SECOND AMENDED AND RESTATED LOAN AGREEMENT Between
Exhibit 10.1
SECOND AMENDED AND RESTATED LOAN AGREEMENT
Between
CRAFTMADE INTERNATIONAL, INC.
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THE FROST NATIONAL BANK | |||
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September 18, 2006
THIS SECOND AMENDED AND RESTATED LOAN AGREEMENT (the “Loan Agreement”) will serve to
set forth the terms of the financing transactions by and between CRAFTMADE INTERNATIONAL, INC., a
Delaware corporation (“Borrower”), and THE FROST NATIONAL BANK, a national banking
association (“Lender”). Borrower and Lender entered into that certain Amended and Restated
Loan Agreement dated October 31, 2005 (the “Amended and Restated Loan Agreement”). Lender has
agreed to modify, renew and extend the terms and conditions under the Amended and Restated Loan
Agreement as hereinafter set forth.
1. Credit Facilities; Interest Rate. Subject to the terms and conditions set forth in
this Loan Agreement and the agreements, instruments and documents evidencing, securing, governing,
guaranteeing and/or pertaining to the Loans, as hereinafter defined (collectively, together with
the Loan Agreement, referred to hereinafter as the “Loan Documents”), Lender hereby agrees
to provide to Borrower the credit facility or facilities hereinbelow (whether one or more, the
“Credit Facilities”):
(a) Borrowing Base Line of Credit. Subject to the terms and conditions set
forth herein, Lender agrees to lend to Borrower, on a revolving basis from time to time
during the period commencing on the date hereof and continuing through the maturity date of
the promissory note evidencing this Credit Facility from time to time, such amounts as
Borrower may request hereunder; provided, however, the total principal
amount outstanding at any time shall not exceed the lesser of (i) an amount equal to the
Borrowing Base (as such term is defined hereinbelow), or (ii) $30,000,000.00 (the
“Borrowing Base Line of Credit”). If at any time the aggregate principal amount
outstanding under the Borrowing Base Line of Credit shall exceed an amount equal to the
Borrowing Base (as such term is defined hereinbelow), Borrower agrees to immediately repay
to Lender such excess amount, plus all accrued but unpaid interest thereon. Subject to the
terms and conditions hereof, Borrower may borrow, repay and reborrow hereunder. The sums
advanced under the Borrowing Base Line of Credit shall be used for working capital and other
general corporate purposes.
As used in this Loan Agreement, the term “Borrowing Base” shall have the meaning set
forth hereinbelow:
An amount equal to 80% of the Borrower’s Eligible Accounts, plus 55% of the Borrower’s
Eligible Inventory; provided, however, the outstanding amount advanced
against Eligible Inventory at any time shall not exceed 50% of total outstanding advances
under the Borrowing Base Line of Credit.
As used herein, the term “Eligible Accounts” shall mean at any time, an amount equal
to the aggregate net invoice or ledger amount owing on all trade accounts receivable of
Borrower and any Affiliates for goods sold or leased or services rendered in the ordinary
course of business, in which the Lender has a perfected, first priority lien, after
deducting (without duplication): (i) each such account that is unpaid 60 days or more after
the original invoice date thereof, or, in the case of Lowe’s, 90 days or more after the
original invoice date thereof, (ii) the amount of all discounts, allowances, rebates,
credits and adjustments to such accounts (iii) the amount of all contra accounts, setoffs,
defenses or counterclaims asserted by or available to the account debtors, (iv) all accounts
with respect to which goods are placed on consignment or subject to a guaranteed sale or
other terms by reason of which payment by the account debtor may be conditional, (v) all
accounts with respect to which a payment and/or performance bond has been furnished and that
portion of any account for or representing retainage, if any, until all prerequisites to the
immediate payment of retainage have been satisfied, (vi) all accounts owing by account
debtors for which there has been instituted a proceeding in bankruptcy or reorganization
under the United States Bankruptcy Code or other law, whether state or federal, now or
hereafter existing for relief of debtors, (vii) all accounts owing by any Affiliates; (viii)
all accounts in which the account debtor is the United States or any department, agency or
instrumentality of the United States, except to the extent an acknowledgment of assignment
to Lender of such account in compliance with the Federal Assignment of Claims Act and other
applicable laws has been received by Lender, (ix) all accounts due by any account debtor
whose principal place of business is located outside the United States of America and its
territories, (x) all accounts subject to any provision prohibiting assignment or requiring
notice of or consent to such assignment, (xi) that portion of all account balances owing by
any single account debtor which exceeds 25% of the aggregate of all accounts otherwise
deemed eligible hereunder which are owing by all account debtors, other than Lowe’s, and
(xii) any other accounts deemed unacceptable by Lender in its sole and absolute discretion;
provided, however, if more than 20% of the then balance owing by any single account debtor
does not qualify as an Eligible Account under the foregoing provisions, then the aggregate
amount of all accounts owing by such account debtor shall be excluded from Eligible
Accounts.
