed or whether such dividends or distributions will be paid in cash.
Shares underlying Restricted Stock Units shall be entitled to dividends or dividend equivalents
only to the extent provided by the Administrator.

     (g) Termination of Employment. The Award Agreement evidencing the grant of an Award of
Restricted Stock or Restricted Stock Units shall set forth the terms and conditions applicable to
such Award upon a Participant’s Termination of Employment.

9. Incentive Bonuses

     (a) General. Each Incentive Bonus Award will confer upon the Participant the opportunity to
earn a future payment tied to the level of achievement with respect to one or more performance
criteria established for a performance period of not less than one year (if payable in Shares), and
not less than one calendar quarter (if payable solely in cash).

     (b) Incentive Bonus Document. The terms of any Incentive Bonus will be set forth in an Award
Agreement. Each Award Agreement evidencing an Incentive Bonus shall contain provisions regarding
(i) the target and maximum amount payable to the Participant as an Incentive Bonus, (ii) the
performance criteria and level of achievement versus these criteria that shall determine the amount
of such payment, (iii) the term of the performance period as to which performance shall be measured
for determining the amount of any payment, (iv) the timing of any payment earned by virtue of
performance, (v) restrictions on the alienation or transfer of the Incentive Bonus prior to actual
payment, (vi) forfeiture provisions and (vii) such further terms and conditions, in each case not
inconsistent with this Plan as may be determined from time to time by the Administrator.

     (c) Performance Criteria. The Administrator shall establish the performance criteria and level
of achievement versus these criteria that shall determine the target and maximum amount payable
under an Incentive Bonus, which criteria may be based on financial performance and/or personal
performance evaluations. The Administrator may specify the percentage of the target Incentive
Bonus that is intended to satisfy the requirements for “performance-based compensation” under
Section 162(m) of the Code. Notwithstanding anything to the contrary herein, the performance
criteria for any portion of an Incentive Bonus that is intended by the Administrator to satisfy the
requirements for “performance-based compensation” under Section 162(m) of the Code shall be a
measure based on one or more Qualifying Performance Criteria (as defined in Section 13(b)) selected
by the Administrator and specified at the time the Incentive Bonus is granted. The Administrator
shall certify the extent to which any Qualifying Performance Criteria has been satisfied, and the
amount payable as a result thereof, prior to payment of any Incentive Bonus that is intended to
satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code.

9

 

     (d) Timing and Form of Payment. The Administrator shall determine the timing of payment of any
Incentive Bonus. Payment of the amount due under an Incentive Bonus may be made in cash or in
Shares, as determined by the Administrator. Subject to Section 10, the Administrator may provide
for or, subject to such terms and conditions as the Administrator may specify, may permit a
Participant to elect for the payment of any Incentive Bonus to be deferred to a specified date or
event.

     (e) Discretionary Adjustments. Notwithstanding satisfaction of any performance goals, the
amount paid under an Incentive Bonus on account of either financial performance or personal
performance evaluations may, to the extent specified in the Award Agreement, be reduced by the
Administrator on the basis of such further considerations as the Administrator shall determine.

10. Deferral of Gains

     The Administrator may, in an Award Agreement or otherwise, provide for the deferred delivery
of Shares or cash upon settlement, vesting or other events with respect to Restricted Stock or
Restricted Stock Units, or in payment or satisfaction of an Incentive Bonus. Notwithstanding
anything herein to the contrary, in no event will any deferral of the delivery of Shares or any
other payment with respect to any Award be allowed if the Administrator determines that the
deferral would result in the imposition of the additional tax under Section 409A(a)(1)(B) of the
Code.

11. Conditions and Restrictions Upon Securities Subject to Awards

     The Administrator may provide that the Shares issued upon exercise of an Option or Stock
Appreciation Right or otherwise subject to or issued under an Award shall be subject to such
further agreements, restrictions, conditions or limitations as the Administrator in its discretion
may specify prior to the exercise of such Option or Stock Appreciation Right or the grant, vesting
or settlement of such Award, including, without limitation, conditions on vesting or
transferability, forfeiture or repurchase provisions and method of payment for the Shares issued
upon exercise, vesting or settlement of such Award (including, without limitation, the actual or
constructive surrender of Shares already owned by the Participant) or payment of taxes arising in
connection with an Award. Without limiting the foregoing, such restrictions may address the timing
and manner of any resales by the Participant or other subsequent transfers by the Participant of
any Shares issued under an Award, including, without limitation (i) restrictions under an insider
trading policy or pursuant to applicable law, (ii) restrictions designed to delay and/or coordinate
the timing and manner of sales by Participant and holders of other Company equity compensation
arrangements, (iii) restrictions as to the use of a specified brokerage firm for such resales or
other transfers and (iv) provisions requiring Shares to be sold on the open market or to the
Company in order to satisfy tax withholding or other obligations.