As used herein, the term “Eligible Inventory” shall mean as of any date, the
aggregate value of all inventory of raw materials and finished goods (excluding work in
progress and packaging materials, supplies and any advertising costs capitalized into
inventory) then owned by Borrower and any Affiliates and held for sale, lease or other
disposition in the ordinary course of its business, in which Lender has a first priority
lien, excluding (i) inventory which is damaged, defective, obsolete or otherwise unsaleable
in the ordinary course of business, (ii) inventory which has been returned or rejected, and
(iii) inventory subject to any consignment arrangement with any other person or entity. For
purposes of
this definition, Eligible Inventory shall be valued at the lower of cost (excluding the cost
of labor) or market value.
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All advances under the Credit Facilities shall be collectively called the “Loans”.
Lender reserves the right to require Borrower to give Lender not less than one (1) business
day prior notice of each requested advance under the Credit Facilities, specifying (i) the
aggregate amount of such requested advance, (ii) the requested date of such advance, and
(iii) the purpose of such advance, with such advances to be requested in a form satisfactory
to Lender.
(b) Interest Rate. The interest to be paid by Borrower and collected by Lender
shall be:
The lesser of (a) a rate equal to LIBOR (as defined below) plus one and one-half
(1.50%) per annum or (b) the highest rate permitted by applicable law, but in no event shall
interest contracted for, charged or received hereunder plus any other charges in connection
herewith which constitute interest exceed the maximum interest permitted by applicable law.
For purposes of this provision, the following terms having the meanings shown below:
“LIBOR” means, for any date, the Wall Street Journal London Interbank Offered
Rate (as defined below) in effect on the 1st day of each calendar month and which will apply
from the first day of the then current calendar month to the last day of the then current
calendar month.
“Wall Street Journal London Interbank Offered Rate” means the London Interbank
Offered Rate (LIBOR) for one month quoted in the most recently published issue of The
Wall Street Journal (Central Edition) in the “Money Rates” column, as adjusted from time
to time in Lender’s reasonable discretion for then applicable reserve requirements,
deposit insurance assessment rates and other regulatory costs. If the Wall Street
Journal London Interbank Offered Rate ceases to be made available by the publisher, or any
successor to the publisher of The Wall Street Journal (Central Edition) the interest
rate will be determined by using a comparable index as determined by Lender in its sole
discretion. If more than one Wall Street Journal London Interbank Offered Rate for one
month is quoted, the higher rate shall apply. The Wall Street Journal London Interbank
Offered Rate is a reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer.
(c) Increased Cost. If any governmental agency, court, central bank or
comparable authority shall impose any taxation, required level of reserves (except reserve
requirements for certificates of deposit), deposits, insurance or capital, or similar
requirements against assets, deposits or credit extended by Lender or shall impose on Lender
or the eurodollar market any other condition affecting advances, and the result of the
foregoing is to increase the cost of Lender making or maintaining advances or reduce any
sums received or receivable by Lender under this Loan Agreement or the Notes by a
material amount as determined by Lender in its sole discretion, then Borrower shall
reimburse Lender for such increased costs or reduced sums upon demand. Nothing
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herein will
be construed to require Borrower to pay any interest, fees, costs or charges greater than
the highest rate permitted by law.
2. Promissory Notes. The Loans shall be evidenced by one or more promissory notes
(whether one or more, together with any renewals, extensions and increases thereof, the
“Notes”) duly executed by Borrower and payable to the order of Lender, in form and
substance acceptable to Lender. Interest on the Notes shall accrue at the rate set forth herein.
The principal of and interest on the Notes shall be due and payable in accordance with the terms
and conditions set forth in the Notes and in this Loan Agreement.
3. Collateral. As collateral and security for the indebtedness evidenced by the Notes
and any and all other indebtedness or obligations from time to time owing by Borrower to Lender,
Borrower, Trade Source International, Inc., Durocraft International, Inc., Design Trends, LLC, and
Prime/Home Impressions, LLC (together hereinafter referred to as “Pledgors”) shall grant,
and hereby grants, to Lender, its successors and assigns, a first and prior lien and security
interest in and to the personal property described hereinbelow, wherever located, and now owned or
hereafter acquired (the “Collateral”):
| (a) | All “accounts”, as defined in the Texas Business and Commerce Code as in effect in the State of Texas on the date of this Loan Agreement or as it may hereafter be amended from time to time (the “Code”) (including health-care-insurance receivables), together with any and all books of account, customer lists and other records relating in any way to the foregoing (including, without limitation, computer software, whether on tape, disk, card, strip, cartridge or any other form), and in any case where an account arises from the sale of goods, the interest of Pledgors in such goods. | ||
| (b) | All “inventory” as defined in the Code, and all records relating in any way to the foregoing (including, without limitation, any computer software, whether on tape, disk, card, strip, cartridge or any other form). |
The term Collateral, as used herein, shall also include all PRODUCTS and PROCEEDS of all of
the foregoing (including without limitation, insurance payable by reason of loss or damage to the
foregoing property) and any property, securities, guaranties or monies of Pledgors which may at any
time come into the possession of Secured Party. The designation of proceeds does not authorize
Pledgors to sell, transfer or otherwise convey any of the foregoing property except finished goods
intended for sale in the ordinary course of Pledgor’s business or as otherwise provided herein.
Pledgors shall execute such security agreements, assignments, deeds of trust and other agreements
and documents as Lender shall deem appropriate and otherwise require from time to time to more
fully create and perfect Lender’s lien and security interests in the Collateral.
4. Guarantors. As a condition precedent to the Lender’s obligation to make the Loans
to Borrower, Borrower agrees to cause Trade Source International, Inc., a Delaware corporation,
Durocraft International, Inc., a Texas corporation, Design Trends, LLC, a Delaware limited
liability company, Prime/Home Impressions, LLC, a North Carolina limited liability
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company, and
C/D/R Incorporated, a Delaware corporation (whether one or more, the “Guarantors”) to each
execute and deliver to Lender contemporaneously herewith a guaranty agreement, in form and
substance satisfactory to Lender.
5. Representations and Warranties. Borrower hereby represents and warrants, and upon
each request for an advance under the Credit Facilities further represents and warrants, to Lender
as follows:
(a) Existence. Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and all other states where it is
doing business, and has all requisite power and authority to execute and deliver the Loan
Documents.
(b) Binding Obligations. The execution, delivery, and performance of this Loan
Agreement and all of the other Loan Documents by Borrower have been duly authorized by all
necessary action by Borrower, and constitute legal, valid and binding obligations of
Borrower, enforceable in accordance with their respective terms, except as limited by
Bankruptcy, insolvency or similar laws of general application relating to the enforcement of
creditors’ rights and except to the extent specific remedies may generally be limited by
equitable principles.
(c) No Consent. The execution, delivery and performance of this Loan Agreement
and the other Loan Documents, and the consummation of the transactions contemplated hereby
and thereby, do not (i) conflict with, result in a violation of, or constitute a default
under (A) any provision of its articles or certificate of incorporation or bylaws, if
Borrower is a corporation, or its partnership agreement, if Borrower is a partnership, or
any agreement or other instrument binding upon Borrower, or (B) any law, governmental
regulation, court decree or order applicable to Borrower, or (ii) require the consent,
approval or authorization of any third party.
(d) Financial Condition. Each financial statement of Borrower supplied to the
Lender truly discloses and fairly presents Borrower’s financial condition as of the date of
each such statement. There has been no material adverse change in such financial condition
or results of operations of Borrower subsequent to the date of the most recent financial
statement supplied to Lender.