12. Adjustment of and Changes in the Stock

     The number and kind of Shares available for issuance under this Plan (including, without
limitation, under any Awards then outstanding), and the number and kind of Shares subject to the
individual limits set forth in Section 5 of this Plan, may be adjusted by the Administrator as it

10

 

determines appropriate to reflect any reorganization, reclassification, combination or
exchange of shares, repurchase of shares, stock split, reverse stock split, spin-off, dividend or
other distribution of securities, property or cash (other than regular, quarterly cash dividends),
or any other event or transaction that affects the number or kind of Shares of the Company
outstanding. Such adjustment may be designed to comply with Section 425 of the Code or, except as
otherwise expressly provided in Section 5(d) of this Plan, may be designed to treat the Shares
available under the Plan and subject to Awards as if they were all outstanding on the record date
for such event or transaction or to increase the number of such Shares to reflect a deemed
reinvestment in Shares of the amount distributed to the Company’s securityholders. The terms of
any outstanding Award may also be adjusted by the Administrator as to price, number or kind of
Shares subject to such Award and other terms to reflect the foregoing events, which adjustments
need not be uniform as between different Awards or different types of Awards.

     In the event there shall be any change in the number or kind of outstanding Shares, or any
stock or other securities into which such Shares shall have been changed, or for which it shall
have been exchanged, by reason of a change of control, merger, consolidation or otherwise, then the
Administrator may, in its sole discretion, determine the appropriate adjustment, if any, to be
effected. Without limiting the generality of the foregoing, in the event of any such change, the
Administrator may, in its sole discretion, (i) provide for the assumption or substitution of, or
adjustment to, each outstanding Award; (ii) accelerate the vesting of and terminate any
restrictions on outstanding Awards; (iii) provide for cancellation of accelerated Awards that are
not exercised within a time prescribed by the Administrator; or (iv) provide for the cancellation
of any outstanding Awards in exchange for a cash payment to the holders thereof.

     No right to purchase fractional shares shall result from any adjustment in Awards pursuant to
this Section 12. In case of any such adjustment, the Shares subject to the Award shall be rounded
down to the nearest whole share. The Company shall notify Participants holding Awards subject to
any adjustments pursuant to this Section 12 of such adjustment, but (whether or not notice is
given) such adjustment shall be effective and binding for all purposes of the Plan.

13. Qualifying Performance-Based Compensation

     (a) General. The Administrator may establish performance criteria and level of achievement
versus such criteria that shall determine the number of Shares to be granted, retained, vested,
issued or issuable under or in settlement of or the amount payable pursuant to an Award, which
criteria may be based on Qualifying Performance Criteria or other standards of financial
performance and/or personal performance evaluations. In addition, the Administrator may specify
that an Award or a portion of an Award is intended to satisfy the requirements for
“performance-based compensation” under Section 162(m) of the Code, provided that the performance
criteria for such Award or portion of an Award that is intended by the Administrator to satisfy the
requirements for “performance-based compensation” under Section 162(m) of the Code shall be a
measure based on one or more Qualifying Performance Criteria selected by the Administrator and
specified at the time the Award is granted. The Administrator shall certify the extent to which any
Qualifying Performance Criteria has been satisfied, and the amount payable as a result thereof,
prior to payment, settlement or vesting of any Award that is intended to satisfy the requirements
for “performance-based compensation”

11

 

under Section 162(m) of the Code. Notwithstanding satisfaction of any performance goals, the
number of Shares issued under or the amount paid under an award may, to the extent specified in the
Award Agreement, be reduced by the Administrator on the basis of such further considerations as the
Administrator in its sole discretion shall determine.

     (b) Qualifying Performance Criteria. For purposes of this Plan, the term “Qualifying
Performance Criteria” shall mean any one or more of the following performance criteria, either
individually, alternatively or in any combination, applied to either the Company as a whole or to a
business unit or Subsidiary, either individually, alternatively or in any combination, and measured
either quarterly, annually or cumulatively over a period of years, on an absolute basis or relative
to a pre-established target, to previous years’ results or to a designated comparison group, in
each case as specified by the Administrator: (i) cash flow (before or after dividends), (ii)
earnings per share (including, without limitation, earnings before interest, taxes, depreciation
and amortization), (iii) stock price, (iv) return on equity, (v) stockholder return or total
stockholder return, (vi) return on capital (including, without limitation, return on total capital
or return on invested capital), (vii) return on investment, (viii) return on assets or net assets,
(ix) market capitalization, (x) economic value added, (xi) debt leverage (debt to capital), (xii)
revenue, (xiii) sales or net sales, (xiv) backlog, (xv) income, pre-tax income or net income, (xvi)
operating income or pre-tax profit, (xvii) operating profit, net operating profit or economic
profit, (xviii) gross margin, operating margin or profit margin, (xix) return on operating revenue
or return on operating assets, (xx) cash from operations, (xxi) operating ratio, (xxii) operating
revenue, (xxiii) market share improvement, (xxiv) general and administrative expenses or (xxv)
customer service. To the extent consistent with Section 162(m) of the Code, the Administrator may
appropriately adjust any evaluation of performance under a Qualifying Performance Criteria to
exclude any of the following events that occurs during a performance period: (i) asset write-downs,
(ii) litigation, claims, judgments or settlements, (iii) the effect of changes in tax law,
accounting principles or other such laws or provisions affecting reported results, (iv) accruals
for reorganization and restructuring programs and (v) any extraordinary, unusual, non-recurring or
non-comparable items (A) as described in Accounting Principles Board Opinion No. 30, (B) as
described in management’s discussion and analysis of financial condition and results of operations
appearing in the Company’s Annual Report to stockholders for the applicable year, or (C) publicly
announced by the Company in a press release or conference call relating to the Company’s results of
operations or financial condition for a completed quarterly or annual fiscal period.

14. Transferability

     Unless the Administrator specifies otherwise and to the extent permitted under the General
Instructions to Form S-8 under the Securities Act of 1933, as amended, an Award may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated by a Participant other than
by will or the laws of descent and distribution, and each Option or Stock Appreciation Right shall
be exercisable only by the Participant during his or her lifetime, and thereafter by the legal
representative of the Participant’s estate or the individual to whom such Award was transferred by
the Participant’s will or the laws of descent and distribution.

12

 

15. Compliance with Laws and Regulations

     This Plan, the grant, issuance, vesting, exercise and settlement of Awards thereunder, and the
obligation of the Company to sell, issue or deliver Shares under such Awards, shall be subject to
all applicable foreign, federal, state and local laws, rules and regulations, stock exchange rules
and regulations, and to such approvals by any governmental or regulatory agency as may be required.
The Company shall not be required to register in a Participant’s name or deliver any Shares prior
to the completion of any registration or qualification of such shares under any foreign, federal,
state or local law or any ruling or regulation of any government body which the Administrator shall
determine to be necessary or advisable. To the extent the Company is unable to or the
Administrator deems it infeasible to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, the Company and its Subsidiaries shall be relieved of any liability with
respect to the failure to issue or sell such Shares as to which such requisite authority shall not
have been obtained. No Option shall be exercisable and no Shares shall be issued and/or
transferable under any other Award unless a registration statement with respect to the Shares
underlying such Option is effective and current or the Company has determined that such
registration is unnecessary.

     In the event an Award is granted to or held by a Participant who is employed or providing
services outside the United States, the Administrator may, in its sole discretion, modify the
provisions of the Plan or of such Award as they pertain to such individual to comply with
applicable foreign law or to recognize differences in local law, currency or tax policy. The
Administrator may also impose conditions on the grant, issuance, exercise, vesting, settlement or
retention of Awards in order to comply with such foreign law and/or to minimize the Company’s
obligations with respect to tax equalization for Participants employed outside their home country.

16. Withholding

     To the extent required by applicable federal, state, local or foreign law, a Participant shall
be required to satisfy, in a manner satisfactory to the Company, any withholding tax obligations
that arise by reason of an Option exercise, disposition of Shares issued under an Incentive Stock
Option, the vesting of or settlement of an Award, an election pursuant to Section 83(b) of the Code
or otherwise with respect to an Award. The Company and its Subsidiaries shall not be required to
issue Shares, make any payment or to recognize the transfer or disposition of Shares until such
obligations are satisfied. The Administrator may provide for or permit these obligations to be
satisfied through the mandatory or elective sale of Shares and/or by having the Company withhold a
portion of the Shares that otherwise would be issued to him or her upon exercise of the Option or
the vesting or settlement of an Award, or by tendering Shares previously acquired.