(e) Litigation. There are no actions, suits or proceedings, pending or, to the
knowledge of Borrower, threatened against or affecting Borrower or the properties of
Borrower, before any court or governmental department, commission or board, which, if
determined adversely to Borrower, would have a material adverse effect on the financial
condition, properties, or operations of Borrower.
(f) Taxes; Governmental Charges. Borrower has filed all federal, state and
local tax reports and returns required by any law or regulation to be filed by it and has
either duly paid all taxes, duties and charges indicated due on the basis of such returns
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and reports, or made adequate provision for the payment thereof, and the assessment of any
material amount of additional taxes in excess of those paid and reported is not reasonably
expected.
6. Conditions Precedent to Advances. Lender’s obligation to make any advance under
this Loan Agreement and the other Loan Documents shall be subject to the conditions precedent that,
as of the date of such advance and after giving effect thereto (i) all representations and
warranties made to Lender in this Loan Agreement and the other Loan Documents shall be true and
correct, as of and as if made on such date, (ii) no material adverse change in the financial
condition of Borrower since the effective date of the most recent financial statements furnished to
Lender by Borrower shall have occurred and be continuing, (iii) no event has occurred and is
continuing, or would result from the requested advance, which with notice or lapse of time, or
both, would constitute an Event of Default (as hereinafter defined), and (iv) Lender’s receipt of
all Loan Documents appropriately executed by Borrower and all other proper parties.
7. Affirmative Covenants. Until (i) the Notes and all other obligations and
liabilities of Borrower under this Loan Agreement and the other Loan Documents are fully paid and
satisfied, and (ii) the Lender has no further commitment to lend hereunder, Borrower agrees and
covenants that it will, unless Lender shall otherwise consent in writing:
(a) Accounts and Records. Maintain its books and records in accordance with
generally accepted accounting principles.
(b) Right of Inspection. Permit Lender to visit its properties and
installations and to examine, audit and make and take away copies or reproductions of
Borrower’s books and records, at all reasonable times.
(c) Right to Additional Information. Furnish Lender with such additional
information and statements, lists of assets and liabilities, tax returns, and other reports
with respect to Borrower’s financial condition and business operations as Lender may request
from time to time.
(d) Compliance with Laws. Conduct its business in an orderly and efficient
manner consistent with good business practices, and perform and comply with all statutes,
rules, regulations and/or ordinances imposed by any governmental unit upon Borrower and its
businesses, operations and properties (including without limitation, all applicable
environmental statutes, rules, regulations and ordinances).
(e) Taxes. Pay and discharge when due all of its indebtedness and obligations,
including without limitation, all assessments, taxes, governmental charges, levies and
liens, of every kind and nature, imposed upon Borrower or its properties, income, or
profits, prior to the date on which penalties would attach, and all lawful claims that, if
unpaid, might become a lien or charge upon any of Borrower’s properties, income, or profits;
provided, however, Borrower will not be required to pay and
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discharge any such assessment,
tax, charge, ▇▇▇▇, ▇▇▇▇ or claim so long as (i) the legality of the same shall be contested
in good faith by appropriate judicial, administrative or other legal proceedings, and (ii)
Borrower shall have established on its books adequate reserves with respect to such
contested assessment, tax, charge, ▇▇▇▇, ▇▇▇▇ or claim in accordance with generally accepted
accounting principles, consistently applied.
(f) Insurance. Maintain insurance, including but not limited to, fire
insurance, comprehensive property damage, public liability, worker’s compensation, business
interruption and other insurance deemed necessary or otherwise required by Lender.
(g) Notice of Indebtedness. Promptly inform Lender of the creation, incurrence
or assumption by Borrower of any actual or contingent liabilities not permitted under this
Loan Agreement.
(h) Notice of Litigation. Promptly after the commencement thereof, notify
Lender of all actions, suits and proceedings before any court or any governmental
department, commission or board affecting Borrower or any of its properties.
(i) Notice of Material Adverse Change. Promptly inform Lender of (i) any and
all material adverse changes in Borrower’s financial condition, and (ii) all claims made
against Borrower which could materially affect the financial condition of Borrower.
(j) Additional Documentation. Execute and deliver, or cause to be executed and
delivered, any and all other agreements, instruments or documents which Lender may
reasonably request in order to give effect to the transactions contemplated under this Loan
Agreement and the other Loan Documents.
8. Negative Covenants. Until (i) the Notes and all other obligations and liabilities
of Borrower under this Loan Agreement and the other Loan Documents are fully paid and satisfied,
and (ii) the Lender has no further commitment to lend hereunder, Borrower will not, without the
prior written consent of Lender:
(a) Nature of Business. Make any material change in the nature of its business
as carried on as of the date hereof.
(b) Liquidations, Mergers, Consolidations. Liquidate, merge or consolidate with
or into any other entity.
(c) Sale of Assets. Sell, transfer or otherwise dispose of any of its assets
or properties, other than in the ordinary course of business.
(d) Liens. Create or incur any lien or encumbrance on any of its assets, other
than (i) liens and security interests securing indebtedness owing to Lender, (ii) liens for
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taxes, assessments or similar charges that are (1) not yet due or (2) being contested in
good faith by appropriate proceedings and for which Borrower has established adequate
reserves, (iii) liens and security interests existing as of the date hereof which have been
disclosed to and approved by Lender in writing, and (iv) purchase money security interests
covering assets other than the Collateral incurred in the normal course of business.
(e) Indebtedness. Create, incur or assume any indebtedness for borrowed money
or issue or assume any other note, debenture, bond or other evidences of indebtedness, or
guarantee any such indebtedness or such evidences of indebtedness of others, other than (i)
borrowings from Lender, (ii) borrowings outstanding on the date hereof and disclosed in
writing to Lender, and (iii) borrowings representing trade debt incurred in the normal
course of business.
(f) Change in Management. Permit a change in the senior management of
Borrower.
(g) Loans. Make any loans to any person or entity except for (i) loans to
Affiliates, and (ii) loans to officers and directors of Borrower not to exceed $100,000.00
in the aggregate at any one time.
(h) Transactions with Affiliates. Enter into any transaction, including,
without limitation, the purchase, sale or exchange of property or the rendering of any
service, with any Affiliate (as hereinafter defined) of Borrower, except in the ordinary
course of and pursuant to the reasonable requirements of Borrower’s business and upon fair
and reasonable terms no less favorable to Borrower than would be obtained in a comparable
arm’s-length transaction with a person or entity not an Affiliate of Borrower. As used in
this Loan Agreement, the term “Affiliate” means (i) any individual or entity
directly or indirectly controlling, controlled by, or under common control with, another
individual or entity, and (ii) Design Trends, LLC.
(i) Stock Repurchases. Repurchase any stock if the Borrower’s Debt to Worth
Ratio (as hereinafter defined) exceeds 3.0 to 1.
9. Financial Covenants. Until (i) the Notes and all other obligations and liabilities
of Borrower under this Loan Agreement and the other Loan Documents are fully paid and satisfied,
and (ii) the Lender has no further commitment to lend hereunder, Borrower will maintain the
following financial covenants on a consolidated basis:
(a) Debt to Worth Ratio. Borrower will maintain, at all times, a ratio of (a)
total liabilities (excluding any Subordinated Debt), to (b) Tangible Net Worth (“Debt to
Worth Ratio”) of not greater than 3.0 to 1.0, tested quarterly.
(b) Fixed Charge Coverage Ratio. Borrower will maintain, as of the end of each
fiscal quarter, a ratio of (a) net income after taxes plus depreciation, amortization,
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other
non-cash expenses and interest expense for the 4 most recently completed quarters ending
with such fiscal quarter to (b) interest expense, dividends and capital expenditures and
current portion of long-term debt for such 4 quarter period, of not less than 1.25 to 1.0.
As used herein, the term “Tangible Net Worth” means, as of any date, Borrower’s total
assets excluding all intangible assets, less total liabilities excluding any Subordinated
Debt. As used herein, the term “Subordinated Debt” means any indebtedness owing by
Borrower which has been subordinated by written agreement to all indebtedness now or hereafter
owing by Borrower to Lender, such agreement to be in form and substance acceptable to Lender.
Unless otherwise specified, all accounting and financial terms and covenants set forth above are to
be determined according to generally accepted accounting principles, consistently applied.