17. Administration of the Plan

     (a) Administrator of the Plan. The Plan shall be administered by the Administrator who shall
be the Compensation Committee of the Board or, in the absence of a Compensation Committee, the
Board itself; provided, however, that with respect to Awards to Nonemployee

13

 

Directors, the Administrator shall be the full Board. Any power of the Administrator may also
be exercised by the Board, except to the extent that the grant or exercise of such authority would
cause any Award or transaction to become subject to (or lose an exemption under) the short-swing
profit recovery provisions of Section 16 of the Securities Exchange Act of 1934 or cause an Award
designated as a Performance Award not to qualify for treatment as performance-based compensation
under Section 162(m) of the Code. To the extent that any permitted action taken by the Board
conflicts with action taken by the Administrator, the Board action shall control. The
Administrator may by resolution authorize one or more officers of the Company to grant Awards under
the Plan, which shall be on the terms and within the limits provided in the authorizing resolution
to the extent required by Delaware General Corporation Law. No such officer shall designate
himself or herself or any executive officer or director of the Company as a recipient of any Awards
granted under authority delegated to such officer. In addition, the Administrator may delegate any
or all aspects of the day-to-day administration of the Plan to one or more officers or employees of
the Company or any Subsidiary, and/or to one or more agents.

     (b) Powers of Administrator. Subject to the express provisions of this Plan, the Administrator
shall be authorized and empowered to do all things that it determines to be necessary or
appropriate in connection with the administration of this Plan, including, without limitation: (i)
to prescribe, amend and rescind rules and regulations relating to this Plan and to define terms not
otherwise defined herein; (ii) to determine which persons are Participants, to which of such
Participants, if any, Awards shall be granted hereunder and the timing of any such Awards; (iii) to
grant Awards to Participants and determine the terms and conditions thereof, including, without
limitation, the number of Shares subject to Awards and the exercise or purchase price of such
Shares and the circumstances under which Awards become exercisable or vested or are forfeited or
expire, which terms may but need not be conditioned upon the passage of time, continued employment,
the satisfaction of performance criteria, the occurrence of certain events (including, without
limitation, events which the Board or the Administrator determine constitute a change of control),
or other factors; (iv) to establish and verify the extent of satisfaction of any performance goals
or other conditions applicable to the grant, issuance, exercisability, vesting and/or ability to
retain any Award; (v) to prescribe and amend the terms of the agreements or other documents
evidencing Awards made under this Plan (which need not be identical) and the terms of or form of
any document or notice required to be delivered to the Company by Participants under this Plan;
(vi) to determine whether, and the extent to which, adjustments are required pursuant to Section
12; (vii) to interpret and construe this Plan, any rules and regulations under this Plan and the
terms and conditions of any Award granted hereunder, and to make exceptions to any such provisions
in good faith and for the benefit of the Company; and (viii) to make all other determinations
deemed necessary or advisable for the administration of this Plan.

     (c) Determinations by the Administrator. All decisions, determinations and interpretations by
the Administrator regarding the Plan, any rules and regulations under the Plan and the terms and
conditions of or operation of any Award granted hereunder, shall be final and binding on all
Participants, beneficiaries, heirs, assigns or other persons holding or claiming rights under the
Plan or any Award. The Administrator shall consider such factors as it deems relevant, in its sole
and absolute discretion, to making such decisions, determinations and interpretations including,
without limitation, the recommendations or advice of any officer or other employee of the Company
and such attorneys, consultants and accountants as it may select.

14

 

     (d) Subsidiary Awards. In the case of a grant of an Award to any Participant employed by a
Subsidiary, such grant may, if the Administrator so directs, be implemented by the Company issuing
any subject Shares to the Subsidiary, for such lawful consideration as the Administrator may
determine, upon the condition or understanding that the Subsidiary will transfer the Shares to the
Participant in accordance with the terms of the Award specified by the Administrator pursuant to
the provisions of the Plan. Notwithstanding any other provision hereof, such Award may be issued
by and in the name of the Subsidiary and shall be deemed granted on such date as the Administrator
shall determine.