10. Reporting Requirements. Until (i) the Notes and all other obligations and
liabilities of Borrower under this Loan Agreement and the other Loan Documents are fully paid and
satisfied, and (ii) the Lender has no further commitment to lend hereunder, Borrower will, unless
Lender shall otherwise consent in writing, furnish to Lender on a consolidated basis:
(a) Interim Financial Statements. As soon as available, and in any event
within forty five (45) days after the end of each quarter of each fiscal year of Borrower, a
balance sheet and income statement of Borrower as of the end of such fiscal quarter, all in
form and substance and in reasonable detail satisfactory to Lender and duly certified
(subject to year-end review adjustments) by the President and/or Chief Financial Officer of
Borrower (i) as being true and correct in all material aspects to the best of his or her
knowledge and (ii) as having been prepared in accordance with generally accepted accounting
principles, consistently applied.
(b) Annual Financial Statements. As soon as available and in any event within
ninety (90) days after the end of each fiscal year of Borrower, a balance sheet and income
statement of Borrower as of the end of such fiscal year, in each case audited and
unqualified by independent public accountants of recognized standing acceptable to Lender.
(c) Compliance Certificate. A certificate signed by the Chief Financial
Officer of Borrower within forty five (45) days after the end of each quarter of each fiscal
year of Borrower, stating that Borrower is in full compliance with all of its obligations
under this Loan Agreement and all other Loan Documents and is not in default of any term or
provisions hereof or thereof, and demonstrating compliance with all financial ratios and
covenants set forth in the Loan Agreement.
(d) Borrowing Base Report. A borrowing base report signed by the Chief
Financial Officer of Borrower within thirty (30) days after the end of each month of each
fiscal year, in form and detail satisfactory to Lender.
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(e) Accounts Aging. An account receivable aging report within thirty (30) days
after the end of each month of each fiscal year, in form and detail satisfactory to Lender.
(f) 10K Filings. Borrower’s annual 10K filing with the Securities and Exchange
Commission within (30) days after such filing.
(g) 10Q Filings. Borrower’s quarterly 10Q filing with the Securities and
Exchange Commission within forty five (45) days after the end of each quarter of each fiscal
year of Borrower.
(h) Additional Information. Such other additional financial information as
Lender may request from time to time, including, without, limitation, operating statements
on any assets listed on Borrower’s financial statement.
11. Events of Default. Each of the following shall constitute an “Event of
Default” under this Loan Agreement:
(a) The failure, refusal or neglect of Borrower to pay when due any part of the
principal of, or interest on, the Notes or any other indebtedness or obligations owing to
Lender by Borrower from time to time.
(b) The failure of Borrower or any Obligated Party (as defined below) to timely and
properly observe, keep or perform any covenant, agreement, warranty or condition required
herein or in any of the other Loan Documents.
(c) The occurrence of an event of default under any of the other Loan Documents or
under any other agreement now existing or hereafter arising between Lender and Borrower.
(d) Any representation contained herein or in any of the other Loan Documents made by
Borrower or any Obligated Party is false or misleading in any material respect.
(e) The occurrence of any event which permits the acceleration of the maturity of any
indebtedness owing by Borrower to any third party under any agreement or understanding.
(f) If Borrower or any Obligated Party: (i) becomes insolvent, or makes a transfer in
fraud of creditors, or makes an assignment for the benefit of creditors, or admits in
writing its inability to pay its debts as they become due; (ii) generally is not paying its
debts as such debts become due; (iii) has a receiver, trustee or custodian appointed for, or
take possession of, all or substantially all of the assets of such party, either in a
proceeding brought by such party or in a proceeding brought against such party and such
appointment is not discharged or such possession is not terminated within
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sixty (60) days
after the effective date thereof or such party consents to or acquiesces in such appointment
or possession; (iv) files a petition for relief under the United States Bankruptcy Code or
any other present or future federal or state insolvency, bankruptcy or similar laws (all of
the foregoing hereinafter collectively called “Applicable Bankruptcy Law”) or an
involuntary petition for relief is filed against such party under any Applicable Bankruptcy
Law and such involuntary petition is not dismissed within sixty (60) days after the filing
thereof, or an order for relief naming such party is entered under any Applicable Bankruptcy
Law, or any composition, rearrangement, extension, reorganization or other relief of debtors
now or hereafter existing is requested or consented to by such party; (v) fails to have
discharged within a period of thirty (30) days any attachment, sequestration or similar writ
levied upon any property of such party; or (vi) fails to pay within thirty (30) days any
final money judgment against such party.
(g) If Borrower or any Obligated Party is an entity, the liquidation, dissolution,
merger or consolidation of any such entity or, if Borrower or any Obligated Party is an
individual, the death or legal incapacity of any such individual.
(h) The entry of any judgment against Borrower or the issuance or entry of any
attachment or other lien against any of the property of Borrower for an amount in excess of
$250,000.00, if undischarged, unbonded or undismissed within thirty (30) days after such
entry.
Nothing contained in this Loan Agreement shall be construed to limit the events of default
enumerated in any of the other Loan Documents and all such events of default shall be cumulative.
The term “Obligated Party”, as used herein, shall mean any party other than Borrower who
secures, guarantees and/or is otherwise obligated to pay all or any portion of the indebtedness
evidenced by the Notes.
12. Remedies. Upon the occurrence of any one or more of the foregoing Events of
Default, and upon the expiration of ten (10) days following the giving of notice in accordance with
Section 16 hereof with respect to any Event of Default described in subparagraph 11(a)
above (provided, however, that no more than two (2) such notices will be given during any calendar
year) or upon the expiration of thirty (30) days following the giving of notice by Lender to
Borrower in accordance with Section 16 hereof, with respect to any Event of Default
described in any of subparagraphs 11(b) through (e), the entire unpaid balance of principal of the
Notes, together with all accrued but unpaid interest thereon, and all other indebtedness owing to
Lender by Borrower at such time shall, at the option of Lender, become immediately due and payable
without further notice, demand, presentation, notice of dishonor, notice of intent to
accelerate, notice of acceleration, protest or notice of protest of any kind, all of which are
expressly waived by Borrower, and (b) Lender may, at its option, cease further advances under any
of the Notes. All rights and remedies of Lender set forth in this Loan Agreement and in any of the
other Loan Documents may also be exercised by Lender, at its option to be exercised in its sole
discretion, upon the occurrence of an Event of ▇▇▇▇▇▇▇.
▇▇
▇▇. Rights Cumulative. All rights of Lender under the terms of this Loan Agreement
shall be cumulative of, and in addition to, the rights of Lender under any and all other agreements
between Borrower and Lender (including, but not limited to, the other Loan Documents), and not in
substitution or diminution of any rights now or hereafter held by Lender under the terms of any
other agreement.
14. Waiver and Agreement. Neither the failure nor any delay on the part of Lender to
exercise any right, power or privilege herein or under any of the other Loan Documents shall
operate as a waiver thereof, nor shall any single or partial exercise of such right, power or
privilege preclude any other or further exercise thereof or the exercise of any other right, power
or privilege. No waiver of any provision in this Loan Agreement or in any of the other Loan
Documents and no departure by Borrower therefrom shall be effective unless the same shall be in
writing and signed by Lender, and then shall be effective only in the specific instance and for the
purpose for which given and to the extent specified in such writing. No modification or amendment
to this Loan Agreement or to any of the other Loan Documents shall be valid or effective unless the
same is signed by the party against whom it is sought to be enforced.
15. Benefits. This Loan Agreement shall be binding upon and inure to the benefit of
Lender and Borrower, and their respective successors and assigns, provided, however, that Borrower
may not, without the prior written consent of Lender, assign any rights, powers, duties or
obligations under this Loan Agreement or any of the other Loan Documents.
16. Notices. All notices, requests, demands or other communications required or
permitted to be given pursuant to this Agreement shall be in writing and given by (i) personal
delivery, (ii) expedited delivery service with proof of delivery, or (iii) United States mail,
postage prepaid, registered or certified mail, return receipt requested, sent to the intended
addressee at the address set forth on the first page hereof and shall be deemed to have been
received either, in the case of personal delivery, as of the time of personal delivery, in the case
of expedited delivery service, as of the date of first attempted delivery at the address and in the
manner provided herein, or in the case of mail, upon deposit in a depository receptacle under the
care and custody of the United States Postal Service. Either party shall have the right to change
its address for notice hereunder to any other location within the continental United States by
notice to the other party of such new address at least thirty (30) days prior to the effective date
of such new address.