18. Amendment of the Plan or Awards

     The Board or the Compensation Committee of the Board may amend, alter or discontinue this
Plan, and the Administrator may amend or alter any agreement or other document evidencing an Award
made under this Plan but, except as provided pursuant to the provisions of Section 12, no such
amendment shall, without the approval of the stockholders of the Company:

     (a) increase the maximum number of Shares for which Awards may be granted under this Plan;

     (b) reduce the price at which Options or Stock Appreciation Rights may be granted below the
price provided for in Section 6(b);

     (c) reduce the exercise price of outstanding Options or Stock Appreciation Rights;

     (d) extend the term of this Plan;

     (e) change the class of persons eligible to be Participants;

     (f) otherwise amend the Plan in any manner requiring stockholder approval by law or under the
New York Stock Exchange listing requirements; or

     (g) increase the individual maximum limits in Sections 5(d) and (e).

     No amendment or alteration to the Plan or an Award or Award Agreement shall be made which
would impair the rights of the holder of an Award, without such holder’s consent, provided that no
such consent shall be required if (i) the Administrator determines in its sole discretion and prior
to the date of any change of control (as defined in the applicable Award Agreement) that such
amendment or alteration either is required or advisable in order for the Company, the Plan or the
Award to satisfy any law or regulation or to meet the requirements of or avoid adverse financial
accounting consequences under any accounting standard, or (ii) the Administrator determines in its
sole discretion that such amendment or alteration is not reasonably likely to significantly
diminish the benefits provided under the Award, or that any such diminution has been adequately
compensated.

19. No Liability of Company

     The Company and any Subsidiary or affiliate which is in existence or hereafter comes into
existence shall not be liable to a Participant or any other person as to: (i) the non-issuance or

15

 

sale of Shares as to which the Company has been unable to obtain from any regulatory body
having jurisdiction the authority deemed by the Company’s counsel to be necessary to the lawful
issuance and sale of any Shares hereunder; and (ii) any tax consequence expected, but not realized,
by any Participant or other person due to the receipt, exercise or settlement of any Award granted
hereunder.

20. Non-Exclusivity of Plan

     Neither the adoption of this Plan by the Board nor the submission of this Plan to the
stockholders of the Company for approval shall be construed as creating any limitations on the
power of the Board or the Administrator to adopt such other incentive arrangements as either may
deem desirable, including, without limitation, the granting of restricted stock or stock options
otherwise than under this Plan or an arrangement that is or is not intended to qualify under Code
Section 162(m), and such arrangements may be either generally applicable or applicable only in
specific cases.

21. Governing Law

     This Plan and any agreements or other documents hereunder shall be interpreted and construed
in accordance with the laws of the Delaware and applicable federal law. Any reference in this Plan
or in the agreement or other document evidencing any Awards to a provision of law or to a rule or
regulation shall be deemed to include any successor law, rule or regulation of similar effect or
applicability.

22. No Right to Employment, Reelection or Continued Service

     Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right
of the Company, its Subsidiaries and/or its affiliates to terminate any Participant’s employment,
service on the Board or service for the Company at any time or for any reason not prohibited by
law, nor shall this Plan or an Award itself confer upon any Participant any right to continue his
or her employment or service for any specified period of time. Neither an Award nor any benefits
arising under this Plan shall constitute an employment contract with the Company, any Subsidiary
and/or its affiliates. Subject to Sections 4 and 18, this Plan and the benefits hereunder may be
terminated at any time in the sole and exclusive discretion of the Board without giving rise to any
liability on the part of the Company, its Subsidiaries and/or its affiliates.

23. Unfunded Plan

     The Plan is intended to be an unfunded plan. Participants are and shall at all times be
general creditors of the Company with respect to their Awards. If the Administrator or the Company
chooses to set aside funds in a trust or otherwise for the payment of Awards under the Plan, such
funds shall at all times be subject to the claims of the creditors of the Company in the event of
its bankruptcy or insolvency.

16exv10w1

 

EXHIBIT 10.1

 RENEWAL AND EXTENSION AGREEMENT

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

RECITALS:

     A. Lender is the sole owner and holder of that one certain Revolving Promissory Note (the
“$20,000,000.00 Note”), dated November 6, 2001, executed by Borrower and payable to the order of
Lender in the original principal amount of Twenty Million and No/100 Dollars ($20,000,000.00), as
modified by a Modification, Renewal and Extension Agreement entered into October 27, 2003, and as
further modified by a Modification, Renewal and Extension Agreement entered into October 31, 2005
(collectively, the “Modification”).