17. Construction, Venue. This Loan Agreement and the other Loan Documents have been
executed and delivered in the State of Texas, shall be governed by and construed in accordance with
the laws of the State of Texas, and shall be performable by the parties hereto in
the county in Texas where the Lender’s address set forth on the first page hereof is located.
In the event of a dispute involving this Loan Agreement or any other instruments executed in
connection herewith, the undersigned irrevocably agrees that venue for such dispute shall lie in
any court of competent jurisdiction in Bexar County, Texas
18. Invalid Provisions. If any provision of this Loan Agreement or any of the other
Loan Documents is held to be illegal, invalid or unenforceable under present or future laws, such
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provision shall be fully severable and the remaining provisions of this Loan Agreement or any of
the other Loan Documents shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance.
19. Expenses. Borrower shall pay all costs and expenses (including, without
limitation, reasonable attorneys’ fees) in connection with (i) any action required in the course of
administration of the indebtedness and obligations evidenced by the Loan Documents, and (ii) any
action in the enforcement of Lender’s rights upon the occurrence of Event of Default.
20. Participation of the Loans. Borrower agrees that Lender may, at its option, sell
interests in the Loans and its rights under this Loan Agreement to a financial institution or
institutions and, in connection with each such sale, Lender may disclose any financial and other
information available to Lender concerning Borrower to each prospective purchaser.
21. Conflicts. In the event any term or provision hereof is inconsistent with or
conflicts with any provision of the other Loan Documents, the terms and provisions contained in
this Loan Agreement shall be controlling.
22. Counterparts. This Loan Agreement may be separately executed in any number of
counterparts, each of which shall be an original, but all of which, taken together, shall be deemed
to constitute one and the same instrument.
23. Facsimile Documents and Signatures. For purposes of negotiating and finalizing
this Loan Agreement, if this document or any document executed in connection with it is transmitted
by facsimile machine (“fax”), it shall be treated for all purposes as an original document.
Additionally, the signature of any party on this document transmitted by way of a facsimile
machine shall be considered for all purposes as an original signature. Any such faxed document
shall be considered to have the same binding legal effect as an original document. At the request
of any party, any faxed document shall be re-executed by each signatory party in an original form.
If the foregoing correctly sets forth our mutual agreement, please so acknowledge by signing and
returning this Loan Agreement to the undersigned.
NOTICE TO COMPLY WITH STATE LAW
For the purpose of this Notice, the term “WRITTEN AGREEMENT” shall include the document set
forth above, together with each and every other document relating to and/or securing the same loan
transaction, regardless of the date of execution.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE
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OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
| BORROWER | LENDER: | |||||||||
| CRAFTMADE INTERNATIONAL, INC., | THE FROST NATIONAL BANK, | |||||||||
| a Delaware corporation | a national banking association | |||||||||
By:
|
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇ | By: | /s/ D. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ | |||||||
| ▇▇▇▇ ▇▇▇▇▇▇▇, President | D. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Senior Vice President | |||||||||
| GUARANTORS | ||||
| DUROCRAFT INTERNATIONAL, INC., a Texas corporation |
||||
By:
|
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇ | |||
| ▇▇▇▇ ▇▇▇▇▇▇▇, President | ||||
| TRADE SOURCE INTERNATIONAL, INC., a Delaware corporation |
||||
By:
|
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇ | |||
| ▇▇▇▇ ▇▇▇▇▇▇▇, President | ||||
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| DESIGN TRENDS, LLC, a Delaware limited liability company |
||||
| By: Craftmade International, Inc., a Delaware corporation, its Manager |
||||
By:
|
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇ | |||
| ▇▇▇▇ ▇▇▇▇▇▇▇, President | ||||
| C/D/R INCORPORATED, a Delaware corporation |
||||
By:
|
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | |||
| ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President | ||||
| PRIME/HOME IMPRESSIONS, LLC, a North Carolina limited liability Company |
||||
| By: Trade Source International, Inc. a Delaware corporation, its Manager |
||||
By:
|
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇ | |||
| ▇▇▇▇ ▇▇▇▇▇▇▇, President | ||||
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