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

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

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

			
	 	 	 
	RENEWAL AND EXTENSION AGREEMENT
	 	Page 1 of 6

 

 

     E. Borrower has requested that Lender modify certain provisions of the $3,000,000.00
Note, all as hereinafter provided, and in consideration thereof Borrower has made certain
agreements with Lender as hereinafter more fully set forth.

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

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

     1. Acknowledgment of Outstanding Balance. The parties hereto acknowledge that the outstanding
principal balance of the $3,000,000.00 Note as of December 27, 2005 is ZERO AND NO/100 DOLLARS
($0.00) and $3,000,000.00 is available for draw and the outstanding principal balance of the
$20,000,000.00 Note is THIRTEEN MILLION EIGHT HUNDRED TWENTY EIGHT THOUSAND AND NO/100 DOLLARS
($13,828,000.00) and $6,172,000.00 is available for draw.

     2. Renewal and Extension of Maturity. The $3,000,000.00 Note is hereby renewed and the
maturity of the $3,000,000.00 Note is hereby extended to January 15, 2007.

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

Interest only on amounts outstanding hereunder shall be due and payable monthly as it
accrues, on the last day of each and every calendar month, beginning January 31, 2006, and
continuing regularly and monthly thereafter until January 15, 2007, when the entire amount
hereof, principal and interest then remaining unpaid, shall be then due and payable;
interest being calculated on the unpaid principal each day principal is outstanding and all
payments made credited to any collection costs and late charges, to the discharge of the
interest accrued and to the reduction of the principal, in such order as Lender shall
determine.

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

			
	 	 	 
	RENEWAL AND EXTENSION AGREEMENT
	 	Page 2 of 6

 

 

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

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

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

			
	 	 	 
	RENEWAL AND EXTENSION AGREEMENT
	 	Page 3 of 6

 

 

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

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

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

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

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

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

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

			
	 	 	 
	RENEWAL AND EXTENSION AGREEMENT
	 	Page 4 of 6

 

 

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

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

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

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

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

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

     EXECUTED as of the day and year first above written.

	 	 	 	 	 
	 
	 	 	 	 
	 	 	BORROWER:
	 
	 	 	 	 
	 	 	CRAFTMADE INTERNATIONAL, INC.,
	 	 	a Delaware corporation
	 
	 	 	 	 
	 

	 	By:	 	/s/ Brad Heimann
	 

	 	 	 	 
	 

	 	 	 	Brad Heimann, Executive Vice President
	 
	 	 	 	 
	 	 	LENDER:
	 
	 	 	 	 
	 	 	THE FROST NATIONAL BANK,
	 	 	a national banking association
	 
	 	 	 	 
	 

	 	By:	 	/s/ D. Michael Randall
	 

	 	 	 	 
	 

	 	 	 	D. Michael Randall, Senior Vice President

			
	 	 	 
	RENEWAL AND EXTENSION AGREEMENT
	 	Page 5 of 6

 

 

Guarantor Ratification of Agreement

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

	 	 	 	 	 
	 
	 	 	 	 
	 	 	DUROCRAFT INTERNATIONAL, INC.,
	 	 	a Texas corporation
	 
	 	 	 	 
	 

	 	By:	 	/s/ Brad Heimann
	 

	 	 	 	 
	 

	 	 	 	Brad Heimann, Secretary
	 
	 	 	 	 
	 	 	TRADE SOURCE INTERNATIONAL, INC.,
	 	 	a Delaware corporation
	 
	 	 	 	 
	 

	 	By:	 	/s/ Brad Heimann
	 

	 	 	 	 
	 

	 	 	 	Brad Heimann, Secretary
	 
	 	 	 	 
	 	 	DESIGN TRENDS, LLC,
	 	 	a Delaware limited liability company
	 
	 	 	 	 
	 	 	By: Craftmade International, Inc.,
	 	 	a Delaware corporation, its Manager
	 
	 	 	 	 
	 

	 	By:	 	/s/ Brad Heimann
	 

	 	 	 	 
	 

	 	 	 	Brad Heimann, Executive Vice President
	 
	 	 	 	 
	 	 	C/D/R INCORPORATED,
	 	 	a Delaware corporation
	 
	 	 	 	 
	 

	 	By:	 	/s/ Clifford Crimmings
	 

	 	 	 	 
	 

	 	 	 	Clifford Crimmings, V.P. Marketing

			
	 	 	 
	RENEWAL AND EXTENSION AGREEMENT
	 	Page 6 of 6

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00096-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00096-of-00352.parquet"}]]